Spring 2010

This article provides an assessment of the implications of the European Court of Justice (ECJ) judgment in BWIN case (case C-42/07 decided on 8/09/2009) on Malta-based remote gaming operators.

Background

In Portugal, the right to offer games of chance is reserved to Departamento de Jogos da Santa Casa da Misericórdia de Lisboa  (‘Santa Casa’), which is both the operator and the body with the right to prosecute illegal gambling in Portugal. BWIN, a remote gaming operator, offers online gaming to consumers, including in Portugal, on the basis of its licence in Gibraltar. BWIN also sponsors Liga Portuguesa de Futbol Professional. As a result of a case brought against it by Santa Casa, BWIN was fined for offering and promoting in Portugal games that only Santa Casa could offer. BWIN challenged the fine before the Portuguese court on the basis that Portuguese law was contrary to Article 49 of the EC Treaty. The court referred the matter to the ECJ.

The ECJ ruling

In its judgement, referring to a number of its previous decisions, including LääräZenattiGambelliPlacanica, the ECJ confirmed its previously established position, namely that

–     legislation  in a Member State (in Portugal in this case) prohibiting providers from other Member States to offer services via internet constitutes a restriction on the freedom to provide Services across border under Article 49 of the EC Treaty;

–     that the said restriction may be justified on the grounds of public policy, public security or public health; as well as on the grounds of overriding reasons in the public interest, such as the objectives of consumer protection and the prevention of fraud, and the general need to preserve public order;

–     in the absence of the Community harmonisation in the field, it is up to the Member State to determine what is required to ensure that the said interests are protected.

–     The restrictive measures imposed by a Member State must satisfy the conditions as regards to their proportionality, so that the measure does not go beyond what is necessary to achieve the objectives and that it genuinely reflects a concern to attain it in a consistent and systematic manner; the measure must also be non-discriminatory.

The Court also found that the granting of an exclusive right to a government-controlled body may, in circumstances such as those in the main proceedings, ‘be regarded as appropriate for the purpose of protecting consumers against fraud on the part of operators.’ Moreover, the ECJ stated that

(a)    A Member State is entitled to take the view that the mere fact that an operator is licensed in its jurisdiction of establishment where it is ‘in principle already subject to statutory conditions and controls’ is not sufficient assurance that national consumers will be protected ‘in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators’; and

(b)   due to the lack of direct contact between consumer and operator in the case of Internet gambling, Internet gambling involves different and more substantial risks of fraud by operators comparing to ‘traditional markets for such games’; and

(c)     ‘the possibility cannot be ruled out that an operator which sponsors some of the sporting competitions on which it accepts bets and some of the teams taking part in those competitions may be in a position to influence their outcome; and

(d)   in the light of specific features of internet gambling, the restriction on such gambling may be regarded as justified by the objective of combating fraud and crime.

The ECJ concluded that Article 49 does not precludePortugalfrom prohibiting operators such as Bwin, which are established in other Member States in which they lawfully provide similar services, from offering games of chance via the internet within the territoryPortugal.

Observations

The ECJ judgment in Bwin case has been regarded by many as a serious blow to remote gaming operators providing services across border, including Malta-based licensees. Indeed, the conclusion explicitly states that Article 49 is not an obstacle if a Member State decides to have a monopoly and prohibit internet operators based and regulated in other Member States from offering their services in that Member State. It also explicitly states that a Member State is justified to maintain a view that the fact that an operator is already regulated by another Member State (such as by Malta) is not in itself sufficient assurance for the purposes of protecting consumers against fraud by the operator. These conclusions, without doubt, will be used by Member States maintaining monopolies in justifying their positions, both in cases referred to ECJ for a preliminary ruling, as well as in infringement proceedings. The judgment has been given by the Grand Chamber of the Court consisting of 13 judges, showing that the Court itself considered the case to be of significant importance.

The most damaging feature of this judgment for online operators, in my view, is that its conclusions (that a monopoly may be justified to protect consumers against crime and fraud) have been reached without any factual examination of the situation in question, but simply on the basis of very generic and quite unfounded statements relating to the nature of internet gambling itself. For instance, while the objective for justification of the restriction is the protection of consumers against fraud and crime, there is no analysis by the Court (and no requirement for such analysis imposed on the national court) as to whether, as a matter of fact, Bwin’s standards of regulation at the place of establishment/licensing are at par with Portugal’s standards for protection against crime and fraud. Moreover, the judgment states that the risk of fraud and crime in internet gambling per se is higher comparing to other channels of gambling.

On the other hand, the judgment does not really establish any new ground for justification of monopolies and extensively refers to previous judgments, such as Placanica, to found its conclusions, while dwelling in more detail on one previously established ground – the justification on the basis of the objectives of consumer protection and the prevention of fraud (as an overriding reason in the public interest). Accordingly, all previously established criteria still apply; and a restriction may only be justified if it is proportionate, non-discriminatory, genuinely reflects a concern to attain the objective, and is consistent and systematic. While in the circumstances of the Bwin case, the Court concluded that the restriction is justified, it does not mean that the same conclusion would necessarily be reached for all other restrictions or in all other cases. The judgment does not remove the need to examine a restriction of a particular Member State against the established criteria. Therefore, conclusions in respect to restrictive measures imposed by other Member States, say Germany or the Netherlands, may still be found not justifiable, notwithstanding the judgment in Bwin case.

Moreover, while in Bwin case the ECJ judgment does not contain a factual analysis of the regulatory standards imposed on Bwin, it may be, at least to a certain extent, explained by the fact that Bwin is regulated in Gibraltar which is not subject to all EU directives and regulations (the point raised by the governments of Member States who made their submissions in this case), possibly causing the Court to dispense with the examination of the applicable regulation as superfluous and to conclude that the standards of regulation are not at par with those of Portugal. The situation is different in case of Malta-based licensees and an analysis of the Malta’s regulatory standards and their comparison to those of the Member States that impose a restriction would then become necessary to assess whether a restriction is justifiable. Given the high level of regulatory oversight in Malta in respect of both applicants for a licence and licensees, as well as the fact that Malta, as a full EU Member State, is subject to EU law in its entirety, the conclusions may well be different from those reached in Bwin case.

Conclusion

With respect to the provision of services by Malta-licensed operators to consumers in EU Member States that maintain monopolies, while the Bwin judgment upholds the Portuguese monopoly and adds strength to other monopolies’ arguments in justifying their exclusive rights, the judgment does not in any way contain a blanket approval of monopolies. Focusing on a single objective that may justify a monopoly – the objective of preventing crime and fraud – the judgment leaves room for operators based in full EU Member State, such as Malta, to argue that the fact that they are subject to high standards of thorough regulatory oversight effectively renders a restriction (monopoly) as going beyond what is necessary to achieve the objectives of preventing fraud and is, thus, not justifiable.

At the same time, in relation to the provision of services by Malta-based licensees to consumers in EU Member States that have opened or in the process of opening of their markets, Bwin judgment appears to have no relevance.

Author:

Olga Finkel(olga.finkel@whpartners.eu)

First Published in:

European Gaming Lawyer, Spring 2010

Link:

http://www.gaminglawmasters.com/magazines/european/EuroGameLawSpring2010.pdf