By Attorney-at-law Dr. iur. Michael Hettich
and Attorney-at-law Andrea Stumbaum, Hambach & Hambach law firm.

Advocate-General Yves Bot did not let down the monopolists in his final opinions on the Dutch preliminary ruling procedures. As expected, the final opinions on 17 December 2009 followed the previous example of his final opinions in the proceedings C-42/7 (Liga Portuguesa) on 14 October 2008. Again they were clearly to the detriment of transnationally active gambling providers, in this case UK-based companies Betfair (case C-203/08) and Ladbrokes (case C-258/08). Extensive parts of the final opinions, in particular the portrayal of the coherence complex, were delivered in the familiar strict style of the Advocate-General Yves Bot, who has been well known for his etatist attitude at the very least since proceedings C-169/07 (Hartlauer), C-171/07 and C-172/07 (Doc Morris II) and C-42/07 (Liga Portuguesa). A critical observer might wonder whether the outcome of the final opinions and judgments in the field of gambling law that are expected blow on blow in 2010 depend on the uncertainty of the assignment of actions (allocation of a neutral Advocate-General), which paradoxically turns it into somewhat of a „game of chance“.

I. Analysis of the final opinions

Only one month after the hearing on the 12th of November 2009, Advocate-General Yves Bot announced his final opinions on the Dutch preliminary ruling procedures. There are certainly differences between the questions submitted for decision in the two proceedings, but this did not stop them from being heard on the same day, with both final opinions announced together.

A common factor in both proceedings is the question whether the freedom to provide services requires mutual recognition of licences for operations of games of chance between the member states. Also, in both proceedings the affected parties are operators based in the UK wishing to offer games of chance in the Netherlands through the internet. Both Betfair and Ladbrokes are unable to obtain a licence for this purpose from the Dutch authorities, as Dutch gambling law only provides for one licence for a single operator in the respective gambling sector. Providing the current licence holders have shown themselves to be reliable and law abiding, there is no possibility of the respective licence being transferred to a different company. It will always be extended.

In proceedings C-203/08 (Betfair) a main point raised in the submission was this intransparent licensing process, as well as the regular extension of the term of existing licences. In contrast, the questions in proceedings C-258/08 (Ladbrokes) queried, amongst other issues, the compliance of Dutch gambling regulations with the principle of coherence required under European law. Decisive is in particular whether the fact that the respective licence holder advertises his gambling operations, even though the Dutch gambling regulations aim to reduce and control gambling addiction and to prevent fraud, complies with EU law.

Yves Bot explains his responses to the questions submitted as follows:

1. Coherence of gambling law regulations

Regarding the issue of coherence, Yves Bot adopts entire paragraphs taken from his arguments in his extensive final opinions on proceedings C-42/07 (Liga Portuguesa). This is surprising, as the ECJ made it clear in its judgment on that particular case that it disagrees with Yves Bot’s approach.

For instance, in margin numbers 58 to 60 of the final opinions, the Advocate-General continues to draw particular attention to the opening of the gambling market “not being a source for progress and development” and that gambling could only work if players “lose more than they win“. In his opinion, competition between service providers might incite “households to spend more funds than available for amusement“.

These approaches cannot be found in the ECJ’s established practice on gambling, and will yet again in this case not be included in the judgment, as it would deliberately undermine the freedom to provide services. Due to the wording of the questions referred the same applies to proceedings C-258/08 (Ladbrokes). There, the assumed premise is that “the aims pursued with the national regulations, that is, restraint of gambling addiction and fraud prevention are achieved as a result of the regulated gambling range keeping the extent of gambling much more limited than would be the case without the national regulating system.“ The question of coherence is strictly limited to verification whether permitting the licence holder to make his offer more attractive through the addition of new games and to advertise extensively would be consistent with the aims. Thus the referred question is so tightly worded that the ECJ is expected to take a stance only on that particular issue.

In accordance with Yves Bot’s etatist attitude, his assessment regarding the extent to which gambling regulation has to be coherent favours extensive discretionary powers for the Member States. Here, his justification for the Dutch gambling regulations in relation to the aim of combating gambling addiction particularly contradicts the ECJ’s established practice. Where the suitability of a regulation for the prevention or reduction of gambling addiction is under scrutiny, any official gambling range that allows advertising is counterproductive and contravenes European law. In these cases the ECJ demands that the purpose of the gambling regulation is indeed to reduce the opportunities for gambling (compare C- 338/04 a. o. Placanica, margin number 53; C-243/01 Gambelli, margin number 62, 67; C-67/98 Zenatti, margin numbers 35, 36). Advertising however achieves the opposite.

Yves Bot also contradicts the ECJ’s established practice in his final opinions when stipulating the allocation of the burden of proof regarding the question whether there is actually a risk that requires regulating. Here Yves Bot expressly contradicts both the Commission’s opinion and the principles declared in the judgment on proceedings C-42/02 (Lindman). He is of the opinion that even a “potential danger” of fraudulent activity during gambling operations is sufficient grounds for restriction of the freedom to provide services by the member state. This argument is reminiscent of the attempts made worldwide by conservative forces to limit civil liberties due to a fear of criminal offences, in particular acts of terrorism. Yves Bot supports his reasoning by entirely misapplying the ECJ’s rulings in the area of health protection.

On the one hand, the area of health protection plays a special role as the ECJ has always strived for preventive protection of the highest level due to the importance of the legal objective to be protected.

On the other hand, the proof of risk requirement also applies in the area of health protection. In margin number 30 of cases C-171/07 and C-172/07 (Doc Morris II), the ECJ simply declared that proof of the actual existence of these risks does “not have to be supplied in full“. However, the Netherlands have not provided any proof to support the statement that there is a substantial fraud risk without a gambling monopoly.

It is of crucial importance for the effective implementation of the fundamental freedoms that this invention by Yves Bot – a “potential danger” as justification for the restriction of the fundamental freedoms – is not reflected in the ECJ’s rulings. Otherwise every economic sector where there is a potential for fraudulent activity would become susceptible to arbitrary state monopolisation. The member states could monopolise services that are of economic interest, such as the entire insurance industry, as there is always a potential for fraud in that sector. This comparison makes it clear that the fundamental freedoms can only be of lesser importance if infringements can be justified by more than simply potential risk of fraudulent activity.

2. Principle of mutual recognition

Yves Bot rejects the application of the principle of mutual recognition of licences between the member states in a non-harmonised area (such as that of gambling operations), in line with the decision in case C-42/07 (Liga Portuguesa). In this point the ECJ is in a sense forced to follow the Advocate-General in his decision, as it would otherwise find itself contradicting the decision of last September.

3. Principle of Equal Treatment and Transparency Requirement for the issuing of licenses

Regarding the question whether under European law a certain degree of transparency and equal treatment should be ensured when a single licence is issued to a gambling operator by an official body, Yves Bot follows the ECJ’s established practice.

Yves Bot also demands that the licensing authority must ensure a suitable degree of openness for the benefit of all interested companies. This opens up the public contract or the service concession to competition and facilitates auditing to verify that the licence issuing procedures were conducted impartially.

In this point the Advocate-General clearly supports the position of the transnationally active providers Betfair and Ladbrokes. This does however only surprise at first glance. On closer inspection, this argument by Yves Bot completely correlates with his etatist attitude:

From the final opinions it can be deduced that Yves Bot’s preferred scenario would be gambling operations conducted directly by an official body or at least conducted by an operator controlled by an official body, similar to a government department. This scenario would require no invitation to tender or other publicity of the granting of licences. Thus the impression is made that according to Yves Bot’s opinion, member states that have missed the chance to offer gambling through their own official bodies should also not benefit from the advantages of free licensing.

Independent of speculations about Yves Bot’s motives, his remarks in the areas of equal treatment and transparency are in any case welcome. They take into account the basic principle of the freedom to provide services and the established practice of the ECJ.

II. Prognosis in light of the hearing

In the Dutch preliminary ruling requests Ladbrokes C-258/08 and Betfair C-203/08, the direction of the hearing on the 12th of November 2009 gave clear indications of the respective judges‘ priorities.

The ECJ’s questions were mainly aimed at establishing whether monopoly companies appointed by official bodies and their regulation really do fulfil the aims in the general interest. Whenever one of the participants made a statement that might imply that the relevant monopoly system is based primarily on commercial interests or that these interests are covered up, there was extensive further questioning.

Enquiries by presiding judge José Narciso da Cunha Rodrigues and judge Allan Rosas focused in particular on the legal structure in which the monopoly companies are organised. Further, the extent to which the licensed gambling companies are entitled to sovereign rights was queried. Once the responses revealed that even a private commercial American company acting fully in its own interests holds a licence, it became evident that at least some judges of the ECJ categorically reject such gambling regulation.

Further, the representatives of the monopoly companies were unable to explain why, despite a directive to the contrary by the Ministry of Justice in 2004, the extent of advertising by the monopoly provider De Lotto was not reduced and total turnover was even increased in 2005. At the latest it was at this point where it became obvious that, considering the circumstances, some judges were disbelieving that under these circumstances a serious fight against gambling addiction was the primary aim.

Generally the hearing left the impression that, unlike Yves Bot, the ECJ, whilst being in no way convinced that the Dutch gambling regulations have the public interests of fraud prevention and gambling addiction restraint at heart, was however able to recognise clear indicators that economic interest of the states play a major part.

III. Conclusion and outlook

To summarise, it should be noted that both the consistent practice of the ECJ as well as the judges‘ comments during the hearing indicate that the monopoly companies will continue to be denied a carte blanche for the uninterrupted accumulation of winnings under the cloak of potential risks. Where a differing opinion is held by Yves Bot, it is very likely that the ECJ will take a clear opposing stance by spring 2010 at the latest.

Regarding the other upcoming preliminary ruling procedures in the area of gambling law submitted by German, Austrian, Swedish and Italian courts, there are grounds for hope that the Advocate-General’s final opinions will follow the jurisdiction of the ECJ in favour of transnationally active providers – unless the Advocate-General assigned is Yves Bot.

Source: TIME LAW NEWS 1/2010 (www.timelaw.de) Hambach & Hambach Law Firm