Gambling in the European Union: An Overview of Current Developments

1. Gambling in the European Union: An Overview of Current Developments Gambling Regulation in Europe 10 November 2009 Leuven, Belgium Alan Littler – a.d.littler@uvt.nl Tilburg Law and Economics Center (TILEC) & Faculty of Law, Tilburg University, the Netherlands

2. Contents • An overview of the status quo • Established case-law • Secondary legislation • Infringement proceedings • Defining the debate • Recent case-law • What role for the precautionary principle? • Mutual recognition • Some ‘fundamental’ issues which deserve consideration

3. An overview of the status quo Established case-law • Schindler • Läärä • Zenatti • Lindman • Gambelli • Placanica Pending preliminary references

4. An overview of the status quo Secondary legislation Limited relevance for (online) gambling, because • Where gambling falls within the scope of secondary legislation, harmonisation is absent, e.g. Information Society Services Directive – notification procedure • Where the country-of-origin principle is relied upon, following harmonisation of ‘co-ordinated fields’, gambling is excluded from the scope of such legislation, e.g. E-Commerce Directive

5. An overview of the status quo Infringement proceedings Currently pending, status unclear, re: • Sports-betting - DA, FI, DE, HU, IT, NL & SW • Casinos - AT • Remote sports-betting - FR & IT • Sports-betting & other games - GR • Prohibition of internet based gambling - DE • (Online) poker games & tournaments - SW

6. Defining the debate What are we talking about today? • Balancing • the supremacy of the free movement of services and the freedom of establishment & • the competence of Member States to regulate gambling • Distinct from the transfer of regulatory competence (for some aspects gambling regulation/some forms of gambling) to the Community level

7. Defining the debate • Although 43 EC & 49 EC enjoy supremacy, free movement is not absolute • Unless there is a transfer of power to the EC, competence remains at the MS level • 43 EC & 49 EC thus mitigated by national regulatory decisions; objectives and standards • Where national measures amount to restrictive measures; assess compatibility in light of the aforementioned case-law

8. Recent case-law • C-42/07, Liga Portuguesa, Bwin v Santa Casa • Question for preliminary ruling • Did PT legislation restrict the freedom to provide services, freedom of establishment & the free movement of payments? • Is it contrary to EC law for exclusive rights to be granted for supplying lotteries & off-course betting, including when supplied via the internet?

9. Recent case-law • C-42/07, Liga Portuguesa, Bwin v Santa Casa • Organisation of lotteries & off-course betting; vested in Santa Casa da Misericórdia, a non-profit making body which has the aim of financing causes in the public interest (lottery operations since 1783) • Exclusive rights extended to ‘electronic means’, including the internet, in 2003 (measure not notified) • Santa Casa enjoys administrative authority to prosecute undertakings operating illegally in PT

10. Recent case-law • C-42/07, Liga Portuguesa, Bwin v Santa Casa • Bwin offers online games of chance (broader range than that of Santa Casa, includes casino games) • Registered in Gibraltar, servers in Gibraltar & Austria • Offered sports-betting services, via the internet, to residents of PT, including betting in real time • No establishment, or intention to establish, within PT • Sponsor of first national football division • Bwin was fined by Santa Casa, sought annulment

11. Recent case-law • C-42/07, Liga Portuguesa, Bwin v Santa Casa • In contrast to AG Bot, the ECJ did not pay attention to PT’s failure to notify the provisions in question • Exclusive rights held by Santa Casa restricted 49 EC • Examination of proportionality of this indistinctly applicable measure • Overriding reason in the public interest; “fight against crime, more specifically the protection of consumers of games of chance against fraud on the part of operators” (63)

12. Recent case-law • C-42/07, Liga Portuguesa, Bwin v Santa Casa • Recalls exclusivity as a means to ensure gambling is offered through ‘controlled channels’ (64) • In this case ensured by; • Santa Casa’s experience as an (offline) operator since 1783 equating this with reliability • Strict controls to which Santa Casa is subject (65) • Ability to bring proceedings against illegal operators • ECJ readily believes that state involvement will lead to achievement of objectives • Monopoly (given the facts) – an appropriate (suitable) means to meet regulatory objectives

13. Recent case-law • C-42/07, Liga Portuguesa, Bwin v Santa Casa • What about the necessity of the monopoly? • MS which receives gambling services via the internet has fewer means of control than over operators within MS • In absence of harmonisation, MS can ignore statutory conditions and controls which are imposed by MS which licences the operator – “cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime.” (69) Why?

14. Recent case-law • C-42/07, Liga Portuguesa, Bwin v Santa Casa • Not because of difficulties in cross-border enforcement but because of “difficulties liable to be encountered … by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators.” (69) • Would be difficult for PT to establish the integrity of operators licensed in Gibraltar in the absence of harmonisation, but upon what basis does the ECJ assume that the authorities where an operator is established will be unable to do so? • Should this not be assessed on a case-by-case basis?

15. Recent case-law • Does the necessity of the monopoly regime need to undermine the scope for mutual recognition between regulatory models prevailing elsewhere in the internal market? Did the ECJ go too far? • According to the ECJ, other factors further the necessity of restriction: • Absence of direct contact between consumers and operator in online gambling increases risk of fraud against consumers (70) • Operators which sponsor teams & events may influence the outcome of events so as to increase profits (71) • Seemingly extremely light evidentiary burden

16. Recent case-law • C-153/08, Commission v Spain • ES law granted a tax exemption from the imposition of tax to gambling winnings when provided by certain ES bodies pursuing social and charitable non-profit-making activities in ES • Exemption not granted to equivalent bodies established in other MS • As in Lindman measure discriminated on basis of nationality • Direct taxation is a national competence; must be exercised in line with requirements of EC law, including 49 EC • Restricted the freedom to provide services of lottery and betting organisers which were ‘objectively comparable’ to those benefiting from the exemption under national law • Could not be justified under 46(1) EC

17. Recent case-law • C-153/08, Commission v Spain • Critical analysis of (the 4) justifications ES advanced • Prevention of money laundering & to combat tax evasion • Combat gambling addiction • Financing of socially useful infrastructure and projects • Protection of social order and of consumers • Refers to case-law concerning indistinctly applicable measures in a case concerning a discriminatory measure • Greater degree of scrutiny

18. What role for the precautionary principle? • Permits adoption of protective/restrictive measures where scientific uncertainty prevails • Treaty of Maastricht introduced this principle as a basis of the EC’s environmental policy, however it has existed since the 1980s regarding 28 EC • A means of risk management; where uncertainty exists in science as to risks involved (e.g. food additives) MS are granted a wide margin of discretion to uphold restrictive measures • MS can err on the side of caution and restrict the movement of goods manufactured in other MS

19. What role for the precautionary principle? • General definition, C-180/96: “Where there is uncertainty as to the existence or extent of risks to human health, the institutions may take protective measures without having to wait until the reality and seriousness of those risks become fully apparent.” (99)

20. What role for the precautionary principle? • Commission Communication on the precautionary principle, COM (2000) 01 states that precautionary measures should be • Proportionate to chosen level of protection • Non-discriminatory in application • Consistent with similar measures taken • Based on an examination of the costs & benefits of action, or inaction • Subject to review in light of new scientific data • Capable of assigning responsibility for producing scientific evidence required for risk assessment

21. What role for the precautionary principle? • Against what risk? • CFI in T-13/99 Pfizer “ … preventive measure cannot properly be based on a purely hypothetical approach to the risk, founded on mere conjecture which has not been scientifically verified … it follows from the Community Courts' interpretation of the precautionary principle that a preventive measure may be taken only if the risk, although the reality and extent thereof have not been `fully' demonstrated by conclusive scientific evidence, appears nevertheless to be adequately backed up by the scientific data available at the time when the measure was taken.” (143-4)

22. What role for the precautionary principle? • If it were to apply to gambling… • … scientific evidence is needed about the dangers arising from forms of gambling & the effectiveness of measures designed to encourage consumers to gamble in a responsible manner and meet other commonly held regulatory objectives, e.g. measures to combat crime & fraud • Although scientific uncertainty may prevail MS should not be allowed to use it as a means to justify restrictive measures which would otherwise be deemed incompatible with free movement provisions

23. Mutual recognition • Without harmonisation automatic mutual recognition of licences awarded in other MS/application of country-of-origin principle would undermine national regulatory competence • This would require the application of the subsidiarity test, in light of defined objectives to specific forms of gambling • Outcome of which would have to show that such objectives could be better met by regulatory activity at the Community level

24. Mutual recognition • In the absence of any harmonisation, MS should recognise equivalence in other regulatory regimes • Santa Casa/Bwin shows that so long as a monopoly is justifiable that MS does not have to recognise other regimes in relation to that sector • Mutual recognition where equivalence prevails should apply where monopolies are not in place • EC law cannot stop MS granting the performance of economic activities to themselves but this does not remove such bodies from the scope of free movement provisions • Public monopolies, like Santa Casa, should remain under scrutiny to ensure that they act in a manner consistent with the objectives which underwrite their very existence (thus avoiding protectionism)

25. Mutual recognition • Co-ordination & co-operation between national regulatory systems to achieve fuller respect of the supremacy of Articles 43 EC & 49 EC whilst also respecting the national competence to regulate • Lead to greater mutual understanding between MS? • Unity between national regulatory regimes, rather than uniformity of national regulatory regimes as a means to uphold internal market principles

26. Some ‘fundamental’ issues which deserve consideration • AG Bot in Santa Casa/Bwin: • “In my view, Community law does not aim to subject games of chance and gambling to the laws of the market.” (245) • “… limiting the powers of the Member States in the field of games of chance and gambling does not have the aim of establishing a common market and the liberalisation of that area of activity.” (249) • What do we mean by an internal market in gambling services? • How do we define what constitutes an acceptable degree of cross-border movement of gambling services and of suppliers? • An internal market with public monopolies…?

27. Thank you for your attention!