Gambling Compliance: Cracks Appear In Germany’s Gambling Treaty As Political Mood Shifts

Published by GamblingCompliance Ltd. / James Kilsby

The new coalition government in the state of Schleswig-Holstein has pledged to abolish Germany’s Interstate Gambling Treaty in a move that experts believe will likely accelerate a wider review of German gambling policy over the next 12 months.
Rumoured in Germany for several days, the commitment to abandon the Interstate Gambling Treaty was confirmed by the newly-empowered Christian Democratic Union (CDU) and Free Democratic Party (FDP) coalition grouping in Schleswig-Holstein over the weekend as the two parties formally set out their policies for their four-year term of office in the northern German state.

Unveiling their coalition agreement, the CDU-FDP group in Schleswig-Holstein said they would introduce a state-level licensing system for private operators if there was no wider change of approach regarding gambling in Germany. They also pledged to privatise the state’s land-based casinos.

Schleswig-Holstein was the most reluctant of the 16 German states in agreeing to the prohibitive gambling treaty, which reserves the control of all lottery and sports betting activities to state monopoly operators and also bans all forms of internet gambling bar online horserace betting.

CDU state Prime Minister Peter Harry Carstensen initially refused to sign the treaty in December 2006 while head of a CDU-Social Democrat government, but he yielded the following year citing fiscal concerns.

The pro-free market FDP has always been against the treaty, however, and the liberal party’s advancement in Germany’s most recent elections appears to have brought about an immediate review of gambling policy in Schleswig-Holstein, one of several new state coalition governments the FDP will form after votes in August and September.

A local FDP spokesperson told GamblingCompliance: “It was our request [to abandon the gambling treaty]. The CDU shared our view, but they had previously been tied by the position of their former coalition partners.”

The results of recent elections mean the FDP is now a coalition partner in a total of seven state governments, the spokesperson added, suggesting the FDP would also be looking to press home its influence on the gambling sphere outside of Schleswig-Holstein.

“On the state level, there are also some other CDU prime ministers who want to abandon the treaty. We think [Schleswig-Holstein] may have some kind of domino effect,” he said.

Germany’s existing gambling regime has found itself under legal bombardment at both national and European level since it took effect in January 2008, but recent decisions at both levels have shown the tide flowing towards state-run operators and against private bookmakers.

However, the prospect of Schleswig-Holstein breaking away from the other 15 Lander could undermine arguments used to justify the states’ gambling monopolies, said Martin Arendts, a German gaming law expert with the firm Arendts Anwalte.

“If one, two or three states were to introduce their own, separate licensing model that really would cause a problem [for the state monopolies] in their legal battles,” said Arendts.

Beyond the legal controversies, the prohibitive treaty has also been criticised in certain quarters for stifling the German lottery sector’s ability to generate tax revenues and funds for good causes such as sports.

“It is important that these discussions on the future of the treaty have finally started,” Arendts told GamblingCompliance.

“Until now, there had been no wind of change,” he said, noting that the treaty would even continue beyond its 2012 expiry date were no alternative policy agreed beforehand.

The prospect of a breakaway state means the treaty will now be discussed widely by state governments next year, agreed Claus Hambach, founding partner of Munich-based law firm Hambach & Hambach.

“Maybe there will be a domino effect after this and the states will all sit down at one table again and take a look at the treaty,” Hambach said. “That is more likely to happen than Schleswig-Holstein going it alone.”

He added: “I think something will now happen before [the treaty’s expiry] at the end of 2011 and we will see important discussions next year.”

September’s federal elections saw the FDP increase its share of the popular vote in Germany to 9.4 percent, up from under 5 percent four years previously.

The outcome means the FDP will also form part of Chancellor Angela Merkel’s federal coalition government, although precisely what influence the FDP may have with regards gambling policy at the federal level remains unclear.

An FDP spokesperson in Berlin told GamblingCompliance the party was unable to discuss federal policy issues as it has yet to settle a formal agreement with its CDU partners in Berlin.

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