EC Observations to Italian New Online Gaming Rules

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)

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

Online gaming industry calls for European cooperation in responsible gaming

Key stakeholders from across the online gaming industry spoke with one voice at the inaugural “Responsible Gaming Day‟ event at the European Parliament on 17 April, calling on the EU for greater cooperation to ensure a safer and more secure online gaming environment for consumers.

The event, the first of its kind to be hosted at the European Parliament, saw a number of MEPs, the EU Slovenian Presidency, regulators and academics join leading industry representatives to exchange best practices and knowledge in the field of responsible gaming.

Norbert Teufelberger, Chairman of the European Gaming and Betting Association (EGBA) said: “No matter how much we do, no matter how many rules we put into place, and no matter how good we are – no solution will be optimal if it is not inclusive and based on the full cooperation and commitment of all stakeholders.”

Christofer Fjellner, MEP (EPP-DE, Sweden) added, “The key ticket to entering national markets is consumer protection. Using this as an argument to protect monopolies is simply letting consumers down.”

Protection of minors was also a key focus of the conference discussions. Andrew Poole, Managing Director, GamCare commented: “There needs to be shared responsibility to minimise underage gaming. Consistent regulation across jurisdictions and proper education are key in achieving an effective industry-wide response to underage gaming.” This view was echoed by Leon Thomas, Head of Regulatory Compliance at PartyGaming who stated “We want governments to help us help consumers.”

The event also featured academia specialised in gaming and betting behaviour research who emphasised the need to use scientific research rather than conjecture when talking about online problem gaming. Richard LaBrie, Ed. D. Harvard Medical School commented: “The advantage of online gaming is that you can track data in real time rather than relying on self reports, which may lack reliability.”

Source EGBA press release. For more information www.ResponsibleGamingDay.eu

Update on Irish Casino Committee Report

The long awaited Irish Casino Committee Report appears to be finally nearing publication and may be published within the next few weeks, LK Shields report.

Update on Irish Casino Committee Report

The long awaited Irish Casino Committee Report (the ‘Report’) appears to be finally nearing publication and may be published within the next few weeks.

Publication of the Report

It is understood following our conversation with a spokesperson in the Irish Department of Justice, Equality and Law Reform that the Irish Minister for Justice, Equality and Law Reform, Brian Lenihan was ready to publish the Report and formally announce the establishment of an informal all party committee charged with the review of the Report. However, the recent announcement, by An Taoiseach (Irish Prime Minister), Bertie Ahern that he is to step down as Taoiseach and as leader of Fianna Fáil on 6 May 2008 has resulted in a slight delay in the publication of the Report. Brian Cowen, the current Minister for Finance and Tánaiste (Irish Deputy Prime Minister), will be elected Taoiseach on 6 May 2008. As with any Taoiseach’s election, there will be a reshuffle of certain ministries and it is currently unclear whether Minister Lenihan will remain in his current post. Until that reshuffle is announced, it is unlikely that the Report will be published.

Broader Terms of Reference for the Informal All Party Committee

The Irish Casino Committee was tasked with preparing a report on the regulation of casino style operations in Ireland. However, it is expected that the Report will cover many different areas of gaming and gambling in Ireland including fixed odds betting terminals and internet gambling. The informal all party committee which the Minister for Justice, Equality and Law Reform will soon announce is expected to be given broader terms of reference. We understand that the position has shifted from ‘how best to regulate casinos in Ireland’ to ‘how best to regulate gaming and gambling in Ireland’. Comment It this is the case, this new position is very much to be welcomed. The main legislation in Ireland governing gaming and gambling has not been substantially overhauled since the middle of the last century. It does not address modern technological developments. Attempting to navigate and interpret such legislation is difficult and indeed frustrating for both existing operators and new operators considering entering the Irish marketplace. No doubt, clarity on the area will be welcomed by all in the industry. However, it looks like the timetable for progress is somewhat uncertain for the moment.

For further information, please contact

Áine Matthews amatthews@lkshields.ie or

Deirdre Kilroy dkilroy@lkshields.ie of the

Gaming and Gambling Unit of LK Shields Solicitors in Dublin or by telephone on +353 1 661 0866.

April 2008.