Codere versus the world

Sportingbet decision looks like a disaster but all might not be lost, according to Spanish lawyers

Spain’s Codere has never been shy of using its lawyers to protect market share and with the online market opening imminent, it is doing its best to disrupt things. Last week it managed to get a Madrid court to close down Sportingbet’s Spanish operations.

Given the amount of hits we have had on this story, the decision was not just a shock to Sportingbet. The world’s eyes are on Spain and decisions like this send a shudder through the market.

The Madrid court’s judgment flies in the face of the approach adopted by two other Spanish courts, which have decided on the same issue with regards to the operations of two other companies, namely, Bwin and PokerStars.

“It is difficult to understand why the situation is so urgent that the only solution is blocking the website. This is very severe,” a Spanish lawyer tells me.

This is especially difficult to understand when firstly, a transition period has been granted by law, allowing operators to continue their business in Spain and to pay the corresponding taxes. (As a matter of fact, Spanish tax law states that taxes can only be derived in connection with legal activities.) And secondly, licenses will be granted very soon.

“I am especially surprised about the court considering that a ‘real and irreparable’ risk was present to Codere unless Sportingbet's Spanish site was blocked,” says my lawyer friend. “This was the key issue and it is hard to imagine how such a risk may be given where there exists a legal provision setting forth the possibility for the operators to operate in Spain - on a transitory basis, but implying the duty to pay taxes.”

In Spanish unfair-competition court proceedings, adopting preliminary injunctions is quite exceptional and is limited to cases where there is an obvious and very severe risk that could not be compensated after the event.

The decision is all the more strange when we take into account the fact that the original writ filed by Codere requested the injunction be adopted from January 1st, 2012. Well, that was two months ago and Codere does not seem to have suffered a financial apocalypse.

Sportingbet and other operators have continued to exploit Codere’s activities (their words) during this period, they have paid their taxes and none of the risks indicated by Codere’s original writ (potential increase of gambling addiction, lack of protection of minors, etc.) seem to have caused massive social upheaval.

“I would be surprised if the injunction is maintained unless Codere provides a significant  guarantee (ie. millions of Euros) before the court in order to ensure that the eventual damages (and again that would be in the millions) that derive from this measure are covered,” says our source.

This is in case the final decision goes against Codere and then Sportingbet would have to be compensated due to the injunction. Sportingbet can appeal - and it probably will although it would not comment at the time of going to press.

So should other operators be living in fear? I have read one Spanish lawyer suggesting this decision indicates a new “get tough” approach from the Spanish authorities but several more tell me that this is a particular decision by a particular court and therefore should not necessarily have dire consequences.

Codere cannot choose which court its cases go to. Codere files its writ and then the registry decides which court is appropriate. Given the fact that two other courts have rejected Codere’s claims, there is no reason to believe this extraordinary decision will be repeated.

“I still think that Codere's position with regards to the preliminary injunction does not make sense and believe there are very strong grounds to counter-argue,” says another lawyer. “And the decision adopted by the court is not binding for the rest of the courts and does not constitute by itself case law, since it is a given decision adopted by a lower court.”

So, if you have just applied for a Spanish licence, you can probably breathe a big sigh of relief.

sah@gamingintelligence.com