EC slams German State Treaty proposals
In a damning letter Commission criticises proposals for failing to address its concerns over compatibility with European law - Minister of Economy says treaty has "failed in its present form".
The European Commission (EC) has issued a detailed response rejecting Germany’s revised proposals for a new State Treaty with several sources including the Minister of Economy claiming this could spell the “end of the road” for the 15 Länder’s online gambling bill in its present form.
In a damning letter to 15 of the Germany’s 16 Länder the Commission criticised their proposals for failing to address its main concerns over its compatibility with European law with Jörg Bode, Minister of Economy and deputy Prime Minister for the state of Lower Saxony saying the treaty had “failed in its present form”.
Despite the Commission having yet to respond to the amended treaty, on 15 December last year, 15 of the 16 Länder signed the treaty with the provision that they would only implement it if the Commission give them the ‘green light’ to do so. As soon as the announcement was made law firm Freshfields’ said the letter failed to provide the green light that the states were seeking and that it had received more of a “dark orange” verdict.
Local operator Jaxx, owners of mybet.com, said the EC’s letter signalled the “end of the road” for the treaty planned by 15 federal states, while a spokesman for bwin.party said the proposed state treaty had “failed again” calling the Schleswig-Holstein model “the future”.
bwin.party’s share price, down for the day, rose 1.8% from a low of 147.5p to 152.8p at the close of the market. The operator generates more than 25% of its overall revenue from Germany.
The EC restated to the 15 Länder that any restrictions on online gambling services must be suitable and proportionate to satisfy the objectives of the relevant law, and at various points, said that such evidence is lacking.
It explained that it was unable to definitively assess whether the restrictions imposed by the Länder “ a high tax rate, a limit on the number of licences to 20, and a limit on stakes “ would satisfy the objectives of the treaty, adding that there had been no data or research provided by the Länder to justify its ban on online poker and casino.
It added that it reserves the right to bring forth infringement procedures against the lander if, following any implementation of the law, it proves to unjustifiably restrict competition and an EU operator’s freedom to provide services.
On 10 May last year the Commission ruled Schleswig-Holstein’s draft gambling law was compliant with EU law, giving Germany’s northernmost state the green light to pass a bill this summer and the licensing process to begin as soon as possible. The state is expected to issue an unlimited number of licences at the beginning of next month with more than 80 companies expressing an interest so far. Licensed operators would then be permitted to transact with players from across Germany in all product verticals while paying a 20% gross profit tax.
On 28 October Kiel prime minister Peter Harry Carstensen (CDU) said there was “still time” for the other 15 Länder to draft a new interstate gambling treaty that meets the goals of all the country’s regions.
Mathias Dahms, management board spokesman for JAXX, said: “We submitted the licence application for myBet in Kiel and look forward to doing business again soon in Germany. We urge the other federal states to take a look at Schleswig-Holstein’s legislation: it is modern, satisfies European standards and above all has received the blessing of a conclusively favourable opinion by the EU Commission.”
In a statement JAXX said that “time is now running out” for the 15 federal states. “The old State Treaty on gaming expired at the start of this year. Only the old implementing statutes were extended. Only in Schleswig-Holstein, where progressive, EU-conform gaming legislation took effect on January 1, 2012, are companies such as mybet getting ready to offer sports betting, casino and poker under licence in North Germany,” it added.
Martin Cruddace, Betfair’s chief legal and regulatory affairs officer said the Lander’s proposals were “clearly a long way short” from satisfying the Commission which had “rightly criticised” them once more.
“The proposals contravene fundamental EU free market principles and it is only right that the Commission acts to prevent Member States from enacting legislation designed to keep local monopolies in and the competition out,” he added.
“The Commission, along with many other industry commentators, law professors and tax experts, have consistently criticised the legislation, and following yet another rebuke, a thorough revision of the draft law is required. The German online gambling treaty required changing as a result of a ruling in the ECJ and should the current proposals be implemented, and the de facto monopoly retained, further legal wrangling is likely to follow suit.
“In the meantime, we look forward to obtaining a licence in Schleswig Holstein and we urge the other 15 German states to adopt a similar regulatory framework, one that is sure to foster a strong, sustainable and competitive market that benefits government, consumers and operators alike.”
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History of the process to date:
- 8 September 2010: European Court of Justice rules German interstate online gambling treaty is incompatible with EU law.
- 15 April 2011: German government issues proposals for a new state treaty. Proposal contains numerous elements which would limit competition and make it unjustifiably difficult for private operators to run commercially viable businesses there. Betfair launches official complaint to the EC on 1 July 2011.
- 18 July: Commission heavily criticises German proposals in its detailed opinion.
- 14 Septembe: Schleswig Holstein passes gambling legislation (based on 20% GPT) which is approved by the Commission. Operators prepare to apply for licences there early in 2012.
- 28 October: In response to the Commission’s detailed opinion, German government proposes an amended treaty.
- 15 December: 15 of the 16 Länder sign treaty with the provision that they will only implement it if the Commission gives them the ‘green light’.
- 20 March 2012: EC sends Länder a letter criticising new German proposals that fail to address itsmain concerns.