ONLINE GAMBLING
BALANCING FREE TRADE & SOCIAL POLICY
What is Online Gambling & Who is ‘at it’?
• Gaming, Betting, Lotteries, Prize Competitions • The concept of remote gambling • Statistics
EXAMPLES
• • • • • Example Betting Example Horse-racing Example Online poker Example Virtual horse-racing Example Virtual race horse breeding
Risks associated with Online Gambling & Regulatory Objectives
• Problem gambling & addiction
– Harm for individual and society
• Minors • Crime associated with (some) gambling operations (fraud, money laundering) • Consumer Protection
– Ensuring gambling is conducted fairly and openly
Motivations for States to regulate
• Socio-economic factors:
– Players’ protection: country of residence bears negative social and economic consequences – Risks associated with certain operators: gaming activities are attractive target for organised crime, money laundering – Traditionally creation of funds for social and cultural purposes => public funds transfer to other countries
Different Regulatory Models
• Outright prohibition of online Gambling
– Workable?
• US Unlawful Internet Gambling Enforcement Act 2006
• State operator monopoly
• Eg Svenska Spel or Norsk Tipping (games); Norsk Rikstoto (horse race betting)
• Single private operator
• Eg Pari Mutuel Urbain in France
• Restricted licensing system • Open licensing system
• Eg UK Gambling Act 2005
National Regulation as Trade Restriction Divergent laws, no harmonisation, no country of origin rule The internet & cross-border access EU Treaty, freedom to provide services & establishment
Excluded from scope of Services Directive, Ecommerce Directive etc
Direct effect => lever for harmonisation?? Role of the courts in the absence of harmonisation?
The Caselaw of the ECJ
• Case C-275/92 Schindler • Case C-124/97 Lärää • Case C-67/98 Zenatti -------------------------------------------------• Case C-234/01 Gambelli • Case C-338/04 Placanica (6. March 2007) • Case E-1/06 Re Amendment to Game & Lottery Law (14. March 2007) • Case E-3/06 Ladbrokes v Norway (30. May 2007)
The caselaw of the ECJ (2)
• Mutual recognition & non-discrimination • Fiscal reasons not allowable • Coherent and systematic approach
– Expansion?
• State operators (monopolies) and licensing restrictions ok • Advertising restrictions discriminatory? • Restrictions on numbers of licenses arbitrary
The Caselaw of the ECJ (2)
• Jurisprudence under Art 267 (ex 234)(Prelim Ref) • Commission infringement procedure Art 258 (ex 226)
– Notification against Denmark, Germany, Finland, Italy, the Netherlands, Sweden and Hungary (April 2006) – Austria and Luxembourg (December 2006) – Commission expressing concerns on the German Inter-State Treaty in March 2007
• Internet prohibition for sports bets and lotteries • Court of Appeal in Hessen
Commission Infringement Procedures
• Jan 2008 Germany; official request for information; total prohibition of games of chance on the internet, including sports betting; advertising restrictions on TV, on the internet, on jerseys or billboards; prohibition on financial institutions to process payments related to unauthorised games • Jan 2008 Sweden; official request for information; poker games and tournaments; since 2006 offered by state-owned company on a large scale- cannot be offered by operators in other Member States
What do the national courts do with this Guidance from the ECJ? • The PMU v Zeturf case as an example
– Situation following Gambelli & Placanica: – PMU v Zeturf : Court of Appeal, Paris: (1) ordering cessation of operations; (2) quantifying the penalty amount due by Zeturf – Maltese courts refuse enforcement – French Cour de Cassation: Reversed to CA (13. July 2007)
Commission Infringement Procedures
• Jan 2008 Sweden; official request for information; poker games and tournaments; since 2006 offered by state-owned company on a large scale- cannot be offered by operators in other Member States • Jan 2008 Germany; official request for information; total prohibition of games of chance on the internet, including sports betting; advertising restrictions on TV, on the internet, on jerseys or billboards; prohibition on financial institutions to process payments related to unauthorised games
GATS-WTO (1)
• General obligation MFN; transparency • Specific commitments, Art 16 • But Article 14
– Exception public morals, prevention of deceptive or fraudulent practices
GATS-WTO (2)
• DS 285 Antigua & Barbuda v United States • Cross-border online gambling services
– Panel Report November 2004 – Appellate Body Report April 2005 – US not complied: March 2007 – Arbitration (lost trade)
• EU Complaint to WTO?
Conclusion
• Online gambling growth sector => pressure to liberalise cross-border provision • Potential for social & individual harm => risk assessment specific to online gambling • Enforcement issues pertaining to national regulation (arrests; payment providers) • Harmonisation unlikely • Role of the ECJ/WTO in determining the limits of social policy
– Proportionality test – But application by the national courts? – Result: Litigation battle