Stanleybet Allowed to Operate in Italy . . . For Now

Italy's Supreme Administrative Court (Consiglio di Stato) ruled on Feb. 22, 2005 that U.K.-licensed bookmaker Stanleybet International has the right to operate data transmission centers (CTDs) in Italy, even if it has not obtained a gaming license from the Italian government. The court's decision is the culmination of a number of legal challenges, including the European Court of Justice's ruling in November 2003 on the Gambelli case.

In its decision on the Gambelli case, the ECJ declared that a European country may not prohibit licensed foreign operators from accessing their market if at the same time the country allows the vigorous promotion of gambling products that are provided by locally licensed companies. A country has the right to restrict access to its betting market, but only if it does so out of a genuine concern about the harms gambling can inflict on the public. The restriction must not be in place to protect government revenue, and it should be accompanied by an effort to minimize the amount of gambling opportunities.

Although the ECJ established all of these rules when deciding the case, it refrained from issuing a verdict as to whether Italy's gambling policy is compatible with internal market rules. It instead delivered the case back to the Italian Supreme Court (Cassazione) so that the Italian judges could use the ECJ's guidance to determine whether the country's gambling policies are consistent and coherent.

The Italian Supreme Court's interpretation of the matter came in April 2004, at which time the court acknowledged that Italy indeed promoted gambling growth for its own licensed operators in direct contradiction to its supposed aim of limiting gambling addiction and other associated ills. The court inevitably concluded, however, that Italy's restrictive policies prevent criminal infiltration and, therefore, do fulfill the purpose of upholding public security.

According to Stanleybet, the court made a crucial error in failing to assess whether Italy's restrictive gambling policies are justifiably proportionate to their goal of reducing criminal infiltration.

To contest the decision, Stanleybet filed a complaint with the European Commission in July 2004, asking the commission to commence infringement proceedings against Italy for hindering the freedom to provide legal services within the internal market. The European Commission has not yet acted upon the complaint, but a Stanleybet newsletter distributed in October stated that the company "is convinced that its complaint will bring the Italian government to launch an in-depth revision of the national regulatory barriers, which prevented non-Italian companies from bidding for concessions in Italy."

Stanleybet was not alone in believing that the Supreme Court's failure to rule on the proportionality of Italy's restrictive policies was tantamount to ignoring the ECJ's decision on the Gambelli case. Following the Supreme Court's ruling in April to forbid the operation of Stanleybet CTD's in Italy, local authorities decided to close some of the company's agencies, resulting in a number of court battles. Some of the lower courts refused to uphold the decision of Italy's Supreme Court because they felt it did not acknowledge the primacy of the ECJ. A ruling in June 2004 by the Court of Catania concluded that "the conflict of Italian law with the principles of the [European] Treaty is all the more evident," and also "the restrictions foreseen by Italian gambling legislation do not appear aimed at satisfying requirements of public security" but at "safeguarding the financial interests of the state."

The courts of Larino-Termoli and Teramo decided in July to refer other cases back to the ECJ for a preliminary interpretation.

One case dealing with the closing of Stanleybet agencies by the order of Italian authorities landed before the Administrative Court of Justice after being appealed from lower courts. (It is important to note that in Italy there are two different court systems; the Supreme Court is not the same as the Administrative Court of Justice.) The Administrative Court of Justice issued an interim decision in December 2004 that Stanleybet is entitled to operate CTD agencies without an Italian license and issued its final judgment in favor of Stanleybet on Feb. 22, 2005.

The latest decision should allow Stanleybet to reopen some of its agencies in the country, but the battle is not yet over for the company or any other foreign gambling provider wanting to access to the Italian market. There may still be much backlash as a result of two conflicting judgments from Italy's two highest courts.

Meanwhile, there are other signs that the Italian gambling market could soon open up in a big way. At the end of November, Italian antitrust authorities fined both Lottomatica and Sisal--the two companies that are licensed by the Italian government to provide betting services in Italy--8 million euro and 2.8 million euro respectively. An investigation launched in July 2003 determined that the companies were successful in keeping two competing operators, Formula Giochi and G-Tech, from entering the contest to manage games that were previously managed by state-owned provider Coni. The authority claims that that Lottomatica and Sisal entered a market sharing deal in October 2001 and that it lasted until after the launch of the investigation. The companies plan to appeal the decision. Lottomatica argues that there is a historical rivalry between itself and Sisal, and that its independent behavior is evidenced by its strong diversification from the Lotto game and by large investments that would not make sense if it had agreements with other companies.

A few days after the antitrust fines, Stanleybet announced that it would appeal an Italian Administration of State Monopolies (AAMS) decision to renew for five years the license granted to Sisal for Superenalotto.

Reports also indicate that a number of I-gaming operators filed complaints to the European Commission after they were ordered to block Italian citizens from accessing their services.

Stanleybet International is the overseas betting operation of Stanley Leisure Plc, the England's largest casino operator. The company is only one of the England's largest betting companies, with nearly 1,000 outlets. It operates betting outlets in Italy, Croatia and Romania and also offers betting via the Internet at Stanleybet.com.