No Las Vegas for Germany?

Schleswig-Holstein, the northernmost of the German Länder, initially declined the joint proposal of the other 15 Länder for a revised Interstate Treaty on Gambling (ITG) and instead opted for its own legislation with a more liberal bill.

However, it now appears that Schleswig-Holstein has taken a step back from its attempt to widely liberalise the German gambling and betting market.

As reported by eGR, Schleswig-Holstein’s Government cancelled the vote on its draft act on the reorganisation of gambling that was scheduled for 24 August 2011. Timing has reportedly shifted into September.

It would not come as a surprise, though, if the delay also marked the early end of Schleswig-Holstein as Germany’s liberal sports betting island. The postponement can rather be seen as a strong indication that Schleswig-Holstein is now paving the way for further negotiations with the other 15 Länder to come up with a mutual suggestion for the entire Federal Republic, avoiding a patchwork rug of different regulations throughout the country.

Presumably, the Länder ““ which are responsible for the regulation of gambling in Germany ““ have these days resumed their talks about a revised draft of the ITG which shall be adopted in late December to come into effect as of 1 January 2012.

The current ITG will expire by the end of this year and cannot be extended since the European Court of Justice (ECJ) in 2010 held that the German public monopoly on sports betting and gambling with a general ban of these activities for online services constituted an unlawful restriction of the freedom of trade as long as it is not reorganised in a coherent and consistent manner.

In April 2011, 15 of the 16 German Länder had agreed upon a revised draft of the ITG which, while upholding the public monopoly on lotteries, provided for awarding seven nationwide permits to private sports betting operators for a test period of five years ““ alongside rather intense regulations such as a 16.66% turnover tax.

It was only Schleswig-Holstein which refused the draft and presented a regional bill that would provide for an unlimited number of permits and a more operator-friendly 20% tax on profits.

The Schleswig-Holstein gambling bill had already received the EU Commission’s approval in May 2011 while ““ only in late July ““ the Commission raised serious concerns over the compliance of the joint proposal by the other 15 German Länder with EU law, mainly based on the limited number of permits.

Until Schleswig-Holstein postponed its bill, all signs pointed towards the members of Schleswig-Holstein’s Parliament allowing the bill to pass, making their State the first-choice destination for private operators queuing up to legally enter the German betting and gambling market.

In light of the opinion issued by the Commission and the approaching expiry of the current ITG, Schleswig-Holstein will now very likely try to convince the other Länder to agree on a more liberal revision of the ITG.

From a nationwide perspective, the potential cancellation of Schleswig-Holstein’s plans to become a Las Vegas on the Baltic Sea could be seen as advantageous: a non-uniform regulation of sports betting within Germany would have raised a number of unprecedented legal questions on a national level, and one could have doubts whether such a solution would be coherent as demanded by the ECJ.

The next episode of Germany’s gambling saga is already scheduled: there are a number of judgments of the German Federal Court of Justice (FCJ) upcoming and expected for late September.

The FCJ has to rule in several cases of alleged unfair competition by private betting operators. The core question behind these cases is whether a breach of the current ITG constitutes such unfair competition ““ despite the ECJ’s ruling on the current ITG.

Time will show how Germany’s never-ending story about the Gambling Treaty continues and whether Las Vegas – that opposition parties accused the ruling CDU/FDP coaliation of trying to recreate in Schleswig-Holstein – will stay in Nevada’s desert.