Confusion reigns for German online gaming licenses

Source: Nicole Kirbach¸ PKF Malta

As published in the Malta Independent on the 6th December 2012

It is well known that Germany has been very prohibitive under the old Interstate Treaty on Gambling which completely banned online gaming even though competition rules within the EU argue in favour of opening up the market. As a background one notes how it was on 2008¸ that an interstate treaty on gambling was entered into by 15 German federal states (i.e. all  States other than the breakaway Schleswig-Holstein) . The interstate treaty was promulgated to last four years¸ i.e. until 31 December 2011¸ but in practice remained in effect until the end of June 2012. The interstate treaty of 2008 was not compliant with the freedom of services since it went against the duty to guarantee one of the fundamental freedoms within the European Union. As a consequence¸ the 15 federal states of Germany were forced to substantially revise their interstate treaty in order to implement a consistent and coherent gambling law. It has resisted the opening of the market to foreign competition. In fact as example we read how the Federal Court of Justice (FCJ)¸ Germany’s highest civil court¸ has ruled that the country’s ban on operators offering online gambling services is justified.

In spite of this ruling¸ many betting operators were waiting nervously in the application hall when the good news was announced that the government introduced a treaty for online betting opening the way for foreign operators. The floodgates were opened for licenses starting with effect from 1 January 2012¸ when Schleswig-Holstein¸ one of the 16 German federal states¸ enacted its own Gambling Act. The new Gambling Act opens up the online-gambling market in Schleswig-Holstein and enables private companies to provide online-gambling services. As for the rest of 15 German federal states¸ the online-gambling market was also partially liberalised as of 1 July 2012¸ however as is being explained in the article the doors were completely opened. Under certain circumstances private companies may now obtain licences to offer and broker online sports betting as well as lotteries. The new Treaty which came into force after being ratified by 15 of Germany’s 16 federal states¸ replaced the 2008 state monopoly on sports betting but levied a prohibitive 5% turnover tax on all sports bets taken by operators active in the German market. The Agreement is not approved by the European Commission although the German government does not seem to bother. Commission asked Germany to abolish about the scheme within the next two years and to be replaced by a more liberal law. But it is highly unlikely that the Commission will block the New Treaty.

This month¸ however the German Federal Court suggested that Germany’s current online gaming policy might still be in breach of EU legislation. What the Federal Court didn’t reveal is if it’s the federal gaming treaty that would have to be repealed or the Schleswig-Holstein law. The Court is expected to rule on this matter on January 23rd 2013 and in the meantime foreign operators are hoping for a quick solution aiming to repeal the confusion that is creating so much uncertainty. In any case the federal law started a process for applications on 3 August under the supervision of the Hessian Ministry of Interior. The bone of contention is that the new law has outlawed all other forms of online g