Setback to gaming industry

Malta's lucrative internet gaming industry suffered a major blow yesterday after Europe's top court ruled that EU member states could ban gambling websites.

The judgment was delivered in a case filed by Bwin, one of the largest internet gambling companies in Europe with subsidiaries in Malta, against the Portuguese state monopoly.

Online internet companies across the EU have been fighting member states such as France, The Netherlands and Germany that insist on protecting their state monopolies to eliminate rising competition from online betting companies registered in other EU member states.

Yesterday's judgment, which can be interpreted as favouring state monopolies, sets back the hope of online companies of ensuring a free competitive services sector in the EU. The European Court of Justice (ECJ) ruled that countries could run state monopolies for online sports betting because of a heightened risk of criminal activity.

Over the past years, Malta has seen a surge in the number of online gaming companies setting base here because of favourable legislation and operational conditions including taxation.

It is estimated that about 10 per cent of the world's remote gaming companies operate from Malta, with the industry directly employing about 2,100 workers.

With yesterday's ruling, the industry could see its penetration dented in some of its most lucrative markets.

In fact, following the much-awaited judgment, the Bwin online gaming group, based in Austria, saw its shares tumble by 9.5 per cent.

The ruling given by the Luxembourg-based court was over a dispute between the Portuguese state betting monopoly, Santa Casa, on one hand and Bwin and the Portuguese soccer league. Santa Casa had sought to break up a sponsorship deal involving the Portuguese soccer league that allowed Bwin to advertise its website to fans.

The EU court yesterday said that "The prohibition imposed on operators such as Bwin of offering games of chance via the internet may be regarded as justified by the objective of combating fraud and crime".

Online gaming groups trying to open shop across the 27-country bloc are fighting several European countries in a number of legal challenges over domestic betting monopolies.

Bwin regretted the ECJ's decision and said it was unfortunate that the court did not recognise that commercial operators could combat fraud or take measures against addiction as well as state monopolies and that bans against legitimate operators would only boost a black market.

"The reality shows that internet state monopolies don't work," said Thomas Talos, a lawyer for Bwin. "We continue to fight for a regulated opening of the market. Bans don't work."

On the other hand, European Lotteries, the EU lobby group representing national lotteries, welcomed the ruling. "This strengthens the hand of national governments and lotteries in controlling what gambling take place on the internet," said Rupert Hornig, the group's EU representative.

Bwin and other online gambling companies vowed that the game is not over and pointed out that the scope of the decision was narrow.

They said the ECJ would still rule on several other gaming cases in the next few months, including disputes in Germany and The Netherlands.