C-124/97

Reply to Questions 1, 2 and 3(a) I-6076

Does the present case come within the scope of Article 30 et seq. of the Treaty? I-6079

Does the RAY's monopoly infringe the principle of the free movement of goods? I-6081

Applicability of the rules of the Treaty on the right of establishment or freedom to

provide services I - 6085

Is the Finnish Law on gaming compatible with Articles 90( 1 ) and 59 of the Treaty ? I-6087

* Original language: Italian.

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5. Under the contract concluded between TSL and the English company Cotswold Microsystems Limited (hereinafter 'CML') dated 25 January 1996, TSL has the exclu- 5 — See Article 1(3) of the Raha-automaattiasetus (Decree No 676 of 29 December 1967 on slot machines, as subse- sive right to install and operate in Finnish quently amended). 6 — See Articles 6(1) and 16(1) of the Raha-automaattiasetus (cited in footnote 5 above). 7 — See Article 6(1) of the Raha-automaattiasetus (cited in 9 — This condition in fact reiterates the content of Article 3 of footnote 5 above). the Raha-automaattiasetus (cited in footnote S above). 8 — See the RAY's web-site (Internet address: http:llwww.ray.fi/ 10 — See Articles 2 and 34 of the Raha-automaattiasetus (cited english/brieflyldefault. htm). in footnote 5 above).

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Jyväskylan Käräjäoikeus acceded to the request of the public prosecutor, sentencing Mr Läärä to a fine and ordering the 10 gaming machines seized, belonging to CML, together with the money they con- tained, to be forfeited to the State. 13 '(1) Is the judgment of the Court of Justice of 24 March 1994 in Case C 275/92 Her Majesty's Customs and Excise v

The player can choose between one mark and five marks [equivalent to about 0.20 and 1 euro respectively] as the price of a game. In their written observations to the Court, Mr Läärä, TSL and CML claimed that this ratio between the amount of the stake and that of the prize was identical to that of the slot machines operated by the RAY. 13 — Under Chapter 2, Article 16(2) of the Finnish Penal Code, the perpetrator of the offence or the person in whose interest or for whose profit the perpetrator acted is liable to confiscation of the instrument belonging to them which was used to commit the offence or which was prepared or (2) Do the provisions of the EC Treaty on obtained for that sole purpose. the free movement of goods and ser-

7. The national court asks whether, and, if so, to what extent, the principles estab- lished in Schindler can be applied to the present case. I therefore consider that I (a) do Articles 30, 59 or 60 or any must begin by recalling those principles. In other article of the EC Treaty Schindler the questions raised by the High preclude Finland from restricting Court of Justice with regard to Articles 30 the right to manage slot machines and 59 of the Treaty concerned United to the monopoly operated by the Kingdom legislation, which at the material Raha-automaattiyhdistys (Public- time, in other words, before the introduc- Law Assocation for the Manage- tion of amendments in 1993 (see foot- ment of Slot Machines), irrespec- note 50 below), prohibited the organisa- tive of whether the restriction tion of lotteries in the territory of the applies under that Law to domestic United Kingdom and the importation of and foreign organisers of gaming tickets, order forms and advertising mate- alike, and rial intended to enable United Kingdom players to take part in legally organised foreign lotteries. The disputed national legislation did, however, lay down excep- tions to the prohibition, thus allowing small-scale lotteries organised by societies or local communities for charitable and (b) can that restriction be justified, non-profit-making purposes. having regard to the reasons set out in the Law on Gaming or the measures implementing that Law, or on any other grounds, by the principles contained in Articles 36 or 56 or any other article of the EC 8. In its judgment in Schindler, the Court Treaty; in addition, is the answer stated first of all that lotteries are to be to that question affected by the regarded as 'economic activities' within the amount of the winnings which may meaning of the Treaty if they entail an be obtained from the machines and importation of goods or the provision of by the question whether the oppor- services for remuneration. Some of the tunity of winning is based on national governments involved in the case chance or on the player's skill?' took the opposite view, observing that

gaming contracts may be regarded as void lottery and [could not], under the Treaty, be under the laws of certain Member States considered independently of the lottery to and, in particular, that lotteries, which which they [related]'. The Court thus consist of operations of pure chance by concluded that the activities performed by way of recreation or amusement, are tradi- the defendants in the main proceedings tionally prohibited in the Member States or related to a 'service' (within the meaning of operated either directly by the public Article 60) and fell within the scope of authorities or under their control, solely Article 59 of the Treaty. 16 The correctness in the public interest. 14 According to the of that conclusion and of the other conclu- Court, however, neither the entertainment sion that a lottery constituted an economic that a lottery provides for the players who activity, was not, in the opinion of the participate nor the element of chance Court, called in question by the fact that in inherent in the correlation between the many Member States the law provides that stake and the prize prevents the transaction gaming profits may be used only for certain having an economic nature. Moreover, purposes in the public interest, or may even lotteries, which are operated in various be required to be paid into the public Member States, cannot be regarded as purse. 17 activities whose harmful nature causes them to be prohibited; nor can they be likened to activities involving illegal pro- ducts. 15 The Court stated that even if the morality of lotteries was at least question- able, it was not for the Court to substitute its assessment for that of the legislatures of the Member States where that activity was 10. Moving on to examine the compatibil- practised legally. ity of the national legislation at issue in that judgment with the prohibition on discrimi- nation based on nationality laid down in Article 59, the Court stated that that pro- hibition may be infringed even by legisla- tion that is 'applicable without distinction' when it is liable wholly to preclude (as in the case of the United Kingdom legislation

In assessing whether all the requirements of the definition tion of advertisements, order forms and contained in Anicie 60 of the Treaty were met in the case tickets on behalf of a lottery operator from in point, the Court observed: 'The services at issue are those provided by the operator of the lottery to enable another Member State were not ends in purchasers of tickets to participate in a game of chance with the hope of winning, by arranging for that purpose themselves, the Court explained, but for the stakes to be collected, the draws to be organised and the prizes or winnings to be ascertained and paid out'. merely instrumental operations, 'specific The price of the ticket normally constituted the remunera- steps in the organisation or operation of a tion for such services. Finally, with regard to the residual nature of the Community concept of 'services', the Court ruled that lotteries did not come within the protection of any other fundamental freedom, in particular that provi- ded by the rules on free movement ofcapital, which do not 14 — See Schindler (cited in footnote 1 above), paragraphs 16 to concern all monetary transfers necessary to economic activities (ibid., paragraphs 27, 28 and 30).

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. . personal profit from it. 20 In my opinion, [applied] irrespective of the nationality of however, this is only an incidental aspect. 21 the lottery operator or his agents and This I deduce from the observation that, in whatever the Member State or States in identifying the overriding public interest which the operator or his agents are considerations regarded in the case in established'. 19 question as being 'such as to justify restric- tions, as regards Article 59 of the Treaty, which may go so far as to prohibit lotteries in a Member State', the Court confined itself to stating the reasons, 'taken toge- ther', concerning the protection of the recipients of the service and, more gener- ally, of consumers as well as the mainte- nance of order in society. 22 The operative part of the judgment then refers to 'con- cerns of social policy and of the prevention of fraud' (see paragraph 3 thereof).

winning. (ii) to control demand in the gambling 21 — V. Hatzopoulos (see the commentary on Schindler in market which has damaging social conse- Comm. Mkt. L. Rev., 1995, p. 841, in particular p. 851) observes that the negative wording used in paragraph 60 quences when taken to excess; and (iii) to of the judgment in question ('First of all, it is not possible protect public morality, in that it is repug- to disregard the moral, religious or cultural aspects of lotteries, like other types of gambling, in all the Member nant that the activity in question, if oper- States') detracts both from the importance that should, according to the Court, be attached to such considerations ated as a commercial enterprise, should and from the possible legal consequences of such an

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purposes cannot be attributed to either of ther, were, in that judgment, such as to these two categories except by distorting justify restrictions that could go as far as the interpretation. prohibiting lotteries on the territory of the Member State concerned. In adopting the disputed measures, the United Kingdom legislature had erected safeguards against risks and adverse developments, the assess- ment of which lay within its discretion, and 12. The fact that lotteries may be an those safeguards could not be considered important means of financing benevolent, an unlawful interference with the freedom sporting or cultural activities or social and to provide services. 24 charitable works is, according to the Court, not without relevance, although under Community law — and I regard this remin- der as important — it cannot in itself be regarded as an objective justification of the restrictions imposed at national level on the economic activities under consideration here. 23 Reply to Questions 1, 2 and 3(a)

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OPINION OF MR LA PERGOLA — CASE C-124/97

16. Having arrived at this point, it is public undertaking, 28 or an undertaking to necessary to see whether and how the which a Member State grants exclusive principles established in Schindler can be rights (see point 3 above) — within the adapted to the case in point. First of all, the meaning of Article 90(1) of the Treaty. installation, operation and provision of slot Article 90(1), which is included among machines for the paying public entails, it the rules on competition, provides that in seems to me, a provision of services against relation to such undertakings Member payment and possibly also an importation States may neither enact nor maintain in of goods, thus coming within the concept force any measure contrary to the rules of 'economic activities' within the meaning contained in the Treaty, in particular to of the Treaty (see point 8 above). On this those rules provided for in Article 6 and point, moreover, there is common ground relating to competition. This has an between the parties, the Member States and immediate and important consequence for the Commission. the present analysis. Although the existence of a monopoly in the provision of services such as that granted by the Finnish legis- lature to the RAY is not as such incompa- tible with Community law, a problem arises if the monopoly in question is organised or exercised in a manner which infringes the rules of the Treaty, in particular those relating to the free movement of goods and the freedom to provide services, which are expressly mentioned by the national court. 29

27 — The concept of an 'undertaking', particularly in the context of competition law, encompasses every entity engaged in an economic activity, regardless of its legal status and the way in which it is financed. This classifica- tion was therefore held to be applicable to a public employment agency engaged in employment procurement activities (see Case C-41/90 Höfner and Elser [1991] ECR I-1979, paragraph 21, and Case C-55/96 Job Centre 28 — It should be recalled that in its judgment in Joined Cases [1997] ECR I-7119, paragraphs 21 to 25) and to a non- 188/80 to 190/80 France, Italy and United Kingdom v profit-making organisation which manages an old-age Commission [1982] ECR 2545 (paragraphs 24 to 26 in insurance scheme established by law as an optional scheme particular paragraph 25), the Court approved the defini- and intended to supplement a basic compulsory scheme tion of a public undertaking ['any undertaking over which and which operates according to the principle of capita- the public authorities may exercise directly or indirectly a lisation in keeping with the rules laid down by the dominant influence.... Such influence is to be presumed authorities, in particular with regard to conditions for when the public authorities directly or indirectly hold the membership, contributions and benefits (see major part of the undertakings' subscribed capital, control Case C-244/94 Fédération Française des Sociétés d'Assur- the majority of the votes, or can appoint more than half of ance and Others [19951 ECR I-4013). On the other hand, the members of its administrative, managerial or super- according to the Court, organisations involved in the visory body'] contained in Article 2 of Commission management of the public social security system, which Directive 80/723/EEC of 25 June 1980 on the transpar- fulfil an exclusively social function in the performance of a ency of financial relations between Member States and non-profit-making activity based on principles of solidar- public undertakings (OJ 1980 L 195, p. 35, as subse- ity, are not undertakings (see Joined Cases C-159/91 and quently amended). C-160/91 Poucet and Pistre [1993] ECR 1-637, para- 29 — See, ex multis, Case C-260/89 ERT [1991] ECR I-2925, graphs 17 to 19). paragraphs 10 and 11.

Does the present case come within the the lottery ticket has paid for the right to scope of Article 30 et seq. of the Treaty? take part in the lottery, that is to say, has paid for the chance of being drawn as the winner of one of the prizes in the lottery in question. The purchase of a lottery ticket corresponds in that context to the signing of an insurance contract or the purchase of 17. The first aspect to consider is therefore personal travel services where the docu- whether Article 30 et seq. of the Treaty are ments issued by the provider of services for applicable to the case before us. The the purchase of the services — the policy appellants contend that the Finnish legisla- and the travel ticket — are not goods tion under examination impinges upon the within the meaning of the Treaty.' 30 free movement of goods. All the national governments taking part in the present case maintain the opposite. The Commission, for its part, observes that restricting the operation of slot machines to the RAY may be equivalent to a quantitative restriction on imports if that association favours Finnish undertakings and products in its purchases of goods. The Commission notes, however, that the dispute in the present case does not touch upon the purchases of goods by the RAY. Apart from that, it adds, the slot machines whose However, unlike a ticket, which is an confiscation was ordered at first instance instrument representing the (conditional) were exported by CML with a view not to right to receive the prize promised by the their resale but to their use in the provision organiser in the event of winning, slot of the service encapsulated in the gaming machines are, it should be noted, the activity. capital good which makes it possible to provide the service. Once the game is over, lottery tickets revert to being simply printed paper of no economic value. The products at issue here, by contrast, are 'products which can be valued in money' and thus in abstract terms are capable of forming the subject of sales or other lawful 18. As the appellants observe, the grounds commercial transactions. 31 The fact that on which the Court ruled in Schindler that slot machines are regarded as goods for the lottery activities do not relate to 'goods' cannot be extended to the gaming machines with which we are dealing in the present 30 — See the Opinion of Advocate General Gulmann in case. In Schindler Advocate General Gul- Schindler, cited in footnote 1 above, point 27. 31 — See Case 7/68 Commission v Italy [1968] ECR 423, mann expressed the view which was later relating to objects of artistic or historic interest. According to the Court, 'objects which are shipped across a frontier espoused by the Court. As we read in his for the purposes of commercial transactions are subject to Opinion, 'there is no particular reason for Article 30, whatever the nature of those transactions' and are therefore 'goods' within the meaning of Article30 et treating lottery tickets as goods. They seq. of the Treaty, including non-recyclable waste (see Case C-2/90 Commission v Belgium [19921 ECR I-4431, para- represent the evidence that the owner of graph 26).

Community customs nomenclature 32 also purpose of providing services mean that proves, in my opinion, that there can be no such an operation forms part of the services doubt in this regard. themselves and accordingly escapes the rules governing the free movement of goods? On the basis of the Court's recent judgment in Case C-158/94, 33 it should be held that a case such as the one before us comes within the scope of Article 30 et seq. of the Treaty. Surgeons purchase scalpels, too, for the sole purpose of providing a service, but it could not seriously be argued that intra-Community flows of such pro- ducts fall outside the scope of those provi- sions. The present case does not concern a main transaction of which another purely ancillary and incidental transaction forms a part, 34 but rather a commercial transaction involving goods which is instrumental to and linked to a provision of services but quite distinct in conceptual and economic terms. This is clear, in particular, from the fact that the contracting parties to the 19. As to the fact that CML did not transactions in question are different: the transfer ownership of its machines to TSL, intended recipients of the service (that is to I would not say — as the Commission and say, players) would by definition not be the Governments of the Netherlands, the involved in the sale of slot machines, even United Kingdom, Sweden and Spain if, given a different legislative framework, claim — that this necessarily prevents us such a transaction made economic sense. from holding that Article 30 of the Treaty For all that the activity performed jointly is applicable to this case. We should ask by the appellants in the main proceedings ourselves, at most, whether CML and TSL falls within the scope of Article 59 of the resorted to the atypical contractual Treaty, it cannot be excluded that Arti- arrangement of cooperation in the provi- sion of services (see point 5 above) pre- cisely because of what could be regarded as the distorting effects of the legislation on games of chance in force in Finland: it is reasonable to ask why an undertaking in the position of TSL should have had to invest large sums of money to acquire the ownership of capital goods which are not lawfully usable in that country in order 33 — See Case C-158/94 Commission v Italy [1997] subsequently to provide gaming services. ECR I-5789, paragraphs 15 to 20 and the Opinion of Advocate General Cosmas in Joined Cases C-157/94 The important point here is different: does to C-160/94 Commission v Netherlands, Commission v the import or export of goods for the sole Italy, Commission v France and Commission v Spain [19971 ECR I-5699, point 15. 34 — Such as, for example, the supply of oil, parts and other goods in conjunction with the conduct of roadworthiness tests for motor vehicles (see Case C-55/93 Van Schaik 32 — See CN code 9504 30 50. [19941 ECR I-4837, paragraph 14).

cle 30 applies to the 'goods element' of the sell automated gaming machines of the overall service. 35 Moreover, the fact that, same type as those used for the activities in applying the national legislation at issue, which the RAY alone is licensed to carry on the Finnish court at first instance also (see point 3 above). The case therefore ordered the seizure of the imported goods, presents strong similarities, from several which CML had lawfully produced and points of view, with the facts in ERT, marketed in another Member State (the referred to above (see footnote 29).

When Does the RAY's monopoly infringe the principle of the free movement of goods? asking the Court for the interpretation necessary to reach a decision in the main proceedings — with regard, in that context, to Articles 9 and 30 of the Treaty — the national court referred expressly to the fact that the legislation at issue left the mono- poly operator free 'to select and favour 20. It now remains to be seen in what national materials and products in prefer- manner, according to the appellants, the ence to those of other Member States of the national legislation at issue could constitute Community'. 36 The Court accepted that a measure equivalent to a quantitative 'the grant to a single undertaking of restriction on imports. By law, the RAY exclusive rights in relation to television holds not only the exclusive right to install broadcasting and the grant for that purpose and operate slot machines provided for of an exclusive right to import, hire or public use but also the right to produce and distribute material and products necessary for that broadcasting does not as such constitute a measure having an effect 35 — See F. Blum and A. Logue, State Monopolies Under EC Law, Chichester 1998, pp. 106 and 137. See also equivalent to a quantitative restriction Case 155/73 Sacchi [1974] ECR 409, paragraphs 6 and within the meaning of Article 30 of the 7, and Case 260/89 (cited in footnote 29 above), para- graphs 13 and 14, in which the Court stated that the transmission of television signals, including those in the nature of advertisements, must be regarded as provision of services, whereas cross-border trade in material, sound recordings, films, apparatus and other products used for the provision of the services in question are subject to the rules relating to the free movement of goods; see also Case 45/87 Commission v Ireland [1988] ECR 4929, paragraph 17, in relation to the question whether Arti- cle 30 of the Treaty precluded the inclusion in an invitation to tender for a public works contract of a clause stipulating that some of the materials to be used had to comply with Irish technical standards. The Court confirmed that 'the fact that a public works contract relates to the provision of services cannot remove a clause in an invitation to tender 36 — In the text I have referred to the second and third questions

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programmes. Under such a system equality of opportunity as between its own pro- grammes and programmes to be re-trans- mitted from other Member States is there- fore liable to be seriously compromised'. 38 Reiterating the principle set out in its ruling on the free movement of goods, 39 the Court then stated that 'the question whe- ther the aggregation of the exclusive right to broadcast and the right to retransmit actually leads to discrimination to the detriment of programmes from other Mem- ber States is a matter of fact which only the

Libérées (19881 ECR 2479, paragraph 10; see also of the grounds indicated in Article 56 of the Treaty, to Case C-17/94 Gervais and Others [1995] ECR I-4353, which Article 66 thereof refers' (ibid., paragraph 3 of the paragraphs 36 to 38). operative part).

is compatible with the provisions of the autonomous commercial conduct on the Treaty governing the free movement of part of the RAY but as an actual 41 and goods. Like the ERT in the above case (see inevitable effect of the national legislation point 21), the RAY operates a monopoly in at issue. Admittedly, since the RAY does the downstream market in the service and not hold an exclusive right to produce and is the only possible purchaser of the sell slot machines and amusement necessary capital goods (slot machines) in machines, the possibility cannot in princi-

their products. Not without reason, the asked whether the national legislation on appellants observe that the RAY uses exclu- gaming infringes the Treaty in the manner I sively slot machines which it has itself have just indicated. And it is also true that designed, developed and produced, a fact the Court is required to base its reply to the which that association emphasises in its questions submitted to it on the facts given own commercial literature (see footnote 8 in the order for reference.

However, it is not necessary that such measures have an appreciable effect on intra-community trade for there to be a breach of the prohibition laid down in Article 30 of the Treaty (see Case 16/83 Prantl [19841 ECR 1299, para- graph 20). 42 — See Case C-21/88 Du Pont de Nemours Italiana [1990] ECR I-889, paragraph 2 of the operative part.

useful guidance as possible for the purpose compatibility with the Treaty's rules on of resolving the dispute in the main pro- competition. More precisely, given the ceedings. In the present case, moreover, the findings of fact described above (see Vaasan Hovioikeus did not omit to men- point 22), the question arises as to whether tion Article 30 of the Treaty among the as a result of regulation the RAY's domi- provisions of Community law referred to. nant position in the market reserved for it The Court is therefore entitled (and in my ex lege is extended to the (competitive) opinion it is in fact required) to provide upstream market in the production and that court with as full an interpretation as marketing of slot machines, and whether possible, even if it must draw information such an extension is lawful. 43 However, from the case-file, in particular from the that is an aspect of the case which I observations of the parties, to supplement mention only in passing.

It is also significant that the aspect concerning possible discrimination in the purchase of the necessary capital goods by. the RAY was not lost on the Commission (see point 17 above) which alluded to that possibility as early as the 43 — According to the case-law of the Court, an undertaking which has a statutory monopoly over a substantial part of written procedure. the common market may be regarded as having a dominant position within the meaning of Article 86 of the Treaty and the territory of a Member State over which the monopoly extends may constitute a substantial part of the common market (see, ex multis, Case C-260/89, cited in footnote 29 above, paragraph 31). Moreover, a Mem-

An abuse within the meaning of Article 86 is committed where, without any objective necessity, an undertaking holding a dominant position on a particular market reserves to itself an ancillary activity which might be carried out by another undertaking as part of its activities on a neighbouring but separate market, the attendant risk being that all competi- tion from the latter undertaking may be eliminated (see Case 311/84 CBEM v CLT and IPB [1985) ECR 3261, paragraph 2 of the operative part, and Case C-18/88 Régie des Télégraphes et des Téléphones v GB-lnno-BM [1991] ECR I-5941, paragraphs 18 to 28).

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cle 30 et seq. (see points 17 to 22 above gaming with the obligations arising from and point 29 below) and Article 59 et seq. the Treaty must be examined, in line with (see points 25 to 27 and 30 to 41 below), I the order for reference, from the point of consider it unnecessary to burden this view of freedom to provide services. The Opinion further by examining that aspect national court is alluding here to the in detail. I shall therefore refrain from services provided by an undertaking which enquiring whether, from that point of view, installs and operates slot machines. The the Finnish Law on Gaming also contra- service consists in enabling paying players venes the prohibitions laid down in Arti- to take part in a single game (or a series of cles 90(1) and 86 of the Treaty. games) and in offering them the hope of winning something by means of an auto- mated mechanism for the collection of stakes and the payment of prizes. 4 4 According to the Finnish and United King- dom Governments and the Commission, however, it is doubtful whether Article 59 et seq. are applicable to the present case, because in all likelihood we are dealing with a purely internal situation, as the service in question is provided by a Finnish undertaking (TSL) to recipients established in Finnish territory. Correctly, however, Finland and the United Kingdom add that it is for the national court to make an assessment (in practical and economic terms) of the legal situation on which the main proceedings hinge. In view of the Applicability of the rules of the Treaty on the right of establishment or freedom to provide services

circumstances and leaving aside the reasons Commission considers that the situation of which may have induced CML and TSL to the United Kingdom company should be arrange their contractual relationship in the analysed on the basis of Article 52 et seq. way I have described (see point 5 above), of the Treaty if it transpires that TSL the Vaasan Hovioikeus considers that the operated in Finland — the Member State playing of slot machines — the activity out in which the services were provided — as a of which the prosecutions brought before it local establishment or infrastructure of the arose — is in the nature of a (cross-border) United Kingdom undertaking, in particular service for the purposes of the Treaty. I as its commercial agent or permanent therefore consider it appropriate to exam- representative. Article 52 permits compa- ine the questions submitted by the Finnish nies to establish themselves, in the sense court in that light. 4 5 used in the Treaty, in more than one Member State by opening agencies, branches or subsidiaries. Furthermore — as the Commission points out, referring to the judgment in Case 205/84 — a provider of services (in casu an insurance under- taking) 'of another Member State which maintains a permanent presence in the Member State in question comes within the scope of the provisions of the Treaty on the right of establishment, even if that presence does not take the form of a branch or agency, but consists merely of an office 26. It is well to note that it is also for the managed by the undertaking's own staff or national court, depending on how it cate- by a person who is independent but gorises the contractual relationship authorised to act on a permanent basis for between CML and TSL, to resolve the the undertaking, as would be the case with question — raised by the Commission and an agency. In the light of the aforemen- the Belgian Government — whether the tioned definition contained in the first provisions of the Treaty relating to freedom paragraph of Article 60, 47 such [a provider of establishment (in alternativa to those of services] cannot therefore avail itself of relating to freedom to provide services) 46 are applicable to the present case. The

Articles 59 and 60 with regard to its der of this Opinion to examining the activities in the Member State in ques- compatibility of the Finnish legislation on tion.' 48 gaming with Article 59, that is to say, with the provision expressly mentioned in the second and third questions in the order for reference, the conclusions I reach should, as a matter of principle, if the national court considers it must analyse the case on the basis of the Treaty provisions on the right of establishment, be capable of being transposed to such an analysis. However, the rules of the Treaty on the right of establishment and the free move- ment of services respectively provide for the abolition of State measures restricting fun- damental freedoms. Leaving aside the dif- ferent ways in which they are exercised in practice, these freedoms are two aspects of the same phenomenon, that is to say the geographical mobility which the Treaty guarantees within the Community for the economic operators of the Member States. Equally, the express derogations sanctioned Is the Finnish Law on gaming compatible by the Treaty and the public interest with Articles 90(1) and 59 of the Treaty ? considerations which can be invoked in abstract terms to justify restrictive national measures are similar. 49 Consequently, even though I shall confine myself in the remain-

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blished — constituted a measure applicable hibited the conduct of the type of lottery to without distinction (see point 10 above). 50 which it related, the Finnish Law on Referring to established case-law, the Court Gaming which the Vaasan Hovioikeus is went on to state that legislation may called upon to apply in the main proceed- infringe Article 59 of the Treaty, even if it ings reserves the activity in question to a is applicable without distinction to the single national operator, more precisely to a provision of services from any source. public law body created for that purpose, Article 59 would be infringed by a State and requires the holder of the exclusive measure which, albeit making no distinc- licence to allocate the profits entirely to tion between foreign or non-resident pro- financing 'good causes'. Such a law pre- viders of services and others, is nevertheless vents persons established in other Member liable to impede or discourage, without States from providing (exporting, if you objective and relevant justification, the will) in the recipient State the service which exercise of the fundamental freedom he offers in the Member State in which he is involved if the service in question is pro- established. At first sight, it could therefore vided in the Member State in which the be concluded that, within the meaning of provider is established in accordance with Community law, the granting to a national the legal requirements in force in that operator of exclusive rights such as those State. 51 held by law by the RAY and the consequent requirement that players resident in the Member State in question purchase the service from the monopolist constitute discriminatory measures in breach of Arti- cles 90(1) and 59 of the Treaty in that they 28. In contrast to the national legislation at operate to the detriment of providers of issue in Schindler, which completely pro- services from other Member States.

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tion applicable without distinction. is to be applied correctly to the case before Above all, if the approach outlined above the Court, it is necessary to have regard to

expression). Similarly, the rule requiring national treat by private companies. The Greek public property insurance ment to be extended to the beneficiaries of the freedom of market accounts for approximately 25% of annual premium establishment ('under the conditions laid down for its own income in Greece, which is a large proportion of the total. . . . nationals by the law of the country where such establish The loans made by Greek State-owneď credit banks account ment is effected') gives rise, in my opinion, to the for same 80% of the credit market in Greece.

The provi establishment where the consequent prohibition on form sions of national law at issue enabled the Flemish Govern ing or operating undertakings competing with the mono ment to authorise only one private broadcasting body (in poly applies to nationals of that Member State (and casu, VTM) to broadcast its programmes and advertising to companies: see Article 58) as well as to those of other the Flemish Community as a whole. The Commission Community countries. Such an approach would thus established that even if the measures in question applied respect the right to treatment as nationals which Article 52 without distinction to non-Belgian operators and to Belgian guarantees to the beneficiaries of the freedom of establish operators other than VTM, they constituted a disguised form ment (see the Opinion of Advocate General Lenz in of discrimination whose effects were protectionist. 'This is so Case C-260/89, cited in footnote 29 above, points 13 and because the fact that television advertising is restricted to a

insurance company. In contrast to the present case, the VTM has a public service function, the means by which it is discrimination against nationals and companies of other to be performed, namely the exclusive rights which are the Member States derived not from the granting of exclusive subject of this Decision, affect trade to an extent which is rights to a single national operator but from the reserva disproportionate and contrary to the interests of the Com tion of a large part of the relevant market to numerous munity, and such as to deprive Article 52 of any effect'; see State-controlled undertakings. The Commission decided, paragraph 14). pursuant to Article 90(3) of the Treaty, that the provisions

the factual and legal situation only of part (b) of that question, regarding possible profit-making operators, leaving aside the justifications for the restrictions placed on special situation of monopolist public-law the free movement of goods and the free- organisations. 53 The treatment envisaged dom to provide services. for the undertakings affected by the national legislation at issue in the main proceedings appears, from that point of view, to be no different and is to be regarded as being applicable without dis- tinction to services of whatever origin, the provision of slot machine games being prohibited by law in the case of operators established either in Finland or in another

In particular, according to the case-law of the Court, (A) Possible justifications for the restric- Article 36 must be interpreted strictly. tions which the Finnish legislation places Accordingly, the exceptions it lists may on the free movement of goods not be extended to cases other than those expressly referred to. For example, what- ever interpretation is to be given to the term 'public policy' under Article 36, it cannot 29. If the answer to part a) of the third in any event relate to consumer protec- question is affirmative, as I propose, the tion. 54 Furthermore, that provision refers Vaasan Hovioikeus must also be provided exclusively to non-economic matters. 5 5A with the interpretations it has sought, in further point to note is that the second sentence of Article 36 is designed to pre- vent restrictions on free movement based 53 — See, mutatis mutandis, Case C-70/95 Sodemare and on the grounds mentioned in the first Others [1997] ECR I-3395, in which the Court examined the compatibility with the Treaty of national legislation sentence from being diverted from their laying down that the participation of private operators in proper purpose and used in such a way as the running of the social welfare system by concluding contracts which entitled them to be reimbursed by the either to discriminate against goods origi- public authorities for the costs of providing social welfare services of a health-care nature was subject to the nating in other Member States or indirectly condition that they were non-profit-making. In stating to protect certain domestic products.

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question there is lawful trade in the same as an undertaking required to manage such goods on which an import ban is placed, a service under a mandate from the public purportedly on grounds of public morality, authorities. 58 Furthermore, even if the it must be held that the application of the RAY were a monopoly in the strict sense, national measure constitutes arbitrary dis- it would not satisfy the two conditions crimination or a disguised restriction on necessary if the exceptions contemplated by trade between Member States, giving rise to Article 90(2) are to apply, namely that an infringement of the Treaty. 56 (i) application of the rules of the Treaty regarding the free movement of goods obstruct the performance, in law or in fact, of an obligation to realise profits to be transferred to the public purse, 59 and (ii) the interests of the Community would not be jeopardised.

It does not appear to me that the facts of the present case permit Article 90(2) of the Treaty to be invoked in derogation from the prohibition laid down in Article 30; despite what the Belgian Government maintains, there is no reason to hold that slot machine games constitute a service of general eco- nomic interest. 57 Moreover, the RAY holds (B) Possible justifications for the restric- a simple licence and could not be regarded tions which the Finnish legislation places on freedom to provide services:

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(see point 28 above). That, according to the on the freedom guaranteed by Article 59 of case-law of the Court, has an important practical consequence: national rules which discriminate against a person providing services on account of his nationality or the fact that he is established in a Member State other than the one in which the service is to be provided are compatible with Community law only if they can be brought within the scope of some of the express exemptions provided for by Arti- cle 55 of the Treaty ('activities which [in the Member State concerned] are con- nected, even occasionally, with the exercise of official authority') and Article 56 there of ('grounds of public policy, public secur- ity or public health'), to which Article 66 then refers. 60 However, if the restrictive measure at issue is not discriminatory, as is the case here, it may be justified, in the

It cannot therefore be maintaining the good reputation of the national financial invoked in order to pursue economic aims (see, ex multis, sector (see Case C-384/93 Alpine Investments [1995] Case 352/85, cited above, paragraph 34). Furthermore, ECR I-1141, paragraph 44); the safeguarding of the the measures taken to protect the interests which they seek proper administration of justice (see, ex multis, to safeguard must be no more than are strictly necessary Case C-3/95 Reisebüro Broede v Sandker [1996 and must respect the principle of proportionality (see, ex ECR I-6511, paragraph 31); the effectiveness of fiscal multis, joined Cases 115/81 and 116/81 Adotti v Belgian supervision (see Case C-250/95 Futura Participations and State and City of Liège and Cornuaille v Belgian State Singer [1997] ECR I-2471, paragraph 31); fair trading [1982] ECR 1665, paragraph 9, and Case C-352/85, cited (see Joined Cases C-34/95, C-35/95 and C-36/95 De Agos- above, paragraph 36). tini and TV-Shop (1997] ECR I-3843, paragraph 53).

the Treaty is necessary and proportion- the public interest? The Vaasan Hovioikeus ate. 63 stated in the order for reference that the exclusive licence regime for the provision of slot machines to the public had been established primarily in order to limit the profit that could be made by exploiting the urge to gamble. This emerges from the preparatory work on the Law on Gaming (see footnote 3 above and the part of the 32. It therefore remains to be seen whether text to which it relates).

The analysis justified by overriding reasons relating to carried out by the Court at the time of the Schindler judgment should, in the view of the Finnish authorities, be extended to the 63 — As the Court has stated — in Mediawet, for example — restrictions on the freedom to provide services as a result of present judgment in that it is compatible national legislation applicable to any person established in with the features of this present case. the national territory 'come within the scope of Article 59 if the application of the national legislation to foreign persons providing services is not justified by overriding reasons relating to the public interest or if the requirements embodied in that legislation are already satisfied by the rules imposed on those persons in the Member State in which they are established'. Furthermore, 'the application of national legislation to providers of services established in other Member States must be such as to guarantee the achievement of the intended aim and must not go beyond that which is necessary in order to achieve that objective. In other words, it must not be possible to obtain the same result by less restrictive rules' (see Case C-288/89, cited in footnote 61 above, paragraphs 13 and 15, and Case C-353/89, cited in footnote 52 above, paragraphs 17 and

graph 21). Similar principles are also applicable with regard to national legislation restricting the right of Schindler is relevant from several points of establishment (see, ex multis, Case C-19/92 Kraus v Land view for the purposes of reaching a decision Baden-Württemberg [1993] ECR I-1663, paragraph 32). In Sodemare (cited in footnote 53 above, paragraph 32), in the present case. The Finnish authorities

It must, however, be reiterated that on the basis of the principles 64 — See footnote 60 above and the partof the text to which it relates. I note that the Netherlands, Portuguese and established in Schindler the reasons put Spanish authorities have relied upon Article 56 of the forward here — leaving aside the doubt, in Treaty in the present proceedings to justify restrictive regulations such as the Finnish Law on Gaming. my view unfounded, as to whether the

Finnish legislation is genuinely in line with also be applied to the present case. Of those principles 65 — do not in themselves course, by that I do not mean that the constitute overriding requirements relating reasons which justified the measures to the public interest which can justify adopted by the United Kingdom legisla- possible restrictions on a fundamental free- ture — which the Court had in mind in dom guaranteed by the Treaty (see Schindler — arise in exactly the same way points 11 and 12 above). Moreover, to my in the present instance. The reasons for the mind, that view is consistent with the requested protection of gaming activities general principle established by the case- are not exactly the same in both cases.

In any case, On the other hand, Schindler recognised games of chance in general, including those that the Member States have a discretion to in which there is an element of amusement ascertain which requirements of public or which require some degree of skill on the interest deserve to be protected from the part of players, can cause personal economic activity considered in that case: resources to be diverted to activities which the national legislature may protect not are commonly considered to be socially only players but also society in general, unproductive. Furthermore, those who play taking account of the social and cultural slot machines are in a weak contractual features and the moral perceptions prevail- ing in its country (see point 13 above). The position, partly because they have no Court reasoned in this manner with regard effective means of checking whether the to the prohibition of large lotteries on a prizes paid out overall to winners by each national scale. And it is the reasoning on the basis of principles that counts.

See also V. Hatzopoulos (op. cit. in foot- Situation, referred to in the Opinion of Advocate General note 21 above), p. 852. Gulmann, cited in footnote 30 above, point 6.

34. The above conclusions should, how- (iii) Is the prohibition on the installation ever, be qualified by a caveat which I and operation of slot machines in Finland consider essential for the correct conduct objectively necessary in order to ensure of the examination to be carried out by the achievement of the objectives pursued? national court. It is clear, in my view, that Member States are not permitted to exempt themselves from the prohibition laid down in Article 59 simply by invoking in abstract 35. That said, it is a matter of seeing terms one or more of the overriding reasons whether the national legislation at issue is recognised by the case-law of the Court. an appropriate means of protecting consu- The measures adopted must in concrete mers and maintaining order in society — terms further the public interest objectives the objectives which the Finnish Govern- which purportedly inspired them or which ment states it is pursuing. Let us consider, the national authority expressly had in first of all, the need for a monopoly in mind when limiting the cross-border provi- order to limit the demand for games of sion of the service in question, which is chance, and specifically for the playing of otherwise guaranteed by the Treaty. Albeit slot machines, in the Finnish market. The adopted in the discretion of the Member total number of such machines is currently State, the restrictive measures selected around 16 000, spread over some 8 200 remain amenable to judicial review; their locations throughout the national territory, appropriateness vis-à-vis the public interest including sparsely populated regions. 68 As requirements is, in fact, subject to scrutiny the Finnish Government itself has acknowl- by the national courts called upon to apply them, which in the course of such enquiry have to refer to the rules on justification — 68 — See http-//www.ray.fi/english/games.default.htm.

edged, in the absence of strict legislative If the examination of the facts which it is provision on this point, it is the RAY itself for the Vaasan Hovioikeus to carry out which sets, on the basis of commercial bears out the above account of the circum- criteria, the maximum number of machines stances of this case, it will disprove the it installs in Finland. Moreover, the appel- initial proposition under examination here: lants have alleged that in order to promote far from applying stringent controls on the game in question the RAY resorts to 'gambling fever', the RAY encourages it, massive and aggressive advertising cam- albeit to acquire financial resources for paigns, while controls on the use of slot allocation to the objectives referred to in machines by minors, imposed on commer- Article 3(4) of the Law on Gaming (see cial establishments by the general contrac- point 2 above). Obviously, it cannot be tual conditions drawn up by the RAY (see ruled out that the RAY may have fallen into point 4 above) are largely ignored in prac- the practices of which the appelllants tice. Above all, they maintain that there is a complain — assuming that this is con- clear economic incentive for the proprietors firmed — precisely because it believed itself of the retail outlets involved not to limit the to be none the less covered by the umbrella number of machines installed in the hope of 'good causes'. Given the uses to which that the machines will attract more custo- the Law requires the related profits to be mers for their main commercial activity direct, action to stimulate demand for and to encourage as many stakes as possi- games of chance could be construed as a ble, even by relaxing checks on the age and kind of venial sin, in other words, a means spending habits of users. The fee paid to of exercising the monopoly which, when such establishments for the installation of examining the need for the prohibition, we the machines is, in fact, calculated as a should view less harshly than would be percentage of the proceeds from the game appropriate if the system permitted the (currently 16%). 69 This, I note in passing, personal enrichment of those organising the sits badly with the Finnish authorities' game. However, I have already pointed out claim that one of the guiding objectives of (see point 32) that the fact that Member the disputed legislation is to prevent the States can ensure that the profits from urge to gamble from being exploited by games of chance are directed towards private entrepreneurial activity. purposes of general utility is not an over- riding reason such as to justify restrictions on the free provision of services. The Schindler judgment makes this clear. Thus, this aspect has no bearing on the question whether the restrictive measure at issue is necessary and adequate. At least in this case, one would be tempted to say that the end does not justify the means. As a consequence, it must be concluded that, given the actual way in which the RAY's

monopoly is conducted and organised, the lawyers have pointed out, the Schindler prohibition on installing and operating slot judgment did not consider closely the machines in Finland is not in itself such as criterion for examining the equivalence of to limit effectively demand for the game. controls. 71 It is therefore all the more interesting to note the reasons for which Advocate General Gulmann, in his Opinion on that case, dismissed the possibility that the prohibition on organising lotteries of the type marketed by Messrs Schindler in the United Kingdom was necessary in order to protect consumers and society from

lished. Consequently, the prohibition on home and host State control and the notion of the mutual installing and operating slot machines in acceptance of home State legislation, and discussed in a rather superficial way the proportionality of the restrictive Finland could be said to be necessary for measure at issue. According to Gormley, the approach adopted in Schindler indicates that the Court was aware of the purposes relevant here only if the law of the practical limits of the criterion of equivalence, which it the home Member State of the provider of considered to be more easily applied to concrete socio- economic concepts than to more abstract public-interest the service does not already embody ade- objectives, such as those considered by the Court in that

considers that the Court applied the relevant overriding reasons as though they related to public morality and then sought its justify the transposition of that approach to the 70 — Sec the Opinion of Advocate General Gulmann, cited in issues raised in Schindler by making reference to order in footnote 30 above, point 93. society and the 'peculiar nature' of lottery activities.

United Kingdom for similar activities, such (iv) Is the prohibition on the installation as local lotteries and football pools (as well and operation of slot machines in Finland as the national lottery introduced in proportionate to the objectives pursued? 1993). 72 In my opinion, it is criteria such as these that the national court should take as the basis for applying the principle of equivalence in the main proceedings. It must compare the level of protection for players and society which the Finnish legislature intends to ensure on the national territory 7 3 with the protection made possi- ble by the controls and legislation applying in the home State of the service.

cle 59. It would still be necessary to machines in question are not 'rigged' and establish that the overriding requirements cannot be used for criminal purposes. relating to the protection of consumers and society could not be satisfied as effectively using less restrictive means. According to the Spanish Government, however, the question whether or not in this instance the rule of proportionality can be said to be satisfied can have no bearing on the out- come of the case. The Spainish Government maintains that, by analogy with the approach adopted by the Court in Schind- ler, even an absolute prohibition on the provision of gaming services — allowing of no exceptions even in the case of a public- 72 — See the Opinion of Advocate General Gulmann, cited in footnote 30 above, points 92 to 97. That finding did not, law body in a situation comparable to that however, prevent Advocate General Gulmann from con- of the RAY — should be held to be cluding that the restrictive nature of the national legisla- tion at issue was justified by other overriding requirements compatible with the Treaty.

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38. Although that line of argument is the Member State itself which demon- appealing at first sight, I cannot go along strates, by providing for an exception to with it: in the final analysis it goes too far. the prohibition, that in the national autho- It is one thing to note that the Finnish Law rities' own estimation the overriding pub- on Gaming and the United Kingdom legis- lic-interest considerations are of only rela- lation on lotteries, at issue in Schindler, tive seriousness and urgency and should be pursue similar public-interst objectives; it is interpreted with a degree of flexibility. That quite another to urge, on the strength of assessment is bound to influence any that analogy, that the conclusion in Schind- appraisal of the possibility that the public ler should, by force of logic, apply a fortiori interest might be just as effectively pro- to the case in point. It does not. The tected — even in relation to potential differences between the restrictive measures competitors from other Member States — at issue in Schindler and those at issue here by measures that restrict the free movement cannot be overlooked. To my mind, there of services to a lesser extent than an can be no question of protectionist motives absolute prohibition on market access. in the case of a prohibition on the provision of a given service to recipients established in a given Member State which allows of no exception, even for a single operator hold- ing the nationality of that State or estab- lished in its territory. The national autho- rities consider the service in question to be undesirable and intend to ban it for reasons which are prima facie legitimate, such as, so far as is relevant for our purposes, the peculiar nature of games of chance. If the prohibition is consistently enforced, a kind of presumption will arise as to its propor- tionality in relation to the reasons invoked.

discriminatory (see point 13 above). That even preclude access to an economic activ- clause appears in paragraph 61 of the ity solely on the basis of the special nature Schindler judgment, towards the end of of that activity. The present case, I repeat, the Court's analysis as to whether legit- relates to a selective prohibition: the activ- imate justifications existed. How is it to be ity in question is reserved for a single interpreted? In my opinion, it is not an national operator.

What I mean is that the effects to which they give rise are subject to twofold scrutiny. It is necessary, first and foremost, to see whether or not the measure with which they are associated is applicable without distinction; those effects must then be assessed in another light, for the purposes of determining whether the measure in question is ade- quate, necessary and proportional to the 39. The Finnish Government, the authori- overriding objectives at which it is directed. ties of the other 'intervening' Member It will be said that this principle of double- States and the Commission submit that in testing is an extremely rigorous standard of this instance the national legislation satis- verification in the context of a discretion- fies that requirement.

apply unlawful discrimination within the thermore, according to the Commission meaning of the Treaty. The range of and the Member States, liberalisation of the acceptable justifications must not be market would not allow them adequately widened unduly, as would happen if the to protect players against the risk of fraud Member States were free to regulate or and society against criminal infiltration into gaming activities. The appellants, for

their part, object that the attempt to vices — could, in my opinion, be applied reformulate the question as though it by means of a less restrictive regulatory necessarily implied a choice between two regime than that currently in force. As the extremes — monopoly or complete dereg- Belgian authorities submit, this could, for ulation of the market — is an unacceptable example, take the form of a system of non- distortion. In any case, in order to obtain a exclusive licences, open also to private revision of the judgment at first instance entrepreneurs; under such a system the the appellants do not appear to have to licence to install and operate the machines argue that the market in slot machine in question would be granted on applica- gaming is open to competition. They would tion to interested operators for the entire merely have to demonstrate that they national territory or only a part of it, but cannot hope to be granted a licence to subject to conditions laid down by the exercise the activity in question, because national legislature in the light of the the current legislation reserves this to the interests to be protected.

40. The arguments adduced by Mr Läärä does not call for extensive comment. Once and the appellant companies seem to me to the maximum number of available licences be well-founded. Once it has been accepted has been set in relation to the level of that the urge to play games of chance is a overall supply deemed desirable by the fact of life, it can be subjected to appro- priate control by means of rules aimed at limiting and controlling market supply. 74 — In any event, as the Court has stated when interpreting Contrary to the assertions of the Spanish Article 30 of the Treaty, Member States may not derogate from a fundamental freedom by introducing or maintain- Government, the controls and checks nee- ing rules or practices which, even though they are ded to achieve the priority objectives pur- beneficial, embody restrictions which are explained pri- marily by a concern to lighten the administration's burden sued — and which, as I have observed (see or reduce public expenditure, unless, in the absence of the said rules or practices, this burden or expenditure clearly point 35), must not unnecessarily duplicate would exceed the limits of what can reasonably be those which may already have been estab- required (see Cases 104/75 De Peijper [1976] ECR 613, paragraph 18, and Case C-128/89 Commission v Italy lished by the State of origin of the ser- [1990] ECR I-3239, paragraph 22).

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I I I— Conclusions

For the reasons I have set out above, I propose that the Court should reply as follows to the questions referred by the Vaasan Hovioikeus:

(1) Articles 90(1) and 30 of the Treaty preclude national legislation which grants a body governed by public law in circumstances such as those which apply to the Raha-automaattiyhdistys the exclusive right to supply slot-machine gaming services and the right to produce and sell the machines necessary for the provision of those services where the grant of such rights to that body gives rise to unjustified discrimination against imported products as compared with domestic products, unless that legislation is justified on one of the grounds indicated in Article 36 or the application of Article 30 raises an obstacle to performance of the particular task entrusted to the body concerned.

(2) Articles 90(1) and 59 of the Treaty preclude national legislation which grants a body governed by public law in circumstances such as those which apply to the Raha-automaattiyhdistys the exclusive right to supply slot-machine gaming services where, having regard to the specific rules governing the organisation and operation of that monopoly, it is found that the provisions restricting the freedom to provide services do not in any consistent, adequate or proportionate manner reflect the requirements of social policy or of fraud prevention invoked by the national authorities to justify the legislation in question.