GERMAN STATES ON A COLLISION COURSE WITH E.C.

13 July 2007

Interstate Lotteries Treaty holds the potential for litigation in European Court of Justice

According to the German Gaming Law blog, the possibility of a confrontation between the 16 German states and the European Commission over a ban on companies from other EU nations entering the German betting market could have moved closer with a declaration by the state of Schleswig Holstein - the only state to hold off since the end of last year on signing the Interstate Lotteries Treaty - to do so.

The European Commission has been adamant that EU nations cannot erect unjustified barriers to the free passage of goods and services and has issued warnings to several states that legal remedies are an option that might be taken.

All forms of Internet gambling in Germany except for horseracing are prohibited by the treaty, which extends the state monopoly on lotteries and sports betting services until 2012. There are also provisions which require German financial institutions to halt payments to online gambling companies, in some ways mirroring the American Unlawful Internet Gambling Enforcement Act.

There have already been a number of exchanges on the issue between the European Commission and Germany, rejecting the protectionist nature of the ban and the German claim that it is necessary to fight gambling addiction despite its own offerings to the German public. The Commission is also unhappy with restrictions on financial movements and advertising.

Explaining the hold-out state's decision, its prime minister said: “There are at present no viable alternatives to securing revenue from gambling."

The draft Treaty is due to be signed later this year.

Unsourced reports in Der Spiegel recently (see previous InfoPowa report) that the European Commission may be seeking a compromise over the issue could be overtaken by these events, says German gaming lawyer Martin Arendts: “It looks like there is going to be some sort of war between Germany and the European Commission - the European Commission has already said in its previous letters that there will definitely be another infringement proceeding if the draft Treaty is adopted,” he opined.

“Even the German civil servants responsible for drafting the Treaty concede there are problems with it given that casinos and slot machines will not be subject to the same level of protection as betting and lotteries,” says Arendts. “If you look at the most recent EFTA Court decision on the case between Ladbrokes and the Norwegian government, the need for states to show consistency in their gaming policy as a whole is important – and there is definitely not a coherent policy in Germany.”

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