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Germany Loses Appeal, Online-gambling Licensing Plans Permanently Nixed

A ruling issued yesterday by an appeals court in one of Germany’s largest states spells the permanent end to the controversial online-licensing regime installed by Germany’s national government in 2012.  As a result, the country must now hastily develop a new licensing program while staying clear of the element of the old plan that was ultimately ruled illegal.

Germany SportsbooksOn Monday, the Hessian Administrative Court (VGH), based in Kassel, Wiesbaden, Hesse, dismissed an appeal brought by Germany’s national government, leaving in force a May ruling in favor of Hesse officials, who had argued that the “Gambling College” rules introduced in 2012 by Germany were unconstitutional, and actually deprived both the state and federal governments of some of their administrative rights under German law.

Back in 2012, Germany had instituted its new State Treaty on Gambling with the usual set of noble goals, including stopping underage and addictive gambling and keeping gambling revenue from flowing into the global underground gambling economy.  But it was how Germany attempted to apply some of its aims that caused the ruckus, by instituting a tiered system of operator-application approvals that left many prominent online-gambling operators out in the cold.  Worse, the winnowing process used by German’s federal gambling regulators was far from transparent, leaving dozens of operators — and various German states as well — wondering exactly how those licenses were awarded.

Yesterday’s decision will have the effect of nullifying those previously issued licenses in their entirety, and likely force Germany’s federal government to shift to a new cooperative system including the individual states.  Under that scenario, all EU-based gaming operators and online betting houses are likely to receive license approval unless good cause can be shown for denial.

The ruling by the 8th Division of the VGH declared two primary points in throwing out German’s licensing plan.  First, the plan was ruled to have violated the “freedom of occupation” (meaning the consistency of agreements between Germany’s federal and state-level governments), as well as the “principle of democracy” as championed by the German nation.

Second, the questionable vetting process used to determine applicants’ suitability was ruled an “infringement of the right to conduct a transparent and non-discriminatory selection procedure,” which Hessian officials had maintained they had a right to oversee for their state’s citizens.  Other German states had general backed Hesse’s claims, and in recent days, even such outlets as Germany’s national lottery had affirmed their belief that the Hessian claims in the case were just.

An excerpt from the case’s recent ruling explains the matter even further.  From a VGH statement (and roughly translated, via Google,

“The Senate sees that the applicant [Germany] violated freedom of occupation by its selection decision in the [application process]. The transfer of the binding decision to award the concessions to the Gambling College is contrary to the Basic Law. The sovereign acts [undertaken by] the Gambling College could not be attributed to either the federal government nor any or a majority of the German states.  This is contrary to the federal principle, according to which there should be no third level of [government] action in addition to the federal and the state level. In addition, the exercise of sovereignty by the Gambling College violated the principle of democracy.  The Gambling College, which is subject as a whole, was neither under the supervision of the Federal government nor a state, and thus lacks sufficient democratic legitimacy.  Its acts of public authority cannot be attributed neither to the citizen of the Federal Republic of Germany nor the citizen of a country. …”

The statement went on to specify that the procurement procedure through which licenses had been awarded to select applicants was not “a transparent and non-discriminatory selection procedure.”  The statement also made mention of a related complaint still on file with European Court of Justice, and noted that as documented there, one of the pre-conditions for licensing — being “most economically advantageous” was neither transparent or non-discriminatory.  Early licenses issuances focused heavily on German-based operations, despite EU-wide agreements that all legal operators based in the European Union should be on equal footing within all EU member countries.

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