James Scicluna and Joseph Borg were recently interviewed by the Lawyer Monthly magazine.  The interview was published in the October 2014 issue and addressed Malta as a place for gambling companies to do business

Please introduce yourself, your role and your firm.

James Scicluna, partner at WH Partners. Joseph Borg, senior advisor at WH Partners. Both heavily involved in advising businesses providing remote gambling services or supplying providers of remote gambling services.

WH Partners is a leading Maltese law firm whose approach combines an in-depth grasp of clients’ industries with a result oriented approach to work. We are particularly active in the gaming & gambling, leisure and entertainment, payments, e-money, e-communications, financial services and wealth management industries. We have leading experience of and expertise in licensing, taxation, IPR protection and exploitation, corporate finance, M&A, and employment in these areas. We regularly assist clients with making sense of multiple jurisdictions.

Our firm has won prestigious international quality awards for its service levels and our partners are ranked by Chambers & Partners, Legal 500, IFLR 1000 and Who’s Who Legal.

Can you give me an overview of the legalities of the gambling industry in your country at the moment?

Gambling is regulated by the Lotteries and Other Games Act (“Act”) and the regulations made under the Act. The Act also establishes the Lotteries and Gaming Authority (LGA), which is the regulator of all gambling that takes place in Malta other than the local Tote, which is a historic anomaly likely to be corrected in the short term.

Maltese law provides for the licensing and regulation of casinos, gambling parlours (VLT shops), the National Lottery, sports betting, bingo halls and remote gambling. There are five bricks and mortar casinos in Malta and a tender process is currently underway for the operation of a further two.

Malta was the first EU Member State to specifically regulate remote gambling back in 2004. It is now one of the largest remote gambling jurisdictions world-wide.

The sound framework of the Remote Gaming Regulations, made under the Act was probably the key contributor to Malta’s popularity as success of online gaming regulation in Malta. An experienced regulator, tax efficient environment, availability of good quality services, human resources and reduced costs of back office operation have also contributed to this.

Are Maltese gambling laws likely to be amended or updated? What effect would the potential reforms have on the gambling industry?

Maltese gambling law has served consumers, operators and Malta well.  But ten years is a long time in a dynamic and technology reliant industry such as remote gambling. Regulation must keep up pace with technology, with regulatory developments elsewhere around the world and with market needs. Given its leading experience in this sector we wouldn’t be surprised at all if Malta sought to future proof its gambling regulations. The impact any reforms might have depends on the reforms, but it is likely that Malta would be minded to keep consumer protection and the availability of new technologies at the forefront of any changes.

Two years ago the EU court judged that OPAP’s gambling monopoly in Greece was illegal and that authorities should reform the sector to protect consumers or open it up to competition. Have there been any reforms?  Several gambling companies accepting customers in Greece are Maltese. What are your views on this?

In that case the ECJ confirmed its view that EU law precludes restrictive national legislation which grants exclusivity to a single entity if that restriction does not (i) genuinely reduce opportunities for gambling, (ii) either limit gambling activities in a consistent and systematic manner or (iii) ensure strict control of the expansion of the gambling sector insofar as necessary to combat criminality.

As a reaction to this ECJ judgement, Greece issued 24 provisional licences to operators which were already licenced in another EEA member state. Several of these are Maltese companies licensed in Malta.  Greece has repeatedly threatened to take action against operators still accepting Greek customers, other than the 24 provisional licence holders. However, it seems to be unable to actually bite also because the Greek regulator earlier this year granted the recently privatised Greek gambling monopoly OPAP the “right” (arguably with no sound legal basis) to accept business remotely, just in time for the FIFA World Cup.

This lack of consistency is one of the factors which we think continues to undermine Greece’s ability to argue in favour of its ability to derogate from the EU’s freedom to provide cross border services. Still, Greece’s threats to prosecute operators which violate national law succeeded in frustrating the operations of large remote gambling stakeholders in the Greek market. Some stake-holders stopped taking business from Greece altogether, others have continued to do so even though their sites were black-listed and blocked by ISPs in Greece, while others have had to renounce control of their player database and operation in general to allow their brand to remain relevant in the Greek market.

There is significant uncertainty as to what will happen next, although the European Commission’s recent warning to Greece that it is preparing to resuscitate infringement proceedings related to Greece’s gambling laws leaves little doubt that the next move must be Greece’s.

What are the key legal issues that gambling companies must consider?

Compliance with the myriad national regulatory regimes across Europe and beyond is probably the biggest challenge operators face  at the moment. Compliance requires substantial investment in human resources, expert advice and technical implementation.

A specific tax related challenge which concerns anybody supplying services electronically in the EU is the implementation of the point of consumption principle in the latest EU VAT directive from 1 January 2015. Remote gambling operators will be affected and must be aware of how their services will be treated for VAT purposes in the countries where their customers are located.

Have there been any other key cases within the industry over the last year?

Apart from the Digibet case (C-156/13) we have not seen many decisions on gaming related cases in 2014. Digibet is very specific to the German situation and somewhat confirms previous decisions, in particular the Carmen Media judgement. We think that the consistency requirement, a key feature of several decisions of the ECJ over the past few years, including the Digibet and Carmen Media cases, as well as arguments related to transparency very much apply to Greece and Germany. It will be particularly interesting to follow litigation related to the issue of licenses under the German Interstate Treaty on Gambling as well as developments in Greece over the coming months.