6 November, 2023

The EU: The Absent Arbitrator

Gustaf Hoffstedt, regular Gambling Insider contributor and General Secretary of the Swedish Trade Association, discusses the EU’s absence from gambling regulation

From the outset, it was clear that the EU’s withdrawal from the gambling sector was a mistake. In 2017, the EU Commission signalled that it would cease all proceedings related to member state violations in the gambling sphere.

Member states that had previously faced scrutiny over their actions were not only exempt from EU oversight but were also authorised to determine if they themselves had violated the rules of the internal market, making them both judge and defendant in their own cases. Unsurprisingly, not many states have since been found in breach of EU law.

By leaving the gambling market to its fate, the EU Commission greatly underestimated its importance in maintaining law and order within the internal market. In my native Sweden, EU law had been violated when the Government continued to uphold its state-run gambling monopoly, vigorously promoting Government-controlled gambling while denying other operators access to the market.

It is somewhat pitiable for countries like Austria and Germany to request EU assistance when they are among the worst at providing their citizens with a gambling market that is free from discrimination and protectionism, contravening the fundamental idea of the EU

It did not matter whether other companies adhered to the same regulatory framework as the monopoly operator or exceeded it in terms of consumer protection. The EU Commission took note of the situation and in 2014 decided to sue Sweden for breaching EU law.

The Commission successfully championed the principle of equal treatment in the EU, asserting that entities should not be treated differently based on their country of origin. 

Sweden eventually acquiesced and introduced a competitive licensing system that took effect in 2019. Regrettably, it marked the last time a nation would abandon a discriminatory monopoly system following an EU Commission lawsuit.

All member states would have benefitted from a shared understanding of how the gambling market should be regulated: A unified EU framework and a single EU licence, setting a standard for what the entire Union demands from gambling companies that want to offer their services to EU citizens.

Today, this notion feels more remote than ever. Individual states regulate domestic gambling market as they see fit. To complicate matters, states often operate their own gambling companies that engage in commercial, and often aggressive operations, in both monopolistic and competitive markets.

It is in this context that one must consider Malta’s contentious Bill 55, which aims to shield gambling companies based in the EU island state from legal proceedings in other member states.

The core EU principle of recognising and treating other member states’ authorities and courts as our own demands equal treatment and a robust EU law framework to resolve disputes.

With the EU abandoning this principle in the gambling sphere, it is hardly surprising that Malta does not automatically enforce an Austrian court’s decision to expropriate a gambling company with a Maltese gambling licence.

To enforce a foreign court’s decision, Malta must trust the EU to uphold the law on both ends, respecting a member state’s right to have its court decisions enforced and assessing whether a member state genuinely has the law on its side when requesting intervention against a gambling company with a Maltese or another EU licence.

The EU Commission’s absence at one end has corresponding consequences at the other end, which should be obvious to member states like Austria and Germany. If you as a state are allowed to operate freely within your own gambling market, you cannot expect significant support when turning to the EU Commission for assistance in your national court decisions. 

I don’t particularly like Malta’s Bill 55; I view it as another setback for the internal market. However, for other EU countries to have a legitimate basis for their demands that Malta rescind Bill 55, then Malta, as well as the gambling companies currently seeking protection there from Austrian and German court decisions, must be assured that a just and fair EU Commission will uphold law and order within the internal market, stretching from Valletta in the South to Stockholm in the North, and from Lisbon in the West to Vienna in the East.

On a final note, it is somewhat pitiable for countries like Austria and Germany to request EU assistance when they are among the worst at providing their citizens with a gambling market that is free from discrimination and protectionism, contravening the fundamental idea of the EU.