French Appeals Ruling Supports PMU Monopoly

20 January 2006

The Paris Court of Appeals on Jan. 4 upheld a previous summary proceeding by a Paris District Court banning Malta-based online betting agency Zeturf from taking bets on French horse races.

"This is only a first round in France. A ruling in summary proceeding never sets a precedent as such, so it should not impact other countries."
- Thibault Verbiest

The Court of Appeals concurred that because Zeturf was licensed in Malta, taking such bets violated the rights of French betting monopoly Paris Mutuel Urbain (PMU), a syndicate of over 70 racing associations, which lodged the initial complaint.

PMU, which controls the sports betting market in France, sued Zeturf on June 2, 2005, basing its case on an 1891 law that forbids bookmakers from taking bets on French horse races without consent from the French agriculture minister.

The July 8, 2005 decision by the District Court also said that according to a 1997 decree, only companies that take bets on French races through PMU can do so by way of remote services. At that time, the court ordered Zeturf to cease taking bets from France and imposed a €15,000 fine for each day of non-compliance.

The Jan. 4 ruling brought the fine up to €50,000 per day.

Thibault Verbiest, a senior partner with ULYS, a law firm with practices in France and Belgium, feels that the court's decision is not consistent with laws stated in the EC Treaty--laws that are designed to promote an internal market and free trade within Europe, particularly Article 49 of the treaty.

"[Article 49] prohibits restrictions on freedom to provide services within the Community for nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended," Verbiest said.

Verbiest stated in a report written after the Jan. 4 decision that the basic principle of Article 49 allows a European gaming operator to offer its services to other member states, provided the operator is subject to strong regulations within its own country and that the country complaining about it (in this case France) does not have a consistent gaming policy.

Verbiest contends that France is in violation of Article 49 because it is missing that consistent gaming policy. To qualify as having such policy, a country must have a governing body in charge of granting operator authorizations, but France has only one person: the interior minister.

The Gambelli decision of 2003 supports Verbiest's opinion. In this case, the European Court of Justice (ECJ) left it up the national courts to "decide whether restrictions on betting services can be justified as exceptional means or justified for reasons of overriding public interest, with the exceptions that such restrictions must be applied without discrimination, must not go beyond what is necessary to achieve the goal and if betting is to be restricted for some general purpose must operate in a consistent and systematic way."

Other qualifications exist, including the presence of policies aimed at preventing gambling addiction, which Verbiest said France lacks.

Regardless of EU law and the definition of consistent gaming policy, he said, the French government in this case, protecting its own, ignored EU law and backed the country's betting monopoly.

Zeturf filed a complaint with the EU Commission in September, 2005, alleging the French government and PMU are in violation of the EC Treaty. The complaint is slated for discussion at the commission's next meeting in October.

Similar cases have surfaced against other member states, such as Germany, Italy and the Netherlands.

"In Europe, EU law supersedes national laws; but national courts may ignore (sometimes on purpose)," Verbiest said. "It's what happened in the Netherlands (Ladbrokes v. DeLotto, 2002) [and] Germany in first place. . . . In such a case, it is up to the EU institutions to intervene; and sometimes, the national courts change their mind when the main proceedings come up (like in Germany)."

The European Betting Association and the Remote Gambling Association filed a joint resolution Nov. 2, 2005 with the EC against the Italian government, citing that its Finance Act, 2006, requiring Italian Internet service providers (ISPs) to block access to all gambling Web sites not authorized by the government violates at least five categories of community rules or legislations of the EC Treaty, including Article 49.

Verbiest is confident France would be condemned by the EC should the case reach the European Court of Justice. In other words, this is not the be-all end-all.

"This is only a first round in France," Verbiest said. "A ruling in summary proceeding never sets a precedent as such, so it should not impact other countries."

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.