Germany: Schleswig-Holstein issues 12 licences to operators of online casino games

On 19 December 2012 Schleswig-Holstein’s Ministry of the Interior issued 12 online casino games and online poker licences to operators. These licenses will be valid for a period of 6 years, i.e. until 18 December 2018. The Ministry’s decision was long expected since licences for sports betting operators had been issued much earlier. The new government of Schleswig-Holstein clearly stated that they did not want to issue these licences but were required to under the existing regulatory framework.

The Ministry’s timing for granting these licenses seems quite surprising as Schleswig-Holstein’s current government is struggling on its way to repeal this Gambling Act, which was implemented by the former government, and adopt the German Interstate Treaty on Gambling instead.

This Interstate Treaty is already in force in the other 15 German federal states and among other things strictly prohibits all kind of online casino games and poker.

The government of Schleswig-Holstein brought the “Gambling Amendment Act”, which shall implement the Interstate Treaty and repeal the liberal Schleswig-Holstein Gambling Act, before the parliament but the second reading had to be postponed and put on hold at least until January 7th 2013 due to “detailed opinions” from Malta and the EU Commission received together with comments from the United Kingdom.

In its opinion, the EU Commission stated that Schleswig-Holstein’s draft bill to implement the Interstate Treaty while maintaining the issued licenses faces serious concerns with regard to its compliance and consistency with EU law, as it changes the current legislation from a transparent licensing model to a restrictive and opaque one within a year. European law requires that the laws of member states are “coherent,” i.e. consistent in application to companies and persons inside the territory of the individual Member State. The EU Commissions raised its concerns about the coherency of German gambling law given the fact that two regulatory frameworks are in place at the same time in Germany.

This lack of coherency has now been underlined by the licences issued for online casino and poker games as these games are banned under the Interstate Treaty.

Further complicating matters is the fact that the online gambling issue has since been brought before the German Federal Court of Justice (Bundesgerichtshof – ‘BGH”) once again, which will decide in January whether or not the absolute ban on online gambling in Germany is in compliance with German/EU law. The BGH made it clear during oral arguments held on 12 November 2012 that it has doubts about the coherency of the German gambling framework and as such, it may not be in conformity with EU law. As the BGH mentioned, this inconsistency within German gambling law is due to Schleswig-Holstein’s current “lenient” gambling law. Coupled with the EU Commission’s opinion on the incoherency of German gambling law, as well as the issuance of the 12 online casino and poker games licenses by Schleswig-Holstein, German gambling law may well see a dramatic shift in direction after the BGH decision in mid-January.

Finally, Schleswig-Holstein is now caught in an interesting legal position and may take one of three separate courses of action, all of which will not be positive for either Schleswig-Holstein or the other German states: The most unlikely of these options is that Schleswig-Holstein will repeal the current Gambling Act and join the Interstate Treaty while also revoking the licenses now issued. This would of course expose the state to massive claims for damages by those currently holding an online gambling license. Especially the Green Party – as one of three parties in the governing coalition – is seeking to avoid this scenario. Schleswig-Holstein could also repeal their current gambling law and join the Interstate Treaty but leave the issued licenses intact (this is what was planned prior to the statement of the European Commission). This may lead to an incoherent framework within Germany since a few businesses would be providing online casino game services in Germany whereas to others this is strictly prohibited. Or, Schleswig-Holstein may simply wish to keep their current and more liberal Gambling Act in place also risking that the BGH may determine that the overall German gambling law regime is incoherent and thus not in conformity with EU requirements.

None of these three options allows Schleswig-Holstein’s governments to go ahead with its initial plan to “simply” join the Interstate Treaty without severe risks. These risks have now become even graver due to the 12 licenses recently issued for online casino and poker games.