MORE PRESSURE FOR THE GERMANS

1 February 2008

Schleswig court believes EU rules are being violated by January 1st ban


The pressure continued to mount of the German authorities this week as the European Union and major gambling companies in other EU states condemned the protectionist online gambling ban introduced on January 1st by the EU member nation.

The Verwaltungsgericht (Administrative Court) of Schleswig - like the EU Commission - has come out with a statement in which it voices a concern that EU laws are being violated and has decided to refer questions relating to European law issues in the context of the new sports betting monopoly to the European Court of Justice.

Lawyer Dr. Wulf Hambach, who is involved in the case, commented: "The referral to the ECJ is a consistent and correct decision by the VG of Schleswig, and is definitely in our client's best interests."

The hearing in Schleswig pertained to the law suit filed by an online provider of sports bets based in Gibraltar who - represented by the Hambach & Hambach Law firm - is looking for the acknowledgement of his European licence for the German Federal State of Schleswig-Holstein as well, as he can invoke the European freedom to provide services.

According to the European Court of Justice, the freedom to provide services also applies for offers provided on the gambling market. However, restrictions to this freedom are possible, provided they are aimed at pursuing general interest objectives and provided the measures taken are suitable and proportionate.

In defending its actions, the Federal State of Schleswig-Holstein invoked the objectives stipulated in the State Treaty on Gambling, i.e. the combat of gambling addiction and the protection of minors.

The private sports betting company argued that the State Treaty on Gambling above all is intended to safeguard the Federal States' fiscal interests, and thus cannot create a consistent and systematic regulation. The area of slot machines in particular, which is especially relevant with regard to addiction issues, is not affected by the new regulation.

"Even when looking at the area of sports betting in isolation, the regulation lacks consistence, as (Internet) horse race betting continues to be liberalised under German Federal legislation", the argument continued. And according to a current survey by the Deutsche Hauptstelle für Suchtfragen (German Institution for Addiction Issues, Jahrbuch Sucht 2008), the addiction danger of lotteries is 0.0%.

Lawyer Ms. Münstermann stated that "a monopoly can hardly be justified by reasons of player protection if the danger in the monopolised areas is close to zero, and if at the same time gambling offers which actually do present dangers are being liberalised."

The VG of Schleswig referral asks the European Court of Justice whether consistent and systematic restrictions of the sports betting market are possible, when areas which are relevant with regard to addiction are not included in the scope of application - as is the case with the State Treaty on Gambling. The statement by the VG of Schleswig draws attention to key areas of concern:

"The Chamber has expressed legal concerns as to whether the objective of preventing gambling addiction and protecting minors - on which the State Treaty between the Federal States is based - may lawfully exclude private providers from the area of lotteries and sports bets only. Other forms of gambling, for instance slot machines, which are regulated by Federal

statutes, are not subject to such restrictions."

"The Chamber has expressed legal concerns as to whether the objective of preventing gambling addiction and protecting minors - on which the State Treaty between the Federal States is based - may lawfully exclude private providers from the area of lotteries and sports bets only. Other forms of gambling, for instance slot machines, which are regulated by Federal

statutes, are not subject to such restrictions."

The Schleswig court's views echo statements yesterday from European Commission officials, who said in a statement: "....it should be noted that in Germany horse race betting on the Internet is not prohibited and slot machines have been widely expanded. Moreover, advertising of games of chance by mail, in the press and on radio is still permitted.

"The European Court of Justice has previously stated that any restrictions which seek to protect general interest objectives, such as the protection of consumers, must be "consistent and systematic" in how they seek to limit activities.

"A member State cannot invoke the need to restrict its citizens' access to these services if at the same time it encourages them to participate in State games of chance."

Dr Hambach describes the VG Schleswig referral as a body blow to the State Treaty on Gambling, and predicts that it will not only occupy the European Commission in infringement procedures, but also the ECJ due to the referral by national courts.

The Swedish online gambling group Unibet weighed in with a statement based on the news yesterday that there is renewed EC activity against Germany and Sweden on monopolistic online gambling policies.

The company's CEO Petter Nylander, who has seen more than his fair share of government interference in business in his recent brush with the French, commented: "We welcome this important action from the European Commission. It is a big step forward for Unibet and the whole gambling sector towards a modern, regulated gambling market. Unibet, through dialogue with the Swedish government, wants to achieve a responsible, modern, regulated gambling industry in Sweden."

The European Gaming and Betting Association has also applauded the revitalised EC action, with general secretary Sigrid Ligne saying: "By commencing these broad proceedings only 30 days after the [German] treaty entered into force, the Commission shows its determination to fight restrictions and in particular prohibitions, which are not backed by genuine consumer protection or public order interests.

"This decision is an important development for EU-licensed operators as it confirms the support of the Commission to guarantee our members' right to a fair market access both for sports betting and poker services.

“This decisive action against the German Interstate Treaty and Swedish poker monopoly sends a clear message to all EU countries maintaining or instigating antiquated protectionist gaming regulations. We applaud the commencement of infringement procedures and encourage the Commission to extend these proceedings against other countries that are also contravening EU law," Ligne added.

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