Monday, 25 July 2011

German deadlock

Anti-gambling organisations in Germany are outraged with their politicians. This might come as a surprise, since the Interstate Treaty on Gambling (ITG) largely outlaws online gambling in Germany. The anti-gambling movement is furious because it is looking beyond tomorrow. Unintentionally, their valued e-gambling ban is at stake.

The current ITG expires at the end of this year, on 31 December at midnight, and in recent weeks it has become evident that German politicians will most likely not be able to have a new Treaty approved and implemented before New Year’s Day. Theoretically, this means the market would be fully open on 1 January.

Many gambling experts wonder how German lawmakers managed to get themselves in such an incredible position. Only last April, the Heads of the German Federal States - except for Schleswig-Holstein - agreed on a new Interstate Treaty (NIT), which was subsequently sent to the European Commission (EC) for approval. The EC has three months to raise any concerns (the so-called standstill period), which means that, by 10 July latest, the EC has to make public whether it has any objections to the draft NIT and whether it is convinced the text complies with EU legislation. So far, the timing was right and the German gambling monopolies seemed to be safeguarded after 31 December.

That was before 13 June, when Germany’s Federal Prime Ministers decided to delay their final decision on the NIT until October; they indicated they will need more time to come up with a legal framework that can be supported by all 16 states. Two issues, however, make the October deadline unrealistic. Firstly, the northern State of Schleswig-Holstein has proposed its own gambling Bill, which has more in common with Atlantic City than the restrictive, monopolistic approach of the 15 other states. Under Schleswig-Holstein’s draft Bill, which was approved by the EC on 9 May, there are no limits as to the number of licences that can be granted and all forms of casino games would be allowed. It will be a huge challenge to come to some sort of agreement that can carry the support of all 16 German Federal States.

Secondly, it is a safe bet to say the EC will reject the NIT in its current form. The NIT would allow online lotteries but solely those that are organised by the state lottery providers, and online sports bets for which a maximum of seven concessions shall be issued. In the past, the EC has made it clear it does not tolerate such monopolies and the Court of Justice of the European Union (CJEU) basically crushed the German framework in September 2010 when it said that ‘Germany’s state monopolies could not be justified under European law’. The NIT has failed to address these issues.

Approval in Brussels
But even if the other states manage to get Schleswig-Holstein on board and all of them will agree on a final text in October, the final Treaty still needs to be sent to the EC for approval. This means that another standstill period of three months will commence, so the EC’s endorsement could be given in early January at the earliest, after which the adoption and approval processes in all 16 federal parliaments still have to begin. Legislative processes that can easily take up to a year. And that is just the most positive scenario. More realistic is that the NIT will be rejected by the EC in July and Schleswig-Holstein will not give up so easily on its liberal draft Bill. Experts predict the NIT will never see the light of day, at least not in its current form, simply because it does not comply with EU legislation. It clearly needs to be amended for EC approval.

Pushing for a NIT that does not respect EU principles seems to be a refusal to acknowledge reality. It is becoming more and more likely the current ITG will expire without a new one replacing it in time, which means the market will be fully open, at least for some time. Conservative lawmakers being unable to regulate - for operators it must be a dream come true.

Michiel Willems, 2011. Published previously in a London based publication. Copyrights apply. Pictures: US State Department,