INSIDE THE EU: THOUGHTS FOR MODERN REGULATION OF INTERNET GAMBLING IN A TRANSATLANTIC PERSPECTIVE. SMART-TECH by Philippe Vlaemminck attorney at law 2010Member.

INSIDE THE EU: THOUGHTS FOR MODERN REGULATION OF INTERNET GAMBLING IN A TRANSATLANTIC PERSPECTIVE.

SMART-TECH by Philippe Vlaemminck attorney at law2010 Member of the Brussels bar (Belgium)New York Vlaemminck & Partners bvba

EU legal developments: overview

European Court of Justice: Recent landmark case: Liga Portuguesa de Futebol

Profissional Increasing number of preliminary cases at European Court Several opinions of Advocates General

Commission: Infringement cases ( under scrutiny against 10 Member

States) Green Book?

European Parliament ( White Paper on Sport, Schaldemose report)

Council: discussions in Working Group (FR, SW, SP, B)

List of pending preliminary cases prove need for legal certainty

Case C-409/06: Winner Wetten (Germany) Joint cases C-316/07 e.a. Markus Stoss and others (Germany) Case C-46/08: Carmen Media Group ( Germany) Case C-64/08 Engelmann (Austria) Case C-145/08: Club Hotel Loutraki (Greece) Case C-203/08: Betfair (the Netherlands) Case C-258/08: Ladbrokes (the Netherlands) Case C-212/08: Zeturf (France) Case C-235/08: Langer (Austria) Case C-448/08: Sjöberg (Sweden) C-58/09: Leo-Libera (Germany) Case C-347/09 Dickinger (Austria) Case C-…/.. Italian Surpreme Court (Italy)

ECJ judgment in Liga Portuguesa de Futebol Profissional case (C-42/07) – 8 September 2009

ECJ extended its previous case law on the validity of an exclusive right in the gambling sector to an exclusive right system regarding the online provision of gambling services

Par 67:

ECJ acknowledges that the grant of exclusive rights to operate games of chance via the internet to a single operator, which is subject to strict control by the public authorities, may, in circumstances such as in the proceedings, confine the operation of gambling within controlled channels and be regarded as appropriate for the purpose of protecting consumers against fraud on the part of the operators.

ECJ judgment in Liga Portuguesa de Futebol Profissional case (C-42/07) – 8 September 2009 (II)

Most important achievement = ECJ explicitly denied application of principle of mutual recognition in the gambling sector (par 69):

“in the absence of Community harmonization, a Member State is entitled to take the view that the mere fact that an operator such as Bwin lawfully offers gambling services via the internet in another Member State, in which it is established and where it is in principle already subject to statutory conditions and controls on the part of the competent authorities in that State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime, 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.”

ECJ judgment in Liga Portuguesa de Futebol Profissional case (C-42/07) – 8 September 2009 (III)

End of off-shore gambling hubs like Malta, Gibraltar, Costa Rica, Antigua,…

Competent authorities in (Member) States of establishment cannot sufficiently guarantee the integrity and professional quality of operators providing their services in another MS

(Member) State of residence of the consumer can maintain its own restrictive conditions and can legitimately prohibit or restrict the access to their territory for operators established in other jurisdictions

ECJ ruled itself that (Member) State is entitled to prohibit the provision of online gambling services within its territory by an operator established in another (member) State

ECJ judgment in Liga Portuguesa de Futebol Profissional case (C-42/07) – 8 September 2009 (V)

ECJ ruling in Liga Portuguesa de Futebol Profissional case is not an isolated ruling: it follows the line of the previous case law related to gambling services

This time the ECJ denied the application of the principle of mutual recognition in an explicit way!

Impact on all national restrictive regimes, not only limited to Portugal!

Guideline for political debate on gambling within EU institutions: no country of origin approach can be accepted!

Opinion AG Bot in Betfair and Ladbrokes cases (C-203/08 and C-258/08)- 17 December 2009

Reiterates right of (Member) States to grant an exclusive right

Gambling should only be open for competition when the (Member) State treats it as a normal economic activity

Supports the application of the precautionary principle in the gambling sector: (Member) State 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

Opinion AG Bot Sjöberg and Gerdin cases (C-447/08 and C-448/08)- 23 February 2010

Confirms validity Swedish legislation which reserves the right to organize gambling services only to licensed operators which carry on their activities under strict supervision of public authorities

Sweden can grant the exclusive right to state entities or to non- profit entities under its supervision

Extends Liga Portuguesa ruling to the factual circumstances of this case: one can no longer argue that the Liga Portuguesa ruling is limited to Portugal

The findings of the Liga Portuguesa ruling are also applicable to a lesser restrictive means, as in casu, a prohibition on the cross border promotion of games organised in other MS

Opinion AG Bot Sjöberg and Gerdin cases (C-447/08 and C-448/08)- 23 February 2010 (II)

Difference with Opinion in Liga Portuguesa ruling: Liga Portuguesa: if Member State treats gambling

services like a genuine economic service and aims to maximize profits, Member State is obliged to open up its market

Sjöberg: if national regime seems appropriate to protect consumers against the risks of fraud and crime, it can be compatible with EU law: in that regard it is not important whether the entity exercises its activities as a normal economic activity in the light of maximization of profits and whether or not the regime can achieve its other general interest objectives (f.e. prevention against gambling addiction)

Economic objective & controlled expansion no longer hurdle in fight against crime & fraud if Court follows AG

Opinion Mengozzi in Markus Stoss (C-316/07) and Carmen Media (C-46/08) cases – 4 March 2010

Consistency of a restrictive gambling policy: Assessment needs to be made for each sub sector separately From a national viewpoint: regional differences may render

system inconsistent BUT mere fact that powers in relation to games of chance are

distributed among a number of territorial entities does not in itself jeopardize the consistency of a policy

Circumstances that need to be taken into account: Fact that monopolist induces people to participate in games of

chance is not sufficient to rule that legislation is inconsistent, if Promotion is moderate Genuinely intended to prevent crime or to channel

propensity for gaming in a regulated and controlled system Not aimed to increase the revenue of the public purse

Opinion Mengozzi in Markus Stoss (C-316/07) and Carmen Media (C-46/08) cases (II)

Allowing private operators to offer games of chance involving a risk of addiction which is equivalent or greater than the games subject to the monopoly is not, in itself, inconsistent in relation to public interest objectives and doesn’t make the monopoly disproportionate, provided that: Public authorities guarantee sufficient supervision of the private

operators “Forms of gaming on offer which are covered by the monopoly are

fewer thah those which migth exist with a private provider

Denial of principle of mutual recognition: Free movement principles do not confer upon licence holder the

right to offer gambling services on the territory of other member states

Especially in relation to off-shore licences

Opinion Mengozzi in Markus Stoss (C-316/07) and Carmen Media (C-46/08) cases (III)

Prohibition online gambling is consistent, if proportionate and consistent with public interest objectives notwithstanding temporary exceptions for certain

undertakings which were operating exclusively

Development in different EU States Different EU Member States have

replaced or are in a process of replacing a total prohibition of Internet gambling by a national regulatory model( Italy ( concession) , France ( licenses) , Denmark, Spain, Belgium (license +),… )The reason behind are: Pressure from EU Commission ( incoherent

regulatory approach of gambling) law enforcement has proven ineffective Loss of revenues and/or taxes

Unresolved matters: regulatory control? If governments wants to control Internet gambling & respect

each other, they must all take measures to keep the offer within their own borders

Different measures prove to be difficult: Geolocation technology, IP blocking, payment blocking

Other risks & problematic solutions : Attractiveness?:

Controlled expansion possible within own borders Probably economic objective possible But, problem of liquidity ( lack of equal opportunities for

customers) in smaller jurisdictions and/or compared to international operating companies

White label connection and foreign player admission: What about the control over other connected operators What about risk of money laundering What about respect of territoriality principle

An EU solution? A transatlantic solution? Inside the EU, if States want to fight fraud and crime in gambling, it seems that States

can expand their gambling policies to Internet gambling and prohibit all cross border supplies

Monopolies and other strongly controlled operators are adequate means for doing so Most probably the States can pursue an economic objective by doing so and try to

maximize profits which will provide consumers with an attractive alternative to illegal gambling

Law enforcement and administrative injunctions (IP & payment blocking) are necessary, but not enough

A regulatory framework under EU law could be created whereby licensees can only offer their games to registered customers who are resident in the concerned EU jurisdiction where they obtained their license.

Operators can only get a license to connect to others if all connected operators know each other and have signed up to such multi party contract as all regulators in the involved jurisdiction may require providing all necessary guarantees for the integrity of the games and financial transactions ( the so-called “EuroMillions model” -approach)

Further coordination could be done through an EU wide Gambling Regulators Committee set up under EU law

In the absence of GATS commitment on the EU side and on US side, and if the involved authorities would consider it appropriate and in accordance with their laws, such regulatory approach could be widened through a transatlantic agreement.

Thank you for your attention!

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Disclaimer : Nothing in this presentation can be considered as legal advice and/or used

for such purposes and/or may be relied upon in any discussion between parties and/or

with government authorities, nor in any Court. Issues addressed in this presentation do only

concern the EU and EU law