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Implementation of the Unlawful Internet Gambling Enforcement Act is becoming reality

October 20, 2008 2008

On 12th November 2008, after two years of stand by, the US Department of the Treasury along with the Federal Reserve Board finally announced the publication of the final rules ensuring the implementation of the Unlawful Internet Gambling Enforcement Act (UIGEA).

The UIGEA was enacted to stop the development of illegal internet gambling websites by means of blocking money transfers between unlawful gambling operators and consumers. Indeed, the UIGEA prohibits any person engaged in the business of betting or wagering (as defined in the Act) from knowingly accepting payments generated by unlawful internet gambling activities while financial firms are required to establish policies and procedures “reasonably” designed to identify and block or prevent such “restricted transactions”.

A final set of implementation rules was necessary in order to enforce the UIGEA. After a first draft in 2007, received with criticism by gambling law specialists, the US Department of the Treasury and the Federal Reserve Board proposed new regulations which draw up the regulatory enforcement framework.

However, the recently announced regulations are quite similar to the initial proposal, especially considering the standing committee’s decision not to define the exact meaning of “unlawful internet gambling” for the purposes of this act. Asserting that “the underlying patchwork legal framework [of gambling] does not lend itself to a single regulatory definition of unlawful Internet gambling”, drafters concluded that providing further details on what is “lawful” “would not be practical” with regards to eventual exemption from the Act (1).

In addition, the Department of the Treasury in accordance with the Department of Justice rejected the suggestion to set up a “blacklist” of unlawful internet gambling websites. Accordingly, such a measure “would not be effective or efficient” as long as gambling operators will be able to “change their payment information with relative ease and speed” and as a result “such a list would be outdated quickly.”

Instead, banks and other payment service providers will have to put into practice a “due diligence process” before opening new customers’ accounts or over account-maintenance procedure in order to control whether the commercial customer originates or receives restricted transactions through the customer relationship or not. For example, if a bank suspects a commercial customer to present more than a “minimal risk” of engaging in an Internet gambling business, the bank will have to ask for further documentation to ascertain that the Internet gambling business is lawful.

According to the Department of the Treasury the implementation of the Act will cost approximately $88,5m in staff costs, whereas further “unquantified costs” such as training, auditing and legal advice are also expected. The final bill could exceed 100m$ only for the first year and the total annual cost to regulated entities to maintain the policies and procedures will be approximately $3,3m.

Interest groups such as the American Banking Association or the Financial Services Roundtable are particularly reluctant to the implementation of the new provisions in a time of economic crisis. In an open letter addressed to US Secretary of the Treasury, Congressman Barney Frank demonstrated that enforcing the new rules at this time would “burden the financial services industry”.

While American government is enforcing the UIGEA, the European Commission is wondering about the opportunity of launching legal proceedings against United States before the World Trade Organization, considering that non American operators are specifically penalized by the implementation of the UIGEA in a restrictive and discriminatory way (2) . The European Commission should publish the conclusion of their formal investigation by the end of the year.

Despite criticisms, the final rules will officially come into effect on 19th of January 2009 and all payment service providers will have until December 2009 to comply with the new provisions.

[1] “Prohibition on funding of unlawful Internet”, Federal Register Notice, http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081112a1.pdf

(2) The US Department of Justice is suspected of violating international trade law by threatening and pressing criminal prosecutions, forfeitures and other enforcement actions against foreign online gaming operators while allowing domestic US online gaming operators.


Agencies Issue Final Rule to Implement Unlawful Internet Gambling Enforcement Act”, the Federal Reserve, Joint Press release, November, 12, 2008, http://www.federalreserve.gov/newsevent/

“Prohibition on funding of unlawful Internet”, Federal Register Notice, http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081112a1.pdf

“Prohibition on funding of unlawful Internet”, regulations to the Unlawful Internet Gambling Enforcement Act ‘s proposal, http://www.treas.gov/press/releases/reports/noticeofproposedrule.pdf

“UIGEA Rules To Take Effect Hours Before Obama Inauguration”, James Kilsby, November, 14, 2008, published on http://gamblingcompliance.com/

“EU gambling firms see WTO case coming against U.S”, Doug Palmer (Reuters), September, 18, 2008, http://www.reuters.com/

“EU online gaming industry challenges US with charge of prosecutorial discrimination”, Remote Gambling Association, Press release, Brussels, 20 December, 2007

A winning ticket for Bwin and the Liga Portuguesa de Futebol Profissional

October 20, 2008 2008

In the Case C-42/07 brought before the ECJ by the Portuguese Court, opposing the Liga and Bwin against Portugal, Advocate General’s recommendations strengthen the consequences of the notification requirement in application of EU Directive 98/34 in the field of gambling. Accordingly, the fines based on the non notified Portuguese Decree cannot be applied. In addition the opinion also considers the Portuguese online monopoly may be compatible with the opening of the gambling market.

In the Case C-42/07 brought before the ECJ by the Criminal Court of First Instance of Porto in a case opposing the Liga Portuguesa de Futebol Profissional (the Liga) and Baw International Ltd (Bwin) against Portugal’s Santa Casa da Misaricordi de Lisboa (Santa Casa), Yves Bot ECJ’s Advocate General’s conclusions were rendered public on October 14th 2008.(1)

His opinion strengthens the consequences of the notification requirement in application of EU Directive 98/34 in the field of gambling. Accordingly, a non notified national regulation cannot bring any effect to a cross-border gambling case. In addition the opinion also addresses the question of the compatibility of an online monopoly with the opening of the gambling market.

We will first go through the case background and then examine Yves Bot ECJ’s Advocate General’s reasoning with regard to the two main findings of his opinion.


Origins of the case in Portugal

It all started as Bwin and la Liga Portuguesa de Futebol Profissional announced a high profile sponsorship in 2005. Portugal’s Santa Casa was then holding the exclusive right to organise and operate lotteries and off-course betting in the whole of national territory.

Portugal’s 2003 Decree extended Santa Casa’s betting exclusive right to operate betting activities through all electronic means of communication, in particular the internet. This legislation also provides for penalties in the form of administrative fines in case of breach of Santa Casa’s exclusive right and for illegal advertisement.

The Portuguese authorities considered that Bwin and The Liga committed an infringement to the prohibition foreseen in 2003 Decree as it constituted a clear off-course betting by electronic means offer and advertising. In consequence, the authorities applied a fine of €74,000 and €75,000 to the respective offenders.

Bwin and the Liga challenged the fines before the Criminal Court of first Instance in Porto. The Court decided to refer the following question to the European Court of Justice for a preliminary ruling as to whether its national legislation, in providing for such a system of exclusive rights for off-course betting on the internet, is in conformity with Community law.

Developments of the case at EU Level

It is interesting to note that the Advocate General’s opinion takes position regarding an issue raised not by the national court but by the European commission

The Criminal Court of First Instance of Porto asked the ECJ following questions:

“1) Does the monopoly granted to Santa Casa, when relied upon against Bwin, that is to say against a provider of services established in another [EU member state] in which it lawfully provides similar services, which has no physical establishment in Portugal, constitute an impediment to the free provision of services, in breach of the principles of… the European Treaty?

2) Is it contrary to Community law, in particular to the above mentioned principles, for rules of domestic law… to establish a monopoly in favour of a single body for the operation of lotteries and mutual betting and then to extend that monopoly to ‘the entire national territory, including… the internet?” (2)

Subsequently, the European Commission raised additional questions regarding the failure of Portugal to notify the challenged piece of legislation: Can fines be applied to a cross-border internet gambling provider, when the national piece of legislation applicable has never been notified as Directive 98/34 requires it ?

All parties considered the argument raised by the Commission’s written submission, as out of the scope of the questions referred to the Court and irrelevant. Even Bwin’s and the Liga’s legal counsel were “convinced the lack of notification is not of particular relevance to the matter.”

The Portuguese Government added that it is for the national court to ascertain the Community law applicable. In the alternative, the Portuguese Government claims that games of chance and gambling were excluded from the ambit of Directive 2000/31 on electronic commerce and Directive 2006/123 on services in the internal market and therefore do not fall under the notification’s requirement of Directive 98/34.

However, Advocates General’s conclusions recommended to the Court to follow the opposite legal opinion.

Analysis of Advocate General’s Yves Bot opinion

EU notification’s requirement encompasses strictest consequences

The Advocate General first recalls that the ECJ may consider some provisions of Community law even if the national Court did not refer to it in its question.

As to the applicability of Directive 98/34, Advocate General’s reasoning relies on the objective of this directive. Namely, in order to effectively put in place a free market of good and services, barriers arising from the adoption by the Member States of different technical regulations should be removed or reduced. It follows that, in application of the Directive 98/34, as amended by Directive 98/48, national initiatives in the field of services of the information society -that is to say by electronic means- have to be notified to the Commission, European standardisation bodies and the other Member States. Such notification aims at enabling the Commission and the other Member States to inform the notifying Member State of their viewpoint and to propose standardisation which is less restrictive to free trade.

Therefore, Advocate General’s first examines whether the national measure, which extended Casa Santa’s monopoly to betting offered through electronic means and which laid down penalties for any operator which disregards that exclusive right, is a technical rule within the sense of Directive 98/34.

In application of the above, Portuguese 2003 Decree is to be considered as a technical regulation and fall within the scope of Directives 98/48 and 98/34 “in so far as they prohibit any other operator from offering lotteries and off-course betting on the internet in Portugal.” (3)

In addition, in response to the Portuguese Government’s objection, Advocate General underlines that, “where the Community legislature wished to exclude games of chance and gambling from a measure relating to services, such as Directive 2000/31 on electronic commerce and Directive 2006/123 on services in the internal market, it provided for such exclusion expressly.”(4) On the opposite, Directive 98/34 does not create such exception.

Accordingly, Portuguese 2003 Decree ought to have been notified to the Commission, which was not the case.

In line with a former ruling of the Court (5) , the Advocate General takes the view that the obligations of notification and postponement laid down in the Directive 98/34 are unconditional and sufficiently precise to be relied on by individuals before national courts. Consequently, such technical regulation which has not been notified is therefore inapplicable to individuals, and national courts must decline to apply it.

As a consequence, the Advocate General recommends that “if that legislation was not duly notified to the Commission of the European Communities, it cannot be relied on against private operators such as the Liga and Bwin.”(6)

Monopolies and opening of the market may not be incompatible?

As to the question of compatibility of the Portuguese Decree with Community law, as explicitly referred to the Court, the Advocate General recalls the fundamentals of the opening of the market.

The Advocate General recalls settled case-law stating that a piece of legislation restricting free provision of services must be justified by overriding reasons relating to the public interest, it must be appropriate for ensuring the attainment of the objectives which it pursues, it must not exceed what is necessary for attaining them and it must not be applied in a discriminatory way.(7)

That is to say that a monopoly given to a single entity may not be contrary to EU law under specified conditions. Advocate General recalls that “a Member State should be required to open up this activity to the market only if, in law or in fact, it treats the gambling and games of chance as true economic activities which yield maximum profits.”(8)

In line with the above, Advocate General considers that the exclusive right to organise online gambling granted to the Santa Casa is in fact a restriction of the freedom to provide services.

However, taking into consideration the risks created by games of chance and gambling on the internet, Yves Bot advocates for Member States to legitimately restrict the right to organise and operate such games with the aim of protecting consumers and maintaining public order.

He considers that the Portuguese monopoly, granted to a century old non-profit-making organisation aiming to finance causes of public interest, may fall under the justifications compatible with EU law.

Following the Portuguese Government arguing for public order objectives, he takes the view that such legislation is appropriate. Finally, he considers that it is not, as such, excessive or discriminatory.


As a conclusion, Advocate General’s opinion may constitute the winning ticket for Bwin and the Liga if the Court decides to follow Yves Bot’s recommendations (this is usually the case). He underlines that even if Member States have argued that the 98/34 Directive was not relevant in the proceedings, a judgement giving a preliminary ruling is binding. Therefore, it is likely that no fine would be applicable to the Bwin’s and Liga’s infringement.

As to the EU compatibility of this regulation, the Advocate General confirms a principle already settled down in former ECJ ruling: justified restrictions to the free provision of services for public order purposes are compatible with EU law. Considering the particular risks inherent to the gambling activities, he defends the Portuguese regulation. This reasoning could be of greatest interest for the Member States currently reluctant to revise their monopolies in the field of on-line gambling.

However, in this respect, the European Commission may decide not to completely follow the Advocate General’s opinion.

To be continued …


1. See attached

2. OJ C 69 of 24.03.2007, p.9

3. Case C-42/07, opinion of Advocate General, Paragraph 160

4. Case C-42/07, opinion of Advocate General, Paragraph 174

5. Case C-194/94 CIA Security International [1996] ECR I 2201, Paragraph 44

6. Case C-42/07, opinion of Advocate General, Paragraph 6

7. See Case C 124/97 Läärä and Others [1999] ECR I 6067 Läärä and Others, paragraph 37, and Case C 67/98 Zenatii [1999] ECR I 7289Zenatti, paragraph 35

8. In the above mentioned cases, the Court considers that the authorisation by a Member State for the operation of gaming and betting activities by an entity with an exclusive right or by a specified number of operators is not incompatible with the aims of protecting consumers from being tempted to spend excessively and maintaining public order. According to the Court, limited authorisation of games of chance and gambling on an exclusive basis, which has the advantage of confining the desire to gamble and the operation of gambling within controlled channels, of preventing the risk of fraud or crime in the context of such operation, and of using the resulting profits for public interest purposes, likewise falls within the ambit of those objectives.

Holland Debuts New Gaming Act

October 5, 2008 2008

Justin Franssen of Amsterdam-based law firm Van Mens and Wisselink examines the proposed legislation and looks at how it may affect operators currently active in the Dutch market.

This article was published on gamblingcompliance (www.gamblingcompliance.com) on 13/08/2007.

On July 18, 2007, the Minister of Justice finally published the anticipated new Gaming Act (in Dutch ‘Wet op de kansspelen’). Revision of the current law was certainly overdue, as several amendments have been made over the years in response to changes in the Dutch gaming market. Illegal and new, riskier games have been introduced and, as a result, the legally available gambling services have been expanded in order to counteract illegal gambling. Different rules have been applied to different games, but these will now be harmonised under the proposed legislation. Online gambling is not covered by the Act but will instead be regulated by a separate piece of legislation, the Online Gaming Act. This Online Gaming Act is currently being debated in the Dutch Senate, ‘Eerste kamer’.

The wording of the bill suggests a tightening of Dutch policy on the offering of games of chance. Increased supervision and enforcement are the key elements in what appears to be a bid to establish a more restrictive gaming policy.

The most significant measure contained within the Gaming Act is the introduction of a new Gaming Authority to enforce the law. This article will examine the significance of this change as well as exploring what the main implications will be for current gaming operators in Holland. Finally, the proposed changes will be looked at from a European perspective, within the context of ongoing infringement and litigation proceedings brought against the Dutch government by the European Commission and private operators.

Gaming Authority

Compared to the current regulator (the Gaming Board) the new Gaming Authority will have greater powers and broader responsibilities. The Gaming Authority will be the body that issues, enforces and revokes licenses and supervises all Dutch licensees. Stricter measures of enforcement are also proposed by the Gaming Act. These are mostly administrative sanctions but some violations fall within the reach of penal law. The new legislation is far more specific than its predecessor as the language of the current legislation [which dates back to 1964] has been modernised and updated.

The Act makes a number of changes. License conditions and the reasons for which licenses can be revoked are harmonised. Direct intervention by the Minister of Justice is made possible in several circumstances. Quantitative and qualitative regulation of the marketing efforts of the gaming operators is also authorised. These marketing regulations are not yet an intrinsic part of the Act but they can be introduced if the current code of conduct on marketing fails to meet the Minister’s expectations.

The Act also defines for the first time precisely what is meant by the term ‘game of chance’. According to the definition it is “…competing for prizes, for which the determination of the winner occurs by chance, on which the participants generally cannot assert any effect.” Regarding the distinction between games of skill and games of chance, it is noteworthy that the Minister considered it wise to exclude, under certain conditions, science quizzes from gaming law.

The Gaming Authority will undertake executive, enforcement, and supervisory tasks concerning the gaming market in the Netherlands. The executive tasks relate mainly to licensing and the manufacturing of gaming machines. In addition, the Authority will provide education and counselling services to both the public and other authorities.

The Authority’s role as supervisor relates to ensuring that licensed gaming operators comply with the law and its regulations. It will have the power to enforce the legislation, however, by imposing administrative sanctions on non-compliant gaming licensees.

Furthermore, the new body will also be charged with suppressing illegal operators. It is noteworthy that in the explanatory statement of this proposed legislation, the Minister of Justice refers to a formal letter (TK 2005/2006, 29 849, nr. 30) proposing a choice of sanctioning systems. Given the fact that, over the past few years, the enforcement of the existing Gaming Law has been conducted primarily through civil litigation, this signifies a change in enforcement policy.

Appeals to the decisions of the Gaming Authority will have to be made to the District Court in Rotterdam, whose ruling can subsequently be appealed with the Trade and Industry Appeals Tribunal.

Implications for current licensees

The new legislation does not make any principal changes as to the type of gaming licenses that will be issued. These licenses cover the following games of chance: lotteries, scratch cards, incidental lotteries, sports and horserace betting, casinos, prize contests, free promotional games of chance, small games of chance and finally gaming machines. The terms and conditions of issuing the respective licenses, and the terms which with operators must comply, are, whenever possible, unchanged from the current regime.

Existing state monopolies will remain intact for the state lottery, lotto, and casinos. Existing licensees retain their licenses and a legal justification for limiting the number of lottery licenses available is introduced.

This reasoning is a curious aspect of the legislation. Introducing a cap on the number of licenses may be incongruent with the overall aims of the gaming policy. The current state-owned monopolies will continue to transfer their net revenue to the state but the other licensees will no longer transfer their funds to specific charities, as is the case now. Instead, the net result of their operations will be donated to a ‘public interest’, defined as a non-private interest or a non-commercial interest. Under this new definition, the current implicit inclusion of the state treasury in the term ‘public interest’ is made explicit. It has been a historic characteristic of Dutch gaming policy to protect consumers by forbidding the ‘exploitation of the compulsion to gamble for private gain’. Because of this, the net result is transferred to the treasury or charities.

A duty of care is imposed upon gambling operators to take action to prevent excessive gambling. The Cabinet can make specific regulations regarding this duty. A provision is already incorporated in the law in case the realisation of this duty interferes with privacy laws. This appears to reflect a genuine effort to take action to prevent gambling addiction.

The accountability of gaming licensees on the transfer of funds to beneficiaries, and the application procedures for these funds, are further regulated and made more transparent.

The Act reflects a concern for the blurred distinction between arcades and casinos. A restriction is placed on the number of gaming machines allowed in casinos, and arcades will be prohibited from using the word casino in their name, as is the situation with many current operators.

Regarding the internet, the issuing of tickets via the web is explicitly permitted for licensees. However, the Act does not authorise operators to offer games themselves over the internet.

Conformity with European Law

Dutch gaming policy is currently being disputed by the European Commission and is being challenged in court by foreign gaming operators. The new legislation contains language reacting to the ongoing discussions being held on the conformity of Dutch gaming policy with the EC-Treaty, mainly by imposing restrictions upon licensees and instructing them to act in compliance with the official aims of Dutch gaming law.

Dutch policy has been criticised as being inconsistent with the government’s stated aims. One of the main arguments centres on the extensive marketing and advertising budgets that current licensees have had at their disposal over the past decade., with the three state gaming monopolies among the biggest advertising spenders in the Netherlands. In the new legislation, the Minister acknowledges that marketing activities should be in harmony with the prevention of gaming addiction and excessive gaming. These marketing efforts are currently being regulated by a code of conduct, but the new Gaming Act also imposes limitations and authorises the Minister to intervene if the code fails to satisfy his demands.

Currently, licensees can offer free, supplementary games to their customers, alongside the main game they operate. These games are crucial to operators’ marketing strategies but in accordance with the new law, they will only be able to offer a supplementary game once per week.

In response to the alleged inconsistency between the extensive marketing efforts of Dutch operators and the government’s stated aim of preventing gambling addiction, the Minister refers to Dutch and ECJ jurisprudence on gaming. The Minister claims that extensive marketing is permissible under European law, so long as the volume of regulated gaming remains small in comparison to the volume it would be without the regulations.

The Minister says that Dutch gaming policy is consistent with the EC-Treaty and that the policy is suitable to achieve its aims. It is noteworthy that the Minister does not refer to EFTA case law, as he has done previously. In the recent case between Ladbrokes and the Norwegian government, the EFTA Court ruled that the aim of preventing gambling from being a source of private profit could not be justified if a state-owned monopoly is allowed to offer a range of gambling opportunities.

European law is also relevant for operators who offer games other than that for which they specifically hold a licence in Holland, with operators’ sideline activities forbidden, except under special conditions. It is debatable whether these restrictions conform to European law on unfair competition, especially if the restriction affects the operators’ business outside the Netherlands.

Licensees are no longer allowed to participate in other companies with a purely financial aim but participation as a contractor is allowed. A limited participation, at a maximum of 5 percent, as a perpetuated partnership with a foreign gaming operator is also possible.


This proposed legislation is partially a reaction to recent criticism of Dutch gaming policy at a European level. It shows awareness that the current Dutch gaming law is vulnerable. The main points of criticism have been the extensive marketing efforts of gaming operators, and consumer and player protection. All of these subjects are referred to in the proposal, and several restrictive measures are taken. At this moment, several institutions are being consulted and given an opportunity to make remarks. The date when the proposed legislation will become effective is yet uncertain.

Dutch Banks Reluctant Players In Payments Ban

October 5, 2008 2008

The Dutch Banking Association is unlikely to co-operate with any rules put forward for blocking payments to online operators unless they see evidence of a criminal conviction of an operator, according to lawyers close to the situation.

Justin Franssen, gaming lawyer with Van Mens & Wesselink, was commenting during the second day of the European Gambling Briefing (EGB) in Amsterdam. His comments follow further suggestions at the weekend from the Dutch Ministry of Justice [2] that the government was considering the possibility of going down the route of attempting to block financial payments to offshore online operators.

Franssen said any action would unlikely be a new law and would more likely be an addition to the current gaming law. However he added that, before they could gain cooperation from the Dutch Banks (Nedelandse Vereniging van Banken, or NVB [3].) the Dutch authorities would find themselves having to pursue and eventually attempt to arrest online operators such as Unibet.

He added that in the case of Unibet, this as something that the Maltese authorities, where Unibet is licensed, would be unlikely to comply with.

Franssen also suggested that the current infringement proceedings begun by the European Commission against the Dutch government in relation to protection of its monopoly lottery and casino operators would be destined to end in the European Court of Justice. He said that a key sticking point was the Dutch system of proposing single licenses but then refusing to open even this license up to an open tender process. He said the process should be “non-discriminatory”.

He also pointed out that though the government and Holland Casino were still confident that a provision for the monopoly operator be awarded an exclusive three-year licence to provide online gaming might be included once again in the Gambling Act proposed for the summer, he believed their hopes would be in vain.

Such a proposal was recently defeated in the Dutch senate [4], and Franssen believes a majority against the proposal continues to exist. “My thinking is it won’t happen,” he said. “The votes are against it.” He added that the only chance it might have would be if the government awarded multiple licenses and opened up the process to competition.

Elsewhere at the EGB, Bartosz Andruszaniec an associate at Allen & Overy in Poland, delivered the message that despite the suggestion for the minister of finance that the Polish government would look at the possibility of opening up the online market, there had yet to be any sign of legislative proposals. “Any future legislation is yet to be presented,” he said. However, he added a hopeful note. “The government is trying to find as much money as possible,” he said.

The author of this article is Scott Longley. This article was previously published on GamblingCompliance.com (http://www.gamblingcompliance.com)

© Gambling Compliance Ltd 2006

Dutch Court Verdict Gives Hope To Private Operators

October 5, 2008 2008

Drawing heavily on the ECJ’s recent Placanica decision, Holland’s highest court has raised severe doubts over the compatibility with European law of the country’s system for licensing domestic lottery operators. According to one observer, the precedent also bodes well for operators hoping to secure access to the Dutch betting market.

On July 18, the Dutch Council of State delivered its judgment on a case brought against the Ministry of Justice by an operator whose application for a Dutch lottery licence had been denied by the Ministry. The operator in question, Schindler, applied for a licence to act as an intermediary for foreign lottery companies within Holland, as well as a licence to offer its own lottery games within the country. The Council of State’s decision last week means that the Ministry of Justice will now have to review Schindler’s application in accordance with the Council’s recommendations.

There are currently three licensed lotteries in Holland and licences are renewable on a five-year basis. As Justin Franssen, partner at Amsterdam-based law firm Van Mens and Wisselink, explains, in reality these licences are “semi-permanent” as they are continually renewed and are not opened to a tendering process once they expire. The Ministry of Justice, in rejecting Schindler’s application, stated that there was no particular need for a fourth licensee as lottery demand in Holland was already being satisfied by the three operators and issuing a licence to Schindler would cause the Dutch government to “loosen its grip” on the market.

The Court found that the absence of any tendering procedure to renew licences “…cannot, in light of principles of necessity and proportionality established by the ECJ […], be justified by merely referring to the objective of keeping a grip on the market.” According to the Court, granting Schindler access to a licensing process would not cause the government to ‘lose its grip’ as all operators would still be obliged to comply with any regulations set by the government under the terms of that process.

Although Dutch courts have traditionally upheld the Dutch system to be in line with European law, the latest Council of State decision suggests that the ECJ’s Placanica verdict in March has led to something of a re-evaluation.

“The Dutch government says that it has large discretion within European law to determine national policy on gaming. The Council of State has now said that on the basis of Placanica this is not true,” says Franssen.

“In its decision, the Council of State is critical of the Dutch policy on the basis of Placanica and Gambelli and argues that if there is to be a limited amount of licences available there has to be a more transparent mechanism to determine how those licences are issued or renewed.”

According to Franssen, such a transparent process should grant foreign, or at least EU-based, operators access to any lottery licence bidding process. The precedent set by the Council of State’s decision could however have an impact upon the sports betting and horse racing markets where long-standing licences are renewed on a similar basis to the lottery market. “This decision could mean that all [lottery, horse racing and betting] licences will become subject to tender. If we stretch the Council of State’s decision to these other licences it means that no operator in Holland, aside from Holland Casinos and the state lottery, is safe,” says Franssen.

For Franssen, the verdict is especially significant given the fact that betting operators, Ladbrokes and Betfair in particular, have challenged the government’s decisions to exclude them from the Dutch market on similar grounds to Schindler. “After all the judgments against foreign operators [3] recently, I would say that this new decision is in a way groundbreaking,” he says. “The Dutch government has taken the view that it has the right to exclude operators from a licensing process – in accordance with this decision it cannot do that anymore.”

Gamblingcompliance.com understands that the Council of State will rule on the Betfair case on August 30.

The author of this article is James Kilsby. This article was published on 25/07/2007 on GamblingCompliance.com (http://www.gamblingcompliance.com)

© Gambling Compliance Ltd 2006

Source URL: http://www.gamblingcompliance.com/node/7239


[1] http://www.gamblingcompliance.com/

[2] http://www.gamblingcompliance.com/author/30

[3] http://www.gamblingcompliance.com/node/6787

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