Champagne Feeling in Malta

12 January 2007

The Maltese court of appeal's refusal on Tuesday to enforce a judgment by a French court in a case instituted by French GIE Pari Mutuel Urbain (PMU) against Malta-based betting operation Zeturf has given advocates for an open gambling market in Europe cause for optimism.

The initial judgment was rendered by the First Instance Court of Paris on July 8, 2005, with Zeturf Society lodging an appeal the following November. According to Mohammed Chawki of the Computer Crime Research Center, the judgment that Zeturf is providing race betting services to French Internet users even though this type of gambling service falls under the exclusive right of PMU will be recalled.

"The act of April 16, 1930 grants PMU (today the leading betting operator in Europe and second biggest worldwide) the monopoly to organize betting activities on horse races," Chawki said. "Moreover, PMU has since 1964 held exclusive right to take bets on horse races that take place outside France."

He added, "During the summary proceedings, the PMU recalled further that the so-called Perben II Act of March 10, 2004 sanctioned the unauthorized organization of lotteries with two years of imprisonment and a fine of 30,000 euros. In its decision of July 8, 2005, the First Instance Court of Paris followed the PMU's requests and argumentation. It argued that "the management of organization has been entrusted to the PMU by the companies authorized to be active in the field of pool betting outside the hippodromes, as it was provided by article 27decree no 97-456 of 5 May 1997 modified by the decree no 02-1346 of 12 November 2002."

Accordingly, he said, "Zeturf inflicts an obviously illicit perturbation to the PMU by taking online bets without proper authorization."

The defendant was ordered to put an end to the activity of taking online bets on horse races organized in France, this on a penalty of 15,000 euros per day following 48 hours from notification of the ruling.

The Appeal Court of Paris on January 4 condemned for taking bets on French races. The court ruled that according to French law, the national pool PMU is the only organization allowed to organize betting on French horseracing.

"It also ruled that the French law is compatible with European Union law," Chawki said. "The appeal judgment confirms the judgment at first instance of July 2005, but increases the penalties for incompliance. The judgment delivered by a French tribunal on July 8, 2005 and later confirmed by the Paris court of appeal on Jan. 4, 2006 had ordered Zeturf Ltd. to cease taking online bets on horse races organized in France.

"Subsequently, PMU sought to have the judgment recognized and enforced by the Maltese Courts, under the Council Regulation on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (EC 44/2001)."

dive news, meanwhile, reports that in turning down PMU's request, the Maltese court of appeal concluded that the matter was of administrative nature and, therefore, falls outside the scope of the EC regulation.

"Reference was made by the Maltese court to the structure of PMU that is incorporated in France as a commercial entity and yet regulated by an ad hoc law that gives it power that is usually not allocated to private enterprise," the publication reports. "In spite of PMU's claims to the contrary, the Maltese court concluded that PMU. is an entity of an administrative nature that is singularly empowered to shape and enforce French policy on relative gaming matters."

The reaction of the Maltese Lotteries and Gaming Authority: "In essence, the verdict is not spectacular in the decision, but it has a very strong unexpected argument which will have a deep impact on future similar cases in the EU."

"The court did not argue whether remote gaming is legal or not," dive news reports, "but instead argued the fact that PMU is a European private company with special powers given to it by the long arm of an EU government. It therefore argued that such companies couldn’t apply EU enforcement, as they are not level playing field. In short the court did not say Malta is right, but that monopolies in EU are wrong."

Lawyers with the French and Belgian law firm Ulys, which represents clients who are challenging EU monopolies, are happy with this latest ruling.

"The Maltese Court has just created a real earthquake by deciding that a commercial entity--here PMU--that exercises exclusive rights granted by the state (which create a monopolistic situation) is equivalent to a public authority," Thibault Verbiest of Ulys said. "Therefore an administrative court, according to administrative law, should deal with any dispute with the said entity. As a result, the Brussels regulations on the competence of the courts in civil and commercial matters do not apply, and the rulings rendered in favor of PMU by a French commercial court are inapplicable in Malta. This is an atomic bomb for the monopolies that are now threatened to be challenged by any EU 'gaming' jurisdiction where the execution of an order from a 'monopolistic' country is being sought. . . ."

Tjeerd Veenstra, a member of the board of the European Lotteries (EL), has a very different take.

"Malta has recently been condemned by the EU Commission for illegal state aid and has been obliged to abolish the international trading company status which provided fiscal advantages to amongst others the remote gambling operators," Veenstra said. "There is a big chance that remote gambling operators will leave Malta anyhow towards EU jurisdiction where judgments can be enforced. Alternatively, they need to go offshore, and then their access to the EU is legally impossible. However, denying enforcement of judgments of other EU states, as this judge is doing, is an even more serious violation of EU law."

He added, "It is at least surprising to hear Mr. Verbiest, a lawyer who is a member of the Bar, saying that he is happy that within the EU, judgments cannot be enforced . . . and that it threatens the gaming monopolies. The alternative is to put those who violate the laws in prison. Whether Mr. Verbiest considers that to be a better idea is not absolutely clear to me."

PMU has signed common pool betting agreements on French races with Monaco, French-speaking Switzerland, Germany, Austria, the United Kingdom and Spain.

Once local taxes are levied, foreign bets are added to French ones, thereby increasing potential winnings for all punters.

PMU's partners take an active part in what is already the biggest pool in Europe.

The amount of tote stakes collected abroad in 2005 increased to 85.6 million euros.

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.