01 February 2006

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Business Today

Responsible gaming

With the gaming industry in Malta booming, responsible regulation has become a necessity, not a luxury

In the post-Enron era, the commercial community is becoming more sceptical of the behaviour of business corporations and organisations and in particular about the ethical and moral standards underlying their day-to-day operations.
In conjunction with its duty to monitor the various cross-boarder gaming restrictions, the European Commission has commissioned a study by the Swiss Institute of Comparative Law to assess whether the differing laws regulating gambling services impact upon the smooth functioning of the internal market. This study should be completed by early this year.
Many say that this cannot come a moment too soon. Philippe Vlaemminck, a prominent Brussels lawyer who specialises on gaming laws commented recently on a Malta licensed operator. This time, MrBookmaker, another remote gambling operator, had brought an injunction against De Lotto ( the Dutch monopoly ) in the courts of Malta. The purpose of the action was to prohibit De Lotto from taking measures against MrBookmaker. It was reliably reported that MrBookmaker wanted to obtain an injunction from a Maltese Court in order to cancel the agreement between De Lotto and MrBookmaker.com preventing MrBookmaker.com from accepting bets from Dutch residents.
It appears that MrBookmaker repeatedly found reasons not to comply and in the end argued before the Maltese Court that the agreement violated European law. In a snap decision, last August , the Maltese court did not find any illegal practice and dismissed the claim by MrBookmaker. Hot on the heels of such a case we meet another classic example that of France’s PMU vs Zeturf.com, another Maltese-licensed operator has lost its case and was ordered to shut down. After being ordered by a French court to cease taking bets on French horseracing, Zeturf sued the PMU in Malta and filed a complaint against both the PMU and France at the EU Commission.
Media reports say that the government of Malta is supporting this claim. In the meantime the International Federation of Horseracing Authorities has filed a complaint against what they call the totally inconsistent gambling policy of the Maltese government.
Just examine what happened on our turf with the recent ruling by the French Court to dismantle a perfectly locally licensed gaming operator. Not only did a French appeal court triple the daily fine against Maltese remote gaming company Zeturf Ltd, but Zeturf's request to the French court to refer the matter to the European Court of Justice for a preliminary ruling was also turned down. The French court of appeal held that French law on the matter is not incompatible with European law. As can be expected, Zeturf's spokesman expressed outrage that "nowhere in the judgment was reference made to the fact that Zeturf has a remote gaming licence issued by another sovereign state through the Malta Lotteries and Gaming Authority. The news that Malta online gaming operator Zeturf was fined by a French court and made to desist in offering gaming services via internet to the French market or that Mr Bookamker lost the case in De Lotto has gone unsung and unheard in the local business community. Quoting from its website ZEturf was launched on the day of France’s biggest trotting race, the Prix d’Amerique in 2001 and in four years, it has become the best and most popular source of information about French racing on the web. The quality and reliability of its information has already seduced more than 300,000 regular users. One may well ask what is so special about the Zeturf decision.
The straight answer is that the case concerned the horse betting bookmaker legitimately licensed in Malta under the Lotteries and Gaming Act. Zeturf is a subsidiary of a French company and provides French internet users with the possibility of betting on horse races, whereas this activity is objectionable to PMU as it falls under the exclusive right of the French state monopoly. As quoted in a local newspaper last month, Dr Axisa the legal and enforcement director remarked that this case may have serious repercussions on the future of cross-border services provided by the 100 odd operators currently licensed by LGA. With hindsight one can attribute the success of the sector’s astronomical growth to the unstinting efforts of the LGA’s officials and other private practitioners who tour the world speaking at conferences and exhibitions to champion the cause of our unyielding regulatory structure. The law was promulgated in April 2000 and in a short period Malta attracted the attention of the crème de l’a crème of operators.
Informed sources speak of a burgeoning gaming turnover reaching a billion euro mark. It comes as no bolt from the blue that both the CEO and the Chairman at LGA are very dynamic in their efforts to attract foreign inward investment. Last September they lost no hay and joined the fray trotting to Las Vegas to exhibit for the first time at the G2E mega conference. The G2E website shows LGA as the crusading Maltese exhibitor, although I am sure a number of service operators will also be supporting them. One cannot but admire the courage and determination of the Malta contingent attending and exhibiting remote gambling services in America. This is a country that has resisted powerfully not to liberalise online gambling and so far no State allows any American or foreign operator to be licensed except to a limited degree on horse racing in Nevada. So what was all the fuss about the ZeTurf case that warranted such exposure in the international press? Apparently the court observed that the whole issue linked to the Malta-based bookmaker seemed directly linked to the aspects of intellectual property rights enjoyed by PMU apart from the prohibition by a state monopoly to inhibit unlicensed intruders offering cross-border gambling services via cyberspace. In its decision, the French court also quizzes the Maltese gaming legislation noting that it grants a Greek lottery operator a seven year monopoly while Maltese punters are not allowed to access remote gaming sites. But having meted out this decision one may conscientiously ask whether this harmonises with the precedent reached by ECJ in 2003 particularly the Gambelli and Lindman judgments. In "Gambelli" the European Court of Justice ruled in November 2004 that public interest considerations may justify limitations on the free movement of services, providing the objectives to be achieved are not disproportionate to the restrictions imposed. It thus remains the praxis that European Member States may, where they have valid moral or social grounds, restrict directly or indirectly access to foreign based gambling services. But as Malta is now a full member of the EU one can safely presuppose that all operators licensed by LGA are also shielded by the Gambelli and Lindman’s case. No doubt legal opinions differ whether Gambelli was in fact a landmark case pioneering the liberalisation of cross-border provision of services. Only a few agree that state monopolies have thus met their nemesis.
Surely it has to be stated that in doing so they do not go beyond what is necessary to obtain the objective, yet there is ample evidence that most of the monopolists do not have as their central objective the restriction of gambling opportunities but the swelling of treasury coffers. Although European Union law allows cross-border trade by gambling companies, many individual states still prevent it. Malta as an emerging jurisdiction has just taken its baptism of fire shortly after its EU accession. But positive news may come from another major EU member state. According to German newspaper Handelsblatt, the European Commission is accusing Germany of blocking foreign companies from the sports betting market and thereby infringing EU rules on freedom of access for the services industry. The newspaper said, citing reliable sources that Brussels intends to order Germany to lift its ban on cross-border services or to prove that the ban does indeed comply with EU law. It goes without saying that if the Commission will not be satisfied with Germany's response, it plans to start proceedings in front of the European Court of Justice. So this year may be the year when the German Constitutional Court may issue its verdict whether the state monopoly could possibly be asked to ease its grip on the German market.
This legal morass needs some clearing up as the public expects a better insight in what is permissible or not particularly in cyberspace. Naturally, games of chance will, because of their fundamental nature, become the subject of increased attention and special surveillance from State regulators. All this is happening in an enlarged EU single market pushing for increased corporate transparency and accountability.
In this direction the EU Commission has been actively trying to secure some clear direction in the conflicting regulatory regimes of its 25 states. Although many agree that the proposed Services Directive is not an appropriate framework to address the practicalities of the gambling sector, it goes without saying that for reasons of public order, the prevention of crime and consumer protection, the gambling sector expects its fair share of regulatory oversight. Responsible Gaming is without doubt a necessity, not a luxury.

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