23 May 2007

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Business Today

Malta Today



George M. Mangion

Regulatory differences on remote gambling in the EU

There seem to be a greater need for discussions following the uncertainty prevailing on regulatory issues among various European jurisdictions concerning remote gambling, including advertising, taxation, cross border sports betting, implication of VAT, abuse of monopoly powers and location of servers.
Malta-based GMM Business solutions is organising another gaming related conference namely the Online Gambling Legislation Debate at IGE, Lake Como- Italy at the end of May. Why Italy and not London or Costa Rica? The answer is simple. Italy recently gave the impression of becoming a more user-friendly jurisdiction for international gaming and last year it issued an impressive set of new gaming licences.
Italy stands out as an attractive jurisdiction with a compromise tax burden which at three per cent is well placed to beat competition and start attracting cross-border trade.
Ladbrokes recently announced that it had formed a Joint-Venture with the Italian betting company Pianeta Scommesse, the first step in a planned e100 million investment by the company to establish high street shops, non-dedicated outlets, and internet and telephone betting operations over the next five years. The announcement was in response to proposals contained within the “Bersani Decree” by which the Italian government is set to reform the Italian betting market, increasing the number of sports betting licences to 7,000, while reducing taxation on sports bets from 17 per cent to between two and eight per cent, depending on turnover.
All this contrasts with the way how London received shock treatment in Gordon Brown’s recent budget. The chancellor announced in his recent budget that the online gaming tax is to be a high of 15 per cent. Previously industry lobbyists had been predicting that the tax would be hovering around the two per cent and three per cent., which would have been comparable with other low-tax EU jurisdictions. The chancellor’s decision means that setting up in the UK is now prohibitive.
The South African proposed Bill effectively legalising internet gambling will be heralding a new era of a well regulated regime which protects ‘problem’ gamblers and keeps away children from gambling. On the other hand land based operation has always been legal and paying significant financial input.
Furthermore, as a result of the decision by the US Congress last year to outlaw the use of credit card for online gaming transactions, many consider that in the short term Europe is the main area of opportunity for operators.
Leading online gaming figures have cautiously welcomed the introduction of a bill by Congressman Barney Frank that could mark a sea change in US official attitudes to online gaming. The Internet Gambling Regulation and Enforcement Act of 2007 bill put forward by the Democratic Representative from Massachusetts and co-sponsored by Republican Congressman Peter King is showing some light in seeing online gambling legalised in the US for the first time. Although this is a step in the right direction things are not all that easy, it takes time, energy and change in perception for such an implementation in the US.
Thus Spain is also about to liberalise its markets in Catalonia, the Basque region and Madrid. The Council of State of the Autonomous Regional Government of Madrid has approved the law for regulating bets, which includes those placed on sporting events, competitions or other previously determined types, and allows those companies within the sector to market the game of bingo and casinos over the internet. This makes Madrid as one of the first autonomous governments to regulate this method of gaming, thus filling the huge legal vacuum that exists in this area.
This has attracted UK heavyweights such as William Hill which recently entered into a joint venture with Codere, a Spanish gaming company that operates 76 bingo halls across Spain.
The same cannot be said for France, to the extent that the EU Commissioner for the Internal Market and Services Charlie McCreevy recently questioned how France could ban European online operators access to the French sport and horse-race betting market on the pretext that it wants to prevent addiction when the French sport betting market continues to expand and offer more choice and opportunity for consumers to bet.
A ruling by the European Court in the Placanica last month, however, opened new horizons for liberalisation in the European gaming markets and one hopes that the French authorities will finally fall in line.
On March 6 the court ruled that Italian criminal penalties imposed on intermediaries for collecting bets on behalf of foreign companies was contrary to EU community law.
The court said that a member state may not apply a criminal penalty for failure to complete an administrative formality where, in breach of Community law, such completion is refused or rendered impossible by that member state. Furthermore, the court pointed out that legislation which prohibits the pursuit of activities in the betting and gaming sector without a licence or a police authorisation issued by the state, places restrictions on the freedom of establishment and the freedom to provide services.
Following the Placanica ruling the European Union opened infringement proceedings against Italy, warning that its restrictions on “legitimate” operators were disproportionate.
Similar infringement notices were also sent to Hungary, Denmark and Finland.
These developments have been well received by legal experts in Europe who feel that the Placanica judgment makes it clear that where a third country’s gambling laws adhere to the strict guidelines now laid down in EU case law, one cannot prohibit legitimate betting and gaming services provided from that third country.
All these issues are of direct relevance to Malta, which is growing into quite a significant remote gaming jurisdiction. The Placanica ruling as well as Britain’s decision to raise its taxation on online betting mean that the former could help generate more cross-border business, while the latter could mean Malta attracting more UK business.
But there are other legal issues which all jurisdictions need to discuss, such as restrictions in some countries or regions, notably in Germany on advertising of sports betting.
Last week the Administrative Court of Gießen referred a second German sports betting case to the European Court of Justice (ECJ) according to Art. 234 EC Treaty.
In a recent newsletter Martin Arendts of Arendts Anwälte, Germany said “the Administrative Court of Cologne had referred a first case to the ECJ (decision of 21 September 2006, file-no. 1 K 5910/05). However, this case (C-409/06 – Winner Wetten) only deals with the temporary suspension of the basic freedoms, guaranteed by the EC Treaty, with regard to sports betting (as the Administrative Court of Appeal of North Rhine-Westphalia openly suspended the freedom to provide services and the freedom of establishment in more than 200 cases concerning betting shops)”.

Arendts reiterated that “the new case has a much broader scope. On the on hand side, the Administrative Court of Gießen asked the ECJ whether a sports betting monopoly is consistent with Community law, if the authorities encourage the participation in gambling and if private operators are allowed to offer gambling services with equal or even higher risks compared with sports betting, e.g. horse betting, slot machines or casinos. On the other hand, the German court wants to know, if operators from other Member States can rely on their foreign license, as the German regulations does not provide for a licensing procedure consistent with the requirements of Community law”.
With the whole industry looking to the European market to drive growth and harness competitive advantage, now is the time for operators to ensure that they have a clear and unequivocal understanding of the exact legal situation across Europe, hence the reason for the specialist conference in Como.
This will be another opportunity for companies involved in the gaming and gambling industry to get on top of the game; hearing from gaming and gambling operators such as Betfair, Ladbrokes, 1128.com (formerly ParadiseBet), Betshop Group Europe, Lottomatica, Intralot, and other industry leading experts such as speakers from AAMS, Sapra and The Hon Francesco Tolotti.

Further information on the conference is available from Joanne Fenech or Colette Mangion at GMM Business Solutions. Tel 2148 4373, 2748 4373 or 9949 6848


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