Sweden Asks ECJ Questions Impacting European Gaming Monopoly Policy

Sweden sent five questions to the European Court of Justice (ECJ) on October 8th concerning the rights of government-owned online poker and Internet gambling monopolies to limit foreign competition under EC rules. Though some say Sweden did so to head off an ECJ case, all agree that answers to this 'comprehensive set of questions' will largely impact the future of the European gambling market.

Since the end of 2004, the country's gambling monopoly has used Sweden's Supreme Court ruling in the Varmdo case (that said the country's lottery law was compatible with the EC Treaty) to defend its gaming monopoly and suppress competition.

But this past February, after global criticism was levied again Sweden in the case against two leading newspapers accused of breaking the lottery law by accepting advertisements by foreign gaming companies, the Supreme Court questioned its earlier ruling. They said that findings in the European Court of Justice had brought the lottery law into doubt, and ordered the Court of Appeals to hear the newspaper's Appeal case. The Supreme Court specifically stated that the lottery law should be tested against Articles 12, 43 and 49 of EC Treaty.

The European Commission has for some time threatened to take Sweden to the ECJ for denying other EU-registered gaming companies access to Sweden's market, as that right is guaranteed under EU rules (along with a number of other governments).

SWEDEN'S 5 QUESTIONS

Here are the five questions, as published by Gaming Intelligence Group, that the Swedish Court sent the European Court of Justice for a preliminary ruling, to establish what is allowed according to EC law:

1. Can discrimination by reason of nationality be passed under any circumstances on national gambling and lottery markets due to coercive consideration for the interest of the public?

2. If several reasons for the restrictive laws on the gambling and lottery market exist, and one of them is the financing of social activities, can this be said to be an incidental beneficial consequence of the restrictive laws? If the answer to this question is no, can the restrictive laws be said to be acceptable, if the purpose to finance social activities cannot be said to be the main reason for the restrictive laws?

3. Can the state refer to coercive consideration for the interest of the public as a reason for restrictive gambling laws, if state owned companies market games and lotteries whose income benefits the state and one of several purposes of this marketing is the financing of social activities? If the answer to this question is no, can the restrictive laws still be acceptable if financing of social activities is not deemed to be the main reason for the marketing?

4. Can a total ban on the marketing of gambling and lotteries organised in another member state, by a company licensed and controlled by the authorities in that state, be proportionate for the purpose of controlling and supervising gambling when there are no restrictions on the marketing of games and lotteries organised by the company licensed in the state practising the restrictive laws? What is the answer to this question if the purpose of this arrangement is to limit gambling?

5. Has a gambling company licensed and controlled by the competent authorities in one country the right to market its products in other member countries, for instance by advertising in newspapers, without first applying for permission to do so from the competent authorities in those countries? If the answer to this question is yes, does this mean that a member country's regulation which is intended to penalise the promotion of participation in lotteries organised in foreign countries is an obstacle to the freedom of establishment and the freedom to provide services, and can never be accepted by referring to the coercive consideration of the public interest? Will the answer to the first question be different if the country in which the gambling company is licensed invokes the same consideration for the interest of the public as the country the company wants to market its gambling services in?

EUROPEAN-WIDE IMPACT

The answers to these questions from the Court of Justice will be binding not only on the courts of Sweden, but also on the national courts of all European Member States. Therefore it will have a significant impact on the gaming market throughout all Europe.

The Gaming Intelligence Group observed that answers which the ECJ gives to question 1 to 3 could potentially create a licensing system if maintaining a monopoly is not allowed under the circumstances described. In this case the state could still impose restrictive gambling policies and collect taxes from the gaming companies that are granted a license, but it would open the market to competition.

The answers to question 4 and 5 could have an even greater impact on private gaming companies as allowing marketing will in effect allow the companies to provide gambling services as well. You could expect the ECJ to still give member states the possibility to restrict gaming companies and to collect taxes, even if they cannot stop them from entering the market.

Answers Won't Come Quickly

Experts estimate that the ECJ may take 18 to 24 months to issue answers to Sweden's questions.

"It will take time, but from the moment these questions are raised, the debate will be elevated to a totally new level," said Stefan Widmark, Partner at Mannheimer Swartling and the lawyer at the heart of this case. "It is a very important development that the Swedish court has been brave enough to face its responsibilities and enter this debate after years of intransigence," he added.

Mr. Widmark noted that it is unlikely that the ECJ will give a clear answer as to whether a gambling monopoly is allowed or not, but that it would go into great detail in terms of what is allowed at a national level.

The Gaming Intelligence Group reported that another possibility is that member states with a monopoly will work together to have the case thrown out, arguing that these questions have already been answered in previous cases, says Widmark. That is why it is important for private operators to also work together to make sure that the case is heard, bringing us one step closer to a free and regulated European gaming market.

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