Germany Ban Of Online Gambling

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Ira Piltz, Greenpoint Technologies
IBLS.com
INTERNET LAW - THE GERMAN BAN TO ONLINE GAMBLING

As of January 2008, an anti-online gambling treaty has been passed in Germany following ratification by the majority of German states. This treaty has awoken a storm of debate amongst many Europeans who have been affected by this German law. Some organizations are working to obtain nullification of this treaty because they consider the treaty will exert prejudice against the rights of surrounding European neighbors. This articles informs on this German Anti-Online Gambling Treaty.
As of January 1st, 2008, an extensive ban outlawing almost all forms of online gambling has been ratified by at least 13 of 16 German states. This ban, known as the German Interstate Treaty (“GST”), bans all Web-based gambling or brokering of all wagering and betting games over the Internet, specifically including the placement of bets with companies located in other countries. The GST, however, is currently subject to an appeal before the European Commission.

The GST imposes a number of restrictions on gaming and betting activities:

1. Discretionary licensing requirement for agencies: Section 19 of the GST in conjunction with Sections 4 to 7, lays down a licensing requirement for betting agencies that accept bets on behalf of betting operators. Pursuant to Section 4(2), an agent does not have a legal claim to obtain such a license even if he fulfils the requirements of the GST.

2. Prohibitions of online gaming and betting: Section 4(4) of the GST introduces a ban for online gaming and betting except for horse race betting.

3. Strict advertising and sponsoring prohibitions: Section 5(3) GST imposes advertising restrictions on TV, the Internet or on jerseys or billboards, as well as by telecommunications equipment (mainly phone or fax).

4. Financial and Internet Service Providers (“ISP”) Blockings: Section 9(1)(4) and (5) enables the gaming authorities of the German federal states to demand that Internet Service Providers block online gaming websites and to prohibit financial institutions from processing payments for and from online gaming prohibited by the Treaty.

Many online bookmakers and European sites as well as politicians opposing the action are appealing the matter to the European Commission (“EC”). The goal of these proponents is to open up and liberalize the European gambling market by declaring that the internal German laws are inconsistent with European Union law and the principles thereof.

The European Court of Justice has previously stated that any restrictions that seek to further general-interest objectives of member states- such as the protection of their individual consumers are permitted but that these restrictions must be consistent and systematic in how they seek to limit the activities of potentially offending companies.



Is the GST discriminatory?
Opponents of the GST, including the European Gaming and Betting Association (“EGBA”), argue that due to the fact that the GST applies to all forms of Internet gambling except horse racing, opponents of the law argue that the GST’s prohibitions are disproportionate and biased.

What are some of the potential costs and negative ramifications that may arise from the passage of the GST?
Opponents of the GST argue that the GST’s mechanisms to institute financial and ISP blockings are inefficient and costly to ISPs. This assertion is based on the fact that similar protective measures have been technologically circumvented in other countries, and have yielded significant costs in terms of both time and manpower to ISP providers, financial institutions and gaming operators.

Is the GST overbroad?
Some of the key restrictions that the EC is questioning in terms of their compatibility with the EC Treaty's Internal Market provision include:

• The total prohibition of games of chance on the Internet - notably sports betting, which the Commission already sent Germany a detailed opinion on in March 2007,

• Advertising restrictions on TV, on the Internet or on jerseys or billboards,

• The prohibition on financial institutions to process and execute payments relating to unauthorized games of chance.

Does the GST violate European law with respect to the free movement of goods and services?
Organizations opposing the GST claim that the GST violates European Union laws requiring the free movement of goods and services within the continent. The fact that the GST restricts all types online gaming except for horse race betting raises serves to bolster this claim.

Moreover, opponents argue that the GST does not ban all types of gambling, only online gambling, and that the intent is, therefore, discriminatory. As a case in point, horse race betting is managed by German states and is not in violation of the GST.

Ultimately, the GST prevents online gaming and betting operators established and licensed in other member states from offering their services to German customers.