EC Asks Denmark and Greece to Lift Gambling Bans

The European Commission last week voiced objections to gambling restrictions in Denmark and Greece, possibly pointing to a shift in attitude toward cross-border interactive gambling.

The Commission on Tuesday warned the government of Denmark that a one-year-old Danish law preventing foreign gambling operators from advertising or supplying services to Danish residents could be in violation of E.U. law.

Under E.U. law, any company established in a European member state must be allowed to provide its services in other member states. Citing this policy, the Commission has formally sent Denmark officials a request for information on its gambling legislation.

In its initial warning, the Commission specially pointed to restrictions in place on the bookmaking industry.

"Danish law restricts in particular the provision of sports betting services," the Commission said Tuesday. "The Commission intends to verify the compatibility of the ban in question with the provisions of the EC Treaty."

The Danish government has two months to assure the Commission that either the ban has been lifted or that steps are being taken to lift it. If the Commission is not satisfied with Denmark's response, it could choose to send a formal request to lift the ban. If that request falls on deaf ears, the Commission could call on the European Court of Justice to sort the matter out.

The Danish Act on Certain Games, Lotteries and Bets came into effect March 23, 2003. It prohibits the supply or advertisement of, and the facilitation of participation in, gambling services offered by providers licensed in other member states.

The prohibition of advertising and the sale of advertising space to gambling providers applies to printed media, radio, television and information society services.

The legislation also makes it impossible for E.U.-based providers of sports betting services to establish a presence in Denmark--for example by setting up an office--and to supply their services via that presence.

The Commission intends to verify the compatibility of the ban in question with the provisions of the E.C. Treaty on the free movement of services and on the freedom of establishment.

The European Court of Justice has established a standard for cross-border provisions that allow governments to keep some business out, but only if it protects consumers or involves the maintenance of the public sector.

The Commission is concerned that, on the basis of the available information, the Danish legislation in question could give rise to restrictions on establishment that aren't legal under current E.U. law.

Meanwhile, the Commission on Friday threatened to take Greece to court if it does not lift a ban on electronic games within two months.

Greece's ban outlawed everything from slot machines and GameBoys to mobile phone and computer games. Its enactment in 2002 led to the raiding of cyber cafes that offered video games, such as simulated motor racing. Following an ensuing backlash, the government clarified that electronic games were allowed as long as no financial steaks were involved.

The Commission argues that the law is at odds with E.U. policy because it bans products freely available in other member states and hampers the work of businesses offering related services, like the repair or installation of equipment.

"The Commission considers that the law in question. . . is incompatible with the provisions of the E.C. treaty on the free movement of goods and services. . ." the Commission said in a statement published on its Web site.

The lifting of the ban would mean that slot machines currently confined to licensed casinos could again be placed in arcades and bars.

If the ban is not lifted, as in the case of Denmark's law, the Commission could choose to refer the case to the European Court of Justice.

The cross-border gambling debate began to heat up last year with the Gambelli case, in which the European Court of Justice ruled that efforts to limit gaming services must be conducted in a consistent and systematic way.

The court stated that a member state cannot invoke the need to restrict its citizens' access to gambling if at the same time public authorities in that member state incite and encourage people to participate in lotteries, games of chance and betting to the financial benefit of the public purse.

Some argue that the ruling opens the door for cross-border gambling. Essential to that argument is that if a government run monopoly is allowed to operate in one member state, private companies offering the same service should be allowed to operate. If a member sate has a ban, both private and public, on an industry, then no private company form another member state should be allowed to operate in that state.

The post-Gambelli landscape began to take shape in February 2004 when the Hessian Administrative Court of Appeal in Germany ruled in favor of an agent for an English bookmaker after unsuccessfully having his case heard in the lower German courts.

Similar to a judgment of the administrative court of Stuttgart, the Hessian Administrative Court of Appeal's decision applies the rule of law stating that a court confronted with profound interferences in the rights of a E.U.-citizen must comment in detail on these interferences by discussing all legal problems in detail.

The agent operated a salesroom in which customers were could conclude sports betting agreements. The agent then conveyed the bets to an English bookmaker.

He was barred in early 2003 from operating his business by German authorities, which cited Art. 1 of the law on state sporting bets and lotteries of Hessia.

The Hessia authorities argued in earlier proceedings that only the state was permitted to offer bets on sporting events. Before the administrative court of Kassel the agent filed for continuation of his business until a final decision could be reached, but he lost the case.

With an injunctive claim, the agent appealed the ruling to the Hessian Administrative Court of Appeal and got a reversal.

The court ruled that Art. 1 is unlawful on the grounds that it constituted interference with the right of freedom of establishment and the freedom to provide services.

The German verdict was the first post-Gambelli ruling to favor cross-border gambling in Europe. That case, however, was heard in the German courts, not in the European Court of Justice.

If the European Commission follows through with its warnings to Denmark and Greece, it would mark the first time the European government has asked the Court of Justice to force a member state to allow cross-border interactive gambling.