GPWA Times Magazine - Issue 19 - February 2012

Further exacerbating this undesirable situation, national courts, when imple- menting EU law (including ECJ case law) with regard to gambling, have taken vary- ing approaches, contributing to the legal ambiguity regarding the legal standards applicable to online gambling within the Internal Market. The EU as an economic entity Notwithstanding its important cultural, social and demographic impact, the EU is first and fore- most an economic entity. The European Internal Market, the pièce de résistance of the EU, as- pired to create a borderless mar- ket for labor, goods, services and capital among the Member States. Indeed, the intricate mechanisms of the Internal Market make it quite possible for a Warsaw car dealer to sell motor vehicles built by Spanish laborers in a German plant owned by a Swedish manufacturer or for a restaurateur in Helsinki to indulge her patrons with premium cheeses produced by Portuguese farmers em- ployed on a French dairy farm. With the advent of the Internet, the free- doms of the Internal Market were simulta- neously extended to and challenged by the ever-growing, dynamic and infi- nitely diverse world of eCommerce. The basic principles governing the Euro- pean Internal Market are set out in Title IV of the Treaty on the Functioning of the European Union. They include, among other things, the freedom of corporate establishment within all Member States as well as the freedom to provide services throughout the Union. Article 56 of the treaty (formerly Article 49) reinforces those basic principles by stating that “restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are estab- lished in a Member State other than that of the person for whom the services are intended.” To ensure the implementation of this basic principle of the Internal Market, Article 59 instructs the governing institutions of the EU to issue appropriate directives. And Article 60 takes it a step further. “[T]he Member States shall endeavour to undertake the lib- eralisation of services beyond the extent re- quired by the directives issued pursuant to Article 59(1), if their general economic situa- tion and the situation of the economic sector concerned so permit,” the treaty reads. In an effort to enforce these treaty provisions, the European Parliament and Council enacted Directive 2000/31/EC “on certain legal as- pects of information society services, in particular electronic commerce, in the Internal Market.” The purpose of the eCommerce Directive was to lay down a general legal framework gov- erning eCommerce within the Internal Market and, specifically, to eliminate barriers to the free movement of goods and services offered in the virtual arena. However, though online gambling services fall squarely within the defi- nition of “services” the directive sought to regulate, Article 1 of the directive explicitly carved out online gambling activities from the directive’s scope. As a result, to this day, the multi-billion Euro market of online gambling, which has grown in popular- ity, volume and vari- ety in the decade since adoption of the direc- tive, remains generally underregulated within the common legal frame- work of the European Internal Market. It is a lamentable reality that needs to change. Online gambling and the service issue The eCommerce Directive re- flects the EU’s legal position that online gambling constitutes a “ser- vice” which (notwithstanding the ex- plicit carve-out included in the directive) is to be governed by the EU law principles ap- plicable to services, first and foremost – the free movement of services within the Internal Market. Indeed, the European Commission, on various occasions, affirmed its support for such recognition of online gambling as a “service” entitled to free movement within the Internal Market, through infringement measures against Member States whose laws were con- sidered incompatible with this basic principle of EU law. In fact, the European Commission has, over the years, initiated infringement proceed- ings in this regard with Denmark, Finland, Germany, Hungary, Italy, The Netherlands, Sweden, Austria and France. The European Court of Justice has also repeat- edly found that online gambling services do in- deed fall within the definition of “services” in the context of EU law – specifically, within the scope of Article 56. But in cases like Piergiorgio Gambelli and Others , the ECJ noted that, un- like other types of services (including most forms of eCommerce), online gambling has not been the subject of legislative harmonization within the EU, and therefore Member States are legally entitled to enact local legislation reg- ulating the field, as long as such legislation is compliant with the general principles of EU law. The result of this approach at the EU level is that while national legislation on this matter remains subject to numerous substantive re- quirements emanating from EU law, Member States have largely been left to their own de- vices with regard to the regulation of online gambling. In fact, over the past six years, a growing number of Member States have tak- en advantage of this gap and adopted legisla- tion governing online gambling (examples in- clude France, Italy, Spain, Denmark, Estonia, Greece and Romania). Similar developments are likely in other Member States in the fore- seeable future. These legislative developments in Member States have, in some cases, been positive for the online gambling industry as pre- viously unregulated markets liberalized their legal stance toward online gambling. Successful regulatory regimes can, gener- ally, lead to a well-developed and attrac- tive licensed market which consumers will usually favor over unlicensed operations, and can also – of course – generate sizable revenue for state coffers. It is the joint responsibility of Member States and of the EU’s governing institutions to ensure that the principles of the Internal Market are upheld. Given the repeated failure of some Member States to live up to that ob- ligation, all eyes have been on the EU institu- tions, particularly the European Commission, with the hope that they would steer the regu- lation of online gambling in Europe in the right direction. “ Successful regulatory reg imes can , generally, lead to a well-developed and attractive licensed market which consum- ers will usually favor over unlicensed oper- ations, and can also – of course – gener- ate sizable rev- enue for state coffers. ” COVER STORY Thanks for nothing