A Final Verdict for PAF?

13 April 2005

The Finish Supreme Court ruled on Feb. 24 that the Internet gambling offering from the Slot Machine Association of Åland (PAF) is in violation of lottery laws in mainland Finland. The court referenced four key issues: marketing, the site's availability in the Finish language, PAF's involvement with Finnish banks and the use of personal data.

Founded in 1967, PAF is an association under public law with the purpose of acquiring funds for the benefit of public welfare in the Åland Islands by offering gaming services to the public. Its gaming operations are licensed and supervised by the Åland government.

The Åland Islands, an autonomous region in Finland, is a group of more than 6,500 islands in the Baltic Sea between Sweden and Finland, east of Stockholm. Their total area is about 1,500 square kilometers, and the total population is approximately 26,000.

PAF made its debut online with the launch of sports betting games in December 1999. Casino games followed in June 2000, and lotteries were added in April 2001.

The Finnish Ministry of the Interior has questioned the permit to operate Internet games granted to PAF by the Åland Provincial Government.

The department filed a complaint to the National Bureau of Investigation on May 24, 2000. That resulted in a police investigation regarding PAF's Internet games, which, according to the state prosecutor, were violating Finland's lottery law. The state prosecutor brought the case to the Åland District Court in September 2001.

The District Court ruled in November 2001 that PAF was guilty of violating Finland's lottery law due to too intense marketing of its Internet games in 2000 and 2001, including, among other things, advertisements in the Finnish media and marketing campaigns in Finland.

The Åland gaming company appealed the judgment of the District Court to the Turku Court of Appeal and was freed of all charges by the unanimous Court of Appeal on March 31, 2003.

State Prosecutor Christer Lundström applied for a leave to appeal in the Supreme Court against the Turku Court of Appeal ruling, and the Supreme court granted the leave on Nov. 17, 2003.

Responses to the Verdict

"The biggest problem," PAF CEO Lars Porko explained, "is that the Supreme Court ruling leaves room for speculation, and at this moment, neither we nor anyone else knows how the verdict should be interpreted. The Ministry of the Interior and Veikkaus (the 100 percent state-owned national lottery of Finland) have made a conclusion of the ruling in their favor, and PAF has made a different conclusion.

"The Supreme Court states that the lottery law has been interpreted in the light of 'common composition and purpose' and 'the social aspects on which lottery legislation is based' are of vital importance.' In the judgment on the operations in question, the Supreme Court has not attached decisive importance to the fact that PAF's administration and other operations are based on the Åland Islands. In this respect, the ruling of the Supreme Court is in a totally opposite direction than the decision announced by the Turku Court of Appeal on March 31, 2003."

PAF has submitted a direct written answer to the government of the Åland Islands concerning the group's conclusion regarding the Supreme Court ruling.

The government will send this answer to the Ministry of the Interior with a few statements. If the Ministry of the Interior rejects this or wants to stop PAF's site in Finnish as well as stop Finnish from customers taking part in PAF gambling, it is likely that the government of the Åland Islands will appeal to the E.U. Commission.

Internet gambling commenced in Finland with the launch of Veikkaus' online services in 1996.

According to a press bulletin from Veikkaus, "The ruling was expected in many respects:

"Firstly, the contents of the ruling were expected: PAF was found guilty of a lottery offense. Secondly, the ruling was expected, or even called for, since the illegal game providers were making use of the unresolved situation. One of the consequences was that the different media accepted and published widely advertisements that were contrary to the lottery legislation.

"The essence of the ruling in the PAF case is that the Supreme Court considers, on the basis of extensive arguments, that PAF has operated a lottery on the Finnish mainland, where it does not have a gaming license. In other words, the Supreme Court put an end to the hair-splitting on where the gaming takes place, stating that it is determined according to the location of the players.

"According to the Supreme Court, the ruling issued by the E.C. Court in the Gambelli case does not affect Finnish legislation or policies in any way. This, too, was expected. The Italian case was clearly not applicable to the Finnish system. In fact, the arguments in the Gambelli case included a reference to a case concerning Finland from a few years ago, stating that the Finnish legislation expressly fulfills the requirements for the monopoly system."

Veikkaus came with its press release five weeks after the Finish Supreme Court's verdict.

Porko said he doesn't know the reason for the delay.

"It is possible," he said, "that they have had a long analysis of the Supreme Court ruling. So have we."

Only the Finnish government can permit a license, and one license is only valid at the time for each type of "gaming." At this moment, only three organizations hold licenses: Oy Veikkaus Ab may operate lotteries; Fintoto Oy, which is owned by the central organization of trotting and horse breeding in Finland (Suomen Hippos ry), may organize toto games; and Rahaautomaattiyhdistys, the Slot Machine Association (a public company better known as "RAY"), operates casinos.


PAF has the right to offer slot machines, casino gaming, betting and lottery games in the Åland Islands, onboard the ships and on the Internet. The gaming operations of PAF include (among other things) service of slot machines, amusement games, kiddie rides, casino games, bingo, lotteries, tote betting and games over the Internet and mobile phones.

PAF Group - Key Figures for 2004

Group turnover: approximately 50 million euro.
Employees: 250 (on average).
Internet gaming: 50,000 active customers.
Money distributed for public good: 9 million euro.

Rob van der Gaast has a background in sports journalism. He worked for over seven years as the head of sports for Dutch National Radio and has developed new concepts for the TV and the gambling industry. Now he operates from Istanbul as an independent gambling research analyst. He specializes in European gambling matters and in privatizations of gambling operators. Rob has contributed to IGN since Jul 09, 2001.