Up to Dutch Court to Prohibit Online Games of Chance of English Ladbrokes
European Court of Justice, 3 June 2010,
C-258/08 (Lotto / Ladbrokes)
The Netherlands have a very restrictive national gaming policy.
Offering games of chance in the Netherlands is only allowed with a
license based on the Betting and Gaming Act (Wet op de
Kansspelen, "WoK") The same is true for games of
chance on the internet, for example if the gambling website is
directed at Dutch visitors or is advertised in the Netherlands.
Although this policy is intended for the protection of consumers
and minors in particular, Dutch license holders like De Lotto have
been trying for years with this policy to keep foreign online
gaming providers, including the British Ladbrokes, off the Dutch
market. Until now they have always
succeeded.
Background of the Dispute
Ladbrokes offers a number of mainly sports-related games of
chance on their internet site , also to Dutch people. After a very
critical interim judgment (in
Dutch), the Court of Arnhem eventually held in a
judgment of 31 August 2005 (in
Dutch) that De Lotto suffers damage as a result and has
imposed blocking measures on Ladbrokes to make gambling on
Ladbrokes' website impossible for Dutch people. This
judgment was upheld on appeal by the Court of Appeal of Arnhem
in a
judgment of 17 October 2006 (in
Dutch). Ladbrokes then lodged an appeal in cassation to the
Supreme Court of the Netherlands. In a
ruling of 13 June 2008 (in Dutch)
the Supreme Court referred preliminary questions to the European
Court of Justice ("ECJ"), because prohibiting a
service of another EU Member State may be contrary to the free
movement of services, which the former Article 49 of the EC
Treaty (now Article 56 of the TFEU) prohibits.
Free
Movement of Services
Ladbrokes has a valid gaming license in England, but is not
allowed by the Dutch Court to offer these services in the
Netherlands. The ECJ had to answer the question whether this
restriction of the free movement of services within Europe was
justified or not. Last year, in a similar Portuguese case
(BWIN, in Dutch), the ECJ already
gave a ruling to the disadvantage of operators of games of
chance from other EU Member States. There have been discussions
for years on this topic following the
Gambelli judgment of the ECJ from 2003. In
the Gambelli case, the ECJ ruled that Member States only have
limited room to impose restricting measures on operators of
games of chance from other EU Member States. The national courts
have to take the following into account when testing whether the
measures are justified: the measures must be applied without
discrimination; they must be suitable for achieving the purposes
pursued; and they must not go beyond what is necessary.
Furthermore, the ECJ observed that a Member State cannot on the
one hand incite consumers to take part in lotteries, games of
chance and bets in order to fill the national treasury, while on
the other hand it relies on public order to justify the current
restrictive measures. The Member States are free to determine
purposes of public interest, but the measures they take in this
respect must be aimed consistently at those purposes. This is
the so-called hypocrisy test that the judgment contains. Read
more about the Gambelli judgment
here (in Dutch).
In this Lotto / Ladbrokes case, the ECJ considers it a
fact that keeping gambling services out of EU Member States
constitutes a restriction of the free provision of services in the
Netherlands. However, such a restriction may be justified by the
purpose of the arrangement, for example in the case of consumer
protection, the prevention of fraud or the general need to preserve
public order.
It is then also up to the national courts to apply the hypocrisy
test: "It is for the national court to determine whether
unlawful gaming activities may constitute a problem in the relevant
Member State and whether the expansion of authorized and regulated
activities would be liable to solve such a problem, and whether
that expansion is on such a scale as to make it impossible to
reconcile with the objective of curbing such
addiction.".
An important starting point here is the fact that there is no
harmonization within the EU for the offering games of chance
through the internet. This means that all Member Sates may apply
their own rules. Furthermore, the ECJ considered that online games
of chance involve a more substantial risk of fraud by providers
because of the lack of direct contact between consumer and
operator.
Conclusion
This judgment does not automatically mean that Ladbrokes must be
kept out of the Netherlands. It does mean that the Dutch courts are
free to express an opinion on this. Although the hypocrisy test has
not been abandoned, the ECJ did distance itself from it a little
further by leaving this issue also to the national courts. The ECJ
never gives an opinion on facts, but this ruling means that the
national courts themselves will have to judge national policies and
possible shielding of the market within the EU. In any case, things
do not look well for Ladbrokes; after all, the Supreme Court does
not pronounce an opinion on facts either, and in the judgments in
various instances - including the Court of Appeal of Arnhem -
Ladbrokes was found to be acting unlawfully vis-à-vis De Lotto by
organizing games of chance in the Netherlands or promoting
participation in such games, although Ladbrokes does not have a
Dutch license to do so. Furthermore, it was held that De Lotto has
the right as a licensee to invoke the justice of its national
legislation, on which the license is based.