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Gambling Restrictions upon Arts. 43 and 49 EC Treaty in GERMANY

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Justification

  • National measure
    • Compatibility with EC law, in particular with the principle of proportionality

Public order, money laundering, crime

  • 284 ff Criminal Code (StGB) in the amended version of the 13.11.1998 (BGBl. I 3322), last amendment the 15.12.2004 (BGBl. I 3396) punishes the operation, organisation, transmission of and publicity for unlicensed games of chance
    Justification: overriding reasons relating to public interest and social order (avoidance of an increase of the human passion for gambling and its exploitation for private or commercial profits and guarantee of an ordered course of the gaming activity; avoidance of the risk of crime and fraud by creating a system of official licensing according to EC Law)
    Interstate agreement concerning lotteries, Staatsvertrag zum Lotteriewesen (LottStV), 18.12.2003,13.2.2004 provides for a State or predominantly State controlled operation of games within the scope of the Länder legislation
    Justification: sec. 1 LottStV: Control of the human passion for gambling, avoidance of excessiveness and abuse for profitmaking, insure compliance with rules and use of proceeds for public interests.
    • A. A rising number of German courts raise doubts as regards the conformity of German gaming legislation, in particular sec. 284 StGB and the Länder legislation providing for State operators or State dominated monopolists, with the EC treaty provisions.
    • E.g.: BVerfG, 1 BvR 1054/01, 28.3.2006; BVerfG, 1 BvR 223/05, 27.4.2005; BVerfG, 1 BvR 1446/04, BVerfG, 1 BvR 2495/04, 1.12.2004, 26.8.2004; HessVGH, AZ.: 11 TG 3060/03, 9. 2. 2004; Az.: 11 TG 2096/04, 27.10.2004; LG Hamburg, 629 Qs 56/04, 12.11.2004 ; OVG Schleswig-Holstein 3 MB 80/04, 18.01.2005; OVG Sachsen, 3 BS 28/04, 405/03, 22.12.2004 ; VG Karlsruhe, 11 K 160/04, 10. 5. 2004 (Baden- Württemberg); VG Aachen, 3 L 17/04,12. 11. 2004N (Nordrhine-Westphalia); VG Minden, 3 L 804/04, 12.11.2004 (Nordrhine-Westphalia); LG Karlsruhe, 14 O 3/04 – KfH III, 21. Januar 2004 (Baden-Württemberg) LG Baden-Baden, 2Qs 157/04, 2.12.2004 (Baden- Württemberg) LG Darmstadt, 3 Qs 144/05, 11.03.2005 (Hessen) LG München I, 5 Qs 41/2003 27. Oktober 2003 (Bavaria) AG Heidenheim, 3 Ds 424/03, 4.12. 2003 (Baden- Württemberg) AG Recklinghausen (Nordrhine-Westphalia); 32 Ds 11 Js 474/04, 10.03.2004.
    • 1. Constitutional Court (BVerfG 1 BvR 1054/01, 28.3.2006)
      The Constitutional Court most recently held that the Bavarian sports bets monopoly is unconstitutional (Art. 12 GG) and herby referred to the Gambelli-Criteria stating that the examination of constitutionality follows the same criteria as the analysis of the EC-law compatibility The plaintiff, unsuccessfully trying to obtain a license, argued that the monopoly on bets would be unjustified and disproportionate, considering the official justifications as unsuitable for achieving the objectives they purport to attain and the objectives as such a pure allegation. The Constitutional Court indeed confirmed that the legislation of the Land in question (Bavaria) which provides for a State monopoly has to be revised because it violates the constitution. According to the Court it is in principle in the discretion of the legislator to opt for a State gaming monopoly, however, the restrictions the legislator’s decision entails must not be disproportionate. The Court confirmed that the prevention of gaming addiction and the prevention of crime is in principle an important reason of public interest (reference was here made to concrete studies, see Hayer/Mayer, Das Suchtpotential von Sportwetten, Sucht 2003, 212). The court stresses however that fiscal interests do not constitute a valid justification.The Court points out that the Bavarian monopoly actually fails to pursue its objectives (prevention of gaming addiction etc.) in a coherent manner and that the interplay of public interest objectives and State fiscal interests becomes contradictory. It is open if this judgement leads to the demise of the State monopoly, as he court obliges the Bavarian legislator to change the legislation at issue until the end of 2007 but leaves it in the discretion of the legislator to either admit a controlled access of private operators to the market or to strictly regulate the marketing strategy of the state operator in a way corresponding to its objectives such as consumer protection. It also claimed a control effectuated by a neutral body. In the meantime the interdiction of commercial betting by private operators is maintained but the State monopoly has to be made consistent with the alleged aims with immediate effect. The court did not pronounce itself on sec. 284 StGB but left its application in the discretion of the instance courts. It has however to be recalled that the decision did not concern a cross border gambling case but the issuance of a license to a German operator
    • 2. High Administrative Court OVG Saxony, (3 BS 28/04, 405/03, 22.12.2004)
      In the same sense the OVG Saxony took position, stating that a monopoly on betting activities must however really aim at limiting the possibilities to gamble and the financing of social activities resulting from the income of such games must be an incidental consequence of, and not the reason for, such restrictions. It is difficult to reconcile a desire to prevent the danger posed to society by private Oddset-betsoperators as a justification for a state monopoly with the advertisement for sports bets in the media by the State, as is the case in Germany.
    • 3. Administrative Court VG Minden, (3 L 804/04, 12.11.2004)
      According to the VG Minden, it can not be stated that the State’s behaviour canalises or limits the human passion for gambling. On the contrary, the conclusion would rather be that the state continuously extends its offer of gaming by means of aggressive advertising campaigns in order to ensure sufficient revenues.
    • 4. Administrative Court VG Osnabrück, 2 B 60/03, 27.5.2004
      The VG Osnabrück decided in a provisional decision that the interest of the plaintiff exchanging bets with a foreign operator to exercise his profession outweighs the public interest in executing the prohibition order. According to ECJ jurisprudence, restrictions of the gaming market can be justified if they aim systematically and coherently at limiting betting activities. The financing of social activities must only be a consequence and not the purpose of a monopoly. It is to be questioned, if the state monopoly really aims at a limitation of betting activities and the protection of players and if the economic aspects are a mere side effect of state controlled gaming. The state operator incoherently recurs to massive advertisement to get financial means for public projects and equilibrate the fiscal deficit. It must be discussed if a monopoly is the only way to guarantee consumer protection and the public order or if a license requirement combined with an obligation to transfer the net proceeds would not be sufficient.
    • 5. Administrative court VG Karlsruhe, 11 K 160/04, 10.5.2004
      In a provisional procedure against an official order interdicting a bookmaker in Mannheim to exchange bets to England the VG Karlsruhe raised doubts as regards the lawfulness of the order and states that the private interest of the affected person must outweigh the public interest in immediate enforcement. In the opinion of the court the interdiction of private betting operators in Baden-Württemberg might be not compliant with EC-law elaborating in detail that the justifications of its restrictive provisions are counteracted by aggressive advertising campaigns, and indicating that the British contract party of the Mannheim betting operator might be limited in his rights provided in Art. 43, 48 EC as the prohibition order limits his economic activity in another EU Member State.
    • 6. Constitutional Court (BVerfG, 1 BvR 223/05, 27.4.2005)
      The Constitutional Court specified that there are doubts regarding the conformity of sec. 284 StGB with the Gambelli criteria. It stated that the Courts of Instance which were called upon to rule in a provisional procedure about a sports bets case did not take into consideration the supremacy of application of the community law and the criteria set up by the European Court of Justice, when examining whether the interest of a sports bets operator in continuing his business outweighs the public interest in enforcing the prohibition order. This decision is criticised to be outdated because of the decision 1 BvR 1054/01 even if the latter did not concern a cross-border gambling case (see below under B. 8, OLG Köln, 6 U 145/05, 21.4.2006).
    • 7. Constitutional Court (BVerfG, 1 BvR 1446/04, 1 BvR 2495/04, 1.12.2004, 26.8.2004)
      The Constitutional Court criticised the instance courts denying that the interest of a businessman exchanging sport bets in continuing his business outweighs the public interest in enforcing the prohibition order without taking into account the fact that the plaintiff exchanged bets with a bookmaker holding a license of another EU-Member State and that the circumstances of the case had changed because of the new ECJ-jurisprudence in the matter (Gambelli-case). This might lead to sec. 80 VII 2 VwGO, which provides for the reversal or modification of a ruling made in a provisional procedure (see also VGH Baden-Württemberg, NVwZ 1999, S. 785). The court of instance should also have taken into account the fact that the plaintiff tried to obtain in vain an exchange license from the Monopolist West-Lotto.
    • 8. County court AG Heidenheim (42 Js 5187/03, 19.08.2004)
      Another aspect was relieved by e.g. the AG Heidenheim. The court stated that other less intrusive measures than a monopoly could fulfil an equal purpose and cites the ”prohibition of massive publicity, a strict licensing system and other control mechanisms”. It held that in the light of the ECJ jurisprudence the legislator has to verify the efficiency and necessity of the measures taken in his discretion and to set forth in detail that they are necessary. He mustn’t solely allege that this „is the case“. In case of doubt the state should first choose a less drastic measure and recur to a more drastic one only if it becomes clear that the first one taken was not sufficiently effective.
    • 9. AG Baden-Baden (Az.: 5 Cs 305 Js 2486/04)
      According to the AG Baden-Baden, Az.: 5 Cs 305 Js 2486/04 AK 288/04, 21.10.2004, the offering of bets on the basis of an English license is not punishable. Neither the wording of sec. 284 StGB nor its interpretation in the light of EC law justify a restriction to licenses issued by German authorities. A license issued in a Member State is valid in another. Another interpretation would violate the EC freedom to provide and receive services.
    • 10. VG Hamburg, 16 E 885/06, 21.4.2006.
      After the BVerfG decision of 28.3.2006 (1 BvR 1054/01) in a case concerning the cross border transmission of bets, the court raised important doubts as to the compatibility of gaming rules with EU law as set out in the Gambelli criteria and suspended the prohibition order, stressing that dangers for the public order justifying the immediate enforcement of the order have not been sufficiently set forth.
    • B. On the other hand several courts consider the restrictions stipulated by the gaming legislation and especially sec. 284 StGB to be justified and proportionate.
    • E.g.: OLG München, 6 U 5104/04, 27.10.2005; BGH, I ZR 317/01, 1.4.2004; BGH I ZR 279/99 (OLG Köln, 6 U 53/98, 22.10.1999), 14.3.2002; BVerwG 6 C 2.01, 28.3.2001; BayVGH, 24 CS 04.1101, 21.12.2004; VGH Baden- Württemberg, AZ: 6 S 1288/04, 15.1.2005; BayObLG (Bavaria), 5St RR 289/03, 26.11.2003; Hanseatisches OLG, 5 U 32/04, 312 O 339/03, 19.8.2004; OLG Köln, 6 U 53/98, 22.10.1999, (confirmed by the BGH in the appeal; BGH I ZR 279/99, 14.3.2002 VG München, M 16 K 02.2154, 27. 1. 2004.
    • 1. BayVGH, 24 CS 04.1101 21.12.2004.
      According to the BayVGH a license requirement bases on overriding public interests (regulation of the demand for games, state control of an ordered course of games, avoidance of exploitation of the human passion for gambling for private or commercial interests) which justify barriers against the freedoms of the EC Treaty. The ECJ judgement in the case Gambelli of 6 November 2003 did not bring any substantial changes. (now see BVerfG 1 BvR 1054/01)
    • 2. BGH, I ZR 317/01 1.4.2004
      Sec. 284 StGB forbids only the operation of games without permission of the authorities and is in so far justified by imperative reasons of public interest. As it does not decide whether and how far games of chance as such are permitted a violation of the EC Treaty freedoms cannot be stated. As according to community law it is in the discretion of the State to forbid gaming even entirely national gaming rules can stipulate an authorisation requirement for the operation of games. The question of whether the provisions concerning the authorisation of commercial games are incompatible with the EC Treaty freedoms does not arise within the scope of sec. 284 StGB as the organisation of games is in any case not legal without authorisation granted by a German Land. Any operator wishing to act on German territory has first to take legal action in order to gain the granting of a license and the examination of EC law aspects has to be reserved to this administrative procedure. An internal authorisation is also not replaceable by a foreign license, because the principle of origin in Art. 3 E-Commerce-directive of 8. June 2000 is not applicable.
    • 3. BayObLG, 5 St RR 289/03, 26.11.2003
      According to the BayObLG Oddset-bets are games of chance within the meaning of sec. 284 StGB. There are no doubts concerning the constitutionality of sec. 284 para.1 StGB and its conformity with EC-law. Apart from the fact that the Gambelli case was based on slightly different facts, it did not change the BayObLG jurisprudence. The court only remarks that a justification based on the public order (necessity to limit incentives to gamble) is not a valid justification to the extent that the national authorities encourage consumers to participate in games to increase the revenues for the state’s budget. The defendant’s argument that fiscal interests are the main reason for and not simply an additional consequence of the restrictive national gaming policy finds no support as neither the stated goals of the legislator nor the current practice of sports bets can provide sufficient proof of it. (now see BVerfG 1 BvR 1054/01)
    • 4. BVerwG (6 C 2.01, 28.3.2001)
      The motifs of the legislator (limitation and canalisation of the human passion for gambling, prevention of gambling addiction and loss of one’s wealth, prevention of accompanying criminality and controlled course of the game) justify the ban on private operators from the gaming market. As the ECJ jurisprudence shows, Community law accepts these arguments as justifications for a barrier to the principle of freedom to provide or receive services.
    • 5. VG Münster (1 L 118/04, 11.3.2005)
      According to the VG Münster, 1 L 118/04, 11.3.2005, the Gambelli decision does not raise doubts regarding the Länder license requirement, even if the plaintiff cites the ECJs argumentation on Member States who base their restrictions on the aim of limiting gaming opportunities but excessively encourage gambling. First the license requirement is not only based on the reduction of gaming opportunities but also on the controlled course of the game (§ 2 para. 1 S. 1 Sportwettengesetz NRW). Second the ECJ did not state a contradictory behaviour in Germany as the German gaming systems were not object of the Gambelli proceedings. It is furthermore doubtful if the Land NRW in practice really excessively encourages gambling.
    • 6. A recent example for the internal controversy concerning the compatibility of national regulatory measures with the EC-treaty and the ECJ jurisprudence is provided by two cases decided differently by the same court (LG Köln) on the same day
      In a civil judgement (LG Köln, 81 O 30/05, 14.7.2005) the court held that a German license is obligatory for the operation of and advertisement for sports bets. Despite the fact that the German rules restrict the freedom to provide and receive services, the case Gambelli was considered to be based on totally different facts and thus not relevant. In a criminal law case (LG Köln, 105 Qs 80/05, 14.7.2005) the court decided that sec. 284 StGB violates the freedoms guaranteed by the EC Treaty. According to the court, the Gambelli criteria have to be taken into consideration (see BVerfG 1446/04, 2495/04, OVG Sachsen, 22.12.2004, 3 BS 405/03; HessVGH, 11 TG 3060/03, 9. 2. 2004 who decided in favour of upholding the business of the bookmaker). In the light of these criteria the German provisions constitute an unjustified obstacle to the freedom to provide services and the freedom of establishment for a bookmaker established and licensed in another Member State.
    • 7. OLG Köln 6 U 145/05, 21.4.2006
      In one of the first decisions after the decision of the Constitutional Court (1 BvR 1054/01) the OLG Köln states that according to the provisions stipulating State monopolies on sports bets (also those in Nordrhine-Westphalia) have -despite of their inconstitutionality- been declared applicable until the 31.12.2007. In consequence restraining orders can be enforced. In this context the court consideres the former decisions of the Constitutional court on the inenforceability of such restraining or prohibition orders to be obsolete 27.04. ( I BvR 223/05) and 27.09.2005 (I BvR 757/05 and I BvR 789/05). The court raises doubts as to the EC law compatibility of the current lottery marketing practice but does not clarify the question any further as its answer is considered to be only decisive in a procedure for licensing, reference is made to the judgement of the BGH, 1.4.2004, I ZR 317/01 – “Schöner Wetten”) Even if the administrative provisions of the Länder violate EC law, the license obligation would not automatically become obsolete. An EC law incompatibility has to be pleaded exclusively in the administrative procedure. It states that even if a monopoly is considered to be EC law incompatible, games of chance cannot be freely permitted and a license would depend on the liability and financial standing of the operator to secure the protection of the players. The alternative would only be a “controlled admission within the limits set by law.” A prohibition of a sports bets operation because of the lack of any such control cannot violate EC law. The court decided therefore not to ask for a preliminary decision of the ECJ.
    • 8. OVG Sachsen-Anhalt, 1 M 476/05, 4.5.2006
      The court consideres the State monopoly to be compatible with EC law. As the decision of the BVerfG 1 BvR 1054/01, 28.3.2006 led to immediate changes of the current advertising practice of State operators which began to drastically restrict advertising measures, the prediction is justified, that the State monopoly will fit the criteria of the ECJ. A general exemption from the authorisation requirement for the transmission of bets was not considered necessary to meet the requirements of EC law.
  • Lottery and Sports bets Acts of the Länder:
    e.g. Lower Saxony: Sec. 3 para. 2 Act on lotteries and bets – Niedersächsisches Gesetz über das Lotterie- und Wettwesen, 21.6. 1997 (GVBl. S. 289), last amendment 12. 12. 2003 (GVBl. S. 446): Only a company whose shares are indirectly or directly held by the Land may hold lottery or betting license for commercial gaming, other shareholders must be legal entities organised under public law or charities; licenses are only granted if there is sufficient need.
    • E.g. Administrative Court VG Stade, 6 B 1674/03, 27.11.2003 (Lower Saxony)
      In the Gambelli judgement the ECJ did finally not state a violation of the freedom to provide or receive services. The ECJ held that national provisions providing monopolies may constitute an obstacle to the EC Treaty provisions, but explicitly left the decision about a possible justification of those monopolies to the national courts. The ECJ established its former jurisprudence holding that it is within the discretionary power of the Member States to set barriers to the freedom to provide services in order to protect its public order. Sec. 3 para. 2 NLottG is therefore “justified for reasons of public interest and proportionate”
  • e.g. Bavaria: State Lottery and Betting Act -Gesetz über die vom Freistaat Bayern veranstalteten Lotterien und Wetten (BayStaatslotteriegesetz), 29. 4.1999 (GVBl. 1999, 226), last amendment 24.04.2001 (GVBl. 2001, S.140): Bavaria organises games of chance by a State institution without legal personality under the authority of the Ministry of Finance, The task can only be transferred to a private legal entity whose sole shareholder is the Land. The monopoly has been declared unconstitutional in its present configuration (see BVerfG 1 BvR 1054/01, 28.3.2006 cited above and the German report under chapter III/D preliminary comment and table)
    Justification: Ratio legis of the Bavarian Act on state lotteries is to satisfy the human passion for gambling but at the same time to minimize the dangers as gaming addiction and its negative consequences as destruction of the basis of existence, delinquency, manipulation, fraud, money laundering, irregular surrender of profits by unfair private operators.
    • E.g. BVerwG 6 C 2.01 (VGH München, 30.8.2000, 22 B 00.1833; VG München, 4.4.2000, 16 K 98.12222), 28.3.2001
      The motifs of the legislator (limitation and canalisation of the human passion for gambling, prevention of gambling addiction and loss of one’s wealth, prevention of accompanying criminality and controlled course of the game) justify the ban on private operators from the gaming market. This ban is in conformity with the federal Constitution and EC Law. As the ECJ jurisprudence shows, Community law accepts these arguments as justifications for a barrier to the principle of freedom to provide or receive services.
  • Casino Acts of the Länder
    e.g. Casino Act of the Saarland, Saarländisches Spielbankgesetz vom 9. Juli 2003 (ABl. S. 2136): Monopoly of State dominated entities (more than 50 % of the shares of a private law entity must be held by the Land)
    • E.g. BVerwG, 6 B 10.04, 25.2.2004
      The Casino Act of the Saarland is not unlawful. According to the established case law, the licensing of state casinos is possible and can be regulated in a strict way, the issuance of licenses can be lawfully limited to State operators. (BVerwG 1 C 19.91, 23 August 1994 , BVerwGE 96, 302 = Buchholz 11 Art. 12 GG Nr. 231 = GewArch 1995, 24).
  • Horse races, Betting and Lottery Act – Rennwett- und Lotteriegesetz (RennLottG), 8 April 1922, last amendment 24.8.2002 (BGBl. I 3412): The authorisation of bookmakers can be subject to conditions
    • E.g. VG Saarlouis 1 K 78/99, 17.1.2000
      The limitation of a bookmaker’s permit according to sec. 2 RennWLottG to the exchange of bets with bookmakers holding internal licenses is lawful. A foreign registered bookmaker needs a German license if he renders possible the participation in bets on horse races by his own facilities. Internet-Terminals of a German agent are to be considered as an own facility, if bets of the foreign bookmaker are accepted there. It is not yet clear if and when internet-bets offered in Germany by a foreign operator but without intervention of a German betting office are subject to German law. OVG Hamburg, 4 Bf 44/01, 12 VG 914/2000 An interdiction of the exchange of bets with foreign bookmakers is not lawful. The permit issued on the basis of sec. 2 Rennwett/LottG comprises the authorisation to exchange bets with foreign bookmakers, the interpretation of the provision does not reveal any indication that the legislator wanted to exclude that possibility. The activities of bookmakers are not limited to those activities which lead to fiscal revenues.

Consumer protection

  • Sec. 284 ff Criminal Code – Strafgesetzbuch (StGB) in the amended version of the 13.11.1998 (BGBl. I 3322), last amendment the 1.9.2005 (BGBl. I 2674)
    Sec. 3, 4 Act on unfair trading – Gesetz gegen den unlauteren Wettbewerb (UWG) , 3.7.2004 (BGBl. I, 1414) last amendment 19. 4. 2006 (BGBl. I S. 866)
    Interstate agreement concerning lotteries, Staatsvertrag zum Lotteriewesen (LottStV), 18.12.2003,13.2.2004
    Lottery and Sports bets Acts of the Länder
    Casino Acts of the Länder
    • See above under “public order”. The reflexions cited above, especially the case BVerfG 1 BvR 1054/01 also refer to the justification “consumer protection”.

Social order, moral and cultural standards

  • Sec. 284 ff Criminal Code -Strafgesetzbuch (StGB) in the amended version of the 13.11.1998 (BGBl. I 3322), last amendment the 1.9.2005 (BGBl. I 2674)
    • See above under “public order”. The reflexions cited above also refer to “social order” grounds. No reference is made to religious or cultural standards

Other grounds

  • Other justifications than those described above have not expressly been set forth, with the exception of charity and promotion of public interest activities, but only as an additional justification Interstate agreement concerning lotteries, Staatsvertrag zum Lotteriewesen (LottStV), 18.12.2003,13.2.2004
    Justification: sec. 1 LottStV: Control of the human passion for gambling, avoidance of excessiveness and abuse for profitmaking, insure compliance with rules and use of proceeds for public interests
    • In BVerfG 1 BvR 1054/01, the Constitutional Court stresses that fiscal interests do not constitute a valid justification.The Court points out that the Bavarian monopoly actually fails to pursue its objectives (prevention of gaming addiction etc.) in a coherent manner and that the interplay of public interest objectives and State fiscal interests becomes contradictory. It also claimed a control of State operators effectuated by a neutral body.

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