Italy's Gambling Ban Ruled Contrary to EU Law- Hope for Online Poker?

A significant victory was won for the gambling industry this week, when the European Court of Justice (ECJ) in the Placanica case ruled that Italy cannot use criminal law to ban gaming companies licensed in another EU nation from taking bets in Italy. Gaming operators are taking this as a sign that European markets are opening up.

The European Court of Justice (ECJ) upheld a claim by Stanleybet International, a UK bookmaker, that Italian authorities were failing to comply with broader EU laws on the freedom of EU businesses to provide services anywhere throughout the EU.

Lawyers said the so-called Placanica case (named after a Italian betting agent for Stanleybet) could have a significant bearing in the struggle between gaming companies looking to break into new markets and states such as France, Germany and Italy who are currently seeking to protect their state betting monopolies.

Under Italian legislation, the organizing of games of chance or the collecting of bets requires a license and police authorization. Rogue operators face criminal penalties of up to three years imprisonment.

In 1999, following calls for tenders, Italian authorities awarded 1,000 licenses for sports betting. The calls for tender excluded operators whose company shares were quoted on the regulated markets.

A company that was excluded was Stanley International Betting, a subsidiary of Stanley Leisure plc, which was then the fourth biggest bookmaker and the largest casino operator in the UK. Stanley operates in Italy through independent operators with contractual links to Stanley.

Mr Placanica, Mr Palazzese and Mr Sorricchio are independent operators linked to Stanley. In 2004 these intermediaries appeared in Italian courts on charges of collecting bets without police authorization. The Italian courts asked the ECJ whether the national legislation on betting and gaming is compatible with the Community principles of freedom of establishment and the freedom to provide services.

Italy said its licensing requirement prevents the exploitation of betting and gaming activities for criminal purposes. But the ECJ said the blanket exclusion of companies from tender procedures for the award of licenses goes beyond what is necessary to achieve that objective.

There are other ways of monitoring the accounts and activities of operators which impinge to a lesser extent on the freedom of establishment and the freedom to provide services, it said, such as gathering information on their representatives or their main shareholders. It added that the lack of a license cannot be a ground for the application of sanctions to such operators.

The ECJ acknowledged that criminal legislation is a matter for which the Member States are responsible. But it pointed out that criminal legislation may not restrict the fundamental freedoms guaranteed by Community law.

The 11 judge panel ruled that: "A Member State may not apply a criminal penalty for failure to complete an administrative formality where such completion has been refused or rendered impossible by the Member State concerned, in infringement of Community law."

In consequence, Italy cannot apply criminal penalties to persons such as the defendants in the main proceedings for pursuing the organized activity of collecting bets without a license or a police authorization, it said.

Former ECJ Advocate General Siegbert Alber comments on this latest ruling: "Monopolies cannot and should not be the only means of regulating gaming. Granting licenses can serve the same purpose. The reasons given in the Placanica case for Italy's monopoly are much more honest than the pronouncements made by other Member States. At least Italy admits that its approach is designed to increase revenues and to combat illegal gaming."

Adrian Morris, managing director at Stanleybet International, the company which was cited in the Placanica case, said the judgment "is another important landmark verdict, but it is only a step. We might have expected some more moves from Europe, but this will give some encouragement to the European Commission."

Bwin also welcomed the judgment, saying it meant "Italian legislation prohibiting the cross-border provision of betting under threat of imprisonment is in infringement of the freedom of establishment and services under the Treaty on European Union. State monopolies were not in compliance with EU legislation before, but in the light of this judgment are no longer tenable."

The European Betting Association (EBA) in their coverage of the ruling said, "It is hoped that the European Commission will pursue with increased vigor and speed all pending complaints of infringement in this area for the benefit of the legitimate operators who suffer daily financial damage and their Executives who are being treated as criminals in various European jurisdictions."

Regarding online gambling, they added, "pretending that online betting and gaming is not a popular form of entertainment that adults across Europe want to have the option of indulging in, from their choice of licensed and regulated European provider, is no longer sustainable. A competitive market among licensed and regulated operators in an innovative and technology driven business is the only way to deliver the highest levels of consumer value and consumer protection."

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