Case Study: European Union Law
Does a prohibition of games of chances and the establishment of a nation-wide monopoly for operating games, including the Internet, violate the freedom to provide services, the freedom of establishment, or the free movement of payments?
Considering the several technological inventions and innovations witnessed in the contemporary world there are different systems and procedures advanced to help in the effective and efficient movement of goods and services across different countries. Online gambling is one of the products of these technological inventions and innovations. The use of different systems and procedures relating to online gambling has presented several legal issues especially among nations within the European Union and always requires special interpretive legal hearings by the Court Of Justice Of The European Union.
The court of justice of the European Union is empowered by article 267 of the treaty on the functioning of the European Union (TFEU) to perform the following functions. The first one is to provide clarity relating to the interpretation of European Union treaties as well as provide an interpretation of EU law or a national law derived from or based on an EU law (Larion, 2019). Secondly, the court of justice of the European Union is to challenge the validity of an EU law based on the existing environmental factors (Larion, 2019).
Through all these, there are several online gambling cases that have been forwarded to the court of justice of the European Union for proper interpretation based on the reigning European union treaties and national laws. One of these cases involves Mr. Giacomo Giacatore and b&b Ltd vs the Italian government. Mr. Giacatore hatched a deal with b&b ltd, a betting company based in Malta to be the company’s intermediary in Italy. The deal involved the gambling contract being closed between the b&b Ltd and the customer in Valetta, Malta, though the client interacts with the company’s systems through the use of devices at Mr. Giacatore’s shop. The server handling the gambling transaction is based in Valetta, Malta. In handling this Mr. Giacatore receives 10% of the betting fees as his commission. However, the existing law in Italy only acknowledges one company to provide online gambling services across the country. The company named Juventina enjoys a monopoly in relation to providing games of chances in the country and the proceeds are channeled to help the poor and other social projects. In the case involving involve Mr. Giacomo Giacatore and b&b Ltd vs the Italian government, the plaintiffs believe the EU laws may be relevant and can help them since they believe the activities were taking place outside Italy; hence were not violating any Italian rule. Similarly, the judges at the competent administrative court in Turin believe that consumers were only making use of Giacatore’s shop and thus not with him personally.
In light of this case, it is essential to note that there is no standardized law constructed by the European Union to governing online gambling. Every European member state has its own laws that govern online gambling, which is only harmonized at the international level to facilitate the seamless flow of goods and products across different borders (Prete, 2018). However, there are some essential factors that precede the call for the relaxation of national laws relating to online gambling. At the top of these is the sovereignty of an individual nation in which a nation can impose different laws in the manner it deems fit as long as they respect the fundamental human rights. Secondly, the societal risk involved in such activities is also considered in line with consumer protection, fight against organized crime and protection of human health based on different primary care principles within the country (Prete, 2018). Thirdly, the European Union must respect the cultural heritage of a nation.
Freedom to provide goods and services
Article 56 TFEU provides a framework from which services are to be provided across different borders among members within the union. The three situations under which such can happen include when a professional need to travel to other nations to render their services when an individual need to travel to receive these services like in the case of tourism and lastly the case involving the movement of services across borders without individuals moving to receive or provide these services like in the case of online gaming (Giegerich, 2018).
Similarly, for an individual to enjoy the freedom of provision of services there are three specific conditions that must be met. The first one the service provider must have a nationality of one member state. The service provided must be primarily an economic activity except in the case volunteering services and the last of these conditions demand that there must be two states involved in any disputes relating to service provision brought before the Court of Justice For The European Union van (Meerten & Schmidt, 2016).
In light of these, Giacatore was an Italian national, which gives the freedom to set up and maintain any service-related business with an economic purpose in any country across Europe as long as they are member states. Similarly, considering he was an expert in computer science he had the legal right of establishing services related to his profession in any country. On the same note, b&b ltd as a legal person from Malta had the right to set up a subsidiary in any of the EU member states. These were to be done in accordance with the specific regulations established in an individual state to warranty a legal operation through due registration protocols.
However, when it comes to online gaming services the court of justice of the European Union acknowledges the autonomy of member states in relation to organizing their services as long as they respect the fundamental freedoms provided in the TFEU treaty. Through this, Italy has the right of restricting the number of service online gaming service providers. However, as long as these companies adhere to the set regulations by the TFEU in regards to nationality, economic activity they are free to provide these services in line with the requirement from the country’s legal framework. Through this, Giacatore was operating a legal business though it involved gambling the service provider was not in Italy and the contracts between the consumers and the company were not provided in Italy but in Valletta, Malta. From this angle, the monopolistic approach developed by Italy in regulating its gambling environment violated the freedom of provision of services. However, in consideration of the country’s national heritage principle of monopolizing the gambling industry to ensure social support and development the country was right to restrict players in this sector.
Freedom of establishment or the free movement of payments
Article 49 under the TFEU provides for the freedom of establishment in which an individual has the right to pursue activities on a self-employed basis as a professional individual (Popescu, 2017). This covers primary establishment involving a professional person relocating to another country and establishing a business there and secondary establishment involving a professional having one business in country A and another in B. it also empowers professionals to set up and manage undertakings of a specific company in another members state as long as the provision in article 53 TFEU regarding the primary establishment and secondary establishment in the form of subsidiaries is adhered to.
Similarly, the TFEU also prohibits indirect discrimination of service providers among member states. The case involving Cassis De Djon provided a framework for gauging the effectiveness of mutual recognition arising from different regulations between two countries. In this case, the Germany authorities failed to give permission for the sale of Cassis De Djon, a blackcurrant fruit liqueur made in France due to its insufficient alcohol strength (Larion, 2019). In accordance with the German laws, a fruit liqueur was required to have 25% alcohol content while in France these products were required to have an alcohol content of between 15% to 20% (Larion, 2019). The court ruled that as long as a specific product or service is lawfully produced and sold in one country they can be produced and sold in another member state country; hence Germany had an obligation of relaxing its rules to ensure harmonization of regulations.
Through this, individual member states are required to uphold the principle of mutual recognition in which member states are to incorporate other legal frameworks from other nations to ensure seamless establishment and movement of goods. Italy has an obligation of relaxing its rules relating to the provision of online gaming services to accommodate the operations carried out by both Mr. Giacatore and b&b ltd; hence was infringing on the freedom of establishment or the free movement of payments. Additionally, the provisions article 49 TFEU gave Mr. Giacatore the freedom to establish an online gaming business in any country across member states of the European Union since he was a professional in the field of computer science and was an Italian national. b&b ltd also has the freedom of establishing a virtual subsidiary in any country as long as the due registration process is followed. As a result of all these, the treat
Does a fine of 75.000 Euro for providing for an infrastructure that allows for entering into gambling contracts with betting providers established in another Member State violate the freedom to provide services, the freedom of establishment, or the free movement of payments?
In consideration of the provisions in articles 26, 49, and 56 of the TFEU both Mr. Giacatore and b&b ltd met all the requirements provided for a legal or natural person to enjoy the freedoms in these provisions. Though the laws in Italy only provide room for one betting company to operate within the country and the proceeds to be directed to social development and provision of goods and services to the poor, the mutual recognition principle requires a full understanding of the legal framework used by other nations to curb effects of online gambling to a nation and allow other companies to operate in such a market. Similarly, nations are required to develop modern gambling procedures that meet the expectations of citizens. This is as a result of different demographic changes witnessed in the contemporary world which presents different employment opportunities as well as diverse tastes and preferences.
Article 49 and 56 of the TFEU allows individuals from different nations within the EU trading block to establish any income-generating activity in any country as long as the procedures involved meet the legal requirements within the state. This includes the establishment of infrastructure that is to help in the provision of goods and services. For instance, in regards to providing a payment between operators and consumers states have developed a system that blocks payment between consumers and non-authorized dealers and allows authorized dealers to conduct their operations. In this system, there is a standardized payment system required to facilitate any transaction between an online gambling service provider and its consumers. The system further develops ISO standards and have specific member banks involved if it is a card payment system based on the Merchant Category Code (MCC) (Reçi & Kokaj, 2016). The card system also has a four-digit identifier that is developed in accordance with the ISO standards. For e-wallets, individual nations always agree with individual service providers to block any payment meant for gambling activities directed to unauthorized organizations.
The level of infrastructural organization in the contemporary world places the burden of detecting unauthorized online gambling service providers on an individual nation. In which it can prevent any transaction occurring between such a company with consumers; hence any company operating within a nation’s border is believed to have met all the legal requirements before certification. This means that Mr. Giacatore had met all the relevant legal standards before establishing the necessary infrastructure needed to ensure smooth interaction between b&b ltd with consumers.
By imposing a fine of 75,000 euros the Italian government greatly infringed on the right of freedom of provision of services, freedom of establishment, and movement of goods and services between member states in the EU trading block. Italy should embrace the principle of mutual recognition and re-adjust its regulations that relate to gambling activities. Similarly, the country should also incorporate the different developments in relation to changes in demographic structures and technological changes. Moving swift in the adoption of the new technologies involved in blocking payment for betting activities carried out in its territories would have denied Mr. Giacatore the license for establishing the infrastructure necessary for interaction between consumers and b&b Ltd based in Malta. However, since they confiscated Mr. Giacatore’s capital goods after his shop was fully functional and running, the action can be termed as indirect discrimination, which is prohibited by TFEU provisions. Through all this, the Italian government action was an infringement to the freedom of provision of services, freedom of establishment, and free movement of payment.
It is imperative for an individual nation to always keep in tabs with the technological changes and demographic changes so as to design a viable regulatory framework that meets the expectations of all stakeholders and foster fruitful collaboration with other players. The monopolistic approach developed by the Italian government greatly infringes on the rights bestowed to citizens from member states of the European Union. The freedom of free movement of services and the establishment of viable income-generating activities are in line with the current technological systems and the demographic changes in the society.
References
Giegerich, T. (2018). Article 56. In Vienna Convention on the Law of Treaties (pp. 1039-1060). Springer, Berlin, Heidelberg.
Larion, I. M. (2019). The meaning of national court in article 267 tfeu and the importance of the court’s independence. Challenges of the Knowledge Society, 590-597.
Popescu, R. M. (2017). Jurisprudential Issues Concerning the Beneficiaries of Provisions of Article 49 TFEU. LESIJ-Lex ET Scientia International Journal, 24(2), 60-67.
Prete, L. (2018). The Gatekeepers of Article 267 TFEU: On Jurisdiction and Admissibility of References for Preliminary Rulings.
Reçi, S., & Kokaj, G. (2016). Freedom of Establishment and the Prohibition of Discrimination in the Internal Market under the Provisions of the Acquis Communautaire. Mediterranean Journal of Social Sciences, 7(3), 135.
van Meerten, H., & Schmidt, E. S. (2016). An Overview of EU Case Law: Consumer Protection as the Guiding Principle in Financial Services. Special Issues, 2016(1), 37-40.