Belgium’s gambling and poker market definitively regulated (?)

In November and December 2010 we informed you that the new Belgian Gambling Act was supposed to come into force as of 1 January 2011, although the effective coming into force could not be realized since the Royal Decrees needed for the implementation of the Act were still to be enacted.

Today not only the lacking Royal Decrees were published, but furthermore – and this is possibly even more important – yesterday the 14th of July 2011 the Constitutional Court passed a judgment in proceedings taken by three (associations of) online gambling operators with the purpose of the annulment of the new Act due to its alleged unconstitutionality. The Constitutional Court rejected the gambling sector’s arguments as unfounded, and with that it seems that the path towards the effective coming into force of the legislation on games of chance is open (for now).

Below we will freshen up your memory on the outlines and the aim of the new Gambling Act. As of 1 January 2011 the operation of games of chance, both physically in gaming arcades and casinos as well as online, is subject to the prior acquisition of a license, granted by the Gaming Commission.

For physical operators (gaming arcades, casinos, drinking establishments, betting agencies for sports betting or horse racing…) there is a predetermined and limited amount of licenses. For instance, there are nine licenses available to operate a casino in Belgium. Given that Belgium has had but nine casinos for years on end, it is apparent that those casinos will be the recipients of the nine licenses to be granted. Also for gaming arcades, betting agencies and drinking establishments there will only be a limited amount of licenses available.

The requesting of these licenses has been suffering delays in recent months due to the absence of the Royal Decrees. These have to determine what should be the contents of the file and which application forms will have to be used for the requests. Finally the Royal Decrees have now been enacted, but the Gaming Commission has been compiling application files behind the scenes for a while.

The new Act brings the most changes for operators of online games of chance. As from now they as well are obliged to carry a license, in the absence thereof they will be operating illegally and are exposed to criminal persecution and substantial penalties. The granting of licenses currently being reserved to holders of physical licenses, the number of online operators will be very limited. On the other hand, numerous – foreign – gambling websites will suddenly be illegal and – as far as technically and practically possible – will be banned from the Internet in Belgium. As a consequence, especially for online licenses, for a while now there has been a rush to acquire a license in time. Many of the online operators have been negotiating with holders of physical licenses to engage in all sorts of cooperations, which would allow them to operate legitimately in Belgium.

Since last Friday they also know a lot of the exact conditions they will have to meet and which were not explicitly mentioned in the Act itself. The Royal Decrees published in the meantime contain among other things the course of filing an application and its content, being inter alia the name of the website, the composition of the website, the location from where the website is managed (bearing in mind that in any case the servers have to be located in Belgium),…

The applicant will also have to present a file showing he fulfills all quality requirements. Among other things he will have to show which measures he will take for the protection of socially weaker groups, how he will treat complaints and for example which advertisement policy he will pursue, while exhibiting “the necessary restraint” and appointing a contact person with the Gaming Commission for every campaign. The criterion seems very vague at first sight and therefore will have to be examined case-by-case in order to understand its scope. We at Sirius Legal are certainly looking forward to the first advertising campaigns for games of chance…

Also interesting is that the refusal of admission the Gaming Commission can impose on problematic players will also apply in the online world. In order to realize this, everyone who wants to gamble on a licensed website will first have to register, for instance via eID reader.

We briefly point to the fact that poker as for now – and although this is a point of controversy in a number of countries, including the Netherlands and the USA – is considered a game of chance which means that online poker tables will also have to obtain a casino license. A poker table which does not have a license ánd the players on that website are exposed to substantial penalties.

However, the entire Belgian legislation on games of chance has not been without controversy. It is part of a full-scale reformation of many of the national legislations on games of chance, including the German and the Greek, and a lot of online operators are strongly opposing the various, often very divergent new national legislations. Consequently, Betfair, among others, recently contested both the Greek as well as the German legislations on games of chance in court.

It was also Betfair that, together with Telebet and the Remote Gambling Association, went to the Constitutional Court in Belgium, where the three operators tried to obtain the annulment of the Gambling Act of 10 January 2010.

In the first place the claimants argued that games of chance were a matter for regional government (“since sports is a regional matter, so is sports betting”, the argument went) and not a federal matter, so that the federal government would be incompetent. This argument was not accepted by the Constitutional Court, almost as if it was self-evident. It is clear that the organizing of sports and the guidance are a Community matter. Nonetheless, the Court has rightly judged that the organizing of sports betting is indeed a federal matter and not a Community competence.

More ponderous was the argument that the required physical presence in Belgium for online operators was incompatible with the principle of equality. As we already mentioned, an online operator is only allowed to offer the same games he also offers offline, so that he is obliged to establish a physical branch/casino/gambling agency/gaming arcade in Belgium to be able to offer online services. Furthermore, he is required to place his servers in Belgium, which imposes massive restrictions for foreign operators of for example online poker games.

Without going into too much detail of the Court’s extensive decision, we can say that the Court almost completely adopts the argumentation of the European Court of Justice in the judgments C-42/07 of 8 September 2009 (Liga Portuguesa de Futebol Professional and Bwin International), C-258/08 of 3 June 2010 (Ladbrokes Betting and Gaming Ltd and Ladbrokes International Ltd) and C-46/08 of 8 September 2010 (Carmen Media Group). This jurisprudence states that member states are allowed to impose restrictions on the exploitation of games of chance on their territory “since games of chance are an economic activity that can have very harmful consequences, both for society as a result of the danger of impoverishment of the players due to excessive gambling, as well as for the public order in general considering in particular the substantial revenue generated by games of chance”. That is why, according to the Court, the free movement of goods, services, persons and capital within the EU can be restricted. Moreover, concerning the assessment of the proportionality, the Court has ascertained and acknowledged that “the specific characteristics of operating games of chance over the Internet entail other and more serious fraud risks by market participants and other and more serious risks for consumer protection – in particular with regard to minors and persons with an exceptional gambling appetite – than games of chance operated in traditional markets”.

In other words the Constitutional Court confirms the trend that was already indicated by the European jurisprudence: by reasons of public order, member states are allowed to deviate from the free provision of services and impose restrictions on foreign (online) gaming operators.

As a consequence, the access to the market of poker games, casino games and sports betting in Belgium will be very limited as from now, and will be reserved to specific operators with a prior license. Operators who do not comply with the standards/licenses will in all likelihood and as far as technically possible be banned from the Internet in Belgium, and the players who nevertheless gamble on those illegal websites will be exposed to serious persecutions.