Opinion: The Czech Republic's first steps towards regulation
With the Czech finance minister to submit a series of proposals to regulate the country's egaming market in June this year, Zuzana Zahumenska of DLA Piper looks at how the country's government has learned from past failures to push through legislation
In the Czech Republic, provision of gambling services is generally subject to previous authorization granted by the Ministry of Finance of the Czech Republic.
Although the currently effective Lottery Act had been amended from time to time, it is often criticized as an unsystematic and outdated regulation, ignoring the technological and economic progress which has substantially influenced the gambling business in recent years.
One of the requirements is a legal presence in the Czech Republic in a form of a joint stock company, issuing exclusively name-registered shares.
Motivated by the growing criticism, the ministry prepared a completely new gambling regulation which was passed by the Czech government in August last year. However, to the disappointment of a lot of foreign “ in particular online “ gambling providers, the currently effective licensing conditions, including the requirement of legal presence in the Czech Republic, remained preserved in the bill.
As a “technical” regulation, the bill was subject to the notification procedure pursuant to the Directive 98/34/EC. During this procedure, the Commission refused the regulation for its non-compliance with the freedom of services as defined by the Treaty on Functioning in the European Union (TFEU). The Czech Republic did not succeed with its attempts to justify the restrictions imposed on foreign entrepreneurs by public interest.
As a reaction to the results of the notification procedure, the government revoked its approval of the bill and ordered the ministry to prepare a completely new regulation by the end of June 2013. The ministry expressed its opinion that the new regulation shall be fully compliant with the EU-law and contain a comprehensive regulation of online gambling which has been missing in Czech gambling law until now.
It is, however, worth mentioning that the Czech Republic was clearly not the only one in the EU with its efforts to apply protectionist policy in this field of business. In case of Belgium for instance, the currently effective Belgian gambling act requires a local presence of the operators as well and moreover, licenses are granted on a numerus clausus basis. Although the Commission criticized the Belgian regulation already prior to its introduction in 2011, no formal steps have been taken so far in order to enforce its compliance with the fundamental freedoms of the internal market. Nevertheless, it can be extracted from the communication issued by the Commission on 23 October 2012 that the Commission is ready to take appropriate actions against the jurisdictions applying unacceptable restrictions on foreign gambling providers.
The upcoming dialogues between the Commission and the jurisdictions applying restrictive policies against the foreign entrepreneurs may take another year or two but the current developments are indicating that not only Czech gambling law but gambling law across the whole Europe might undergo a substantial liberalization quite soon.