German developments on internet gambling

The German legal situation hit the newswires Thursday with the news that the Schleswig Holstein provincial government has ditched its formerly liberal and EC-approved online gambling act, and that the German Federal Court has referred questions on the country’s gambling laws under the State Treaty on Gaming and its consistency with EU law to the European Court of Justice, effectively deferring its own decision on the matter and placing a hold on enforcement.

Both actions are associated with the restrictive and controversial Treaty, already supported by the 15 other provinces, which Schleswig Holstein intends re-joining despite the European Commission view that the Treaty’s provisions conflict with EU law.

The Treaty allows for only 20 sports betting licenses and does not recognise online casino and poker action as legal.

The Schleswig Holstein situation is doubly complicated because right up to its repeal of the former act, the government has continued to issue six-year duration licenses – some thirty-six in all – to foreign and German companies under the terms of the original act’s provisions.

That means that SH on the one hand subscribes to the restrictive Treaty, but on the other has widely licensed internet casino, poker and sports betting within its provincial boundaries, creating a confusing and parallel regulatory regime that has the potential to generate legal actions.

European Court of Justice precedents suggest that member states in the EU may impose gambling restrictions provided they can be shown to be necessary in the public interest and safety, but there are stringent criteria for assessing such necessity that includes being able to present a fair, consistent and reasonable argument supporting the measure and the reasoning behind its implementation.

The German court has requested a ruling from the European Court of Justice on whether the disparity in provincial and federal gambling law is compatible with European Union law.  It also wants the view of the superior court on whether this week’s repeal of the ‘old’ Schleswig Holstein online gambling law impacts the consistency question.

Until the ECJ gives its views, the Germans are unable to enforce the federal provisions linked to the Treaty

The Reuters news agency reports that just last month, the European Commission delivered a legal opinion to the Germans querying the logic of Schleswig-Holstein moving to a more restrictive regime so soon after liberalising its online gambling market.

“The Commission would be interested in receiving information that would explain the substantial legislative changes to the regulation of online sports betting in Schleswig-Holstein not even one year after authorisation of this market,” it said in a confidential document seen by Reuters.

Some foreign gambling companies, including industry leaders like Betfair and William Hill, have scaled down their operations in Germany because of a 5 percent turnover tax on sports betting under the Treaty.

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