Tipp24 Plots German Comeback After ECJ Shake Up

14 Sep, 2010 published on GamblingCompliance by Daniel Macadam

Private lottery operator Tipp24 plans to resume its formerly outlawed German business in the wake of Europe’s top court ruling last week against Germany’s state lottery and sports betting monopolies.

Prosecutions against Tipp24, and other private operators, for breaking the country’s prohibitive Interstate Treaty are now on hold as gaming authorities wait for the national courts to decide how the ECJ rulings will be applied.

The ECJ’s judgments on Wednesday plunged the German gambling market into legal chaos, as they found that Germany’s regulations did not limit games of chance in a consistent and systematic manner.

The court ruled that maintaining sports betting and lottery monopolies in German states to minimise gambling addiction ceases to be justifiable, when at the same time seemingly more addictive privately-run slot machines have been allowed to expand.

“The ECJ ruling has fully confirmed our legal viewpoint. The State Treaty on Games of Chance is illegal and not applicable – a victory in all aspects,” Dr Hans Cornehl, Tipp24’s chief executive, said.

“We expect that we will soon be able to resume our business of brokering state lotteries in Germany – a business we successfully conducted until late 2008.”

A spokesperson told GamblingCompliance that Tipp24 was analysing the German legal situation in detail and is expecting it to “take some weeks” before the company resumes its lottery business.

Tipp24’s announcement heralds a turnaround after last month’s half-year report, which gloomily predicted that the company could be prevented “in the medium term, or even permanently” from accessing Germany’s huge market potential.

The Frankfurt-listed lottery operator, which argued unsuccessfully that the Interstate Treaty was unconstitutional in the national courts, said there was a risk the ECJ would uphold Germany’s restrictive legal framework.

How soon Tipp24 can resume its German business depends on whether the state lotteries will work with them again and what the national courts decide about Germany’s gambling legislation, according to local gaming experts.

Wulf Hambach, founding partner of the German gaming law firm Hambach and Hambach, told GamblingCompliance that the state lotteries should face the reality of what is happening after the ECJ rulings.

“If the Interstate Treaty is not applicable any longer, then we have a situation where European operators cannot be sanctioned for offering their services in Germany,” Hambach said.

Impending decisions in the Berlin and Stuttgart administrative courts on the ECJ rulings, expected in the next few weeks, will clarify whether private operators can use that argument to enter the German market.

“The legal chaos has not cleared yet,” Martin Arendts, gaming specialist at German law firm Arendts Anwalte, told GamblingCompliance.

“The gaming authorities have put cases on hold. They are no longer prosecuting betting shops or lottery operators, but they are not declaring prohibition orders null and void either.”

German-based betting and gaming operator Jaxx, which saw an increase in regulatory proceedings filed against it in the first half year of this year, turned its attentions from a legal to a political solution to the Interstate Treaty’s prohibitions.

After the ECJ ruling, Jaxx’s chief executive Mathias Dahms reiterated: “Politicians now need to come up with a timely solution that complies with European law.”

“Schleswig-Holstein has already given a lead,” Dahms added. “It is currently the only legally compliant concept to meet the general conditions for a coherent gaming policy laid down by the ECJ.”

Hesse’s economically liberal Free Democratic Party announced after the ECJ rulings that the current Treaty was unlawful and disadvantaged state lottery monopolies, and Hambach is convinced many other Lander will follow.

“The lobbyists for the gambling monopolies are proclaiming that monopolies are feasible and the best solution. Feasible? Yes. But not the best solution,” Hambach said.

“If Germany now re-enforces the Interstate Treaty, then it will cut off its arms and legs commercially.”

“Not only with the gambling monopolies at the state level. It will also have to bring slot machines under stricter control, if it’s to comply with the ECJ, and so will commit commercial suicide at the federal level too” he added.

The majority of Lander, though, are still nominally in favour of the current gambling legislation, and Arendts said the political situation is far from certain, with more dust-ups likely.

“Some politicians argue they need to issue a new Interstate Treaty to fit in with the ECJ but still support monopolies,” Arendts said. “While Schleswig-Holstein and Lower Saxony argue they need a licensing system for sports betting.”