Landmark Decision in Europe's Highest Court on Internet Gambling

14 September 2009 Publication

Legal News Alert: Global Gaming

On September 8, 2009, the European Court of Justice (European Court) delivered a landmark ruling in the case opposing the Gibraltar-based remote gambling operator Bwin to the Portuguese state-owned lottery (case C-42/07 Bwin & Liga Portuguesa de Futebol v. Departemento de Jogos da Santa Casa da Misericordia de Lisboa). Many EU member states did intervene in the case to support Portugal. The ruling is considered to be a landmark decision as it provides very clear and far-reaching answers to the questions of Internet gambling. It is a big victory for the EU member states and their state-owned lotteries.

In an interpretative judgment delivered upon request of the Portuguese court of Porto, the European Court decided that Portugal is entitled to prohibit the supply of Internet gambling services from another jurisdiction. This ruling, which cannot be appealed, is binding in all courts throughout the EU’s 27 member states. Its impact is far-reaching for the remote gambling industry who see their pan-European business plans undermined.

After the adoption of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) by the United States, the ruling from the European Court is now also reducing the potential for remote gambling services in the EU.

In summary, the European Court confirmed its case law that the EU member states are free to set policy objectives on betting and gambling and to define in detail the level of protection sought (§ 59). However, the European Court extends its previous case law by declaring that a monopoly for internet gambling is perfectly valid (§ 67), stating: “The grant of exclusive rights to operate games via the internet to a single operator, which is subject to strict control by the public authorities may confine operation of gambling within controlled channels.”

The application of the principle of mutual recognition, a cornerstone of the EU’s internal market, providing that an operator licensed in one EU jurisdiction is, on this basis, entitled to offer its services all over the EU without any additional licenses, is explicitly denied in the gambling sector (§ 69): “An operator such as Bwin which lawfully offers its services via Internet in another MS, in which it is established and where it was already subject to statutory conditions and controls of the competent authorities in that state, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime. The Court goes very far by saying that the authorities of the MS of establishment cannot assess sufficiently the professional qualities and integrity of operators.”

The European Court does consider, in line with the WTO Appellate Body in the WTO case opposing the United States against Antigua that Internet games involve different and more substantial risks of fraud compared with land-based games (§ 70).

Finally the European Court states that an operator sponsoring sporting competitions on which it accepts bets and teams taking part in those competitions may influence the outcome directly or indirectly, thereby increasing profits (§ 71). This may seriously affect the sponsoring of the top EU soccer teams like Bwin-sponsored Real Madrid.

In practice, this means that one can no longer offer games over the Internet with a Gibraltar (or Maltese or Isle of Man) license in other states of the European Union. Each state decides on its own how they want to organize Internet gambling (e.g., monopoly, concession, and so forth). However, without a license delivered by the authorities of the jurisdiction where the consumers are located, an operator is not permitted to offer games.

Philippe Vlaemminck, of Vlaemminck & Partners, represented as Counsel the Belgian government in this case before the European Court of Justice.

Foley has a cooperation agreement with Vlaemminck & Partners and share offices with them in Brussels.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues.

If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following individuals:

Elizabeth L. Corey
Chicago, Illinois

Philippe Vlaemminck
Vlaemminck & Partners bvba
Brussels Belgium
+32 2 787 97 11