Breakdown of the Zeturf/PMU Ruling

12 July 2007

Editor's Note: Thibault Verbiest is representing Zeturf in its case against PMU.

On July 10, 2007, the commercial, financial and economic chamber of the French Supreme Court ("Cour de Cassation") established the conditions where a monopolistic market is a restriction to free movement of services within the European Union.

The dispute opposed Zeturf, a Maltese company organizing and offering online horse races betting taking place in France, to the French monopoly PMU (Pari Mutual Urbain).

A court of appeal had confirmed a decision of first instance banning Zeturf from offering its services in France under a daily penalty, according to a law granting exclusive rights to PMU to organize betting on horse races taking place in France.

The Cour de Cassation overturned this decision of the court of appeal on the grounds of Article 49 of the EC Treaty, guaranteeing the free movement of services, and of the interpretation of these principles by the European Court of Justice (ECJ).

According to the ECJ, member states' gaming policies restricting the free movement of services can only be justified with the objective of combating criminality by making the operators active in the sector subject to control and channeling the activities of betting and gaming into the systems thus controlled or the objective of reducing gambling opportunities.

With regard to the second type of objective, restrictions must in any event reflect a concern to bring about a genuine diminution of gambling opportunities and to limit activities in that sector in a consistent and systematic manner. This is certainly not the case when national authorities have an expansive gaming policy in order to raise higher profits.

When seized with a dispute over a restriction to activities covered by the principle of free movement of services, National courts must examine concretely whether the restriction, in this case the monopoly granted to the PMU, complies with the requirements set by article 49 as interpreted y the ECJ.

In the Court of Appeal's decision, the case was not examined through these requirements, since the judge did not seek whether the French authorities had an expansive gaming policy in order to raise the State profits.

In addition; national judges must also make sure that when activities are restricted because of an overriding interest, the regulatory framework of the operator’s Member State does not already protect this interest. In this case, the Cour de

Cassation reproaches the Court of Appeal with not examining the Maltese regulations, and therefore of not justifying properly its decision.

In light of this decision, the case will be re-examined by the Paris Court of Appeal.

Thibault Verbiest is a senior partner with the ULYS law firm, specializing in new technologies and gaming law.