1. worldonline
gamblinglawreport
FEATURED ARTICLE
01/08
cecile park publishing
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2. GERMANY
Interstate treaty on gambling:
regulations and issues
Germany decided last year on a The new Interstate Treaty on the end of 2007.
Gambling (Glücksspielstaats- As a result of the decision of the
new legal framework designed to vertrag1) came into force on 1 Federal Constitutional Court, a
uphold its state gambling monopoly January 2008. However, the main new legal framework for gambling
using a new interstate treaty banning aim of the Treaty, upholding the has been decided by the prime
internet gambling, which was state monopoly on gambling, has ministers of the German states at a
approved by the 16 German states already been challenged by the meeting in Bad Pyrmont, in
courts. On 7 January 2008, the October 2006, upholding the state
in the weeks before Christmas. Administrative Court of Stuttgart monopoly. The draft of an
Martin Arendts, an attorney with decided to protect a betting shop Interstate Treaty on Gambling has
Arendts Anwälte, examines the key against a prohibition order, been discussed and approved by 15
points of the regulations, legal issues effectively undermining the of the 16 state prime ministers
with them under EU law and monopoly. Also, the European
Commission regards the main
(Schleswig-Holstein raised legal
objections, but gave way in July
assesses the outlook for the future. provisions of the Treaty as contrary 2007, citing fiscal reasons)5.
to EU law and announced it would A licensing system, allowing
initiate a further infringement private sports betting operators to
procedure against Germany. be licensed as well (in return for
taxes), was rejected by the majority.
Background An alternative draft of an Interstate
Germany has an exclusive rights Treaty on Sports Betting
system with regard to gambling (Sportwettenstaatsvertrag),
(which includes sports betting, presented by the CDU Schleswig-
which is now legally defined by the Holstein in February 2007, failed to
Interstate Treaty as being a game of win support. The idea behind the
chance). The 16 German lottery alternative draft was to open up
operators (one in each state, either the sports betting market in order
a private company or an to keep the monopoly on lotteries
authority), cartelised in the (which generate much more
Deutscher Lotto- und Totoblock, earnings for the states than sports
have used this legal position to betting).
fight the cross-border provision of
gambling and sports betting Regulations
services2. German authorities have Jurisdiction
issued thousands of prohibition In Germany, gambling and sports
orders against private operators betting (with the exception of
licensed in other EU member horse betting6) has been regulated
states, their betting shops and by the states (however, the Federal
advertising partners (football Constitutional Court expressly
clubs3, affiliates, broadcasters etc.). mentioned the possibility of a new
The Federal Constitutional Court regulation by the Federal
(Bundesverfassungsgericht) held Parliament, as sports betting has to
the state monopoly, in its be regarded as a business matter).
landmark sports betting decision Matters, falling under the
of 20064, to be unconstitutional. jurisdiction of the states, can be
Fiscal reasons, such as the regulated not only by normal state
promotion of sports, cannot justify acts, but also by interstate treaties.
the state monopoly. However, The idea behind interstate treaties
instead of declaring the act in is the creation of uniform law,
question, the Bavarian Act on without giving the jurisdiction to
Lotteries (Staatslotteriegesetz), to the federal level (conserving the
be null and void, the Federal checks and balances of the federal
Constitutional Court ordered the system). Interstate treaties are quite
legislator to change the law before commonly used to regulate media
world online gambling january 2008 05

3. GERMANY
matters, e.g. the Interstate Treaty Several illegal games of chance and for a waiting period of at least
on Broadcasting bookmakers, payouts from the same; and three months. The European
(Rundfunkstaatsvertrag). in particular G prohibit the providers of Commission has expressly stated
bwin, have
announced services ... from cooperating as that not only the Interstate Treaty,
Key points that they will regards access to unauthorised but also the execution acts have to
The Interstate Treaty on Gambling fight the offers of games of chance’. be submitted. So, the states decided
replaced the Interstate Treaty on Interstate to take the relevant provisions out
Lotteries (Lotteriestaatsvertrag7), Treaty Legislative procedure of the drafts of the execution acts
which came into effect on 1 July The European Commission was and to decide on them in 2008,
2004. According to the will of the notified of the draft in December after these provisions have been
states, the state monopoly shall be 2006 (in accordance with directive formally submitted to the
upheld for (at least) a further four 98/48/EC). The European European Commission.
years8. Commission held that the
The Interstate Treaty now infringement of the freedom to Legal problems
expressly covers sports betting provide services, as provided by the The content of the new Interstate
(betting is legally defined as a game Interstate Treaty (no provision of Treaty on Gambling is highly
of chance, § 3 par. 1) and also any gaming services over the problematic from a legal point of
contains certain provisions for internet), is not justified10. It also view. It contravenes constitutional
casinos (§ 1, 3 - 8, 20 and 23). raised serious further objections in law, EU law, as well as competition
According to the Treaty, offering the infringement procedure against law. The following legal aspects
gambling services over the internet Germany11. have to be considered:
is illegal (§ 4 par. 4), as well as After the signing of the draft by
advertising it. This is clearly meant all state prime ministers (including Is market foreclosure compatible
to restrict foreign operators and the prime minister of Schleswig- with EU law?
the cross-border offering of Holstein, who finally signed the The Interstate Treaty leads to a
gambling (which is regarded as draft he vehemently opposed in foreclosure of the German
illegal gambling by the authorities, 2006), the draft and relevant gambling and sports betting
punishable according to Art. 284 et ratification and execution acts were market with regard to operators
seq. German Criminal Code). This introduced in the state from other EU Member States as
prohibition, however, poses parliaments. The Treaty was well as those from the European
technical problems to foreign ratified by all state parliaments in Economic Area (EEA). Only
operators, as they cannot close the week before Christmas 2007. German state operators or those
their websites to German Even the state parliament of related to them are legally allowed
customers. The Administrative Schleswig-Holstein ratified it, to offer sports betting and other
Courts of Appeal of Bavaria and despite its legal doubts. The games of chance, whereas private
Hesse, therefore, have recently president of the state parliament operators as well as state operators
ruled that a prohibition which is commissioned a legal opinion from other Member States are left
technically not feasible cannot be from the Academic Service out by the monopoly.
legally expected from an operator9. (Wissenschaftlicher Dienst) of the The evidently intended market
According to several reports, the parliament12, which came to the foreclosure by the states is in
authorities have already discussed conclusion that the regulations are particular a violation of the
how to block gambling websites against EU law and German freedom to provide services and is
and how to restrict payments to constitutional law (freedom to therefore neither compatible with
foreign operators (following the chose one’s profession, as EU law nor with EEA law.
ideas behind the US Unlawful guaranteed by Art. 12 of the
Internet Gambling Enforcement German Constitution). Are the requirements being
Act). The Treaty contains Apart from that, the European implemented?
provisions with regard to payments Commission has yet to be notified The Interstate Treaty does not
to and from private operators. Art. of the state execution acts that provide a coherent,
9 of the draft states: contain further regulations with comprehensible and systematic
‘The authority may specifically regard to the online offering of legal regulation. The legal regime
G prohibit banks and financial services (fines of up to €500,000), for gambling machines has recently
service institutes from being in accordance with directive been liberalised. Also, horse betting
involved in payments relating to 98/48/EC. This directive provides can be offered by private
06 world online gambling january 2008

4. GERMANY
bookmakers. From a constitutional proceeding. The Administrative 12. Wissenschaftlicher Dienst, Gutachten
point of view, a coherent Court of Stuttgart raised doubts as über europa- und verfassungsrechtliche
Aspekte zum Staatsvertrag zum
regulation for the whole area of to the compatibility of the Glücksspielwesen in Deutschland, 11
gambling is necessary to uphold Interstate Treaty with EU law15. October 2007.
the monopoly. Therefore, it granted protection to 13. Oberlandesgericht (OLG) Düsseldorf,
decision of 23 October 2006, file no.VI-
a betting shop, arguing that the Kart 15/06 (preliminary proceeding) and
May private competition be European Court of Justice first had decision of 8 June 2007, file no. VI-Kart
banned? to decide the pending cases 15/06 (V) (main proceeding). The Federal
The projected Interstate Treaty brought by German courts. Court of Justice (Bundesgerichtshof)
upheld the main points of the preliminary
does not take into consideration The European Commission is decision of the OLG Düsseldorf, decision
concerns and objections voiced by also expected to initiate an of 8 May 2007, file no. KVR 31/06.
the Federal Cartel Office. The infringement procedure (as 14. Bundeskartellamt
www.bundeskartellamt.de
Federal Cartel Office repeatedly announced by the Internal Market 15. Administrative Court of Stuttgart,
stressed that the rest of marginal commissioner McCreevy in 2006). decision of 7 January 2008, file no. 4 K
competition had to be upheld. The A letter of formal notice, the first 6081/07.
complete ban of private step of an infringement procedure,
competition is neither compatible will soon be served on the German
with German nor with EU government.
competition law. In the anti-trust
proceedings against Deutscher Martin Arendts Attorney at Law
Arendts Anwälte
Lotto- und Totoblock, the Court of martin.arendts@anlageanwalt.de
Appeal of Düsseldorf explicitly
held that an interstate treaty 1. Official title: Staatsvertrag zum
cannot suspend European Glücksspielwesen in Deutschland
(Glücksspielstaatsvertrag - GlüStV).
competition law13. 2. Arendts, A View of European
The argument that only a state Gambling Regulation from the
operator can care about problem Perspective of Private Operators, in:
Littler/Fijnaut, The Regulation of
gambling and the protection of Gambling: European and National
minors does not really hold water, Perspectives, 41, 43 et seq.
as one of the German monopoly 3. Cf. Arendts, ‘bwin and VfB Stuttgart:
operators, the operator in advertsing update’, World Online
Gambling Law Report Volume 6, Issue 9,
Rhineland-Palatinate, is a private September 2007.
company owned by the sports 4. Bundesverfassungsgericht, decision of
associations of this state. In 28 March 2008, file no. 1 BvR 1054/01.
5. Cf. Arendts, ‘Interstate Treaty on
December 2007, the Federal Cartel Lotteries: not signed, but passed’, World
Office14 prohibited the state from Online Gambling Law Report Volume 5,
buying a majority of the shares Issue 12, December 2006, 15.
(51%) of Lotto Rheinland-Pfalz 6. Which is regulated by a federal act,
Rennwett- und Lotteriegesetz
GmbH (which, by the way, offers (RennwLottG) of 1922.
its services cross-border to 7. Staatsvertrag zum Lotteriewesen in
Luxembourg). The Cartel Office Deutschland.
argued that the state would have 8. According to § 28, the Interstate
Treaty expires after four years. If not, at
become even more market least 13 states must decide to keep it in
dominating. force.
9. Bayerischer Verwaltungsgerichtshof,
decision of 7 May 2007, file no. 24 CS
Outlook 07.10. The Adminstrative Court of
The legal battle is certainly not Appeal of Hesse pronounced a similar
over. Several bookmakers, in decision in November 2007.
particular bwin, have announced 10. European Commission,
Stellungnahme zu dem notfizierten
that they will fight the Interstate Entwurf für einen Staatsvertrag zum
Treaty and filed suits. A first Glücksspielwesen, letter of 14 May
decision has already been 2007.
pronounced in a preliminary 11. European Commission, Ergänzendes
Aufforderungsschreiben
Vertragsverletzung-Nr. 2003/4350.
world online gambling january 2008 07

5. cecile park publishing
Head Office UK Cecile Park Publishing Limited, 17 The Timber Yard, Drysdale Street, London N1 6ND
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