Gambling Restrictions upon Arts. 43 and 49 EC Treaty in ITALY

Justification

National measure
- Compatibility with EC law, in particular with the principle of proportionality

Public order, money laundering, crime

Criminally-sanctioned prohibition of operation or participation in a game of chance laid down in the Criminal Code (Art. 714 et seq.)
Need for a license by the Ministry of Finance for the operation of lotteries, games of chance, bets. License may be awarded exclusively to the entities which are concessionaires or authorised by the Ministry or other entities to which the law reserves the power of organising and operating the bets, as well as entities entrusted by the licensees or the holder of the authorisation based on the license or the authorisation (Art. 88 TULPS of 1933 as amended in 2001)
Various limitations to the tendering procedures (financial stability, ownership, prevent of concentration, etc.) Criminal sanctions against any person who unlawfully participates in the organisation of lotteries, betting or pools reserved by law to the State or to entities operating under licence from the State; b) any person who organises betting or pools in respect of sporting events run by CONI, by organisations under the authority of CONI or by UNIRE; c) any person who unlawfully participates in the public organisation of betting on other contests between people or animals, as well as on games of skill; d) any person who advertises competitions, games or betting being an accomplice to an offence defined; e) any person who participates in competitions, games or betting organised in the manner described in paragraph 1 without being an accomplice to an offence defined therein (Art. 4 of Law No 401/89)
Penalties above shall be applicable to any person who without the concession, authorisation or licence required by Article 88 of [the Royal Decree] carries out activities in Italy for the purpose of accepting or collecting, or, in any case, assisting in the acceptance or collection in any way whatsoever, including by telephone or by data transfer, of bets of any kind placed by any person in Italy or abroad” (Article 4a of Law No. 401/89).
According to case-law, the prohibition covers also sports event to take place abroad and operated by foreign operators if the bet-taking activities takes place in Italy through an intermediary taking the bets from Italian residents and transmitting them to the foreign operator
- The grounds for the restriction to freedom of services and establishment in the Italian system are more extensively discussed in the case-law (B) than in the legislation itself (A).
  A) As regards the arguments put forward by the legislature, according to a parliamentary inquiry “on the sector of the games and of betting”, whose Report has been approved in March 2003 (Doc. XVII n. 10 (Documento approvato dalla 6a Commissione Permanente a conclusione dell’indagine conoscitiva sul settore dei giochi e delle
  scommesse).):
  – “the organisation of the games, betting and sports betting by the State aim at the objective to increase its financial resources;
  – however, these financial needs find a rigorous limitation in the carrying out of the tasks of protection of the public order and of the health of the citizens, that may be endangered by uncontrolled and unregulated games and bets, as well as to combat illegal and clandestine phenomena;
  – the moral implications involved in the public action in the gaming sector need also to take into account: an attitude of open support of game, that may turn the public action in a open promotion of conducts socially sanctioned by current morals, is full of risks;
  – as a result, “the Commission deems essential to stress, as a starting point, the full legal, political, moral regulatory justification of the State intervention, whose extent, also in terms of supervision, cannot find any limitation in a misunderstood economical hyperliberalism, though the contribution to the national economy and particularly to the public finance of the whole gaming sector, extensively understood, is considerable”.
  Also see also below, under “Consumer Protection”
  B) If the Court of Cassation has never had any doubts as to the compatibility of the national legislation with the community freedoms, a significant evolution is visible in its case-law when it comes to justify this compatibility
  (a). Lower courts have been mainly willing to follow the Court of Cassation rulings. However, some of them have recently “dissented”, and came to the conclusion that the Italian barriers are not justified in the light of the ECJ case-law (b).
  a) Case-law of the Court of Cassation: Until the passing of Law No. 401/1989, the main justification was to ensure important financial revenues to the State as well as to promote sporting and charitable activities to which a fair proportion of these revenues was destined. As of 1989, increased emphasis was put on the objective of protecting social and public order and to prevent fraud. The terms “social order”, “public order”, “moral order”, “fraud and criminality”, are not used in a technical, category-specific way, and no clear distinction may be drawn between them. This evolution is thoroughly explored in the paramount ruling of Court of Cassation of July 2004, No. 23271/04, where the implications of the Gambelli case for the Italian justification are extensively discussed in a insightful 30-pages decision, the conclusion being that barriers are still compatible with community legislation.
  According to this ruling:
  – Law 401/1989 has extended the spectrum of the protected interests laid down in D.Lgs. of 14 April 1948, n. 496. These were restricted to the financial interests of the State; now the emphasis is put on protection of public and social order with a view to prevent some specific forms of criminality that may sneak into the operation of betting.
  – The Court, in the wake of the ECJ case-law, particularly the Gambelli case, is aware that, when assessing the justification of the barriers, the national judge has first to exclude any relevance to the fiscal objectives. The need to finance social activities through a tax on the proceeds is not in itself a sufficient justification.
  – On the contrary, social or criminal needs may justify restrictions, such as the protection of the consumers, prevention of frauds, restriction of the inclination to play, but only if pursued in a coherent and systematic way.
  Where the authorities of a Member State encourage the consumers to take part in the lotteries, games of chance, or betting so as to enrich the public finances, the authorities of this State cannot invoke the public social order with respect to the needs to restrict the opportunities to play to justify decisions such as the one at issue.
  – In view of this, the Court feels it necessary to review its case-law which, before the decision in Gambelli, has always claimed the compatibility of the Italian legislation. It cannot be denied that the Italian legislation as been for some years pursuing a policy clearly expansive of the sector to increase the tax revenues.
  This policy of expansion contradicts the policy of restricting the inclination to play.
  – However, this objective does not affect the objective of avoiding criminal infiltrations: it is not incompatible with the grounds of public order and public security, that, according to art. 46 and 55 of the EC Treaty, are equally if not more appropriate to justify restrictions to the principle of freedom of establishment and freedom to provide services.
  – In conclusion, the Italian legislation, which is designed to put under control the operation of lotteries, of the bets and games of chance, does not purport to limit the offer and demand of game, but to canalise it in controllable circuits so as to prevent the criminal degeneration, as a result, this legislation is compatible with community law.
  Another significant decision is Cass. Sez III penale, Decision of 27 March 2000. According to this ruling:
  – The case-law of the ECJ leaves no doubt whatsoever with respect to the legitimacy of a national legislation that poses limitations or restrictions to the freedom of providing services to protect order or social security interests.
  – In the light of the principles established by the Court of Justice, the full compatibility with community legislation of law 13 December 1989, n. 401 is beyond discussion. As appears from its legal content and also from the parliamentary report, the law has enlarged the spectrum of the protected goods, that in the previous D.lgs. 14 April 1948, n. 496, was restricted to the protection of the inancial interests of the State, whereas in Law 401/1989, this is extended to the protection of the public and social order, so as to deter some form of organised crimes, for which the operation of bets and illegal games and the operation of “concorsi pronostici” represents sources of important gains.
  b) Some ruling against compatibility
  As said above, some lower courts have vehemently denied the compatibility of the Italian national legislation with the community legislation. Particular insightful is the decision of Tribunal of Viterbo of 2003, which ruled as follows:
  – the Italian legislator has seriously restricted the freedom to provide services, the freedom of establishment and the free competition within the community by submitting the activity of collecting bets to the issuing of a concession or an authorisation;
  – the instruments it used are disproportionate and inappropriate with respect to the pursued ends. With the Financial Act 2001, there has been an increase of possibility of exercising activities relating to the organisation of bets and the taking of games and wagers on sports event is given. The only concern of the legislator has been that of maintaining the reservation of the operation of these activities in favour of the State and its concessionaires;
  – this intention, far from pursuing ends of protection of the social and economic security of the families, find an explanation exclusively in the policy of ensuring to the State the considerable revenues from games.
  Indeed, the granting of licenses is not subject to investigations of any kind as regards the personality of the requiring entity, any criminal precedent has no role.
  No anti-mafia certificate are requested, nor other certifications. Consequently, no verification is set forth to guarantee the public order or the public security, of the prevention of crimes or of the infiltrations of criminal organisation in the operation of bets. The only concern is that the candidate for licenses provide appropriate financial guarantees under the economic profile. In this regard, the restrictions posed by the Italian legislation do not seem to find any justification in regard to the imperative needs of public order.
  – These limitations are on the contrary exclusively designed to ensure to the state the considerable revenues from these activities. The proportionality test is not fulfilled. This interest may be satisfied through instruments different from the reservation to the State of the activity and the criminal activity, which, for example, the fiscal imposition at the charge of the operators of the sector.

Consumer protection

Art. 1/535-551 of the Law 23 December 2005, n. 266 (Financial Law 2006), on “Provisions for the drafting of the annual and multi-annual balance sheet of the State”, implemented by Decree of A.A.M.S. (“Decreto direttoriale”) on 7 February 2006: The providers of internet access or access to other telecommunication networks have a duty to prohibit any access to those operators whose name is supplied by A.A.M.S., to inform A.A.M.S. of any such activity they may know as well as to supply any information to identify such non-authorised operators. In case of non-compliance with these duties, civil liability towards third parties may arise and administrative sanction of 30.000 up to 180.000 Euro for each single violation may be imposed by A.A.M.S.
- In the “whereas” of the decree of A.A.M.S. of February 2006, it is said among other things that:
  a) “it is necessary and urgent to prohibit the illegal taking of games and bets by operators having no authorisation to do so or by those who, while having an authorisation, collect the bets and other games in Italy but transfer the stakes abroad”;
  b) “collecting of bets and games which are not subject to the provisions set forth by Italian legal order” are prohibited in that “they cause missed gains for the State”;
  c) “the combat of illegal game is one of the primary objectives of the Italian legislator and government and as such of A.A.M.S., also to the end of protecting the players and the authorised game operators as well as to safeguard the revenues for the State”.
  To defend the legitimacy of this most recent legislative measure, A.A.M.S. stressed once more that “the decree prohibiting the access to non-authorised bookmakers represents, among other things, a protection of those players who, by connecting themselves with nonauthorised providers, risk of being the victim of frauds and of suffering considerable financial prejudice”. (See Press Communication by A.A.M.S. of 16 February 2006, published on the website of AAMS)

Social order, moral and cultural standards

- See above the decision of the Court of Cassation of June 2004.
  Some decision (see particularly Cass., Sez. III penale, Decision of 8 October 2001, n. 36206) has particularly mention the moral and religious values attaching to the regulation. Particularly, it is stressed that Italian gaming legislation is “the product of a compromise between the desire of forbidding private activities that may be morally reprehensible and that may provide opportunities for fraud and cheating, and the need to regulate and control or operate those among them that, despite any prohibition, are rooted in the conscience of the community (such as the lotto) of those which are organised for the pursuit of ends of general interests or in any event worthy of protection. A derogation from the community freedoms is certainly legitimate having regard to the protection of particular moral, religious and cultural values present in our order. If it cannot be overlooked that the gaming and betting activities may sometimes represent a relevant means for charitable purposes or general interest, such as the social works, charitable works, sport and culture, it has to be recognised that these peculiarity of the phenomenon justify that the national authorities have a discretionary power to define the needs of protection of the social order and the instruments to carry out the protection.
  The illegal exercise on sporting foreign competition, sanctioned to protect, in addition to financial interests, also public and social interests, is not in contrast with the freedom of economic initiative and of providing services ensured by the EC Treaty; restrictions to this liberty may in fact be imposed by the national legislation provided that they are justified by social policies and are not disproportionate to these objectives.

Other grounds

Protection of fiscal revenues
- Both the legislator and the national courts freely admit that at least one of the grounds for the restrictions in the field is to protect the fiscal revenues of the State: see above, both under “Public policy etc.” and “Consumer protection”. As said above B).b) under “Public policy”, some national courts have stated that the public-policy grounds are merely mentioned to camouflage the protection of fiscal revenues, which would in their opinion constitute the real aim of the national restrictions.