Today, the CJEU manifestly ruled that enforcement actions against EU licensed operators unlawfully excluded from national licensing processes are prohibited and not in compliance with EU law.
The Court confirmed the obligation on Member States to organise transparent licensing processes and rejected EU countries’ discretion to impose enforcement measures.
This ruling comes at a crucial time for countries like the Netherlands, were national legislation that has been found incompatible with the Treaties, is enforced.
The Court of Justice of the EU (CJEU) found that Hungary violated the fundamental freedom to provide services guaranteed under Art 56 of the EU Treaty (TFEU) prohibiting a cross-border operator licensed in the EU to lawfully provide its services in Hungary, by failing to organise a licensing tender published according to objective, transparent, non-discriminatory and proportionate criteria. This has been precised in paragraph 42 stating that, where it may be of interest to an undertaking located in a Member State other than that in which the concession is granted, (the State is required) to enable the service concession to be opened up to competition and the impartiality of the award procedures to be reviewed. The Court is further stressing the need for an impartial licence award (para. 41) and stressed that the rules of law be clear and precise and predictable in their effect (para. 43). The judgment confirms existing CJEU jurisprudence, such as the February 2016 Sebat Ince ruling (C-336/14).
Hence, when the national regime is in violation of EU law, a Member State is precluded from sanctioning an operator holding a licence in the EU. Such jurisprudence is more relevant than ever with Member States such as Poland and the Netherlands introducing very restrictive and incompatible regulatory frameworks and imposing subsequent enforcement measures which clearly contradict the fundamental principles of EU law.
“In that regard, it is sufficient to recall that, where a restrictive system has been established for games of chance and that system is incompatible with Article 56 TFEU, an infringement of the system by an economic operator cannot give rise to penalties (Pfleger and Others, C 390/12, EU:C:2014:281, paragraph 64 and the case-law cited.)” (para. 50).
“The answer to the third question is that Article 56 TFEU must be interpreted as precluding penalties [Note: see para. 22 where penalties are, amongst others, defined as ISP blocking and fines], such as those at issue in the main proceedings, imposed for the infringement of national legislation introducing a system of concessions and licences for the organisation of games of chance, if such national legislation proves to be contrary to Article 56 TFEU.” (para. 51).
Maarten Haijer, Secretary General of EGBA, comments: “The Court reiterated that Member States must guarantee that national regulation on online gambling services meets objective, transparent, non-discriminatory and proportionate criteria. Only a properly regulated and transparent online gambling market can ensure that the consumer is channelled to the regulated offer.”
Haijer added “The Court’s ruling is a clear message to other Gaming Authorities, including the Dutch Gaming Authority, that they must not enforce regulation that does not comply with basic EU law. We expect these Member States to reconsider and lift these enforcement measures as they are acting in violation of EU law. Their actions do not serve the interest of consumers, they fail to channel the consumers to reliable providers, instead they merely prop up failed regulation.”
The Budapest-Capital Administrative and Labour Court asked the CJEU whether Hungary violated the freedom to provide services (Article 56 TFEU) for imposing administrative fines and temporary ISP blocking measures against an EU licensed and regulated operator, whilst it failed to publish a call for tenders and did not enable the operator to submit an application for the purposes of obtaining a Hungarian license. In 2014, the European Commission sent an EU Pilot letter to Hungary in reaction to the changes in the Hungarian gambling framework, in which it emphasised the negative impact on the freedom to provide services (Art 56 TFEU).