Feature: An update on gambling in the EU - the Placanica case - May 2007  

As previously documented in S&T, the legal status of cross-border gambling in the EU is a grey area, writes Tom Lippiett and Chris Bryant, solicitors in the betting and gaming group at Berwin Leighton Paisner LLP. Whilst previous judgments by the European Court of Justice (‘ECJ’) have provided a degree of clarity on the matter, the fact that these judgments maintained a Member State’s right to use discretion in their treatment of gambling enabled pro-monopolist Member States to undermine the ECJ’s more liberal criteria. It was hoped that a greater amount of clarity would be brought about through the Placanica judgment, which was delivered on 6 March 2007.

Clarification in Placanica?

Massimiliano Placanica operated as an Italian agent for Stanleybet International, in alleged violation of a criminal law preventing operators without an Italian sports betting licence from operating in Italy. The Italian authorities penalised Placanica, considering his principal, Stanleybet, to be an “unlicensed” bookmaker. The Italian domestic courts referred the issue to the ECJ for clarification on the compatibility of the Italian law with EC law.
The Italian authorities sought to justify their restrictions on freedom of establishment and free movement of services (enshrined in Articles 43 and 49 of the EC Treaty), claiming that they were legitimate attempts to limit access to gambling and keep gambling crime free, in the interests of public policy, public security and/or public health (criteria which permit derogation from EU law under Article 46). It therefore fell to the ECJ to determine the legitimacy of this stance.
While Article 46 and the case law permits a "margin of discretion" to restrict gambling services, such margin of discretion must be “suitable for achieving the objective… invoked by the Member State concerned” and “not go beyond what is necessary to achieve those objectives".

Accepted justifications

The ECJ therefore split the accepted justifications for restrictive practice by Member States into two areas:
 (i) the objective of reducing gambling opportunities; and
 (ii) subjecting operators to control to keep crime and fraud out of gambling.
 On point (i), the ECJ stated that the reduction of gambling opportunities is capable of being justified, provided it is genuine. Under the established case law, Member States which offer heavily marketed and attractive monopolies cannot then justifiably restrict private licensed operators whilst claiming they are reducing gambling opportunities. Equally, if a Member State increases activity in the betting and gaming sector, for example through a partial liberalisation of the market, it cannot then seek to restrict access to EU licensed operators on the basis of reducing gambling opportunities.

On point (ii), monopolies are permitted to advertise to entice gamblers away from prohibited operators, but the grounds for prohibition in the first place need to be justified by adherence to the permitted criteria. Therefore the only method by which Member State monopolies can restrict other EU licensed operators (while themselves advertising legitimately) is if such marketing would entice gamblers away from operators that would otherwise bring crime and fraud into that Member State’s gambling market. However, that Member State still then needs to justify the fact that such operators will in fact lead to crime and fraud occurring in the domestic market.
In addition, the ECJ held that any blanket exclusion of a class of operators goes beyond what is necessary to prevent criminal or fraudulent activities. Accordingly, as Mr Placanica’s principal, Stanleybet International, was unjustifiably restricted from obtaining a licence (the Italian authorities refused to grant licences to publicly traded companies), Mr Placanica could not have criminal penalties imposed on him by Italy. Far from being “unlicensed”, the ECJ noted that Stanleybet was actually "subject to controls by the British authorities in the interests of public order and safety” and “to internal controls over the lawfulness of its activities".
 Placanica categorically denies Italy the right to claim it is diminishing gambling opportunities, because it has an established policy of “expanding activity in the betting and gaming sector”. Equally importantly, only genuine attempts to restrict operators on the basis of keeping out crime and fraud will be permitted.

Remedies

The Placanica judgment is a further chip away at restrictive national practices such as those operated by the Italian authorities, which are contrary to EU law. However, the judgment addresses only the specific issue at hand and does not answer the question of how other companies can benefit from the principles set down by the European Court of Justice. Despite the case law developments of recent years, several betting and gaming companies continue to come up against obstacles in many EU Member States.
There are two main ways in which companies facing problems can avail themselves of the principles set down in Placanica and previous ECJ judgments:
1) Businesses and individuals are entitled to sue Member State governments for breaches of EC law. In order to bring such an action, the claimant must show that the Member State has committed a sufficiently serious breach of EU law. Several factors have to be taken into account when assessing whether a breach is sufficiently serious, including the existence of ECJ case law in the subject area. In this respect, the Placanica judgment helps to further demonstrate that arbitrary restrictions on betting and gaming activities are in breach of EU law. Given that Placanica reaffirms existing case law, Member States that continue to apply such restrictions are increasingly at risk of being held liable for damages. A claimant suing a Member State government must also show that that the EU law breached was intended to confer rights on individuals (which will usually be the case with the principle of free movement of services)
2) Companies have the right to make a formal complaint to the European Commission when a Member State has breached EU law. This instigates a procedure that can ultimately lead to the Commission bringing infringement proceedings against the Member State. In extreme circumstances, if the Member State continues to refuse to comply, it can be fined by the Court of Justice.
These methods can often be combined to useful effect to put pressure on a Member State government to comply with EC law.

In summary

Ultimately, as a result of Placanica, it is questionable whether Italy can legitimately grant licences to certain EU operators who pass the Italian licensing criteria while prohibiting other EU licensed operators. The Italian licensing procedure is no more stringent than that of the significantly more sophisticated and experienced EU licensing jurisdictions, and any restriction of such operators will require the justification that they are likely to introduce crime and fraud into the Italian domestic market. It is difficult to see how this will be achieved, and it will be interesting to see how the judgment is interpreted by the Italian courts.
 
Berwin Leighton Paisner LLP specialises in UK and international aspects of the law on gambling and skill gaming. Headed by Hilary Stewart-Jones and David Collins, the group offers a full service regulatory, commercial and corporate service to clients and has been ranked number one in the betting and gaming sector by the Legal 500 for the last six years. 

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