Reaction to E.C. “Do your own thing” resolution

Yesterday’s EU Parliament communication on the deliberations of European politicians regarding online gambling are stirring up some controversial questions, not least of which is the propriety of the apparent intention that a different set of EU free trade principles should be applied to internet gambling.

Litigation has been repeatedly waged over how the EU principle of free movement of goods and services should be applied to online gambling as the ultimate cross-border activity.

Theoretically, an operator licensed in one EU member state ought to have access to the market in another EU member state, but that fundamental right has proved contentious in a Europe where lucrative and often monopolistic national markets are jealously ring-fenced by governments hungry for more revenue.

All too often the argument for maintaining this anomaly is moralistic (we just want to protect our consumers), all the while promoting the activity for state reward.

The latest EP communication suggests that a dangerous pro-national school of thought is gaining traction in the political sphere; a “do your own thing, but try and cooperate on enforcement” approach that de facto applies a different set of principles to a particular industry – ours.

This week the publication Low Tax examined the situation, concluding that taxes are the real reason for the internet gambling licence band-wagon.
“There are two sets of problems, however: one is the existence inside the EU of legitimate, low-tax centres for on-line gaming, notably Malta and Gibraltar; and the other is the inability of European governments to censor the Internet, so that an average Joe or Jane can play on gaming sites hosted in Costa Rica or Vanuatu which are untaxed, and can offer better odds to the punters,” the editorial suggests.
“Such sites may be locally regulated, so why should Joe and Jane not be able to play on them if they so choose?”
The article points out that any initiative aimed at regulatory harmonisation could be difficult due to self-interest among member nations. And it points out that there are jurisdictions within the EU which offer far more attractive tax regimes to operators [the article does not mention the British plans for ‘secondary licensing and taxing” before an operator is permitted to access the UK market.]

“In the past the EU has gone to immense trouble to enforce compliance with EU principles – against stiff national resistance in most cases – through ‘passporting’ rules”, the article points out before asking: “Is it now going to turn around and offer a contradictory regime for gambling? How can it avoid the principle that a gambling operator properly licensed in a member state can offer its services throughout the Union?

“The ECJ, which is normally at the forefront of enforcement of the EU’s freedoms, has been hesitant over gambling and has taken (or been offered) few references. It gave a judgment over a Swedish advertising case which seemed clear enough, but in other cases where it could have taken a clear and principled stand it has tended to be mealy-mouthed,” the Low Tax opinion piece comments, noting that, short of a direct attack on the freedom of the Internet, players will continue to access sites with the most competitive offers, regardless of national efforts at market ring-fencing.
“It is a worry perhaps that the EU may try to demonize external providers and use them as an excuse for permitting ‘filtering’ and other constraints on Internet access,” the piece continues. “The French are already enforcing their ‘three strikes’ law in respect of intellectual property; but that is a clear case of criminality, and no-one knows whether the courts will permit disconnection once it actually reaches that stage and some human rights activist contests it.

“And what is the point of ‘disconnecting’ a particular user, anyway? You just walk next door and start up again.”

This interesting take on the latest EU developments concludes with the proposition: “In the end, this is a clear case of over-government. Member states and the Commission should simply step back and let the market take its natural course, which will be away from them! But you can bet your life they won’t.”

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