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Hungary – Court of Justice rules against Hungary’s online gaming laws in Unibet case

By - 26 June 2017

In a case brought by Unibet of the Kindred Group, the Court of Justice of the European Union has ruled that Hungarian legislation on online games contravenes the principle of the freedom to provide services.

It said the legislation was ‘limited, first, in a discriminatory manner, and, second, by reason of its non-transparent nature.’

In 2014, the Hungarian authorities established that Unibet was providing, on Hungarian-language internet sites, services relating to games of chance even though it did not hold the licence required in Hungary to carry on such an activity. Subsequently, those authorities, first, ordered, on 25 June 2014, that access be temporarily blocked from Hungary to Unibet’s internet sites and, second, on 29 August 2014, imposed a fine on that company.

Unibet thereupon brought an action before the Fővárosi Közigazgatási és Munkaügyi Bíróság (Administrative and Labour Court, Budapest, Hungary) seeking the annulment of those two decisions on the ground that the Hungarian legislation underlying them was contrary to the principle of the freedom to provide services.

Unibet took the view that, although, during the periods in dispute, operators established in other Member States could, theoretically, have been granted a licence in Hungary to organise online games of chance (as the provision of such services was not reserved to a State monopoly), it was in practice impossible for them to obtain such a licence. According to Unibet, during those periods, Hungary did not issue a public call for tenders for the purpose of concluding concession contracts which would have made it possible to obtain the required licences. Likewise, Unibet took the view that Hungary in practice excluded it from the opportunity provided for under Hungarian law to conclude such contracts as a ‘trustworthy’ operator of games of chance.

The Court of Justice has ruled that the national legislation at issue, which prohibits the organisation of games of chance without prior licensing by the administrative authorities, constitutes a restriction of the principle of the freedom to provide services.

The Court then goes on to point out that, according to the national legislation on the basis of which the decision of 25 June 2014 was adopted, operators of games of chance were required, in order to be deemed ‘trustworthy’, to demonstrate that they had, for a period of at least 10 years, carried out an activity involving the organisation of games of chance in Hungary. The Court considers that such a requirement constitutes a difference in treatment because it places at a disadvantage operators of games of chance established in other Member States in comparison with national operators, who may more easily meet that condition. For that reason, the Court rules that the www.curia.europa.eu legislation being challenged is discriminatory and, therefore, contrary to the principle of the freedom to provide services.

With regard to the national legislation on the basis of which the decision of 29 August 2014 was adopted, the Court ruled that the obligation imposed on undertakings wishing to be granted the status of ‘trustworthy’ operator of games of chance that they must have carried out an activity involving the organisation of games of chance for three years in a Member State does not give rise to an advantage for operators established in the host Member State and might, therefore, in principle, be justified by a general-interest objective, such as consumer protection or the safeguarding of public order. However, that legislation does not satisfy the requirement of transparency in so far as neither the conditions governing the exercise by the national authorities of their powers during the procedures for awarding concessions to ‘trustworthy’ operators of game of chance nor the technical conditions which operators must satisfy when submitting their tenders had been defined with sufficient precision. In those circumstances, the Court of Justice concludes that the principle of the freedom to provide services also precludes that legislation.

Following the ruling, the European Gaming and Betting Association has urged regulators from Netherlands and Hungary to guarantee more transparent and objective online gambling legislations, after both countries failed to offer a non-discriminatory license criteria.

The Court of Justice of the EU found that Hungary violated the fundamental freedom to provide services guaranteed under Art 56 of the EU Treaty (TFEU) prohibiting a cross-border operator licensed in the EU to lawfully provide its services in Hungary, by failing to organise a licensing tender published according to objective, transparent, non-discriminatory and proportionate criteria.

Maarten Haijer, Secretary General of EGBA, said: “The Court reiterated that Member States must guarantee that national regulation on online gambling services meets objective, transparent, non-discriminatory and proportionate criteria. Only a properly regulated and transparent online gambling market can ensure that the consumer is channelled to the regulated offer.”

He added: “The Court’s ruling is a clear message to other Gaming Authorities, including the Dutch Gaming Authority, that they must not enforce regulation that does not comply with basic EU law. We expect these Member States to reconsider and lift these enforcement measures as they are acting in violation of EU law. Their actions do not serve the interest of consumers, they fail to channel the consumers to reliable providers, instead they merely prop up failed regulation.”

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