Who: Ministry of the interior of the German federal state Hesse
When: September 2014
Once again, a lot is going on in the German gaming market: At the beginning of September 2014, the ministry of the interior of the German federal state Hesse (the competent authority for gambling license grants) had informed the lucky “winners” of the 20 sports bets licences that were to be granted at the end of September 2014.
It was hoped that the whole tendering process would finally find a (happy) ending as it had already lasted for about two years. This hope was, however, dashed as some unsuccessful tenderers have taken legal steps against the decision of the ministry. As a consequence, the Administrative Court of Wiesbaden has now prohibited the granting of any licenses by the Ministry.
Additionally, a new request for a preliminary ruling is pending before the European Court of Justice. Thus, it has to be feared that the troubles in the gaming market will continue. Time will tell whether the limitation to 20 licences has a future or whether it will be abandoned.
German gaming law has been subject to conflicts between private and state providers for years now, especially with regard to sports betting.
For a long time, a state monopoly existed for sports bets. However, in 2006 the German Federal Constitutional Court and in 2010 the European Court of Justice ruled that the German gambling and sports betting regime in force at that time was infringing German and European law.
As of today, all German federal states have agreed on a new State Treaty on Gambling (“Glücksspielstaatsvertrag”), which entered into force in 2012. Under this Treaty, the sports betting market had been opened to a small extent for private providers: 20 providers could apply for a licence for sports betting which would expire on 30 June 2019. Applications were possible until September 2012. However, the requirements for such licence grants are very strict, e.g. it is necessary to provide an unlimited, directly enforceable bank guarantee ranging between 5 and 25 million Euros.
So far, the two-step application and selection procedure has gone anything but smoothly: In a first attempt, according to the Ministry, none of the 41 applicants who made it to the second stage fulfilled the requirements for a licence grant. So the second stage of the procedure had to be repeated. Moreover, some applicants filed a suit during the procedure.
On 2 September 2014, the competent Ministry of the interior of the German federal state Hesse informed the 20 out of the remaining 41 lucky applicants that they would obtain a licence. It was planned that after a standstill period, the final awarding of the concessions should take place on 18 or 19 September 2014. However, the unsuccessful 21 applicants that were not chosen by the Ministry of Hesse have taken legal steps against this decision. By an interim ruling dated 17 September 2014, the Administrative Court of Wiesbaden has now stopped the procedure altogether and prevented the final granting of the licences for the moment.
Why this matters:
Consequences of the decision of the Administrative Court Wiesbaden
Without awarding concessions, there are still no licensed sport betting providers operating in Germany. Therefore, there is still legal uncertainty for the remaining 41 applicants as to whether or when they will get a licence. Also, the lengthy concession procedure has not yet come to an end. Due to the fact that the decision of Administrative Court Wiesbaden was an interim order only in order to prevent the Ministry of Hesse from taking any definitive actions, the final court decision is still pending. In this regard, it remains to be seen if the Ministry of Hesse will appeal against the court’s decision. Apart from that, there are some more cases of unsuccessful applicants pending before other German courts.
Obviously, the last word has not yet been said about the licence grant and further developments in the ongoing concession procedure remain to be seen. It is highly questionable if the limitation to 20 concessions will remain valid in the future. In its answer to a Parliamentary question, the Ministry of the interior of Hesse has already indicated that it will support the abolition of limits on licence grants (Hesse State Parliament, Printing Matter 19/446 dated 28 July 2014).
Apart from that, the District Court of Sonthofen has asked the European Court of Justice in the course of a preliminary ruling procedure if the so called experimentation clauses for sports betting in the State Treaty on Gambling infringes European law (District Court of Sonthofen, judgement dated 7 May 2013, case ref. 1 Ds 400 Js 17155/11). It would not be the first time that the European Court of Justice held that the German State Treaty on Gambling infringes European law.
Consequences for advertising for sports betting
What are the consequences for advertising for those 41 sports betting providers which are not holding a licence? Concerning this question, besides Section 5 of the State Treaty on Gambling, the Advertising Directive (“Werberichtlinie”) applies. In this regard, some judgements already exist, which are however contradictory.
According to the State Treaty on Gambling, advertising for unauthorized gambling is not allowed. Therefore, advertising for sports betting providers to whom a licence was not yet granted would be illegal.
However, in contrast to their initial administrative practice, the competent media authorities no longer take actions against private sports betting providers who have applied for a concession and who already advertise. The Administrative Court Munich has held that such practice is legal. Otherwise, private providers would be discriminated against compared to state gaming providers, since it would not be possible to permit advertising because of the lengthy proceedings of which the end is still not yet in sight (Administrative Court Munich, judgement dated 30 January 2014, case ref. M 17 J 11.5502).
In contrast, the Higher Administrative Court Münster took a different view: According to the court, online advertising for sports betting providers may be prohibited. The fact that the concession procedure is still running does not lead to the consequence that the supervisory authorities have to tolerate advertising for sports betting (Higher Administrative Court Münster, judgement dated 25 February 2014, case ref. 13 A 3027/11).
The two judgements clearly show that – as it is often the case in German gaming law – there are large regional differences in case law. Therefore, until the final decision on the licence grant is made, no legal certainty exists for sports betting providers who have applied for a concession. The risk that the supervisory authorities take legal steps against the applicants and prohibit any advertising for sports bets cannot be excluded.