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Gambling body calls for EU to act on German online gambling rules after CJEU ruling

Out-Law News | 08 Feb 2016 | 3:29 pm | 3 min. read

A gambling industry body has called on the European Commission to take action to help prompt reforms to German laws on online gambling after the EU's highest court issued a critical ruling on the existing framework that applies in the country.

The Court of Justice of the EU (CJEU) ruled that prosecutors in an EU country cannot penalise someone who acts as an unauthorised intermediary of sporting bets in that country where the company providing such offers is a licensed betting operator elsewhere in the EU even if the company is not a licensed betting provider in the target market if the gambling regime in that target market has been ruled as breaching EU law.

Public prosecutors in Bavaria in Germany have accused Sebat Ince of acting illegally by facilitating sporting bets between people in Germany and a gambling operator licensed in Austria but not Germany.

Germany places tight restrictions on online betting via an interstate treaty on gaming. Those restrictions, the CJEU confirmed in earlier rulings, represented a "public monopoly on the organisation and intermediation of sporting bets" in the country and have made it difficult for businesses to break into the online betting market.

German courts have taken issue with the public monopoly and the restrictions it has placed on businesses entering the German online betting market. They have ruled that it runs contrary to EU law. Some changes to the German framework have since been made, but the CJEU has now said the changes amounted only to a "fictitious authorisation procedure" and "cannot be regarded as having remedied the incompatibility with EU law … of provisions of national law establishing a public monopoly regime with regard to the organisation and intermediation of sporting bets".

In its ruling, the CJEU ruled that the German regime is in breach of fundamental EU principles laid out in the Treaty on the Functioning of the EU (TFEU) that generally prohibit restrictions being placed on the freedom to provide services across the trading bloc.

The CJEU said the TFEU precludes an EU country "from penalising the unauthorised intermediation of sporting bets on its territory on behalf of an economic operator holding a licence to organise sporting bets in another member state: where the issue of an authorisation to organise sporting bets is subject to the obtaining of a licence by that operator in accordance with a procedure for the award of licences … if the referring court finds that that procedure does not observe the principles of equal treatment and non-discrimination on grounds of nationality and the consequent obligation of transparency".

The CJEU said that position applies if "to the extent that, despite the entry into force of a national provision permitting the grant of licences to private operators, application of the provisions establishing a public monopoly regime with regard to the organisation and intermediation of sporting bets, deemed by the national courts to be contrary to EU law, has persisted in practice".

The European Gaming & Betting Association (EGBA) said the European Commission should now step in to prompt reforms to online betting rules in Germany.

"The German online gambling regime still violates EU law and cannot be enforced," Maarten Haijer, secretary general of EGBA, said. "The European Commission must now swiftly open an infringement case against Germany to ensure it changes its course rather than persists with the failed interstate treaty. A comprehensively and cautiously prepared reconsideration of the legal framework, which needs to be carefully adapted to the realities of the digital 21st century, will allow German consumers access to a competitive and regulated online offer under the protective umbrella of German legislation."

"Existing regulation in Schleswig-Holstein, the proposal put forward by Hesse as well as other European regulatory models like the Danish one can provide good inspiration for successful regulation," Haijer said.

Gaming and gambling law expert Diane Mullenex said the ruling is very positive for the gaming industry because it "confirms that Germany has now to move on and start regulating online gambling in an appropriate fashion".

"As Germany is one of the largest markets in Europe, operators and providers of gaming services have high hopes that a proper infringement case will be opened against Germany by the European Commission," Mullenex said. "Similar circumstances have pushed France to regulate, although such regulations are now seen to be rather uncompetitive and strenuous both from the compliance point of view and the tax rate. This is probably why stakeholders are pushing for regulations similar to those that apply in Denmark; expecting the worst and hoping for the best."