Two recent events have once again brought the gaming world’s spotlight onto France. First, the government clarified its proposals to open up the market by setting up a licensing system towards the tail end of 2009 . Secondly, the Supreme Court (the Conseil d’Etat) decided on 9 May to refer two questions to the European Court of Justice (“ECJ”). Whilst the former event has made headline news both here in France and elsewhere in Europe, the ECJ referral has, on the contrary, generated little comment from the press. Yet, the questions are significant, for two main reasons.
1. Towards a clarification of the exceptions to the four fundamental principles
First, in legal terms, the referral is noteworthy because the questions formulated by the Conseil d’Etat (the highest Public Law court in the land) relate closely to other questions already tabled by authorities in Germany (ECJ, case C-262/07), Belgium, Austria (ECJ, case C-64/08) and Portugal (ECJ, case C-55/08).
This referral has come out of the well-known Zeturf saga. On 8 July 2005, this Maltese company was ordered by the Paris Tribuanl de grande instance to stop accepting bets on French horse races. It filed an appeal on 22 July 2005 – and the rest of the dispute is now history, with the Court of Appeal’s confirmation of the first instance decision to ban Zeturf being eventually overturned at Cour de cassation level on 10 July 2007, a groundbreaking judgement. In the interim, on 18 July 2005, Zeturf had filed an administrative request to the relevant Ministry to cancel the statutory instrument, a decree of 1997, which effectively sets out most of the regulations governing the monopoly on off-racecourse horse bets granted to the Pari Mutuel Urbain (or PMU). The Ministry did not respond, which means that it did not accede to the request. Zeturf appealed against this implicit rejection and this matter was escalated to the Conseil d’Etat. In attempting to determine whether the French regime is compatible with current EU jurisprudence, and especially the guidance of Gambelli and Placanica , the court decided to seek guidance from Luxemburg.
Accordingly, the principal question referred to the ECJ is:
“are articles 49 and 50 of the EC Treaty (freedom of services) to be interpreted as precluding a national legislation that creates a monopolistic regime [for off-racecourse horse betting] in favour of a sole operator […] and that appears fit to achieve the aims of fighting against criminality and protecting public order in a more effective way than would achieve less restrictive measures, u[if such a regime […] is accompanied by a dynamic commercial policy of the authorised operator, which therefore results in not entirely satisfying the aim of reducing gaming opportunities]u?”.
Whilst the questions regarding the compatibility with EU law of the regime in Schleswig-Holstein, Germany, is very much jurisdiction-specific, given that it focuses on the interaction between the differing legislative powers of the Bund and the Länder, the questions referred to the ECJ by the Portuguese and Austrian authorities are, on the contrary, rather similar to those of the Conseil d’Etat.
The Landesgericht Linz has asked the ECJ:
“are articles 43 (freedom of establishment) and 49 (freedom of services) EC Treaty to be interpreted as precluding a national monopoly on certain types of gaming […] if there is no consistent and systematic policy whatsoever in the Member State concerned to limit gaming, inasmuch as national licensed organisers encourage participation in gaming […] and advertise such gaming […] in a manner which goes as far as offering a cash payment […].”
The Portuguese referral, submitted by the Tribunal Judicial da Comarca do Porto, however elliptic, relates in essence to the same point:
“What criteria should guide interpretation of national legislation restricting those principles [EU law principles of freedom to provide services and of “free competition and prohibition of State monopolies], for the purposes of determining whether such restriction is admissible […]”.
Fundamentally, the courts are all attempting to ascertain exactly what criteria should be applied to determine whether the commercial actions (advertising, launching special promotions, encouraging gaming etc.) of the State-backed monopolistic operator are such that they jeopardise the restrictive regime under which they are authorised to operate by making the regime’s underpinning policy not consistent and not systematic.
Operators and legal observers EU-wide now eagerly wait to discover the ECJ’s approach. The ECJ’s answers should finally equip specialist lawyers with the tools to analyse what concrete exceptions may exist to the obligation to comply with the four fundamental principles. The ECJ’s position may, with time, become a fundamental stepping-stone towards European harmonisation. With several Member States already moving away from restrictive, sometimes monopolistic regimes, the ECJ’s ruling will lay down precise guidelines of what is authorised in a prohibitive model for the jurisdictions that still apply such a model. Defining what is and what is not acceptable in terms of restraining non State-backed operators is a first stage in setting out what constitutes a minimum pan-EU level of liberalisation. Commissioner Charles McCreevy’s term runs out in 2009; his future successor may take the approach that the best way of achieving some form of consistency in the regulatory regimes, would be to incorporate the ECJ’s view into a Directive or Regulation that sets out the minimum authorised level of market openness. Of course, the initiative of such a reform does not rest wholly in the hands of the Brussels Commission and would require the backing of the entire European Council, which is why the remarks in this paragraph are rather speculative – in this industry sector, it is difficult to second guess developments 6 months away, yet alone an EU-wide drive some 4 or 5 years down the line.
2. With the French reform pending, what is currently tolerated in France and how high is the legal risk?
Secondly, the referral to the ECJ leads us to another question: what is, in France, the precise current regulatory position? For the time being, private operators are still unauthorised to offer bets in the French territory – but how much legal risk would they actually be taking by offering bets to French punters between now and the moment the market actually opens, when these same operators, or certainly some of them, will be legally authorised to offer their services?
There appears to have been a moratorium of sorts installed by the courts. This has come about since the government’s decision about 10 months ago to enter into negotiations with the EU Commission with a view to liberalising its model, following Mr. McCreevy’s reasoned opinion of June 2007. This opinion, based upon the ECJ’s then-recent Placanica decision, described the French regime as a set of restrictive measures that did not seem compliant with the EU’s set of fundamental freedoms.
The first indication of a moratorium of sorts was noticed on 18 January 2008, when the Versailles Court of Appeal froze the criminal indictment against Mr. Didier Dewyn, the former managing director of Unibet (operating under the name of ‘Mr Bookmaker’), by requesting from the relevant ministry additional information (a procedure akin to an ECJ referral, but at national level) regarding the compatibility of the French regime with EU rules, especially the guidance provided by the Gambelli and Placanica rulings. The Conseil d’Etat’s ECJ referral, though not related to criminal proceedings but rather to the Zeturf case, confirms this moratorium of sorts, in the sense that it indicates judges’ desire, prior to drawing conclusions in a legal dispute, to seek clarification over the conformity of the French regime with EU law.
Yet, the courts have not been systematically in favour of the private-owned cyber-bookmakers. For instance the Paris Tgi, presided over by an IP specialist, Mr. Jean-Claude Magendie, sanctioned, in successive months, Unibet and William Hill for trade mark infringement , then Unibet and Expekt for offering bets on Roland Garros matches without the express authorisation of the competition organisers , the French Tennis Federation. Government officials have not particularly been pro-private operators either; for example, the Budget minister, Mr. Eric Woerth, during a press conference held on 6th June, threatened bookmakers with severe sanctions should they breach the current set of regulations, which are still good law right up until the day when they are genuinely repealed and replaced by a new set of rules and regulations.
How seriously should these threats be taken? Of course, there is a strong political slant to any minister’s statements. There is a lot at stake for the French government in its talks with Commissioner McCreevy, not least in terms of pure treasury – at a time, let us not forget, when Brussels’ budgetary restraints are one of the main preoccupations of President Nicolas Sarkozy and Prime Minister Francois Fillon’s government.
Whilst it would appear that prosecutional activity in France has slowed down (or has it even stopped?), the authorities are nonetheless maintaining a tough-guy rhetoric towards foreign-licensed operators attempting to increase their presence in the French market over the coming months. Sources quoted by a French tax inspector, Mr. Bruno Durieux in his recent report to the French government indicated that about one third of bets currently placed by French Internet users are made on sites that are illegal in France according to the still-current French regulations. Clearly operators are already trying to increase their market share (for instance Bet-clic constantly advertises in the French dailies), but how will the authorities effectively counter this? Will judges in France continue with criminal proceedings? Will French IP judges keep handing down judgments against private bookmakers?