Mobile gambling and European law: what is the outlook for operating in Europe?

1. Mobile gambling and European law: what is the outlook for operating in Europe? Thibault Verbiest Member of the Paris and Brussels Bars Senior Partner ULYS Thibault.verbiest@ulys.net

2. (1) How is mobile gambling regulated in Europe? (1) The EC Treaty • Article 49 ECT: freedom to provide services within the Community • Article 50 ECT: services are provided for remuneration • Discriminatory restrictions ok if public policy, public security, public health (art.46) or overriding reasons of general interest + proportionality and necessity (Schindler, Läära, Zenatti)

3. (1) How is mobile gambling regulated in Europe? (2) Gambelli: limitation of admissible restrictions • Consistent gaming policy • Clear guidelines to national courts on how they should use their discretional power to interpret the facts of the case • Country of origin principle • Proof of clear and present risks for consumers • Proof of proportionality by submission of statistical or other evidence

4. (1) How is mobile gambling regulated in Europe? (3)Secondary EU law and initiatives of the Commission • E-commerce directive: exclusion of gambling services • Study on gambling services in the internal market • To evaluate how the differing laws regulating online and offline gambling services impact on functioning of the Internal Market • To evaluate whether those laws restrict the economic and employment growth associated with gambling services • Publication of report June 2006 ► sector specific Act? • Directive 98/48 EC: notification obligation for inf soc.serv. • Proposal for a Directive on Services in the Internal Market (Jan 2004): gambling excluded from COP

5. (1) How is mobile gambling regulated in Europe? (3) Secondary EU law and initiatives of the Commission • Gebhardt report on the services directive (April 2005) • Complete exclusion of gambling • Mutual recognition & Country of Destination: • Country of origin rules do not apply in fields of consumer protection, environmental protection, labour law • MS may invoke Country of Destination principle if : • Reasons of public interest (social policy) • This interest is not yet protected by provisions applicable to the service provider in his Country of Origin (equivalence) • These rules are proportionate, generally applicable, business-related in nature

6. (1) How is mobile gambling regulated in Europe? (3)Secondary EU law and initiatives of the Commission • Inconsistency of the Gebhardt report with ECJ case-law • The right of MS to impose restrictions is not absolute: see Gambelli and Lindman (consistent gaming policy) • Restrictions of cross-border gambling to secure public revenues is not a justified ground to override the freedom to provide/receive services (Schindler, Zenatti, Gambelli) • EP’s plenary will probably vote in January 2006Gambling services very likely to be excluded

7. (2) How is mobile gambling regulated in Member States? • Germany: case-law gambling • Supreme Court, April 2004 Questions the consistency of German gaming policy with “Gambelli”. • Federal Constitutional Court, April 2005 Expresses doubts on the consistency of the German cross-bordergaming restrictions with EC law requirements

8. (2) How is mobile gambling regulated in Member States? • Germany: case-law gambling • German Federal Constitutional Court, oral hearing 8 November 2005 • Case relating to the consistency of a provision of the German criminal code (art.284) with the freedom to exercise a profession (art.12 German constitution) • Court asked local authorities to act prudently and refrain from too restrictive actions against local intermediaries while decision pending • Decision delayed until February 2006: future liberalization of the gaming market very likely • Conclusion: no risks involved for (mobile) gaming operators

9. (2) How is mobile gambling regulated in Member States? (2) The Netherlands: case-law gambling • Administrative Court of Breda, 2 December 2005 • Questions the consistency of Dutch gaming restrictions with EC law (Gambelli) • European Commission: critical comments to legislative proposal extending national casino monopoly to information society services • Market deregulation not excluded in mid-term • But earlier case-law diverging (main proceedings vs summary proceedings) • Conclusion: prospects looking brighter but caution

10. (2) How is mobile gambling regulated in Member States ? (3) France: 4 Acts • 1983 and 1907 Act: games of chance unlawful if • Gaming house • Open to the public • Games of chance take place ► ok if skill prevails over chance • 1836 Act: lotteries unlawful if • Offer made to public • Profit • Stake involved • Random outcome • Exception for FDJ and charitable lottery • 1891 Act horse betting: monopoly (PMU)

11. (2) How is mobile gambling regulated in Member States ? (3) France: case-law gambling • TGI Paris,8 July 2005 • PMU wins case against Malta established bookmaker Zeturf • Debate focused on intellectual property aspects and PMU’s exclusive rights • Court did not assess the compliance of French gaming policy with European law • Confirmed by Court of appeal, 7 January 2006 French gaming restrictions consistent with EC law No referral to the ECJ • Conclusion: high risks for (mobile) gaming operators in field of sports betting

12. (2) How is mobile gambling regulated in Member States? (3) France: mobile services regulation • Law transposing the 2002 E-commerce directive (LCEN): • Service provider liability, e-commerce rules, designation of a director of publication, service identification etc.. • Consumer law transposing the 1997 Consumer Directive: • no withdrawal right for authorized gaming services, liability of the professional party, consumer pre-contractual obligation of information • 1991 mail privacy law (eg, winning numbers)

13. (2) How is mobile gambling regulated in Member States? (3) France: mobile services regulation • Postal and telecommunications Code (CPCE): • Broadcasting regulation (not content reg.) • Regulatory authority (ARCEP) • Recommendations (CST & CTA): eg, availability of games’ rules • Operators’ civil (art.1382 Civil code; summary proceedings) and criminal liability(specific gaming offences: Perben Act 2004, art.121.-7 criminal code, ie, complicity, art.321-1 crim code, ie, “recel”)► French courts competent

14. (2) How is mobile gambling regulated in Member States? (4) Belgium • 1999 Games of chance Act: licence required if • stake • chance • Televised SMS games ok under art.3.4 (but not implemented) • Fixed odd betting not regulated • Sports betting such as pool betting: light sanctions and little risk of public action • Future Games of chance Act might regulate information society services

15. (2) How is mobile gambling regulated in Member States? (4) Belgium • Constitutional Court, March 2004 Partial application of Gambelli • Case-law promotional game via SMS: “SMS message nothing more than a technical carrier used to participate in the game” (no stake involved) But SMS price must = normal market price, otherwise ►stake►forbidden under 1999 Act • Conclusion: low risk environment for mobile gaming operators

16. (3) Conclusions and forecasts • Likelihood of a Community Act: Swiss Institute’s report • Increase in number of complaints to the Commission on national gambling restrictions: Commission waiting for the report before it takes any actions against MS • Tendency clearly shifting towards deregulation: UK, Germany, Belgium + some new MS (Tcheck Rep, Latvia)+ Mc Greevy’s statements in October • Grey zones: The Netherlands (unsettled case-law), Italy (ECJ referrals still pending), Nordic MS (Norway referred to EFTA court) • Some “black zones”: France (sports betting), Sweden • Conclusion: prospects look rather positive in the mid-term for the mobile gambling industry