In its judgment in Case C-440/23, European Lotto and Betting and Deutsche Lotto-und Sportwetten, the Court of Justice of the European Union (the “Court”) was called upon to clarify the relationship between the freedom to provide services under Article 56 TFEU and national rules restricting the provision of gambling services.
Confirming a settled line of case-law, according to which gambling services may be subject to national restrictions and are not eligible for mutual recognition, the judgment provides useful guidance on the private-law consequences of unlicensed gambling services. As such, the judgment may be of particular significance for jurisdictions which, like Luxembourg, are currently in the process of reforming their legal framework and where little guidance is offered by national case-law.
Background to the dispute
The dispute arose in connection with online gambling services, consisting of online virtual slot-machine games and betting on the results of lottery draws, offered to customers in the Federal Republic of Germany by companies established in Malta and holding licences issued by the Maltese Gaming Authority. A player residing in Germany made use of those services during a period in which German law generally prohibited online games of chance, subject only to certain exceptions, such as sports and horse-race betting and certain lotteries.
After losing several stakes, the player sought restitution of the sums lost before the German courts. The claims were subsequently assigned to a third party, which brought the proceedings before the Maltese courts against the Maltese operators. The referring Maltese court asked, in essence, whether Article 56 TFEU precluded German legislation prohibiting the organisation of such online gambling services where the operator was licensed in another Member State, and, the civil-law consequences of that prohibition, including the nullity of the gambling contract and the consequent recovery of the lost stakes.
The issues at stake
In a consolidated line of case-law, the Court had already established that gambling activities, whether offered on a land-based or online basis, constitute services for the purposes of Article 56 TFEU and that national legislation restricting their provision may amount to a restriction on the freedom to provide services. However, in the absence of EU harmonisation and in light of the moral, cultural and social differences existing across the Union, Member States have been recognised as enjoying a broad discretion in regulating gambling activities, provided that the restrictions imposed are justified by overriding reasons in the public interest, including consumer protection, the prevention of fraud and the preservation of public order.
The Court’s proportionality assessment, which is often more stringent in other areas of the internal market, is therefore adapted to the specific nature of gambling services. In practice, the Court verifies whether the national measures pursue legitimate objectives, are suitable for attaining them and are applied in a consistent and non-discriminatory manner, while also ensuring protection against arbitrary decision-making. Conversely, the Court does not require Member States to recognise authorisations granted in other Member States. National legislation in this area generally follows three models: imposing authorisation requirements on gambling service providers; granting exclusive rights to a public or state-controlled operator; or, as in the case at stake, prohibiting gambling activities subject to limited exceptions, generally for sports betting and certain lotteries.
Against this background, the question whether Germany was required to take account of the authorisation obtained in Malta, or whether it remained free to impose its own restrictions on gambling services accessible to persons residing on its territory, was central to the determination of the possible private-law consequences. This context was further complicated by the later evolution of German law, which moved from a general prohibition towards a system of prior authorisation. Since the relevant facts, namely the player’s loss of stakes in Germany, occurred before the entry into force of the new legislation, the referring court asked, in substance, whether that subsequent reform could affect the compatibility of the previous prohibition with EU law.
In this context, the practical focus of the case was on the consequences of illegality under national civil law. If the German prohibition was compatible with EU law, the gambling contract could be treated as null and void under national law. This, in turn, could pave the way for the player, or the assignee of the player’s claim, to seek restitution of the stakes lost. The issue was therefore whether such restitution would itself undermine the freedom to provide services or the legal certainty of operators licensed elsewhere in the Union.
The judgment is particularly relevant for Luxembourg in light of the law of 20 April 1977 on the operation of games of chance and bets relating to sporting events (the “Law of 1977”), as amended. Similarly to the previous German legislation, the Luxembourg framework reflects a restrictive policy approach, under which gambling activities are, in principle, prohibited unless expressly authorised, while Luxembourg’s Loterie Nationale is granted exclusive rights in relation to certain betting and lottery activities. However, as the Law of 1977 was conceived in a very different technological context, it does not provide a modern and comprehensive regime for online gambling. This leaves a degree of uncertainty as to the treatment of online gambling services offered by non-Luxembourg operators, even where licensed in another Member State, and creates interpretative difficulties in a field where national case-law offers very limited guidance.
The findings of the Court
The judgment is particularly strict towards online gambling, which the Court treats as presenting higher risks than its land-based counterpart. These risks include permanent accessibility, anonymity, the absence of social control, the potentially unlimited frequency of play and the attractiveness of online gambling to young or vulnerable persons.
Against that background, the Court held that EU law does not preclude national legislation prohibiting online casino games, online slot-machine games and certain forms of online betting, such as betting on the results of lottery draws, even where the operators concerned are licensed in another Member State. The fact that an operator is lawfully established and supervised elsewhere in the Union is not sufficient, in itself, to render the host Member State’s prohibition inconsistent or disproportionate.
The Court also rejected the idea that the subsequent reform of German law necessarily undermined the previous prohibition regime. The replacement of a prohibition by a system of prior authorisation may form part of a controlled expansion policy designed to steer players towards an authorised gambling offer. Such a development does not, in itself, prove that the earlier prohibition was incoherent or incompatible with Article 56 TFEU.
Most importantly, the Court held that EU law does not preclude the civil-law consequences attached to the breach of a compatible national prohibition. If the applicable national law treats contracts concluded in breach of the gambling prohibition as null and void, EU law does not prevent such nullity. Nor does EU law preclude an action for restitution of the stakes lost.
Finally, the Court rejected the argument that the player’s claim necessarily amounted to an abuse of rights under EU law. The mere fact that the player participated in the prohibited games, even though the operator held a licence in another Member State, is not sufficient to establish such abuse. Any question of bad faith remains a matter for national law.
The way forward
The judgment confirms that gambling remains one of the areas in which the Court’s review under Article 56 TFEU is comparatively deferential to national regulatory choices. Proportionality review is not abandoned, but its intensity is shaped by the sensitive nature of gambling, the absence of EU harmonisation and the discretion afforded to Member States in determining their desired level of protection.
For operators, the lesson is clear. As confirmed in previous case-law, a licence granted in one Member State does not create a passport allowing online gambling services to be offered freely throughout the Union. Where the target Member State prohibits certain games, reserves them to a monopoly, or requires prior authorisation, the operator remains exposed to national enforcement and, potentially, to civil claims by players. The judgment therefore sharpens the practical risk analysis: in the gambling sector, the freedom to provide services does not operate with the same liberalising force as in many other areas of the internal market.
The impact of the judgment on Luxembourg remains uncertain. An extensive interpretation of the Law of 1977, extending its prohibition to online gambling services, could suggest that such a regime is not, in itself, incompatible with Article 56 TFEU, provided that it pursues legitimate objectives and is applied coherently. Operators established and licensed in another Member State could then face the risk that gambling contracts concluded with Luxembourg-resident players are challenged as unlawful, with possible claims for restitution of stakes.
At present, Luxembourg does not appear to have developed a systematic enforcement practice against online gambling operators established abroad, which may create a perception of practical tolerance. However, the judgment also shows that the risk may arise from private litigation rather than public enforcement, especially where players, or specialised recovery entities, seek restitution of losses on the basis that the underlying gambling contracts were void under national law.
From a Luxembourg law perspective, the way forward is therefore legislative clarification. This process is already reflected in Draft Law No. 8679 and proposal No. 8650, currently under parliamentary discussion. A modernised regime would usefully address online gambling expressly, distinguish between operators, suppliers and passive accessibility, and clarify the scope of any prohibition, authorisation requirement or monopoly. Until such clarification is adopted, legal advice in this area will necessarily remain cautious: the risk may be low in practice, but it is difficult to exclude in law.
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