E.U. GAMBLING MONOPOLY PRINCIPLES IN THE SPOTLIGHT

17 October 2008

Portugal's request for guidance reignites the cross border debate

 

Yves Bot, the advocate-general at the European Court of Justice, reignited the cross-border gambling debate this week when he opined in a non-binding media statement that the Portuguese decision to ban online gaming operators based outside the country could be legal if it met conditions that include a public interest test and essential protection of consumers.

But such monopolies must not become pure money machines, the statement cautioned - monopolies are only acceptable if the goal is to protect consumers and maintain public law and order.

And the Financial Times reports that the ECJ official said it was up to the local courts to decide whether Portugal acted legally in extending its gambling monopoly to Internet-based betting.

The European Union policy of free movement of goods and services between member nations, which has so often formed the basis for litigation against exclusive state owned gambling monopolies, could be influenced by future rulings from the ECJ as the superior court in the EU.

The case is the first in which an ECJ official has considered whether a country can legitimately extend a state gaming monopoly to the Internet, and could have wide implications. Private gaming companies, intent on expanding their operations in the EU's Euro 400 billion gambling market, have argued repeatedly that restrictions aimed at keeping them out of certain countries breach principles of free and fair trade.

The Reuters news agency reports that the Portuguese case was initiated when online gambling betting group Bwin and the Liga Portuguesa de Futebol Profissional were fined Euro 74 500 and Euro 75 000 respectively by a Portuguese court for offering "mutual betting by electronic means" and advertising their services.

The companies contested the fines and questioned the legitimacy of the Portuguese law extending the gaming monopoly to online betting. Subsequently, the Portuguese courts asked for guidance from the ECJ on the issue.

According to the ECJ official's press release, a member country can only be forced to liberalise Internet gaming for its residents ‘if the country treats gaming and gambling as an economic activity to ensure maximum profit.’

With several EU countries currently under pressure from the European Commission to liberalise online gambling policies, including Germany, France, Holland and Denmark, the statement, although non-binding and an opinion at this stage, will be read with considerable interest.

Portugal's Santa Casa betting monopoly will also no doubt find it encouraging, although laws bringing into question the central EU policy must be approved by the European Commission.

Bot said the Portuguese law as written "constitutes a restriction on the freedom to provide services" by barring foreign gaming firms. But such a restriction was justified if it met an overriding reason relating to the public interest, was proportionate and not applied in a discriminatory way, the court statement said.

The European Gaming and Betting Association has been quick to interpret the ECJ statement as an opinion that shows that the Portuguese monopoly should not be extended to the Internet and would not pass the tests laid out.

Taking an opposite view, the European State Lotteries and Toto Association said the Bot opinion backed its view that gambling and betting should not be subject to the rules of the EU's internal market.

EU Internal Market Commissioner Charlie McCreevy, who oversees the gaming sector and has been behind a determined drive to enforce the free movement of goods and services between member nations, said last month he was facing opposition inside the EU executive and from key member states to pushing ahead with legal actions against offending states.

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