The European Court of Justice last month made a ruling on the case brought by the joint forces of Gibraltar-baseed Austrian online gambling company bwin and the Liga Portuguesa de Futebol Profissional (Portuguese Professional Football League - henceforth referred to as the ‘LPFP’) against the state betting monopoly, Departamento de Jogos da Santa Casa da Misericórdia de Lisboa. On 8th September, the ECJ rejected the case stating that “a member state could be allowed to ban gambling websites if its intention was to stop crime”.
This case has great significance for the future of the online gambling industry within Europe, which has been turning to the Free Trade Agreements of the European Community over the past few years in order to try to maintain its legal foothold within the various 27 member countries of the EU. In this article we will look back over the clash between the three companies, analyse the ECJ’s rulings and actions and look at the impact that these actions will have on the online gambling industry within Europe and what it might mean for its future.
To start with, let’s look at the details of the case in question and the chronological landmarks in the disputes between the three companies; bwin, the LPFP and the state betting monopoly, Santa Casa da Misericórdia de Lisboa (henceforth referred to as “Santa Casa”).
As a result of the partnership between bwin and the LPFP, (whereby bwin was offering odds for online betting on the Portuguese football leagues games), the Portuguese government fined the companies EUR 74 500 and EUR 75 000 respectively for violating its gambling laws and for offering and advertising “games of chance” on the internet. According to the Portuguese government, Santa Casa holds the only legal concession (thus holding a monopoly) for providing on and offline lottery and betting services in Portugal. The football betting facilities that Santa Casa provides are called ‘Totobola’ (whereby you can bet on a win, draw or loss) and ‘Totogolo’ (whereby you can bet on the number of goals scored by the teams). The Portuguese authorities claimed that bwin and the LPFP were acting illegally by providing a betting facility outside of that of the state system.
Both bwin and the LPFP then took Santa Casa to the European Court of Justice on the basis that it was violating the Free Trade Agreements of the European Community. They argued that the Portuguese legislation wasn’t compatible with the freedom of establishment, the free movement of capital and the free movement of services as set out by the FTA of the EC. On 8 September, the ECJ threw out the case on the basis that the Portuguese government was aiming to protect consumers against risks of fraud and crime…
In response to the ruling, bwin released a press release. In the press release, aside from the suggestion that the European Commission wake up to the realities of the online gaming industry and get in line with a market force that is already here, bwin’s Co-CEO Norbert Teufelberger stated that;
“Internet legislation contains technical requirements and the Commission must be notified of these before they come into force. This was not done in the present case. As the national court did not consider the notification issue, the ECJ refrained from addressing the matter. It will therefore have to be resolved in the national proceedings. In so doing, the national court will surely go by the statements of Advocate General Bot who pointed out that no penalties could be imposed as no notification had been made…” That is to say, bwin are hoping that as the Portuguese government didn’t follow procedure, the fines should not be enforceable. The full press release can be found here on bwin’s website.
The full details of the court case can be found on the ECJ’s website here and a press release issued by the ECJ can be viewed here.
The following is a great portion of a Press Release released by the ECJ on 8th September:
“First of all, the Court of Justice takes the view that freedom of establishment and the free movement of capital do not apply to the dispute in question.
In those circumstances, the Court examines whether the freedom to provide services precludes the Portuguese legislation in so far as the latter prohibits operators such as Bwin, established in other Member States where they lawfully provide similar services, from offering games of chance via the internet in Portugal. In the context of that analysis, the Court finds, first, that the Portuguese legislation constitutes a restriction on the freedom to provide services.
The Court points out, however, that restrictions on the freedom to provide services may be justified by overriding reasons relating to the public interest. In the absence of Community harmonisation in the area of games of chance, Member States are free to set the objectives of their policy in that area and, where appropriate, to define in detail the level of protection sought. However, the Court notes that the restrictive measures that Member States may impose must satisfy certain conditions: they must be suitable for achieving the objective or objectives invoked by the Member State concerned, and they must not go beyond what is necessary in order to achieve those objectives. Lastly, in any event, those restrictions must be applied without discrimination.
As regards the justification for the Portuguese legislation, the Court recalls that the objective of the fight against crime relied on by Portugal may constitute an overriding reason relating to the public interest that is capable of justifying restrictions in respect of operators authorised to offer services in the sector concerning games of chance. Games of chance involve a high risk of criminal activity or fraud, in view of the scale of the earnings and the potential winnings on offer to players.
With regard to the suitability of the legislation in question for achieving that objective, the Court expresses the view that the grant of exclusive rights to operate games of chance via the internet to an operator such as Santa Casa, which is subject to strict control by the public authorities, may confine the operation of gambling within controlled channels and be regarded as appropriate for the purpose of protecting consumers against fraud on the part of operators.” (Information taken courtesy of the website http://curia.europa.eu)
A layman’s interpretation of this baffling legal / political schpeel as per the press release, might be as follows. The Portuguese government is allowed to enforce “restrictions” upon those who infringe upon their “right” to provide the only online and offline lottery and betting services via the company Santa Casa. The restriction in the supply of services brought about by this monopoly is compatible with the EC regulations because it is looking out for public’s best interest by attempting to protect consumers against risks of fraud and crime.
Now we shall go into a more in depth analysis of both the Press Release and the Judgement of the Court.
The 3 counts upon which bwin and the LPFP took their case (their objection to the Portuguese governments fines) to the European Court of Justice were because they said that the actions of the Portuguese government were in contradiction to the freedom of establishment, the free movement of capital and the freedom to provide services - regulations applying to the E.U.
The ECJ stated that the actions of the Portuguese government were not in opposition to the freedom of establishment or the free movement of capital. However, “the Court finds, first, that the Portuguese legislation constitutes a restriction on the freedom to provide services,” i.e.: the actions of the Portuguese government do go against the EU’s trade stipulations that there should be a freedom to provide services. Case closed – bwin wins you might think – but no… The ECJ goes on to state that the restrictions to provide services can be deemed acceptable, as long as they are in the public interest. As there are no specific European laws on online gaming (”no Community harmonisation in the area of games of chance”), each country can set their own laws (”free to set the objectives of their policy in that area”) as long as they are appropriate and suitable (”suitable for achieving the objective or objectives”) and the laws are measured and reasonable (”they must not go beyond what is necessary in order to achieve those objectives”), and that the laws made, apply to all (”without discrimination”).
One wouldn’t need to be too great a cynic to draw a parallel here with the Orwellian phrase “we are all equal, but some are more equal than others”.
In this instance, there should be freedom to provide services across member states of the EU, but restrictions to provide services are acceptable if they are in the “public interest”. The ECJ is here stating a premise but then in the nitty-gritty, in depth investigation of a specific case, negating the basic principle or premise set out in the initial statement. In this case, the Portuguese government are imposing restrictions on the provision of services, but it’s an acceptable restriction on the provision of services, because they’re doing it for the right reasons…they’re fighting crime, which is in the public interest. Additionally, the remit is gambling and “games of chance involve a high risk of criminal activity or fraud”, so that makes the Portuguese government’s actions very much more politically correct and in the public interest.
Whether there is a global crackdown on online gambling, due to moral pressure, political correctness or cotton-wool governance techniques, or whether the online gaming industry has been caught up in the legal and political no-man’s land of the European Communities lack of harmonisation in yet another area of governance – it is hard to say.
Within the sampled text from the press release, is the following passage, which constitutes the crux of the issue at hand;
“…the objective of the fight against crime relied on by Portugal may constitute an overriding reason relating to the public interest that is capable of justifying restrictions in respect of operators authorised to offer services in the sector concerning games of chance…”
Some criticisms of this statement might be as follows;
- Firstly, the politically correct justification of the Portuguese governments actions, that they were acting in the public interest, by attempting to fight crime is ridiculous. A statement like that is a non sequitur because any government’s intention should be to “stop crime”.
- Secondly, the wording of the ruling is subjective, in favour of the government making the ruling – in this case, the Portuguese Government. The words “objective to fight crime“, refer to the intentions behind the action of “fighting crime”. There is no way to prove or disprove an intention or purpose behind any action - because if evidentiary proof exists, whether it is being used to support or disprove an argument, it does not necessarily bear any relation to the original intention or objective. For example: I may say that I am taking my umbrella out today because it might rain. I am carrying my umbrella with me with the “objective of staying dry, should it rain”. You will never know whether that is my true objective in taking my umbrella out with me, will you, because you cannot prove it either way? Even if I were to happen to do something totally different with that umbrella whilst out, and not use it for protection against precipitation, you could never prove that using the item for some other purpose either was or wasn’t my original purpose behind taking the item with me, can you?
- Thirdly, the reference to the “fight against crime” - what proof did the Portuguese government provide of actual criminal activities on the part of either party that they fined? What proof would any government need to supply to support prosecution of any online gaming company, (or other company for that matter), in the pursuit of their “intentions of stopping crime“. Surely any government would have to prove a link between any given online gaming company and illegal or criminal activities?
This reference to the link between online gambling organisations and crime is a far-flung, age-old allegation, bandied about by a multitude of governments (the US for example) in the name of banning online gaming. It cannot be denied that historically there has been a link between the crime world and gambling - the intermediary being organisations like the Mafia. However, today, the online gambling world purports itself to be like any other business, with balanced books, paying vast amounts into governmental coffers in taxes. Any state that has seen fit to legalise online gambling will attest to the fact that the revenues generated from online gaming companies greatly boost their fiscal resources. The prejudiced attitude displayed by the ECJ in this instance is similar to the double standard attitudes exhibited by most present day governments towards the tobacco industry; which is legally condoned, but socially and morally condemned.
The associative link between the two worlds of crime and online gambling are what one might consider a form of “conservative scare-mongering”. This libellous label should not be stuck on any company in isolation without proof of wrongdoing, let alone a whole industry.
Some may put the second and third points down to the rantings of conspiracy theorists or semanticists. However those people would do well to remember that it is in the gaps between concrete language (“legal loopholes”) that legal, social and political danger lurks. When, non-specific language is used by governments and law-makers, amidst present day tendencies for political spin-doctoring, there is room for enormous political “mischief”. If we have learned nothing from the global events of the 20th Century we should have learned that the more safeguards that are erected against possible abuse of power, the safer we are as nations of people and the more protected we are against power-hungry, greedy totalitarian opportunists, who have at their fingertips spin-doctors and media systems which can contort the “truth” into any shape that they see fit.
The idea of any government in the democratic world hypothetically being able to fabricate justifications for its actions according to its allegedly pure “intentions” should be a nightmare to us all. Equally appalling should be the idea of any government being able to fine any company based on the premise that it “might” be engaging in criminal activities.
- Fourthly, who decides what is in the “public’s interest”. Is the “public’s best interest” subject to individual interpretation? Yes, of course it is and therefore it is not a concrete, singular, eternal entity - it is a variable, subjective idea.
- Fifthly, the statement refers to the online betting service that bwin and LPFP were providing as “services in the sector concerning games of chance”. It can quite easily be argued that betting on a game of football, is not the same as playing bingo or roulette. If the game of football is a skill game, gambling on the outcome of such a game involves certain knowledge or skill also, thus betting on football, or any other sports game for that matter, is not a game of chance.
As though the above five points weren’t enough of a damnation of the ECJ’s hypocritical ruling, the press release issued by the ECJ on 8 September also states that;
“With regard to the suitability of the legislation in question for achieving that objective, the Court expresses the view that the grant of exclusive rights to operate games of chance via the internet to an operator such as Santa Casa, which is subject to strict control by the public authorities, may confine the operation of gambling within controlled channels and be regarded as appropriate for the purpose of protecting consumers against fraud on the part of operators.”
This segment of the press release is equally bizarre. Seemingly, the ECJ is supporting the Portuguese government’s legalisation of its online gambling monopoly (provided by Santa Casa) because the strict controls that it (Santa Casa) must adhere to may help guard against fraud. On this basis, the ECJ is evidently trying to vouch for the “suitability of the legislation”, which it said initially “…that the restrictive measures that Member States may impose must satisfy certain conditions: they must be suitable for achieving the objective or objectives invoked by the Member State concerned, and they must not go beyond what is necessary in order to achieve those objectives”. Surely, these “strict controls by the public authorities” could simply be imposed upon all other companies who attempt to provide the same service as Santa Casa – in this instance another online gambling facility. If other companies were allowed the opportunity to provide the same wonderfully legal and law abiding service as Santa Casa, then the legitimization of Santa Casa’s monopoly could not be argued upon the basis that it was the only company providing a fraud-free operation of its kind.
Conclusion
There are three main factors to consider in the analysis of the case between Liga Portuguesa de Futebol Profissional (CA/LPFP) and Bwin International Limited v Departamento de Jogos da Santa Casa da Misericórdia de Lisboa.
Firstly, there is the question of the motivation behind the creation of the E.C. in the first instance. The motivations for the creation of the E.C. will point to the commitment to it by its constituent members and therefore the tour de force behind the E.C. as a governing body with power and authority. Secondly we will ask whether the ECJ could have done anything to support bwin and LPFP’s case and thirdly, there is the question of whether the “powers that be” are hypothetically interested in supporting the online gaming industry anyway.
Motivations
The E.C. is essentially a collective of states – all of which have their own national identities and cultural, social, economic, legal and political frameworks. Each member state has its own legal framework, which has been established over the last 1-2 millennia. So to hope to find “common ground” between all of its 27 member states, on the spectrum of agendas and laws within the E.C.’s remit, is what a realist might term impossible or impracticable.
The E.C. was created despite these great cultural, social, political and economic differences. In order to facilitate this enormous collection of states functioning as one entity there were two real directions that could have been followed. One would have been to discard all previously formed individual state laws and legal frameworks and replace them with a harmonised, uniformly enforced and accepted singular E.C. system of law. The other way would have been to try to supplement individual state laws already in existence and to create a new level of cross-state government, primarily concerned with facilitation of free trade and economic prosperity rather than internal state laws.
The motivation for the E.C’s creation was never to form a governing body of whose sovereignty would supersede that of its member states. The reason why Britain, for example, took so many years to join the “club”, was for the most part due to its fear of loosing its sovereign powers. For this and obvious practicable reasons, scrapping all previous state laws was never an option.
The motivation for the E.C’s creation should for the most part be put down to a combination of both peace-keeping and economic incentives. Post WWII there was a well-meaning desire to bring Europe together as a unit in order that it could work through any future problems together. It wanted to ensure that human rights were respected and that peace between states was maintained. The economic incentive was a form of “mutual back-scratching”, allowing it to compete as a collective in the global economy against such powerful markets as the US, Russia and China. The more formal name for the E.C. after all is the European Economic Community. The purpose of the E.C. was therefore to enhance the relationships between member states and to encourage trade between them. This is why the E.C. was created along the lines of a sort of “supplementary” governing body, not reshaping pre-existing laws, but adding “European” laws to the pot. Because of this, the majority of rulings and laws that it has created, have been regarding freedom of trade and human rights, or “soft” areas of governance, which are easy for member states to agree upon.
The E.C. falls down though because it cannot be all things to all people and it has no sovereign power over its member states.
The individual needs of the E.C.’s 27 member states are always going to be diverse – because they all have their own national identities and cultural, social, economic, legal and political frameworks. Whilst one state may desire more financial support from the E.C., another may want a relaxation on immigration laws. Whilst one may need more grants to feed its economy, another may resent “paying” for another’s “growth”. What is beneficial to one state might be detrimental to another, but the standpoint that the E.C. has to take is act in the best interests of the “greater good” – which in essence siding with the majority or those with the greatest rights, votes, powers of persuasion or vetoes within the Council. By its very nature, the E.C. “can’t please all the people [states] all the time” – so there will always be disgruntled parties within. Add to that strain of compromise the current global economic climate and the extra financial strain on the E.C. and its member states - with member states having to justify their financial contributions to European “pot” when so much is needed at home - and you the existence in the E.C looks unstable. Despite it having been in existence now for around half a century, it is not unimaginable for the E.C. to be disbanded, or abandoned by some or all member states, who don’t feel like they are getting a “return on their investment” or feel that their sovereignty is being threatened.
These economic motivations, rather than ideological ones, which are behind the formation of the E.C. are obviously important when we are investigating whether the “powers that be” are hypothetically interested in supporting the online gaming industry anyway.
Could the ECJ have ruled in favour of bwin and LPFP?
The second question of whether the ECJ could have ruled in favour of bwin and LPFP is also linked to the first question.
As the motivations behind the formation of the E.C. have been determined to be predominantly economic, it means that a homogenous legal European framework was never created for the E.C. So, despite the E.C. having its own directives on trade, like the freedom to provide services, if these ideological values (which is essentially all they are, as is proved by the outcome of this case) are not mirrored by the internal state laws of the individual member states, then there is nothing that the ECJ can do about it anyway, as it has no jurisdiction over the state laws of its constituent member states.
In this instance, with regard to the question as to whether the ECJ could have ruled in favour of the case brought by both bwin and the LPFP, the answer is no. The Portuguese government does not support the freedom to provide services in the online gaming sector because it instead sanctions a state run monopoly. Ever since 1783, the concession of a Portuguese gambling licence (originally for the lottery) has been given solely to Santa Casa. Because of this state sanctioned monopoly in Portugal the ECJ is powerless to punish the Portuguese government in any way for not allowing the two companies (bwin and LPFP) the freedom to provide their services. To put it bluntly, Portugal “got there first”, back in 1783 and as already stated, when it comes to laws taking precedence, the previously created laws of a state supersede the laws, directives or ideologies of the E.C.
In an attempt to distract us from its actual impotence in this instance, the ECJ, in its ruling, goes to some lengths to justify Santa Casa’s monopoly within the online gambling industry in Portugal, stating that the basis for the monopoly is that the current system is under strict control by the public authorities and thus not so open to fraud as it might be should other companies be involved. Whether Santa Casa’s monopoly is justifiable or not is a question that the ECJ has no power to negotiate anyway, should it deem the monopoly unjustifiable (as it in effect does).
The fact that the legal slate was never wiped clean when the E.C. was created, giving sovereign power to the E.C., means that there is no cross-state legal harmony in all areas of governance. As a result the EU and hence the ECJ, are exceptionally tentative when it comes to making rulings on “hard” areas of governance or areas that have no common legal ground or “Community harmonisation”. To use very common parlance, the E.C. doesn’t want to “upset the apple cart” and run the risk of member states “leaving the party early” by debating the issue of sovereignty. This lack of desire to tackle areas where there is no community harmonisation is exaggerated by the current global recession and the non-idealogical motivations behind member states participation in the E.C.
Are the “powers that be” hypothetically interested in supporting the online gaming industry anyway?
We know that the impotence of the ECJ in areas of state law, (unless upon mutually beneficial politically correct “soft” issues – which this case did not represent) means that the ECJ couldn’t have ruled in favour of bwin and LPFP. This lends the question; would they have ruled in bwin and LPFP’s favour if they could have done? Although a hypothetical question, putting forward an answer will give us an idea of the mood and the attitude of the European Community towards the online gambling industry, and therefore an idea of what its future might hold. If there is support for the online gambling industry from the “powers that be”, it means that with the right political pressure, there is a possibility that the harmonisation of cross-state laws on online gaming has a chance. If not, then it would infer that the online gaming industry will remain a marginalised and persecuted industry because it doesn’t fall within the legal remits of already established community harmonisation.
The “powers that be” in this instance, are represented by 3 parties; the E.C. as an entity, the E.C. as made up by individuals from its member states, and the states of Europe, who happen to be members of the E.C.
The E.C. as an entity, we have concluded already, is a well-meaning cross-state governing body, which is unfortunately limited in its powers and remit. The ordinances of the freedom of establishment, the free movement of capital and the freedom to provide services as per the FTA, are noble ideals, but have been shown to mean little when put to the test against internal state laws, like in this instance, Portugal’s. As an unprejudiced “institution” one might conclude that the E.C. is in theory in favour of the online gaming industry because it simply represents another form of business or service which can be traded between the member states for mutual economic benefit. However, the E.C. still has to bring the constituent member states on board – so that they are singing from the same hymn sheet.
The second and third parties to consider are both, by their nature and nurture, tainted by their individual political motivations both within the E.C. and from a position of state governance. Differing personal and political agendas of individuals from different member states working within the E.C. might have an effect on whether these “powers that be” are hypothetically interested in supporting the online gaming industry or not.
More arguable and visible though is the apparent global crackdown on the online gambling industry, which could be a worrying indicator of the current climate of political correctness amid individuals and member states of the E.C. This wave of anti-gambling-morally-self-righteous sentiment sweeping across the globe is a threat to the industry. The online gambling industry, despite being one of the oldest and arguably most innate habits of mankind and an already societally entrenched pursuit – is in the firing line of many governments hell-bent on protecting people “from themselves” and the (scare-mongering) threat of “fraudulent or criminal enterprises”.
The differing national identities, cultural, social, economic, legal and political frameworks within the E.C. also means that there is no generic approach to the subject of online gambling. Where one country condones it, another might condemn it and because the online gaming industry represents one of a multitude of areas of governance caught up in the legal and political no-man’s land of the European Communities lack of harmonisation, there is no way of forcing a consistent treatment from all member states. Therefore even if some states want a standardized legal approach to the online gambling industry, they are not in a position to force other states to cooperate.
Equally, certain European states, like Germany and Portugal, have state-run online and offline gambling operations and don’t want to share this market with other companies (like bwin). Whether this is for the reason of “protecting its consumers against risks of fraud and crime” or for the more likely reason of gleaning all the profits from the industry for itself, is essentially an “intention” that we shall never truly know, but according to James Hollins, analyst of gambling stocks at Daniel Stewart & Company this recent ECJ ruling has “…strengthened the hand of countries who want to continue to protect state monopolies, [which include Portugal or Germany].” We can therefore say with certainty that these two states specifically, aren’t in favour of the freedom of services within the online gambling market, and therefore to all intents and purposes aren’t interested in supporting an open and free online gaming industry.
Finally, of course, is the consideration of the primarily economic motive behind the creation of the E.C. This materialistic driving force behind the E.C. means that there is no ultimate passion behind or ideological commitment to E.C. from its member states. As a body politic, this makes it lacking in gumption, faith and ambition. The lack of commitment to the often altruistic “one for all and all for one” nature that has to be at the heart of any real community gives one little hope that the E.C. will bother to tackle politically sensitive issues like the harmonisation of European laws towards such sectors as the online gaming industry.
So despite elements within the E.C. being supportive of the online gaming industry in theory and in practice, it is hard to see the Community as a whole being able to come together as a cohesive unit on the matter and wholeheartedly support the industry.
One thing that is certain is that the case of the Liga Portuguesa de Futebol Profissional (CA/LPFP) and Bwin International Limited v Departamento de Jogos da Santa Casa da Misericórdia de Lisboa should never have gone to the ECJ in the first instance – as under the circumstances there could sadly have only ever been one outcome for this case.
This entry was written by Nena on Friday, October 30th, 2009 at 3:17 am and is filed under Articles.
