France's Controlled Opening Inches toward Realization

28 October 2008

As lobbyists, gambling industry execs and parliamentarians gathered in Paris last week to discuss the liberalization of the French Internet gambling market, the country's budget ministry announced draft reform legislation is still expected before yearend but observers are not hopeful that licenses will be issued before 2010.

Sébastien Proto, deputy director of the Budget, Public Accounts and Civil Service Ministry, at Thursday's conference said draft legislation will be sent to Parliament before the end of the year. But the prevailing view, according to a consultant close to the legislative developments, is that the bill will be taken up for discussion by Parliament sometime in 2009 -- not this year.

The consultant said that while license applications may be accepted before yearend 2009, it's unlikely that actual licenses will be issued before 2010 -- a prospect later confirmed by Anouk Hattab-Abrahams, a gambling law specialist with the Brussels branch of Ulys.

Although particulars of the draft legislation have yet to be released, the French government has been busy this year gathering information on how best to regulate Internet gambling.

An April report authored by Bruno Durieux, inspector general of the French finance ministry, examined how a potential French regulatory regime would mesh with European Union rules. And in July, a report authored by Alain Bauer, a criminologist who presides over the country's National Crime Commission, identified potential criminal risks associated with Internet gambling and how, most effectively, to limit them.

The consultant said the draft legislation is expected to govern parimutuel horse betting (but not fixed odds horse betting) and fixed odds sports betting on event results (but not in-running betting). Poker is also expected to be licensable, though the jury is still out on other casino games.

With Pari Mutuel Urbain and Française des Jeux holding exclusive rights to offer Internet gambling services, commercial casino bosses like Partrick Partouche of Groupe Partouche lambasted the government for not allowing his business to compete online with illegal foreign operators like Bwin Interactive Entertainment A.G. and Unibet.

"We have the monopoly on offering casino games in the country and pay dearly for it, having a tax of 58 percent to pay," Mr. Partouche railed at Thursday's conference. "However, we are the only group here today that is unable to offer online casino games."

The French casino industry was also shaken in January 2008 when a smoking ban, which took partial effect in 2007, was extended to casinos and other public places. Mr. Partouche said his chain -- France's largest -- had experienced double-digit losses as a result. The Agence France-Presse reports moreover that the country's casino industry has projected losses of around 13 percent for the year.

"This situation must end tomorrow morning," Mr. Partouche said in reference to the perceived inequity of the legislative situation. "We can no longer afford to wait."

The consultant said that commercial casino interests are now seeking acknowledgement from the government that if they do launch Internet gambling sites in France, they won't be prosecuted. But according to the French media, Mr. Partouche will launch an online casino on a Gibraltar license by the end of October -- with or without the government's blessing.

The flamboyant Mr. Partouche is certainly no stranger to controversy. In March 2007 he was given a 12-month suspended prison sentence and a 40,000 euro fine after being accused of illegally operating an online casino in France via a connection in Belize.

Still to be decided, meanwhile, is the all-important issue of taxation. Ahead of the draft bill's introduction to Parliament, the consultant said very little has been leaked, rendering the issue of gross-profits-versus-turnover-tax an uncertain one.

According to published reports, the French government does not intend to recognize foreign licenses -- like those from, say, Malta or the Isle of Man -- which will almost certainly subject licensed operators to higher duty rates.

"As always with France, it is complicated," Warwick Bartlett, the owner of Global Betting and Gaming Consultants, told IGamingNews in an e-mail today. "I doubt they will improve on Italy’s legislation. The French government takes about Euros 6b a year in tax and during these difficult times is likely to fight tooth and nail to retain that tax stream."

Ahead of the bill's introduction to Parliament, no action from the European Commission is expected, the consultant said.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.