Two recent judgements delivered by the European Court of Justice against UK betting companies Ladbrokes International and Betfair have upheld Dutch restrictions on internet gambling.

The Netherlands had a licensing system that allowed it to restrict access to the gambling market. As a result De Lotto, a non-profit foundation that controls domestic gambling profits, enjoyed a monopoly over sports gambling and could object to other member states companies from taking bets from Dutch citizens. De Lotto used the funds it collected to promote sports, health, and culture in the country.

Two British firms, Ladbrokes and Betfair, challenged the Dutch ban arguing, in separate cases, that they were properly licensed as betting companies in another EU nation and that European law upholds the right of companies to cross borders and carry out business in other EU countries.The gambling companies were both attempting to break the monopoly held by domestic game-of-chance agencies in the Netherlands.

De Lotto filed suit against Ladbrokes claiming that the company was not licensed to operate in the Netherlands. De Lotto asked the Dutch court to stop residents from using British bookmaker Ladbrokes' online gambling operation as it was not licensed in the Netherlands. Ladbrokes appealed to the Dutch Supreme Court after the lower court backed De Lotto, and the Dutch Supreme Court referred the matter to the ECJ requesting guidance on whether the Dutch licensing system was compatible with EU law, particularly the rules on free movement of goods and services.

In this second challenge, Betfair took its case to a Dutch court after Dutch authorities refused to grant it a licence similar to others given to two Dutch companies. The court subsequently sought guidance from the ECJ.

In similar judgments, the ECJ ruled in both cases that national regulations on games of chance are compatible with EU law.

First, it concluded that as EU laws on online gambling have not been harmonised, the two firms' UK licences were not relevant. Secondly, it held that EU countries can ban online gambling if they have a defensible aim. The ECJ backed the position of the Dutch court on Ladbrokes, holding that restrictions may be justified, in particular by the objectives of consumer protection and the prevention of both fraud and incitement to squander money on gambling, as well as the need to preserve public order. It cited the same rationale for the Betfair case.

These two judgments delivered by Europe's highest court handed down a setback to online betting sites by allowing member states to ban the operation of games of chance on the Internet for justified reasons.

While these cases concerned the Netherlands, the ruling covers the whole of Europe. It is evident therefore from these judgments that the principles of the free market are subordinate to overriding principles of public policy aimed at preventing addiction and fraud.

Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.

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