The European Court of Justice (ECJ) ruled in November on the Piergiorgio Gambelli case, agreeing with the advocate general that Italian legislation prohibiting companies without an Italian license from taking bets in the county is in violation of the freedom of establishment and the freedom to provide services as set forth in articles 43 and 49 of the European Commission.
The ECJ ruled that such restrictions are justified if they are necessary for consumer protection and societal order and if they are intended to curb the amount of gaming opportunities. A state may not maintain such restrictions to keep funds in the state.
Inevitably, however, the decision was turned back to the Italian courts. According to the ECJ, "It is for the national court to determine whether the Italian legislation actually serves the aims of consumer protection and of public order and whether the restrictions imposed are disproportionate."
The decision has sparked a broad range of reactions from experts in the European I-gaming industry. IGN asked two of them:
What does the Gambelli decision mean for I-gaming in Europe and what happens next?
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David Zeffman: "... The general principles stated by the ECJ in Gambelli are likely to have an effect and, in my view, do represent another step towards dismantling the barriers to a true European gambling market."
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David Zeffman: The ECJ found that the restrictions imposed by the Italian government did impinge on freedom of establishment and the free movement of services within the E.U. The ECJ did consider that the restrictions might be justified if there was an overriding public interest. However, it also made it clear that any restrictions, even if justifiable in the public interest, must be suitable for achieving their policy objectives and must be both proportionate and non-discriminatory.
As is normal in references of this kind, the ECJ, having given its view on the legal principles, has left it for the Italian courts to determine whether the restrictions can be justified. However, the ECJ made it clear that preventing a possible diminution in tax revenues does not constitute an overriding public interest. Also, where a member state is actively pursuing a policy of substantially expanding betting and gaming activities (as the Italian state is) that member state cannot claim that the restrictions are necessary in order to reduce opportunities for betting and gaming in the public interest. Similarly it is disproportionate for a member state to restrict the availability of bookmakers' licenses to resident companies in order to avoid the risk of granting licenses to companies engaged in criminal or fraudulent activities, particularly where foreign jurisdictions have adequate procedures in place to deal with this.
In the light of the ECJ's ruling, it is unlikely that the Italian court will find sufficient justification for the restrictions. However, it is for the Italian court to decide the Gambelli case on its facts. Similarly, in future, although the ECJ will offer guidance as to the law, the courts of individual member states will have to apply E.U. law to the particular situation in their country in order to determine whether or not their laws are justified. Because of this, there are likely to be more references to the ECJ in an attempt to clarify the boundaries.
Having said this, the Gambelli decision--particularly if the Italian court decides that the restrictions are not in fact justifiable--is likely to prompt other E.U. member states to review their current legislative regimes to ensure compatibility with the principles outlined by the ECJ. Because the ECJ does not make a decision on the facts of a case, it is difficult to predict with great certainty what clear and consistent changes are imminent with regard to the online gambling industry. However, the general principles stated by the ECJ in Gambelli are likely to have an effect and, in my view, do represent another step towards dismantling the barriers to a true European gambling market. Sooner or later, E.U.-based companies providing online gambling services are likely to be free to enter the markets of other member states, whether through the use of intermediaries, or the establishment of branches, in that other member state.
However, the expansion and liberalization of the market in this way, whilst undoubtedly providing greater opportunities for online gambling providers throughout the E.U., may also have an unsettling effect on the industry, particularly in countries where gambling activities are restricted to monopoly providers. And, for example, it is only recently that the loss of revenue suffered by bookmakers in the U.K. as a result of competition from offshore has led to a review of U.K. gambling taxes and legislation.
A more cautious alternative view is that rather than liberalizing their gambling markets, member states may instead try to tighten up their laws to ensure that any restrictions can be justified in accordance with E.U. law. The ECJ judgment left open the possibility that restrictions could be justified, in this case for example, if the Italian state was to stop actively pursuing the policy of substantially expanding betting and gaming activities. Whether the Italian state (and other member states) will adopt such a strategy and lose out on the revenues that an expanding gambling market would bring is open to debate, but it is not inconceivable. If this was to be the case then the judgment in Gambelli, essentially favorable to the gambling industry, may actually lead to reactionary measures that hinder the industry's growth and progress in Europe.
Since 1994 David Zeffman has been a partner at Olswang, a technology, media, telecommunications, and property law firm in London. He graduated from Oxford University in 1980 and was admitted to Olswang as a solicitor in 1983. David provides commercial advice to clients in the television, sports, music and digital media services sectors. He is also an expert in betting and gaming law. His clients include broadcasters, operators of digital TV platforms, interactive TV technology suppliers, record companies, bookmakers, racecourses and greyhound promoters.
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Philippe Vlaemminck: "Is Gambelli changing the I-gaming environment in the European Union? Not really."
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Philippe Vlaemminck: Is Gambelli changing the I-gaming environment in the European Union? Not really.
The expectations were quite high since the discussion in Gambelli was about the transmission of bets from Italy to the server of Stanley in the U.K. by means of the Internet. In Zenatti, a previous case, the transmissions of the bets were mostly done by fax, although the Internet was also used. In Gambelli, the ECJ clarified that I-gaming services are gaming services supplied through a cross-border mode just like telephone services. The rules of the EC Treaty on free movement of services are applicable, but so are the exceptions to those rules and in the same way.
The ECJ did not bring any real changes to its jurisprudence. The only difference is that the court emphasized the need for an in-depth analysis by the Italian court, who referred the case to the ECJ, of the actual justifications put forward by the Italian government and the proportionality of the Italian measures (especially with regard to land based intermediaries and consumers) to limit the free movement of services.
The reason for this is that the court noticed during the hearing that its ruling in Zenatti was not applied by the different Italian judges in the same way so that further clarification was required. The ECJ made it now perfectly clear: Restrictions are still possible if they really aim at limiting gambling, but that remains a "de facto" decision to be made by a national court.
In the meantime the commission shall launch a study to find out whether they need to propose that the member states bring I-gaming within the scope of the e-commerce directive. So the final decision shall be political and made by the E.U. governments who can decide, considering the Gambelli ruling, to liberalize gambling or to restrict gambling even more.
Philippe Vlaemminck (ph.vlaemminck@vlaemminck.com) is a senior partner of the Belgian law firm Vlaemminck & Partners and a visiting professor in European law at Ghent University (1998-1999 and 2001-2002). He is a member of the International Masters of Gaming Law. He has a very important pan-European gaming law practice advising both operators and regulators in several European jurisdictions. He has appeared before the WTO dispute settlement bodies ( Panel and Appellate Body) and has been involved in all gaming law cases before the European Court of Justice (from Schindler to Gambelli).