Europe: EU Court of Justice takes stand against prohibitions on cross-border betting and gaming activities

by DLA Piper
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Patrick Van Eecke and Antoon Dierick (both DLA Piper Brussels) comment on the latest ruling of the European Court of Justice in respect of Italian gaming an betting regulations.

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In its most recent judgment in the gambling and betting sector, the European Court of Justice on 12 September 2013 ruled on several questions relating to Italian legislation. Italian law foresees that collecting and managing bets can only be done by entities holding a licence and a police authorisation.

First, the Court ruled on the question as to whether the freedom of establishment (article 49 of the TFEU) and/or the freedom to provide services (article 56 TFEU) oppose to a national legislation which requires companies to obtain both a police authorization and a State-issued license, as a condition to offer gaming and betting services, and it being understood that only those entities who have obtained the license can also obtain the police authorization (hence, closing the market for those entities who have not obtained the license).

Referring to its well-known Placanica judgement (joined Cases C-338/04, C-359/04 and C-360/04), the Court reiterates that the necessity to obtain a police authorisation and licence in order to offer gaming and betting services, constitutes a restriction on the above-mentioned freedoms. However, restrictions on the freedoms can be justified under certain circumstances. In respect of the regulations at hand, the Court has already ruled in Placanica and Costa (Joined Cases C-72/10 and C-77/10) that only the objective of combating criminality is capable of justifying this kind of restrictions, provided that those restrictions comply with the “principle of proportionality” and in so far as the means employed are “coherent and systematic”. To make the latter assessment, the Court refers, as it did before, to the national court, who it finds better placed to rule on this issue. The Court however gives some guidance to the national court as it adds that a regime of ex ante controls and on-going supervision, contributes to the objective of preventing criminality, hence is not per se to be looked upon as a disproportionate measure.

Secondly, the Court had to tackle the question whether the aforementioned freedoms preclude national legislation which protects commercial positions acquired by existing operators. Thus, Italian regulations provide, amongst others, for minimum distances to be observed by new licence-holders vis-à-vis the already existing operators.

As the Court already ruled in Costa, Union law indeed does not allow a Member State to exclude a category of operators from an economic activity, nor does it allow a Member State to protect acquired market positions in the way described. The Court ads that national legislation which in fact precludes all cross-border activity in the betting and gaming sector, irrespective of the form in which that activity is undertaken and, in particular, in cases where there is the possibility of direct contact between consumer and operator and where physical checks for police purposes can be made of an undertaking’s intermediaries who are present on national territory, is contrary to the freedom to provide services and the freedom of establishment.

The third question referred to the Court deals with the mutual recognition of licensed operators of other Member States. The Court repeats its earlier rulings (see e.g. Dickinger and Ömer, C-347/09), and states that in the light of the wide discretion the Member States have in this area and in the absence of harmonisation, there is no obligation of mutual recognition of authorisations issued by the various Member States.

This ruling goes hand in hand with the ruling already rendered in Costa. It confirms the ECJ’s case law that certain restrictions on the basic freedoms can only be justified on the basis of specific justifications. It also emphasizes again that national law cannot be construed solely to protect the interests of already established operators in a jurisdiction. Especially noteworthy however is that, in answer to the second question, the Court explicitly states that Member States cannot simply ban all cross-border activity. Although the principle of mutual recognition is not accepted by the Court in this area, the question arises whether this part of the ruling is an opening to a more liberalized approach by the European Courts.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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