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German Gaming Law updated No. 17 |
Newsletter on Betting and Gambling Law
No.17 of November 26th 2004
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Contents:
1. Editorial
2. Hessen starts a new initiative to close private betting agencies
3. A Munich Criminal Court again rejects the notion of punishing an Austrian bookmaker for unlawful betting
4. Freedom of Services following EEA-law: EFTA-Surveillance Authorities introduce proceedings against Norway
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1. Editorial
We report on the state of affairs in the area of gaming law in particularly turbulent (and exciting) times. The supporters of the state controlled lottery appear to be resurfacing.
They are building up a line of defence in order to prevent and frustrate the entry of private contractors into the German commercial gambling market. Following a long period of calm, the State bookmakers are again bringing an action against betting firms from other EU States, including those operating under sport betting license.
As regards the German betting agencies, they are being tackled by the Department of the Interior and the Regulative Authorities with new methods. According to records of the 15th of November 2004, eg., the Hessian Department of the Interior for sport, sent an “Organisation and negotiation of sport betting bulletin„ to all of the known betting agencies in Hessia (refer to our report under 2.).
Even though the Bavarian Supreme Court, in its 26th of November 2003 decision, and the Bavarian Constitutional Court, in its 28th of September 2004 decision, ruled against a liberalisation of the private sport betting market, lawfirm ARENDTS ANWÄLTE achieved a positive result for an Austrian bookmaker at the end of October 2004 in the Munich district court (Case no. Cs 384 Js 44646/03). A report on this decision... .
The meaning of a recent decision of the (little known) EFTA-Surveillance Authority is commented on by attorney at law, Martin Arendts. This decision could be seminal for the EU and for the current breach of contract proceedings.
Anrendts Anwälte
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2. Hessia starts a new Initiative to close Private Betting Agencies
In our last newsletter Nr. 16, we reported on the recent decision of the Hessian Constitutional Court. In effect the Constitutional Court did not repeal the legal opinion on EC law that it had reached in its February decision (refer to our Newsletter No. 7 on www.gaminglaw.de).
Nevertheless, Hessen Lotto announced rejoicingly on its website (www.lottohessen.de): „(The) controlled campaign of the illegal (Note: always used by the State providors to refer to „private“) sport bet providors, with the aim of creating a legal uncertainty in the sport betting market, has collapsed. Hessen Lotto strongly welcomes the legal certainty which has come back into force through this decision of the Constitutional Court.“
At this stage, one must ask why Hessen Lotto is so interested that legal certainty to that effect prevails, that the freedom of services not be applicable to the „Isle of Man”, whcih lies outside of EU Jurisdiction.
In addition, as a reaction to this “legal uncertainty”, the Hessian Interior Department composed a bulletin, which better resembles a voluminous and detailed complaint than a bulletin. Herein, every private sport bet organiser and broker is informed that an application for permission to organise and negotiate sport bets, though in principle possible, does not offer much prospect of success.
In this context, the Gambelli-decision of the ECJ from November 2003 will be referred to.
„Contended – and because of this in need of clarification – are alone the questions, whether the authorities in the member state of the consumer can encourage and incite the partaking in lotteries and gambling, in order to accrue income for the exchequer.“ (Question raised in the Gambell decision) or whether there is „huge increase in games on offer accompanied by aggressive advertising“ (Question raised in the decision of the Federal Constitutional Court).“
In the bulletin such critical questions are in fact answered in just one sentence:
„For local reasons both questions are to be answered resoundingly in the negative.
The decision of the Administrative Court of Appeals, Münster from 13th of September 2004 (Case No. 4 B 1961/04) followed. This court decision did not just ignore the Gambelli decision, but also applied the legal test set down by the court in such a way as to deprive it of its effect, in that it said, „it is to be again accounted that in a consistently “strongly charming” advertising world, excessively moderate advertising measures would not be appropriate for use by the State gaming agencies in reaching the emotive public.”
These comments clearly contradict the guidelines of the ECJ, that an aggressive advertising effort initiated as a market expansion strategy, may not be introduced as a limiting policy in order to close off the gaming market from private operators.
For this reason, the content of this bulletin on organisation and negotiation of sport betting in Hessia remains a lipservice to the Hessian Interior Department. The legal view of the Hessian Interior Department is not only questionable, but from a Community and Constitutional law point of view, dubious.
The questionability and inconsistency of the Interior Department’s view is confirmed by the decision of the North Rhine-Westphalian District Court, Essen from 17th of September 2004 (Case No. 42 Ds 75 Js 169/04 – 635/04) as well as by the decision of the North Rhine-Westphalian District Court, Minden from the 12th of November 2004 (Case No.: 3 L 804/04).
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3. A Munich Criminal Court again rejects the Notion of punishing an Austrian Bookmaker for Unlawful Betting
The decision of the Munich District Court (Department for Criminal Cases), attained by the law firm ARENDTS ANWÄLTE on the 28th of October 2004, suggests that Art.
284 of the Penal Code will mainly be inapplicable to betting providers in possession of a valid European license to organise sport betting.
The court dismissed the applications of the Public Prosecutor for an Order of Summary Sentence, in accordance with Art. 408 par. 2 of the Code of Criminal Procedure, against the manager of an Austrian Betting Agency.
The judge based her decision on the objective inapplicability of Art. 284 of the Penal Code on sport bet providers in possession of a valid Austrian permit, who offer their services here in Germany, within the EU. Secondly, it could not be discerned that there had been knowing or intentional perpetration.:
„The Austrian bookmaker has, according to the credible account of his defence, been in receipt of legal advice (including with regard to the community guarantee of free movement of services for the provision of sport bets) from a licensed and monitored bookmaker in another EU State over a long period of time. (…) The accused traded without knowledge of the ban. (…) The lack of knowledge of the ban was inevitable. (…)
Art. 284 of the Penal Code is not applicable to the present case because its application would result in a disproportionate infringement in the free movement of services and right of establishment of the Austrian Firm and the accused manager, as guaranteed by the EC Treaty.
Up until now, neither Bavaria nor any other Federal State has granted a license for the organisation of sport bets. (NJW 2003, 1698).
The ECJ determined, that it is within the competence of the national court to examine whether such a regulation, with penal sanctions, actually reaches the aim sought and if the limitations imposed by it can be justified and are not disproportionate with regard to this aim.
The infringement in the free movement of services guarantee is therefore only justified where it is necessary in the interests of the common good.
As compelling reasons the ECJ strictly cites the protection of consumers and the prevention of an increased expenditure by citizens on gambling. (ECJ-Case from 06.11.03, No. 67).
Following this, no licenses were granted in Bavaria or in any of the other Federal States and so there is considerable doubt whether the proportionality test which was applied, followed the rules set down by the ECJ, namely, only allowing a ban where absolutely necessary in the interest of the common good.
A limitation in the licensing of gambling is only permissible if, in the first place, it effectively serves the aim of preventing gambling and if the financing of social activities is not the main reason for the generation of such a restrictive policy but rather just a positive side effect. (ECJ Case EuZW 2000, 151 (153) margin no. 36 – Zenatti).
The German provisions, and in particular their restrictive interpretation respectively, breach valid EU Law. The fact that no permit has yet been granted to a betting provider shows that the States are primarily concerned with retaining the income which the lucrative Oddset-betting market generates.
The other aims, that is to say, the protection of consumers and the prevention of deception, could be ensured through State control of licensed games, as it is in other EU countries.
The containment of gambling fervour could be achieved through the education of citizens and advertising to prevent gambling (as per the anti-smoking Ad campaign).
The state is however doing precisely the opposite to this, generating more and more advertising for State betting agencies. It is clear from this, that it is not in order to protect the common good but rather primarily out of financial interest, that the State maintains such regulations. This is precisely what EU Law prohibits.
Consequently Art. 284 of the Penal Code is inapplicable because of its infringement of the free movement of services guarantee.“
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4. Freedom of Services following EEA-law: EFTA-Surveillance Authorities introduce Proceedings against Norway
- a commentary by Attorney-at-law, Martin Arendts, M.B.L.-HSG -
The Gambelli-decision shows effect outside of the EU as well. Alongside the rules in the EC Treaty are namely the rules in the EEA, which has been agreed between the EU Member States and the EFTA States, and regulate the free movement of services and the right of establishment. Art. 31 of the Agreement guarantees the right of establishment, while Art. 36 guarantees the free movement of services within the entire European Economic Area.
The EFTA-Member State Norway (despite many attempts, not yet an EU Member) changed its gambling law in 2003. As the sole operator, only the government owned Norsk Tipping, was permitted to operate the ca. 10,000 gambling machines.
Because of this, the EFTA-Monitoring Authorities (the equivalent of the EC Commission) brought Breach of Agreement Proceedings against Norway. The Norwegian regulations were held to be inconsistent and disproportionate (with the agreement). According to a statement of the Norwegian Government a reasoned opinion followed against Norway.
The judgement of the Norwegian Government is not to be reconciled with the Consistence Test as laid down in the Gambelli decision (which was not just applicable to sport betting, but to all other lottery games as well). The EFTA-Monitoring Authorities ascertained, that an unjustified breach had occurred in the legal regulations against the free movement of services and the right of establishment (Art. 31 and 36 EEA-Agreemenet). The Norwegian Government was compelled to comply with this decision within one month.
The EFTA Monitoring Authorities were quicker than the EC Commission in bringing the proceedings against Denmark and Greece though they could not bring these to a conclusion. Nonetheless, the EFTA’s decision to bring proceedings was ground-breaking.
The EFTA decision shows that the Gambelli decision does not apply only to sport betting, but is also applicable to other lotteries. A liberalisation of the gambling market in the Scandinavian area (and also concerning the EEA Member Lichtenstein) seems henceforth possible.
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© 2004; Publishing is desired with publication of the source including contact information.
A copy or publication information is desired |
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