Germany doing it the hard way

Back in September last year the European Court of Justice (“ECJ”) ruled that Germany’s State Gambling Treaty was protectionist in nature and inconsistent with European law.

In April this year the German government put forward a new draft Treaty that they hoped could be adopted by all 16 German Länder (states). It wasn’t exactly the shining example of trying to follow the single market approach to online gambling that the ECJ and European Commission (“EC”) were looking for.

Instead it introduced tight restrictions on the number of private sports betting licenses to be handed out, a 17% tax on turnover, and a continued prohibition on other online gambling offerings like casino games and poker.

The day the new laws were proposed, shares in bwin.party dropped almost 30% and most commentators opined that they were too protectionist to be accepted by the EC.  Those commentators were spot on.

Yesterday the EC advised the German government that the draft as it currently stands isn’t consistent with EU law. If adopted, it would likely lead to an EC infringement proceeding.

But more important, from a pragmatic standpoint, all European based gambling operators will now be emboldened to disregard the German law secure in the knowledge that it doesn’t have EC support.  Rather than trying to apply for a license and play by Germany’s rules they will just passively work the market without having to pay additional taxes.