The ire of the European Court of Justice against those member states which seek to impede companies established in other member states from penetrating the gaming market in another state, has now turned onto Austria. Following the recent ruling against Germany, the court has now condemned Austrian laws, the practical implications of which are to ensure that only companies established in Austria can place a bid for the operation of casinos in Austrian territory.

Austrian law makes provision for a state monopoly over gaming. The Austrian government can grant a maximum of 12 concessions entitling their holders to operate gaming establishments. The concessionaire must, however, be a public limited company having its seat in Austria and is subject to supervision by the relevant ministry. The organisation of games of chance without any authorisation may give rise to criminal proceedings. At the time of the proceedings, a single company was vested with the 12 concessions and the latter were granted and renewed without a public tendering procedure.

The facts that gave rise to this ruling were briefly as follows. A German national operated two gaming establishments in Austria without previously having applied for a concession from the Austrian authorities. The Austrian Court of First Instance found him guilty of unlawfully organising games of chance and he was ordered to pay a fine. Upon appeal, the appellate court proceeded to make a preliminary reference to the European Court of Justice requesting guidance as to whether Austrian legislation on the operation of gaming facilities infringes the rights to freedom of establishment and freedom to provide services as guaranteed by EU law.

The Court of Justice ruled that such a requisite as envisaged by Austrian law, namely that only legal persons having a seat in Austria are entitled to hold concessions to operate gaming establishments on the territory, constitutes a restriction on the freedom of establishment. Such a requirement discriminates against those companies which have their seat in another member state and prevents such companies from operating gaming establishments in Austria through an agency, branch or subsidiary.

The court refused to accept Austria’s justification that such a restriction is necessary in order to prevent gaming activities from being carried out for criminal or fraudulent purposes. It maintained that the categorical exclusion of operators whose seat is in another member state is disproportionate to such an objective, as it goes beyond what is necessary to combat crime. There are in fact various less restrictive measures available to monitor the activities and accounts of such operators, the court noted.

Any undertaking established in a member state can be supervised and have sanctions imposed on it, regardless of the place of residence of its managers. Moreover, there is nothing which impedes the Austrian authorities from supervising the premises of the establishments in order, in particular, to prevent any fraud from being committed by the operators against consumers, the court asserted.

Nonetheless, the European Court of Justice accepted that limiting the number of concessions may be justified by the need to limit opportunities for gambling. The grant of concessions for a 15-year duration, as is the case under Austrian law, may also be justified by the concessionaire’s need to have a sufficient length of time to recoup his investments. However, the court remarked, it is the absence of a competitive procedure when the concessions were originally granted to the current concessionaire that contravenes the EU’s internal market rules.

In order to safeguard transparency, the relevant authorities are obliged to ensure enough publicity to enable a service concession to be opened up to competition as well as the impartiality of the award procedures to be reviewed. Such conditions must be met before a member state can exercise its right to award licences to operate casinos, irrespective of the method of selecting operators.

Indeed, the court concluded that if a member state does not proceed likewise, it is discriminating against those operators located in other member states, who are deprived of the opportunity to express their interest in obtaining the concession in question. Hence, any member state which does not ensure such a possibility for foreign operators when granting a concession, is indirectly discriminating on grounds of nationality and is therefore in breach of EU law.

This ruling constitutes the latest feather in the cap of the European Court of Justice in its mission to curtail any obstacles to the operation of the internal market in so far as gaming is concerned and to do away with national barriers which seek to preserve insularity to the detriment of the objectives of a single market economy.

mariosa@vellacardona.com

Dr Vella Cardona is a practicing lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is also a visiting lecturer at the University of Malta.

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