Thought leadership from our experts

The European Online Gaming Regulation between Political Standstill and Judicial Fire

The European Union passes through the hardest proving ground since its foundation by the six founding states in the late 50s. The dream of an internal market has broadly become reality. Political fields beyond this such as security of its external borders, immigration and asylum, foreign policy and defense are heading the sensitive construction to threat of a breakup scenario.

This also influences the internal market: The Commission is unable to dare harmonization initiatives in legal areas where national restrictions of the free flow of services pop up again but where the consent of the majority of Member States to abolish these remains illusionary.

Indeed there is such initiative of Commissioner Günther Oettinger with regard to online trade (see europa.eu/rapid/press-release_IP-15-5704_de.htm) but you will not find such approach in politically unpopular topics such as online gaming. Thus, the European continent is still signified by many diverging national regulatory concepts which do not contain joint thoughts and strategies on licensing, content regulation or taxation. There seems to be an overwhelming interest to protect national (state) monopolies.

No surprise that this is the time for judges: The European Court of Justice declares barely any national restriction of the transfrontier freedom to provide and receive services as discriminatory or at least disproportionate and inconsistent and thus null and void (e.g. ECJ C-390/12 Pfleger). In the meantime national judges realize their responsibility as well. Two examples: The highest civil court of Austria (Oberster Gerichtshof, joint cases 4 Ob 31/16m, 4 Ob 253/15g, 4 Ob 27/16 g, 4 Ob 46/16t, 4 Ob 50/16f, 4 Ob 56/16p) has most recently declared the nationwide Gaming Law (Glücksspielgesetz) and the slot machine law of the Federal State of Lower Austria (niederösterreichisches Spielautomatengesetz) as unconstitutional and as a breach of Union Law, but not only that. The Court states that both legal sources – the Austrian Constitution and the European TFEU – will also apply in cases without a transnational element to avoid an otherwise evident reverse discrimination. Whether such violation of the rights of Austrians would be given or not must be decided by the Austrian Constitutional Court (Verfassungsgerichtshof) to which the case is referred to. However, the Civil Court declares already now the Austrian monopolies as breach of Union law which can no longer be upheld.

Similar to this, the German Administrative Court of Wiesbaden (capital of Hesse) decided a few weeks ago that the Treaty on Gaming Law of all German Federal States (Glücksspielstaatsvertrag) is a breach of Union law and the German Constitution (Grundgesetz) as it limits the number of concessions for private sport bets operators to 20 (VG Wiesbaden, 5 K 1431/14.WI). Here again a national (first instance) court did not allow any doubts to be competent and able to evaluate the clear illegality of the legislative attempt to distort competition in order to maintain the business to state owned monopolists.

In both Member States there is no legislative appropriate reaction to perceive, to the contrary it is the intention to win further time and to remain in a conscious ignorance, a situation which is unworthy for countries which usually follow the rule of law.

What does this mean for us practitioners? We need patience and courage to help our clients to benefit from the market opportunities. Transnational online gaming services are flourishing and far from being a "grey market" product. The ban to apply national law in conflict with Union law opens opportunities to the market players from abroad as well as national ones. Countries of destination of those services are losing step by step the claim to be taken seriously if they invent new obstacles instead of building a functioning regulatory framework with competitive and transnational perspectives. Having recourse to the Courts is less risky than to stay away from the business. However, the march to an internal market for online gaming will be a long one, a very long one!