On 23 October 2012, the European Commission (the “Commission”), in step with developments and decisions arising from the Court of Justice of the European Union (CJEU), adopted a communication entitled “Towards a Comprehensive Framework for Online Gambling” which lays the groundwork for the development of policy to govern Member States' treatment of online gambling. While the Communication explicitly states that it does not, at this stage, appear appropriate to propose EU legislation for the sector, it will still be of interest to those in the gaming and betting industry.

The Communication, which can be accessed here, is the result of a public consultation and Green Paper adopted in 2011 which reviewed the legal landscape across the EU in the area of online gambling. It is accompanied by a staff working document which details more comprehensively the results of the Green Paper and public consultation process. The Commission had undertaken to investigate whether Member States are best left to their own devices and national laws, or whether legislative intervention is necessary. This will be of particular interest to the Irish government which is currently in the process of bringing remote bookmakers and remote betting intermediaries into the tax net. Concurrently, a body of case-law has been developed by the CJEU which has been faced with a number of cases involving national gambling laws.

EU gambling case-law

In 2010, in the case of Engleman, the CJEU held that the right to freedom of establishment should be interpreted as prohibiting legislation in Member States which stipulated that games of chance could only be offered in Member States by operators whose seat is in that Member State. In September 2011, in the case of Dickinger and Omer, the CJEU held that Article 49 EC on freedom of establishment must be interpreted to apply to online gambling services and that national laws restricting the operation of such services will infringe European law unless they pursue legitimate aims, and are proportionate to achieve such aims. Later, in July 2012 in the case of Hit Larix, the CJEU established that Article 56 EC, which prohibits restrictions on the freedom to provide services to recipients in other member states should also apply to the advertising in a Member State for a casino in another Member State (provided that the legal provisions for the protection of end-users in the latter state are equivalent to those in the former).

Cross-border co-operation

While Member States will, for the time being, continue to enjoy autonomy in regulating the area of gaming and betting, empirical evidence contained in the European Commission’s Green Paper on Gambling (March, 2011) and the case-law set out above would seem to reinforce the decision of the Commission to give some guidance as to the parameters for national laws and legislative interpretation. The Communication sets out challenges posed by online gambling and proposes certain responses. The inherently international nature of internet services coupled with divergent national laws means that cross-border disputes are inevitable. The Staff Working Paper which accompanies the Communication outlines the results of studies taken by Member States into the extent to which citizens use services operated by foreign businesses. Additionally, the high-economic value of the gambling industry renders it vulnerable to corruption, fraud, addiction and potential abuse.

Expert Group on Gambling

In light of these challenges, the Commission has appointed an expert group on gambling, composed of representatives from Member States, to exchange experiences and good practices as well as to provide advice and expertise on the preparation of EU initiatives. The Communication also proposes to facilitate co-operation between national gambling regulators and develop regulatory dialogue with non-EU countries. This is a direct response to the fact that internet services span the globe. The Commission highlights that international best practice should instruct approaches to enforcement of national law and also indicates that recourse to the Internal Market Information System (an application facilitating national, regional and local authorities to communicate quickly and easily with their counterparts abroad) would be useful in this regard.

Blacklists

Significantly, the Communication also calls for preventative and responsive action at national level to prevent citizens from using services, offered in another Member State, which are not compliant with the legislation in force in the recipient’s Member State. However, in regulating this type of activity it must be borne in mind that such preventative legislation must comply with the principles of EU law by having a legitimate purpose and by being proportionate to achieving that purpose.

When responding to breaches of national law, measures such as notice and take-down procedures must also comply with the relevant EU provisions on cross-border enforcement actions.

A Recommendation on the Common Protection of Consumers

It was noted that compliant operators must still be able to offer sufficiently attractive products so that consumers are not driven towards unauthorised providers which can be potentially harmful to both consumers and the industry as a whole. In order to achieve a balance between consumer protection and commercial viability, the Commission states that it will prepare a recommendation on the common protection of consumers in the area of online gambling. These principles will set out best practice in the following areas:

  • effective and efficient registration of players;
  • age verification and identification controls;
  • in particular in the context of money transactions, account activity;
  • warning signs, signposting to helplines in the case of pathological gambling/excessive gambling;
  • credit policies and protection of player funds;
  • self-restriction possibilities (time/financial limits, exclusion); and
  • customer support and efficient handling of complaints.

Furthermore, the Communication outlines the need for responsible advertising so that citizens are sufficiently informed of the risks associated with gambling. Whilst self-regulation by Member States in this area is envisaged by the Communication, it is clear that the Commission will be monitoring whether the implementation of the core recommendations is adequate to achieve the aims set out, and if not, more binding regulation at an EU level can be expected.

Prevention of fraud, money laundering, match-fixing and cybercrime

The Third Anti-Money Laundering (AML) Directive1,  which pursues the goal of ensuring that gambling revenue is not diverted into the black market, currently applies to casinos only. The Communication proposes to extend the application of this Directive to all gambling platforms. Other measures to tackle match-fixing and cybercrime are also required to protect consumers as well as service providers themselves so that progress made in legitimate online gambling and the benefits it can bring to the economy are not undermined by fraud. In this regard the Communication recommends certification of online gambling equipment and software and the training of the judiciary on issues surrounding fraud, money laundering and cyber-crime. They also recommend adopting a formal EU level “recommendation” as well as the promotion of international co-operation in relation to match-fixing.

Conclusion

Broadly speaking, the communication establishes that action in the EU is needed so as to:

  • draw consumers away from unregulated and potentially harmful offers;
  • protect minors from accessing gambling facilities;
  • safeguard other vulnerable groups; and
  • prevent the development of gambling-related disorders.

The Commission has set out an ambitious plan to formulate policy in the area of online gambling and it intends to establish an expert group on gambling. On 5 December 2012, the Commission adopted a decision setting up the group of experts on gambling services to provide advice in relation to the formulation of policy initiatives.  However, rather than drafting an EU directive or regulation, it is clear that the Commission has, for the time being, opted to use the tools it already has at its disposal, such as the interpretation of Articles 49 and 56 to include online gambling services; consumer protection laws; the Anti-Money Laundering Directive; Directives 98/34/EC (on the provision of information and regulation of information society services) and 95/46/EC (on data protection) as well as administrative co-operation through IMI to formulate policy on internet gambling. Notwithstanding this stance, as internet gambling becomes more prevalent and lucrative it may become too problematic for national law to regulate. The Commission will no doubt be keeping a close eye on the success of Member State and industry self-regulation and if the Commission’s guidelines are not followed it may well be the case that some form of legislative intervention will be proposed.