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Gambling as a service in European Union in the light of EC Treaty

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1. Article 49 EC Treaty – Freedom to provide and receive services

Art. 49 EC Treaty reads as follows:

Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended.

The Council may, acting by a qualified majority on a proposal from the Commission, extend the provisions of the Chapter to nationals of a third country who provide services and who are established within the Community.

Scope of application and definition of a ”service”

Art. 49 EC Treaty is applicable to nationals and companies (Arts. 55 and 48 EC Treaty) of one Member State providing or receiving a service in another Member State and can be invoked by both the provider and the receiver of services.

The provisions are only applicable in case of cross-border activity. Therefore, either the provider (positive freedom) or the receiver (negative freedom) or the service itself (correspondence services)(1) must cross a border.

Pursuant to Art. 50 para. 1, 2 EC Treaty, services are those normally provided for remuneration, in so far as not governed by the provisions relating to the freedom of movement for goods, capital and persons. They include activities of an industrial or commercial character, activities of craftsmen and activities of the professions, thus independent activities.

Contrary to Art. 43 EC Treaty, which refers to a permanent activity, Art. 49 applies, when the person or company providing a service temporarily pursues an activity in another State.

As a result, the characteristics of a “service” are the temporality of the activity and the fact that it is pursued against remuneration.

Gaming as a “service”

Gambling activities, as such, fall within the scope of art. 49 EC Treaty, as stated in the judgements Schindler, Zenatti and Anomar (2) and confirmed in the subsequent jurisprudence.

According to the ECJ, games of chance/gambling must be deemed to be economic activities within the meaning of the EC Treaty (Art. 2), since they fulfil the two criteria laid down by the Court in its case-law, i.e. the provision of a particular service for remuneration and the intention to make a profit.(3) The provisions concerning the freedom to provide services thus apply to an activity which enables people to participate in gambling in return for remuneration consisting of payment of the stake,(4) as it was explicitly clarified e.g. for the importation of lottery advertisements and tickets for a lottery operated in one Member State into another Member State with a view to the participation by residents of the latter State.(5)

Content of the principle of freedom to provide and receive services

As Art. 50 par. 3 EC Treaty shows, Art. 49 EC Treaty expressly prohibits any discrimination based upon nationality. Moreover, according to ECJ case law, Art. 49 is interpreted as an interdiction of any other restriction upon the free movement of services.(6) In consequence any non-discriminating national measure, applicable without distinction to nationals and aliens, has to be examined as regards its conformity with EU law and to be subject to a proportionality analysis.

2. Art. 43 EC Treaty – Freedom of establishment

Art. 43 EC Treaty reads as follows:

Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. That prohibition shall also apply to restrictions on the setting-up in the territory of any Member State of agencies, branches or subsidiaries by nationals of any other Member States.

The freedom of establishment shall include the right to take up and pursue activities as a selfemployed person and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, under the conditions laid down for its own nationals by the law of the Member State where such establishment is effected, subject to the provisions of the chapter relating to capital.

Scope of application and definition of an “establishment”

The freedom of establishment is applicable to nationals and companies (Arts. 43 and 48 EC Treaty) of a Member State which set up agencies, branches or subsidiaries in other Member States.

Within the meaning of the EC Treaty, an “establishment” exists where a person exercises independent activities in another Member State, which are to be considered as economic activities. That presupposes a permanent economic integration within the territory of another Member State, usually by setting-up agencies, branches or subsidiaries.

Gambling within the scope of Art. 43 EC Treaty

The provision applies in the event that restrictions are imposed on the activities of a company pursuing gaming activities established or wishing to establish in one Member State. Unlike activities described under Art. 49 EC Treaty, it refers to a non-temporary activity exercised from within the economic structure of another Member State. This is, for instance, the case for agencies which establish themselves in other Member States with the aim of collecting bets as intermediaries.(7)

Content of the principle of freedom of establishment

As Art. 43 para. 2 EC Treaty shows, it shall be guaranteed that nationals and companies from other Member States can exercise their profession on a permanent basis in another member state in the same manner as the Member State’s own nationals. Any discriminating restrictions are forbidden. Moreover non-discriminating restrictions concerning the access of nationals of a Member State to the market of another Member State are prohibited, including restrictions on the setting-up of agencies, branches or subsidiaries and all restrictions limiting access to certain professions.(8)

3. Justification and proportionality of barriers to Art. 43, 49 EC Treaty

Both Arts. 49 and 43 EC Treaty prohibit discriminatory measures. Moreover, according to the ECJ jurisprudence, the provisions are to be interpreted as containing prohibitions of any nondiscriminatory restriction (9) to the freedom to provide and receive services as well as the freedom of establishment. National measures have to be based on objective justification grounds, must be suitable to attain the public interest objective alleged and must not go beyond what is necessary to attain it.

A discrimination could only be justified if it falls under one of the exceptions expressly provided for by the EC Treaty for the reasons stipulated in its Arts. 55, 46 (public order, security, health) which are to be applied strictly.

Non-discriminatory restrictions to the fundamental freedoms of Arts. 43 and 49 EC Treaty arising from national measures, applicable irrespective of the nationality, are only permissible if they are justified by overriding reasons relating to the public interest. (10)

The ECJ defined in its jurisprudence i.a. the following requirements as imperative to the public interest:(11): Consumer protection, protection of creditors, protection from unfair competition, enforcement of tax laws, functioning of the law, protection of health, environmental protection, media pluralism, important threat to the financial stability of the social security system, traffic security.

In EC Case law a common formula has been developed for the analysis of the EC law compatibility of national measures. Any objective justification of the restriction of fundamental freedoms of the EC treaty must satisfy a cumulative four-part test. (12) First, the measure breaching a fundamental freedom must not be discriminatory. Secondly, the measure concerned must meet an appropriate overriding public interest objective.(13) Thirdly, the measure must be suitable for securing the achievement of the objectives. And fourthly, the measure must not go beyond what is necessary in order to achieve them.(14)

As regards the proportionality analysis of national measures, it has to be taken into account that the impact of a restriction within the scope of the freedom to provide and receive services is unlike that resulting from restrictions to Art. 43 EC Treaty. Due to the temporality of the cross-border activity under Art. 49 EC Treaty, the proportionality analysis must be even more stringent and substantiated(15) and the possibility that the aim of a national measure can be attained by less severe means must be very closely examined. In that context the ECJ considered, for example, whether the public interest alleged to justify national measures is not already protected by the legal and regulatory provisions of the Member State from which the service provider originates.(16)

 

(1) See C-294/97, Eurowings Luftverkehr, ECR 1999, I-7447, para. 33, 34; C-106/89, Bleckmann, ECR 1990, I-4421; C-398-95, Syndesmos Ton en Elladi Touristikon/Ypourgos Ergasias, ECR 1997, I-3875; C-286/82 &. 26/83, Luisi and Carbone, ECR 1984, 377; C-384/93, Alpine Investments, ECR 1995/I-1141, para. 22.

(2) C-275/92, Schindler, 24.3.1994, C-67/98, Zenatti, 21.10.1999,C-6/01, Anomar: 11.9.2003: see in detail below, under B. Please note that the information concerning ECJ jurisprudence relating to gambling and cited in the tabular summary under B below – that is the three just mentioned cases as well as C-124/97, Läära, 21.9.1999, C-243/01, Gambelli, 6.11.2003, C-36/02, Omega, 14.10.2004, C-42/02, Lindman, 13.11.2003 – is based on the wording of the judgements as published on the official website of the ECJ (http://www.curia.eu.int/). As a result, these cases are cited hereafter by the name of the (first) party involved.

(3) Anomar, para. 47, 48.

(4) Zenatti, para. 24.

(5) Schindler, para. 37.

(6) See C-33/74, Van Binsbergen, ECR 1974, 1299 et seq.; C-76/90, Saeger/Dennemeyer, ECR 1991 I-4221, para. 12.

(7) Gambelli, para. 46, 48.

(8) C-255/97, Pfeiffer/Löwa, ECR 1999, I-2835; C-19/92, Kraus, ECR 1993, I-1663, para. 32; C-55/94, Gebhard, ECR 1995, I-4165 para. 37.

(9) See the ECJ jurisprudence C-33/74, van Binsbergen, C-55/94, Gebhard, C-76/90, Saeger/Dennemeyer.

(10) See especially C-33/74, van Binsbergenpara. 10 et seq.

(11) See also C 288/89, Collectieve Antennevoorziening Gouda, ECR 1991 I, 4008 para. 13, 15; C-110-111/78, Ministère Public v Van Wesemael, ECR 1979, 35, para. 28; C 220/83 Commission v France, ECR 1986, 3663, para. 20; C-15/78, Société Générale Alsacienne de Banque v Koestler, ECR 1978, 1971 para. 5.

(12) C-55/94, Gebhard, ECR 1995 I-4165 para 37.

(13) See especially C-33/74, van Binsbergen, ECR 1974, 1299/1309 et seq., para. 10 et seq.

(14) C-55/94, Gebhard, ECR 1995, I-4165/4197 para. 37; C-76/90, Saeger/Dennemeyer, ECR 1991 I-4221, para.12; see also C-193/94, Skanavi and Chryssanthakopoulos, ECR I-929, para.34 to 39, and C-459/99, MRAX, ECR 2002, I-6591, para. 89 to 91; C-54/99, Église de Scientologie, para. 18 ; C-368/95, Familiapress, para. 34; C-275/92, Schindler, para. 60.

(15) C-76/90, Säger/Dennemeyer, ECR 1991, I 4221/4243, para.13: “In particular, a Member State may not make the provision of services in its territory subject to compliance with all the conditions required for establishment and thereby deprive of all practical effectiveness the provisions of the Treaty whose object is, precisely, to guarantee the freedom to provide services”.

(16) C-222/95, Parodi, C-369/96 and C-376/96, Arblade.

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