• European Commission to Take a More Coherent Approach to (Online) Gaming
  • April 14, 2010 | Authors: Thomas De Meese; Flip Petillion
  • Law Firm: Crowell & Moring - Brussels Office
  • After years of ad hoc rulings by the European Court of Justice and several hints from the European Parliament and the EU Council in that sense, the EU Executive body finally seems to be planning a more systematic and pan-European approach to gaming and betting in the Internal Market.

    On 11 February 2010, Internal Market Commissioner Michel Barnier announced that the European Commission "does not exclude" alternative solutions to individual infringement procedures against member states on gambling. Little over a year ago, the European Parliament and the EU Council of Ministers had already called upon theEuropean Commission to start a European-wide dialogue in view of reaching a political agreement with regard to the regulatory framework applying to gaming and betting. The need for such an agreement increases as the sector and technology both evolve and become less national/territorial.

    From the start, gaming and betting have been considered to be 'special' services in light of EU law. National authorities wish to regulate this area according to their own views on public morality, consumer protection and the need to combat all sorts of fraud and manipulation. All these reasons that are invoked for restricting the freedom to provide (online) betting and gaming activities across the European Union. For this same reason, gaming and betting activities have been excluded from the EU's Services Directive at the time of its adoption. Obviously, betting and gaming can also be a significant source of revenue for Member States and their policy decisions may therefore also often be inspired by financial considerations.

    In the last couple of years, there have been a growing number of complaints by sports betting service providers and online gaming companies licensed and authorized in one Member State and seeing their access to other national markets within the EU restricted. This has led to a number of European Court of Justice rulings on the issue as well as to several Commission infringement proceedings against Member States. All these cases relate to the question whether national measures restricting the cross-border supply of online betting and gaming services are compatible with Article 49 of the EC Treaty (now Article 56 of the new Treaty on the Functioning of the European Union), which guarantees the free movement of services within the Internal Market. Some of the rulings by the European Court appear to be inconsistent. The tend to be interpreted very differently by national gaming authorities on the one hand, and gaming and betting service providers on the other. Moreover, no less than nine Commission infringement procedures are said to be currently pending in the area of cross-border betting on sports events online. In other words : a more consistent top-down initiative seems appropriate.

    As said, w hile the legal frameworks differ, there are significant similarities in the Member States' objectives as regards gaming and betting. As shown in December 2008 by the French EU Presidency in an overview of the different legal frameworks and policies , virtually all Member States are claiming to be pursuing considerations of public order and prevention of crime (combating money laundering, organized crime, fraud, corruption etc.), social order (prevention of addiction, protection of minors and vulnerable persons etc.), and consumer protection (ensuring that gambling operations and operators are trustworthy, etc.). Only the methods differ, although some are widely spread among Member States : a ban on access to gambling by minors or vulnerable persons, obligatory identity checks at the entrances to casinos and gaming arcades, restrictions on amounts of bets or winnings, advertising restrictions , obligations to inform players of the risks associated with gambling, checks with regard to the owners and managers of private companies before granting authorizations or licenses, rules on the player return rate, mandatory reporting of transactions, etc.

    The development of online gaming and betting raises some additional challenges : the services are permanently available, are crossing borders and are easy to access. The Member States have opted for widely differing responses to this development, ranging from opening up the market in a regulated framework to a complete ban. However, in light of the common issues surrounding the regulation of cross-border betting and gaming, the current discrepancies do not seem tenable in the long run. In addition, certain legislations are clearly inconsistent with basic principles of EU law. The new Belgian Gaming Act, for instance, provides for an obligation to have the company's servers located in a permanent establishment on the Belgian territory. It is clear that, if every Member State would instate such rule, it would defeat the purpose of the internet's ubiquity, convenience in terms of access and low cost. It would simply be impossible for an online provider to comply with every such regulation in the EU. Plus, apart from the state levies to which they are subject, gaming and betting very frequently contribute substantial amounts, totaling billions of euros annually EU-wide, to numerous causes: social, charitable or cultural activities, support for sport or equine organizations, etc. Hence, there is a consensus to be sought.

    In light of the foregoing background, Mr. Barnier's proposal seems the sensible road to follow. Unfortunately, mentalities do not change overnight and Member States do not yet seem prepared to abandon their power of appreciation in this matter. That is also the reason why the Commissioner is being rather careful, and takes it one step at a time : "I want to launch a constructive dialogue with the Parliament and member states and concerned stakeholders," he said, explaining that an EU Green Paper would be the first step forward.