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JULY 2014
Legal Focus
51 Gambling Law
The online gambling industry in Malta is regulated by the Lotteries and Other Games Act and, more specifically, the Remote Gaming Regulations (the ‘RG Regulations’), originally introduced in 2004 as a first for the European Union. The Lotteries and Gaming Authority (the ‘LGA’ or ‘Authority’) is the single regulatory body responsible for the supervision of all gaming activities in Malta including but not limited to remote gaming. Dr Malcolm Falzon, Partner at Camilleri Preziosi, provides us with an overview of the gambling industry in Matla.
Can you give me an overview of the legalities of the gambling industry in your country at the moment?
The RG Regulations lay down the licensing requirement for any entity seeking to operate or promote or sell or abet remote gaming in or from Malta. Such licence need not necessarily be issued by the LGA but could potentially be an equivalent authorisation issued by the government or competent authority of an EEA Member State, or any other jurisdiction approved by the LGA. Licensed operators are required to take the form of a limited liability company registered in Malta. The RG Regulations were amended by Legal Notice 90 of 2011, which introduced, inter alia, an important proviso to Regulation 3 thereof empowering the LGA to impose proportionate requirements and conditions, which comply with EU law, as it may deem necessary. All licences are issued for a five-year period and are renewable subject to continuous compliance by the licensee with the relevant regulations and directives issued by the LGA.
Players wishing to participate in an authorised game conducted by the licensee must necessarily be registered and licensees are bound to maintain a secure online list of all registered players. Player protection is a top priority for the local regulator. The safeguarding of vulnerable player groups is given particular attention, with various measures in place including the blanket prohibition against registration of minors and an obligation to advertise remote gaming services responsibly.
The Second Schedule of the RG Regulations lays down the application and licence fees payable by online gaming operators. In terms of the Fourth Schedule to the RG Regulations, licensees are also subject to the payment of gaming tax, calculated depending on the license class held though subject to the maximum cap of €466,000 payable by one licensee in respect of any one remote gaming licence per annum.
Two years ago the EU court judged that OPAP’s gambling monopoly in Greece was illegal and that authorities should reform the sector to protect consumers or open it up to competition. Have there been any reforms?
Competitors of Opap SA (“OPAP”), William Hill,
Sportingbet and Stanleybet have certainly moved in the right direction by taking legal action against the Greek gambling monopoly. Here, the Court of Justice of the European Union (the “CJEU”) held that the OPAP monopoly was contrary to EU law, as it had gone beyond what is necessary to achieve the acceptable objectives (namely protection of consumers, the limitation of gambling and gambling- related crime).
In recent years, the CJEU has examined a number of cases such as Ladbrokes plc and Betfair Ltd, in relation to whether state monopolies may block them from operating freely across the EU. Ladbrokes and Betfair failed to overturn the Netherlands monopoly De Lotto. It has however recently been published that the Dutch online gambling market is set to open up to competition in 2015. De Lotto’s sportsbetting monopoly will also come to a close. Whatever the motivation for liberalisation, it is undeniable that the underlying effects are positively contributory to the enhancement of competition at an inter-state level.
Have there been any other effects of this judgment on the industry in the last twelve months?
In November 2013 the European Commission sent letters of formal notice to a number of Member states to ensure the compliance of their national regulatory frameworks for gambling services within the fundamental freedoms of the Treaty on the Functioning of the EU. The Commission required that in regulating gambling services, Member States should respect EU law when restricting or limiting the cross- border supply of gambling services on the grounds that such would be in the public interest for purposes of consumer protection or the prevention of fraud and/or other criminal activities. Two Commission recommendations, on consumer protection measures for consumers of gambling services, and on responsible gambling advertising, seek to create inter alia, greater clarity and transparency in order to provide for a common high level of protection for consumers of gambling services throughout the EU.
What are the key legal issues that gambling companies must consider?
When choosing to set-up shop, gambling companies have several legal issues to consider. The key items
may be said to be the viability and demand of their business and gaming product, the regulatory system of a jurisdiction (primarily in relation to licensing and taxation), together with the reputability of a particular jurisdiction and its regulator.
Malta’s regulatory framework has been praised as highly sophisticated and robust. In order to meet the LGA’s first stages of the application process, the aspiring licence-holders must be considered fit and proper to conduct gaming business. Business practicality and feasibility is also imperative, and therefore such companies must have in place the correct business strategy. In this respect, an applicant would be required to submit a business plan to the LGA for examination. Moreover, gambling companies must ensure that they have the operational and statutory requirements to meet the legal obligations expected of them under Maltese law.
Is there anything else you would like to mention?
A noteworthy local development is the extension of the Highly Qualified Persons Scheme to the remote gaming industry whereby certain employees of remote gaming businesses in Malta (and expat employees) can pay income tax at the reduced rate of 15%, as opposed to the normal highest tax rate of 35%. Eligibility is determined on the basis that such employee earns an annual salary of at least €75,000 and holds requisite professional qualifications.
Also in relation to the remote gaming sector the Authority is in the process of creating a central online player self-exclusion system which is to be linked across all the licensees duly authorized by the Authority. LM