The Court of Justice of the EU (CJEU) ruled yesterday in the case C-49/16 (Unibet International against Hungary) that member states are not allowed to restrict gambling operators licensed in another EU member state from operating in local markets, if these restrictions are imposed in a discriminatory or non-transparent manner:

In those circumstances, the Court of Justice concludes that the principle of the freedom to provide services […] precludes that legislation.

Finally, the Court of Justice states that no penalties may be imposed on the basis of rules held to be contrary to the principle referred to above.

Maarten Haijer, Secretary General of industry body EGBA, commented:

The Court reiterated that Member States must guarantee that national regulation on online gambling services meets objective, transparent, non-discriminatory and proportionate criteria. Only a properly regulated and transparent online gambling market can ensure that the consumer is channeled to the regulated offer.

The Court’s ruling is a clear message to other Gaming Authorities, including the Dutch Gaming Authority, that they must not enforce regulation that does not comply with basic EU law. We expect these Member States to reconsider and lift these enforcement measures as they are acting in violation of EU law. Their actions do not serve the interest of consumers, they fail to channel the consumers to reliable providers, instead they merely prop up failed regulation.

Haijer added that the CJEU, as well as the Dutch Council of State, found in 2011 and 2013 that current Dutch gambling legislation is in violation of EU law. “There is no other alternative for the Netherlands Gaming Authority but to immediately cease its current enforcement measures.”

Rutger-Jan Hebben, Director of Speel Verantwoord, said that the Court’s decision was “good news” for the Dutch market. “This ruling also renders the recent changes in the Netherlands Gaming Authority’s enforcement priorities highly questionable,” Hebben stated.

“Furthermore, it is yet another illustration of the fact that a speedy regulation of online gambling in the Netherlands is urgently needed.”

Analysis

Gaming lawyer Justin Franssen of Kalff Katz & Franssen offered the following legal perspective on the CJEU’s decision.

On June 22, the CJEU reminded us once again that national authorities cannot enforce legislation by means of criminal or administrative sanctions based on legislation which clearly breaches EU law. More specifically, the Hungarian authorities are unable to apply enforcement measures against Unibet as it has been established that the (non-transparent) license allocation system failed to pass scrutiny of the Court.

Whilst the specific regulatory circumstances in the Netherlands differ from those in Hungary, it must be noted that both the CJEU and the Dutch Council of State established years ago in the Betfair case that the license allocation system pertaining to sports (and horserace) betting breached Community law. Nevertheless, the Dutch authorities decided to completely neglect these decisions by introducing a contra legem policy rule in 2015 and simply renewed existing licenses to incumbents whilst excluding other interested parties from entering the market. Not only did the government fail to respect the final decisions from the EU and national Court, it has so far failed to fulfill its political commitment and its promise to the sector to introduce a transparent license allocation procedure.

This situation forced various parties to re-engage in licence allocation litigation. To date, all relevant cases have been lost by the Dutch authorities. This cannot come as a surprise given the preceding judgements of both the CJEU and the Council of State. Nevertheless, up and until today, the Dutch authorities refuse to introduce proper EU compliant procedures pertaining to allocation of gaming licenses.

Unfortunately, this leaves the industry with no other option than to continue with legal proceedings. In case the outcome of pending cases are not materially different from existing judgements, then this may impact the enforcement capabilities of the Netherlands Gaming Authority and the Public Prosecutor’s Office.

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