Hoping to profit from media exposure on AS Monaco’s football shirts, the Austrian company Bwin (formerly “Bet and Win”) entered into a sponsorship contract with the club. On 15 September, as the two co-executives of Bwin were about to take part in a press conference organised by the club at its training ground, they were taken into custody in Nice and questioned by police.

The police were acting under a warrant from a judge in Nanterre who was investigating complaints lodged by the Française des Jeux (FDJ) for the organising of “illegal gaming, illegal lotteries and displaying illegal advertising of lotteries” and then by the Pari Mutuel Urbain (PMU) on the grounds of “accepting illegal bets on horse racing”. Indicted for infringing “the monopoly of bets on horse racing, other sporting events and lotteries”, they were released on €300,000 bail each and they remain under judicial supervision. They face up to three years in prison and a fine of up to €45,000.

This case was widely followed in the press, where the question of whether on-line betting operated by private providers should be legal was fiercely debated. This marks an opportunity for us to reflect on the current legal position, a subject on which we are frequently consulted.

Europe’s mixed positions

In Europe, some states and countries allow private companies to offer on-line sports betting and casinos. This is the case in Malta and Cyprus, part of the European Union since 1 May 2004, and also the Netherlands (marketing solely within the Netherlands) and above all territories such as Gibraltar, the Isle of Man and Alderney (off Guernsey). These countries, which have in some instances implemented licensing systems and set up monitoring commissions to review the companies’ ethics, now account for a large number of the service providers within Europe.

Since 1994, the UK has allowed its bookmakers to accept on-line bets. The Gambling Act 2005, which will not come into force until 2007, sets up an authorisation regime for all interactive games.

However, most European states prohibit on-line betting, except in favour of certain providers that are authorised by statute and therefore protected under the State’s monopoly. This is the case in Germany, Denmark, Finland and Sweden amongst others.

France: a derogatory and monopolistic system

France also operates a system of this type. Lotteries benefit from a State monopoly granted in 1931 to the Loterie National, which has since become the Française des Jeux, by derogation from an 1836 law forbidding “lotteries of any type”. Accepting bets on horse races is the PMU’s prerogative, since an Act of 1891 (this statute was subsequently extended to greyhound racing). Save for horse racing (now greyhounds), sporting bets are classified as lotteries, and therefore fall under the FDJ’s monopoly.

The on-line betting market in France therefore rests on a derogatory and monopolistic system. Likewise, it is not possible to offer on-line betting services in France from abroad (French criminal law would apply) or to carry out promotional activities or to advertise for foreign services.

Several companies have been forced to close shop or cease trading in France owing to court judgements. For example, in 1997 the Cour de cassation (France’s Supreme Court) convicted a bookmaker based in Guernsey and London who organised a betting competition on the results of the Tour de France and sent out 900,000 mailings in France to this effect. This closely resembles the case of a minitel company that organised games such as roulette and poker.

More recently (Zeturf CA Paris, 4 January 2006), the Court of Appeal confirmed a judgment ordering the closing down of a horse racing betting web-site accessible in France. The PMU objected to the site, set up in Gibraltar, offering information and on-line betting services relating to horse races taking place in France.

French rules and regulations, like many other national regimes elsewhere in Europe are now increasingly contested, for one by the many companies established abroad who wish to offer their services in France and, secondly, by EU legislators.

Policy of channelling gaming

These State monopolies would indeed appear to be contrary to the principle of the free movement of services. Article 49 of the Treaty of Rome does not allow for restrictions to this principle, except in the interests of public order. In particular, this enables Member States not only to fight against offences and fraud but also to restrict gaming opportunities.

In the famous Gambelli judgment (ECJ, 6 November 2003, C-243/01), the European Court of Justice (ECJ) held that a business involved in sports betting established in the European Union must be authorised to freely offer its services in another Member State if:

– it is subject to a proper and reliable licensing and monitoring regime in its country of origin; and if
– the Member State which has submitted the complaint does not itself follow a channelling gaming policy which is “coherent and systematic”.

Such a policy will be considered to have been implemented if the State in question has set up an independent administrative authority responsible for monitoring and controlling the taking of bets in that country, if the national monopolies restrict promotional activities and limits its client base, and lastly if there is an efficient and coherent national policy which aims to reduce gaming abuse.

In Gambelli, the ECJ held that Italy was not following a “coherent and systematic” policy to channel gaming and therefore was estopped from preventing an English bookmaker from offering its services in Italy through an Internet server.

As in the case of Italy, it seems unlikely that France will successfully defend its claim that its regulatory system is compliant with the requirement to channel gaming.

France, alert to warning signs from the EU, adopted two decrees last February imposing on the FDJ channelling objectives on gaming and creating an “advisory committee for the implementation of the channelling of gaming and the promotion of responsible gaming” chaired by a magistrate . Is this sufficient? Perhaps not. The list of games offered by the FDJ, which is published in the Official Journal, and the company’s aggressive marketing has the effect of making France a “Croupier State”, to copy the title of the report of Senator Trucy on gaming and betting policy in France.

The French Government has recently announced that it envisages strengthening financial penalties (up to five times the amount of the advertising investment) in the event of a breach of the gaming and betting rules. Jean-François Copé, France’s Finance Minister, opines that these penalties must have a sufficiently deterrent effect so as not to “lead to an uncontrollable explosion of gaming offers”. It is true that a number of family associations, anxious to protect minors against the dangers of gaming, are in favour of maintaining strict FDJ and PMU monopolies. Furthermore, a police crack-down directed at illegal web-sites is currently in the pipeline.

The Government’s draft bill includes two measures that relate to on-line betting specifically. The first one establishes a mechanism of cash flow suspension for those organizing prohibited on-line gaming. Under “prohibited on-line gaming” is caught every type of betting or lottery web site, except those controlled by FDJ or PMU. The other provision concerns Internet providers. They would be under an obligation to provide information to their Internet users, providing a list of named prohibited gaming web sites. In addition, the providers may also be obliged to warn users that they risk sanctions should they decide to log onto those sites.

But some observers have already voiced concern that this bill is not compliant with European Law, especially with the provisions on free movement of services. Yet, the Government seems resolute on frightening the on-line betting world.

Faced with this legal situation, how have the providers of betting gaming services reacted? Bow down, like many companies , or stand up and defend themselves, risking legal setbacks on their way to possibly obtaining an EU ruling sanctioning France (by the Commission or the ECJ) or perhaps a change in the legislation?

The second scenario seems to be have been followed in 2006. The website Zeturf.com hopes to appeal against its decision whilst Bwin has announced that it has issued a complaint against France for “breaching human rights”. Similarly, the European Commission has announced that it has already received around fifty complaints, and the Internal Market Directorate-General, through its commissioner Mr McCrevy, has indicated that it hopes to “increase the number of countries caught by its current investigation” and stated specifically that the compliance of France’s monopolistic provisions with EU competition rules would be examined.

The debate goes on…