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Clive Hawkswood, Chief Executive of Remote Gambling Association. chawkswood@rga.e
u.com
“Germany has been a big market for the online gambling industry in recent years, but in many ways it remains one of the sleeping giants and there is undoubtedly a chance for the online gambling market to grow substantially. Unfortunately, the Federal system, which gives devolved power for gambling laws to the individual States, almost seems designed to keep the giant unconscious. The States seek to achieve uniformity through State Treaties, but the co-operation and horse trading that is needed to agree anything formally tends to lead to more contentious issues being parked indefinitely. Despite the establishment of working groups to consider various online gambling issues, we seem a very long way from seeing the introduction of anything resembling a national framework for the licensing of private sector online gambling operators. In the longer term it highly questionable whether the German approach can be deemed compliant with EU Internal Market rules, but this is one area where the wheels of justice barely seem to move. One light at the end of the tunnel is provided by the relatively small German state of Schleswig- Holstein. To the immense credit of the local government there they have taken the view that any State Treaty which effectively seeks to close down the market is doomed to failure and will not in reality achieve any of its stated policy objectives. This is primarily because German consumers like online gambling and will continue to seek it out irrespective of what the politicians might try and do. .So Schleswig-Holstein seems committed to introducing its own local licensing regime and we must hope that it is the thin end of a thicker wedge to come.”
The new draft Treaty was notified to the European Commission in April with a ‘standstill’ period, which recently expired on July 18 and been extended by one month. Meanwhile, due to the necessary European procedure, a vote by 15 out of the 16 German regional Parliaments on the proposal (as mentioned below, Schleswig-Holstein is proposing its own system), has been delayed until October to take into account any ‘detailed opinions’ or ‘comments’ by Commission itself or any member state.
Predictably, the Commission has recently published a ‘detailed opinion’ on its website on provisions that the Commission feels falls foul of European law as well as comments from the UK and Malta. The Maltese economy relies heavily on its local licensing system and sees local regulation as a threat. Leading online operators have welcomed the Commission’s move. Although no details are available, the objections likely centre on controversial provisions such as the high turnover tax rate, monthly stake limit, high licensing costs, and the few licences available – only seven compared to the unlimited number of horse race betting and slot machines available. Now Germany will have to respond to these objections and have will to amend the draft accordingly or it may face potential infringement procedures by the Commission.
The period between October and the New Year
the challenGe is how to
foRmulate a
RoBust, coheRent ReGulatoRy ReGime that satisfies the needs of the
political paRties
will be crucial to agreement on a new framework, since the current Interstate Treaty expires on December 31, 2011, and lawmakers do not want gambling services to be caught up in what could be a ‘legal vacuum’. This period coincides with the release of consultation documents on the ‘EU Green Paper on Remote Gambling’ that may shed some light on the legality of state-owned monopolies in local licensing systems.
Despite the high tax rate proposed by 15 out of the 16 Länder, there is a commercially viable alternative for operators. In June 2010, the northern State of Schleswig-Holstein, interestingly, went against the grain by proposing a draft that would allow the state to licence online private sports betting and online
casino operators under a more liberal and separate regime than the rest of the country. As this alternative model has already been approved by the Commission and the proposal by the other Länder is being criticised left, right, and centre, lawmakers may be drawn to accepting a ‘Schleswig-Holstein hybrid’ model at national level.
The main talking points include proposals:
• To set up a regulatory/supervisory body, the ‘Inspecting Authority for Gaming in Schleswig-Holstein’.
• For a more reasonable 20 per cent Gross Profits Tax rate, and no limits on the number of licences up for tender.
• For licences to be valid for two years initially, then a maximum of four years subsequently.
In May, the European Commission approved this draft bringing it one step closer to becoming law this summer, with a licensing process to begin later this year or early next year. However, crucial details need to be worked out, including the costs of licences and whether local licensees would be legally permitted to take bets from consumers outside the state/country as well as advertise outside the state/country. It is highly likely that other Länder would object to such a move. Predictably,
Bwin.party and Betfair have
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