Online gaming and betting: Commission raises serious doubts about the compliance of German gambling regime with EU law

Brussels, 7 December 2012: EU online gambling operators welcome the European Commission’s ‘detailed opinion’ against the Draft Act amending acts pertaining to gambling law of the land of Schleswig-Holstein (Gaming Amendment Act S-H) which is seeking to replace its existing legislation with the controversial German State Treaty on gambling (GST). The detailed opinion confirms that there are real concerns with Schleswig-Holstein’s proposed switch from a transparent licensing model to one that is restrictive and opaque, raising further doubts about the overall compliance and consistency of the German gambling regime with EU law. Under Directive 98/34/EC, Schleswig-Holstein must not adopt its draft legislation before January 2013.

Schleswig-Holstein notified its proposed legislation to the Commission on 6 September 2012 (see link). Today’s detailed opinion (see link), which has also received the support (see link) of Malta (detailed opinion) and the U.K (comments), extends the standstill period until 7 January 2013.

The proposed alignment of Schleswig-Holstein’s gambling legislation with the GST marks an abrupt policy reversal. If confirmed, Schleswig-Holstein would move from a sustainable and EU-compliant licensing model introduced in 2011 (see link) to a prohibitive and restrictive model which bans online poker and casino, imposes an uncompetitive tax regime, and restricts the online sports betting offering to 20 licenses.

Sigrid Ligné, Secretary General of the EGBA, commented: “Schleswig-Holstein’s proposed move from a sustainable and EU compliant licensing system to an inconsistent and unjustifiably restrictive regime would be a significant step backwards, one that - as confirmed today - the European Commission cannot approve”.

The European Commission already confirmed its concerns about the non-compliance of the German gambling legislation with EU law in July 2011 (see link). Today’s detailed opinion shows the consistent position of the Commission towards Germany’s gambling reform. 

The tendering procedure for the allocation of the 20 online betting concessions under the GST is currently managed by the state of Hessen and has already resulted in more than 100 applications but fails to provide the applicants with clear, transparent and reliable information on the criteria which will be used for allocating the 20 concessions.

Sigrid Ligné added “The European Commission’s detailed opinion against Schleswig-Holstein sends a clear message that Member States are no longer going to be allowed to impose gaming regulations that fail to meet the tests set by the CJEU. The German states cannot continue to ignore the warnings coming from Brussels and the growing criticism evidenced by the multiplication of complaints and litigation even before the new legislation is introduced. This creates an extreme level of legal uncertainty which is a damaging for all parties and German consumers in particular. At this stage, only the EC can restore legal security by acting on the many complaints it has received, not only against Germany, but also against Greece, Belgium and several other Member States.”  

The European Commission confirmed on 23 October 2012 in its Communication on online gambling that “ensuring compliance of national law with the Treaty is […] a prerequisite of a successful EU policy on online gambling”¹ and that it would take action against all Member States whose legislation does not comply with EU law.

For further information or comment please contact:
Sigrid Ligné: +32 2 554 08 90
sigrid.ligne@egba.eu

Licensing procedure in Germany: A never-ending story

By Attorney-at-law Martin Arendts, M.B.L.-HSG

Under the new Interstate Treaty on Gambling 2012, 20 sports betting licenses will be awarded. When this might eventually happen, remains still open. The deadline for the first step has been prolonged once. The deadline for the second step has now been prolonged for the second time (and the end is not near). Applicants which survived the first step are now required to send in their concepts and other documents until 21 January 2013. If more than 20 applicants fulfill the (confidential) minimum requirements, the 20 best will be chosen by the Hessian Ministry of the Interior and for Sports. The information memorandum (which explains the procedure) and the selection criteria (a maximum of 5000 points can be awarded) have not been published yet (as required under EU law). So, the whole procedure might be declared null and void.

EGBA: EUROPEAN COMMISSION’S NEW POLICY PAPER ON ONLINE GAMBLING

EU operators call for ‘hard’ action from the Commission to curb market fragmentation and protect consumers - EU operators lodge formal complaint with the Commission against the new German gambling régime.

The EGBA today outlined its expectations for the European Commission’s Communication and Action Plan on online gambling, currently scheduled for mid to late October. This initiative, which flows from the Commission’s commitments to the European Parliament last November, will be a key test:

• Will the current fragmentation of the EU online gambling market continue?
• Will consumers therefore continue to suffer different levels of protection throughout the EU?
• Will some consumers, and in particular children and the vulnerable, continue to suffer no protection at all, where a Member State closes the door to EU-regulated operators, thus encouraging consumers to look for non-regulated websites?

As Commissioner Barnier has said: “[It is] important for legal operators to be able to offer sufficiently attractive products for them to be a credible alternative to the illicit sites”

 

Sigrid Ligné, Secretary General of EGBA said: “We deplore the situation today where we see 27 ‘mini-markets’ for gambling in Europe. We are calling for the introduction of European rules to ensure proper protection for consumers and maintain a crime-free environment throughout the EU, while affording open, fair and transparent licensing conditions for EU-regulated operators.”

The EGBA also today announced that, together with other industry partners, it is lodging a formal complaint with the Commission against the new German gambling regime on grounds of incompatibility with the EU treaty.

 

Sigrid Ligné added: "Together with other industry partners, EGBA this week lodges an official complaint with the Commission against the revised German gambling law. We urge the European Commission to handle our complaint urgently as Germany is in the process of allocating licenses on the basis of a highly contentious tendering procedure which appears, on the basis of a cumulation of evidence, not to be designed to pursue the declared purpose of conducting an open, fair and transparent Europe-wide call for bids."

 

Infringements:

In his June 2012 speech to the European Parliament Commissioner Barnier made a clear commitment that the Commission will assume its responsibility and ensure that national regimes are in conformity with the Treaty. Unfortunately, the situation is worsening in a number of jurisdictions. Several Member States have decided to move forward with legislation that is - at best - highly questionable under EU law. Some have even gone a step further. If the Commission fails to provide a timetable for reactivating these dormant procedures, and to take rapid action against new offenders, certain Member States will continue to consider that they have “carte blanche” to do as they please. They will also be exposing consumers to potentially unsafe operators.

 

Sigrid Ligné said: “Action from the Commission on European gambling markets is more justified and urgent than ever. The normal course of EU justice – infringement procedures – can no longer be put on hold. There are 9 infringement procedures suspended for the moment, and many more new complaints lodged with the Commission."

 

EU legislative framework:

What is ultimately needed is overarching EU legislation for online gambling, as there is for virtually all other online services. The objective is to have EU wide sector specific legislation that regulates both market access and consumer protection issues. But a first practical step should be made by the Commission in its action plan next week by announcing it will take the initiative by developing;

• Common consumer protection standards, ideally based on the existing workshop agreement published in 2011 by the CEN (European Committee for Standardization).
• Common technical standards and reporting tools
• Common licensing requirements

Sigrid Ligné added: “The Commission wants the online single market to work as effectively as the offline market in promoting economic growth. Can the Commission therefore afford to sit back and ignore an online industry which is set to grow from €8.5 billion in 2010 to €13 billion in 2015?”

Bavarian Administrative Court of Appeal: Internet ban not coherent and disproportionate

By Martin Arendts, M.B.L.-HSG

The Bavarian Administrative Court of Appeal (Bayerischer Verwaltungsgerichtshof), in its recently published decision of 26 June 2012, file no. 10 BV 09.2259, held that the Internet ban with regard to gambling advertising was not enforceable. Section 5 par. 3 of the German Interstate Treaty on Gambling states that advertising public gambling over the Internet is prohibited.

The court rescinded a prohibition order against an Internet portal (offering sport news), which advertised a private bookmaker. It argued that there was a serious “structural enforcement deficit”. All state operators were continuously and systematically breaking the law, advertising their services over the Internet. The Internet ban was not adequate and not coherent and, therefore, not enforceable. Apart from that, the Internet ban was also not proportionate, as the authorities were issuing prohibition orders only with regard to private operators. As the ban was not enforced against state operators, the regulation was obviously not taken seriously (and, in truth, fiscal reasons were decisive).

From my point of view, it is a very important decision, as it points to the fact that the treatment of state operators and private operators is clearly discriminatory and disproportionate. According to the court, the state operators (in Bavaria, it is the state itself who operates casinos, lotteries, scratch cards and sports betting) were systematically breaking the law (without any enforcement by the authorities). Last year, the Federal Court of Justice (Bundesgerichtshof), ignored this fact and upheld the Internet ban in several unfair competition cases. The Bavarian Administrative Court of Appeal now comes to the conclusion that the whole regulatory system is not working properly. So, I do not follow the state attorney (Landesanwaltschaft) who argued that the decision was only relevant with regard to the situation before 1 July 2012 (when the Amendment Treaty to the Interstate Treaty became effective).

newsletter "Sportwettenrecht aktuell" no. 127: licensing procedure in Germany

Sportwettenrecht127 from Martin Arendts

New newsletter "Sporwettenrecht aktuell" no.128

Sportwettenrecht aktuell Nr. 128 from Martin Arendts

INTRALOT ENTERS THE GERMAN SPORTS BETTING MARKET

press release of 16 July 2012

THE GERMAN STATE LOTTERIES SELECT SGI & INTRALOT FOR RETAIL AND ONLINE SPORTS BETTING

Following a competitive process, ‘ODS ODDSET Deutschland Sportwetten GmbH’ (ODDSET) has awarded Scientific Games International (SGI) in cooperation with INTRALOT with a contract for the operation of sports betting in Germany both in the retail and the interactive space. Under the agreement with SGI, INTRALOT will provide the new generation of its renowned INTRALOT Betting Platform, fully supporting the retail and the interactive operational modes, together with complete Risk Management Services and Interactive Operational Services. ODDSET is the newly established entity that will modernize and develop the existing sports betting operations in Germany, through the national retail network of the Deutsche Lotto und Toto Block lotteries, which is comprised of 23,000 points of sale.

Germany’s betting market is among Europe’s largest and is currently undergoing regulatory reforms. As many as 15 of the country’s 16 regions signed the Interstate Treaty at the end of 2011 and most of these regions have already ratified it in their local parliaments. The new Treaty is in force since beginning of July 2012. Aiming to become the leader of Germany’s betting market, ODDSET will apply for one of the twenty upcoming national concessions to be issued for the organization and brokerage of sports betting for an initial period of seven (7) years.

Mr. Constantinos Antonopoulos, INTRALOT Group CEO, stated: “We are very pleased to become part of this great opening of the German market, one of the most important markets in Europe and worldwide. SGI’s considerable experience and knowledge of the local market together with INTRALOT’s extensive know-how of sports betting operations and the powerful market position of the German State Lotteries create the synergy to address the challenges of the newly regulated German market. Our common objective is to establish through ODDSET a modern, attractive and competitive product portfolio in the German market enabling ODDSET to become the market leader in sports betting in the Federal Republic of Germany over the medium term.”

The Parties have the common objective of supporting ODDSET to launch first in Germany’s regulated sports betting market, which is estimated to take place before the end of 2012.

About INTRALOT
INTRALOT, a public listed company, is the leading supplier of integrated gaming and transaction processing systems, innovative game content, sports betting management and interactive gaming services to state-licensed gaming organizations worldwide. Its broad portfolio of products & services, its know-how of Lottery, Betting, Racing & Video Lottery operations and its leading-edge technology, give INTRALOT a competitive advantage which contributes directly to customers’ efficiency, profitability and growth. With presence in more than 53 countries, with approximately 5.500 people and revenues of €1.2 billion for 2011, INTRALOT has established its presence on all 5 continents.

First sports betting licenses in Schleswig-Holstein

by Martin Arendts, M.B.L.-HSG The German state of Schleswig-Holstein has issued several sports betting licenses to private operators. Licenses have been issued inter alia to Polco Limited, a subsidiary of Betfair, and to Personal Exchange International, a subsidiary of JAXX SE. A license was also granted to the former monopoly operator, Nordwestlotto. 23 more applications are pending. 14 applicants want to offer casino games (which also can be licensed under the Gambling Act of Schleswig-Holstein).

Online gaming and betting: proposed new law in Germany criticised by the European Commission

Brussels, 19 July 2011

The European Commission today issued a ‘detailed opinion’ against the draft German State Gambling Treaty. This detailed opinion confirms that the Commission believes the proposed German State Treaty is in breach of EU law. If the draft is not substantially changed after this warning, Germany risks formal infringement proceedings, referral to the European Court of Justice (CJEU) and ultimately financial penalties.

The Commission has identified a number of provisions in the German draft State Gambling Treaty which are in conflict with the EU Treaty. While the draft law appears to open the market for online sports betting operators from all EU member states, it in practice reserves the market for the incumbent German monopolies. EGBA considers that several requirements in the draft State Treaty are in breach of EU law, including:

• The total number of sports betting licences available is limited without justification to seven (7), whereas the state monopoly for sports betting is exempt from the requirement to apply for a licence;
• An exorbitant tax of 16.67 percent of the amount wagered is imposed on all operators. This will make online wagering uneconomic, excluding online operators and is clearly intended to protect the current state monopoly on offline bets from online competition;
• The licensing system ‘bundles’ offline and online sports betting together and applies a commercial viability test to would-be operators, thus putting online-only operators at an automatic disadvantage in applying for a licence;
• While privately owned land-based premises are limited to 350 per license, no such restriction applies to outlets employed by the state-owned operators
• Certain casino games may be offered online but only by specified casino game operators that are already operating land-based casino games in Germany;
• An illegal expansion of marketing is encouraged for the state monopoly, but marketing restrictions are placed on other operators;
• The license fee will favour those applicants with land-based operations that attract higher margins and appears to be unrelated to the costs incurred to deliver and then maintain the license.

Sigrid Ligné, Secretary General of EGBA said today: ‘The draft German treaty has many provisions which are in conflict with EU law. But worse: it is clear that, taken together and especially including a prohibitive tax on wagers from which the incumbent state monopoly is exempt, these provisions effectively slam the door in the face of EU operators from other member states and will in fact extend the monopoly for offline to online games. The Commission must act quickly to stop this test case for its stated aim of a common EU framework for this sector ’.

The proposed German State Gambling Treaty comes after a number of preliminary rulings by the EU Court that the current State Treaty is incompatible with EU law (see inter alia Carmen Media, C- 46/08). The current law expires at the end of 2011 and the intention was to have the new treaty to come into force in January 2012.

In Germany the regions, or Länder, are competent for lotteries and sports betting while casinos and slot machines are the competence of the federal state. There is however no agreement between the Länder on this draft treaty on sports betting. Schleswig Holstein has already notified an alternative gambling law that will foster a commercially viable sports betting market for EU-licensed operators, thereby removing the attractions of the black market for consumers. The Commission raised no objections to such law and EGBA remains fully supportive of the efforts to enact it.

According to a study by Gold Media, the gross online gaming and betting revenue in Germany was €1 billion in 2009, with a 30 percent annual growth rate (1). Online gaming is a large and vibrant segment of the digital economy in Germany. Whilst material, failing to comply with EU law is only one of the major issues with the proposed State Gambling Treaty. The draft Treaty, if enacted as proposed will simply drive consumers into the hands of black market operators that will not deliver the same levels of consumer protection, that will reduce visibility of the online gaming and betting market in Germany and will forego the opportunity to raise tax revenue.

(1) http://www.goldmedia.com/en/press/newsroom/
study-betting-and-gambling-in-germany.html

For further information or comment please contact:
Sigrid Ligné: +32 2 554 08 90
Sigrid.Ligne@egba.eu

About EGBA
The EGBA is an association of leading European gaming and betting operators Bet-at-home.com, BetClic, bwinparty, Digibet, Expekt, Interwetten, and Unibet. EGBA is a Brussels-based non-profit association. It promotes the right of private gaming and betting operators that are regulated and licensed in one Member State to a fair market access throughout the European Union. Online gaming and betting is a fast growing market, but will remain for the next decades a limited part of the overall European gaming market in which the traditional land based offer is expected to grow from € 79.6 Billion GGR in 2009 to € 83 Billion GGR in 2012, thus keeping the lion’s share with 87% of the market. Source: H2 Gambling Capital, April 2010


The Notification Procedure

Under Directive 98/34/EC, Member States must notify to the European Commission and other Member States draft regulations regarding products and Information Society services such as online gaming and betting, before adopting them. This procedure is aimed at preventing Member States from creating new barriers to the internal market freedoms by giving the opportunity to the Commission and Member States to evaluate the content of a draft law before it is adopted.

The notification of a text to the Commission opens a three month standstill period during which the draft text must not be adopted. This period allows the Commission and Member States to ascertain whether the draft text presents any unjustified barriers to the internal market. The Commission and/or Member States may then issue:
• a detailed opinion, if they consider that the draft text would, if implemented, create barriers to trade, services or establishment within the EU;
• comments, if they consider that the text raises issues of interpretation or requires further details; or
• no response, if they consider that the text is compatible with EU law.
A detailed opinion attempts to prevent Members States from adopting a text, which contains barriers to the internal market, or to urge them to remove the restrictive provisions, thereby avoiding unnecessary legislative work and future EU infringement proceedings.

Once a detailed opinion had been issued, the standstill period, during which the draft text must not be adopted, is extended by one month. If, after this time, the draft text is adopted without modification, the Commission can immediately commence an infringement procedure against the Member State’s newly adopted legislation.

To access the TRIS database and search for other draft laws see:
http://ec.europa.eu/enterprise/tris/pisa/app/search/index.cfm?lang=EN

Sportwettenrecht120 final

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Sportwettenrecht120 final

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A View of European Gambling Regulation

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A view of european gambling regulation

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Principality of Liechtenstein: Call for Tenders for a Casino License

by Attorney-at-Law Martin Arendts, M.B.L.-HSG

The new Gambling Act (Geldspielgesetz - GSG) and the Casino Ordinance (Spielbankenverordnung - SPBV) of the Principality of Liechtenstein allow the operation of a casino. Today, the government authorised the call for tenders. Until an evaluation report will be published, only one license will be granted. Applications for the license have to be filed by 31 March 2011, 4:30 p.m.

European Parliament: Online gambling - a roll of the unregulated dice?

A number of MEPs urged Internal Market Commissioner Michel Barnier to come up with common rules to regulate cross border online gambling in Europe. In a debate on 11 February many MEPs were concerned about the effects of gambling on minors, addiction and money laundering.

With gambling being a €70 billion industry in Europe online firms are hoping to break into this national market. This has brought tension and the European Court of Justice has upheld the right of nations to regulate online gambling.

The tension between the EU's internal market and the right of national regulators to monitor the trade lies at the heart of the legal confusion over online gambling. At present no rules on online gambling exist. Several countries have tried to ban cross-border online betting and the European Commission launched proceedings against them for flouting internal market rules. However, the court's decision to uphold a case where Portugal banned a company based in Gibraltar has shaken things up.

Join our debate online on Facebook on the issues raised in this article.

"Can and must be regulated"

Speaking in the debate Michel Barnier promised a "new approach" with a Green paper on possible policy options by the end of the year.

Thursday's debate was in response to an Oral Question tabled by five MEPs led by the Chair if the Internal Market Committee Malcolm Harbour. Speaking in the debate, the British Conservative said, "it is absolutely the right time for the Commission to be coming out with a clear strategy". He went on to say that online gambling "can be regulated and must be regulated".

However, Mr Harbour stressed the importance of giving people the right to choose: "We must also respect our citizens and the fact that many of them want to access online gambling" so "it can't be right to ban online gambling with a company from outside your own country".

States should not be forced to open markets

Andreas Schwab of the European People's Party called for "uniform cross-border solutions at the European level". The woman who steered the services directive through Parliament in 2006, German Socialist Evelyne Gebhardt called on the Commission to stop "quite improper" infringement procedures. She said "member states should not be forced to open market up if their controls are strong and effective and we want the Commission to finally understand this".

For the Greens, Heide Ruhle said that European rules should respect "European specificities".

"These are not services just like any other"

In terms of the possible legal and social dangers of gambling Dutch MEP Dennis De Jong of the leftist GUE/NGL told the House "we should limit online gambling as much as possible and we should ask the Commission not to lower the level of protection".

Speaking at the end of the debate, Mr Barnier said, "make no mistake; I have come to talk about a new approach". He went on to say "these are not services just like any other. Fighting cross-border crime without a European approach is impossible. We have to have strict limits so that minors can't play and on this we need EU coordination".

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press release of the European Parliament

Online Gaming and Betting: Barnier to take the lead

Brussels, 11 February 2010

EGBA welcomes the commitment made by the newly appointed Internal Market Commissioner Michel Barnier to address the situation of gaming and betting at EU level.

Addressing members of the European Parliament today, Commissioner Barnier confirmed that the analysis of the Commission Legal Service regarding the most recent European Court of Justice ruling (Santa Casa, C-42/09) does not change fundamentally the Commission’s approach towards infringement procedures. The Commissioner said that the Santa Casa ruling of 8 September 2009 was based on considerations specific to Portugal and to its national monopoly operator. The Commission will therefore continue to examine the compliance of national legislation with EU law on a case-by-case basis.

Sigrid Ligné, Secretary General of the EGBA, comments “With several Member States currently reforming their gaming and betting legislation, this is an important confirmation that the Commission will not stand by while Member States introduce restrictions that go against fundamental principles of the EU”.

She adds “We believe that the respect of Internal Market rules in our sector will promote high standards and improve the protection of players throughout the EU”.

EGBA also strongly supports the Commissioner’s intention to engage in a broad consultation with stakeholders and to work on a political document, based on reliable figures and a clear diagnosis of the situation in Europe. The Commissioner raised the prospect of a Green Paper on gambling, a move which EGBA believes could offer a real opportunity to test the interest and support of the European Parliament and Member States for future EU harmonization in the sector.

For further information or comment please contact:

Sigrid Ligné: +32 (0) 2 2567527
sigrid.ligne@egba.eu

ECJ: No exception to the primacy of EU law over national gaming legislation says Advocate General Bot

Brussels, 26 January 2010

The European Gaming and Betting Association (EGBA) welcomes today’s opinion of Advocate General (AG) Bot in the betting case involving Winner Wetten (C-409/06) before the Court of Justice of the EU (CJEU). The opinion confirms that the primacy of EU law over national gaming legislation does not allow for any exception or transitional period. AG Bot dismissed the argument of Germany and other Member States that they should be allowed to have such an exception. Member States therefore have to immediately stop applying national gaming legislation that is not consistent with EU law.

This case involves Winner Wetten, a company located in Germany, accepting bets on behalf of an online betting service provider based and licensed in Malta. The Court in Cologne asked whether governments are allowed to continue to apply for a transitional period gaming legislation that is not compatible with the freedom of establishment and freedom to provide services provisions in the EU Treaty. The Cologne court considered North Rhine-Westphalia´s law on sports betting in force in 2006 to be inconsistent with the freedom to provide services as interpreted in the Gambelli ruling.

AG Bot clarified that there are no legal arguments to allow for an exception to the direct application of the Treaty to the gaming and betting sector. In addition, AG Bot confirms that it is not in the interest of consumers to maintain non EU compliant legislation that does not offer consistent and systematic protection. According to AG Bot, such ´legislation is itself inappropriate for the protection of consumers´ (para 113).

Secretary General Sigrid Ligné comments: ´This opinion is crucial for developments in Germany. The AG has made clear that EU law prevails and that unjustified restrictions are not admissible even for a transitional period. Today’s opinion will further fuel the current political debate on online gaming in Germany´.

Sigrid Ligné further adds: ´We agree with the conclusions of AG Bot. Essential is AG Bot´s confirmation that it is detrimental to consumers to have national gambling legislation that doesn’t offer consistent and systematic protection. Many Member States do not have consistent and systematic gambling legislation; this opinion clearly strengthens our argument.´

A date for the ruling of the CJEU has not yet been set.