In two major judgments published on the same day, Ladbrokes Betting & Gaming v Stichting de Nationale Sporttotalisator Case C-258/08 and Sporting Exchange v Minister of Justitie (Stichting de Nationale Sporttotalisator intervening) Case C-203/08 , the Court of Justice has upheld the right of Member States to prohibit the operation of games of chance on the Internet. Both cases concern the Netherlands legislation which allows De Lotto exclusive licences for games of chance. The Hoge Raad der Nederlanden and the Raad van State sought a ruling on the compatibility of the Netherlands legislation with the Article 49 freedom to trade.
In the Ladbrokes case, the Court ruled as follows:
1. National legislation, such as that at issue in the main proceedings, which seeks to curb addiction to games of chance and to combat fraud, and which in fact contributes to the achievement of those objectives, can be regarded as limiting betting activities in a consistent and systematic manner even where the holder(s) of an exclusive licence are entitled to make what they are offering on the market attractive by introducing new games and by means of advertising. It is for the national court to determine whether unlawful gaming activities constitute a problem in the Member State concerned which might be solved by the expansion of authorised and regulated activities, and whether that expansion is on such a scale as to make it impossible to reconcile with the objective of curbing such addiction.
2. For the purpose of applying legislation of a Member State on games of chance which is compatible with Article 49 EC, the national courts are not required to determine, in each case, whether the implementing measure intended to ensure compliance with that legislation is suitable for achieving the objective of that legislation and is compatible with the principle of proportionality, in so far as that measure is necessary to ensure the effectiveness of that legislation and does not include any additional restriction over and above that which arises from the legislation itself. Whether that implementing measure was adopted as a result of action by the public authorities to ensure compliance with national legislation or of an application by an individual in the context of a civil action to protect his rights under that legislation has no bearing on the outcome of the dispute before the national court.
3. Article 49 EC must be interpreted as not precluding legislation of a Member State, such as the legislation at issue in the main proceedings, under which exclusive rights to organise and promote games of chance are conferred on a single operator, and which prohibits any other operator, including an operator established in another Member State, from offering via the internet services within the scope of that regime in the territory of the first Member State.
In the Sporting Exchange case, the ruling was:
63. 1. Article 49 EC must be interpreted as not precluding legislation of a Member State, such as the legislation at issue in the main proceedings, under which exclusive rights to organise and promote games of chance are conferred on a single operator, and which prohibits any other operator, including an operator established in another Member State, from offering via the internet services within the scope of that regime in the territory of the first Member State.
2. Article 49 EC must be interpreted as meaning that the principle of equal treatment and the consequent obligation of transparency are applicable to procedures for the grant of a licence to a single operator or for the renewal thereof in the field of games of chance, in so far as the operator in question is not a public operator whose management is subject to direct State supervision or a private operator whose activities are subject to strict control by the public authorities.
Netherlands legislation in relation to games of chance is based on a system of exclusive licences under which the organisation or promotion of games of chance is prohibited unless an administrative licence for that purpose has been issued, and only one licence is granted by the national authorities in respect of each of the games of chance authorised. It is not lawful to offer games of chance interactively via the Internet in the Netherlands.
De Lotto is a non-profit-making foundation governed by private law and holds the requisite licence for the organisation of sports-related prize competitions, the lottery and numbers games. Its objects, according to its constitution, are the collection of funds by means of the organisation of games of chance and the distribution of those funds among institutions working in the public interest, particularly in the fields of sport, physical education, general welfare, public health and culture.
Case C-258/08 Ladbrokes
The Ladbrokes companies offer a number of mainly sports-related games of chance on their Internet site. They do not physically carry on any activity in the Netherlands.
De Lotto alleged that the Ladbrokes companies were, without a licence, offering games of chance on the Internet to persons residing in the Netherlands, and made an application to the national court.
It was common ground that the legislation at issue constituted a restriction on the freedom to provide services. The question for the Court of Justice was whether the restriction could be justified, in particular, by the objectives of consumer protection, the prevention of both fraud and incitement to squander money on gambling and the need to preserve public order. It would then be for the national courts to determine whether a Member States’ legislation actually serves those objectives and whether any restrictions are proportionate in the light of those objectives.
In that context, the Hoge Raad had expressed doubts as to the consistent and systematic nature of the national legislation, since the legislation allows De Lotto and others to offer new games and to use advertising messages to make what they are offering on the market attractive.
The Court of Justice considers that it is possible that a policy of controlled expansion in the betting and gaming sector may be entirely consistent with the objective of drawing players away from clandestine betting and gaming to activities which are authorised and regulated. If it were established that the Netherlands are pursuing a policy of substantially expanding betting and gaming, by excessively inciting and encouraging consumers to participate in such activities, principally with a view to obtaining funds, it would have to be concluded that such a policy does not limit betting and gaming activities in a consistent and systematic manner. In the context of that assessment, it is necessary, specifically, to determine whether unlawful gaming activities may constitute a problem in the Netherlands and whether the expansion of authorised and regulated activities would be likely to solve such a problem.
The Ladbrokes companies submitted that they are holders of a licence issued by the UK authorities which allows them to offer sports-related prize competitions and other games of chance via the internet and by telephone, and are subject in the UK to very strict legislation for the prevention of fraud and of addiction to games of chance. In their view, there should be no duplication of controls and safeguards.
The Court noted that the Internet gaming industry has not been the subject of harmonisation within the EU. A Member State is therefore entitled to take the view that the mere fact that an operator such as the Ladbrokes companies lawfully offers services in that sector via the Internet in another Member State is not a sufficient assurance that national consumers will be protected.
In addition, because of the lack of direct contact between consumer and operator, games of chance accessible via the Internet involve different and more substantial risks of fraud by operators against consumers compared with the traditional markets for such games.
Case C-203/08 Sporting Exchange (Betfair)
Sporting Exchange (Betfair) operates its services solely via the internet and by telephone. From the UK, it provides the recipients of its services with a platform for betting on sporting events and horse races on the basis of British and Maltese licences. Sporting Exchange (Betfair) has no office or sales outlet in the Netherlands.
Sporting Exchange (Betfair) submitted, in essence, that the Netherlands authorities were obliged to recognise the licence which it held in the UK, and to respect the principle of transparency when granting a licence for the provision of games of chance.
First, following the same reasoning as in the Ladbrokes case, the Court observed that, in the light of the specific features associated with the provision of games of chance via the Internet, the restriction on the freedom to provide services may be regarded as justified by the objective of combating fraud and crime.
Second, as regards the single-operator licensing scheme, the Court states that the Member States have sufficient discretion to determine the level of protection sought in relation to games of chance. However, if a prior administrative authorisation scheme is to be justified, it must be based on objective, non-discriminatory criteria known in advance, in such a way as to circumscribe the exercise of the authorities’ discretion so that it is not used arbitrarily.
In any event, the restrictions on the freedom to provide services which arise specifically from the procedures for the grant of a licence to a single operator or for the renewal thereof may be regarded as being justified if the Member State concerned decides to grant a licence to, or renew the licence of, a public operator whose management is subject to direct State supervision or a private operator whose activities are subject to strict control by the public authorities. In such situations, the grant to such an operator of exclusive rights to operate games of chance, or the renewal of such rights, without any competitive tendering procedure would not appear to be disproportionate in the light of the objectives pursued by the Netherlands legislation.
It is for the national court to ascertain whether the holders of licences in the Netherlands for the organisation of games of chance satisfy those conditions.
