Online gaming in the Netherlands: farewell to Ladbrokes?

Publié le 09/02/2003 par Christoph De Preter

For a long time, the incumbent national gaming operators seemed to adopt a fairly passive attitude towards foreign companies offering gaming activities online. At least in the Netherlands, those days are over, since the Arnhem Court recently forced Ladbrokes to prevent Dutch customers from entering its Ladbrokes.com website. Introduction As a rule, the Dutch Act…

For a long time, the incumbent national gaming operators seemed to adopt a fairly passive attitude towards foreign companies offering gaming activities online. At least in the Netherlands, those days are over, since the Arnhem Court recently forced Ladbrokes to prevent Dutch customers from entering its Ladbrokes.com website.

Introduction

As a rule, the Dutch Act on Games of Chance (‘Wet op de Kansspelen’ or ‘WoK’)prohibits the offering of games of chance on the Dutch territory. However, the Act provides for a licensing scheme for certain activities such as lotteries, casinos, slot machines, and the taking of sports bets. As it is the case in a number of other countries, this licensing scheme actually rather resembles a de facto monopoly. As a matter of fact, as regards the organization of lotto games, instant lotteries and sports bets, the Dutch government has granted a single license to the ‘Stichting Nationale Sporttotalisator’ or ‘Lotto’.

Since a while, the Lotto is acting very aggressively vis-à-vis foreign gaming operators that are taking gambles or bets online from Dutch customers. Recently, the Lotto summoned the famous British company Ladbrokes to appear before the Court of Arnhem in summary proceedings. The holdings of the judgement dated January 27, 2003 are fairly remarkable and have caused great concern with foreign gaming operators acting online in the Netherlands.

The Ladbrokes decision

What were the facts in the case at hand? The British company Ladbrokes Ltd., together with its Gibraltar affiliate Ladbrokes Internationl Ltd., offered various games of chance, mainly related to sports events, through the website ladbrokes.com. Ladbrokes had also registered the domain ladbrokes.nl, but did not yet offer any gaming activities under this domain. Customers could also place gambles and bets through a special 0800-number.

The Court of Arnhem ruled that it had jurisdiction over the matter under the Brussels I- Regulation of December 22, 2000.

Furthermore, the Court held that the case at hand did not fall within the scope of the E-commerce directive. Therefore, the country of origin principle set forth in the E-commerce directive did not apply. The Court held that under Dutch international private law, the matter was to be analysed under Dutch law.

Before applying the Dutch Act on Games of Chance to the case at hand, the Court had to verify whether the Act on Games of Chance was in compliance with EC competition law, and more in particular with the ECJ’s holdings set forth in the Schindler, Läärä and Zennatti cases. As a matter of fact, the licensing obligation set forth in the Act could be considered as an impediment to the free provisioning of services within the Internal Market. According to the Court, the Dutch Act was not discriminatory and was justified by compelling national interests, such as consumer protection and crime prevention, and therefore in conformity with EC competition law.

It is noteworthy that in its decision, the Court of Arnhem explicitly referred to the geolocation technologies used by Ladbrokes in order to prevent American citizens from placing gambles or bets on the Ladbrokes.com website. According to the Court, the prior use of such technology towards American citizens clearly proved that Ladbrokes was capable of also preventing Dutch citizens from entering its website.

On the basis of the foregoing, the Court of Arnhem ordered a preliminary injunction, forcing Ladbrokes to prevent Dutch citizens from placing gambles or best on the Ladbrokes.com website in the same way as it did vis-à-vis American citizens. The Court also ordered that Ladbrokes could not organize any games of chance through any .nl domain, including the Ladbrokes.nl domain. Since it was not clear whether the 0800-number was a Dutch or an English number, and whether the number could be accessed by Dutch citizens, the Court declined the Lotto’s claim to organize games of chance through telephone.

As mentioned previously, other foreign gambling operators offering their online services to Dutch customers are very concerned with the Arnhem Court judgment, especially since Lotto’s counsel stated that after Ladbrokes, other operators will also be summoned before court. On February 13, an introductory hearing will take place before the Utrecht Court in a case between the Lotto and Casinolux.com, an online gambling operator located in the Dutch Antilles.

Observations

A few remarks with regard to the Arnhem Court judgment are in place.

First, the judgment has been rendered in summary proceedings, which means that a judge will only verify whether the plaintiff’s claims are justified at face value. It is therefore very likely that Ladbrokes will appeal to the Arnhem Court judgment, or that it will initiate a procedure on the merits of the case.

Second, in our view, the Arnhem Court concluded too quickly that the Dutch Act on Games of Chance did not infringe the ECJ case law on the free movement of services. It did not verify to what extent the UK betting legislation, to which Ladbrokes is subject, already internalizes issues such as consumer protection or crime prevention, so as to render additional Dutch legislation irrelevant. In doing so, the Court denied the fact that the ECJ only allows Member State limitations on the free provisioning of gambling services in so far as these limitations are proportionate to the goals pursued by the Member State.

Third, the ECJ ruled in the Zenatti case that it is up to the national judge to determine the real rationale of a given national gambling legislation. A Dutch court should therefore verify whether the licensing scheme set forth under the Dutch Act on Games of Chance is truly inspired by consumer protection and crime prevention, or whether it is mostly inspired by the wish to grant a de facto monopoly to a national gambling operator, thereby securing that income out of gambling activities is kept within the Dutch borders. In a landmark case in Germany, the Düsseldorf administrative court has recently decided that the German administration had acted unlawfully by refusing a lottery license to an alternative gambling operator on grounds that there was no public need for an additional lottery. According to the Court, such license refusal was a violation of the constitutional right to freely exercise a profession. The Court therefore forced the administration to grant a license. Although this decision is likely to be reversed in appeal, it may illustrate that the national governments’ monopolist behaviour on the gambling market may encounter some boundaries.

Finally, one can ask whether the geolocation technology that is currently out on the market, is truly as effective as the Arnhem Court seems to believe, especially in the European environment where gambling legislation is dispersed and differs from country to country.

More informations

See the judgment, in dutch version, available on our website.