No Consensus in EU Yet on Remote Gaming Industry

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Times of Malta

Ivan Camilleri, Brussels

European Union member states were not obliged to allow gaming firms to penetrate their territory just because they were licensed in another EU state, the Advocate-General of the European Court of Justice decreed in an opinion seen here as a setback to Malta's lucrative remote gaming industry.

Advocate General Paolo Mengozzi, whose opinion is usually followed by the Court, released his conclusions on seven cases referred by different German regional courts about the compatibility of German gaming rules with EU legislation.

He said the offshore and extraterritorial licences granted by Malta and Gibraltar distorted the mutual trust between member states when it came to gaming laws.

He said a member state could have a monopoly for some gambling and betting services. Furthermore, since there was no mutual recognition in gambling, member states were not obliged to allow operators on their territory on the mere grounds that they were licensed in another EU member state.

He ruled that gambling monopolies had the right to advertise their products in an adequate manner in order to present an attractive legal alternative to an illegal offering.

Over the past years, Malta has seen its remote gaming industry flourish, with hundreds of foreign companies opening offices on the island attracted by an array of favourable legislative incentives introduced by the government. The industry employs hundreds of people and pays millions of euros in taxes every year.

There is no consensus yet in the EU on how the remote gaming industry should move forward. The European Commission has not enacted any specific laws and has preferred to treat it as just another service to be regulated by the general free movement laws.

However, member states disagree in their interpretation of the EU treaties on the matter. Some, particularly those wanting to defend their monopolies, like France and Portugal, say they have the right to regulate their market and, thus, use certain laws to keep online competition at bay. Others, including Malta and the UK, insist the treaties give companies registered on their territory the right to operate in every EU member state without any barriers, according to the spirit of free movement.

The different interpretations have led to many new legal cases being filed before the ECJ, including some by offshore companies licensed in Malta, which are finding it difficult to penetrate the gaming markets of some member states.

Industry sources said the Advocate-General's opinion was therefore being seen as a blow to the burgeoning business in Malta.

On the other hand, the Association of European Lotteries, representing state monopolies, welcomed Mr Mengozzi's decision: "This is a further defeat for the many commercial operators that continue to ignore the legislation of the member states, contrary to the clear jurisprudence of the European Court of Justice."

The association's president, Fredrick Stickler, explicitly welcomed the harsh criticism of the Advocate-General towards "tax havens Malta and Gibraltar".

He referred to Mr Mengozzi's statement that "their practice (of Malta and Gibraltar) to issue offshore licences to hundreds of commercial online gambling operators distorts the trust between EU member states".

The sources said this opinion amounted to a direct accusation of Malta for using loopholes in the EU laws to give an advantage to companies wanting to introduce online gaming in markets that have been protected for a long time.

"This is what the Advocate-General means by a distortion of trust. However, the internet has changed the world and the EU has to move on," the sources said.

The Advocate-General's opinion is not binding on the Court of Justice but is only intended as a proposal to the Court as a legal solution to the cases for which it is responsible.

However, it is very rare that the ECJ decides against the opinion of the Advocate-General.

The judges have now started their deliberations and a judgment will be handed down later.

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