Opinion: Lack of transparency is preventing German progress
Matthias Spitz, attorney at MELCHERS law firm in Germany, discusses ongoing German licensing issues
A number of firms are looking to gain access to the online German gaming and betting market which is estimated to amount to 10.7bn in gross profits in 2012, however, the licensing process for sports betting in Germany is stagnating as a result of procedural errors by the Hessian Ministry of the Interior.
The Hessian Ministry of the Interior expects to face more than 80 lawsuits in total against the German online gaming tendering process and licence conditions. A number these lawsuits will certainly be filed by licence applicants recently rejected at the second stage of the process.
In order to be prepared for this flood of litigation, the Ministry has even initiated a particular tendering process for legal services. The Hessian Ministry of the Interior is the responsible gambling regulator for the state of Hesse and has been assigned by the other states with conducting the tendering process for 20 sports betting licences.
In the recent Victor Chandler case, the responsible court chamber indicated that it is highly sceptical whether the transparency requirement in this process is satisfied. The regulator is trying to evade this procedural trap by casting the blame on the applicants.
According to an announcement recently circulated in the media, none of the applicants were considered to have proven the minimum requirements in ‘auditable form’. This means that none of the applications in the second stage of the process was considered satisfactory.
However, the decision of the Higher Administrative Court of Hesse of June 2013 clearly states that 14 out of the 41 applicants completely satisfied the requirements and were invited to a negotiation phase.
All the applications have become unsatisfactory because the Ministry has applied different criteria now. This again points to the lack of transparency surrounding the whole process. It is absolutely uncommon that the majority of licence applications are deemed to be unsatisfactory and this is further evidence that the Ministry is trying to disguise its own procedural errors by blaming the applying companies.
Now, the regulator claims that licence applications will need to be amended, albeit this was strictly denied earlier this year. Administrative courts already indicated in litigation that they consider the process to be intransparent.
A main reason is that licensing criteria wasn’t released widely prior to the process, only in an information memorandum disclosed to the applicants in the second stage. The fact that a total of 599 questions about the process were raised by the applicants provides further evidence for intransparency.
It seems rather unlikely that the process will be completed within next year or at any time soon, unless the German states fundamentally change the process. This includes lifting the restrictions to the number of licences and cÂommercial obstacles, such as the 1,000 stakes limit per month and restrictions to in-play betting.
The legal basis for the licence tendering process in the German Interstate Treaty on Gambling is set to expire in 2019. However, given that the door to a market opening in Germany was opened with this tendering process, I think that there is no way back to a monopoly as some have suggested.
Implementing a monopoly in 2019 would be quite difficult to justify under EU law. Considering the problems German regulators are currently facing with the Interstate Treaty, it appears that this regulatory regime is living on borrowed time. Instead, there is likely to be a reform in German gaming and betting regulation within the next few years.
Spitz is also an affiliated member of the International Masters of Gaming Law