Dutch Gaming Authorityinstalled ahead of openingup remote gaming marketO                                                  ...
enforcement instruments.                        and will act as knowledge centre for both           Netherlands. Both the ...
laundering); and iii) in cases whereby a              There is, however, no basis in the            alternative was to rev...
Dutch consumers in the run-up to licensing.      Nevertheless, administrative                  shaping new remote gaming p...
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Dutch gaming authority installed ahead of opening up remote gaming market. By Justin Franssen and Frank Tolboom of VMW Taxand.

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On December 20, 2011, the Dutch Senate approved the legislative proposal regarding the introduction of the Gaming Authority. The new
independent regulatory body will be operational as of April 1, 2012, and will make enforcement of the Dutch gaming regulations much more effective. A change in government in October 2010 resulted in plans to modernise the Dutch gaming policy. The State Secretary for Safety and Justice now responsible for the
gaming dossier sent a policy note to the House of Representatives ("Tweede Kamer") on March 19, 2011, which marked a dramatic shift in the government's thinking on the regulation of all forms of gambling. These plans were fuelled by the final ruling of the Dutch Council of State in the post CJEU case Betfair/Ministry of Justice (Case 258/08). The supreme administrative court held that the Dutch licensing procedure is in breach of EU law because the procedure failed to comply with the principles of non-discrimination and transparency. (...) 2012 will be the year in which the legal landscape for (remote) gaming in the Netherlands undergoes a substantial redesign. While the Dutch government is shaping new remote gaming policy and intending to present a remote gaming bill in the first half of this year, the Gaming Authority will already become operational as of April 2012. These developments will create both opportunities and risks for parties active on the Dutch gaming market such as operators, software companies, PSPs and media companies. The Authority will actually have teeth to effectively enforce current and future Dutch gaming regulations which could particularly affect local-based entities or foreign entities with assets in the Netherlands. Nevertheless, it remains to be seen how the Gaming Authority will behave towards market players in the transitional period until the new remote gaming licensing regime unfolds. Without a transparent, sustainable and viable regulatory framework which is compliant with EU law, difficulties will remain with respect to enforcement.

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Dutch gaming authority installed ahead of opening up remote gaming market. By Justin Franssen and Frank Tolboom of VMW Taxand.

  1. 1. Dutch Gaming Authorityinstalled ahead of openingup remote gaming marketO Frank TolboomBy Justin Franssen and Frank Tolboom of VMW Taxand n December 20, 2011, the Dutch consistent, transparent and Introduction of the Gaming Authority Senate approved the legislative non-discriminatory manner. proposal regarding the introduction The liberal policy plans were followed by Backgroundof the Gaming Authority. The new critical debates in parliament wherebyindependent regulatory body will be Dutch MPs argued that the governments The main argument behind theoperational as of April 1, 2012, and will plans were too vague and that uncertainty introduction of the Gaming Authority is tomake enforcement of the Dutch gaming prevailed. They were concerned about the improve the effectiveness of theregulations much more effective. possible harmful side effects of regulating enforcement of the Dutch Betting and A change in government in October 2010 remote gaming such as the impact on the Gaming Act. According to the Explanatoryresulted in plans to modernise the Dutch prevalence of gambling addiction and on Memorandum there is a lack ofgaming policy. The State Secretary for revenues generated for good causes enforcement activities against unregulatedSafety and Justice now responsible for the and sports. gaming activities, especially regardinggaming dossier sent a policy note to the Subsequently, the Ministry has remote gaming, despite there being a totalHouse of Representatives ("Tweede instructed external parties to conduct ban on such offerings in the Netherlands.Kamer") on March 19, 2011, which marked studies into remote licensing/taxation Neither a B2C nor a B2B remote gaminga dramatic shift in the governments scenarios, potential cannibalisation effects, operator has ever been criminallythinking on the regulation of all forms of gambling addiction, technical and prosecuted for a violation of the Act.gambling. These plans were fuelled by the operational compliance requirements for This can be explained in a number offinal ruling of the Dutch Council of State in remote gaming licences and finally a study ways. Firstly, because the Act was onlythe post CJEU case Betfair/Ministry of into scenarios for the effective digital enforceable through means of criminal lawJustice (Case 258/08). The supreme enforcement of illegal remote gaming. In which is considered as impractical,administrative court held that the Dutch some of these studies our firm plays an especially regarding foreign-based parties.licensing procedure is in breach of EU law important role by providing legal expertise The former Minister of Justicebecause the procedure failed to comply from the sectors perspective. A bill for the acknowledged in parliament that it iswith the principles of non-discrimination regulation of remote gaming is now disproportionate and too time-consumingand transparency. expected in the first half of 2012. to try such matters before the courts. The existing objectives of Dutch gaming Nevertheless, a legislative proposal Strikingly the State Secretary evenpolicy, namely consumer protection and regarding the introduction of a Gaming mentioned in parliament in 2011 that thecombating criminality and illegality, will Authority (submitted back in December Public Prosecution Department is unwillingremain the same. However, the manner in 2009) was pending and there was strong to prosecute B2C operators.which these objectives are given effect is consensus in parliament that the Gaming Secondly, until April 2012, the nationalnow subject to reform. The State Secretary Authority should be installed as soon as market is regulated directly and solely byannounced plans to: i) introduce a licensing possible. The legislative proposal was the Ministry of Safety and Justice and othersystem for remote gaming in 2012 adopted in the Dutch Senate without any ministries according to the monopoly in(currently subject to a total ban); and ii) in votes being cast. The Gaming Authority will question and the national Gaming Control2015 to shift away from monopolies in the formally be operational as of April 1, 2012. Board ("College van Toezicht op deoffline sector (and possibly the privatisation Therefore, this article will focus on the Kansspelen"), the latter being limited toof state-owned Holland Casino) to enable objectives, structure and enforcement providing advice to the government andcompetition between operators. Under powers of the new regulatory body and the generally regarded as a ‘toothless tiger’.these plans all operators will function on potential implications for both the offline Both the Ministry and the Gamingthe basis of licences awarded in a and remote sector. Control Board do not have any actual14 | Winter Issue 2012 | EGL intergameonline.com | INTERGAMING
  2. 2. enforcement instruments. and will act as knowledge centre for both Netherlands. Both the Gaming Therefore, as indicated in the the public and other authorities such as Authority and the municipalities will beExplanatory Memorandum to the law addiction care institutes. allowed to order physical changes tointroducing the Gaming Authority, for In this respect the State Secretary end violations of the gamingeffective enforcement it is necessary that explicitly mentioned in the parliamentary regulations. It can also set a termthe Authority is equipped with adequate debate that high priority will be given to the for the violator to undo a violation,and proportionate administrative introduction of a central register with enter and seal buildings andenforcement instruments. problem players. In addition, the Authority confiscate goods. will keep and regularly update a registerMain tasks with self-excluded players which is linked • Incremental penalty payment: both the to both the offline and online sector (not Gaming Authority and municipalities The Gaming Authority will be awarded including lotteries). As you can imagine, will be able to impose an order forthe status of an independent administrative these registers will raise many privacy incremental penalty payments toregulatory body with operational tasks related issues and it remains to be seen enforce the gaming regulations. Awhereby the Ministry will maintain ultimate how this will be worked out in violator failing to cease the illegalresponsibility for instigating overall greater detail. activities will be subject to a penalty forgambling policy. It cannot be excluded that non-compliance. This order cannot bethere will remain the risk of a dependent Enforcement powers imposed if an administrative order isrelationship by the Authority leaning heavily also imposed. These incrementalupon the government, or the risk that it Whereas originally only criminal penalty payments will mainly beprovides (indirect) protection to certain measures could be used against imposed if a licensee does not comply(incumbent) market players. unlicensed gaming operators that exploit with the rules in relation to the age of The Gaming Authority will be staffed with their activities in the Dutch market, the the participants of games of chance.35 full-time employees and an additional amendment of the Act attributes to the Participants of the instant lottery,13 full-time employees from "Verispect". Gaming Authority the power to use sports betting, lottery, casino andThis organisation was previously administrative measures against both amusement arcades must haveresponsible for monitoring the slot licensed operators, (locally) unlicensed reached the age of 18. Secondly,machine sector. The Dutch Gaming Control B2B and B2C operators, PSPs/ISPs and incremental penalty payments can beBoard ("College van Toezicht op de also affiliates. These administrative imposed if there is an infringementKansspelen"), which advised the Ministry enforcement instruments should make with respect to specific provisionsinter alia regarding the allocation of enforcement more effective and efficient. relating to gaming machines. Thislicences, has already been wound up. The measures consist of: instrument can also be seen as an The Gaming Authority will be the body effective tool regarding violations ofthat issues, enforces and revokes licences • Administrative fines: most importantly advertising provisions.and supervises all Dutch licensees. Once both the Gaming Authority as well asremote gaming regulations are adopted, municipalities will be entitled to Criminal enforcement still possiblethe Authority will be required to grant impose an administrative fine uponremote gaming licences in an open, fair both unlicensed and licensed entities Although the Gaming Authority primarilyand non-discriminatory manner. which infringe the Act. The proposed enforces the Act by administrativeImportantly, following the above mentioned fines could be as high as €760,000 and measures as mentioned above, regularBetfair ruling, the Authority is not entitled can be raised by 10 per cent of the criminal prosecution cannot be excluded.to automatically allocate and renew annual revenue. It’s not clear whether Criminal prosecution by the Publiclicences in favour of incumbent operators the total revenue of the company or Prosecution Service would generally bewithout an open and fair process unless only revenues generated in the Dutch used in the case of serious offences of thesuch operators are subject to very strict market will be taken into account. Next Gaming Act and are considered as thegovernment control. Therefore, in our view to that the Gaming Authority or ‘ultimum remedium’. The Authority and thea preferable position for, or preferential municipalities could in certain Public Prosecution Service will set up atreatment of, incumbent operators in the circumstances impose multiple fines cooperation agreement to dividelicensing process will no longer for the same offence. Failure to object competences for different offences underbe possible. to the administrative fine means that it the Act. The Authority will undertake executive, becomes irreversible. A fixed rate of However, the State Secretary alreadyenforcement and supervisory tasks €370 will apply in respect of minor mentioned instances during discussions inconcerning the gaming market in the offences, such as failure to comply with the Senate in which criminal enforcementNetherlands. The State Secretary stated the prohibition on minors being present is required and desirable, such as: i)that the Authority will need to closely in amusement arcades. repeated serious infringements wherecooperate with foreign regulators and administrative enforcement fails to havementioned in parliament those in Malta • Administrative orders: administrative the desired effect; ii) where theand Italy as examples. In addition, the orders may be imposed on entities that infringement of the Act is also related toAuthority will provide educational services have a physical presence in the other criminal activities (such as moneyINTERGAMING | intergameonline.com EGL | Winter Issue 2012 | 15??
  3. 3. laundering); and iii) in cases whereby a There is, however, no basis in the alternative was to revoke the licence whichprecedent is needed because criminal legislative history of the Act nor in any case was considered as disproportionate. Nextprosecution will have a serious deterrent law for such a broad interpretation. In our to that it was not practicable to revoke theeffect for the rest of the sector. opinion, the promotion of participation in licence of a monopoly player because it games of chance pursuant to Section 1(b) would then create a large vacuum in termsBlacklisting of the Act pertains solely to publicity and of supply and revenue generation. advertisements for games of chance and The State Secretary explicitly mentioned As mentioned before, the State Secretary not to the provision of financial services. It that specific attention will be given tois facing considerable resistance from seems that in the current situation the marketing activities. An amendment to thewithin parliament as to his liberal plans for Ministry is stretching the connotation of Gaming Authority bill has been tabled andthe regulation of remote gaming. In the Article 1(b) of the Act beyond its original approved which states that the Authoritylatest debate on September 7, 2011, in the intent in order to be able to tackle remote must provide specific regulations relatingHouse of Representatives, which was gaming operators. to the careful and balanced marketing andscheduled to discuss the Gaming Authority, Also quite remarkable is the fact that the promotional activities by licensees. In thisseveral MPs took the opportunity to State Secretary in the same discussions context it is possible that the Authority willquestion the State Secretary regarding the stated that he would consider the undertake targeted actions againstregulation of remote gaming. possibility of implementing provisions into excessive advertising of the incumbents. Several MPs pushed the State Secretary the Act that would enable ISP and PSP- Next to that it must also be noted thaton enforcing the current prohibition against blocking. The fact that ISP and PSP- we are still awaiting a final decision fromunlicensed operators and ensuring that blocking need a legal basis in the the Dutch Supreme Court in the post CJEUsuch operators will not qualify for remote announced reform of the Act could be case De Lotto/Ladbrokes (C-258/08), whichgaming licences in the future. It is within understood as suggesting that there is essentially deals with the question to whatthis context that the State Secretary stated indeed no such legal basis at the moment. extent a monopoly operator can advertisethat he would undertake blacklisting as Another legal ground for the blacklisting and make games attractive when the aimsoon as possible as a means to ensure the process would be Customer Due Diligence of the restrictive legislation is to preventblocking of financial transactions between regulations. Based on general KYC- crime and problem gambling.Netherlands-based financial service requirements established in financialproviders and unlicensed operators. regulations, banks are entitled to Remote sector Currently many remote operators have (voluntarily) break off their relationshipbeen receiving so-called "cease and desist" with illegal operators. According to the former Minister ofletters. These actions are being taken Justice, Mr Donner, action againstbefore the opening up of the remote Implications for the sectors operators of online games of chance willgaming market, which theoretically means be one of the highest priorities for thethat any remote gaming operator targeting As we have experienced with the Gaming Authority. Although some MPs arethe Dutch market and accepting Dutch introduction of similar regulators in the pressuring the State Secretary to takeplayers could be addressed. Operators Netherlands (such as the "OPTA": immediate enforcement action againstfailing to comply with the conditions set out regulator for the electronic communication current "illegal" unlicensed remote gamingin the letter will be included on the blacklist. sector), it’s not inconceivable that the operators and to disqualify them from The Gaming Authority will maintain and Gaming Authority will show its teeth from future licensing procedures, it must beregularly update the actual list of the very beginning to make a statement noted that regarding the latter the Stateoperators. Details of operators listed will and anchor its position in the political and Secretary was hesitant to comply withbe sent to the Nederlandse Vereniging van regulatory landscape. Although of course it these calls. Nevertheless, currently theBanken ("Dutch Banking Association") is difficult to predict, it cannot be excluded Ministry (and as from April 1 the Authority)which will forward this information to its that the Authority will be particularly active will maintain a blacklist with "illegal"members so that they can take measures from the start, possibly through especially operators on the basis of whichto stop providing financial transaction targeting entities with a local presence enforcement could take place.services to unlicensed operators. which clearly act in violation of gaming It remains to be seen how the Authority However, there is considerable regulations and which could be addressed will react to currently unlicensed operatorscontroversy with respect to the legal basis easily and effectively. until a new remote licensing regime is infor the black-listing process and its place. Hopefully, there is an awarenessenforceability. There is currently no specific Offline sector that, apart from a legal point of view that atact or legislation prohibiting the facilitation this moment this sanctioning policy cannotof financial services to unlicensed gaming In the last couple of years the incumbent be considered legitimate in view of theoperators. Although the State Secretary is monopoly players faced much criticism Betfair ruling, a blackout approach has theinconsistent in his statements, he seeks to from parliament regarding their extensive potential to be highly counterproductive.include the provision of financial services advertising activities and policy regarding The objectives behind regulating thethrough a broad interpretation of the term consumer protection. However, it was remote gaming market will be frustrated if‘promotion’ in the prohibition of the difficult for the government to effectively either the majority of operators arepromotion of illegal games of chance monitor and control the incumbent unsuccessful in future license applications(Section 1(b) of the Act). operators because their only enforcement or if operators are required to stop serving16 | Winter Issue 2012 | EGL intergameonline.com | INTERGAMING
  4. 4. Dutch consumers in the run-up to licensing. Nevertheless, administrative shaping new remote gaming policy and There is a danger that their current enforcement instruments may easily be intending to present a remote gaming billconsumers will fall into the hands of those imposed and enforced towards local in the first half of this year, the Gamingwho have no intention of obtaining a entities or foreign entities with any assets, Authority will already become operationallicence. The Authority is, however, a subsidiary or agency in the Netherlands. as of April 2012. These developments willdesigned as a body independent from the Such entities with a presence in the create both opportunities and risks forMinistry and it remains to be seen how Netherlands could face severe parties active on the Dutch gaming marketthe Authority will actually act in the administrative penalties and fines when such as operators, software companies,transitional period up to the new remote infringing the Act. In this context marketing PSPs and media companies.licensing regime. of gaming related businesses (affiliate The Authority will actually have teeth to If and when the Authority will use its marketing) will likely be more complicated. effectively enforce current and future Dutchadministrative enforcement powers, it must Apart from administrative enforcement, gaming regulations which couldbe noted that the administrative measures regular criminal prosecution by the Public particularly affect local-based entities orcannot be easily executed abroad. Prosecution Service cannot be excluded, foreign entities with assets in theTherefore, we anticipate at this moment but the chance of such action is not Netherlands. Nevertheless, it remains tothat foreign-based entities cannot be affected by the introduction of the Authority. be seen how the Gaming Authority willeffectively addressed by the Authority. The behave towards market players in theState Secretary, however, announced that Conclusion transitional period until the new remotean external party is currently conducting gaming licensing regime unfolds. Without aresearch into different scenarios for 2012 will be the year in which the legal transparent, sustainable and viableeffective and efficient digital monitoring landscape for (remote) gaming in the regulatory framework which is compliantand enforcement of (cross-border) illegal Netherlands undergoes a substantial with EU law, difficulties will remain withremote gaming activities. redesign. While the Dutch government is respect to enforcement.INTERGAMING | intergameonline.com EGL | Winter Issue 2012 | 17

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