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ECJ Rules On Dutch Gaming Licenses

by Ulrika Lomas, for LawAndTax-News.com, Brussels

10 June 2010


The European Court of Justice (ECJ) has delivered two key preliminary rulings on the compliance of Dutch legislation with the EU Treaty in respect of e-gaming regulation.

The cases (C-203/08 and C-258/08) at stake originate in national proceedings involving Ladbrokes and Betfair, two companies established in the UK.

Netherlands legislation in relation to games of chance is based on a system of exclusive licences under which the organisation or promotion of games of chance is prohibited unless an administrative licence for that purpose has been issued, and only one licence is granted by the national authorities in respect of each of the games of chance authorized.

There is no possibility at all of offering games of chance interactively via the internet in the Netherlands. De Lotto, a non-profit-making foundation governed by private law, holds the requisite licence for the organisation of sports-related prize competitions, the lottery and numbers games.

Its objectives, according to its constitution, are the collection of funds by means of the organization of games of chance and the distribution of those funds among institutions working in the public interest, particularly in the fields of sport, physical education, general welfare, public health and culture.

The Hoge Raad der Nederlanden (Netherlands Supreme Court) and the Raad van State (Netherlands Council of State) had asked the Court of Justice about the compatibility of Netherlands legislation on gaming policy with European Union law.

According to the ECJ, although the legislation at issue here constituted a restriction on the freedom to provide services, such a restriction may be justified, in particular, by the objectives of consumer protection and the prevention of both fraud and incitement to squander money on gambling, as well as the need to preserve public order.

The ECJ ruled that the national courts should determine whether member states’ legislation actually serves those objectives and whether the restrictions it imposes do not appear disproportionate in the light of those objectives.

The court stated that if the Netherlands is “pursuing a policy of substantially expanding betting and gaming, by excessively inciting and encouraging consumers to participate in such activities (…) it would have to be concluded that such a policy does not limit betting and gaming activities in a consistent and systematic manner and is not, therefore, suitable for achieving the objective of curbing consumer addiction to such activities.”

The court further noted that: “Since the objective of protecting consumers from gambling addiction is, in principle, difficult to reconcile with a policy of expanding games of chance characterized, inter alia, by the creation of new games and by the advertizing of such games, such a policy cannot be regarded as being consistent unless the scale of unlawful activity is significant and the measures adopted are aimed at channeling consumers’ propensity to gamble into activities that are lawful.”

In the second case, as regards the single-operator licensing scheme, the ECJ said that "Article 49 EC must be interpreted as meaning that the principles of equal treatment and the consequent obligation of transparency are applicable (…) in the field of games of chance.”

The ECJ stated that member states had sufficient discretion to determine the level of protection sought in relation to games of chance. However, it must use objective, non-discriminatory criteria known in advance, in order to circumscribe the exercise of the authorities’ discretion so that it is not used arbitrarily.

Sigrid Ligné, Secretary General of the EGBA, said: “The Court has confirmed that if a member state wants to prohibit or channel gambling through a single operator it has to comply with strict features that we consider are clearly not met in the context of the Dutch legislation. But it is now for the national judge to assess the consistency of the Dutch gambling policy and to make a final decision”.

Ligné added: “The Internet raises new questions and challenges that cannot be resolved through the judicial process. It is for the European legislator to ensure that this IT-based medium which allows for the highest security standards warrants consistent customer protection and fraud control throughout the EU.”

Ligné concluded: “We are confident that reform of the gambling laws will take place in the Netherlands, as they already do throughout the EU. Beyond the legal considerations, you also have to look at the reality of the market. There is a consumer demand for online gaming in the Netherlands, like there is all over Europe. Increasingly, EU member states like Italy, Denmark and France realize that online gaming is a popular leisure activity and are opening their market to competition. EGBA urges the Dutch authorities to also start regulating the market.”

A comprehensive report in our Intelligence Report series examining the new possibilities that offshore e-commerce open up for business, and analysing the offshore jurisdictions that have led the way in offering professional e-commerce regimes for international business, with a particular focus on e-gaming, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report6.asp
TAGS: court | business | Netherlands | commerce | law | internet | e-commerce | gambling | licensing | legislation | European Union (EU) | Europe

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