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Gaming Law updated No. 09 |
Newsletter on Sportingbet – and Gambling Law
Edition 9 of April 12th 2004
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Summary:
1. Editorial
2. Antigua v. USA – Gambling and WTO-Law
3. The administrative high court (Bundesverwaltungsgericht) defends the monopolistic structure of the casino business
4. Newsflash
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1. Editorial
Dear Reader,
we have already reported about the crucial meaning of the Gambelli-case for the liberalization of the gambling market in the European Union. A groundbreaking opinion was rendered concerning a case pleaded before a WTO-court. The panel established that the restrictive practice of the US not allowing cross-boarder gambling had to be considered as a breach of WTO law. The following essay of lawyer Martin Arendts discusses the backgrounds of this decision.
The Commission of the European Communities (hereinafter Commission) has taken the Gambelli-decision serious as well. It has taken first steps to initiate an action for infringement of the treaty against Denmark which restraints operation and advertisement for foreign gambling providers. The Commission now reviews whether these Danish provisions are conform to the freedom of establishment and the freedom to provide services. Germany could face similar consequences, if it is not willing to liberalize its gambling market and continues to protect state providers.
The administrative high court does not believe in liberalisation though as is shown in a new decision reported on ARENDTS ANWÄLTE. It dismissed appeal with formal arguments mainly.
The Editorial Staff
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2. Antigua v. USA – Gambling and WTO-Law
by lawyer Martin Arendts, M.B.L.-HSG
The Caribbean state of Antigua and Barbuda initiated a WTO procedure against the U.S claiming its legislation on Internet gambling violated WTO rules. The small Caribbean state counting 67.000 inhabitants only, invoked the considerable economic importance of Internet Casinos and other online gambling offers. According to the foreign minister of Antigua about 3.000 jobs depend on the gambling industry. The freedom to provide services granted by the General Agreement on Trade and Services (GATS) were infringed by the U.S. and its states. US legal conception holds that according to the Wire Act of 1961 all online gambling is illegal.
Whereas the predecessor of the WTO (Word Trade Organisation), the GATT (General Agreement on Tariffs and Trade) affected trade related questions only, the GATS (one of the WTO-agreements) brought progress in liberalising service commerce as well. The offering of games of chance also falls under the scope of this agreement. One of the basic principles of the WTO-agreement is the imperative of resident-like treatment. It obligates the member states (Antigua participating since 1995) not to treat foreign services worse than domestic ones. From the point of view of Antigua the U.S violates this principle by prohibiting Americans to place wagers with foreign Internet Casinos. Antiguan gambling providers were discriminated compared to American ones. Thus the U.S. infringed Art. II, VI, VIII, XI, XVI and XVII of the GATS.
With its legal conception the state of Antigua which had initiated the formal WTO-procedure after unsuccessful mediation has been successful so far. Unlike the old GATT the new WTO-system now allows a formalised system of conflict settlement the so called Dispute Settlement Understanding (DSU). It provides for a panel of three (in exceptional cases five) WTO-Experts to advise on the case. This panel must come to a decision within 6 months. This decision will then be rendered to the Dispute Settlement Body, which decides on whether to accept the advice or not. The decision is subject to appeal to the appellate body.
So far not more than an (actually confidential and not yet published) “Interim Report” of the panel on the Antigua case exists. According to press reports it finds a U.S. violation of WTO-principles. Due to the considerable economic importance (not only for the U.S., but also for other WTO member states like Germany) the decision was often reported on.
It is already conceivable that the dispute will continue until the appellate body’s decision. A corresponding proclamation was announced by the U.S. after the decision became public. It is also doubtful whether the U.S. would abide by the negative decision reached (just like it did not in many other cases an U.S. infringement was found). In this case Antigua could theoretically be authorised to impose sanctions but certainly with little effect on the U.S.
In case Antigua were successful other WTO member states would surely be sued too, and would be more likely to act in conformity to WTO rules. Although the ECJ rejected a direct applicability of WTO rules in his decision Portugal v. Council of 1999, individuals too could invoke that national law had to be interpreted in conformity with WTO rules, arguing that the member state was obliged to implement the commitments entered by ratification. Insofar the up-coming fundamental judgement will be of considerable importance for Germany.
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3. Administrative High Court ( BVerwG)defends monopolistic structure of the casino-business.
Like sporting bets and lotteries, the operation of casinos is regulated by state laws as well. The licensing of public casinos is based on the pre-constitutional “law on licensing public casinos” of July 7th, 1933 and the “regulation on public casinos” of July 27th, 1938. These provisions were integrated into state legislation and in the meantime were partly replaced by new state laws on casinos. In most states casino legislation provide for state owned companies or state authorities as concessionaire exclusively, creating a state casino monopoly. In some states casinos may also be operated by private businesses under strict supervision, though.
By its decision of February 24th, 2004 concerning the problem of constraining licensing for private casinos the BVerwG affirmed the prevailing case-law. Accordingly the states may strongly limit the issue of casino licenses in their respective laws. Thus the state of Saarland were allowed to impose these restrictions in its law of Aug. 8th, 2004. The provision allowing for two licenses only were to be considered justified. Furthermore the state of Saarland were allowed to issue those licenses exclusively to state owned providers, allowing them to open (an unlimited number) of branches. In these branches so called “small games” (fruit machines etc.) may be offered.
It is more than doubtable though, whether the policy of allowing the opening of an unlimited number of branches is really suitable to “control people’s playing instincts” (the states’ main argument).
The decision becomes notable by one specific fact: the applicant’s plaint not having received a license for operating a casino was not dismissed on substantial but on formal grounds. The BVerwG did not even admit appeal against the lower instance (OVG Saarland OVG Saarland: Decision of November 21, 2003 (3R 7/02)), because the case was not be attributed essential significance in terms of Art. 132 II VwGO (Administrative Procedure Act); since prevailing case-law justifying monopoly-like restraints for casinos as lawful had not changed.
Using this tactics, the administrative high court avoids a problem the lower instance discussed on 22 pages: that is whether state has enough legal arguments to defend its gambling- respectively casino monopoly. This avoidance tactics of the administrative high court are even more astonishing in the light of its decision of 2001 (decision of March 28th 2001 – 6C 2/01). There the administrative high court held that a critical revision, whether the arguments for restraining the German gambling market “were based on appropriate considerations” had to take place after a reasonable period of time. The Gambelli-decision having enormous effect on the German jurisdiction (see the decisions of the Hessian administrative court of appeal, the administrative court of Stuttgart, the county court of Heidenheim, the county court of Bremen and the county court of Recklinghausen and last but not least the district court of Munich, on which we reported in our last issues) should have given enough reason to the highest German administrative court to such a critical revision. Invoking the formerly rendered high court jurisdiction does not prove a high level of persuasiveness.
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4. Newsflash
Two new judgements in favour of agents conveying sporting bets were rendered in the last few weeks. One by the county court of Bremen and one by the county court of Recklinghausen. Both decisions dismissed the opening of the main penal procedure against the accused holding that in the light of the latest jurisdiction a conviction of the accused were not likely. Subsequently you will find a short summary and an editor's head note of the case. The complete decision will be available on our homepage “gaminglaw.de” soon. will follow soon.
County court of Bremen decision of March 16th 2004, (74 Ds 601 Js 7083/03)
Editor’s Head Note:
In the light of the latest court decisions a conviction of an agent conveying sporting bets to England has become improbable.
With this decision the administrative court of Bremen refused to open main proceedings regarding charges of illegal gambling against the accused. The caveat order providing for securing the daily revenue was dismissed.
Decision of the county court of Recklinghausen of March 10th 2004, (32 Ds 11 Js 474/04)
Editor’s Head Note:
Conveying sporting bets to an Austrian bookmaker is not liable to prosecution since sporting bets cannot be considered as games of chance in terms of Art. 284 German penal code.
With this decision the administrative court of Bremen refused to open main proceedings regarding charges of illegal gambling against the accused. The caveat order providing for securing the daily revenue was dismissed.
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