European Court of Justice to rule on the conformity of gambling monopoly with EU law

Rechtsanwalt Martin Arendts, M.B.L.-HSG

Arendts Rechtsanwälte
Perlacher Str. 68
D - 82031 Grünwald (bei München)
As already reported in German Gaming Law updated no. 93, the Administrative Court of Schleswig (Schleswig-Holsteinisches Verwaltungsgericht) raised considerable doubts as to the conformity of the new Interstate Treaty on Gambling (Glücksspielstaatsvertrag) with EU law and referred a case regarding the state monopoly on sports betting and gambling to the European Court of Justice (ECJ). The 19 page reference for a preliminary ruling, including the four questions submitted to the ECJ, was recently published (decision of 30 January 2008, file no. 12 A 102/06).

An interesting aspect is that this reference – unlike the other seven German references for a preliminary ruling submitted by the Administrative Courts of Cologne, Giessen, and Stuttgart – not only calls for the interpretation of the extent of the freedom to provide services, as provided for by Art. 49 EC Treaty, with regards to the monopoly on sports betting but with regards to lotteries as well.

Like the other German courts which referred cases to the ECJ, the Administrative Court of Schleswig argues that fighting compulsive gambling invoked as justification for the state monopoly is manifestly unsustainable. Other games of chance having higher or equal addiction potential (especially slot machine games – according to the Administrative Court of Schleswig those having the highest addiction potential – as well as horse-betting) can nonetheless be offered by private operators. In addition, state authorities expanded casino games despite their increased addiction potential.

The Administrative Court of Schleswig argued that the entire gambling legislation needed to aim at limiting gambling for a state monopoly to be justified. The argument of state monopoly advocates that there were different sectors of gambling (also embraced by the Administrative Court of Appeal of Hamburg) is clearly rejected by the Administrative Court of Schleswig. Rather one had to take a holistic view at the legislation as a whole:

„Regarding the question of a coherent and systematic limitation of gambling, the court is therefore not capable to find that the ECJ‘s requirements for enacting a valid limitation were complied with. A holistic view of all licensed and permitted offers of games of chance is obviously non-existent. Only such a holistic view can enable the legislator called upon to comprise the perceived dangers of gaming- and gambling addiction for the individual and society and to provide the necessary remedies.“

Federal particularities regarding legislative authority could not justify a gaming monopoly limited to a single sector.

The questions submitted to the ECJ

The Administrative Court of Schleswig requested the ECJ to give a ruling on the following question by way of preliminary rulings proceedings (Article 234 EC Treaty):

a) Is Article 49 EC Treaty to be interpreted to the effect that – invocation of the freedom to provides services implied – the provider of the services needs to have permission to provide the services in the country of establishment – here: limitation of the gambling license of Gibraltar to „offshore bookmaking“?

b) Is Article 49 EC Treaty to be interpreted to the effect that it conflicts with a national state monopoly on the operation of sports betting and lotteries (with more than minor addiction potential) justified by the need to fight compulsive gaming, if other games of chance with considerable addiction potential may be offered by private service providers and the different statutory regulations regarding sports betting and lotteries on the one hand and other games of chance on the other hand are based on the diverging legislative authority of the federation and the states?

In case question b) is answered in the affirmative:

c) Is Article 49 EC Treaty to be interpreted to the effect that it conflicts with a national regulation that leaves the granting of a license for the operation and the transfer of games of chance to the licensing authority’s discretion even in case that the statutory requirements for granting such a license are fulfilled?

d) Is Article 49 EC Treaty to be interpreted to the effect that it conflicts with a national regulation that prohibits the operation and the transfer of public games of chance via the Internet, in particular, if – although limited to a transition period of one year – the operation and the transfer via the Internet complying with youth- and gambler protection provisions is permitted in order to observe the principle of proportionality and to allow two commercial gaming agents, who had been operating via Internet so far, to adapt to the distribution channels to be permitted by the Interstate Treaty?