French Regulatory Proposal Moves to Council of Ministers

The French member of Parliament charged with organizing the opening up of the country’s gambling market has presented his plans to the Council of Ministers. With the announcement that the head of the French Tennis Federation will be taking the helm of the new regulatory authority, and long-term challenger to the status quo, Patrick Partouche, cleared by the Appeal Court, everything now seems in place for the liberalization to proceed as planned.

Eric Woerth, the country’s budget minister, on Wednesday gave details of his plans which, in recent weeks, had already elicited significant interest from parliamentarians, who tabled questions on a range of subjects including the privatization of La Française des Jeux, the effects of the introduction of Internet betting on the network of outlets selling existing gaming products and the format of sports betting.

However, Mr. Woerth appeared to respond to many concerns with the details of his proposals. As he indicated in his March 5 presentation, operators will be able to apply for licences valid from Jan. 1, 2010 -- good for five years and renewable thereafter -- in order to offer online betting on sports and horseracing as well as online poker.

He indicated that there would be measures in place to prevent problem gambling and corruption of sporting events, adding “operators will be required to sign commercial agreements with organizers of sporting events in order to respect their property rights” -- an assertion that was met with dismay by many in the industry, including the European Gaming & Betting Association.

Sigrid Ligné, who is secretary general of the gaming and betting association, also expressed her concerns over the nomination of Jean-François Vilotte -- a long-time bureaucrat but most recently head of the French Tennis Federation -- as the man in charge of the new regulatory body, Arjel (in French, l’autorité administrative indépendante de régulation des jeux en ligne).

Mr. Vilotte had previously taken legal action against Betfair, Bwin Interactive Entertainment A.G., Expekt, Ladbrokes and Unibet for their offering of bets on the Rolland Garros French Open tennis tournament without permission. He even went on to allege, in public, that online sports betting was causing match-fixing in tennis.

However, Mr. Vilotte, a born bureaucrat thanks to his graduation from France’s École Nationale d’Administration, has served, since 1986, under governments of all persuasions and, having worked with sporting bodies since 2002, was seen as a natural choice for the position.

Nevertheless, having chosen a figure who, to overseas operators, was seen as a more controversial choice for the regulatory authority, Mr. Woerth had to ensure that there were enough positives in the proposed legislation to attract overseas gaming companies into the market.

From this point of view, the fact that betting duty had been set at 7.5 percent on turnover -- as opposed to the double-figures percentage previously trailed -- and only 2 percent on poker buy-ins, would have gone a long way to easing concerns of operators despite an additional 1 percent levy to be paid to France’s sporting bodies.

Furthermore, in spite of many attempts by lobbyists and parliamentarians supporting Pari Mutuel Urbain, the existing horseracing betting monopoly, to ensure that all betting be tote-based, fixed odds betting will be allowed on sports.

Following the Italian model, in addition to the carrot being offered to gaming operators, there is also a stick in the form of site blocking and up to three years in prison and fines of up to 45,000 euros for those found guilty of promoting unlicensed gaming in the country. Mr. Woerth indicated that “connection to these (unlicensed) sites, as well as the financial transactions between players and illegal operators, will be blocked.”

Applauded by the European Lotteries and Toto Association but viewed with suspicion by overseas operators and Ms. Ligné’s gaming and betting association, the legislation, if approved, does seem to be sufficiently attractive for European gaming companies to want to get involved in the new market.

In the meantime it appears that the various legal cases against operators previously found to have contravened France’s existing gaming laws will be quietly put to one side.

The national courts had already ruled that they were unable to decide in the cases against Unibet and Mr. Bookmaker. On Dec. 14, 2007, the French court suspended any legal decision relating to prosecutions of the operators of Mr. Bookmaker’s director, Didier Dewyn, who had been prosecuted for organizing “illicit lotteries and acceptance of illegal bets.” Similarly, Unibet’s chief executive, Petter Nylander, who was controversially arrested in the Netherlands, is also unlikely to face charges.

Mr. Partouche, the flamboyant casino proprietor, had also found himself in the dock. Frustrated at the activities of operators offering online casino and poker products to the French public -- while he was expressly prevented from doing so by the terms of his license – Mr. Partouche set up a number of offshore companies operating with licences in Belize, Gibraltar and Malta in a direct challenge to the government, famously declaring to the media at one point: “There is a time for shouting about things and a time for action. No one ever listens to me so now I am going to act.”

However, on March 4 the Appeal Court effectively discharged Mr. Partouche, despite the fact that, in its ruling, it made clear the Nanterre court was right to find against him and those who assisted him to create the Belize-registered Web site offering online casino and poker games, as the activities were clearly in contravention of legislation that made unlicensed casinos in France illegal.

Unwisely, the servers for the site were based on French soil, and promotional material highlighted the fact that there was a call centre based in France to assist customers. Nevertheless, in a legal fudge to accommodate the new reality the 12-month suspended sentence and hefty fine were dropped.

Mr. Woerth’s legislation is now expected to pass unscathed through the French Parliament to allow applications to be made by European Union-licensed operators during the second half of 2009. With a thriving horseracing and gaming sector and one of the largest, most affluent populations in Europe, France is certain to prove attractive to gaming operators despite their reservations.