Volume: 16 Issue: 6
The German Federal State of Schleswig-Holstein coalition agreement, published on 16 June 2017, has announced that the State will not approve the Second State Treaty Amending the Interstate Treaty on Gambling that is intended to enter into force in Germany in January 2018. Instead the new coalition will withdraw from the current Interstate Treaty on Gambling and together with other Federal States (e.g. North Rhine-Westphalia, Rhineland-Palatinate and Hesse) seek a viable solution for the regulation of sports betting, which will include online casinos and poker games, in line with European law and which will be based on the regulations of the Schleswig-Holstein Gambling Act 2012. “The plans of the new coalition in Schleswig-Holstein are a big chance for a completely new regulation in Germany,” said Dr Michael Stulz-Herrnstadt, Partner at DLA Piper.
“This is the second heavy strike against the Second State Treaty Amending the Interstate Treaty on Gambling,” adds Dr Stulz-Herrnstadt. “The current version and the draft of the Second State Treaty have already been criticised in recent court decisions and now it looks as if a few states might rethink their current gambling policies. Schleswig-Holstein has already developed a promising solution in the past with its 2012 Gambling Act, which got the green light from the European Commission. This is a very exciting development for operators.”
The Second State Treaty Amending the Interstate Treaty on Gambling was agreed by the Prime Ministers of the German Federal States in October 2016 and was intended to be implemented in each of the 16 German State Parliaments by the end of 2017. The Second State Treaty focuses on the regulation of sports betting, and does not provide for the licensing of online casinos and poker. Schleswig-Holstein pursuing its own gambling regulation means that the Second State Treaty cannot enter into force as intended as the Amended Treaty can only enter into force if all State Parliaments in Germany agree to ratify the Treaty. As such the 15 other German States will have to restart the whole process, explains Dr Joerg Hofmann, Partner at Melchers.
“The current Interstate Treaty of 2012 with all its regulatory flaws would remain in force. The fact that other German States may be interested in joining Schleswig-Holstein could be regarded as a unique if not historical chance for Germany to actually start working on a viable online gaming regulation including sports betting, casino and poker,” comments Dr Hofmann. “The new Government is the only one in Germany I currently think is capable of establishing a gambling regulation regime which will succeed in generating tax revenues for the State and in ensuring efficient consumer protection. If Schleswig-Holstein proceeds as communicated so far, I could imagine Germany introducing a regulatory model similar to Denmark or Sweden in the foreseeable future.”
As a consequence of the European Court of Justice’s decision in Ince, German gambling authorities have faced difficulties in enforcing prohibition orders against sports betting providers. As a result, some Federal States in Germany, most notably the Federal State of Hesse, introduced ‘toleration proceedings,’ during which sports betting service providers would not officially receive sports betting licences, but their offerings would be ‘tolerated.’ However, the Hesse procedure was suspended following a decision of the Wiesbaden Administration Court on 9 November 2016, which ruled that private operators are not obliged to take part in the toleration proceedings if they have already fulfilled the requirements for a licence.
The Higher Regional Administrative Court of Hesse confirmed this view on 29 May 2017, clarifying that Hesse must not request participation in toleration proceedings from sports betting providers licensed in other EU Member States even if they had not participated in the German sports betting licensing proceedings, as both the sports betting licensing proceedings and the toleration proceedings contravene EU law. “Hesse’s approach to request additional safeguards from providers offering sports betting has been refused by the Court. As the decision cannot be appealed, this means (i) that the toleration proceedings will not be restarted and (ii) that at least for Hesse, but potentially also for other Federal States, it will be very difficult for gambling authorities to take action against the provision of sports betting services for the time-being. As the decision is very strict and also criticises the advertisement of some state monopoly lottery providers, the decision can even be interpreted as going beyond sports betting, and may potentially be relevant to the provision of online casino and poker services in Hesse,” explains Paul Voigt, Salary Partner at Taylor Wessing.
“The toleration proceedings are dead,” concludes Dr Hofmann. “Nevertheless, Hesse was on the right track in acknowledging that there is a need to change the regulation. The Hessian Government has been advocating broader reforms for the past couple of years. Hesse now has a chance to do the right thing by joining Schleswig-Holstein.”