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Gambling taxes and barriers in The Netherlands

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Taxes

The taxation of games of chance in the Netherlands is dealt with in the Taxation Act on Games of Chance of 1961. According to its article 2, the Taxation Act on Games of Chance does not apply to slot machine gambling (either in or outside casinos), life insurance and certain loan regimes.

Gaming taxes are due on winnings in domestic games of chance (excluding casino games)662 and winnings in foreign games of chance (including casino games), in so far as the winner of the prize is domiciled in the Netherlands or has his residence in the Netherlands (article 1 par. 1 litt. b and c Taxation Act on Games of Chance).663 Operators of casino games in the Netherlands are equally subject to taxation (article 1 par. 1 litt. a Taxation Act on Games of Chance). According to the case law, the Taxation Act on Games of Chance does not apply to pyramid schemes.664

The Dutch legislature recently modified the Taxation Act on Games of Chance and as of 1 January 2006, increased the taxes that are levied on prizes won in games of chance665. A tax of 40.85% (previously, 33.33%) is levied on the gross gaming revenue generated by casino gaming (article 5 par. 1 litt. a of the Taxation Act on Games of Chance). For other games of chance, such as lotteries and sports or horserace betting, a gaming tax of 29% (previously, 25%) is imposed on winnings (article 5 par. 1 litt. b of the Taxation Act on Games of Chance).666 Gambling taxes on prizes won in lottery games (including the State Lottery, the Instant Lottery, the Lotto and charitable lotteries), as well as by sports and horserace betting, are withheld at the source; winnings are paid to the players net of tax (article 5a par. 2 of the Taxation Act on Games of Chance). Article 4 par. 2 of the Taxation Act on Games of Chance provides in a so-called cumulative rule for lottery winnings and winnings on sports and horserace bets: all winnings which are paid to the same winner on the same occasion are treated cumulatively, as if they had been won in a single event.

No gaming tax is levied if the prize money does not exceed 454 euro,667 or if the prize money does not exceed the stake money (article 4 par. 1 litt. a and b, Act on Games of Chance). Moreover, games of chance are exempted from VAT in the Netherlands. VAT is only levied on slot machine gambling.

LISTING

LEGISLATION ENACTED

General

– Taxation Act on Games of Chance of 14.09.1961, O.J. 1961, 313.669
– Act on Games of Chance of 10.12.1964, O.J. 1964, 483.670
– Act establishing the Foundation for the Exploitation of the Netherlands State Lottery of 14.05.1992, O.J. 1992, 282.671
– First draft bill regulating interactive gambling. (March 2002, rejected by the Minister of Justice, no regulation in force yet)
– Decree fixing the amount referred to in article 7a Act on Games of Chance of 17.08.1974, O.J. 1974, 476.672
– Decree establishing the Dutch Gaming Board of 6.12.1995, O.J. 1995, 595.673
– Decree on games of chance of 1.12.1997, O.J. 1997, 616.674
– Decree on machine gambling of 23.05.2000, O.J. 2000, 213.675
– Decree transferring the responsibility for the Law on games of chance to the Minister of Justice of 19.02.2004, O.J. 2004, 79.676
– Decree relating to the supervision of the Dutch gaming regulations of 30.09.1986, O.J. 1987, 2.677
– Decree regarding the application of article 7 litt. e Act on Games of Chance of 8.11.1999, O.J. 1999, 222.678
– Decree relating to article 7 litt. e Act on Games of Chance and the conversion in to the euro of 29.11.2001, O.J. 2001, 237.679
– Regulation relating to the supervision of the Act on Games of Chance of 9.11.1976, O.J. 1987, 2.680
– Regulation on gambling machines of 25.05.2000, O.J. 2000, 223.681

Lotteries

– Act on Games of Chance of 10.12.1964; Title II article 8 ff State Lottery; Title IIa article 14a ff Instant lottery; Title IV a De Lotto.
– Act establishing the Foundation for the Exploitation of the Netherlands State Lottery of 14.05.1992, O.J. 1992, 285.682
– Decree on games of chance of 1.12.1997.

Casino Gaming

– Act on Games of Chance of 10.12.1964; Title IVb article 27g ff Casinospelen
– Decree on games of chance of 1.12.1997
– Decree on machine gambling of 23.05.2000
– Decree relating to the supervision of casinos of 9.11.1976.
– Decree relating to the establishment of a casino in The Hague of 28.12.1978, O.J. 1979, 19.683
– Decree relating to the establishment of a casino in Breda, Groningen, Nijmegen and Rotterdam of 28.08.1985, O.J. 1985, 175.684
– Decree relating to the establishment of a casino in Amsterdam of 7.04.1986, O.J. 1986, 82.685
– Decree relating to the supervision of the Dutch gaming regulations of 30.09.1986, O.J. 1987, 2.686
– Decree relating to the establishment of a casino in Enschede of 1.12.1993, O.J. 1993, 237.687
– Decree relating to the establishment of a casino in Haarlemmermeer of 21.02.1995, O.J. 1995, 42.688
– Decree relating to credit card transactions in casino games of 26.06.1995, O.J. 1995, 336.689
– Decree regarding the application of article 7 litt. e Act on Games of Chance of 8.11.1999, O.J. 1999, 222.690
– Decree relating to article 7 litt. e Act on Games of Chance and the conversion in to the euro of 29.11.2001, O.J. 2001, 237.691
– Decree relating to the establishment of a casino in Valkenburg-Houthem of 19.02.1976, O.J. 1976, 48.692
– Regulation relating to the supervision of casinos, O.J. 1976, 225.693
– Regulation relating to the supervision of the Act on Games of Chance of 9.11.1976, O.J. 1987, 2.694
– Regulation on gambling machines of 25.05.2000, O.J. 2000, 223.695

Machine Gambling Outside Casinos

– Act on Games of Chance of 10.12.1964; Title VA article 30 ff Speelautomaten.
– Decree on games of chance of 1.12.1997.
– Decree on machine gambling of 23.05.2000, O.J. 2000, 213.696
– Regulation on gambling machines of 25.05.2000.

Betting

– Act on Games of Chance of 10.12.1964; Sport betting: Title III article 15 ff. Sportprijsvragen; Horse races: Title IV article 23 ff De totalisator.
– Decree on games of chance of 1.12.1997.

Bingo

– Act on Games of Chance of 10.12.1964; Article 7c.
– Decree on games of chance of 1.12.1997.

Media Gambling Services

– Act on Games of Chance of 10.12.1964; Article 7a ff.
– Decree on games of chance of 1.12.1997.

Sales Promotional Gambling

– Act on Games of Chance of 10.12.1964; Article 7b.
– Decree on games of chance of 1.12.1997.

Charity Gambling

– Act on Games of Chance of 10.12.1964; Article 1 subsection a juncto article 3 Act on Games of Chance.
– Decree on games of chance of 1.12.1997.

BARRIERS

Panorama

General overview

The Parliamentary history of the Dutch gaming regulations reveals that the Dutch gaming regulations are intended to safeguard the interests of consumer protection and to prevent fraud, illegal gaming and gambling addiction.732

Article 1 subsection a, Act on Games of Chance733 provides that games of chance734 may only be organised if validly licensed by the Dutch authorities. Gaming licenses can be issued for lotteries (including the state lottery, the lotto, the instant lottery and other charitable lotteries), sports betting, horse racing, casino gaming, machine gambling, shopping week actions, bingo and prize contests. No licence can be issued for pyramid schemes (article 1a Act on Games of Chance). Contrary to other games of chance, pyramid schemes necessarily result, by their very nature, in a loss to the participants. Various court decisions confirm that the organisation of pyramid schemes violates the Dutch gaming regulations and the Act on Canvassing.735

The Act on Games of Chance and the Decree on Games of Chance736 provide that the issuance of licences for games of chance is subject to a series of strict conditions, relating inter alia to the advertising and the practical organisation of the game of chance. Persons under 18 years of age are excluded from participation in games of chance. At least a fixed percentage of the gross revenue of games of chance must be dedicated, in general, to a charitable or public purpose. Only machine gambling is considered a regular commercial activity; its proceeds are not dedicated to a charitable purpose. The net proceeds of the State Lottery and casino games benefit the State Treasury.

Gaming licenses are issued by the Mayor and the City Council (maximum prize money of 4.500 euro) or the Department of Justice (article 3 par. 1 Act on Games of Chance). The Minister of Justice is responsible for the implementation of the Dutch gaming regulations. The Dutch Gaming Board advises the Minister on the issuance or renewal of gaming licences and supervises whether the licensees comply with the requirements of the different gaming regulations. The Board is composed of seven independent members appointed by the Government. The Board is solely advisory; it has no administrative powers.737 Current licensees include the Foundation for the Exploitation of the Netherlands State Lottery, the National Sports Totalizator Foundation (De Lotto), Scientific Games and the National Foundation for the Exploitation of Casino Games in the Netherlands (Holland Casino). The bankgiro-lottery, the postal code lottery and the sponsor lottery are licensed to organize a national charitable lottery. These licenses are issued for a period of 5 years, as are the licenses for the National Sports Totalisator Foundation (De Lotto) and horse betting.

The State Lottery and Holland Casino have permanent licenses. All current licensees of national gaming licences are Dutch registered legal entities738.

No specific provision of the Act on Games of Chance addresses promotional games of chance (including sweepstake contests or media gambling services) or on-line games of chance.739 The Dutch courts have repeatedly argued that promotional games of chance or on-line games must comply with Dutch gaming law if they are addressed to Dutch consumers or if participation by Dutch residents was possible.740 The organisation of on-line games of chance or (free) promotional games of chance was thus subject to the issuance of a gaming licence by the Dutch authorities. However, since the Act on Games of Chance does not provide for the issuance of a gaming licence for on-line games of chance (even if these games are free), organizing on-line games of chance or (free) promotional games of chance is considered by the Dutch courts to be per se unlawful.741

Anticipating an amendment of the Act on Games of Chance, the Dutch Justice Department recently issued a Code of conduct for promotional games of chance, which entered into force on the first day of January of 2006.742 Pursuant to article 1, par. 7 of the Code,743 a promotional game of chance is a game that promotes certain products or services and the participants in which compete for prizes or bonuses. Success must depend completely or predominantly on coincidence and cannot be influenced by the player. Promotional games of chance may only be offered in order to promote a product or service; they can not constitute an independent game of chance.744 Although the new Code of Conduct allows promotional games to be organised in the Netherlands as of 1 January 2006, it clearly confirms the restrictive attitude of Dutch gaming policy and affirms that, as a general rule, the organisation of promotional games of chance remains prohibited.745 Promotional games of chance may only be organised when a series of (restrictive) conditions are complied with.746 Unlike other games of chance, promotional games of chance are not subjected to the requirement of holding a gaming licence.747

Moreover, interactive internet gaming, which is currently prohibited in the Netherlands, will be allowed on an experimental and provisional basis (refer supra, point II, B, a, 1).748 A draft law which deals with interactive internet gaming – the Amendment of the Act on Games of Chance, containing temporary provisions on games of chance via the Internet – is currently pending before the Parliament of the Netherlands.749 A single on-line gaming licence will be issued for a provisional period of three years to Holland Casino, the current exclusive casino gaming licensee of the Netherlands. Depending on what happens during this trial period, a decision will be made on the possible permanent authorisation of the provision of interactive games via the Internet and on the conditions under which this could take place.750

Advertising for games of chance in the Netherlands must comply with the provisions of the Dutch Advertising Code.751 This self-regulatory instrument requires Dutch advertisers to respect the law and the requirements of good taste and decency. Advertising may not contravene the public interest, public order or morality, nor may it be gratuitously offensive or constitute a threat to mental or physical public health. Specific provisions in the Advertising Code protect the interests of minors. Allegations of violations of the Advertising Code may be submitted to the Advertising Code Committee. The committee must hear the advertisers’ arguments and decide whether the particular advertising campaign conflicts with the Advertising Code. The Advertising Code Committee can also initiate investigations on its own initiative. If an advertisement is found to infringe the Dutch Advertising Code, the Committee will admonish the advertiser to stop using it in its current form. These admonishments have only persuasive authority; they are not legally binding.

In reaction to comments by some lower-echelon Dutch courts, that an abundance of gaming advertising could conflict with restrictive gaming policy and might undermine the protection of consumer interests, as well as the prevention of gaming addiction,752 the Dutch authorities recently enacted a new Advertising Code for Games of Chance organised by Dutch Gaming Licensees.753 This new self-regulatory instrument sets forth strict advertising guidelines for the current licensed gaming operators, including the licensed operators of gambling machines outside casinos,754 in order to prevent excessive gaming and to protect the interests of consumers (see, inter alia, articles II.1 through II.7 of the Code) and minors (see, inter alia, articles III.1 through III.7 of the Code). This new self-regulation entered into force on 15 February 2006. A special advertising code755 exists for prize contests.756 In respect of any special advertising code, the General Section of the Dutch Advertising Code remains in force (article 18 of the Dutch Advertising Code). Complaints regarding non-compliance with a special advertising code can therefore be addressed to the Dutch Advertising Code Committee.

The Dutch gaming regulations result in a series of potential barriers to the free circulation of services and goods. These include:

– Foreign or domestic providers, who act as intermediaries or offer games of chance on Dutch soil, must comply with the restrictive requirements of the Act on Games of Chance and possess a valid Dutch gaming licence. Whether the operator holds a foreign license or complies with foreign gaming regulations is irrelevant. Since the Dutch licensing scheme results in a monopoly or oligopoly for the most commercially important games of chance (i.e. national lotteries, casino gaming, sports betting, horse racing, etc.), licensing only Dutch registered legal entities,757 foreign providers are de facto excluded from accessing the Dutch gambling market. Dutch residents who wish to participate in a foreign game of chance758 must do so through a foreign provider outside the Netherlands.

– (Free) promotional games of chance (including sweep-stake contests and media gambling services) and on-line or interactive games of chance must comply with the provisions of the Dutch gaming regulations. On-line games of chance addressed to Dutch consumers or in which Dutch residents can participate, are considered to be domestic games of chance, subject to the provisions of the Act on Games of Chance. Foreign or domestic operators of on-line games must possess a valid gaming licence issued by the Dutch authorities. In anticipation of a revision of the Act on Games of Chance, promotional games of chance are subject to the requirements of the Code of conduct for promotional games of chance. Moreover, a draft law dealing with interactive internet gaming – the Amendment of the Act on Games of Chance, containing temporary provisions on games of chance via the Internet – is currently pending before the Parliament of the Netherlands.759 A single operator, Holland Casino, will be licensed for a provisional period of three years to organise on-line games of chance in the Netherlands. The organisation of on-line gaming will be subject to a series of strict conditions that protect the interests of consumers and minors and prevent gambling addiction.

– The operation of slot machine gambling (both in and outside casinos) is subject to a triple licensing scheme (cf. infra, III litt. a, 4), allowing only gaming machines of a type approved in the Netherlands. Moreover, only the casino games licensee can obtain a licence to operate slot machines inside its casinos. Compliance with the Dutch gaming regulations is reinforced by criminal penalties imposable on unlicensed foreign or domestic providers of games of chance, on intermediaries who promote participation in foreign games of chance in the Netherlands and even on mala fides consumers who deliberately participate in unlicensed games of chance in the Netherlands.760 Despite the fact that the Act on Games of Chance serves a public interest, a horizontal application of its provisions is deemed to be possible: Dutch licensees whose commercial interests are unlawfully breached by the activities of an unlicensed provider of a game of chance can invoke a violation of the Dutch gaming regulations to claim damages in tort.761 Dutch courts will uphold their claims if it is proven that the unlicensed operators profited from an «illegal advantage»762 over the Dutch licensee by marketing their illegal games of chance in the Netherlands.763

Despite these infringements of the principle of free movement of services, a majority of Dutch courts consider the Dutch gaming regulations to be compatible with European legislation and article 49 of the EC Treaty.764 The Dutch licensing scheme does not discriminate against foreign or non-resident providers, since both foreign and domestic providers can equally obtain gaming licenses. Moreover, to impose a licensing requirement for the organisation of games of chance, subject to a series of strict conditions, is said to be a legitimate and proportionate means of protecting the interests of minors and consumers, as well as countering fraud and gambling addiction. Recent statements of the Dutch authorities765 confirm that the so-called «prohibited unless specifically authorised» policy of the Dutch authorities766 vis-à-vis games of chance, prohibiting the organization of games of chance unless the operator possesses a valid Dutch gaming licence and complies with a series of strict requirements, is to be pursued in the future. The recent enactment of a Code of conduct for promotional games of chance, the new Advertising Code for games of chance organised by gaming licensees and the draft law dealing with interactive internet gaming (Amendment of the Act on Games of Chance, containing temporary provisions on games of chance via the Internet), clearly confirm this conclusion.

So far, only the Administrative Court of Breda, in a decision of 2 December 2005, has decided that restrictions on gaming activities may be justified by imperative requirements in the general interest, such as consumer protection and the prevention of fraud and incitement of gambling. Such restrictions should however be suitable for achieving these objectives, inasmuch they must serve to limit gambling activities in a consistent and systematic manner.

The Court argued that «Pursuant to Gambelli the government’s actions on the regulation of casinos in order to prevent illegality and criminality and to protect consumers against gambling addiction should be coherent and systematic. Because this concerns the justification of an exemption from the principle of the freedom to provide services in the EC, this coherence and systematic structure should be explicit».767 According to the court, the contested decision relating to the issuance of a casino gaming licence failed to specify whether the Dutch regulation on casino gaming is «coherent and systematic» and suitable to achieve the objectives underlying the Netherlands gambling regulations as required for under the Gambelli decision of the ECJ.768 The court thus decided that the contested decision (a refusal to issuance a gaming licence) cannot be upheld and instructed the Netherlands authorities to issue a new decision. In this new decision the Netherlands authorities should answer the question whether the government actions on the regulations concerning casino gambling are coherent and systematic, and evidence of such coherence and systematic structure should be provided. In the event that the coherence and systematic structure cannot be demonstrated, the court holds the view that the justification of the restriction of Article 49 of the EC Treaty contained in Article 27h.1 of the Act on Games of Chance is absent and that said provision should remain inapplicable because it is in violation of Article 49 of the EC Treaty.769

Lotteries

The organisation of a lottery in the Netherlands is subject to a licence requirement, that presupposes a series of conditions.770 Participation of persons under 18 years of age in instant or other lotteries is not permitted.771 Various licenses are issued each year to organise incidental local or national lotteries. Licenses are issued by the local authorities when the total amount of prizes does not exceed 4.500 euro, or by the Department of Justice.772

Currently, three licensees are licensed to organise a national charitable lottery with a total amount of prizes exceeding 4.500.000 euro (the bankgiro lottery, the postalcode lottery and the sponsor lottery). The Dutch Gaming Board supervises their activities and advises the Justice Department on the issuance or renewal of their gaming licence. 50,0% of the net proceeds is earmarked for the benefit of charitable organisations. The licensees decide on the charity sectors they whish to benefit. The Postal Code Lottery donates its proceeds to charity for society and environment, the Sponsor Lottery supports sport, culture and social welfare and the Bank Giro Lottery supports organizations dealing with public health, welfare and culture.

Special provisions in the Act on Games of Chance regulate a State Lottery, an Instant Lottery and a Lotto. The Dutch Gaming Board supervises whether these national lotteries comply with the gaming regulations and advises the Justice Department on the issuance or renewal of gaming licenses.773

Article 8 par. 1 Act on Games of Chance states that the organization of a State Lottery is subject to a licence requirement. Article 9 par. 1 Act on Games of Chance indicates that only one licence can be issued to organise a state lottery. The current licensee is the Foundation for the Exploitation of the Netherlands State Lottery. At least 60% of the proceeds are distributed as prize money (article 8 par. 2 Act on Games of Chance). The net proceeds from the State Lottery are for the benefit of the State Treasury (article 9 par. 2 Act on Games of Chance).

A single licence is also issued for the organization of an Instant Lottery and a Lotto (articles 14a par. 1 juncto 14b par. 1 Act on Games of Chance and articles 27a par. 1 juncto 27b par. 1 Act on Games of Chance). Current licensees include the the National Sports Totalizator Foundation, which is licensed to organise the Lotto and the Instant Lottery. A minimum oft 47.5% and a maimum of 65% of the proceeds of the Instant Lottery are distributed as prizes (article 14b par. 3 Act on Games of Chance). For the Lotto, a minimum of 47.5% and a maximum of 50% of the gross proceeds must be allocated for distribution as prizes (article 27b par. 3 Act on Games of Chance). Contrary to the State Lottery, the net proceeds of the Instant Lottery and the Lotto are for the benefit of charity organisations in the areas of sport, culture, social welfare or public health (article 14b par. 2 Act on Games of Chance and article 27b par. 2 Act on Games of Chance).

For the most commercially important types of lotteries, the lottery licensing scheme in the Netherlands thus results in a monopoly (with respect to the State Lottery, Instant Lottery and the Lotto) or an oligopoly (with respect to the bankgiro lottery, the postalcode lottery and the sponsor lottery), licensing only Dutch legal entities. Moreover, national lottery licences are granted for a five year period (eg. the bankgiro lottery, the postalcode lottery and the sponsor lottery) or, as it is the case for the State Lottery, permanently.

Whereas the different lotteries can sell electronic lottery tickets, only the National Sports Totalizator Foundation is granted the right to offer an on-line or SMS version of its lottery games within its current licence (e-commerce). E-gaming is not allowed. Article 8 of the Lotto’s Rules and Regulations concerning participation in the on-line Lotto774 provides that participation in the on-line Lotto is only possible with a Dutch bank account number or credit card number. Participation in the Lotto with a foreign bank account is prohibited.

The refusal of the Dutch authorities to issue the Foundation for the Exploitation of the Netherlands State Lottery a license to organise a new SMS lottery game called «Sevens», notwithstanding the fact that the National Sports Totalizator Foundation had previously been granted the right to offer an on-line or SMS version of its lottery games within its gaming licence, was deemed valid and not discriminatory by the ‘s Gravenhage District Court.775 Licensing new games of chance would contradict the restrictive Dutch gaming policy and would undermine the struggle against gaming addiction and the protection of minors (i.e. young adults), since the SMS lottery raffle «Sevens» was specifically addressed to 18-24 year olds. A limitation of the Dutch gaming market was considered to be justified by the court, because the Dutch gaming regulations intend to counter fraud, to protect the interests of the young and consumers and to prevent gaming addiction and other adversary effects.776 The court held that a tolerance of SMS lotteries in the past did not oblige the authorities to issue the Foundation for the Exploitation of the Netherlands State Lottery a licence to organise new games of chance.

Article 1 subsection b, Act on Games of Chance states that it is unlawful to promote the participation in foreign games of chance in the Netherlands. It is equally illegal to offer foreign games of chance on Dutch soil if not licensed by the Dutch authorities. The ‘s Hertogenbosch Court of Appeal,777 the ‘s Hertogenbosch District Court778 and the Utrecht District Court779 held that intermediaries who offer foreign lottery games in the Netherlands (each case dealt with participation in the German lottery), must comply with the requirements of the Dutch gaming regulations and possess a valid Dutch gaming licence. Offering foreign lottery games in the Netherlands without being issued a Dutch gaming licence violates the Act on Games of Chance and is considered to be illegal. The restrictions on the free circulation of services and goods (article 49 EC Treaty) were deemed justified, since the gaming regulations protect the interest of consumers and minors and prevent gaming fraud and addiction. Moreover, since both foreign and domestic providers can apply for gaming licenses, the Dutch gaming regulations are not considered to be discriminatory.

Other court decisions deal with on-line lottery games operated by foreign providers. Online games of chance addressed to Dutch consumers or in which Dutch residents can participate, are considered to be domestic games of chance subject to the provisions of the Dutch gaming regulations. Providers of these games must possess a valid gaming licence, issued by the Dutch authorities.780 Since currently the Dutch gaming regulations do not provide for the issuance of licenses for on-line gaming, foreign providers who organise on-line lotteries infringe the Dutch gaming regulations and can be held liable.

Whether the foreign provider possesses a foreign gaming licence or complies with foreign gaming regulations, is irrelevant. Interactive internet gaming will however be allowed on an experimental and provisional basis.781 A draft law which deals with interactive internet gaming – the Amendment of the Act on Games of Chance, containing temporary provisions on games of chance via the Internet – is currently pending in the Parliament of the Netherlands.782 A single, exclusive on-line gaming licence will be issued for a provisional period of three years to Holland Casino, the current casino gaming licensee of the Netherands.

Advertising of lottery games in the Netherlands must comply with the special Advertising Code for Games of Chance organised by the Netherlands Gaming Licensees783 and the General Section of the Dutch Advertising Code (article 18 of the Dutch Advertising Code). The special advertising code lists a series of additional obligations in order to counter excessive gaming, to prevent gaming addiction and to protect the interests of minors and consumers.784 Advertising of lotteries may not be fraudulent, gratuitous or false, nor may it promote excessive gaming (articles II.1 through II.5). Particular provisions of the Advertising Code protect the interests of minors (articles III.1 through III.7 of the Code). Complaints alleging infringements of the Advertising Code are heard by the Advertising Code Committee, which can render an advisory award and a fine of up to 22.690 euro.

In summary, then, barriers to the free circulation of lottery games include the following:

– The organizing of a lottery in the Netherlands is subject to a licence requirement, the issuance of which is subject to a series of conditions.

– For the most commercially important types of lottery games (State Lottery, Instant Lottery, the Lotto, national charity lotteries) a single gaming licence (State Lottery, Instant Lottery, the Lotto) or a limited number of lottery licenses (national charity lotteries) are issued; the Dutch lottery market therefore results in a monopoly or an oligopoly barring de facto the access of foreign providers.

– Lottery licenses are granted on a (de facto) permanent basis.

– On-line lottery games are currently prohibited: only the National Sports Totalizator Foundation is granted the right to offer its (existing) lottery services off-line, on-line or via SMS within its current license (e-commerce). E-gaming is not allowed. A draft law, which is currently pending before the Parliament of the Netherlands, will authorise, for a provisional period of three years, the operation of (new) on-line games of chance in the Netherlands. Only Holland Casino will be licensed to operate interactive internet gaming during the first period of three years.

– Gaming licenses can only be issued by the Dutch authorities; the fact that the foreign provider possesses a foreign gaming licence or complies with foreign gaming regulations is irrelevant.

Casino Gaming

Article 27h, Act on Games of Chance provides for the issuance of a single licence to organise casino games. Contrary to licenses for some other games of chance, the casino gaming licence is issued on a permanent basis. Issuance of a casino gaming licence is subject to strict conditions. The Dutch gaming Board monitors the compliance of the licensee with the casino regulations. Article 27i, Act on Games of Chance states that the casino gaming licence must specify the advertising policy for casino games, must limit the stake money and must list the type and number of casino games that are allowed in a casino. Casino games, such as roulette cylinders, card shuffling machines, SIC BO tumblers and big wheels, are only allowed if they satisfy the statutory requirements. Casino equipment has to be tested periodically by the Dutch Measurement Institute (NMI Certin) 785, just like the equipment used for the lotteries786. The current holder of the license to organise casino games in the Netherlands is the National Foundation for the Exploitation of Casino Games (Holland Casino).787 The number of casinos it can operate is limited to 14 (numerus clausus).

Establishing a casino is subject to the consent of the local City Council. The net proceeds from the casino games are for the benefit of the State Treasury (article 27h par. 2, Act on Games of Chance). As for any other game of chance, participation of persons under 18 years of age in casino games is prohibited (article 27j par. 1, Act on Games of Chance). Operating machine gambling in casinos is subject to a separate gaming licence. Article 30z AGc states that a gaming licence to organise machine gambling in a casino can only be issued to the licensee of the casino games (Holland Casino). As any other operator of gambling machines (cf. infra III.4), Holland Casino can only operate typeapproved slot machines in its casinos. The net proceeds of the slot machines operated in the casinos are for the benefit of the State Treasury.

Advertising for casino games in the Netherlands must comply with the special Advertising Code for Games of Chance organised by the Netherlands Gaming Licensees788 and the General Section of the Dutch Advertising Code (article 18 of the Dutch Advertising Code). The special advertising code lists a series of additional obligations in order to counter excessive gaming, prevent gaming addiction and protect the interests of minors and consumers.789 Advertising of casino gaming services may not be fraudulent, gratuitous or false, nor may it promote excessive gaming (articles II.1 through II.5). Particular provisions of the Advertising Code protect the interests of minors (articles III.1 through III.7 of the Code).

Complaints alleging infringements of the Advertising Code are heard by the Advertising Code Committee, which can render an advisory award.

Various Dutch court decisions deal with on-line casino games offered by foreign providers.790 According to the case law, foreign providers who organise on-line casino games specifically addressed to Dutch consumers or in which Dutch residents can participate, must comply with the requirements of the Dutch gaming regulations and possess a valid Dutch gaming licence. On-line casino games are considered by the Dutch courts to be domestic games of chance, subject to the Dutch gaming regulations. Since no licenses can be issued for on-line gaming, foreign operators who operate on-line casino games in the Netherlands violate the Dutch gaming provisions. The fact that the foreign provider possesses a foreign gaming licence and complies with foreign gaming regulations is irrelevant.791 Interactive internet gaming is expected to be authorised in the near future on an experimental and provisional basis.792 A draft law which deals with interactive internet gaming – the Amendment of the Act on Games of Chance, containing temporary provisions on games of chance via the Internet – is currently pending in the Parliament of the Netherlands.793 In order to counter illegal on-line gaming, to prevent gaming addiction and to protect the interests of consumers and minors, the Dutch authorities propose to modify the Dutch Act on Games of Chance in order to allow on-line gaming in the Netherlands on an experimental basis and for a provisional period of three years.794 A single (provisional), exclusive on-line gaming licence will be issued to Holland Casino, the current casino gaming licensee in the Netherlands. The draft law was criticised by the Raad van State, a consultative organ in the Dutch legislative process.795 The Raad van State expressed its concerns regarding the compatibility of the draft law with European Law and considered an expansion of the existing supply of gaming services to be contrary to the restrictive Dutch gaming policy.796 The Raad van State furthermore considered the reservation of the on-line gaming market to a single licensed operator – i.e. Holland Casino –, thereby excluding other Dutch or foreign operators from the Dutch on-line gaming market, to be contrary to the proportionality principle and article 49 of the EC Treaty, since other operators, whether resident in the Netherlands or abroad, can guarantee the adequate protection of Dutch consumers against gaming addiction, the adequate prevention of fraud and illegal gaming and sufficient protection of the interests of minors.797

To date, only the Administrative Court of Breda, in a decision of 2 December 2005, has decided that restrictions on gaming activities may be justified by imperative requirements in the general interest, such as consumer protection and the prevention of fraud and incitement of gambling. Such restrictions should however be suitable for achieving these objectives, inasmuch they must serve to limit gambling activities in a consistent and systematic manner. Although the court recognised that, pursuant to the case law of the European Court of Justice, the free movement of services can be limited, it argued that the Dutch State has failed to prove in its contested decision that the casino gaming monopoly and other restrictive government measures satisfy the criterion of suitability to attain the objectives of the prevention of illegality and criminality and the protection of the interests of consumers.798 The court thus decided that the contested decision cannot be upheld and instructed the Netherlands authorities to issue a new decision. In this new decision the Netherlands authorities should answer the question whether the government actions on the regulations concerning casino gambling are coherent and systematic, and evidence of such coherence and systematic structure should be provided. In the event that the coherence and systematic structure cannot be demonstrated, the court holds the view that the justification of the restriction of Article 49 of the EC Treaty contained in Article 27h.1 of the Act on Games of Chance is absent and that said provision should remain inapplicable because it is in violation of Article 49 of the EC Treaty799.

To sum up, barriers to the free circulation of casino gaming services include:

– A single licence can be issued to organise casino games in the Netherlands, the issuance of which is subject to conditions.
– The casino gaming licence is granted on a permanent basis to a Dutch registered legal entity.
– Interactive or on-line casino gaming addressed to Dutch consumers or in which Dutch residents can participate, is currently prohibited in the Netherlands. A draft law which is currently pending before the Parliament of the Netherlands, will authorise the operation of on-line gaming in the Netherlands for a provisional period of three years. Only Holland Casino will be licensed to operate interactive internet gaming during the first period of three years.
– Operating slot machines in casinos is subject to a separate licence requirement; a slot machine licence can only by issued to the current casino gaming licensee.
– Only gaming machines of an approved type can be operated in Dutch casinos.

Machine Gambling Outside Casinos

The legislation on machine gambling was amended in 2000. The new machine gambling regulations do not apply to machines of skill.800 Contrary to other games of chance, such as lotteries or casinos, machine gambling is offered by multiple providers throughout the Netherlands, which makes machine gambling more easily accessible for juvenile players and enhances the risks of illegal gambling and gaming addiction. Moreover, machine gambling is considered to be regular commercial activity; its net proceeds do not serve a charitable or public purpose.

To counter the risks of machine gambling, the Dutch legislator introduced a triple licence requirement scheme for slot machine gambling, each subject to a series of specific conditions.

– First, all locations where gaming machines are set up (bars, restaurants, gaming arcades) require a licence issued by the mayor (article 30b par. 1, Act on Games of Chance). This license is issued to the owner or operator of the location (bar owner, arcade operator, etc) (article 30d par. 1 Act on Games of Chance).

– Second, all operators of gaming machines require a licence issued by the Minister of Justice (article 30h par. 1, Act on Games of Chance). The operator of the machine is often not the operator of the location, especially in bars and restaurants.

– Third, all gaming machines require a type approval issued by the Minister of Justice.

The «type-approval» conditions for gaming machines are set forth in articles 30m through 30s, Act on Games of Chance and the Decree on machine gambling of 23.05.2000. This license is issued to the manufacturer or the importer of the machines. It is issued after type testing by an independent testing laboratory has shown that the machines of that type fulfil the legal requirements. These requirements vary according to the different locations where machines may be set up, e.g. an arcade machine may not be set up in a bar.

To safeguard the interest of consumers and minors, the legislator also limited the number of gambling machines that can be authorised per location, according to the type of location where the machines are placed. A maximum of two slot machines is admitted in so-called «high barrier locations» (article 30c par. 2, Act on Games of Chance). The Dutch Supreme Court, in a decision of 5.01.2001, upheld the decision of the local authorities to prohibit the issuance of licenses for gaming machines in low barrier locations, licensing only the set up of machines of skill.801 According to article 30 par. 1 litt. c, Act on Games of Chance only in amusement arcades may more than two slot machines be authorised. The establishment of an amusement arcade is subject to the consent of the local city council. In order to protect the interests of minors, machine gambling is not allowed in «low barrier locations» (such as bars or snack bars). Persons under 18 years of age are not permitted to participate in machine gambling (article 30g, Act on Games of Chance), nor are they permitted to enter amusement arcades (article 30u, Act on Games of Chance).

As for any game of chance, advertising for machine gambling services must comply with the (General Section of the) Dutch Advertising Code.802 Moreover, advertising for machine gambling is equally subject to the provisions of the special Advertising Code for Games of Chance organised by the Netherlands Gaming Licensees.803 This special advertising code lists a series of additional obligations in order to counter excessive gaming, prevent gaming addiction and protect the interests of minors and consumers.804 Advertising for machine gambling may not be fraudulent, gratuitous or false, nor may it promote excessive gaming (articles II.1 through II.5). Particular provisions of the Advertising Code protect the interests of minors (articles III.1 through III.7 of the Code). Complaints alleging infringements of the Advertising Code are heard by the Advertising Code Committee, which can render an advisory award.

Various court decisions deal with the problem of so-called «Internetzuilen» that are placed in bars, snack bars or other publicly accessible locations.805 «Internetzuilen» are computers linked to the Internet and programmed for participation in (on-line or other) games of chance. Unlike with ordinary computers, it is not possible to access other functions such as word processing or surfing to other web-sites on the «Internetzuil» computer. In addition, the computers generally have the appearance of slot machines. Since stake money must be paid to use an «Internetzuil» and since consumers can win money or time-credits allowing them to play yet another game, Dutch courts consider these «internetzuilen» to be concealed gaming machines. Because internetzuilen do not fulfil the legal requirements for gaming machines, they cannot receive a type approval for gaming machines and are prohibited. In addition, they are generally found in so-called «low barrier locations», where gaming machines are illegal. Only non-payout skill-based machines may be used in such locations. In summary, then, barriers to the free circulation of slot machine gambling services include the following:

– Operating slot machine games outside a casino is subject to a triple licensing scheme. Moreover, licensees must comply with a series of strict conditions.
– Only gaming machines of approved types are permitted in the Netherlands.
– The number of gaming machines is limited according to the type of location (cf. «high» and «low» barrier locations).
– Gambling Machine licenses can only be issued by the Dutch authorities.

Betting

Article 16 par. 1, Act on Games of Chance provides that only a single license can be issued for sports betting games. The present holder of the license is the National Sports Totalizator Foundation, which must comply with a series of stringent requirements (article 21, Act on Games of Chance). At least 47.5% of the proceeds of sports betting games are distributed as prizes. The net proceeds from sports betting games are for the benefit of charitable organisations in the area of sport, culture, social welfare and public health. Persons under 18 years of age are not permitted to participate in sports betting.806 In the field of horse racing as well, only a single gaming license is issued (article 24, Act on Games of Chance), subject to a series of conditions (article 25 Act on Games of Chance). The present holder of the licence is Scientific Games, a 100% Dutch registered subsidiary company of a North-American legal entity. The net proceeds of the totalisator is earmarked for the benefit of not-for-profit organisations in the area of equestrian sports or other charitable purposes. Persons under 18 years of age are prohibited from participating in horse racing bets. Moreover, bookmaking in the Netherlands is prohibited.

As for any other game of chance, advertising for sports bets or horse racing must comply with the (General Section of the) Dutch Advertising Code.807 Moreover, advertising for betting is equally subject to the provisions of the special Advertising Code for Games of Chance organised by the Netherlands Gaming Licensees.808 This special advertising code lists a series of additional obligations in order to counter excessive gaming, prevent gaming addiction and protect the interests of minors and consumers.809 Advertising for betting games may not be fraudulent, gratuitous or false, nor may it promote excessive gaming (articles II.1 through II.5). Particular provisions of the Advertising Code protect the interests of minors (articles III.1 through III.7 of the Code). Complaints alleging infringements of the Advertising Code are heard by the Advertising Code Committee, which can render an advisory award.

On-line sports’ betting and on-line horse racing games are currently prohibited in the Netherlands. De Lotto (SNS) and Scientific Games however validly offer their current gaming products on-line or via SMS within the framework of their current gaming licence; this is not considered as on-line gaming but is considered to be e-commerce. Various court decisions deal with on-line sports bets or on-line horse racing games (sometimes combined with other on-line games of chance) offered by foreign providers.810 On-line games of chance addressed to Dutch consumers or in which Dutch residents can participate are considered to be domestic games of chance. These games must comply with the Dutch gaming regulations. Since no gaming licence can be issued for on-line games of chance, (foreign) providers of on-line games violate the Act on Games of Chance and face criminal penalties.

The fact that the foreign provider possesses a foreign gaming licence or provides its services in accordance with foreign gaming regulations, is irrelevant. It is equally irrelevant whether the on-line game is exclusively addressed to Dutch residents or whether other foreign players can also participate. Compliance with the Dutch gaming regulations is required when either the game is addressed to Dutch consumers, or participation of Dutch residents in the on-line sports betting is possible. Interactive internet gaming is expected to be authorised in the near future on an experimental and provisional basis.811 A draft law which deals with interactive internet gaming is currently pending in the Parliament of the Netherlands (see infra).812 These restrictive Dutch gaming regulations and licensing schemes act as a barrier to foreign providers’ access to the Dutch gambling market. Despite the infringements on the free circulation of services and goods, the Dutch Act on Games of Chance and related gaming regulations have been held to comply with the standards set out in the Gambellijudgment of the ECJ. According to Dutch case law, a series of imperative requirements of public interest such as consumer protection, and the fight against fraud, illegal gambling and gambling addiction, validly justify the barriers to article 49 EC Treaty.

Furthermore, the licensing scheme has been held to be non-discriminatory, since both Dutch and foreign operators can equally obtain gaming licenses. A licence requirement subject to a series of strict conditions is considered by Dutch case law as a legitimate and proportionate means of protecting these interests, even if it results in a de facto monopoly. An interlocutory decision of the Arnhem District Court recently held the liberal and tolerant approach of the Dutch authorities towards games of chance to be in contradiction with the authorities’ restrictive gaming regulations.813 The Court considered the proliferation in the advertisement for certain games of chance, the broadening of the gambling services offered and the tolerance of the Dutch authorities concerning SMS or internet raffles, to run contrary to the restrictions of the Act on Games of Chance, the goals of which are the protection of consumers and the prevention of fraud and excessive gaming. The Arnhem Court concluded in an interlocutory judgement that the Dutch gaming regulations as they were applied in practice, could not justify the infringements to the free circulation of services and thus violated article 49 EC Treaty.

In the aftermath of this interlocutory judgement, the Minister of Justice clearly confirmed the restrictive Dutch gaming regulations by clearly stating that organising games of chance in the Netherlands is prohibited unless validly licensed by the Dutch authorities.814 In order to counter the objections of the Arnhem court, the competent Minister detailed a series of proposed laws to adapt the Dutch gaming regulations to new developments in the gaming market, such as interactive or on-line games of chance. Draft legislation dealing with interactive internet gaming – the Amendment of the Act on Games of Chance, containing temporary provisions on games of chance via the Internet – is currently pending before the Parliament of the Netherlands.815 To counter the proliferation of advertising for games of chance, a new code of conduct – the Advertising Code for Games of Chance organised by Gaming Licensees – has been elaborated to give gaming licensees clear guidelines concerning what is and is not permitted.816 These self-regulatory norms anticipate a revision of the Dutch gaming regulations.

Recent court decisions reaffirm that the restrictive Dutch gaming regulations validly infringe the free circulation of services and goods.817 The Dutch Supreme Court concluded in its decision of 18.02.2005 that the Dutch gaming regulations comply with the standards set out in the Gambelli-judgment of the ECJ. The requirement of a licence, subject to a series of conditions, to organize games of chance is a valid and proportionate means of protecting the public interest. Moreover, the Supreme Court held that the so-called «Kanalisatiedoelstelling» (policy of the Dutch authorities to counter illegal gaming and prevent gaming addiction by «channelling» gamers to the legal gaming market) can imply a widening of the gaming market, a renewal of the existing offer of games of chance or an increase in advertising by current gaming licensees. These measures do not necessarily contravene a restrictive gaming policy. In summary, then, barriers to the free circulation of betting services include the following:

– A single licence can be issued for sports betting and horse racing in the Netherlands; a betting licence can only be issued by the Dutch authorities.
– On-line sports betting and on-line horse racing addressed to Dutch consumers or in which Dutch residents can participate are deemed unlawful under the Dutch gaming regulations. A draft law – currently pending before the Parliament of the Netherlands – will authorise the operation of on-line gaming in the Netherlands for a provisional period of three years. Only Holland Casino will be licensed to operate interactive internet gaming during the first period of three years.

Bingo

In the sector of bingo games, no license is required, but due warning of sessions must be given in advance to the local authorities. Bingo games can only be organised by Dutch associations and foundations in existence for a minimum period of three years (article 7c par. 1, Act on Games of Chance). Foreign societies are prohibited from organising a bingo as are companies that pursue commercial interests. The total amount of prize money may not exceed 1400 euro per session and 350 euro per game. Profits must be paid entirely to given to deserving social causes and charitable causes. Barriers to the free circulation of bingo services include the following:

– Only Dutch companies are permitted to organize a bingo.
– Organizing a bingo is subject to the approval of the local authorities and must comply with a series of specific conditions.

Media Gambling Services

Media gambling services (i.e. games of chance offered in journals or magazines) are considered to be promotional games of chance. As is the case for any other game of chance, promotional games of chance must comply with the provisions of the Dutch gaming regulations. A number of court decisions deals with the organisation of sweepstake contests in the Netherlands. A sweepstake contest (a promotional game) is considered to be a game of chance and subject to the provisions of the Act on Games of Chance, even if participation is free. Hence, according to the courts in the Netherlands, a valid Dutch gaming licence is required in order to organise a sweepstake in the Netherlands. Providers who have not obtained gaming licenses thereby violate Dutch gaming law. It is disputed whether agreements that are concluded between the organiser of an illegal sweepstake contest and the consumer who claims to have won a prize, can be enforced. A majority of Dutch courts state that these agreements are void and unenforceable.818 Consumers participating in these games are not entitled to collect their prize money. Some lower courts, however, argue that these agreements are not automatically or de iure void. Bona fide consumers who participate in an illegal sweepstake can enforce their agreement and compel the organiser of the sweepstake to pay the prize money.819 Whether or not the organiser of the sweepstake deliberately violated the Dutch gaming regulations was considered to be not important.

In anticipation of a revision of the Act on Games of Chance, the Dutch Justice Department has recently issued a Code of conduct for promotional games of chance,820 which entered into force on 1 January 2006. Pursuant to article 1, par. 7 of this code of conduct, a promotional game of chance is a game that promotes certain products or services and allows participants to compete for prizes or bonuses.821 Success must depend completely or predominantly on coincidence and cannot be influenced by the player. Promotional games of chance may only be organised in order to promote of a product or service; they may not constitute an independent game of chance.822

Although the new code of conduct allows the organisation of promotional games of chance in the Netherlands, it clearly confirms the restrictive attitude of the Netherlands towards games of chance. The Preamble to the Code of conduct states that, as a matter of principle, promotional games of chance are prohibited, unless they comply with a series of strict guidelines which protect the interests of minors and consumers and prevent excessive gaming.823 So called «small promotional games of chance»,824 for which prize money is limited, are subject to specific, more flexible gaming rules (article 8 of the Code). Barriers to the free circulation of services include the following:

– The organization of media gambling services or other promotional games of chance, including free promotional games, is subject to a licence requirement.
– Gaming licenses must be issued by the Dutch authorities.

Sales Promotional Gambling

The organization of a shopping week-action825 is subject to a license issued by the local Chamber of Commerce. A license can be issued twice a year to shopkeeper’s associations or a group of shopkeepers to organise a shoppingweek-action. A shoppingweek action can last a maximum of four weeks. The total amount of prize-money is limited to 10.750 euro. Instant lotteries such as scratch cards are not permitted in a shoppingweek action. Finally, consumers may not be required to pay stake money to participate. Barriers to the free circulation of services include the following:

– The organisation of a shoppingweek action is subject to a licence requirement, issued by the local Chamber of Commerce.

Charity Gambling

In general, games of chance are only permitted if the net proceeds are used for charitable purposes (i.e. charity organisations in the areas of sport, culture, social welfare or public health). The State Lottery and Holland Casino donate their proceeds to the State Treasury. Machine gambling outside a casino is considered to be an ordinary commercial activity; therefore, its net proceeds need not serve a charitable purpose.

Currently, three charity lotteries with an annual turnover of 4.500.000 euro or more are issued a gaming licence (National Postcode Lottery, Sponsor Lottery and the Bank Giro Lottery). At least 50,0% of the proceeds of these lotteries is earmarked for the benefit of charitable organisations. The Nationale Postcode Lottery donates its proceeds to charities for society and the environment, the Sponsor Lottery supports sport, culture and welfare and the Bank Giro Lottery supports organizations dealing with public health, welfare or culture. Earmarking of a portion of the proceeds for charitable purposes is also a precondition to obtain a gaming license for sporting bets and horse racing, as is the case for prize contests. Prize contests can be authorized depending on the sum of the prizes, either by local authorities (maximum price of 4.500 euro) or the department of justice, provided that at least 50 % of their turnover is for the benefit of charitable purposes. Advertising for lotteries run by the three licensed charity lotteries in the Netherlands is subject to the provisions of the special Advertising Code for Games of Chance organised by the Netherlands Gaming Licensees826 and the General Section of the Dutch Advertising Code (article 18 of the Dutch Advertising Code). The special advertising code lists a series of additional obligations in order to counter excessive gaming, prevent gaming addiction and protect the interests of minors and consumers.827 Advertising for lottery gaming may not be fraudulent, gratuitous or false, nor may it promote excessive gaming (articles II.1 through II.5). Particular provisions of the Advertising Code protect the interests of minors (articles III.1 through III.7 of the Code). Complaints alleging infringements of the Advertising Code are heard by the Advertising Code Committee, which can render an advisory award.

Barriers to the free circulation of services include the following:

– Gaming licenses828 are generally issued only if the net-proceeds of the game of chance serve a charitable purpose.

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