The European Commission (Commission) must launch a formal State aid investigation into the granting of Dutch lottery licences, following an appeal to the EU General Court by the European Gaming and Betting Association (EGBA), who successfully argued that the Commission’s decision not to open a formal investigation was incorrect.
Background to the General Court ruling
Dutch gambling legislation is based on a system of exclusive licences, under which the organisation or promotion of gambling is prohibited unless expressly authorised.
In March 2016, EGBA, a non-profit organisation whose members are European online gambling operators, lodged a complaint with the Commission in connection with licences granted to several entities pursuant to this legislation.
In its complaint, EGBA stated that the licences granted by the Dutch authorities constituted State aid under EU rules. It argued that the aid was granted in the form of an extension to existing licences on an exclusive basis, without the authorities having either requested remuneration at market rates or organised the appropriate open and transparent procedure.
In May 2017, the Commission issued a preliminary assessment of EGBA’s complaint, concluding that the extension of the licences on an exclusive basis did not constitute State aid under the rules. While EGBA subsequently challenged this assessment, its complaint was ultimately dismissed by the Commission.
As a result, in December 2020, the Commission decided not to raise objections in relation to the granting of the licences. Its reasoning was based on the fact that the Dutch rules requiring licence holders to donate part of the proceeds of their gambling activities to non-profit organisations meant that no actual advantage had been conferred on the recipients.
As a result, no formal State aid investigation was launched.
EU State aid rules
In assessing the legality of specific measures under EU State aid rules, the Commission must consider whether any indirect advantages have been conferred, as a specific measure can give rise to both a direct advantage to the recipient and an indirect advantage to other entities.
In the event that there are any doubts about the legality of the measures assessed during the Commission’s initial assessment, a formal State aid investigation should be initiated in line with the Commission’s standard procedure.
The parties’ arguments
EGBA applied to the General Court to annul the Commission’s decision not to launch a formal investigation, on the basis that the Commission was wrong to conclude that no doubts were raised as to whether the granting of the licences conferred an advantage on recipients. Specifically, EGBA claimed that at the time of the Commission’s decision, there was information available in the public domain which indicated whether the licences gave rise to an indirect advantage, as the Dutch legislation obliged licence holders to donate part of the proceeds of their gambling activities to non-profit organisations. It argued that this issue was all the more relevant given that the Commission, in its original decision not to raise doubts in relation to the aid, had relied on the fact that recipients were obliged to pass on proceeds to charitable organisations in its reasoning.
EGBA also argued that the charitable status of the non-profit entities should not prevent them from falling within State aid rules.
The Commission challenged this argument in court, stating that the charitable bodies in question did not fall within EU State aid rules as they did not qualify as relevant entities, and that it had had no evidence of any indirect benefits of the possible aid at the time of reaching the decision (and was not required to seek it out).
Interestingly, the Commission also noted that by requiring licence holders to donate part of their proceeds to charitable bodies, the Dutch authorities were pursuing goals directly related to public policy and morality.
General Court ruling
On 15 November 2023, the EU General Court ruled that, in reaching the decision not to launch a formal investigation, the Commission should have examined whether the granting of the licences conferred an indirect advantage on the charitable bodies who benefited from the proceeds, noting that this was one of the ‘main features’ of the Dutch legislation. It added that the fact that this issue was not examined at the time of the original decision not to raise objections, did not mean that ‘serious difficulties’ with the assessment could be ruled out.
As a result, the Court upheld EGBA’s arguments in relation to the granting of the exclusive licences and annulled the Commission’s 2017 decision.
What happens next?
The Commission must now initiate a formal State aid investigation, during which interested parties will be invited to submit comments.
If the Commission ultimately concludes that no illegal State aid was granted, the status quo will be maintained. However, if it concludes that illegal State aid was indeed granted, the Dutch authorities will most likely be required to recover the aid from both direct and indirect beneficiaries in order to restore the competitive balance in the market. This outcome would necessitate a finding from the Commission that the relevant charitable bodies fell within the remit of EU State aid rules.
The timeframe for a formal State aid investigation can vary significantly depending on the complexity of the case and the cooperation of the interested parties, but it can last from several months to a few years. While the Commission is not bound by a specific minimum timeframe, it provisionally aims to conclude its investigations within 18 months.
Article co-authored by Mihaela Ungureanu, a stagiaire in the CMS EU Law office in Brussels.