The European Court of Justice has delivered another unfavourable judgment that does not bode well for the future of Malta's flourishing online gaming industry.
According to the Court, a Swedish ban on advertising of websites hosted in other member states, including Malta, is legal as long as the penalties imposed are the same as those for illegal gambling organisers within the country.
The case is being considered groundbreaking because it effectively allows a national government to stop its citizens advertising services that are legal in other EU states but illegal at home as long as it can prove this is in the public interest.
The Luxembourg-based Court concluded "that the Swedish legislation reflects the objective of the exclusion of private profit-making interests from the gambling sector and may be regarded as necessary to meet such an objective".
However, any laws imposing a penalty on people advertising outside the country that was higher than on those running illegal betting rings inside the country would break EU rules, the Court said.
Swedish law bans the organisation of gambling for profit. The only groups allowed to run betting in the country are those which use the money for "socially-beneficial objectives".
But in 2003 and 2004, Swedish papers Expressen and Aftonbladet advertised online betting on four commercial websites in Britain and Malta. The Swedish government fined the chief editor and publisher of the papers, Otto Sjoberg and Anders Gerdin, 50,000 crowns (roughly €5,200) each. Both men appealed against the fines and the Swedish court asked the ECJ whether its law was in line with EU rulings.
In general, it is illegal under EU law to limit the provision of commercial services and this is the main argument used by Malta when defending the online gaming industry.
However, the Court stressed that "considerations of a cultural, moral or religious nature can justify restrictions on the freedom of gambling operators to provide services, in particular insofar as it might be considered unacceptable to allow private profit to be drawn from the exploitation of a social evil".
European Lotteries, representing state lotteries and opposing cross-border online gambling, welcomed the ECJ decision describing it as "another serious blow to the commercial online gambling industry".
Its president, Friedrich Stickler, said the court had given "full backing to the gambling model we stand for, a model from which the whole of society benefits".
"It has once again rejected the arguments of the many private online gambling operators which pursue purely commercial interests."
Malta and the UK host the majority of online gaming operators in the EU, particularly through the provision of favourable legislation. It is estimated the industry is leaving millions of euro annually in Malta's state coffers and employs thousands.