August 2012

As remote gaming operators prepare to file applications hoping to obtain one of the limited number of licenses available under Germany’s new Inter-State Treaty on Gambling the newly-elected government in Schleswig Holstein is chasing its electoral promise to overturn that state’s current gambling rules and joining the Inter-State Treaty, to which the other German States are already a party.

However, it appears that this small German state is also considering issuing more licenses under its own gambling laws – the same ones that the new government wants to repeal. The reasoning seems to be that until a final decision is taken on how to move forward in respect of repealing its existing remote gambling laws it would be unreasonable, if not also illegal, for the state to deny legitimate applications for licenses under its existing legal framework.

In addition, no doubt to relief of the seven operators licensed under Schleswig Holstein’s remote gaming laws, Schleswig Holstein’s Minister of Interior Affairs has stated that licenses which have already been issued are not to be challenged.  In the meantime Liberal Party Chairman Wolfgang Kubicki commented that Schleswig-Holstein’s rules are in line European Union standards, but the 15 states’ rules do not meet such requirements. He stated that repealing Schleswig Holstein’s current rules will cost Schleswig-Holstein small state jobs and tax income, and could also lead to it being involved in numerous lawsuits. Without the benefit of having analysed German federal law or Schleswig Holstein’s laws in detail, it seems to us that on the face of it holders of a Schleswig Holstein remote gambling licence (sportsbook, poker or both) would be entitled to damages arising contractually under the licence agreement. We do not see why applicants for a licence which have not yet receive one should not also be able to formulate a claim for restitution based on a legitimate expectation.

Background: Back in May 2012, Schleswig-Holstein issued its first batch of sportsbetting licences to Betfair, Jaxx AG subsidiary myBet and state lottery firm NordwestLotto. This came after this state passed its own legislation for the regulation of remote gambling in September 2011 rather than joining the Inter-State Treaty along with the other 15 German states.

Schleswig Holstein’s current remote gambling rules require operators to pay a 20% tax on gross profits instead of the 5% of turnover imposed under the Inter State Treaty. There is also no limit on the number of licences. The European Commission has recently issued its opinion on the Inter-State Treaty which we understand questions several aspects of the Inter State Treaty including the E15’s failure to properly  justify the ban on remote poker and casino and certain aspects of the licensing procedure for sportsbetting. We also understand that the European Commission has not excluded the possibility of taking action against Germany on the basis of non compliance of the Inter State Treaty with European Union Law.

On the other hand, Schleswig-Holstein’s legislation had been deemed to satisfy European standards after receiving the blessing of a conclusively favourable opinion by the European Commission. breakaway state. While the latest indications are that the seven remote gaming licenses issued by Schleswig Holstein might be safe for now  it remains to be seen what Schleswig Holstein will do with pending applications and indeed how the European Commission will deal with the German Inter State Treaty on Gambling going forward. It seems to us that the very latest decision by the Court of Justice of the European Union (Costa and Cifone, Hit and Hit LARIX, Fortuna, Grand and Forta, Garkalns SIA) indicate that the CJEU will not bend over backwards to accommodate European Union Member State the laws and administrative procedures of which do not adhere to the principles which the CJEU itself has set out in the field of gaming and gambling.

Author:

James Scicluna

Beverly Pace

Date:

28th August 2012