Analysis: Two years on and no progress in Germany

When Germany’s Interstate Treaty on Gambling was granted a two-year grace period by the European Commission on 1 July 2012, the intent was to allow for the country to implement a liberalised regulatory framework that would open the gates for international operators.

However two years on and with that grace period having now expired, the regulatory process appears to have made little progress. Operators that have applied for one of just 20 sports betting licences are no clearer as to where they stand having had their licence applications rejected in November last year.

All 41 applicants are understood to have submitted amended applications by the 14 March 2014 deadline, however it is widely regarded unlikely that any licence will be issued in 2014 ““ as had previously been expected ““ with most not expecting any movement until early 2015 at the earliest.

Since then, a number of cases brought forward by the German courts have sought to seek clarification regarding the process and the licensing regime in general.

One such case, started by domestic operator Digibet, questioned the legality of having two regulatory regimes running alongside each other in the same. The German federal state of Schleswig-Holstein issued around 50 licences in 2012 following a more liberal gambling law before joining the Interstate Treaty a year later, however these licences remain valid for a further five years. The Digibet case concluded last month with the Court of Justice of the European Ruling that such a procedure does not necessarily contravene EU law.

Additional cases that have criticised a lack of transparency and inconsistencies in the process remain outstanding and could pour more doubt on the procedure’s future, however with no conclusion expected until 2015 operators have been left exasperated still.

Time to act?

Speaking last month Maarten Haijer, secretary general at the European Gaming and Betting Association, was unequivocal in his stance on the legislation and called for further action to be taken. “The Interstate Treaty has evidently been a failure for Germany,” he said.

“As no sports betting licence has been granted it is clear that this will not be possible and we call on the Commission to properly enforce EU law in Germany and open an infringement case for failure to comply with EU law.”

Infringement proceedings could be one such way in forcing Germany’s hand. The European Commission launched proceedings against Sweden, Belgium, Cyprus, the Czech Republic, Lithuania, Poland and Romania in November last year, with Sweden in particular under threat of being brought before the European Court of Justice.

Poland has since accelerated its efforts to liberalise the online gaming market in the country, however a tax rate of up to 12% on revenues is thought to be too expensive for operators looking at entering the market.

Infringement proceedings are however unlikely to result in licences being issued to applicants for the German market anytime soon. Those that maintain an interest in the market still face a lengthy delay, long beyond what was originally hoped for and promised by the regulator. The two-year grace period for the Interstate Treaty may have expired, but it is still achieving success in preventing gambling companies from legally operating within German borders.