According to the will of the 15 consenting state prime ministers the state sports betting and gaming monopoly shall be upheld for further four years. A licensing system, allowing private operators to be licensed as well, which was proposed and supported by many, was rejected by the majority.
However, the procedure of passing the new treaty as well as the content of the new Interstate Treaty on Gambling is highly problematic from a legal point of view. The following legal aspects have to be considered:
Is market foreclosure compatible with Community law?
The current as well as the projected Interstate Treaty lead to a foreclosure of the German gambling market with regard to operators from other EU Member States as well as those from the European Economic Area (EEA). Only German state operators or those related to them are legally allowed to offer sports betting and other games of chance, whereas private operators as well as state operators from other Member States are left out by the monopoly. Especially Internet offers, which are particularly suited for the cross-border provision, will be completely forbidden without any objective reasons.
The evidently intended market foreclosure by the states is in particular a violation of the freedom to provide services and is therefore neither compatible with EU law nor with EEA law.
Are the requirements set forth by the Federal Constitutional Court being implemented?
The Interstate Treaty is meant to create a consistent legal situation for all 16 German states. An Interstate Treaty which is not adopted by all states leads to a split legal situation in Germany and therefore exactly not to a coherent, comprehensible and systematic legal regulation. However, from a constitutional point of view, such a coherent regulation for the whole area of gambling is necessary to uphold the monopoly. The requirements set forth in the decision of the Federal Constitutional Court of 28 March 2006 are therefore not implemented by an Interstate Treaty which is not applicable in all the states.
May private competition be banned?
The projected Interstate Treaty does not take into consideration concerns and objections voiced by the Federal Cartel Office (Bundeskartellamt). The Cartel Office repeatedly stressed that the rest of marginal competition had to be upheld. The complete ban of private competition is neither compatible with German nor with EU competition law.
As we already mentioned in no. 50 of our newsletter German Gaming Law updated, the Court of Appeal of Düsseldorf explicitly retained that an Interstate Treaty cannot suspend European competition law. From a constitutional point of view, a transitional period as short as one year should not be able to be upheld.
Legitimacy of the 13/16 rule?
According to the draft of the new Interstate Treaty, it comes into effect, if it is ratified by 13 of the 16 state parliaments. This is not compatible with the principle of Federalism and violates the state parliaments’ rights. The Interstate Treaty leaves open the consequences for the (up to three) states in which the Treaty will not come into effect.
What happens to the current Interstate Treaty?
Every treaty, the current Interstate Treaty included, can be annulled or modified by unanimous decision. Without such a unanimous decision one could only think of a unilateral termination. The current Interstate Treaty on Lotteries, in its Art. 17, provides for a termination with a period of two years to the end of a calendar year, with the first termination possibility on 30 June 2014. The other states, even by a clear majority vote, can not release themselves from their obligation towards their contractual partner Schleswig-Holstein.
Conclusion: If the majority of the German states will continue to pass and implement the new Interstate Treaty, this will certainly lead to considerable legal disputes on German as well as on European level.