What is the position of German legal science regarding the decisive issues after the ECJ’s judgments of 8 September 2010?

By Attorney-at-law Dr. Stefan Bolay, Hambach & Hambach law firm

An analysis of the following essays: Streinz/Kruis: „Unionsrechtliche Vorgaben und mitgliedstaatliche Gestaltungsspielräume im Bereich des Glücksspielrechts“ (Requirements under union law and discretion of the member states with regard to the design of gambling law) (NJW 2010, 3745 et seq.) and Heine: „Glücksspielstaatsvertrag ade? – Zur Bedeutung der jüngsten EuGH-Rechtsprechung“ (Goodbye to the Inter-State Treaty on Gambling? – On the consequences of the latest ECJ judgments) (NJW-aktuell 41/2010, 16 et seq.)

1. Are the ECJ’s judgments binding for the national courts, meaning that these courts will have to decide that the German gambling monopoly does breach union law?

 

Streinz/Kruis (NJW 2010, 3749):

“In the Carmen Media judgment, the ECJ decided that the state monopoly for lotteries and sports bets as established by the GlüStV (Glücksspielstaatsvertrag = Interstate Treaty on Gambling) does not comply with the requirements under union law regarding the consistent and systematic design of such regulations. This interpretation of union law is binding for the national courts and authorities. However, the ECJ has expressly stressed that this incompatibility is based on the determinations made by the submitting administrative court, the VG of Schleswig, according to whom the German authorities are pursuing a policy of extending offers with the aim of maximising revenue with regard to other types of games of chance which are not covered by the monopoly, but have higher addiction potential. This is in accordance with the division of labour between the ECJ and the national courts in proceedings under section 267 of the Treaty on the Functioning of the European Union, according to which the ECJ is responsible for the interpretation of union law, whilst the determination and assessment of the facts is incumbent upon the national courts (ECJ,  Stoß and others par. 63, NVwZ 2010, 1409 with further references). In theory, this means that a deviation from the ECJ’s binding decisions seems possible, provided that a national court comes to a different conclusion with regard to the facts of a case. However, in practice this is unlikely, as the decision was mainly based on the easing of the legal prerequisites for the operation of slot machines; this is a fact which can easily be verified, so that a contradicting decision is not very likely.”

 

Heine (NJW-aktuell 41/2010, 16 and 18):

“In the preliminary proceedings pursuant to section 267 of the Treaty on the Functioning of the European Union (previously section 234 EC Treaty), the ECJ is neither responsible for deciding on the validity or the interpretation of the member states’ legal norms, nor for the determination of the compliance of such norms with union law (see, for instance, B. Hecker, Europäisches Strafrecht (European Criminal Law), 3rd edition, § 6 par. 11). Rather, the court (merely) provides ‘suggestions’ on the basis of the facts submitted by the national courts, in order to allow the national courts to interpret the national rules without breaching union law. Any breaches detected in this context will, due to the priority of union law, without fail lead to the non-applicability of such national rules. These suggestions by the ECJ are binding for authorities, for the courts and for the legislator. The suggestions in the judgments of 8 Sep. 2010 are far-reaching indeed! (…)

Compliance with union law depends on the overall consistency of gambling policy as a whole (Stoss par. 83, CM par. 45, 68). Therefore, it is irrelevant that the BVerfG (German Constitutional Court) has decided that the GlüStV as a part of this gambling policy complies with the Constitution (NJW 2009, 139). This total package of gambling rules is where the (German) spanner is in the (European) works. Pursuant to the facts submitted by the national court, there are two main reasons which do not fulfil the union law requirement of consistent and systematic restrictions of the fundamental freedoms in the course of an overall assessment: 1. The intensive advertising campaigns by the holders of the state monopolies, with the aim of maximising their profits (Stoss par. 100); 2. The policy of extending the offers for liberalised games of chance (additional casinos, easements of the SpielV (gaming decree); see CM par. 67). (…)

The first of the objections raised by the ECJ may be open to different evaluation; however, the second issue is not: the easing of statutory requirements for slot machines and casinos.”

Summary and conclusive answer:

Yes.

Whilst the ECJ’s decisions in principle do not have directly binding legal effect which would mean that all national courts would imperatively be forced to determine that the German gambling monopoly is in breach of union law, they de facto lead to a binding effect in the specific case, as the facts provided by the submitting courts with regard to the easing of the commercial law requirements for gambling machines and the increase in the number of casinos cannot be refuted, so that a national court de facto cannot reach a conclusion other than the one stating that the German gambling monopoly is in breach of union law.

 

2. Do sections 1 et seq. of the GlüStV and sections 284 et seq. StGB (Strafgesetzbuch = German Criminal Code) continue to be (partially) applicable in spite of the German gambling monopoly being in breach of union law?

 

Streinz/Kruis (NJW 2010, 3749 and 3750):

“At this point, we need to address the question as to which provisions of the GlüStV are inapplicable. As section 4 (1) of the GlüStV only contains a general licencing obligation, whilst the state monopoly only results from section 10 (2) and (5) of the GlüStV, which reserve this licence to legal entities controlled by the German Laender, it may be assumed that only section 10 (2) and (5) of the GlüStV are inapplicable, which would mean that private betting providers could apply for a licence pursuant to section 4 (1) of the GlüStV. However, a fact speaking against this is that the legislator has up to now attempted to completely exclude private providers from the sports betting and lottery market. Furthermore, non-compliance with union law does not mean that the legislator will now imperatively have to open the market to private competitors. Rather, he continues to be entitled to establish a state monopoly which is oriented to the requirements of union law, even though this will probably be difficult due to the distribution of competence between the German national government and the Laender. The application of section 4 (1) of the GlüStV, with the consequence of an opening of the market to private competitors, will therefore probably not correspond to the legislative intent, so that section 4 (1) of the GlüStV will also be inapplicable, meaning that no licencing requirements exist until a revision which complies with union law has been implemented. Another inapplicable provision is section 9 of the GlüStV as the legal basis for prohibition orders, as the failure to hold a licence which cannot be obtained in a way which complies with union law cannot be made subject to sanctions, in particular as there is no licencing obligation due to the priority of union law. This may not be sidestepped by applying the subordinate provisions of the criminal law regulations of one of the Laender (such as section 7 (2) of the BayLStVG in connection with section 284 of the StGB).

An issue which cannot be answered quite so unambiguously is the inapplicability of the internet ban pursuant to section 4 (4) of the GlüStV. Whilst the ban of this marketing channel for games of chance is in principle justified due to the specific inherent dangers, the lack of a consistent overall concept for combatting gambling addiction will probably lead to the inapplicability of this ban.

In this context, the provisions of the GewO (trade regulations) replace the GlüStV, meaning that the principle of the freedom of trade pursuant to section 1 (1) of the GewO applies. As sections 33 c through 33 g are not applicable to games of chance pursuant to section 33 h of the GewO, private market participants are only subject to a notification obligation under section 14 of the GewO, until a revision which complies with union law has been implemented.“

Heine (NJW-aktuell 41/2010, 18):

“With regard to criminal prosecution, authorities are at present well advised to dismiss the relevant criminal proceedings in accordance with section 170 (2) of the StPO (criminal procedure code). In practice, the assessment has frequently been made that the non-compliance with union law of the administrative provisions on gambling is irrelevant for sections 284 of the StGB due to the fundamental values chosen by the legislator (repressive ban). However, irrespective of the question as to whether the choice of these values (generally undesirable and only permitted in exceptional cases) can be maintained under the present circumstances, the functional separation of the administrative law ban which breaches union law on the one hand and a criminal law provision which complies with union law simply must be regarded as a breach of union law (ECJ, NJW 2004, 140 – Gambelli).”

Summary and conclusive answer:

No.

The violation of union law leads to the inapplicability of sections 1 et seq. of the GlüStV, meaning that the provisions in sections 284 et seq. of the StGB, which are linked to the administrative law provisions, also must be inapplicable.

In view of the GlüStV, teleological and systematic reasons show that the provision in section 10 of the GlüStV, on which the monopoly is based, cannot be inapplicable on its own, but that the entire regulatory system, including the internet ban in section 4 (4) of the GlüStV, must be inapplicable.

Furthermore, the internet ban in particular is lacking a “consistent overall concept” (Streinz/Kruis) or an “overall consistency” (Heine), as the German internet ban does not cover online horse race bets (see, for instance: http://www.wettstar.de) and online slot machines (such as http://www.7play.de), and is being bypassed by state offers such as LOTTO by e-letter in Hesse (see https://service.deutschepost.de/epost/faq/was-ist-der-dienst-lotto-e-postbrief).

 

3. May gambling supervisory authorities be liable for damages if they issue prohibition orders based on the GlüStV after 08 Sep. 2010?

 

Streinz/Kruis (NJW 2010, 3750):

“A claim against the state for damages due to the execution of a provision which does not comply with union law (…) requires (…) a “sufficiently severe breach” (to this effect, see Berg in: Schwarze, (editor), EU commentary, (above footnote 63) Art. 288 of the EC Treaty par. 82 et seq.). As the issue of the compliance of the German monopoly with the requirements of union law were highly controversial before the judgment by the ECJ on 08 Sep. 2010, and as even the majority of the German courts assumed that the provisions were in compliance with union law, such action did not constitute a “sufficiently severe breach” prior to this judgment. This is not altered by the fact that the Commission opened infringement proceedings as early as 31 Aug. 2010, as this does not (yet) unambiguously mean that union law is breached. However, should authorities take action against private betting providers after 08 Sep. 2010, based on the provisions of the GlüStV, this would represent a “sufficiently severe breach” which would give rise to damage claims, provided that the other prerequisites are fulfilled (damage and attributability) (see ECJ,  ECR 1996, I-1029 par. 57   Brasserie du pêcheur = NJW 1996, 1267).“

Summary and conclusive answer:

A simple but significant “Yes“.