In a landmark ruling on the 8th September 2010, the EU‘s highest court, the ECJ has ruled that restrictions on gambling by Germany‘s state monopolies could not be justified under European law. In a response to cases brought by egaming operators including Happybet Sportwetten, Digibet and Carmen Media Group in several of Germany‘s administrative courts, the European Court of Justice ruled that although monopolistic restrictions on the freedom of private internet operators to offer sports bets under EU law could be justified “by imperative reasons” in the public interest, “the German rules do not limit games of chance in a consistent and systematic manner.”

The German State Gambling Treaty, prohibiting all organisation or intermediation of public games of the chance on the internet, came into force on 1 January 2008. This is due to expire on 1 January 2012.

The Treaty came under challenge last year from one of the 16 Lander locked in legal disputes with private operators. Schleswig-Holstein, whose rejection of Gibraltar-licensed Carmen Media Group‘s application to offer bets in Germany via the internet was also considered in this ruling, last November demanded the treaty‘s cancellation so it could introduce an intrastate licensing system.

The ECJ said in its ruling that the “preventive objective” of the German monopoly system such as preventing gambling addiction “ceases to be justifiable”, on grounds of public safety and morality given that the monopolies were carrying out intensive advertising campaigns with a view to maximising profits, and by tolerating policies designed to encourage participation in games of chance which do not fall within the public monopoly such as casino games and automated games. Thus, ruled the court: “The public monopoly of the organisation of sporting bets and lotteries in Germany does not pursue the objective of combating the dangers of gambling in a consistent and systematic manner.‘

However, in a statement which will be received rather less positively by private egaming operators, the court re-stated Member States‘ right to establish public monopolies, on the basis that “Such a monopoly is likely to overcome the risks connected with the gaming industry more effectively than a system under which private operators are authorised to organise bets subject to compliance with the relevant legislation.”

Further, the ECJ‘s opinion also re-stated its earlier position that EU law does not oblige Members States to recognise licences issued in other Member States. The various cases will now return to the regional Administrative Courts, with the monopolies now expected to move to limit advertising and promotion of their offerings and gambling products more widely.