Court critical of Italian legal framework
By Sophie Mosca | Thursday 16 February 2012
Italy’s gaming laws have had their wings clipped once again: on 16 February, the EU Court of Justice delivered a substantially critical judgement of a new Italian reform of these laws, challenging among other things the minimum distance between betting shops imposed by the reform - a measure which, although it aims to protect existing operators, does not comply with EU legislation.
It is the first time that the EU court has spoken out on this subject, responding to questions raised by the Italian Corte Suprema di Cassazione (Court of Cassation) over doubts as to the compatibility of the new gaming reform - introduced by Rome in 2006 - with EU legislation. The Italian court had already issued two judgements in 2003 and 2007 (Cases Gambelli C-243/01 and Placanica e.a. C-338/04, C-359/04 and C-360/04).
Another new factor among these abundant legal rulings is that judges have clarified the conditions for granting betting licences for sporting and horse-racing competitions under a public tendering procedure, calling for greater transparency. This question of granting licenses under public tendering procedures - a crucial element of gaming activities in Italy - is at the heart of the judgement. Two managers at data transmission centres (DTCs) linked to the UK company Stanley International Betting were accused of the illicit operation of betting activties because they had been collecting bets without meeting the requirements of Italian law, yet Stanleybet had not submitted a call for tender due to the legal uncertainty surrounding the distribution of licences, having been excluded from a previous public tendering procedure.
PROTECTING EXISTING OPERATORS?
Firstly, the Court of Justice examined the new Italian law obliging new licence holders, when setting up an outlet, to respect a minimum distance from existing licensees. According to judges in Luxembourg, the effect of this measure will be to protect the market position acquired by already established operators to the detriment of new licence-holders, who find themselves relegated to premises in less comercially attractive locations. Such discrimination is incompatible with EU law.
Under EU law, it is possible to justify such discrimination by overriding reasons in the public interest, judges point out, and the Italian government put forward two such reasons. The first of these, relating to the purported aim of preventing consumers who live close to betting establishments from being exposed to an excess of supply, has been firmly rejected by the EU court. The betting and gaming sector in Italy has long been marked by a policy of expanding activity with the aim of increasing tax revenue, judges said.
As for the second justification put forward by Rome, the claim that the objective of the legislation is to counter the risk that consumers living in less well-served areas might opt for clandestine betting or gaming, the court highlights that the means used to achieve the purported objective must be consistent and systematic, and the rules on minimum distances were imposed not on licence holders already established on the market but on new licence-holders, who would be the only operators placed at a disadvantage as a result of these measures. A national system that requires minimum distances between outlets would only be justifiable if its true objective was not to protect the market position of existing operators, judges stated.
Elsewhere, the court examined Italian legislation under which a licence must be withdrawn if the licensee or director of the licensee has marketed unauthorised gambling. The court declared that the principles of freedom of establishment and the freedom to provide services preclude the imposition of penal sanctions on persons such as Mr Costa and Mr Cifone, who were excluded from a public tendering procedure in breach of EU law. Furthermore, this would also apply to the case of a new tendering procedure intended to remedy the operator’s unlawful exclusion if that procedure had nonetheless failed to achieve that objective.
The court declares that «In order to preclude any risk of favouritism or arbitrariness on the part of the licensing authority […] it is therefore necessary […] to set out the circumstances for the withdrawal of licenses in a clear, precise and unequivocal manner,» which judges stated was not the case in the circumstances under consideration. This call for transparency in order to reinforce legal certainty can be found several times in the text of the judgement, which sheds new light on the current debate on the problems cited by new operators regarding implementation of gaming legislation.
Stanleybet’s Director, David Purvis, welcomed these points, saying that after 12 years of legal battles, the judgement finally recognises Stanleybet’s «right to enter the Italian market under conditions of equality and fairness vis-a-vis other national operators». He emphasised that the Commission should learn from the matter, particularly concerning its 2010 decision to close Italian infringement proceedings, which Purvis considered «premature». He added: «I hope this is a lesson to be learned and from now on the Commission will not allow political considerations to overtake EU law in other jurisdictions such as France, Greece and Germany».
This point of view was shared by Sigrid Ligné, secretary-general of the European Gaming and Betting Association (EGBA): “The court has made particularly clear the ‘red lines’ that member states must observe when they regulate gambling; it is high time for the European Commission to enforce the consistent case law of the ECJ and pursue complaints and infringements procedures accordingly».
Member states cannot discriminate against new operators under the guise of protecting consumers or preventing fraud, EGBA says, adding that the court has highlighted that «no penalties may be imposed on operators having been excluded from obtaining a license in breach of EU law».
European Lotteries said that «This judgement does not call into question the key elements on gambling that have been established by the EU court in its standing jurisprudence,» these being; no mutual recognition in the field of gambling, and the effective regulation of gambling at member state level.
«It is necessary to set out the circumstances for the withdrawal of licenses in a clear, precise and unequivocal manner»