Player claims against casino operators are already big business in Germany, but a recent order by the country's highest civil court indicates that future claims against betting operators could now succeed as well.

Germany's leading gambling lawyer, Dr. Joerg Hofmann explains what is happening and what is at stake in his guest contribution below.

Federal Court of Justice indicative order: Can players also reclaim their sports betting losses?

Dr. Joerg Hofmann, Senior Partner, Melchers Law

This is evidenced by an analysis of public tax data published by Prof. Dr. Tilman Becker.

Introduction

On March 22, the 1st Civil Senate of the Federal Court of Justice issued an indicative order in appeal proceedings in connection with a player reclaiming their sports betting losses from an operator.

Indicative orders are meant to allow parties to prepare for the issues that will be raised during the oral hearing and thus often signal how a court intends to rule.

The indicative order of March 22 signaled that the Federal Court of Justice intends to uphold the plaintiff's claim for reimbursement of their losses, which – for reasons explained below – caused quite a stir among legal experts.

The oral hearing in these proceedings has been scheduled for 2 May 2024.

The issue at stake

The case concerns a plaintiff's claim for reimbursement of sports betting losses to the amount of almost EUR 12,000.00, which the plaintiff suffered in the period from 1 October to 28 December 2018.

In proceedings such as these, the question is always whether the underlying gambling contracts were null and void due to a breach of a statutory prohibition and, consequently, obligate the sports betting operator to refund lost stakes.

While for casino games, case law in this regard largely considers the absence of a German license to be sufficient, such a legal consequence in regards to sports betting offers is questionable, as both the sports betting regulation in force at the time and the sports betting licensing procedure that began in 2012, as part of the experimental (failed) clause of the Interstate Treaty at the time, were in violation of EU law.

In view of the violation of EU law during this period, the central question is therefore whether an operator based within the European Union was allowed to offer bets in Germany without a German license, provided that the operator had applied for a local license at the time.

The Federal Court of Justice takes a left turn

Surprisingly, the Federal Court of Justice leaves precisely this question unanswered in its indicative order. Although the Court suggests there are arguments in favor of a violation of EU law, it plays with the idea that the requirements for contractual nullity could already be met if the respective sports betting offers were not readily capable of obtaining a license for reasons of substantive (German) gambling law, even if these offers complied with EU law.

The Court cites, among other reasons, non-compliance with betting limits as an example that could prevent operators’ offers from being licensed in accordance with German law. For instance, a violation of the limit requirement of sec. 4 (5) no. 2 of the 2012 Interstate Gambling Treaty (IST 2012) should lead to the disqualification of the entire sports betting offer as being potentially licensable.

This very far-reaching and seemingly undifferentiated interpretation is met with incomprehension among legal experts.

Reasons for skepticism

On the one hand, the Federal Court of Justice has so far overlooked the fact that sec. 10a IST 2012 (on the experimental – but legally unsound – admission criteria for sports betting operators to the German market), as a special provision, takes precedence over the chain of provisions referred to in sections. 4 (1), 4 and 5, section 4a (1) IST 2012 (on specific licensing conditions).

The Court simply assumes the conformity of this chain of provisions with EU law without further justification, while higher administrative courts have already confirmed the illegality of sec. 10a IST 2012 under EU law. But can individual licensing conditions be deemed to have come into legal effect if the overall licensing system did not (i.e., was nullified by the relevant courts)? Remarkably, the Federal Court of Justice does not address this question of whether prohibitions (e.g., on the absence of a loss limit) had legal force but merely assumes that this is the case.

Subsequently, the Court resolves the legal dispute on the mere assumption that said conditions and prohibitions had come into legal existence, and, secondarily, whether the resulting assumed violations require sanctions under civil law, including declaring the gambling contract null and void.

The Court also ignores the fact that the violation of provisions from the IST 2012 (as well other such treaties), insofar as these are not based on the absence of a license, can (only) be sanctioned by the administrative authorities, for instance through fines or revocation of the license.

Potential impact

If the Federal Court of Justice were to decide in line with its indicative order, all gambling losses that are not time-barred would possibly be affected, insofar as operators have violated the relevant restrictions.

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Quelle: Gaming in Germany