Taking a gamble
The decision to uphold national legislation restricting internet gambling to a national monopoly is not consistent with the ideals of a single market, says Paul Stanley NO
Internet gambling is big business, and in recent years it has proved good business for lawyers too. In Case C'“42/07 Liga Portuguesa de Futebol Profissional (Grand Chamber, 8 September 2009), the ECJ upheld the right of Portugal to prohibit internet suppliers established in other member states offering their services in Portugal.
The case concerned the activities of Bwin International Ltd, an online gambling undertaking registered in Gibraltar, with its servers in Gibraltar and Austria. It offered a wide range of games of chance including betting, casino-type games, and bingo-type games. All contact was via the internet (or by telephone), and payments were made electronically. Bwin sponsored the Liga, which was the body responsible for organising professional football in Portugal.
In Portugal the organisation of gambling was reserved to an organisation known as Santa Casa de Misericórdia de Lisboa, a publicly organised body with a long history. Santa Casa fined Bwin and the Liga for their part in organising internet gambling in Portugal outside the scope of Santa Casa's monopoly. The question before the ECJ, on a reference from the Portuguese courts, was whether this was compatible with article 49 EC, which guarantees the freedom to provide services.
There was no doubt that the Portuguese legislation constituted a restriction on the freedom of Bwin, lawfully established and operated from other member states, to provide services. The sole question was whether the restriction was justified. Nor was the ECJ in any doubt that in principle objectives such as the prevention of fraud, control of the 'incitement to squander money on gambling' as well as the 'general need to preserve public order' might justify measures of control '“ as was indeed clear from the ECJ's case law, notably Joined Cases C-338/04, C-359/04 and C-360/04 Placanica [2007] ECR I-1891. Moreover, how far gambling is a moral danger is a matter of controversy, and member states must be given a reasonable measure of freedom to decide for themselves where they stand on this. Thus, each member state must define the 'level of protection'. Community law only sets limits once that level of protection has been defined, by insisting that the requirements of proportionality are respected.
One might expect the ECJ to leave the application of that standard to the national court; but in fact it went further, simply saying that article 49 did not preclude legislation such as that in issue. It took the view that reserving a national monopoly in gambling and betting and prohibiting internet gambling was a legitimate means by which to avoid fraud and malpractice, and that it was legitimate for a member state to assume that the supervision of the operator in the member state of its establishment was not sufficient to avoid fraud.
Surprising decision
This is surprising. It may well be for each member state to take policy decisions about gambling. But if a state chooses to permit gambling, it seem questionable whether it should, consistently with the ideal of the single market, be permitted to reserve it to a national monopoly in the name of consumer protection. So far as basic things such as the fraud prevention are concerned, a fairly high degree of mutual trust is appropriate. After all, millions of transborder transactions take place in the EU; some risk of fraud attends them all, and there are mechanisms (for instance in the rules governing jurisdiction and enforcement of judgments) which are designed to offer consumer protection. In practical terms, too, the credit card system functions in a way that offers a fairly large measure of protection. There was no evidence before the ECJ that these mechanisms do not work, and the ECJ did not even make any sustained attempt to consider whether they worked or how they fail.
The ECJ seems increasingly willing to opine unequivocally on the acceptability of national measures which interfere with freedom of movement in a way that seems to give surprising latitude to member states. If this is a real trend, then it is of great importance as it would constitute a structural change in the court's approach.