Dutch Verdict: De Lotto Defeats Ladbrokes

Rob van der Gaast contributed to this article.

Ladbrokes on Wednesday suffered another defeat in its legal battle to offer remote gaming services to residents of the Netherlands, as one of the country's courts issued a primary proceedings judgment stating that Dutch laws are consistent with their goals of limiting gambling-related fraud and addiction.

The U.K.-based bookmaker has been consequently ordered to install geolocation software--or some other solution--to ensure that Dutch citizens cannot participate in its gambling offerings.

The 16-page decision concludes the primary proceedings battle for Ladbrokes, which has been arguing that the gambling monopoly enjoyed by De Lotto in the Netherlands violates E.U. policy, which allows the free movement of services throughout Europe.

The court in Arnhem issued an interlocutory judgment in June 2004 stating that the Dutch laws are not only inconsistent with their goals of limiting fraud and addiction, but are also inconsistent with the guidelines set forth in the European Court of Justice's Gambelli decision. Rather than make its judgment final, however, the Arnhem court suggested that the De Lotto solicit a response from Minister of Justice Piet Hein Donner as to whether he could justify the country's restrictive gambling policies. In his response issued in the fall of 2004, Hein Donner argued that the restrictions on foreign remote gambling operators are indeed valid, and this week's ruling largely reflects this view.

Justin Franssen, who represents Betfair in a similar legal battle in the Netherlands, said that it's unusual for a court to ask the government to intervene in normal civil proceedings between two parties.

"It is understandable because obviously the implication of the interim judgment would have been very huge; it was the beginning of the end of the monopoly." Frannsen explained. "On the other hand, you have to ask yourself whether or not the division of powers theory is respected if you are going to ask the government to intervene. You're asking this government--which is not only the largest beneficiary of gambling income but also the entity responsible for gambling controls--to provide an objective opinion, which is very hard."

As far as the Gambelli ruling is concerned, it seems that the court has favored a marginal appreciation approach to interpreting its guidelines rather than an in concreto test."

IGN sources (mostly International commercial operators) say the Gambelli decision prescribes that it is not enough to state a goal of limiting fraud, addiction and other social ills associated with gambling; there must also be concrete data proving that those goals are met. They add, however, that the Dutch court looked marginally at the case, putting more emphasis on theory than on fact.

De Lotto CEO Tjeerd Veenstra is hopeful that other countries will follow the Dutch court's lead in standing their ground against foreign gambling operators.

"With this verdict De lotto won a decisive blow in combat against illegal games of chance on the Internet," Veenstra said. "These victorious court cases will have a positive effect on judges in other countries. In Norway, Sweden and France in the meantime, verdicts haven been read that were very favorable for the licensees.

"De Lotto has been a real pioneer in those legal procedures. It was the first national operator that started court cases against illegal offering on the Internet.”

Wednesday's ruling states that if Ladbrokes fails to implement a solution for blocking Dutch citizens, the company will be subject to a 10,000 euro fine every per day up to a maximum of 2 million euro. Ladbrokes must make all of its offerings unavailable to the Dutch market even though De Lotto is only licensed to operate sports betting services and lotteries.

Because Ladbrokes is based in Europe, De Lotto and the Dutch courts will not have a difficult time enforcing the ruling if the bookmaker chooses non-compliance.

Ladbrokes has the option of appealing the case to higher courts in the Netherlands.

Meanwhile, another Dutch court was due to issue a decision Wednesday on Betfair's challenge to national gaming monopolies, but the verdict has been postponed to Oct. 12. The Ladbrokes decision doesn't bode well for that case.