Fines for breaching local gambling licensing regulations can qualify as breach of the EU laws even if the underlying licensing system is EU law compliant. A recent judgement from the CJEU.
Gambling is a regulatory area where Member States, due to their moral and cultural differences, enjoy a wide margin of discretion when choosing their objectives and thus market structure, however such freedom is not without boundaries: restrictive measures, such as state monopolies, must nevertheless satisfy the requirements best summarised by the landmark decision of Gebhard.
The CJEU’s established case-law has seen both compliant and non-compliant national systems, and connected to the latter, it has also been established that infringement of laws incompatible with Article 56 TFEU cannot give rise to penalties. Interestingly enough, in Case C‑231/20 MT v Landespolizeidirektion Steiermark (“MT”), novel questions arose concerning the examination of penalties imposed for infringement of otherwise justified regimes and thus the Court was given the opportunity to bring additional perspective to the assessment of gambling-related restrictions on the freedom to provide services.
a. Facts of the case
Despite the fact that in Styria (Austria) the provision of lotteries was, with some exceptions, prohibited, in the spring of 2016 an unauthorized company established in Slovakia has made 10 gambling machines available to the public. The company was found guilty of violating the rules in place and the enforcement authority has imposed on him an administrative penalty, a custodial sentence in lieu of such penalty and also a fee as contribution to the costs of proceedings.
After several set of proceedings, the company has appealed against the determination of the penalty. The referring court recalled the essential fact that the monopoly’s legitimacy has already been established in a former stage. That being said, the national court was of the view that its assessment on the penalty’s lawfulness depended on the question if the applicable provisions were compatible with Article 56 TFEU and Article 49 (3) of the Charter, thus it referred the following questions to the CJEU for a preliminary ruling.
b. First question
For a start, the Court was to answer if the compliance of penalties with Article 56 TFEU must be specifically (separately) assessed or not in cases where the gambling monopoly itself has already been held to be compatible with that provision.
In light of the Court’s well-established case-law that scrutinized Member States’ restrictive gambling systems and pointed towards an especially broad assessment of these, it is no wonder that the Court represented a pro-integration approach and reiterated that its system-wide assessment of proportionality include the penalties laid down by national legislation.
For this reason, national courts must specifically assess the lawfulness of penalties imposed for infringement of a monopoly in light of Article 56 TFEU even if other restrictions have already been held compatible with the fundamental freedom to provide services. It has also been made clear that the assessment of national courts should rely on the actual rules for determining the penalties at hand.
c. Second question
By its second question the Supreme Administrative Court of Austria asked whether it is against Article 56 TFEU that national law makes it mandatory to (i) impose a minimum fine for each unauthorised gaming machine with no limit on the total amount; (ii) impose a custodial sentence in lieu of the above fine with no limit on its total length; and (iii) contribute to the costs of proceedings.
The Court, after having referred to the status quo concerning competence to regulate gambling and the justification framework (see under Introduction above), turned to the rather unique case in question (where the restrictive measure has already been justified) and concluded that in similar cases the imposition of penalties in order to enforce those restrictions must be regarded as serving the same overriding reasons as the restrictions themselves.
In case of the suitability of penalties, we are witnessing a similar approach: as a matter of principle, the imposition of penalties must be held as appropriate for the objective pursued.
Connected to the necessity of penalties, which requirement also stems from Article 49 (3) of the Charter, the Court held that neither the minimum fine rules nor the custodial sentence provisions appeared to be disproportionate in themselves, however it is for the national courts to ensure that the severity of penalties is commensurate with the seriousness of infringements. Moreover, contribution to costs of proceedings deemed to be justified as it supports the proper functioning of the judicial system, except if it is excessive or infringes the right of access to a tribunal.
In its MT judgment, contrary to the theoretical opportunity that a penalty imposed for a violation of a legitimate system could per se be compliant with EU law, the Court decided that national courts must specifically assess the rules for determining penalties. In the meantime, the Court noticed that a complete separation of the penalty’s assessment from the justification already carried out would go against the common roots of these and thus answered that in such scenarios (as the requirements of overriding reasons and appropriateness should be considered as met) the justification of penalties must mainly focus on the necessity element of the proportionality test.
The MT judgment is without doubt a significant addition to the Court’s case-law because (i) it confirms the rather wide scope of assessment of gambling regimes’ lawfulness and more importantly, (ii) establishes that even if a national system has been held compatible with EU law, national authorities must take the requirement of proportionality into account when imposing fines on unlicensed operators. That being said, if penalty-related national laws and enforcement practices of authorities provide space, unlicensed and fined operators may be given an additional line of arguments in challenging restrictive gambling systems.
 para 61 of Case C-275/92 H.M. Customs and Excise v Schindler  ECLI:EU:C:1994:119, paras 47-48 of Case C-338/04 Placanica  ECLI:EU:C:2007:133 („Placanica”), para 57 of Case C-42/07 Liga Portuguesa  ECLI:EU:C:2009:519 („Liga Portuguesa”)
 paras 48-49 of Placanica, para 37 of Case C-55/94 Reinhard Gebhard v Consiglio dell’ Ordine degli Avvocati e Procuratori di Milano  ECLI:EU:C:1995:411 („Gebhard”), para 59 of Liga Portuguesa, para 25 of Case C-42/02 Lindman  ECR I-13519
 see the example of Portugal in the Liga Portuguesa judgment
 see the example of Hungary in Case C-49/16 Unibet International Ltd v Nemzeti Adó- és Vámhivatal Központi Hivatala  ECLI:EU:C:2017:491 („Unibet”)
 para 64 Case C‑390/12 Pfleger and Others  EU:C:2014:281 and the case-law cited, para 51 of Unibet
 para 11 of MT
 Ibid., 12
 Ibid., 16
 Ibid., 17
 Ibid., 18
 Ibid., 25
 The global assessment of national gambling systems should not only cover the circumstances in which those were adopted, but also their implementation. See the case-law referred to under para 29 of MT
 para 27 of MT
 Ibid., 28
 Ibid., 35
 Ibid., 36
 Ibid., 43
 Ibid., 44
 „The severity of penalties must not be disproportionate to the criminal offence.”
 paras 45-55 and para 58 of MT
 Ibid., 56-58
Author: Dániel Élő