Shopsson Loses Out to Differing Legal Views in Sweden

Nineteen months after launching its Shopsson branded retail outlet in Stockholm, Sweden, online gaming operator Betsson may have exhausted legal options in fighting the country's Lottery Inspectorate following a ruling against it last week in the Court of Second Instance.

Betsson opened the doors to Shopsson on May 30th 2008, providing something between an internet café and retail betting shop to Swedish consumers. The company said at the time that the opening of the shop was fully compliant with European law and lambasted the slow rate of political progress in settling the questions surrounding the Swedish gaming monopoly.

Within one month of the launch of Shopsson, Sweden's Lottery Inspectorate issued a fine of SEK2.5 million against Shopsson for promoting participation in unlicensed gambling , a crime under Article 38 of Swedish Lottery Law.

Shopsson subsequently challenged the fine in Swedish courts and requested a referral for a preliminary ruling to the European Court of Justice (ECJ) on grounds that the country's lottery law is incompatible with EC law.

The appeal was rejected by the County Administrative Court of Södermanland in November 2008 and again last week by the Administrative Court of Appeal.

In its ruling of December 7th 2009, the Administrative Court of Appeal found that Shopsson has promoted participation in gambling arranged outside Sweden and that there is no reason to refer the question of compatibility with EC law to the ECJ.

The court stated that "a series of rulings has clarified and detailed the meaning of the EC regulations brought up in this case," and that it has "established that the lottery law is compatible with European law".

The court added that following the ruling, Shopsson must now immediately cease the business in question.

However, despite the Court of Appeal's assertion that the lottery law is compatible with EC law, the country's second highest court, the Svea Court of Appeal, appears less certain.

On January 14th 2010, the ECJ will hear a referral for a preliminary ruling from the Svea Court, lodged on 13th October 2008.

The Court has referred five questions to the ECJ:

1. May discrimination on grounds of nationality be accepted, under some circumstances, on national gaming and lottery markets on the basis of overriding reasons in the general interest?

2. If there are a number of objectives pursued by the restrictive policy adopted on a national gaming and lottery market and one of them is the financing of social activities, can the latter then be said to be an incidental beneficial consequence of the restrictive policy? If this question is answered in the negative, can the restrictive policy pursued still be acceptable if the objective of financing social activities cannot be said to be the principal objective of the restrictive policy?

3. Can the State rely on overriding reasons in the general interest as justification for a restrictive gaming policy if State-controlled companies market gaming and lotteries, the revenue from which accrues to the State, and one of several objectives of that marketing is the financing of social activities? If this question is answered in the negative, can the restrictive policy pursued still be acceptable if the financing of social activities is not found to be the principal objective of the marketing?

4. Can a total prohibition on the marketing of gaming and lotteries organised in another Member State by a gaming company established there and supervised by that Member State's authorities be proportionate to the objective of controlling and supervising gaming activity, when at the same time there are no restrictions on the marketing of gaming and lotteries organised by gaming companies established in the Member State which pursues the restrictive policy? What is the answer to the question if the objective of such an arrangement is to limit gaming?

5. Is a gaming operator who has been granted a licence to operate certain gaming activities in a State and is supervised by the competent authority in that State entitled to market its gaming products in other Member States through, for example, advertisements in newspapers, without first applying for a licence from those States' competent authorities? If this question is answered in the affirmative, does this mean that a Member State's rules which are based on the imposition of criminal penalties on the promotion of participation in lotteries organised abroad constitute an obstacle to the freedom of establishment and the freedom to provide services which can never be accepted on the basis of overriding reasons in the general interest? Is it of any significance for the answer to the first question whether the Member State where the gaming operator is established invokes the same overriding reasons in the general interest as the State where the operator wishes to market its gaming activities?

In light of the obvious doubt that exists regarding the compatibility of the Swedish monopoly with European law, even amongst the country's highest courts, Betsson, or rather Shopsson, may yet believe that it can win its long running battle against the Lottery Inspectorate.