IFCLA June 6 th, 2008 Paris State monopoly and online gambling update Thibault Verbiest, Attorney at law, partner at ULYS

European Law brief EC Treaty : free movement of services (art.49) and freedom of establishment (art.43) Gambling = Service (art. 50) M.S. must modify national laws that restrict the freedom of establishment, or the freedom to provide services, and are therefore incompatible with these principles Exceptions where national regulations are:  justified by imperative overriding general interest (consumer protection, prevention of fraud etc.)  proportionate and necessary  Part of a systematic and consistent gaming policy (ECJ, Gambelli)

European Law brief Who controls if restrictions imposed by M.S. are justified?  The European Commission  The E.C.J  National courts

European Law brief The European commission: Infringement procedure  1 st stage: letter of formal notice.  2 nd stage: reasoned opinion.  3 rd stage: referral to the ECJ. Standstill clause: M.S. notify new draft technical regulations and apply standstill periods during which the Commission and all M.S. can react. (Directive 98/34)

France: before 2 State controlled monopolies (FDJ and PMU) Blanket prohibition of online gaming and betting with an exception for the two monopolies. The monopolies operate an aggressive strategy with marketing which even targets children: inconsistency with ECJ case-law Recent law (March 2007) reinforcing criminal sanctions against private gaming operators. Arrest of Peter Nylander ( October 2007)

France:after July 2007: PMU vs. Zeturf: Groundbreaking decision from the French supreme court.  Is the barrier to free provision of services justified and necessary ?  Questions proportionality of the blanket prohibition need to check if the MS of origin protects consumers. October 2007: France starts to negotiate with the European Commission after 2 nd stage of infringement procedure is launched. March 2008: Durieux report published French government announces the “regulated” opening of online gaming market

Internet Payments Ban This idea from the US inspires many M.S. such as France, Germany, Holland, Norway, Spain or Estonia. Commission’s reaction:  Draft French law deemed likely to be contrary to EU treaty. (art.56 EC Treaty granting free movement of capital).  German Interstate Treaty adopted in January 2008: Negative opinion of the Commission+ Since January referral to the ECJ.

Recent changes in the EU… …towards liberalization ITALY: After Gambelli, Placanica and infringement procedures = new decrees  Decree on remote skill games = where “skill predominates over chance”  Online Gambling draft proposal criticized by the Commission (on ) for 3 reasons  Cost of licenses (around € )  Obligation to connect to a national database for controls  Betting turnover threshold required to obtain a license.

Recent changes in the EU… …towards liberalization DENMARK: March 2007: 2 nd stage of infringement procedure launched by the Commission for restrictive practices in the sport betting market. April 2008: Government preparing to formally liberalize the market with a licensing system.

Recent changes in the EU… …towards liberalization SWEDEN: 2 ongoing infringement procedures (sport betting and poker) February 2008:The Supreme court questions the Swedish banning foreign gambling adds. March 2008: Prosecutors not allowed to prosecute cases of illegal foreign gambling adds until further notice.

Recent changes in the EU… …towards liberalization HOLLAND April 2008: Dutch Senate rejects a bill granting State Monopoly the right to be for 3 years the exclusive online gambling operator.

WTO: EU v. US September 2006: UIGEA is passed December 2007: RGA lodges a complaint before EU Commission since UIGEA causes a ban of gambling in violation of GATS between US and EU.(market access and national treatment.  Compensation deal for the future  Investigation from the EU Commission is pursued to assess past impact of UIGEA on trade.  Further to this report of the EU, WTO could launch proceedings.

Thank you for your attention! Thibault Verbiest Partner, Ulys