Latest Court of Justice Ruling on Gambling Restrictions in the EU

September 12, 2010

In Germany, jurisdiction over gambling is divided between the federal State and the Länder. In most of the Länder, there is a regional monopoly for the organisation of sporting bets and lotteries, while the organisation of bets on horse racing and the operation of gaming machines and casinos are entrusted to duly authorised private operators. By the treaty on lotteries in Germany (Lotteriestaatsvertrag), the Länder created a uniform framework for the organisation of games of chance, apart from casinos. Following a judgment of the Budesverfassungsgericht (German Federal Constitutional Court), that treaty was replaced by the treaty on games of chance in Germany (Glücksspielstaatsvertrag) which entered into force on 1 January 2008. The latter prohibits all organisation or intermediation of public games of chance on the Internet.

In the series of cases where judgment was given on 8 September, various German courts are asking the Court of Justice to rule on the compatibility of the rules on games of chance in Germany with EU law.

In Joined Cases C-316/07, C-358/07 to C-360/07, C-409/07 and C-410/07 Markus Stoß v Wetteraukreis, the Verwaltungsgerichte (Administrative Courts) of Giessen and Stuttgart have to resolve disputes between, on the one hand, intermediaries for sporting bets and, on the other, the German authorities, which have prohibited those intermediaries from offering in the Länder of Hessen and Baden-Württemberg sporting bets organised by the Austrian undertakings Happybet Sportwetten and Web.coin, the Maltese undertaking Tipico, the British company Happy Bet and the Digibet company established in Gibraltar. Those undertakings hold authorisations to organise sporting bets.

In Case C-46/08 Carmen Media Group Ltd v Land Schleswig-Holstein, the Schleswig-Holsteinisches Verwaltungsgericht (Administative Court of Schleswig-Holstein) has to determine, by contrast, whether the Land Schleswig-Holstein was right to reject the application of the Carmen Media Group for authorisation to offer sporting bets in Germany via the Internet, in circumstances where that undertaking holds in Gibraltar, where it is established, an ‘off-shore’ licence, authorising it to organise bets only outside Gibraltar.

Finally, in Case C-409/06 Winner Wetten GmbH v Bürgermeisterin der Stadt Bergheim, the Verwaltungsgericht Köln (Administrative Court, Cologne) has before it a dispute between an intermediary for sporting bets, acting on behalf of the Maltese undertaking Tipico, and the German authorities. That court asks the Court of Justice whether the principle of the primacy of Union law over national law allows Member States to continue to apply, by way of exception and during a transitional period, a regulation concerning a public monopoly on sporting bets which contains unlawful restrictions on the freedom of establishment and the freedom to provide services.

The ECJ ruled as follows:

·         the German rules on sporting bets constitute a restriction on the freedom to provide services and the freedom of establishment

·         such a restriction may be justified by imperative reasons in the public interest provided that the measures adopted are suitable and limited to the restrictions necessary

·         Member States are free to establish public monopolies because such a monopoly is likely to overcome the risks connected with the gaming industry more effectively than a system under which private operators are authorised to organise bets subject to compliance with the relevant legislation.

However, the ECJ found that the German courts were right to take the view that the German rules do not limit games of chance in a consistent and systematic manner. First, the holders of public monopolies carry out intensive advertising campaigns with a view to maximising profits from lotteries, thereby departing from the objectives justifying the existence of those monopolies. Secondly, with regard to games of chance such as casino games and automated games, which do not fall within the public monopoly but carry a greater risk of addiction than games which are subject to that monopoly, the German authorities carry out or tolerate policies designed to encourage participation in those games. In such circumstances, the preventive objective of that monopoly can no longer be pursued, so that the monopoly ceases to be justifiable.

But the ECJ reinforces the view it has previously expressed that Member States have a broad discretion in determining the level of protection against the dangers emanating from games of chance. Thus, and in the absence of any Community harmonisation in the matter, Member States are not required to recognise authorisations issued by other Member States in that area. For the same reasons, and having regard to the risks posed by games of chance on the Internet in comparison with traditional games of chance, Member States may also prohibit the offering of games of chance on the Internet.