Evelyn Heffermehl, Auteur à Droit & Technologies

Pénal

Publié le 07/03/2007

Placanica ruling strengthens the case for private online gaming operators in their battle against national monopolies

Rédige un résumé fluide et bien structuré de l’article suivant, d’une longueur comprise entre 220 et 250 mots : In a long awaited decision concerning criminal proceedings in Italy against Mr Placanica, Palazze and Sorricchio, the European Court of Justice (ECJ) has today ruled that the Italian criminal penalties for the collecting of bets by intermediaries acting on behalf of foreign companies are contrary to Community law: « A Member State may not apply a criminal penalty for failure to complete an administrative formality where, in breach of Community law, such completion is refused or rendered impossible by that Member State ». Moreover, the ECJ ruled that EC law precludes national legislation which excludes from the betting and gaming sector operators in the form of companies whose shares are quoted on the regulated markets. Background The reference for a preliminary ruling followed divergences between an Italian Supreme Court ruling back in April 2004 and the ECJ’s Gambelli decision. In view of this conflict, the Italian judges (Tribunale di Larino) referred the case to the ECJ. Under the Italian legislation, the organization of games of chance or the collecting of bets is subject to possession of a license and a police authorization. Any infringement of those rules carries criminal penalties of up to three years’ imprisonment. In 1999, following calls for tenders, the Italian authorities granted a certain number of licenses. The calls for tender excluded operators in the form of companies whose shares were quoted on the regulated markets, such as Stanley International Betting Ltd (‘Stanley’), a company incorporated under English law, which operates in Italy through ‘data transmission centres’ (DTCs) run by independent operators with contractual links to Stanley, who places a data transmission link at the disposal of bettors so that they can access the server of Stanley’s host computer in the United Kingdom. Mr Placanica, Mr Palazzese and Mr Sorricchio are all DTC operators linked to Stanley. In 2004 they were prosecuted because they did not hold the required police authorization. The court seized the ECJ in order to know whether the Italian legislation on betting and gaming is compatible with the Community principles of freedom of establishment and the freedom to provide services. The ECJ decision Referring to Gambelli, the Court ruled that, « in so far as the national legislation at issue in the main proceedings prohibits – on pain of criminal penalties – the pursuit of activities in the betting and gaming sector without a license or police authorization issued by the State, it constitutes a restriction on the freedom of establishment and the freedom to provide services. » It reiterated its settled case-law according to which such restrictions may be justified by imperative reasons of overriding general interest such as such as the objectives of consumer protection and the prevention of both fraud and incitement to squander on gaming, as well as the general need to preserve public order. In that context, the Court ruled, moral, religious or cultural factors, as well as the morally and financially harmful consequences for the individual and for society associated with betting and gaming, may justify such restrictions. However, according to the ECJ, the restrictive measures must nevertheless satisfy the conditions laid down in the case-law of the Court as regards their proportionality and suitability. In view of these principles, the ECJ examined each of the requirements set out by the Italian legislation, i.e.: 1/ the obligation to obtain a license under a tender procedure excluding certain types of operator and, in particular, companies whose individual shareholders are not always identifiable at any given moment; 2/ the obligation to obtain a police authorization; and 3/criminal penalties for failure to comply with the legislation at issue. Licenses and exclusion of companies quoted on the regulated markets The Court reiterated what it stated in Gambelli, i.e., that although restrictions on the number of operators are in principle capable of being justified, those restrictions must in any event reflect a concern to bring about a genuine diminution of gambling opportunities and to limit activities in that sector in a « consistent and systematic manner. » As such, the ECJ noted that « the Italian legislature is pursuing a policy of expanding activity in the betting and gaming sector, with the aim of increasing tax revenue, » and therefore « that no justification for the Italian legislation is to be found in the objectives of limiting the propensity of consumers to gamble or of curtailing the availability of gambling. » However in view of the second objective of the Italian authorities, which is to prevent the use of betting and gaming activities for criminal or fraudulent purposes by channeling them into controllable systems, the Court stated that a licensing system may constitute « an efficient mechanism enabling operators active in the betting and gaming sector to be controlled with a view to preventing the exploitation of those activities for criminal or fraudulent purposes. » The ECJ thus distinguished between two grounds of justifications, one founded on the reduction of gambling opportunities, which must respond to the requirement of consistency (Gambelli); the other one founded on the fight against criminality, which may justify the licensing requirements as set out by the legislation. As regards the limitation of the total number of such licenses, the ECJ ruled that it does not have sufficient facts before it to be able to assess that limitation, as such, in the light of the requirements flowing from Community law. It therefore directs the national courts to determine whether, in limiting the number of operators active in the betting and gaming sector, the national legislation genuinely contributes to the objective invoked by the Italian Government, namely, that of preventing the exploitation of activities in that sector for criminal or fraudulent purposes. Concerning the exclusion of companies from tender procedures for the award of licenses the Court stated that those rules constitute a restriction on the freedom of establishment and go beyond what is necessary in order to achieve the objective of preventing operators active in the betting and gaming sector from being involved in criminal or fraudulent activities. The court ruled that 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 (for example, the gathering of information on their representatives or their main shareholders). Moreover, as regards the consequences flowing from the unlawful nature of the exclusion of a certain number of operators from tender procedures, the ECJ ruled that it is for the national legal order to lay down detailed procedural rules to ensure the protection of the rights which those operators derive by direct effect of Community law, provided, however, that those detailed rules are not less favorable than those governing similar domestic situations (principle of equivalence) and that they do not make it excessively difficult or impossible in practice to exercise the rights conferred by Community law (principle of effectiveness). In any case, the ECJ stated that, in the absence of a procedure for the award of licenses which is open to operators who have been unlawfully barred from any possibility of obtaining a license under the last tender procedure, the lack of a license cannot be a ground for the application of sanctions to such operators. Police authorizations The procedure for the grant of a police authorization depended on the award of a license. Therefore, the lack of a police authorization cannot be a valid ground for complaint in respect of persons who have been unable to obtain them because they were barred from any possibility of being granted a license, contrary to Community law. The criminal penalties The ECJ reiterated that in principle, criminal legislation is a matter for which the Member States are responsible. However, criminal legislation may not restrict the fundamental freedoms guaranteed by Community law. The Court makes it clear once again 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 breach 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. Conclusion Although the Placanica ruling does not come as much of a surprise and to a large extent draws on the Gambelli principles, it undoubtedly contributes to strengthen case for private online gaming operators. First of all, it expressly prohibits criminal penalties where these are the result of a breach by the Member State of Community rules. This goes further than the mere disproportionate character of criminal sanctions which had been previously condemned by the ECJ. Indeed, what the court states here is that insofar as a member state’s gambling regulation are inconsistent with EC law, no criminal sanctions are applicable. Secondly, in this ruling, the ECJ expressly prohibits Member States from preventing companies whose shares are quoted on the regulated market to obtain a license and prohibits the application of sanctions upon them. This is a fundamental and new element, which will undoubtedly bear far reaching consequences since the leading European gaming and betting operators are quoted on the regulated market (stock exchange) and will use this argument as a powerful levy in order to access European markets. The Placanica ruling is therefore likely to fuel the battle waged by the private online gaming industry against national monopolies…

Evelyn Heffermehl

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Placanica ruling strengthens the case for private online gaming operators in their battle against national monopolies