New Infringement Procedures for Sweden and Germany

Gambling-related legal action continues in Europe as Sweden and Germany both heard from the European Commission today.

Very broadly, Brussels is looking to determine whether national legislation in both member states is compatible with certain Articles of the European Community Treaty, namely Article 49, which guarantees the free movement of services.

But what does this mean?

In Sweden and Germany, current national legislation restricts residents' access to certain gambling services and/or commercial businesses' -- both domestic and non-domestic -- ability to provide them.

So, the European Commission, grounded by previous decisions handed down by European Court of Justice, has been tasked with determining whether the restrictions outlined in Swedish and German national legislation are consistent and systematic in how they limit betting activities.

According to the European Court of Justice, a member state cannot invoke the need to restrict its residents' access to betting services "if at the same time it incites and encourages them to participate in state lotteries, games of chance or betting, which benefits the state's finances."

The first step of the investigation -- or, infringement proceeding -- taken today involves the issuance of a "letter of formal notice," which is a request for information.

Regarding Sweden, Brussels said it is looking to verify whether all national measures relating to poker games and tournaments are consistent and compatible with Article 49.

This particular infringement proceeding is separate from the commission's investigation into Swedish legislation governing sports betting, which began in April 2006.

Currently, Svenska Spel, Sweden's state monopoly on gambling, offers online poker among many other services.

Like Sweden, Germany also received a letter of formal notice, though the commission is investigating certain provisions of the country's Interstate Lotteries Treaty, which was enacted Jan. 1, 2008.

More specifically, the commission is looking to discern whether Germany's prohibition over certain Internet-based games of chance; over advertising restrictions on television, the Internet, athletic jerseys and billboards; as well as over financial institutions' ability to process payments relating to Internet-based games of chance, are compatible with the EC Treaty's internal market provisions.

Like Sweden's latest, this infringement proceeding is separate from Brussels' investigation into German legislation governing sports betting, which began in April 2006.

Thus far, at least some in Germany maintain that the Interstate Lotteries Treaty is in compliance with European Community law.

"The European Court of Justice expressly allows gambling monopolies because of player protection," Friedhelm Repnik, head of the Baden-Wuerttemberg state lottery, which coordinates the national lottery, told Reuters. "We are confident that Germany's legal situation will withstand inquiry."

And across the commercial sector of the Internet gambling industry, reactions have been positive.

"We expect prompt action from the German government to rectify the legal and economic madness imposed by the State Treaty on gaming," said Fluxx AG Board Spokesman Rainer Jacken. "The commission's criticism of the State Treaty could scarcely be more clear-cut."

With regard to the Swedish proceedings, Unibet Chief Executive Petter Nylander echoed: "We welcome this important action from the European Commission. It is a big step forward for Unibet and the whole gambling sector toward a modern regulated gambling market."

Both Sweden and Germany have been given two months to reply to the commission, after which the commission will issue its "reasoned opinion" -- its definitive position on the alleged infringement.