The Gaming Perspective – Malta

Why Malta?

Remote gaming is a borderless activity so why bother with a license? Why would any cyberspace operator want and need a serious license from one or more particular jurisdictions?

The answer is simple: serious operators welcome serious regulation. The intrusion of a serious regulator is regarded as an opportunity for stability and solidity and serious regulation is deemed a benefit rather than a hindrance.

Malta introduced its new Remote Gaming Regulations in April 2004. These regulations were a much awaited mile-stone superseding the previous law regulating offshore betting offices (The Operation of Betting Offices Regulations, 2000 – LN 34). The Remote Gaming Regulations 2004 definitely present a much awaited solution to cyberspace operators that want a qualitative solution to their business needs.

Serious and avant-garde regulatory techniques, verifiable and stable regulations and a positive regulatory ambience are not the only benefits derived from establishing ones operation in Malta. The benefits are various and range from beneficial corporate and gaming taxes, a variety of licensable activities, the skill of the Maltese workforce, stable IT resources and the general competitiveness of costs when setting-up ones operation.

One other very important consideration for an operator tapping the European market is the freedom to provide ones services throughout the EU. Malta is a full member of the EU and is very important to any operator wishing to target Europe to be located in a European jurisdiction. This definitely translates in additional benefits:

For the player – such operator would be deemed to be safe and credible;

For other regulatory authorities such operation would be regulated by higher and more serious standards imposed by an EU country.

Player Protection

Player protection has always been of paramount importance. Gaming has unfortunately presented us with some bitter experiences of vanishing operators and unpaid players.

Maltas rules related to player protection ensure that players money is protected; that players money is kept separately from the operators funds in a separate clients account; that players are given the required information on the operator, the games, handling of players money and lodging of complaints; rigorous procedures for registration and opening of accounts; filtering of players and a clear indication that the operator is regulated by the Malta Lotteries & Gaming Authority (LGA), including a hyperlink to the site of the Gaming Authority.

Player protection is definitely high on the LGAs agenda with regular checking and monitoring of operators and complaints by players. This results in serious protection of players hence resulting in more players seeking to be on the customer list of Maltese operators.

Cross-Border Activities Free Movement of Services

An online gaming operator definitely needs to be able to roam freely in cyberspace – it has to be able to reach customers across borders without unnecessary hindrance!

The EC Treaty presents us with the fundamental principle of movement of services. The problem is that national authorities have still sought to impose restrictions on gaming activities involving their nationals mainly to protect state monopolies. Recent jurisprudence of the European Court of Justice (ECJ) has sought to bring down these national limitations that hinder the fundamental principle of free movement of services.

Basically, the ECJ has held that justifiable restrictions would mainly centre around grounds of public policy and consumer protection. Besides, limitations imposed by national governments should be have to be objectively applied to everyone, without any discrimination on grounds of nationality or residence.

The Gambelli Case

The Gambelli case was a landmark case in this respect. In this case, the Public Prosecutor initiated criminal proceedings against Piergiorgio Gambelli and other intermediaries for the organization and reception of bets for the British bookmaker Stanley International Betting.

Gambelli and others argued that by prohibiting Italian citizens from linking up with foreign companies in order to place bets and thus to receive the services offered by those companies by internet, by prohibiting Italian intermediaries from offering the bets managed by Stanley, by preventing Stanley from establishing itself in Italy with the assistance of those intermediaries and offering its services in Italy from another Member State amounted to a clear case of restrictions imposed by a monopoly in the betting and gaming sector, hence resulting to a restriction on both freedom of establishment and freedom to provide services

The ECJ in the Gambelli case finally held that national legislation which prohibits the pursuit of the activities of collecting, taking, booking and forwarding offers of bets, in particular bets on sporting events, without a licence or authorisation from the Member State concerned constitutes a restriction on the freedom of establishment and the freedom to provide services provided for in Articles 43 and 49 EC respectively.

It is for the national court to determine whether such legislation, taking account of the detailed rules for its application, actually serves the aims which might justify it, and whether the restrictions it imposes are disproportionate in the light of those objectives. It is thus for the courts of the Member States to determine whether the national authorities have acted proportionately in their choice of means, having regard to the principle of freedom to provide services.

In this case the ECJ did not explicitly say that the Italian regulation in the field of sports bets imposes a discriminatory and unjustified restriction on the freedom to provide services. Nevertheless, it gave a clear indication that:

  • Member States must stop invoking imperative reasons of public order to justify restrictions, particularly in relation to public funding, while the actual objective pursued is the protection of the national markets from foreign competition;
  • To the extent that the court leaves the decision to the Italian court, it gives clear guidelines on how the latter should use its discretional power to interpret the facts of the case; and
  • The level of protection offered by the country of establishment and the control exercised over the legality of the gaming operation should be taken into consideration when the authorities of the country of destination assess the proportionality and necessity of the restrictive measures.

Therefore, it is not absolutely guaranteed that all EU established operators could unconditionally offer their services throughout Europe. The national court would need to determine whether the restrictions imposed by national authorities on operators/intermediaries who facilitate the provision of services by a bookmaker in a Member State other than that in which those services are offered (by making an internet connection to that bookmaker available to players at their premises) is a restriction that goes beyond what is necessary to combat fraud, especially where the supplier of the service is subject in his Member State of establishment to a regulation entailing controls and penalties.

The proposed directive on services aims at removing the obstacles to the freedom of establishment for the provision of services and the freedom to provide services within the internal market. When the directive becomes reality, further harmonisation would be necessary to ensure that gaming is fully integrated and interpreted, but when this takes place gaming operations will fall within the scope of the directive, hence resulting in the principle of free movement of services as being applicable. The important factor in this case would be that the operator be established in the EU. In this way, the benefits from the application of the internal market principles relating to the freedom to provide cross-border services within the EU can be reaped to the full.

Malta is a country presenting a stable history in financial, banking and commercial services. By joining the EU, Malta aligned its position and perspective to EU directives and regulations, including corporate rules and money laundering safeguards. This, coupled to a strong gaming legal regime, render the Maltese license as the best solution to any serious operator.