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09 November 2006
For the third time in 2006 the European Commission is considering bringing infringement proceedings against Italy in relation to its restrictions on the provision of betting services. Under Article 226 of the EC Treaty the letter of formal notice sent on October 12 2006 is the first step in the procedure. Italy, France and Austria, the three states thus notified, have two months to send their responses to the commission.
The first proceedings against Italy - and six other EU member states - were started in April 2006 and focused on an alleged breach of the freedom to provide services (under Article 49 of the treaty) in the field of sports betting. Several member states require operators to hold a national concession or licence in order to provide such services. This could be viewed as an unjustified restriction of freedom, as some commentators consider that the grounds on which the restrictions are based are inconsistent with EU principles. Internal Market and Services Commissioner Charlie McCreevy has indicated that the aim of the proceedings is not to liberalize the betting market in Europe, but to verify whether the restrictions in national legislation comply fully with EU rules. McCreevy has indicated that a state monopoly in the betting services market, such as that which exists in Italy, may be compatible with EU law if it is established and structured correctly.
The commission opened further proceedings against Italy on July 28 2006 for an alleged infringement of EU Directive 98/34/EC, which lays down a procedure for the provision of information in the field of technical standards and regulations, on the grounds that Italy had failed to notify the commission before introducing a blacklist of online gambling websites (for further details please see "Government Raises Stakes With Online Gambling Blacklist"). Article 8 of the directive requires that member states communicate draft technical regulations to the commission immediately; therefore, the commission should have received notification before measures were implemented by the State Monopolies Authority. Meanwhile, Italy's administrative and civil courts have issued conflicting rulings on the blacklist. It is hoped that an upcoming decision by the Administrative Court of Rome will clarify the state's position.
The third proceedings began on October 12 2006 and focus exclusively on the provision of online sports betting services. McCreevy appears to be concerned about several complaints filed by European sports betting operators in relation to restrictions in certain EU states. In the case of Italy, most operators, lawyers and industry commentators agree that the authority's blacklist contravenes Article 49. The blacklist appears to be intended primarily to maintain government tax revenue and takes no account of the fact that several of the blacklisted websites belong to online operators which are fully licensed in other EU states. As of November 9 2006 the list precluded 621 websites without Italian licences from providing services in Italy.
The latest request for clarification follows the guidelines of the European Court of Justice (ECJ). As indicated in the Gambelli Case (C-243/01), a restriction of the freedom to provide services is consistent with EU law only if it is justified by imperative public interest requirements, such as consumer protection and the prevention of fraud and incitement to gamble to excess. Restrictions based on other grounds are incompatible with Article 49 and are therefore unjustified. Several ECJ decisions have confirmed that the restrictions in force in Italy are neither justified nor proportionate and were established exclusively for tax reasons. Almost all of Italy's gambling regulations work to the government's fiscal advantage, although the authority maintains that they are intended to protect public order and the gamblers themselves. Moreover, the adoption of restrictive measures seems to run contrary to the authority's proactive policy of continually improving and developing the range of betting opportunities for Italian users, who can now bet on events such as the San Remo music festival.
The outcome and even the instigation of the latest infringement proceedings are likely to affect future Italian rulings on the issue, as they have done in the past. In April 2004 the Italian Supreme Court issued its decision in the Bruno Corsi Case, ruling that the Italian gambling regulations then in force were justified on the grounds of public policy. It held that the criminal regulations on gambling, which were the subject of the decision in Gambelli, were justified because they prevented fraud and money laundering in the gambling sector. This judgment was effectively the Italian reply to Gambelli and has had a significant impact on subsequent Italian case law. However, as Italian courts are not bound by precedent, several lower courts continued to hold that the national restrictions on betting were unjustified and incompatible with EU principles, disapplying Italian criminal legislation on this basis.
The approach of the courts of first instance highlights the fact that the state is restricting betting services provided by operators without Italian licences, supposedly to prevent crime, while creating ever more licensed betting opportunities for which there seems to be no effective monitoring to exclude criminal interference. Most of the lower courts have concluded that the restrictions on gambling seem disproportionate to their objectives. The conflict between higher and lower courts has led to the unusual situation of the same Italian regulations being brought before the ECJ twice, as previously occurred in the Placanica Case (C-338/04) (for further details please see "Further Challenge to Online Gambling Blacklist").
The most recent Italian regulations on online gambling were introduced by Decree-Law 223/2006, which was implemented on August 4 2006 by Law 248/2006, known as the Bersani Decree. The decree contains several provisions on gambling, particularly with regard to taxation, on the basis of which the authority launched a tender to grant several new betting licences. The tender period closed on October 20 2006.
Article 38 of the decree gives the authority the power to regulate the provision of betting services by foreign operators according to certain criteria. Among other things, the authority is required to consider betting services for authorization regardless of where the operators are based, provided that such operators satisfy the reliability requirements which the authority is to set. Among other things, the article further empowers the authority to issue new regulations on (i) interactive, peer-to-peer remote betting on fixed-odds and skill-based games, and (ii) the provision of remote gaming services - including skill-based games - subject to a deposit of €200,000. The regulations are expected to come into force in early 2007.
As it stands, the draft budget legislation for 2007 confirms the principles established by the decree. It also consolidates the powers previously granted to the authority by the Budget Law 2006 to restrict the provision of gambling services through computer and television networks; it was on the basis of these powers that the authority first drew up its blacklist. To add to the uncertainty, the majority of the 4,000 amendments to the draft legislation which have been proposed by members of Parliament relate to the rules on gambling.
Gambling operators will wish to pay particular attention to the development of new business opportunities in Italy. New and detailed regulation would arguably be the most efficient way to create new online gambling opportunities in Italy - and increase government revenue.
For further information on this topic please contact Francesco Portolano or Yan Pecoraro at Portolano Colella Cavallo Studio Legale by telephone (+39 06 3974 5437) or by fax (+39 06 3974 5400) or by email (firstname.lastname@example.org or email@example.com).
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