Current affairs in the Netherlands

Gaming law in the Netherlands has seen numerous developments in the first months of 2008. The European Commission took a new step in the infringement proceeding targeting the sports betting monopoly. The proposed Online Gaming Act has been rejected by the Senate. The highest administrative judiciary intends to ask preliminary questions to the European Court of Justice on the allocation of sports betting and horse betting licenses.

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Despite these developments, the government has made it clear that it does not intend to liberalize its policy on gaming. The Netherlands Moreover, Justice Minister Ernst Hirsch Ballin has stated that he intends to maintain the prohibition on online gaming by addressing payments service providers and Internet service providers assisting online gambling operators.

The Rejected Proposal for an Online Gaming Act

Currently, all offering of online gaming to Dutch residents is illegal. This includes the offering of online gaming to Dutch residents by operators licensed in other member states. It is not possible to obtain a license for offering online gaming in the country.

The proposed Online Gaming Act was a part of the government’s fight against online gaming operators. The proposed act would have created an exclusive but temporary license for online gaming. Justice Minister Hirsch Ballin’s intention was that the temporary offer would be an experiment to gain knowledge on, and experience with, online gaming. The experimental license was supposed to be granted to Holland Casino, the state-owned casino gambling operator. Holland Casino, in turn, was supposed to offer a trustworthy and safe alternative for the estimated 400,000 Dutch residents that are currently gambling with illegal operators. The proposed act has met fierce criticism from the European Commission, high advisory bodies and members of the Senate. One of the points of critique was a possible infringement of European law. Two rounds of debate were held in the Senate, and on April 1, 2008, Senate members voted 35-37 against the proposed act.

It is noteworthy that a majority of the Senators did not express any concern about a possible infringement on European law, or about provoking the European Commission to initiate a second infringement proceeding on Dutch gaming regulations. The main arguments expressed in the debate ranged from a wish by the conservative Christians and socialists for a total ban on online gaming and a strict enforcement policy on illegal operators on the one side, to, on the opposite side, the liberals’ wish to admit more companies in the participation of the experiment.

However, the rejection of the proposed Online Gaming Act does not mean that the government’s efforts to create an exclusive license for Holland Casino have come to a full stop. Justice Minister Hirsh Ballin has stated that he now intends to incorporate the exclusive online gaming license in the newly-proposed Gaming Act. This new act is intended to replace the 1964 Gaming Act. The justice ministry expects that this separate piece of legislation will be discussed in the Tweede Kamer, or Lower House, this summer. Setting aside the possible incorporation of regulations on online gaming in the near future, the proposed act would not drastically change Dutch gaming policy. In our view, the most notable change is the installation of a Gaming Authority with more competences than the current Gaming Board.

Reasoned Opinion on Sports Betting Monopoly

The European Commission has initiated an infringement proceeding against the Netherlands because of the single-license system for sports betting. The commission has stated in its letter of formal notice, dated April 4, 2006 — and in its supplementary letter of formal notice, dated March 21, 2007 — that this monopoly on sports betting infringes the freedom to provide services, contained in Article 49 of the European Community Treaty (EC Treaty).

On February 28, 2008, the European Commission issued a press release stating it had sent a reasoned opinion to the Netherlands regarding its policy on sports betting. A reasoned opinion initiates the second stage of an infringement proceeding. (The third and final stage is a proceeding before the European Court of Justice.)

In the reasoned opinion, the Dutch government was reportedly asked to change its current regulations into regulations that are compatible with European law. However, Justice Minister Hirsch Ballin has thus far refused to publish the reasoned opinion. During the second senatorial debate on the Online Gaming Act, Mr. Hirsch Ballin stated that when his reaction to the European Commission is published, he will publish the reasoned opinion. It is expected that Mr. Hirsch Ballin will ask for an extension of the date by which a response must be given. If so, it is expected that the reasoned opinion and the reaction will be made public in late June of this year.

During the senatorial debate Mr. Hirsch Ballin emphasized that he does not agree with the Commission’s point of view. He persisted in his position that the Dutch policy on sports betting does not contravene Article 49 of the EC Treaty. Mr. Hirsch Ballin also noted that the European Commission expects the Netherlands to recognize sports betting licenses issued in other member states. According to Mr. Hirsch Ballin, however, there is no case law by the European Court of Justice stating that the principle of mutual recognition of licenses is relevant in gaming law.

Pending Proceedings

At the moment, two cases involving online gaming operators are pending before the highest judiciaries. In the proceedings on the merits, the De Lotto v. Ladbrokes case is pending before the highest civil judiciary, the Supreme Court. The opinion of Advocate General Keus is noteworthy in many respects and discussed below. In the administrative case, Betfair v. Ministry of Justice, preliminary questions from the Council of State to the European Court of Justice are expected.

De Lotto v. Ladbrokes

The dispute between De Lotto and Ladbrokes was decided in summary proceedings by the Supreme Court on February 18, 2005. The pending litigation constitutes the proceedings on the merits.

De Lotto demanded an injunction verdict, prohibiting Ladbrokes from offering games of chance to Dutch residents. De Lotto stated moreover that Ladbrokes, by offering said services, committed a tortious act. According to De Lotto, Ladbrokes is, de facto, given an unjustified advantage, because De Lotto is bound to strict Dutch licensing obligations and requirements while Ladbrokes is not. In the proceedings on the merits, a more substantive examination of the conformity of Dutch gaming policy with European law, and of the role of the sports betting licensee, De Lotto, can be made in comparison to the summary proceedings.

In his opinion, delivered during the hearing on April 4, 2007, Advocate General Keus referred to the infringement proceedings initiated by the European Commission. Other preliminary questions from courts in other member states that are relevant to this case are also discussed, as is the fact that the Council of State intends to ask preliminary questions regarding the allocation of sports betting licenses. According to Mr. Keus, an infringement proceeding by the European Commission is a more suitable framework for a substantive examination of the Dutch gaming policy, compared to the national civil dispute between De Lotto and Ladbrokes. Mr. Keus emphasized that if the European Commission proceeds with the infringement proceeding, this will lead to a final answer from the European Court of Justice on the conformity of Dutch gaming law with the EC Treaty.

Although Mr. Keus concluded that Ladbrokes’ appeal on European law should be rejected, he also provided guidelines for the subjects of possible preliminary questions, and proposed two possible, preliminary questions regarding the compatibility of European law with the Dutch situation.

The first proposed question is based on a comparison of the current gaming policy and its aims — as described by Mr. Hirsch Ballin — with a situation in which there is no national regulation of gambling, and asks if the current situation is compatible with European law. However, this proposed question takes for granted that the Dutch gaming policy is aimed at, and suitable for, the containment of the human urge to gamble. This is the definition of the aims of the current gaming policy expressed by the government, a view which Ladbrokes opposes.

The second proposed question relates to the specific nature of a civil injunction proceeding by a licensee against a non-licensed competitor. Mr. Keus proposes to ask the European Court of Justice whether an injunction verdict by a judiciary, which leads to a specific restriction on the freedom to provide services, should also be justified by a reason of overriding general interest — such as the protection of consumers, prevention of problem gambling and the counteraction of fraud and criminal activities — as defined in case law by the European Court of Justice.

Betfair v. Ministry of Justice

In Betfair v. Ministry of Justice, the highest administrative judiciary — called the Council of State — stated in a letter to the litigating parties on Feb. 4, 2008 that it intends to ask preliminary questions regarding the compatibility of the Dutch allocation of the exclusive license for sports betting and the exclusive license for horse betting.

In its proposal for preliminary questions, the council formulated questions on the principle of mutual recognition of gaming licenses, the transparency of the allocation of an exclusive license and the automatic renewal of gaming licenses.

The litigating parties were offered a four-week period during which to formulate comments on draft preliminary questions that were proposed by the council. It is not yet clear when the final questions will be made available by the council.

Possible Blocking of Financial Transactions and Access to Web Sites

In a press release dated Jan. 29, 2008, the ministry of justice stated that it will “take a firm line” against financial institutions that offer services to unlicensed gaming operators. On March 4, 2008, Justice Minister Hirsch Ballin sent a letter to the Senate which mentioned his intention to address not only financial institutions, but also Internet service providers.

The justice ministry compiled a blacklist of 30 online operators that are aimed at the Dutch market. This list will be issued this spring to the Dutch Banking Association. The ministry expects financial institutions to refuse clients who are either operating illegal online gaming Web sites in the Netherlands, or clients who operate online gaming Web sites from abroad and are excepting Dutch residents as clients. The press release stated that the ministry will take legal action against companies who “nevertheless have relations with clients who operate illegal gaming websites in the Netherlands.” It is noteworthy that the press release was not issued by the public prosecution department but the justice ministry, which, itself, has no authority to indict individuals or companies — it can merely file a complaint with the public prosecution department.

On the evening of Jan. 29, 2008, a debate on the proposed Online Gaming Act was held in the Senate. Senators referred to the press release that was issued in the morning and asked if this “firm line” includes criminal prosecution, which Mr. Hirsch Ballin promptly confirmed.

These statements by Mr. Hirsch Ballin resulted in several critical reactions in the press from the Dutch Banking Association and Currence, operator of leading Dutch payments service provider IDEAL. A spokesman for Currence mentioned in a radio interview on Jan. 30, 2008 that it is in principle unwilling to comply with Mr. Hirsch Ballin’s request, for as long as no judge rules that facilitating payment transactions to gaming operators is illegal. The Dutch Banking Association mainly pointed to the practical problems and stated that the debate on the acceptance of clients should only relate to Dutch accounts, held by Dutch companies at Dutch banks.

The criticism from the Dutch Banking Association, as expressed on its Web site, may have been effective. In a letter to the Senate dated March 4, 2008, Mr. Hirsch Ballin was less threatening in his remarks than in his Jan. 29 statement. Mr. Hirsch Ballin now stated that only the provision of bank accounts to online gaming operators is illegal. The justice minister also acknowledged that banks cannot completely monitor or block financial transactions between Dutch residents and online gaming operators. Dutch banks cannot prevent Dutch residents to transfer funds through a third party, such as an online bank account at a bank in another jurisdiction (Mr. Hirsch Ballin explicitly mentioned a PayPal account). Since PayPal has a banking license in Luxemburg, the justice ministry stated that it cannot oblige a bank with a foreign license to break up its relations with online gaming operators.

Because of the fact that the blocking of Dutch payments service providers can be circumvented, Mr. Hirsch Ballin stated on March 4, 2008 that he intends to address Internet service providers, as Internet service providers can remove, or block access to, illegal Web sites. Mr. Hirsch Ballin stated that the police and the public prosecution department can indicate this possibility to the Internet service providers regarding online gaming operators. The justice minister stated that such an approach on illegal Web sites by police and public prosecutors often leads to a “positive action” by the Internet service providers.

According to Mr. Hirsch Ballin, the public prosecution department is willing to take action against operators of online gaming, and against intermediaries such as payments and Internet service providers that serve these operators.

However, if the approach as described above proves to be ineffective, Mr. Hirsch Ballin has threatened to propose legislation that blocks transactions to and from online gaming operators. This legislation would be similar to the U.S. Unlawful Internet Gambling Enforcement Act. The justice minister did not mention that similar regulations to the UIGEA that prevent financial transactions to and from online gaming operators have already been criticized by the European Commission as infringements of the free movement of capital, as laid down in Article 56 of the EC Treaty.

On March 3, 2008, France received a detailed opinion from the European Commission following a draft decree similar to the UIGEA, and Germany has received a letter of formal notice because of the its Interstate Gambling Treaty. The letter of formal notice contains criticism on the prohibition of financial transactions with online gaming operators. These documents are a clear sign that the (eventual) Dutch legislation, prohibiting financial transactions to or from online gaming operators, can also be non-binding because such legislation potentially constitutes a violation of European law, notably Article 56 of the EC Treaty.

Conclusion

Despite several setbacks in administrative proceedings and the creation of a state monopoly on online gaming, Justice Minister Hirsch Ballin seems to be reluctant to make a move towards liberalization of the Dutch gaming market. With the latest statements on the blocking of payments and Internet service providers, Mr. Hirsch Ballin has shown that he intends to take the fight against online gaming operators to a new level. While it has become clear that the blocking of financial transactions can be easily circumvented, it is still unclear how Internet service providers will react to the government’s appeal to block access to online gaming Web sites.

This article was previously published in I-Gaming News and on the I-Gaming News website, as a preview to the 2008 European Gambling Briefing in Amsterdam. (http://www.igamingnews.com/index.cfm?page=artlisting&tid=8659)

The French Tennis Federation looses a set in the Roland Garros online betting issue

Following a legal action brought in Belgium under summary proceedings by the French Tennis Federation (FFT) against Ladbrokes, Bwin and Betfair and aimed at preventing Belgians from betting on the Roland Garros and French Master Series results, the first court Tribunal of Liège dismissed the action.

The FFT accused the defendants of not behaving as “prudent and diligent operators”, and of acts of parasitism (unlawful competition) .

Hence the FFT asked namely for:

• A total ban on online betting taken by the Belgian public on the upcoming 2008 Roland Garros tournament and the Paris Masters 2008

• The annulment and the reimbursement of bets already taken by Belgian residents

The defendants’ lawyers argued that gambling is a legal and ancestral practice in sport that has never been challenged until now. In addition, they exposed that their clients had enacted a code of conduct and respect corporate governance rules. They also explained that the defendants had set up individual measures to fight against bribery.

On April 28th, the Liege first instance court ruled in favour of the defendants.

It is to be emphasized that the litigation brought before the Belgian judge was international. Thus, the plaintiff was a sport federation which was granted powers from the French Government to organize tournaments in Paris while the defendants were companies that are not based in Belgium. That’s why the first question that arose in this case was the competence of the Liège first instance court. The judge grounded its decision on article 5.3 of the European regulation 44/2001, which provides that “A person domiciled in a Member State may, in another Member State, be sued in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur”. It is not contested that regarding Internet matters, the place where the harmful event occurs is wherever a website is accessible. In order to establish the accessibility of the involved websites, the judge assessed several criteria including the available language (English is deemed to allow perfectly an access from the Belgian market), the targeted market (it appears that bets on the Belgian football league are possible) and the fame of the FFT tournaments in Belgium. Consequently, the Liège first instance court declared itself competent to rule in this case.

It is interesting to confront this reasoning with several decisions of the Paris Court of appeal (Cour d’appel de Paris, 4ème ch.A, 6 juin 2007, n°06/14.890). Indeed, the French court appears to adopt strict criteria to avoid a systematic territorial competence to the French jurisdiction. Thus, the judges expect a “sufficient, substantial and significant link between the activity and the harmful event.

First, the court, taking into consideration the corporate responsibility of the EU operators concerned and the procedures in place “preventing all anonymous bets, ensuring perfect traceability” concluded that these operators had behaved in a prudent and diligent manner. Interestingly, the judge also took into account “the various measures, namely for the protection of minors” implemented by Bwin, as well as its membership of “ESSA (“European Sport Security Association”) which aims to guarantee the integrity of sports betting offers and to keep sports honest and free from fraud”.

Secondly, the judges took into account the fact that the defendants did not use the names of the FFT tournaments in a promotional way. Indeed, it was considered that the “simple mention of the name of a sports event is a necessary indication for the online betting activity” which therefore “cannot be considered as an act of parasitism since its sole purpose is to let the player identify which sport event to place a bet on”.

The Belgian judge ordered the French Tennis Federation to pay €5000 per case for the recovery of legal costs.

It should be noted that the FFT is also facing an action from Bwin in the Paris high court. The latter will undoubtedly use this first victory to support its claim in these other proceedings.

Danish Minister announces liberalization of online gaming and sports-betting

The Minister for Taxation, Kristian Jensen, told Danish radio station that the governments prepares to formally liberalise online gaming and skill-games.

The Danish government is preparing a formal liberalization of online gaming and skill-games. Fixed-odds betting is considered a skill game in Denmark. Danish Tax Minister Kristian Jensen said that the Danish gaming market is already competitive because of the nature of the internet. He also acknowledged that Danish authorities have ample possibilities to prevent its citizens from participating in online gaming. Therefore, a licensing system for online gaming and skill-games will be prepared.

Mr. Jensen emphasized that licensing conditions will be strict, and operators should expect a Danish tax burden. Further specifics on the liberalization, such as a time schedule, are still unclear.

The monopoly for lottery games will not be affected by the liberalization and will remain in the hands of the state-owned Danske Spill.

Duplicate poker officially recognized by the French government

The legal affairs section of the French interior ministry confirms that duplicate poker does not come under the scope of the 1983 act on games of chance

Traditionally under French law, games of chance where a stake is involved are prohibited.

Traditional poker is considered in France as a game of chance and its offer is restricted in France to casinos and private gaming clubs.

Duplicate poker is a poker variation based on Texas Hold’em: the basic rules are the same. However, in duplicate poker the element of chance is strongly reduced.

The concept of duplicate comes from Bridge which recognized in France as a mind sport: each player seated at different tables is dealt the same hand.

In duplicate poker, each player are seated at different tables and is dealt the same hand as the player holding the corresponding seat on another table: for each deal, players holding the same position at another table will receive the same cards (flop, turn and river).

Contrary to Texas Hold’em poker, the deals at the beginning are identical: player X in table 1 receives the same cards as his counterparts in table 2 etc.

Thus, players directly competing with each other for the winning prize all have the same set of cards to start with, and are further playing against opponents who also have the same set of cards amongst themselves.

Players do not know the game distributed to other players.

Moreover, the objective of the game is to do one’s best with the game at hand, knowing that one only plays against those who have the same game as oneself.

It should be stated that this authorization only covers duplicate poker.

Traditional poker games are still prohibited where stakes are involved and their offer limited to casinos and gaming clubs.

Sweden halts prosecutions of media carrying gaming advertisements

The Swedish Prosecutor-General has issued a circular letter, in which Swedish prosecutors are ordered to await prosecution on illegal gaming advertising until further notice.

The landmark decision to halt the prosecution on illegal gaming advertisements is the result of a landmark decision by the Swedish Supreme Court of 6 February 2008, which stated that the editors of two Swedish newspapers are entitled to appeal criminal convictions for publishing advertisements for private betting companies. The European Commission is of the opinion that Swedish gaming law is inconsistent with EU law and two infringement procedures are ongoing. In its decision of 6 February, the Swedish Supreme Court has stated that it is unclear if the Swedish laws are valid. The Prosecutor-General subsequently stated that the outcome of the infringement proceedings by the European Commission should be awaited, and prosecutors should not initiate new proceedings against media carrying betting advertisements.

The Supreme Courts decision stated that the Court of Appeal should hear the editors’ cases and referred to recent decisions by the European Court of Justice and the Reasoned Opinion that was sent by the European Commission to Sweden regarding the monopoly on sports betting. The Court of Appeal had previously stated that there was no reason to hear the editors’ case because Swedish case-law established that the Swedish gambling policy is justifiable under EU law.

The recent developments in Sweden are good news for private remote operators, currently excluded from the racing and gaming markets. Although a definite decision is not expected soon, and the legal situation is therefore still unclear, the decision of the prosecution department to cease prosecution of betting advertisers is significant. Private operators now have the ability to extend there marketing efforts in Sweden.

However, a liberalization of the gambling market can not be expected in the near future. According to reports on www.gamblingcompliance.com(1), Ola Wiklund, partner in the Stockholm offices of Swedish law firm Wistrand, said that none of the ruling government coalition parties wants gambling to become a political issue ahead of the next general election in 2010. However, if the ruling government retains power in the election, Wiklund expects that “they will likely try to dismantle the gaming monopoly in some way, maybe with some kind of licensing system.”

Also, Wiklund suggested that the interim period will be extremely important in terms of how private betting companies position themselves in the Swedish market. He urged private operators to strike sponsorship deals with grass roots sports, as well as with more established football clubs. According to www.gamblingcompliance.com, Wiklund explicitly mentioned the trotting industry, because this is quite open for new sponsorship opportunities.

(1) James Kilsby, Private Operators Gather Momentum In Sweden, available on http://www.gamblingcompliance.com/node/13476