Malta is a relative newcomer to the EU, but is already one
of the fiercest advocates of the pillar of free movement. Of course, Malta’s
championing of the free movement of services is driven by more than just an
academic interest in seeing the principles on which the EU was built upheld: a
significant chunk of the country’s revenue depends on it.
Before the decision
was made to apply to join the EU in the 1990s, Malta was
essentially an offshore jurisdiction, relying on tourism and
tertiary services to fuel its economy. Since then, the country
has gone to great lengths to harmonise subsequent legislation
with Europe and make itself an attractive destination for funds
and companies. And Malta was granted ascension to the EU in
2004, joining the Eurozone in 2008.
In that time the
country has also become a leader in the online gambling
industry. Malta was the first EU member state to regulate
internet gaming when, in May 2004, it passed the Remote Gaming
Regulations under the Lotteries and Other Games Act 2001. Malta
is now home to more than 250 remote gaming companies, holding
over 350 licences.
As well as offering
operators a regulated, EU member state, Malta also makes itself
attractive from a tax standpoint. Maltese companies are taxed a
flat rate of 35 per cent, but shareholders get six-sevenths of
the total tax paid back upon payment of dividends. Malta also
has a full imputation system, which means dividends will not be
taxed again once received by the shareholders.
But just how much
of the country’s revenue is dependent upon online gambling is
unclear. The subject even became a matter of debate when Malta
Labour MP Alfred Sant called on the government to reveal the
sector’s contribution to the economy, after his requests for
disclosure were rebuffed on the grounds of confidentiality.
Regardless of the
lack of hard data, the importance of the gaming sector can be
gleaned from the fact that businesses employ around 5,200 people
in Malta, who are estimated to contribute 10 per cent of the
internet gambling industry globally.
So when the European
Court of Justice (ECJ) stated in September 2009, in a case
brought by Austrian gaming company Bwin against Portugal’s
state-owned sports betting monopoly Santa Casa de Misericórdia
de Lisboa, that EU member states could ban gambling websites
within their territories, it provoked quite a reaction. Bwin’s
shares subsequently dropped 9.5 per cent.
But it was not just
the betting companies that were given a scare by the judgment.
Malta has set itself up as a jurisdiction for these gaming
companies to use as a base from which to penetrate the rest of
Europe, so the country’s economy would also lose out if the
internet gambling market was to close.
The judgment was
seen as an erosion of the fundamental principles on which the EU
was based.
“What was previously
the position, that derogations [to the principle of free
movement of services] must be justified, has been diluted,”
argues Adrian Vella,.... “Santa Casa has a monopoly in Portugal
and this was challenged by Bwin, but the ruling was in favour of
monopoly. So it seems the free movement of services has lost
some ground.”
What is more, the
sentiment of the Bwin judgment was reiterated by Paolo Mengozzi,
the advocate-general of the ECJ, in March 2010 when he stated
that “the mutual recognition of national licenses for games of
chance is not viable as the EU now stands”.
But not everyone
thinks the ECJ judgment in the Bwin case is such a bad omen.
“The Portugal case
doesn’t add anything new,” says Ian Gauci, .... “It was just
saying what others already have - that where there are issues of
public policy or there’s a need to combat crime then gaming
activities can be stopped.”
Indeed, the judgment
only says: “The prohibition imposed on operators such as Bwin
of offering games of chance via the internet may be regarded as
justified by the objective of combating fraud and crime.”
The bone of
contention is how far member states can go under the umbrella
of public interest and the protection of consumers. “We’re
faced with a situation of uncertainty where the term ’public
interest’ is being used or misused and where no certain
parameters are established,” says
Silvana
Zammit, head of the
Gaming Law Practice Group at Chetcuti Cauchi Advocates.
But Malta is
insulated by its tough regulatory scheme, overseen by the
Lotteries and Gaming Commission (LGA). When the LGA first
started issuing licences, the process was viewed as cumbersome
and unnecessarily stringent, but since member states have
started bringing actions against Malta-registered companies, the
regulations look set to provide an effective shield.
“The [Bwin] ECJ
judgment and the recent opinions by the attorney general Yves
Bot have created a spectre of uncertainty over the remote gaming
industry. However, the sector is still vibrant,” says Gauci.
“Malta has built a solid reputation; maintaining this, being
reactive and flexible and keeping a watchful eye on how the
gaming market is evolving will ensure that the industry
prospers, and maybe also tap new opportunities for Malta.”
