HomeInsightsAdvocate General opines that fight against risks associated with gambling addiction may justify reduction in commission and fees payable to licence holders

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In 2013, following a call for tender in 2011, seven Italian betting and companies, including Admiral Gaming Network Srl, Cirsa Italia SpA and Codere Network SpA, entered into licence agreements with the Italian authorities to manage slot machines in Italy.

In 2014, Italian law reduced the amount payable by the State as commission to those licence holders for the year 2015. The law provided that the licence holders, in exercising the public functions entrusted to them, would pay an annual amount of €500,000,000, in proportion to the number of machines registered to each of them as at 31 December 2014, in addition to what they ordinarily paid to the State. They were obliged to distribute the remaining amounts as their fees and commission. The amounts due were settled and distributed, pursuant to the law, amongst all operators in the gambling sector and not just to the licence holders.

The licence holders issued proceedings in Italy against the Italian authorities on the ground that the new law had significantly affected their profit margin and was contrary to EU law.

The Consiglio di Stato (Council of State), the court of final instance, referred questions to the CJEU, seeking to establish whether the national legislation constituted a restriction on the freedom of establishment or on the freedom to provide services guaranteed by Articles 49 and 56 of the Treaty on the Functioning of the European Union and, further, whether the legislation was compatible with the principle of the protection of legitimate expectations.

The Advocate General opined that the Italian legislation did constitute a restriction on the freedoms guaranteed by Articles 49 and 56 TFEU, given that the reduction of State resources made available to the licence holders, after the licences were granted, made the business of providing gambling services less attractive to licence holders.

As for whether those restrictions were justified by overriding reasons in the public interest, the AG noted that there is significant disparity amongst Member States in relation to gambling legislation due to the moral, religious and cultural differences between the countries. Therefore, Member States enjoy a wide discretion as far as the level of consumer protection and the preservation of order in society are concerned. Nevertheless, any restrictive measures imposed by Member States must still be justified by overriding reasons in the public interest and comply with the principle of proportionality.

The Italian Government argued that its new law had been made in the broader context of restoring balance within the gambling sector in Italy. It submitted that the legislation was aimed at reducing the profitability of providing gambling services in order to fight against the spread of illegal gambling activities and to protect the most vulnerable sections of the population from the effects of gambling, notably the risk of gambling addiction. The AG said that these objectives prima facie appeared to constitute overriding reasons in the public interest capable of justifying a restriction on the freedom of establishment or on the freedom to provide services.

However, the AG said, it was for the national court to identify the objectives of the Italian legislation and ascertain whether the law in fact pursued these aims. In the AG’s view, the new law, in effect, authorised the Government to reorganise Italian gambling laws, including revising commission payments payable to licensees, but in the AG’s opinion this was not the main aim of the national legislation.

It was also for the Italian courts to verify the proportionality of the restrictions and to establish whether the national legislation, by reducing the profitability of gambling activities, was necessary to attain the objectives cited by the Italian Government and did not go beyond what was necessary to attain those objectives. To that end, the national court could not overlook the fact that, despite the law being temporary, far from being an isolated measure, it was part of a broader context of consolidating public finances generally, across the board.

As for the principle of legitimate expectations, the AG observed that the contractual relationship between businesses and public authorities in relation to the licensing system had a “dynamic character”, which allowed for State interventions justified by public interest objectives. He concluded that the evolving and uncertain nature of betting and gambling legislation, as well as the temporary nature of the levy and its limited impact on the profitability of investments made by the licence holders, made the Italian legislative intervention in question far from exceptional or unforeseeable.

In conclusion, the AG opined, the principle of the protection of legitimate expectations did not preclude, in principle, national legislation that reduces, for a given year and in respect of limited amounts, the commission stipulated in a licensing agreement for slot machine gambling services. It was, however, for the national court to consider, by examining all the relevant circumstances, whether that principle had been complied with. (Joined Cases C-475/20 to C-482/20 Admiral Gaming Network Srl v Agenzia delle Dogane e dei Monopoli EU:C;2022:290 (Opinion of Advocate General) (7 April 2022) — to read the Opinion in full (in French), click here; to read the CJEU press release in full (in English) click here).