Administrative Court of Karlsruhe affirms permissibility of procuring sporting bets to foreign bookmakers

Rechtsanwalt Dr. Wulf Hambach

Hambach & Hambach Rechtsanwälte
Haimhauser Str. 1
D - 80802 München
Tel.: +49 89 389975-50
Fax: +49 89 389975-60
Administrative Court of Karlsruhe affirms permissibility of procuring sporting bets to foreign bookmakers – a report of Dr. Wulf Hambach, attorney-at-law with Arendts Anwälte.

Within 3 days (decisions of May 7th , case no. 3 K 145/04 and of May 10th 2004, case no. 11 K 160/04) the Administrative Court of Karlsruhe had to decide on identical facts: A betting office accepted wagers (above all Oddset-wagers) from clients for an English sports book (in possession of a valid license) and conveyed them to the same.

The authorities intervened in both cases invoking Art. 1 and 3 police law closing the offices in December 2003 respectively in January 2004.

The operators’ protests in the protest proceedings as well as their claims in the preliminary court proceedings were directed against these actions (The operators claimed for a preliminary injunction for restoration of the original administrative act).

Invoking the Gambelli decision of November 6th 2003 (case no. C – 243/01) the Administrative Court of Karlsruhe in its well reasoned decision argued that due to the penal sanctions of Art. 284 German penal law as well as the explicit prohibition of conveying bets, the English bookmaker’s activity in the state of Baden-Württemberg was being cut off at least indirectly. Thus these provisions constituted an interference with the freedom of establishment as well as the freedom to provide services.

The Administrative Court of Karlsruhe explicitly invokes the decision of the Administrative Court of Appeal of Kassel of February 9th 2004. Pointing to the necessity of a coherent restriction policy to be adopted by the states, the Administrative Court of Karlsruhe clearly reveals, that the state of Baden-Württemberg does not practise such coherent politics. It is rather disputable whether the restrictions on offers of sporting bets imposed by the state of Baden-Württemberg was necessary.

After a summary review of the case necessary during preliminary proceedings, the Administrative Court finds that the applicant’s – that is the English bookmaker’s -activity subject to the licensing requirement of Art. 284 German Penal Law is not capable of being licensed under the present law. Insofar the act on sporting bets with fixed win – loss ratio (Oddset-bet) of June 1999 does not contain any licensing options. Thus the applicant’s activity is subject to a state monopoly.

The Administrative Court of Karlsruhe further makes clear, that such a monopolisation was the most intense interference possible. Insofar the question arises, whether the need to protect potential sporting bet clients and the public interest of implementing such activities in a compatible way would not be satisfied by rendering the licensing subject to the operator’s obligation to distribute profits.

Another utmost remarkable point of this decision is, that the Administrative Court of Karlsruhe invokes the Federal Administrative Court’s decision of March 28th 2001. We mentioned this decision in our last newsletter (No. 9). In its decision the federal Administrative Court pointed out, that the courts should review their practice of ascertaining these interferences after a reasonable period of time. Contrary to the Federal Administrative Court’s decision of February 25th 2004 regarding the monopolistic structures of the casino business (also see our newsletter no. 9) the Administrative Court of Karlsruhe really does undertake a critical review of former decisions and arguments.

The court also seizes the suggestion of review explicitly pointing to the necessity of raising the question in the upcoming protest procedure or the main court proceedings, whether the federal administrative court’s jurisdiction could – with regard to the latest experiences made within Oddset-bets and the latest decision of the European Court of Justice – still be upheld.

In addition the Administrative Court mentions the points subject to a critical review in the main proceedings. In favour of the applicant it had to be taken into consideration, that commercial activity and procuring Oddset sporting bets falls under the scope of Art. 12 I of the Constitution (Freedom of choosing one’s profession) and that therefore a “critical review” were necessary, whether organising sporting bets in a state monopoly is really suitable to confine the dangers associated with gambling, which, in view of “aggressive” advertisement combined with an extreme increase of gaming offers, can hardly be affirmed.

Insofar the defendant’s justification, the public interest in a immediate execution of the injunction was to be regarded as far higher than the applicant’s commercial interests for reasons of protecting the general public from the dangers of gambling cannot persuade. In addition gambling is widely being tolerated by law and in not regarded as socially unethical. Only gambling operated without administrative license is being punished.

It another, also very extensively reasoned decision (18 pages) of May 10th 2004 (case no. 11 K 160) the Administrative Court of Karlsruhe raised questions on whether the provisions of the state of Baden-Württemberg complied with the requirements set by European Law. It found that the complete monopoly attributed to the state of Baden-Württemberg for operating sporting bets and the resulting restriction for procuring sporting bets to state approved betting offices was in fact not directed towards protecting potential betting interested from financial exploitation by such events and the dangers resulting from excessive participation in sporting bets.

The sports interested public’s attention is drawn to Oddset sporting bets by a large net of betting offices winning new clients. New, especially young customers are being targeted. Young girls’ enthusiasm is being for soccer events delivers new clients to the state gambling provider who would normally not participate in Oddset-bets. At the same time office executives are being called on to develop strategies in order to curb “sales” and stop the decrease in turnover. In its decision of May 10th the Administrative Court of Karlsruhe mentions further examples for a market expansion strategy of Baden-Württemberg’s state gambling provider.

In the light of these advertisement events for Oddset sporting bets there are severe doubts whether the state’s revenues from licensed games is only a lucky side effect of the legal position created by the implementation of state betting offices.

By the way the English gambling operator provided for the client in Germany not to take the risk of suffering excessive losses. The wagers are were throughout limited to 20 Euros.

Finally the court addresses another crucial point, which is often misunderstood in this state of proceeding. The court makes clear, that the operator of the betting office had reported his business, but that this reporting did not constitute an application for the licensing of a betting office.

Therefore the operator of a betting office – adhering to the principle of proportionality – could be called upon to apply for such a license before his operation is closed in accordance with Art. 15 II Trade, Commerce and Industry Regulations Act (“In case a business is operated without the necessary license the continuation of the same may be foreclosed by the competent authority”)