Memorandum by Mr Alan Littler
1. OVERVIEW
Gambling is excluded from the scope of application
of the Services Directive[12]
following amendments made to the European Commission's 2004 proposal[13]
by the European Parliament. The European Parliament justified
these amendments by reference to consumer protection issues and
the disparities between national approaches to regulating gambling.
Although the gambling sector was subject to a transitional derogation
in the proposed draft, the European Commission envisaged that
it would be subject to the country of origin principle following
additional harmonisation of national regulations. At present,
gambling does not benefit from the country of origin principle
at all. In instances where this principle is embodied in secondary
legislation gambling is excluded there from. A prime illustration
of this is the E-Commerce Directive which aims to create a single
market for "information society services".[14]
Nevertheless, gambling remains subject to the
freedom to provide services as under Articles 43 and 49 EC Treaty
and this relationship has generated six preliminary reference
rulings from the European Court of Justice ("ECJ").
In summary, the Schindler case[15]
recognised that gambling amounts to a service, consequently falling
within the scope of the freedom to provide services (Article 49
EC Treaty). However the ECJ noted that lotteries have a "peculiar
nature" based upon; the moral, religious and cultural aspects
of lotteries; the accompanying high risk of crime and fraud; the
damaging individual and social consequences from lotteries being
an incitement to spend; and that lotteries contribute to the financing
of benevolent or public interest activities. Only the first three
can constitute justifications to restrictive measures, ie restrictions
to the freedom to provide services.
The scope for Member States ("MS")
to restrict gambling services, their so-called margin of discretion,
was not diminished by the subsequent case of Laara.[16]
The ECJ considered that the assessment of a particular national
restriction could only be made by reference to the objective of
the restriction in question and not in light of other regulatory
regimes upheld in other MS. Following the cases of Zenatti[17]
and Anomar,[18]
the most important developments arose in Gambelli,[19]
Lindman[20]
and most recently, Placanica.[21]
Gambelli saw the ECJ require that restrictive
measures have to be applied in a manner consistent and systematic
with their aim; for example MS can no longer restrict the cross-border
supply of gambling on the basis of avoiding the stimulation of
demand, while permitting national monopoly operators to advertise
extensively. Furthermore, Gambelli sees the ECJ recognise
the importance of home state control and supervision mechanisms,
requiring the destination/host Member State to take these into
consideration when deciding whether to restrict supply. However,
if a MS uses the monopoly supply model then other operators are
de facto excluded, regardless of the nature of their home
MS control.
Lindman points towards the possibility
of an evidentiary burden upon the Member State seeking to uphold
the restrictive measure since the importance of proving a causal
relationship between the concern against which the MS sought to
guard against and the actual dangers which their residents face,
was noted.
Most recently Placanica saw the ECJ reduce
the margin of discretion enjoyed by MS, although it does not require
the abolition of monopolies or any degree of liberalisation, deregulation
or harmonisation of national markets. Firstly, given that the
aim of the Italian legislation was to eradicate crime and fraud
in the gambling sector, while not seeking to curb demand, the
ECJ stated that a policy of controlled expansion (by the incumbent
provider(s)) was permissible, even if the cross-border supply
of gambling was restricted. This could allow for advertising,
an extensive range of games and the use of new distribution methods.
However, a simple numerus clausus would fail to justify
a restrictive measure. Secondly, the exclusion of operators quoted
on regulated markets outside of Italy from being able to hold
a licence was deemed disproportionate, amounting to an infringement
of Articles 43 and 49 EC Treaty. This points towards the recognition
of home state control and the removal of double regulatory burdens.
Nevertheless MS remain free to establish their own objectives
and standards.
2. THE CURRENT
STATE OF
THE SINGLE
MARKET
2.1 Are there significant barriers to firms
seeking to offer their goods or services, or to consumers accessing
these goods or services, in other Member States of the European
Union? If so, what are the most important of those barriers? What
measures are needed to overcome those barriers?
Regarding the supply of gambling services in
a cross-border context the vast majority of barriers are encountered
by the (potential) suppliers of such services. Far fewer examples
of barriers exist which restrict the ability of consumers from
accessing gambling services offered by a supplier established
in another MS.
The barriers encountered by suppliers are a
consequence of the model of supply chosen by particular national
governments, or are a consequence of the implementation of that
model. Some MS have chosen to supply gambling services, or perhaps
a particular form of gambling, by granting a monopoly position
to an undertaking. It would be in contradiction to the very nature
of a monopoly if suppliers located in other MS were able to access
the home market of a particular monopolist. One such example is
the Française des Jeux of France. Monopolies however are
not per se contrary to EC law, if a competitive licensing
procedure is in place which allows both national and non-national
undertakings to bid on an equal footing, then EC law is most likely
to be respected. One such example would be the UK National Lottery.
Tendering procedures are important in MS which
award numerous licences to various suppliers. To uphold the Single
Market it is of utmost importance that non-national suppliers
can compete in such procedures, procedures which do not include
requirements which can only be met, or most easily met, by national
suppliers. The recent case of Placanica[22]
provides an illustration; the Italian legislation in question
excluded all companies (whose shares were) quoted on regulated
markets from tendering for a licence.
As a consequence of MS seeking to maintain national
consumer bases for their monopolists, consumers can be prevented
from accessing the services of suppliers based in other MS. For
example, case-law arising in the Netherlands requires Ladbrokes
to refuse bets placed by residents of the Netherlands. This can
be regarded as a practical consequence of maintaining a monopoly
model of supply, but from the consumers' point of view amounts
to an infringement of their right to access services under Community
law. Furthermore, other MS may require internet service providers
to block their residents from accessing gambling services hosted
in other MS.
Although these barriers exist, there are only
two ways at present through which they can be overcome. Firstly
they can be challenged on an ad hoc basis through cases
before national courts and via infringement proceedings undertaken
by the European Commission. Proceedings at the national level
have given rise to preliminary references before the ECJ. The
subsequent rulings of the ECJ however are not intended to develop
a European gambling policy but merely to apply existing Community
law to the particular national circumstances of the cases in question.
Consequently the existing requirements of the law are in an embryonic
stage and, apart from upholding the freedoms enshrined in the
EC Treaty, lack any policy direction. Furthermore, the infringement
proceedings can only apply the existing case-law. By virtue of
the fact that this is relatively limited, such proceedings have
their limitations if perceived as a mechanism for developing a
European gambling policy.
A potential second means for overcoming such
barriers would be for secondary legislation to be enacted. This
would require the 1994 Edinburgh Council Decision[23]
to be overcome, but would be of value since it would provide a
policy direction and establish a framework for assessing the legality
of restrictions. Furthermore, it would furnish an opportunity
for determining whether monopolies are to be permitted to remain
within this sector, and under what conditions. The legislative
process would provide an opportunity for matters to be discussed
and decisions taken which do not fall within the remit of the
ECJ during preliminary reference proceedings.
2.2 Do you consider further legislative measures
by the Commission to be necessary for the completion of the single
market? If so, what measures would you consider appropriate?
In light of the answer above, legislative measures
are necessary to not only complete the single market, but more
fundamentally perhaps, be used to decide where the boundaries
of the single market lie in relation to this sector. Relying upon
the ECJ and European Commission infringement procedures to settle
this issue is subject to the limitations inherent in these mechanisms,
as alluded to above.
During a conference on this matter, former Advocate-General
Alber of the ECJ noted that MS should accept that the EC Treaty
has far reaching effects; and that as a consequence, national
gambling markets should be open to competition.[24]
MS have different views on this, as various approaches to regulating
gambling indicate.
Consequently, the legislation of various MS
clashes with the ideals behind the single market on a theoretical
level, and with each other on a practical level as operators mount
challenges, using Community law as a tool, to prise open protected
markets.
MS also have numerous concerns regarding consumer
protection and the eradication of crime and fraud from gambling,
as indicated by the justifications put forward in the ECJ's case-law.
Community secondary legislation would provide an opportunity for
these to be addressed. For example, responsible gambling mechanisms
could have a pan-EU application so that a resident of one MS cannot
circumvent national mechanism by playing on a site located in
another MS. Furthermore, secondary legislation would provide an
opportunity for different forms of gambling to be distinguished
and accorded different treatment where deemed appropriate. The
means by which gambling is delivered, whether via the internee
and other means of distance communication or in an off-line environment
frequently entails a considerable difference to the manner in
which it is regulated. Again, secondary legislation would provide
an opportunity for necessary distinctions and nuances to be made.
In my view, the legislative process would provide
a coherent framework for these issues to be debated at an institutional
level. The outcome of this process is likely to be far more coherent
than the results of various ad hoc preliminary references
and infringement proceedings, and would hopefully contain an effective
supervision and enforcement mechanism.
2.3 What is your view of the Country of Origin
Principle, whereby a company registered to provide services in
one Member State is automatically qualified to provide those services
in any other Member State on the basis of home country regulation?
Does this Principle constitute the best basis for single market
measures?
The use of the Country of Origin Principle would
provide an effective mechanism for encouraging the cross-border
supply of gambling services. However, numerous issues regarding
the quality of supply, the eradication of crime and fraud, as
well as consumer protection/responsible player mechanisms would
have to be determined at a European level. Inherently, the status
of monopolies would have to be decided upon also. Consequently,
it is unimaginable that this principle could apply to this sector,
without detailed legislation, probably of a harmonising nature,
being in place. If Community secondary legislation were to be
enacted then the means by which providers established in different
MS are recognised in other MS would have to be decided upon, and
the merits of the Country of Origin Principle would have to be
balanced against other potential forms, such as mutual recognition
which has been used in other fields, eg professional qualifications.
2.4 Should there be a greater role for technology
and research in facilitating the single market?
Research on gambling in the context of the EU
is extremely limited. Before decisions are made at the level of
the European institutions a thorough understanding needs to be
gained of the effects of gambling in a cross-border environment,
particularly with reference to whether the dangers associated
with gambling are likely to be greater in such an environment.
This will either support MS restrictions or point towards greater
cross-border activity, but could also be used to develop cross-border
mechanisms to respond to such concerns while upholding the Single
Market.
29 June 2007
12 Directive 2006/123/EC of 12 December 2006 on services
in the internal market. Back
13
European Commission, Proposal for a Directive on services in
the internal market, 13 January 2004, COM(2004) 2 final. Back
14
Art. 1(5)(d) of the Directive 2000/31/EC of 8 June 2000 on certain
legal aspects of information society services, in particular electronic
commerce, in the Internal Market. Back
15
Case C-275/92, Her Majesty's Customs and Excise v. Gerhart Schindler
and Jörg Schindler, [1994] ECR I-1039. Back
16
Case C-124/97, Markku Juhani Laara, Cotswold
Microsystems Ltd and Oy Transatlantic Software Ltd v Kihlakunnansyyttaya
(Jyvaskyla) and Suomen valtio (Finnish State), [1999]
ECR I-6067. Back
17
Case C-67/98, Questore di Verona v Diego Zenatti, [1999]
ECR I-7289. Back
18
Case C-6/01, Associaçã Nacional de Operadores de
Máquinas Recreativas (Anomar) and Others v. Estado português,
[2003] ECR I-8621. Back
19
Case C-243/01, Criminal Proceedings against Piergiorio Gambelli
and Others, [2003] ECR 1-13031. Back
20
Case C-42/02, Diana Elisabeth Lindman v Skatterattelsenamnde,
[2003] ECR 1-13519. Back
21
Joined Cases C-338/04, C-359/04 and C-360/04. Available online
at www.curia.eu. Back
22
Ibid. Back
23
European Council, DOC/92/8, European Council in Edinburgh-11
and 12 December 1992 Conclusions of the Presidency, 13 December
1992. Back
24
As stated by Professor Siegbert Alber during his presentation
"Key Principles to be Remembered", during the conference
The Future of Gambling in the Internal Market: The Demise of State
Monopolies?, Academy of European Law, Trier, Germany, 8-9 February
2007. Back
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