Mixed news around Europe

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This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The liberalisation of gambling services within the EU remains a contentious issue. A number of EU Member States continue to restrict online gambling operators from competing with state monopolies. However, recent court challenges and European Commission intervention provide at least some positive news for operators. Comments from the EU Trade Commissioner also indicate that bringing an end to rules which prevent EU sports betting operators from providing services outside of the EU remains high on the Commission's agenda.

Mixed news in Germany

Bet and Win International (BWin) recently claimed a victory for online sports betting operators. An Administrative Court of Appeal in the state of Hessen overturned a ruling by a lower court that had prohibited the online gambling operator, which is based in Austria, from providing its services to German customers. The court found that a ban on internet gambling would be impossible to enforce and as such ought to be considered "null and void".

Notwithstanding the Hessen court decision and the European Commission's numerous warnings, it is expected that all German states will shortly pass a treaty banning nearly all forms of online sports betting services. Hessen, Saxony and Bavaria were the first states to introduce such a ban arguing that BWin had breached the states' gambling monopolies.

The proposed adoption of the treaty is controversial because it will have the effect of protecting the national lottery and betting monopolies. Online sports betting operators will be excluded from providing all forms of online gambling services within Germany, except for those in relation to horserace betting. As such, it is expected that, if adopted, the treaty will be the subject of legal challenges and that the European Commission may initiate infringement proceedings. The adoption of this legislation is also likely to have the knock-on effect of ending sponsorship deals between BWin and German sports teams including VfB Stuttgart.

French have more time to bring betting laws in line with EU rules

Following talks with French ministers, the EU Commissioner for the Internal Market has recently agreed that France can have an additional four months to find a solution to keeping its national betting laws in line with EU rules. These negotiations follow the European Commission's reasoned opinion this summer that France's gambling laws breach the EU laws on the free movement of services. If France fails to modify existing legislation as requested it is likely to face proceedings in the European Court of Justice. It is hoped that negotiations between France and the Commission will lead to a resolution of the issues by spring 2008.

The French budget minister responsible for brokering this extension with the Commission has insisted that there will be a controlled opening of the French sports betting services market which is currently dominated by two state-owned monopolies Français des Jeux (FDJ) and Pari-Mutuel Urbain (PMU). However, sports betting operators are reported to be unhappy with the proposals which would open the betting market only to a limited extent e.g. the fixed odds betting market would continue to be served solely by FDJ.

Meanwhile the PMU has suffered a defeat in its attempts to prevent a Maltese sports betting service operator (Zeturf) and its co-location service provider BellMed from offering services in France. PMU began proceedings in the French courts in 2005 and was initially successful in seeking orders to stop Zeturf offering its services in France and forcing BellMed to disable Zeturf's website.

As expected PMU sought to enforce the French judgments against Zeturf and BellMed in Malta applying EC Regulation 44/2001 (the "Brussels Regulation"). The Maltese court upheld PMU's application for the enforcement of the French judgment at the initial application stage. However, Zeturf and BellMed successfully appealed this enforcement decision in January and September, respectively. The Maltese court considered that PMU was exercising powers of an "administrative nature" and, as the Brussels Regulation applies only to the enforcement of civil or commercial matters not those of an administrative nature, the decision could not be enforced in Malta.

Zeturf has continued legal action in the French courts by appealing the French judgments to the French Supreme Court. The French court held in July 2007 that any restriction on operators' freedom to provide services needed to be adequately justified (e.g. in order to prevent criminal or fraudulent activity or reduce gambling addiction). The Supreme Court held that it did not believe that a public policy objective would be realised by protecting PMU's monopoly position even if this potentially increased government revenue. Further to this, the Supreme Court quashed the decision under appeal and has remitted it back for the Court of Appeal to consider the legal status of PMU as a state monopoly.

Sweden's response to European Commission still unclear

Sweden also received a reasoned opinion from the European Commission this summer threatening to bring proceedings in the European Court of Justice if legal obstacles to the provision of sports betting services were not removed. The Commission issued the reasoned opinion just a week after the Swedish government authorised a new revision of the current legislation which is to be finalised in December 2008.

In Sweden (as in many other jurisdictions) the liberalisation of gambling laws has been highly political. In late October, the ruling Moderate Party voted in favour of privatising state-owned gaming operator Svenska Spel and introducing a licensing system for the gaming market. The CEO of Svenska Spel, Jesper Kärrbrink, recently stated that he considered a new Swedish gaming system allowing competition in the market was required on condition that unlicensed cross-border operations could be prevented from operating in Sweden.

Opportunities increase in Italy

Following the Gambelli and Placanica rulings and the change of government last year, the Italian betting and gaming market has finally been the subject of some liberalisation.

Firstly, in 2006, new gaming licences were awarded to international operators based in the EU and EFTA states to provide online betting services to Italian punters as well as licences for traditional betting shops outlets based in Italy. It is now expected that Rome will shortly issue a second tender process for remote gaming licences.

Secondly, it is anticipated that the Italian government will shortly provide clarification of the legal definition of "skill gaming". In particular, it is hoped that this re-clarification will mean that, once licensed, online operators will be able to offer poker and other popular card games to Italian consumers. However, games such as roulette will not be licensed in Italy as these are not classified as games of skill and can only be organised in a very limited number of land-based casinos.

Norwegian amendment to gambling law proposed

At the end of November, the Norwegian government proposed that existing gambling laws should be amended to prohibit Norwegian banks and financial institutions from processing payments for online gambling services. The justification for this proposed amendment is in order to clarify the current legislation which prohibits companies from "mediating" with online gambling service operators. If adopted, this ban is likely to take effect from the middle of 2008. This proposal follows the recent EFTA court ruling that Norwegian national gambling monopoly, Norske Tipping, was justified on the basis of legitimate public policy.