In a decision that has long been awaited by the industry and the legislator alike, the European Court of Justice ruled today, 12 June 2014, on the question to what extent two conflicting regulatory frameworks within one member state lead to inconsistency.

On 24 January 2013 the German Federal Court of Justice referred a detailed set of questions to the European Court of Justice (“CJEU”) asking whether, and if yes, to what extent two conflicting regulatory frameworks for gambling offerings within one member state lead to inconsistency, ie a non-justifiable restriction of European market freedoms. The background for this decision were the gambling regulations in Schleswig-Holstein which were in force between 1 January 2012 and 8 February 2013. The Schleswig-Holstein regulations provided a more liberal framework than the restrictive revised Interstate Treaty on Gambling. The licences granted under this regime remain in force for a transitional period, despite the repeal of the Schleswig-Holstein legislation.

The CJEU issued its rather short judgment on 12 June 2014 (C-156/13). Effectively, the court decided that the existence of two existing regulatory frameworks is not a violation of European market freedoms, provided that the more restrictive legislation “is able to satisfy the conditions of proportionality laid down by the case-law of the [CJEU], which is for the national court to ascertain.” 

In its reasoning, the CJEU goes on to say that: “[...] even assuming that the existence of legislation of one Land, which is more liberal than that in force in the other Länder, might damage the consistency of the legislation at issue as a whole, it must be observed that, in the circumstances of the case in the main proceedings, such damage to consistency was limited ratione temporis and ratione loci to a single Land. Therefore, it cannot be argued that the derogating legal situation in one Land seriously affects the appropriateness of the restrictions on games of chance applicable in all the other Länder to achieve the legitimate public interest objectives that they pursue.”

The CJEU, however, did not rule on the general compliance of the Interstate Treaty on Gambling with European law as “[i]n the present case, the referring court does not raise any questions concerning the justification of the restriction at issue on the freedom to provide services.”

It is therefore to be expected that the case will be referred back to the national courts to determine whether the regulations of the Interstate Treaty on Gambling are disproportionate. Another referral case by the lower instance court Sonthofen which mainly deals with questions on the sports betting licence tender process is currently pending with the CJEU.  A judgment on this case is not expected prior to 2015.