GamblingCompliance: German State Treaty Faces Internet Censorship Test

Germany’s states have fast tracked their controversial plans for interstate online gambling at a European level, but legal experts warn the measures may risk public scorn ahead of parliamentary votes this summer.

Germany’s ‘Interstate Treaty On Gaming’ which will regulate the online sports betting market was referred to the European Commission on April 15 with a standstill period set to end on July 18, just days before the law itself is set to be voted on in regional parliaments.

High tax rates and a tough licensing regime proposed by the 16 Lander president-ministers earlier this month have left private operators protesting that the treaty will make the market completely unviable, with many predicting it will fail to pass European scrutiny.

The plans provided for just 7 licences and a 16.7 percent tax on turnover, news that, at the time, sent shares in German-facing betting firms tumbling.

The draft legislation with the European Commission is the same as that proposed at the Lander’s April 6 meeting, which was passed by the regional representatives with just one abstention - Schleswig-Holstein, which continues to push its alternative model for regulating online gambling.

The Lander are set to meet again in May, potentially before the European Commission will return its appraisal, before putting the measures to vote in their respective parliaments in August.

Private operators claim that, as it stands, the legislation will be found to be ‘inconsistent’, a concern raised in the European Court of Justice cases on Germany late last year.

In addition to European concerns, legal experts warn the provisions, which create a black-list of blocked websites, have the potential to transform the legislation into political “dynamite” at home.

Olswang lawyer Christoph Enaux said: “This gambling bill could open a debate on internet bans, and that is a hefty political discussion.”

He noted that a similar proposal on child pornography was written into law, but was never enacted by politicians over concerns about censorship.

Wulf Hambach, a lawyer with Munich firm Hambach & Hambach, agreed: “The internet blocking issue has really been received by the German press as a ‘no go’.”

“This is really dynamite, politically speaking. We are in the middle of an election year and this law could become a very unfavourable issue when the elections come up.”

Further complicating the matter is that northern state Schleswig-Holstein, with the support of major private operators, believes it can push forward with its own licensing system for online gambling.

Berlin-based Enaux said: “So far Schleswig-Holstein seems to think that it is possible that operators it licenses would be allowed to advertise their offers and offer their offers to other people within Germany. But from a legal perspective this is not quite clear.”

"Whether Schleswig-Holstein can act as the Macau of Germany really depends on the legal questions - whether the Schleswig-Holstein gambling law would only be applicable to participants located in Schleswig-Holstein, or to everyone in Germany and maybe offshore as well.

Given its provisions that allow the blocking of operators geographically, Enaux explained that this could see a situation where a Schleswig-Holstein licence would only allow operators to take bets from that state and foreign jurisdictions that allow liquidity sharing which he said “would not be very practical”.

"I think these are questions where Schleswig-Holstein may not have thought far enough at the moment,” he added.

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