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EC Observations to Italian New Online Gaming Rules

May 6, 2008 2008

First remarks on the proposed online gaming rules by Italy in the wake of the observations submitted by the European Commission

At the end of the scrutiny of the proposed draft featuring the new and quite more European-friendly online gaming rules Italy intends to adopt (“the New Rules”), the European Commission wrote on 14 April 2008 a letter to the Italian Minister of Foreign Affairs (“the EC Remarks”) to make certain recommendations and comments in relation thereto. What follows is a brief summary and comment of the most relevant aspects of the EC Remarks.

First and foremost it is interesting to note that there is no explicit statement in the EC remarks ruling out the concession regime currently implemented by the Italian gaming authority (“AAMS”). As a matter of fact, at point 2 of its note the Commission stresses the importance that said concession regime should remain open-ended, ie. no numerus clausus restrictions should be imposed by AAMS to thereby limit the number of foreign operators who may wish to access the local gaming market. So if on the one hand the EC reiterates its firm opposition to any attempt possibly made by AAMS (or any other national regulatory bodies throughout the EU) to cap the licences that can be awarded at local level, on the other hand it implicitly confirms the full validity of the state-granted concession regime altogether with respect to online gaming.

Turning its attention to the new AAMS requirement whereby a licence may be sought even by a non-gaming operator (whereas currently the applicant has to prove that it already holds an online gaming licence), the EC recommends AAMS to ensure that for purposes of assessing the actual eligibility of a non-gaming operator as well as licence applicant it apply fair, transparent, non-discriminatory and proportionate standards as also recently ruled by the European Court of Justice in re Europa 7 (C-380/05 of 31 January 2008).

Another request contained in the EC Remarks is aimed at amending any reference in the New Rules to operators based/licensed in the EU to cover instead operators based/licensed in the EEA – European Economic Area (which includes Liechtenstein, Norway and Iceland plus the whole European Union).

It is reasonable to believe that AAMS will have no problems in accepting the above suggestion. Actually to further encourage licence applications from throughout Europe it cannot even be ruled out that AAMS might possibly consider taking a “whitelist” approach similar to the one followed in January 2007 by the UK Department of Culture, Media and Sports with respect to non-EEA jurisdictions like the Isle of Man and Alderney, as a result of which all operators licensed there now can legally advertise their gaming services in the UK too.

Always with respect to the licensing requirements laid down in the New Rules, the Commission criticises the one-off AAMS licence fee (currently set at €300.000 yet scheduled to progressively go down year by year) which is generically justified as a “contribution towards expenses incurred by AAMS for the management and functioning of the licence-related infrastructure”. While conceding that in the New Rules the licence fee will be substantially slashed on an annual basis until the natural expiry date of the current licences (30 June 2016), the Commission requests AAMS to prove the alleged proportionality between the fee charged and the expenses the Italian regulator claims to incur

With respect to the requirement of the New Rules whereby an AAMS licensee may no longer have to (re)locate its gaming servers provided (i) they are still based in the EU/EEA and (ii) a safe 24/7 connection between the servers and the AAMS centralised system is guaranteed, the Commission urges AAMS to provide alternative operational solutions that should prove less burdensome and costly for the operators while equally and adequately allowing all checks and monitoring required by AAMS.

This remark reflects a largely popular concern across the online gaming industry, namely that AAMS is unduly forcing its licensees to fully link up their gaming platforms to its centralised system and database via the setting up of quite a complicated and expensive connection procedure which according to the claim of many concerned foreign operators results in unnecessary costs and much longer kickoff times.

Last but not least, the EC Remarks carry a very crucial query for the Italian authorities asking to know whether once the New Rules fall in place all EU operators that will then become licensees and which are currently included in the AAMS namelist of ”illegal” gaming sites, will be eventually struck off said list. This is undoubtedly not an easy answer to be provided by AAMS specially if one bears in mind that all its current licenses who do continue to operate a ‘.com’ site in parallel to the AAMS-licensed ‘.it’ one have not seen their names wiped off the AAMS blacklist, which seems to suggest that the Italian gaming regulator may not be so prepared to relax its grip over the unlicensed sites.

The Italian authorities and AAMS in particular are now expected to carefully review and digest the EC Remarks prior to deciding how to bring about the implementation of the New Rules, something which will hardly be a matter of just a few more weeks.

Yet all in all regulations-wise there do not appear to be any insurmountable problems nor irreconcilable positions between Brussels and Rome hence it is fair to say that if and when AAMS properly deals with and addresses all the issues raised by the EC, once the New Rules become effective all state-granted concession regimes still prospering across the EU will be strengthened and corroborated even further.

Quirino Mancini, partner

Sinisi Ceschini Mancini (qmancini@scm-partners.it)

Quirino Mancini

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