In July, the Malta Gaming Authority (MGA) issued a ‘White Paper to future proof Malta’s Gaming Legal Framework’ for public consultation.  It closed yesterday. Being a public consultation one hopes that stakeholders, apart from the industry, would have read and submitted their reactions.

I will not go into all the aims that the MGA and the legislator are seeking to achieve by this new package of legislation that will govern an increasingly important economic sector, for they are many and very explicit in the explanatory memorandum that precedes the legislative proposals.

The Draft Act and the 10 sets of regulations that are included in the white paper will yet need to be followed by a host of other regulatory and quasi-regulatory instruments, such as codes (which may be mandatory) and guidance notes.

Among the aims, the MGA lists the need to simplify the applicable licensing and regulatory processes, the further empowerment of the MGA and notably: the ‘future proofing’ of the legal framework. Many comments made on other media have focused on the industry perspective and the benefits that should accrue to it from the proposed simplified licensing structure and new market opening possibilities that could be tapped, such as new types of games.

I will comment on a few other of the MGA’s aims.

The term ‘future proofing’ has now entered the government’s discourse and refers to a regulatory framework, in this case, that is forward-looking and flexible enough to remain relevant, operative and effective when foreseen and unforeseen developments in the area being governed occur.

This is no mean feat when one is dealing with a sector that is characterised by its dynamism and global reach fuelled by continuous technological development and innovation.

Now the need for a complete overhaul of the current gaming regulatory regime (read as ‘gambling’ by many) has been felt by both the regulator and the industry for many years, albeit not always for the same reasons. Although many, nowadays, associate the Maltese gaming sector with growing online part of it, there is an equally, if not even more present for the Maltese resident- land-based sector comprised of the national lottery (and their retail outlets), casinos and the street market outlets that have been located in our towns and villages since 2012.

The casinos currently fall under the Gaming Act of 1998 while the rest, save for a few exceptions that yet fall under more archaic legislation, falls under the Lotteries and other Games Act of 2002.

While the current legislation has served the sectors well for over a decade (and almost two decades in the case of casinos) one cannot overlook the fact that there is a lot of catching up to do. Both governing Acts are designed in the typical format of their time, similar in design and detail to the legislation that governs more ‘stable’ sectors such as resources of example and notably, served to open up the sectors as they were intended to do (ref: the privatisation of the management of Dragonara in 1997 and opening up of other casinos thereafter and the establishment and growth of Malta and a hub for online gaming in 2004 and beyond).

The legislation did not limit growth per se, although even diversification is constrained, but its main handicap is the restriction of the hands and actions that the regulator can take and this compromising its effectiveness and thus ‘performance’ of the regulatory framework itself.

In order to address the various constraints, the new gaming regime will firstly seek to consolidate the regulation of the sector under one piece of legislation – the new ‘Gaming Act’. Apart from providing for a more coherent approach, it should also provide for consistency in the regulation of the sector irrespective of the means of supply and therefore cater also for the technological developments and convergence seen and foreseen between sectors.

However, one also notes the absence of regulatory detail in the proposed new Act and a focus on the institutional structure and powers, including some new ones, to be vested to the MGA and the responsible minister. This is what makes this draft Act an ‘empowering act’, different from many other home-grown sectoral regimes.

It is worth recalling that gaming is not regulated directly at EU level and each member state adopts its own regulation, which has been subject to a multitude of court rulings owing to their restrictive features.

This is the best endeavour Malta has ever made at good governance – that of giving precedence to public interest above economic interest

Some critics would rightly lament that empowering legislation leads to unmitigated power and discretion to the institutions and in turn, it may lead (abusively) to arbitrary decisions. Indeed, this would be a risk if these powers, and therefore flexibility, are not somehow delimited in so far as they attain the aims but are not abused.

This risk of unmitigated power has been foreseen and the draft Act, unlike current legislation, sets forth a list of principles and objectives to which the institutions, namely the minister and the MGA, will be bound.  These are general principles and objectives that if adopted, and I hope they would as this will set a precedent for good governance, will, apart from being a first for Malta in explicitly setting these, require that the institutions act within parameters set in these objectives and principles rather than according to legislatively prescribed and often obsolete rules or even worse, unfettered latitude.

The principles and objectives are many and include the arch-objectives of gaming regulation: the protection of vulnerable people, the prevention of crime and fraud and the fairness of games. However, it is worth noting that the first in list of objectives is “to ensure that regulation of the gaming sector is carried out in the public interest”. One cannot argue with that.

It goes further as in the principles to be followed in pursuing the stated objectives (to be statutory) and after the principles of proportionality, non-discrimination and the consideration of risk we find a safeguard clause that states that “in case of a conflict between public interest and economic considerations, public interest considerations shall prevail”.

This is a novelty in our institutional structure and design, that of ranking objectives. Public policy, and regulation in particular, always includes a trade-off between objectives (industry welfare or public welfare?) and therefore to consign public interest as a priority at law, is as much a novelty as it is obvious to society where it concerns this sector that is often associated with undesired effects.

The public interest precedence however seems to have been lost in the scope of the composition of the board of governors. These are listed in Schedule 1 which among other things, provides for the appointment of these to be in the minister’s discretion and the choice of persons to be “able to represent the points of view of the industry and players”.

While the industry and consumer aspects are indeed essential, such a composition would provide for a very narrow view of the public interest objective in the governance of the sector. The concept of public interest is usually the remit of the court to accept or reject, and in the process, define.

It is expected that the legislative process in Parliament will highlight these issues and require that a guiding definition of what may constitute public interest is established. At EU level, this is an evolving principle, mainly established by the courts.

Notwithstanding, there is a proposed primary law that ranks public interest above economic interest (when these may be in conflict). This is the best endeavour Malta has ever made at good governance – that of giving precedence to public interest above economic interest – when this is warranted. After all, that is the purpose of market regulation – to balance the public interest against industry interests.

It is often difficult to attain but the attempt to inscribe it into national law is commendable and should be replicated in other sectors. How this will be operated remains to be seen, but the discussion one expects during the parliamentary process will sure, or rather hopefully, give society and the industry, a bench mark of what is to be expected.

This seems to be an exercise in good governance of a sector that is ripe for it, at a national and EU level. May Malta be the beacon of good regulation. It has the experience and therefore it could be.

Phyllis Farrugia is a freelance consultant and specialises in competition and regulation policy.