Europe: ECJ emphasises importance of compliance with Transparency Directive

The ECJ ruling in the case brought by Fortuna, Grand and Forta against the Polish government acts a timely reminder to Member States of the supremacy of EU Law and the need for Member States to notify domestic legislation to the Commission prior to its enactment or amendment. On the 19 July, the European Court of Justice, (the “ECJ”) issued a judgement in relation to Polish restrictions and the failure of the Polish Government to notify the EC about technical regulations before their adoption, a key requirement of European Directive 98/34.

 Background and facts

The case was bought by Polish operators, Fortuna, Grand and Forta, against the Dyrektor Izby Celnej w Gdyni (Director of the Customs Chamber, Gdynia;the DICG“) concerning the Polish Governments refusal to amend, extend or issue authorisations to organise and carry on an activity relating to gaming on low-prize machines.

Polish Gambling law prior to 2009 was governed by the Law on gaming and totalisator betting (ustawa o grach I zakladach wzajemnych) of 29 July 1992 (Dz. U. 2004, No 4 as amended) (“1992 Law“).

On 31 December 2009 the Law on games of chance (ustawa o grach hazardowich) (DZ. U. No 201, heading 1540) Law of Games of Chance (“2009 Law“) came into force repealing the 1992 Law. The 2009 Law restricted rights available to operators under the previous legislation.

Fortuna requested the amendment of its authorisation, granted under the 1992 Law, but its request was refused. The DICG refused the request citing Article 135(2) of the 2009 Law, which prohibits any alteration of the places where gaming may be organised, except where the number of the sites at which gaming on low-prize machines is carried out is reduced.

Grand was issued a statutory authorisation for the organisation and running of gaming on machines in 2004 for a period of six years. In 2010, Grand requested the extension of its authorisation for a further six year period. Whilst such extensions were expressly permitted under the 1992 Law, the DICG refused, citing the 2009 Law.

In December 2008, Forta issued an application to run low-prize machines under the 1992 Law. In discontinuing the application process, the DICG, again, cited the 2009 Law claiming it has the right to do so for applications commenced under the 1992 Law but not concluded when the 2009 Law came into force.

The complaint

All three operators challenged the decisions of the DICG. Their claim centred around the premise that since the 2009 Law contained ‘technical regulations’, it should have been notified to the European Commission, which it hadn’t been. Failure to so notify can render legislation contrary to EU legal principles. As a result, it was claimed the provisions of the 2009 Law, upon which the DICG had based its decisions, had no lawful application.

The ECJ held that Article 1(11) of Directive 98/34/EC must be interpreted as meaning that national provisions which would have the effect of limiting or rendering impossible the running gaming machines anywhere other than in casinos and gaming arcades, are capable of constituting “technical regulations”. As such, draft regulations must be notified to the Commission insofar as they contains provisions which can significantly influence the nature or marketing of the product concerned.

What next?

The Polish domestic courts now need to decide if 2009 Law did amount to regulations that were worthy of notification to the European Commission. In the event the Polish courts conclude the 2009 Law should have been notified, then additional operators may similarly cry foul.

The decision serves as a timely reminder to Member States, as a number of them update their gaming laws. They must comply with EU requirements, notably on this occasion the need to notify the European Commission where draft regulations can have a limiting or restrictive nature. If they do not, then the law they pass (or elements of it) could be rendered unenforceable.