Italy cannot use criminal law to stop gaming companies licensed in another EU nation from taking bets in the country, the European Court of Justice (ECJ) ruled Tuesday. Italian restrictions are incompatible with Community principles, the court said.
The ruling has been welcomed by gaming operators as a sign that European markets are opening up.
Under Italian legislation, the organising of games of chance or the collecting of bets requires a licence and police authorisation. Rogue operators face criminal penalties of up to three years' imprisonment.
In 1999, following calls for tenders, Italian authorities awarded 1,000 licences for sports betting. The calls for tender excluded operators whose company shares were quoted on the regulated markets.
One such company was Stanley International Betting, a subsidiary of Stanley Leisure plc, which at that time was the fourth biggest bookmaker and the largest casino operator in the UK. Stanley operates in Italy through "data transmission centres" (DTCs) run by independent operators with contractual links to Stanley, who place a data transmission link at the disposal of bettors so that they can access Stanley's UK server.
Mr Placanica, Mr Palazzese and Mr Sorricchio are DTC operators linked to Stanley. In 2004 these intermediaries appeared in Italian courts on charges of collecting bets without police authorisation. The Italian courts asked the ECJ whether the national legislation on betting and gaming is compatible with the Community principles of freedom of establishment and the freedom to provide services.
Italy said its licensing requirement prevents the exploitation of betting and gaming activities for criminal purposes. But the ECJ said the blanket exclusion of companies from tender procedures for the award of licences goes beyond what is necessary to achieve that objective.
There are other ways of monitoring the accounts and activities of operators which impinge to a lesser extent on the freedom of establishment and the freedom to provide services, it said, such as gathering information on their representatives or their main shareholders. It added that the lack of a licence cannot be a ground for the application of sanctions to such operators.
It added that the lack of police authorisation cannot be a valid ground for complaint in respect of those who have been unable to obtain them because, contrary to Community law, they were barred from any possibility of being granted a licence.
The ECJ acknowledged that criminal legislation is a matter for which the Member States are responsible. But it pointed out that criminal legislation may not restrict the fundamental freedoms guaranteed by Community law.
The 11 judge panel ruled that: "A Member State may not apply a criminal penalty for failure to complete an administrative formality where such completion has been refused or rendered impossible by the Member State concerned, in infringement of Community law."
In consequence, Italy cannot apply criminal penalties to persons such as the defendants in the main proceedings for pursuing the organised activity of collecting bets without a licence or a police authorisation, it said.
Adrian Morris, deputy director-general of Stanley, described the ruling as a "landmark".
"We think its time that the Commission and national lawmakers act now to end this protectionism," he told the Bloomberg news service.
Copyright © 2007, OUT-LAW.com
OUT-LAW.COM is part of international law firm Pinsent Masons.