C-67/98

QUESTORE DI VERONA V ΖΕΝΑΤΠ

O P I N I O N OF ADVOCATE GENERAL FENNELLY delivered on 20 May 1999 *

I — Introduction documents. He also receives photocopies sent by SSP and transmits them to his clients. The defendant states that he merely acts as an intermediary and denies engaging in bookmaking or having any influence on the terms of the betting transaction, which 1. This preliminary reference by the Con­ are fixed by SSP in London. He is paid a siglio di Stato (Italian Council of State, percentage of the turnover arising from bets hereinafter 'the national court') raises the submitted to SSP. He states that he does not question whether the Court's interpretation act exclusively on behalf of SSP and in Schindler1 of the Treaty rules on free­ describes his business as a data transmis­ dom to provide services in the context of sion centre, which is open to all persons national restrictions on the sale of lottery who wish to transmit data either within tickets is equally applicable to national Italy or abroad. legislation regulating the taking of bets.

II — Legal and factual context

4. Article 88(1) of the 1931 Decree pro- vides as follows:

'No licence shall be granted for the taking 6. The organisation of betting is permitted of bets, with the exception of bets on races, in respect of sporting events run by the regattas, ball games and other similar Comitato Olimpico Nazionale Italiano (the contests where the taking of bets is a national Olympic Committee, hereinafter precondition for the competition to take 'CONI') and of horse races. The Minister place ... .' for Finance fixes the levy to be paid from gross betting receipts from these events to CONI 2 and to the Unione Nazionale Incremento Razze Equine (the national equine organisation, hereinafter 'UNIRE') 3 respectively. The use to which these monies are put is also regulated by the same It then makes express reference to the legislative instruments, provision being establishment of a monopoly on betting made for investment in sporting infrastruc- on horse races in favour of the bodies ture and training, particularly in poorer authorised to conduct such events. areas, and for the support of horse racing and of horse breeding. Article 6 of Legisla- tive Decree No 49 6 of 14 April 1948 reserved to CONI and UNIRE the right to take bets in respect of events organised by them or under their supervision. If they did 5. Article 88(1) of the 1931 Decree is not wish to exercise this role, the Ministry considered by the national court to have of Finance could, by virtue of Article 2 of been amended by the general provisions of that Legislative Decree, either organise Article 19 of Law No 241 of 7 August betting directly itself or entrust this task 1990, introducing new rules on adminis- to persons who furnished adequate finan- trative procedure and rights of access, as cial and moral guarantees as defined by the amended by Article 2 of Law No 537 of 24 December 1993. This substitutes for the licensing process referred to in Arti- 2 — Article 3(231) of Law No 549 of 28 December 1995, as cle 88(1), a procedure whereby a notice of amended by Article 24 of Law No 449 of 27 December 1997. commencement of activity is submitted by 3 — Article 12(1) of Presidential Decree No 169 of 8 April the person concerned to the competent 1998.

9. With regard to the conclusion of con­ 7. Article 718 of the Italian Penal Code tracts with a cross-border character, Arti­ penalises the holding or facilitating of a cle 1327(1) of the Italian Civil Code pro­ game of chance in a public place or a place vides that where, at the request of the open to the public or in private. Article 4 of promoter, or because of the nature of the Law No 401 of 13 December 1989 pena­ activity, or according to custom, a contract lises anyone who unlawfully organises a is to be executed without any prior com­ lottery or bets or prediction contests, which munication, the contract is concluded at are reserved by law to the State or its the time and place where performance agents. Participation in such unlawful bet­ begins. ting is also prohibited. Article 1933 of the Italian Civil Code provides that no action lies for payment of a gaming or betting debt, nor can an action lie for recovery where the debt has been paid voluntarily 10. The national court considers, pursuant 4 — In the case of CONI events, see Article 3(229) and (230) of to Article 1327(1) of the Civil Code, that Law No 549 of 1995, as amended by Article 24(25) and betting contracts passed on to SSP by the (26) of Law No 449 of 1997; as regards horse races, see Article 3(77) and (78) of Law No 662 of 23 December defendant on behalf of Italian clients are 1996, as amended by Article 24(27) and (28) of Law concluded in Italy, as this is the place where No 449 of 1997, and the Ministerial Decree of 15 June 1998. the better, accepting the bookmaker's offer 5 — These guidelines on the running of the betting business are set out in Article 2 of Decree No 174 of the Minister for to the public, commences performance by Finance of 2 June 1998. placing the bet and tendering the required

'Do the Treaty provisions on the provision 14. The defendant submits that the Court's of services preclude rules such as the Italian reasoning in Schindler is not applicable in betting legislation in view of the social his case, as betting on sporting events is not policy concerns and of the concern to a game of chance but of informed predic- prevent fraud that justify it?' tion of the result.

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QUESTORE DI VERONA V ΖΕΝΑTTI

6 — Case C-3/95 [1996] ECR 1-6511, paragraph 28. 7 — OJ 1990 L 192, p. 10. 9 — Case 205/84 Commission v Germany [1986] ECR 3755, 8 — O J 1997 L 117, p. 15. paragraph 21.

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OPINION OF MR FENNELLY — CASE C-67/98

10 — Loc. cit., paragraph 60. 11 —See Case C-76/90 Säger [1991] ECR I-4221, para- 12 — Schindler, loc. cit., paragraph 19. graph 12. 13 — Ibid., paragraphs 31 to 35.

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QUESTORE DI VERONA V ΖΕΝΑΤΠ

21. It is necessary, next, to determine Treaty, a residual category of economic whether the regulation of the defendant's activities, so that the provisions on services economic activities in relation to betting are subordinate to those on the right of falls to be examined under the Treaty establishment. 16 The concept of establish provisions on freedom to provide services ment is a broad one, relating essentially to (Article 59 of the EC Treaty (now, after stable and continuous participation in the amendment, Article 49 EC) and Article 60 economic life of a Member State other than of the EC Treaty (now Article 50 EC)) or that where an economic actor originates, under those guaranteeing the right of whereas services are understood as nor establishment (Article 52 of the EC Treaty mally pursued on a temporary basis. 17 It is (now, after amendment, Article 43 EC)). worthwhile quoting the Court's remarks in Although the criteria applicable both to the this regard in Gebhard: identification of restrictions on the exercise of these rights and to the possible justifica tion of such restrictions are essentially the same, a potential practical difference arises from the fact that a service provider may only be subjected to national restrictions, imposed in the general interest, in so far as that interest is not safeguarded by rules applied in his State of establishment. 14 As '[T]he temporary nature of the activities will be seen below, this is of relevance to has to be determined in the light, not only one of the two principal grounds of justi of the duration of the provision of the fication invoked by Italy in the present service, but also of its regularity, periodicity

It border services of two types: passing on is possible for a service provider to challenge restrictions imposed by his own State of establishment; see, for example, Case C-384/93 Alpine Investments [1995] ECR I-1141, paragraphs 29 to 31. 14 — Case 205/84 Commission ν Germany, loc. cit., para 16 — See the first paragraph of Article 60 of the EC Treaty; Case graph 34 et seq.; Case C-43/93 Vander Elst ν Office des C-55/94 Gebhard ν Consiglio dell'Ordine degli Avvocati e Migrations Internationales [1994] ECR I-3803, para Procuratori di Milano [1995] ECR I-4165 (hereinafter graph 16; Reisebüro Broede ν Sandker, loc. cit., para 'Gebhard'), paragraph 22. graph 28. 17 — Ibid., paragraphs 25 and 26.

Member State (including an office, cham­ any other evidence of the nature of the bers or consulting rooms) in so far as such defendant's relationship with SSP, I think it infrastructure is necessary for the purposes preferable to approach the case, as the of performing the services in question.' 18 national court has done thus far, as one relating to services, while it is, of course, a matter for the national court to verify that this is appropriate before reaching final judgment in the case. Should it decide otherwise, the remarks, in the text which follows, regarding home-State regulation of SSP's activities will, of necessity, have to be discounted, but the rest of my analysis The Court has also observed, in Case would still be applicable. 205/84 Commission ν Germany, that an insurance undertaking which maintains a permanent presence in another Member State comes within the scope of the Treaty provisions on establishment even if that presence does not take the form of a branch or agency, but consists merely of an office managed by a person who is independent but authorised to act on a permanent basis for the undertaking, as would be the case with an agency. 19Such a form of establish­ 23. It is useful, as a next step in my ment may be contrasted with the provision analysis, to note certain similarities and of services via an intermediary who is not certain differences between the context of an authorised agent of the foreign under­ this case and that of Schindler. First, an taking. 2 0 In the present case, the defendant arguable, but in my view usual, distinction states that he does not act exclusively for may be made between lotteries and betting SSP because his transmission centre sends on sporting events on the ground that the messages, documents and data of all sorts latter involves an element of skill absent 2 on behalf of clients. It is not apparent that from the former. 1However, it is the he acts for any other bookmakers. The personal, social, moral and economic con­ possibility that the defendant's relationship sequences of gambling of all kinds which with SSP is one which is more permanent underlie both Italy's arguments in favour of and more closely bound up with the its regulation of the sector and the Court's promotion of SSP's business in his region acceptance of certain arguments of this 2 of Italy than that of a simple provider of type in Schindler. 2 Such arguments may, occasional telecommunications services is of course, apply with greater or lesser force evidenced by the fact that he is paid on the depending on the type of gambling to basis of betting turnover rather than in which they are applied. Thus, for example, accordance with the volume of material the disproportion between the stake and transmitted. However, in the absence of the potential winnings is normally much

greater in the case of lotteries than in the 25. Although the grant of such special or case of betting. 23 exclusive rights to national undertakings inevitably results in a disadvantage to foreign service providers operating in the same field, 27 this is not treated as being a form of discriminatory restriction which can be maintained only by application of Article 56 of the EC Treaty (now, after amendment, Article 46 EC) and Article 66 of the EC Treaty (now Article 55 EC). 28 Such restrictions may be justified to the extent that they serve imperative require ments in the general interest.

cumstances. Although this is done through an exception to a general prohibition, it appears to be, in substance, a restriction imposed on the provision of organised betting services (or, as the case may be, on the establishment of betting undertakings) 26. The restriction on the organised provi under the guise of the grant of special or sion of betting services in the present case is exclusive rights to two organisations, prohibited by Article 59 of the EC Treaty CONI and UNIRE. 2 5Of these, UNIRE is unless it can be justified by overriding the more relevant, as it does not appear reasons relating to the public interest which that CONI organises betting on individual are not already satisfied by the rules events separately from its pools competi imposed on such service providers in the

Schindler, ibid. General Gulmann at paragraphs 75 and 76 of his Opinion in Schindler, loc. cit., and by Advocate General La Pergola 24 — Loc. cit., paragraph 52. at paragraph 28 of his Opinion of 4 March 1999 in Case 25 — On the restriction of freedom to provide services through C-124/97Markku Juhani Läärä and Others v Kihlakun- the grant to certain undertakings of special or exclusive nansyyttäjä and Suomen Valtio (hereinafter 'Läärä'). rights, see, for example, Case C-353/89 Commission ν 30 — It cannot be plausibly argued that the Italian rules are Netherlands [1991] ECR I - 4069, paragraphs 21 to 25 and protected by Article 90(2) of the EC Treaty (now Arti- 33 to 37 (hereinafter 'Mediawet'). cle 86(2) EC); see the Opinion of Advocate General La 26 — See Alpine Investments, loc. cit., paragraph 38. Pergola in Läärä, loc. cit., paragraph 30.

28. I must, therefore, consider, firstly, the possible justification of the Italian legisla- tion based on consumer protection and prevention of crime. It is already clear from the judgment in Schindler that this is a 27. Italy rightly accepts the secondary permissible ground on which to impose a function of the third justification pleaded. restriction on cross-border gambling activ- The Court stated in Schindler that the ity. 34 It is noteworthy that the Court, when possibility of exploiting certain forms of addressing this question in Schindler, did gambling to finance public interest activ- not advert, as Advocate General Gulmann ities could not, in itself, be regarded as an had done, 3 5to the possible existence of objective justification of a restriction on a equivalent safeguards in the Member State fundamental freedom, although it also where the relevant service provider was remarked, cryptically, that it was 'not established — safeguards which he thought without relevance'. 32It was not mentioned were sufficient in that case. The Court's in the operative part of the judgment, silence in this regard may be because other which referred only to social policy and national supervisory mechanisms, no mat- the prevention of fraud. I share the reserva- ter how stringent, were not considered to tions expressed by Advocate General La be equivalent in protective effect to a Pergola in his Opinion in Läärä 3 3 that such comprehensive prohibition of the gambling a ground of justification of a restriction is activity in question. In any event, there is of an essentially economic character and no reason to conclude that a comparison of consequently unacceptable. This assess- regulatory regimes need not be undertaken ment is reinforced by the comment of the by the national court in the present case, in agent for Portugal that, if gambling were order to verify the necessity for the Italian opened to competition, with the conse- restriction. When engaging in that exercise, quent reduction in revenue from pre-exist- the national court should, of course, bear in mind that it is the efficacy of the United 31 — Mediawet, loc. cit., paragraphs 17 and 19; Gebhard, loc. cit., paragraph 37; Reisebüro Broede ν Sandker, loc. cit., paragraph 28. 34 — Loc. cit., paragraphs 60 and 63 and paragraph 3 of the 32 — Loc. cit., paragraph 60. operative part. 33 — Loc. cit., paragraphs 11, 12 and 33. 35 — Loc. cit., paragraph 97 of his Opinion.

30. On the other hand, the argument in favour of justification of the Italian rules by reference to a social policy of countering the harmful moral and financial effects of 29. However, quite apart from the results gambling on individuals and on society of any such comparison, the necessity for through limiting betting opportunities is, in the prohibition of organised betting outside my opinion, more plausible. This, again, is the framework of the special or exclusive a ground of justification which was rights granted to UNIRE and CONI on expressly accepted by the Court in Schind­ consumer-protection and crime-prevention ler. 3 7 Given the particular nature of gam­ grounds is placed in doubt by the very fact bling, which can incite individuals to spend that lawful channels for sporting betting a large proportion of their disposable exist in Italy under the responsibility of income in the hope of merely contingent these two organisations. One assumes that rewards, Member States are entitled to take these two organisations' gambling activities steps to avoid stimulating demand in order are subject to what is deemed by the to protect the players and to maintain order authorities to be an adequate level of in society. 38 National authorities have, in supervision on such grounds, without this this regard, particular latitude to determine resulting in an outright prohibition. Unless what steps to take, in the light of specific it can be demonstrated to the national social and cultural features, especially the court that some special risk attaches to the widely differing moral and social attitudes defendant's dealings with SSP, which can­ to gambling in the Member States. 39 Thus, not be countered through the application to the fact that certain forms of gambling are each of the existing supervisory mechan­ permitted, subject to necessary controls, isms in the two relevant jurisdictions, with while others, which differ in their objects, the result that there is a greater danger of rules and methods of organisation, are fraud or other crime than in the purely prohibited, may be the acceptable conse­ domestic context, it must be concluded that quence of national choices of a socio­ 4 the prohibition of the taking of bets outside cultural character. 0 the limited authorised channels is overly restrictive and, therefore, cannot be justi­ fied on these grounds. The mere fact that 37 — Loc. cit., paragraphs 58, 60, 61 and 63 and paragraph 3 of the operative part. 38 — Ibid., paragraphs 57, 59, 60 and 61. 39 — Ibid., paragraph 61. 36 — Joined Cases 110/78 and 111/78 Ministère Public and 40 — Ibid., paragraphs 51 and 61; see also paragraphs 69 and A.S.B.L. ν Van Wesemael [1979] ECR 35, paragraph 30. 70 of the Opinion of Advocate General Gulmann.

32. Thus, the grant of special or exclusive rights through a restrictive system of licences or concessions may be consistent 33. To conclude my analysis, I would like with such a policy of limitation of supply, to make two final observations. First, the provided this is adopted in pursuit of a exercise of Italy's police power in its own genuine diminution in gambling opportu- territory through the justified imposition of nities and in the stimulation of demand restrictions on betting cannot be affected through advertising. It would not be accep- either by the fact that contracts such as table, on the other hand, if the grant of those entered into by the defendant and SSP licences or concessions were simply a with their clients may not be governed by Italian law, which is exclusively a private- law matter, or by the fact that the actual 41 — See the Opinion of Advocate General Gulmann in Schindler, ibid., paragraphs 40 to 42 and 49. bookmaking is undertaken in the United 42 — Ibid., paragraph 101 of the Opinion. Kingdom. Secondly, the fact that indivi-

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QUESTORE DI VERONA V ZENATTI

duals resident in Italy can freely place bets social order seem very small compared to with overseas bookmakers by telephone, those of unrestricted provision of organised fax or Internet does not affect my analysis, betting services through representatives because the likely effects of such activity on operating in Italian territory.

V — Conclusion

34. In the light of the foregoing, I recommend that the Court respond to the question referred by the Consiglio di Stato as follows: