ECJ Says Blocking of Unlicensed Gaming Sites Can be Legal

In a blow to Betfair and Ladbrokes’ dispute with the Netherlands government over their right to provide gambling services to Dutch citizens, Advocate General Bot of the European Court of Justice said today that Member States could grant a single operator the right to provide gambling services in the country and reaffirmed the State’s right to prohibit unlicensed foreign operators from offering such services to its citizens.

The two references for a preliminary ruling sought to determine whether the Netherlands legislation conforms with EC Treaty rules on the freedom to provide services.

Case C-203/08 concerns a dispute between The Sporting Exchange, trading as Betfair, and the Dutch Ministry of Justice. The case concerns the rejection of Betfair’s application for a licence to provide betting services in the Netherlands and its actions against the decision to extend the licences of De Lotto and Scientific Games Racing.

Case C-250/08 has arisen from actions brought against Ladbrokes by De Lotto, seeking to prohibit the British bookmaker from offering internet gambling to Dutch citizens.

The two references for preliminary rulings raised four questions.

The first question sought to establish whether an EU Member State with a restrictive gaming policy for the purposes of curbing gambling addiction and fraud, can be deemed to consistently and systematically pursue those objectives when the monopoly holder is authorised to make its offering more attractive by introducing new games and using advertising.

In Advocate General Bot’s non-binding opinion, he states that the “legislation of a Member State must be deemed to pursue those objectives in a consistent and systematic manner if, according to the assessment carried out by the national court, that law, in the light of its content and how it is applied, actually contributes to the attainment of those two objectives.”

He said that a Member State was justified in imposing restrictive measures for the purpose of counteracting fraud in the gaming sector by way of prevention, since it has the right to invoke the risk of fraud associated with gaming as the basis for legislation restricting that activity, without being required to show that fraud is actually being committed in its territory.

The second question sought to establish whether a national court is required to ascertain whether an enforcement measure aiming to secure compliance with the country’s legislation is consistent with the principle of proportionality, if it has already ascertained that the national legislation is compatible with Community law.

In reply to the second question, Bot said that “where the national court has found that the restrictions imposed by its national legislation conform with the Community principle of proportionality, that court is not compelled to ascertain and to show, in every particular case, that a measure simply enforcing that legislation is also consistent with that principle, where that measure is strictly confined to ensuring that the legislation in question is applied, without creating any additional restriction.”

The third question asked whether a Member State with a restrictive gaming policy can prohibit an operator from providing gaming services in its territory, when that operator is licensed to provide such services in another Member State.

The reply to the third question is to be inferred, first, from the judgment in Liga Portuguesa de Futebol Profissional and Bwin International, which states that the principle of mutual recognition does not apply to a licence to offer games online and, second, from the case-law to the effect that a system of exclusive rights may be compatible with Community law.

Bot proposes that Article 49 EC must be interpreted as meaning that “the fact that a provider of games online is authorised to engage in that activity by the Member State in whose territory he is established does not preclude the competent authorities of another Member State, in which gaming is subject to a system of licences limited to a single operator, from prohibiting that provider from offering games on the internet to persons residing in the territory of that other Member State.”

The fourth question sought to establish whether under Article 49 EC, does the principle of equal treatment and the associated obligation of transparency apply in the gambling sector in relation to a system for licensing a single operator and if so, how far can a single operator’s licence be extended without competitive tendering?

This question relates to the extension of the licences of De Lotto and SGR in 2004 and 2005 respectively, and the assumption that the decisions were taken without prior call for tenders.

With regard to the principle of equal treatment and the obligation of transparency, Bot said that Article 49 EC must be interpreted as meaning that the principle of equal treatment and the associated obligation of transparency apply also to the gaming sector in the context of a system where a licence is issued to a single operator. This means that even when a monopoly license is to be granted, operators must be able to compete in a transparent manner for the right to such a license.

Commenting on the ECJ Opinion, Sigrid Ligné, Secretary General of the European Gaming and Betting Association, said: “This is a key question for the Court given that the exclusive licence has repeatedly been handed out to De Lotto without any form of tender. There was no opportunity for other EU operators to compete with De Lotto.”

Bot proposes that “the Court should find that they apply to a licensing system which is limited to a single operator in the gambling sector, and that they preclude the extension of a licence without competitive tendering unless the omission of a call for tenders is validly justified on one of the grounds laid down by the Treaty or accepted by the case-law, which is a matter to be verified by the national court.”

The opinion of the Advocate General is a formal part of the proceedings but is not legally binding upon the Court.