Tuesday, 27 March 2007

EFTA and Gambling

Shortly after the decision of the European Court of Justice in Placanica, the EFTA Court gave its decision in Case E-1/06 on March 14th. In considering the legality of the Norwegian legislation in question, the EFTA Court interprets particular aspects of the case-law of the ECJ in considerable detail.

The case arose out challenges to the Norwegian Act No 90 of 29 August 2003 Relating to Amendments to the Gaming and Lottery Legislation which sought to grant an exclusive right for the operation of gaming machines to the state-owned gambling operator, Norsk Tipping. Gaming machines in Norway have been subject to a licensing regime whereby they are operated by private operators on behalf of humanitarian and socially beneficial organisations, whom receive a proportion of the revenue. Since all parties agreed that the legislation amounted to a restriction to the free movement of services and the freedom of establishment, the case concentrates upon the justifications used to uphold the restrictive measures.

Among the objectives of the legislation was that of limiting the reduction in revenue which would result from the envisaged reduction in the number of gambling machines. Having recalled standing case-law to the effect that the financing of good causes cannot amount to an objective justification to a restriction on the free movement of services (para. 36), the Court noted that the introduction of the monopoly was primarily for reducing the risk of gambling addiction (para. 37). An exclusive right system would allow for this while limiting the consequent reduction in revenues. Since this limitation exercise was an ancillary objective, the overall legitimacy of the legislation remained intact (para. 40) as the restriction was justifiable on the grounds of reducing addiction and crime.

In considering whether the restrictions were consistent and suitable for the purpose (para. 42-46) the Court highlighted the need to consider the particular characteristics of the form of gambling in question, and in light of the legislation in question, the degree of addictiveness. Given the prevalence of gambling addiction in Norway which results from slot machines the Court felt that this form of gambling was not comparable with other forms offered by Norsk Tipping. Consequently, the marketing and development of other forms of gambling by the state body was deemed irrelevant for the assessment of this gambling machine specific legislation. The ECJ has yet to make a distinction in its case-law between the differing characteristics of different forms of gambling, and how this could affect the consistency, and thus proportionality of restrictions.

In assessing the necessity of the restriction the Court considered the test to be whether the introduction of the monopoly would lead to ‘a more effective achievement of the aims set than other less restrictive measures.’ (para. 49). However this part of the proportionality test relates to whether a less restrictive but equally effective provision could be used to achieve the legislative objective. By assessing this on the basis of a more effective achievement of the objectives, the Court would appear to alter the criterion by which the national measure is to be assessed. Arguably, the assessment used rests upon the effectiveness of the measure and not its restrictiveness and nor that of any alternatives.

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