PAF Faces Uncertain Future in Finnish Market

A decade-old dispute between the Finnish government and Ålands Penningautomatförening, a gambling operator licensed on the autonomous province of Åland Islands, reached a boil last week as Finland's prosecutor general threatened legal action citing the operator's ongoing violation of Finland's Lotteries Act.

The spat hinges on whether Ålands Penningautomatförening -- or PAF, as it's better known -- has, by marketing and offering services to Finnish residents from Åland, organized a lottery on Finnish soil without a license.

Åland forms an archipelago in the Baltic Sea off the Southwest tip of Finland; established in 1921, it is a self-governing, Swedish-speaking province. PAF has been operating gambling there as the sole concessionaire since the late 1960's, and was given permission by the Åland government in 1999 to launch online services.

That year, Finland's Ministry of the Interior asked the country's Supreme Court whether the Åland government was able, legally, to grant PAF permission to offer online gambling services directly to Finnish residents. In April 2001, the court ruled Åland was indeed within its legal right to do so.

The Supreme Court ruling, though, didn't foresee the conflict between PAF and Finland's three state-run gambling companies -- which have the exclusive right to organize gambling in Finland under the Lotteries Act.

Three PAF employees, including the company's chief executive, Lars Porko, in May 2001 were charged with illegally organizing gambling on the mainland.

Mr. Porko's case wound its way through Finland's judiciary and finally reached the Supreme Court in February 2005. The court found the three men guilty of "lottery offenses" and ordered each to pay a fine. The Supreme Court's decision was predicated -- among other conditions -- on PAF having marketed its services directly to Finnish residents; translated its Web site into Finnish; and operated a payment processing system that required mainland customers possess a Finnish bank account.

In accordance with the Supreme Court decision, PAF discontinued marketing in Finland, but it continued to allow Finnish residents to play on its sites. In December 2005, at the behest of the interior ministry, the Finnish police began an investigation into whether PAF had complied fully with the conditions set forth in the February ruling.

Three years passed before Christer Lundström, Finland's prosecutor general, threatened to bring charges against PAF (stemming from the police investigation) for continued violation of the Lotteries Act.

In a prepared statement last Wednesday, Mr. Lundström said PAF's Finnish-language Web site -- coupled with the fact that over half of its clients are Finnish -- means PAF is still operating illegally in Finland. Curiously, however, he elected not to press charges against the company's board members because, previously, they were given "imperfect information" by the Åland government.

"It's a really strange decision, because if you conclude that the gaming operation is illegal, you should prosecute," John Eriksson, an attorney with Widman & Hannes Snellman on Åland, told IGamingNews Monday. "He waived the charges on some ground that the Åland government had not told PAF that their gaming operators are in breach of Finnish law."

Mr. Eriksson, whose firm represents PAF, suggested that Mr. Lundström may have waived the charges because under recently proposed amendments to the Lotteries Act, the interior ministry would be granted greater power to impose prohibitions and penalties against operators it deems are unlawfully organizing gambling in Finland.

The amendments, which were proposed last June, are being debated ahead of a March 31, 2009, implementation deadline.

Under threat of prosecution, Jarl Danielsson, chairman of PAF, said in a prepared statement last Wednesday that the company "feels secure" about the legality of its activities in Finland up to now.

"We believe in continued support from the Government of Åland in our activities and we will keep fighting for our right as long as it is possible," he said.

Mr. Porko told IGamingNews Monday that discussions between PAF and the Åland government are underway, and that a way forward in Finland will likely be settled in the coming weeks.

"Until a decision is reached, we will continue to serve our clients, and hopefully we can do it after that," he said.