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Establishment and licensing of on-line gambling services in EU

Green paper

According to the Court’s case law under Article 49 TFEU, the concept of establishment is a very broad one, allowing an EU national to participate, on a stable and continuous basis, in the economic life of a Member State other than his State of origin and to profit from this market, so contributing to economic and social interpenetration within the Community (Case C-55/94, ECR 1995, Page I-4165.). However, in order for the provisions relating to freedom of establishment to apply, it is generally necessary to have secured a permanent presence in the host Member State (Case C-386/04, ECR 2006, Page I-8203.). Such a permanent presence could for example be an office set up to follow sport in order to set fixed odds or a commercial office with the objective to promote cross border gambling services or to provide local customer support.

According to the e-commerce directive, a company offering information society services is established where it pursues its economic activity. It is therefore neither the place where the technology supporting its website is located nor the place where the website is accessible. In cases where it is difficult to determine from which of several places of establishment a given service is provided, the place where the company has the centre of its activities relating to the particular service should be the deciding factor. Since a company can use one or multiple servers or a “cloud-based” (A cloud is a platform or infrastructure that enables execution of code (services, applications etc.), in a managed and elastic fashion.) infrastructure and since it can switch and relocate them within a very short period of time, a server cannot be considered a secure link to determine the company’s place of establishment relating to a particular on-line service.

National laws sometimes set quantitative limits on the number of licences that may be held for on-line gambling services or may even ban them altogether within their jurisdictions. (E.g. a prohibition or a legal or de facto monopoly for one or more categories of gambling services). Other Member States do not set limits on the total number of licences that they may issue – a licence is given to any on-line operator that meets a number of conditions set out in law or regulations. Licences may be limited in time or granted for an undefined period. Within the EU, the largest number of licensed on-line gambling operators is to be found in Malta (ca 500
licences in 2009).

The current regulatory situation in the Member States is such that operators may be required, when offering the same type of on-line gambling service (e.g. sports betting) in different Member States, to apply for a licence in each of these Member States. Certain Member States recognise licences issued in other Member States that are notified to them (white listing) and allow such licensed providers to offer their on-line gambling services into their territories without an additional licence. Others may take account of such licences when issuing their own licences to such operators but impose double licensing regimes whereby each operator, irrespective of whether he is operating in another Member State, must be licensed within their territory before he can offer such services.

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