24 November 2017

Lottery monopoly unlawful: In the opinion of the Administrative Court of Munich, the monopoly violates EU law and constitutional law

For the first time, a German court has judged the lottery monopoly claimed by the German states to be unlawful. Thus, the billions in revenues for the 16 German states from the games of chance offered by them are clearly endangered.

The Administrative Court of Munich, in a judgment, reached by the law firm ARENDTS ANWÄLTE, concludes that the German lottery monopoly in its current form violates both the freedom to provide services guaranteed under EU law (Art. 56 et seq TFEU), as well as the constitutionally guaranteed freedom of choice.

In October 2010, the applicant approached the Government of Upper Palatinate, which was responsible for issuing gambling licenses for the organization of lotteries with not only low risk potential, and inquired about the possibility of licensing a number lottery in the Free State of Bavaria. The applicant was then given a "checklist for permission to operate public gambling". Based on the explanatory notes of the (unpublished) checklist, the applicant submitted a request for permission to hold a number lottery in the Free State of Bavaria. On the basis of the unclear information which the plaintiff received from the Government of Upper Palatinate in response to repeated inquiries about the conditions for obtaining a license, the plaintiff repeatedly amended the permit application. On the instructions of the Bavarian Ministry of the Interior, the Government of Upper Palatinate justified the refusal by stating that the plaintiff, in the opinion of the authorities, did not meet the requirements of material permission (without mentioning the monopoly).

The plaintiff brought an action before the Administrative Court of Munich against the refusal by the Government of the Upper Palatinate after almost one and a half years of administrative proceedings in 2012. Remarkably, the Government of the Upper Palatinate only at the first oral hearing, and only after repeated inquiries from the Chairwoman Judge, argued with the applicability of the monopoly regulations, which were, according to the Government, compliant with German constitutional law and European Union law.

The Administrative Court of Munich disagreed in its judgment of 25 July 2017. According to the recently served reasoning of the court, the lottery monopoly enshrined in section 10 (2) and (6) of the German Interstate Treaty on Gaming (Glücksspielstaatsvertrag - GlüStV) is unlawful because of the advertising practice of the state gambling operators.

The court relies on several points. For example, the Advertising Guidelines of the German States, which concretizes section 5 (1) to (3) GlüStV with regard to permitted advertising, do not strictly consider the criteria elaborated by the Court of Justice of the European Union (CJEU) and by the Federal Administrative Court, which must be observed in order to justify a gambling monopoly. The Administrative Court of Munich points out in this regard that section 3 (3) sentence 4 of the Advertising Guidelines explicitly allows image advertising contrary to the requirements of the Federal Administrative Court. Furthermore, according section 5 no. 1 sentence 2 and 3 of the Advertising Directive, gambling can be advertised attractively and the charitable nature of lotteries can be emphasized.

Also, the advertising practice does not meet the requirements of the relevant case law. The Administrative Court of Munich justified this on the basis of numerous advertising examples of the state gambling operators, which were submitted by the applicant in the administrative court procedure. For the systematically operated inadmissible advertising practice of the state gambling operators in the area of ​​number lotteries, the Administrative Court refers to the improper advertising with specifically advertised high jackpot sums in radio and television spots. In addition, unlawful jackpot advertising can be found in newsletters and in customer magazines of the state gambling operators, in social networks, in banner advertising on news sites on the Internet and on the Internet start pages of the state gambling operators.

According to the administrative court, the jackpot advertising of the state gambling operators stimulates the wishes of the citizens for winning money and so far stimulates undecided persons to play along. Often, the promised high profit with a future better life without the compulsion to earn a living by work, were linked to gambling. Thus, with the jackpot advertising not only existing gambling passions were addressed in order to direct them into order, but first time game incentives were created for non-game enthusiasts or a need for gambling in already interested gamblers was increased. In addition, in the opinion of the court, the state gambling operators pursued inadmissible image and sympathy advertising.

Furthermore, the statements made by the state lottery companies about millionaires had an inadmissible incentive to gambling participation, especially if they were linked to the awarding of the winner's comparatively small stake.

Consequently, the Administrative Court of Munich, in its ruling, comes to the conclusion that the regulations in the advertising guideline and the advertising practice based on it to promote high jackpot profits go well beyond a channelling and steering function of people interested in public gambling. The practice of jackpot advertising would actively and clearly provide incentives to participate in public gambling, number lotteries. Through such advertising practice, the goals of the GlüStV are ultimately no longer met.

Finally, the Administrative Court of Munich rejects a new assignment of the plaintiff's application on the grounds that the financial capacity of the applicant was not sufficiently established. However, in the "checklist" sent by the Government of Upper Palatinate, it merely requested the submission of a so-called sales concept.

Attorney-at-law Clemens Schmautzer of the law firm ARENDTS ANWÄLTE refers to the economic importance of the no longer tenable lottery monopoly: "The statements of the Administrative Court of Munich are likely to cause panic attacks in the German states, which were, since the fundamental decision of the Federal Constitutional Court of 28 March 2006, file no. 1 BvR 1054 / 01, more bad than right trying to continue to secure the proceeds of the lotteries."

According to attorney-at-law Martin Arendts, the states, and if they do not succeed, then the federal parliament, are called upon to finally create a coherent and consistent gambling regulation: "We definitely need a quantum leap. It was a gross tactical mistake that the state Prime Ministers at the ministerial presidents' conference on 17 March 2016 only decided on minimally invasive amendments to the existing regulations of the GlüStV in a formulaic compromise. After the sports betting licensing procedure, which was started in 2012, ended in a dead end due to several court decisions (which held the procedure not to be compliant with EU law), the state of Hesse had submitted a draft for the fundamental revision of the gambling system.”

22 June 2017

Online gambling: Court rejects non-transparent licensing regimes and prohibits enforcement measures

EGBA Press Release

Brussels, 22 June 2017

Today, the CJEU manifestly ruled that enforcement actions against EU licensed operators unlawfully excluded from national licensing processes are prohibited and not in compliance with EU law (case Unibet International (C-49/16). The Court confirmed the obligation on Member States to organise transparent licensing processes and rejected EU countries’ discretion to impose enforcement measures. This ruling comes at a crucial time for countries like the Netherlands, were national legislation that has been found incompatible with the Treaties, is enforced.

The Court of Justice of the EU (CJEU) found that Hungary violated the fundamental freedom to provide services guaranteed under Art 56 of the EU Treaty (TFEU) prohibiting a cross-border operator licensed in the EU to lawfully provide its services in Hungary, by failing to organise a licensing tender published according to objective, transparent, non-discriminatory and proportionate criteria. This has been precised in para. 42 stating that, where it may be of interest to an undertaking located in a Member State other than that in which the concession is granted, [the State is required] to enable the service concession to be opened up to competition and the impartiality of the award procedures to be reviewed. The Court is further stressing the need for an impartial licence award [para. 41] and stressed that the rules of law be clear and precise and predictable in their effect [para. 43]. The judgment confirms existing CJEU jurisprudence1, such as the February 2016 Sebat Ince ruling <http://www.egba.eu/cjeu-german-sports-betting-regulation-continues-being-in-breach-of-eu-law/> (C-336/14).

Hence, when the national regime is in violation of EU law, a Member State is precluded from sanctioning an operator holding a licence in the EU. Such jurisprudence is more relevant than ever with Member States such as Poland and the Netherlands introducing very restrictive and incompatible regulatory frameworks and imposing subsequent enforcement measures which clearly contradict the fundamental principles of EU law.

In addition, the CJEU judgment states (see link <http://curia.europa.eu/juris/documents.jsf?num=C-49/16> ):

* “In that regard, it is sufficient to recall that, where a restrictive system has been established for games of chance and that system is incompatible with Article 56 TFEU, an infringement of the system by an economic operator cannot give rise to penalties (Pfleger and Others, C 390/12, EU:C:2014:281, paragraph 64 and the case-law cited.)” (para. 50).

* "The answer to the third question is that Article 56 TFEU must be interpreted as precluding penalties [Note: see para. 22 where penalties are, amongst others, defined as ISP blocking and fines], such as those at issue in the main proceedings, imposed for the infringement of national legislation introducing a system of concessions and licences for the organisation of games of chance, if such national legislation proves to be contrary to Article 56 TFEU." (para. 51).

Maarten Haijer, Secretary General of EGBA, comments: “The Court reiterated that Member States must guarantee that national regulation on online gambling services meets objective, transparent, non-discriminatory and proportionate criteria. Only a properly regulated and transparent online gambling market can ensure that the consumer is channelled to the regulated offer.”

Haijer added “The Court’s ruling is a clear message to other Gaming Authorities, including the Dutch Gaming Authority, that they must not enforce regulation that does not comply with basic EU law. We expect these Member States to reconsider and lift these enforcement measures as they are acting in violation of EU law. Their actions do not serve the interest of consumers, they fail to channel the consumers to reliable providers, instead they merely prop up failed regulation.“

See the CJEU’s press release here <https://curia.europa.eu/jcms/upload/docs/application/pdf/2017-06/cp170068en.pdf> .

Background

The Budapest-Capital Administrative and Labour Court asked the CJEU whether Hungary violated the freedom to provide services (Article 56 TFEU) for imposing administrative fines and temporary ISP blocking measures against an EU licensed and regulated operator, whilst it failed to publish a call for tenders and did not enable the operator to submit an application for the purposes of obtaining a Hungarian license. In 2014, the European Commission sent an EU Pilot letter to Hungary in reaction to the changes in the Hungarian gambling framework, in which it emphasised the negative impact on the freedom to provide services (Art 56 TFEU).


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1 Sebat Ince, C-336/14, paragraph 55, EU:C:2016:72; Carmen Media Group, C-46/08, EU:C:2010:505, paragraph 90; and Stanleybet International and Others, C-186/11 and C-209/11, EU:C:2013:33, paragraph 47.

15 June 2015

Hesse Minister of the Interior concedes that Interstate Treaty on Gambling has failed

In an article, published today by Frankfurter Allgemeine Zeitung, the Minister of the Interior and Sport for the German state of Hesse, Peter Beuth, whose department is responsible for issuing Germany's 20 sports betting licences, has called for an overhaul of the Interstate Treaty on Gambling (Glücksspielstaatvertrag). He admitted that the current legislation is incapable of achieving its objectives. The German states should leave the "blind alley" and change the law.

http://wettrecht.blogspot.de/2015/06/peter-beuth-sportwetten-neu-regeln.html

12 June 2015

CJEU further clarifies requirements for EU-compliant gambling law

Brussels, 12 June 2015

Yesterday, the CJEU not only questioned several aspects of the Hungarian gambling law, but its ruling also provided a number of conclusions that are widely applicable (Case C-98/14, Berlington Hungary). These included taxation, the need to provide an attractive regulated offer and the requirement to notify gambling legislation.

EGBA Secretary General Maarten Haijer said: “The ruling of the CJEU is a timely reminder to Hungary and other Member States that national gambling legislation needs to respect the requirements of EU law. In particular, legislation must actually and primarily address the pursued objectives. Restrictions can only be justified if they serve to combat actual problems in the Member States, for example with regard to gambling-related crime or gambling addiction. Today’s ruling adds to the growing body of CJEU case law on gambling and the limits within which Member States must set their gambling policy.”

The particular case at hand concerns an amendment to the Hungarian law on games of chance made in 2012, which prohibited the operation of slot machines in amusement arcades (allowing them only in casinos).

The CJEU confirms (see link http://curia.europa.eu/juris/document/document.jsf?text=&docid=164955&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=496760) that:

- Prohibitions are found to constitute technical rules, which need to be notified to the EC: “the provisions of national legislation that prohibit the operation…constitute ‘technical rules’ within the meaning of that provision, drafts of which must be communicated...” to the European Commission (para. 100)

- The CJEU confirms that taxes may constitute a restriction on the freedom to provide services: “… national legislation, such as that at issue in the main proceedings, which, without providing for a transitional period, introduces a five-fold increase in the … tax … constitutes a restriction on the freedom to provide services, guaranteed by Article 56 TFEU provided that it is liable to prohibit, impede or render less attractive the exercise of the freedom to provide the services…” (para.42)

- The Court also inter alia embraces the need to have an attractive regulated offer as a pre-requisite to channel the consumer: “In order to achieve that objective of channelling into controlled circuits, the authorised operators must provide a reliable, but at the same time attractive, alternative to a prohibited activity...” (para. 70)

It will now be to the local Court in Hungary to provide the material ruling in the case, taking into account today’s CJEU conclusions.

For more information, please contact: Maarten Haijer, Secretary General of EGBA: +32 2 554 08 90, maarten.haijer@egba.eu

19 March 2015

Question to the European Commission with regard to the Interstate Treaty on Gambling

Question for written answer to the Commission
Rule 130
John Stuart Agnew (EFDD)

 Subject:  Germany's Interstate Treaty on Gambling
Germany’s apparent ‘gentlemen’s agreement’ (Commission communication SG(2012) D/50777) with the Commission has protected it from an infringement procedure related to its amended Interstate Treaty on Gambling for over two years now. Under the agreement, Germany was obliged to prove the suitability of its gambling law. Although the agreement’s two-year validity period expired on 1 July 2014, no infringement procedure has been initiated to date. This means that a potentially illegal law is still in place.

1. Have other Member States been granted a gentlemen’s agreement before which delayed the initiation of an infringement procedure?

2. Does the Commission deem the amended Interstate Treaty on Gambling and its implementation to be in compliance with EC law?

3. If not, why has the Commission not taken action by means of an infringement procedure without further delay?