All eyes are Europe

Published on Business Today, issue May 2007

Quotes  

With the embargo imposed by US law, which outlawed the use of credit card for online gaming transactions, many consider that Europe is the main area of opportunity for operators in the short term.  

With the whole industry looking to the European market to drive growth and harness competitive advantage, now is the time for operators to ensure that they have a clear and unequivocal understanding of the exact legal situation across Europe As Gordon Brown's budget deals a severe setback to the online gaming industry, all eyes are on Europe where previously rigorous restrictions over gambling are being dismantled.

GMM Business solutions is organising another international Gaming Expo to be held in Lake Como , Italy at the end of May. You may well ask why Italy and not London or Costa Rica ?

The answer is simple. Italy has recently turned into a user-friendlier jurisdiction, having last year issued an impressive set of new remote gaming licences. On the other hand London has just received its first shock treatment by Gordon Brown's recent budget. Many agree that setting up in the UK is now prohibitive, given that the chancellor decided to place the online tax at a high of 15 per cent. Previously, industry lobbyists were predicting that the tax would be hovering around the 2 - 3% bracket, which would be comparable with other low-tax EU jurisdictions. So Italy stands out as an attractive jurisdiction with a compromise tax burden which, at 3%, is well-placed to beat competition and start attracting cross-border trade.

Hot on the heels of the Italian move came Ladbrokes, which recently entered into a joint venture with the Italian betting company Pianeta Scommesse, the first step in a planned EURO100 million investment by the company to establish high street shops, non-dedicated outlets, and internet and telephone betting operations over the next five years. The announcement comes in response to proposals contained within the Bersani Decree by which the Italian Government is set to reform the Italian betting market, increasing the number of sports betting licences to 7,000, whilst reducing taxation on sports bets from 17% to between 2 and 8%, depending on turnover.

With the embargo imposed by US law, which outlawed the use of credit card for online gaming transactions, many consider that Europe is the main area of opportunity for operators in the short term. Spain is about to liberalise its markets in Catalonia , the Basque region and Madrid . This has attracted UK heavyweights such as William Hill, which recently entered into a joint venture with Codere, a Spanish gaming company that operates 76 bingo halls across Spain .

But the same cannot be said for the attitude taken by France . The EU Commissioner for the internal market and services, Mr McCreevy, questioned how the France could ban European online operators access to French sport and horse-race betting market, on the pretext that it wants to prevent addiction to its citizens when "the French sport betting market continues to expand and offer more choice and opportunity for consumers to bet." Certainly the positive announcement of the Placanica judgment this month has opened the horizons for liberalization in the European gaming markets and one hopes that the French authorities will finally toe the line. 

On 6 March, the Court of Justice in Placanica ruled that the Italian criminal penalties imposed on intermediaries for the collecting of bets acting on behalf of foreign companies are contrary to community law. In the words of the judge we see that the verdict was not vague: "a Member State may not apply a criminal penalty for failure to complete an administrative formality where, in breach of Community law, such completion is refused or rendered impossible by that Member State ."

Furthermore, the Court of Justice pointed out that legislation which prohibits on pain of criminal penalties the pursuit of activities in the betting and gaming sector without a licence or a police authorisation issued by the state, places restrictions on the freedom of establishment and the freedom to provide services. Following the Placanica ruling, Italy which banned overseas online betting in February, was warned by the Commission that its restrictions on "legitimate" operators were disproportionate.

It goes without saying that Liverpool-based Stanley International Betting was jubilant at the news of the Commission opening of infringement proceedings against Italy . Similar infringement notices were also sent to Hungary , Denmark and Finland .

This has been well received by legal experts in Europe who feel that the Placanica judgement makes it explicit that where a third country's gambling laws adhere to the strict guidelines now laid down in EU case law, it is not permitted to prohibit legitimate betting and gaming services provided from that third country. The dispute between the Bavaria Head Office for New Media (BLM): the controlling authority for private radio and television stations- and the Bavarian State Ministry for Science and Art is worth a mention.

The ministry ordered BLM to stop advertising for sports betting in Bavaria . BLM objected to this order and, in an urgent proceeding, this objection was accepted by the Bavarian Administrative Court in Munich . The judges decided that orders by the ministry in this area are, on principle, not allowed.

Unfortunately, things are not so clear cut and we also find that during the infringement procedure against Germany , the German government recently came up with a proposal for the new German LotterieStaatsvertrag to the European Commission for a provisional review but the Commission responded that the revised LotterieStaatsvertrag doesn't conform to European law. This means that the German government has to find a better and more equitable solution for regulating gambling. Probably they have to discuss the alternative Staatsvertrag proposal suggested by the federal state Schleswig Holstein which contains a compromise system allowing legroom for both, private and governmental providers. (Source: http://www.isa-casinos.de/articles/15712.html) Further bad news can be recalled on the matter of advertising in Germany . Currently there exists a blanket prohibition on advertising. This is most prevalent in Baden-Wurttemburg and was recently issued against the football Bundesliga VfB Stuttgart by the Regional Council of Karlsruhe.

On a similarly positive note last year, the Administrative Court of Cologne (North Rhine- Westphalia) decided that sports clubs, sports associations, and other providers of sports information in the Cologne-Bonn region may continue to advertise sports betting on their websites, provided by the advertisers are in possession of a licence issued by an EU-member state. Uncharacteristically, one notes that in other cases, German courts have decided to object to advertisers on TV stations such as RTL and n-TV, where for instance the District Government of Düsseldorf (North Rhine-Westphalia) prohibited any advertisement for sports betting. Another prohibition order was issued against a sports-betting firm based in Saxony . This had the effect of disallowing operators from organising bets, distributing bets, or advertising bets on the pretext that their license was not valid since it was issued at before the unification of Germany . In one more instance, the Federal Cartel Office recently ruled that a boycott of private lottery agents by the state-owned lottery was unlawful and constituted an "intolerable violation of both German and European competition law."

With the whole industry looking to the European market to drive growth and harness competitive advantage, now is the time for operators to ensure that they have a clear and unequivocal understanding of the exact legal situation across Europe hence the reason for attending the specialist conference in Como Italy . This will be another opportunity for companies involved in the gaming and gambling industry to get on top of the game; hearing from gaming and gambling operators such as Betfair, Ladbrokes, 1128.com (formerly ParadiseBet), bwin, and Probability Games Corporation; and other industry leading experts such as speakers from AAMS, The European Commission, European Parliament, Swiss Institute of Comparative Law, Belgian Gaming Commission, Gambling Control Commission, and IMLP. These experts will be discussing the key issues that you need to understand on how to  operate in Europe post Placanica.