Gambelli Verdict Sparks Mixed Reactions

Seven months after the Italian court referred the criminal proceedings against Piergiorgio Gambelli and 137 others to the E.U. Court of Justice, the court today ruled that, "It is for the national court to determine whether the Italian legislation actually serves the aims of consumer protection and of public order and whether the restrictions imposed are disproportionate." This means the ball is back in the Italian court.

Piergiorgio Gambelli and 137 other persons manage data transmission centers that collect sports bets in Italy on behalf of an English bookmaker to which they are linked by the Internet. The bookmaker, Stanley International Betting Ltd., carries on business under a betting license granted pursuant to English law by the city of Liverpool.

Wagering in Italy is reserved to the state or its licensees, and breach of this rule can result in criminal penalties of up to one year's imprisonment. Accordingly, criminal proceedings were brought against Gambelli and others for unlawfully taking bets, and the data transmission centers were placed under sequestration.

Gambelli claims that the Italian provisions are contrary to the Community principles of freedom of establishment and freedom to provide services. The Tribunale Ascoli Piceno, before which the case was brought, asked the Court of Justice of the European Communities how to interpret the relevant provisions of the E.C. Treaty.

The court responded in its ruling:

"The court finds first of all that the Italian provisions constitute a restriction on the freedom of establishment, the freedom to provide services and the freedom to receive or benefit from services offered by a supplier.
As regards the possibility of justifying such restrictions, the court states that they may be justified if they are necessary for consumer protection and for the preservation of the social order, taking account of moral, religious and cultural factors and of the moral and financial consequences for individuals and society. Furthermore, the main aim of such restrictions must reflect an overriding reason of general interest, such as reducing gaming opportunities. The procurement of finances for public funds, on the other hand, cannot constitute justification. The restrictions must not go beyond what is necessary to attain that objective and must be applied in a non-discriminatory manner."

The Italian court points out that the Italian state is pursuing a policy of substantial expansion of betting and gaming at national level to procure funds, while protecting licensees of the state. The Court of Justice finds that if participation in lotteries, games of chance and betting are encouraged by a member state with the aim of deriving a benefit for itself, that state cannot rely on the need to uphold public order in order to justify restrictive measures.

The court in response to the question referred to it by the Tribunale di Ascoli Piceno, by an order of March 39, 2001, hereby ruled:

"National legislation which prohibits on pain of criminal penalties the pursuit of the activities of collecting, taking, booking and forwarding offers of bets, in particular bets on sporting events, without a license or authorization from the member state concerned constitutes a restriction on the freedom of establishment and the freedom to provide services provided for in Articles 43 and 49 EC respectively. It is for the national court to determine whether such legislation, taking account of the detailed rules for its application, actually serves the aims which might justify it, and whether the restrictions it imposes are disproportionate in the light of those objectives."

At a hearing of the court, arguments were raised in particular by the Greek and Portuguese governments to justify restrictions on games of chance and betting, suffice it to note that it is settled case law that the diminution or reduction of tax revenue is not one of the grounds listed in Article 46 EC and does not constitute a matter of overriding general interest, which may be relied on to justify a restriction on the freedom of establishment or the freedom to provide services.

Lawyers involved in several court cases in Europe have the opinion that instead of restrictions on games of chances, betting monopolies are bringing more products in the market with increasing prize schemes, often promoted by TV programs. One of them stated during a congress in Hungary, "From now on it will be a war for lawyers."

Justin Fransen, a Dutch lawyer specializing in the gambling industry and the defense counsel for cross-border betting organizations, told IGN, "I am hopeful and moderately positive after this 'verdict.' It looks good."

Opponents of cross-border gambling, meanwhile, say the ruling won't hurt their cause. Peter Loft, permanent secretary in the Danish Ministry of Taxation, said the verdict doesn't conflict with his country's efforts to block foreign operators. "Legally speaking, there is nothing in the Gambelli sentence that makes it necessary to make any changes in the Danish gambling legislation," Loft said. "Thus, the E.U. Court of Justice has passed a sentence which is in accordance with the previous sentences in this field."

Click here to view the Gambelli ruling.