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Berlin Court Casts Doubt Over Online Lottery Ban

October 1, 2008 2008

published on GamblingCompliance, September 26th, 2008 by James Kilsby, GamblingCompliance Ltd.

A Berlin court ruling has boosted the hopes of private lottery distributors in Germany seeking protection from a ban on online lottery sales scheduled to take effect in January of next year, legal observers agree.

A Berlin administrative court this week upheld a challenge, launched by private lottery mediator Tipp24, to local lottery laws that were introduced in the wake of Germany’s Interstate Gambling Treaty that came into effect in January.

The Interstate Treaty in itself introduced stringent restrictions for Germany’s state-owned lottery companies – including tougher advertising regulations and a ban on lottery company directors’ salaries being set according to lottery revenues, on top of the total ban on the sale of lottery products over the internet that will come into effect in January 2009. However, the treaty also empowered authorities in each of Germany’s 16 states to introduce further legislation in accordance with the treaty’s principals.

The Berlin court this week ruled that Berlin’s law banning the state lottery from paying commissions to private lottery distributors such as Tipp24 was constitutionally invalid, as well as finding that Tipp24 did not require special permission from the state in order to offer its services as a lottery distributor in Berlin.

But more significant for the likes of Tipp24 and competitor JAXX, according to Tipp24’s director of investor relations Frank Hoffmann, was the court’s finding that the online lottery ban constituted an unjustified restriction on the free movement of services as guaranteed under German and EU law.

“This is the most important thing for us,” Hoffmann told GamblingCompliance. “The court’s ruling essentially means that the Interstate Gambling Treaty will not apply to Tipp24’s activities in Berlin.”

Tipp24 and JAXX continue to derive significant amounts of revenue from their online lottery sales businesses, and are lobbying fiercely against the ban on online lottery sales that would significantly undermine their business operations in Germany if it took effect as scheduled.

In an interim results report released earlier this year, Tipp24 acknowledged that the Interstate Treaty “and subsequent legislation passed on the basis of the [treaty] would mean the complete elimination of Tipp24’s current business basis in Germany from 1 January 2009 onwards.”

Unsurprisingly, both Tipp24 and JAXX have indicated their intentions to seek legal protection from the online ban once it comes into force, and they believe the Berlin court’s verdict boosts the prospects of them obtaining preliminary injunctions against the ban from further state courts come January.

“If we need to seek preliminary protection [from the prohibition on lottery sales via the internet] in other states, then the courts there will be certain to look at this decision from Berlin,” Hoffmann said.

In a press statement released yesterday, JAXX chief executive Rainer Jacken said the Berlin verdict raised further question marks over the enforceability of the German Interstate Treaty as it affects private lottery companies. “This precedent will certainly strengthen our position in other legal procedures,” Jacken said.

Claus Hambach, founding partner of Munich-based law firm Hambach & Hambach, agreed that the Berlin decision raised significant doubts as to whether the online lottery ban could now be brought in against the likes of Tipp24 and JAXX. He added, however, that the decision would only directly affect the German lottery market and that the judge’s ruling could not be applied to other sectors, such as online sports betting, blighted by the Interstate Treaty’s restrictive provisions.

For further information please see the webside of GamblingCompliance.

Wulf Hambach

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