C-243/01

B — Provisions of national law I - 13036

III — Facts and procedure I - 13038

IV — Observations of the parties to the proceedings I - 13041

A — Mr Gambelli I - 13041

B — Mr Garrisi I - 13044

C — The Italian Government I - 13047

J — The Swedish Government I - 13050

K — The Commission I - 13051

V — Assessment I - 13052

A — The Schindler, Läärä and Zenatti judgments I - 13054

1. The Schindler judgment I - 13054

2. The Läärä judgment I - 13055

I — Introduction under concession from the State. Bets placed in Italy are forwarded to a British bookmaker. The case therefore raises ques- tions as to the compatibility of the national 1. This case was brought before the Court provisions concerned with the Community of Justice by way of a reference for a law on the freedom of establishment and preliminary ruling from the Tribunale di the freedom to provide services. The rel- Ascoli Piceno (District Court, Ascoli Piceno evant Italian provisions were examined by (Italy)). It arises from criminal proceedings the Court to some extent in Zenatti. 3 This instituted against Mr Piergiorgio Gambelli case, however, has to do with a different and over 100 others 2for the infringement, aspect of the issue addressed in Zenatti, inter alia, of Article 4 of Italian Law since it relates to measures of criminal law N o 401/89, which makes it a criminal and is primarily concerned with whether offence to collect and forward bets reserved those measures are proportionate. Fur- to the State or to undertakings operating thermore, the Italian provisions are to be considered from the point of view of the freedom of establishment, whereas the 2 — According to the order for reference, there are 137; according to the written submissions of Mr Gambelli's counsel, there are 140 others. In view of this uncertainty, I shall henceforth refer simply to 'Mr Gambelli and over 100 others' or 'Mr Gambelli and the other defendants'. 3 — J u d g m e n t in Case C-67/98 Zenatti [1999] ECR I-7289.

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2. Article 43 EC provides: 'Companies or firms formed in accordance with the law of a Member State and having their registered office, central adminis- tration or principal place of business within 'Within the framework of the provisions set the Community shall, for the purposes of this Chapter, be treated in the same way as out below, restrictions on the freedom of natural persons w h o are nationals of Member States. 4 — See the judgment in Case C-275/92 Schindler [1994] ECR I-1039. 5 — See the judgment in Case C-124/97 Läärä and Others [1999] ECR I-6067. 6 — See the judgment in Zenatti (cited above in footnote 3). 7 — S e e Law N o 388/2000 of 23 December 2000 (Legge Finanziaria (Finance Law)); Supplemento ordinario (Ordi- "Companies or firms" means companies or nary Supplement) N o 302 to the GURI (Official Journal of firms constituted under civil or commercial the Italian Republic) of 29 December 2000 (hereinafter 'Law N o 388/00'). law....'

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OPINION OF M R ALBER — CASE C-243/01

1. Any person who unlawfully partici- pates in the organisation of lotteries,

B — Provisions of national law 8 — Royal Decree N o 773 of 18 June 1931 GURI N o 146 of 26 June 1931 in the version of Law N o 388/00 of 23 December 2000 (the Finance Law) (Supplemento ordi- nario (Ordinary Supplement) N o 302 to the GURI of 29 December 2000). 6. Under Article 88 of the Regio Decreto 9 — Law of 13 September 1989 (GURI N o 294 of 18 December N o 773, Testo Unico delle Leggi di Pub- 1989; hereinafter 'Law N o 401/89').

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GAMBELLI AND OTHERS

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OPINION OF MR ALBER — CASE C-243/01

lottery tickets, pools or bets by tele- means of collecting and forwarding bets phone or data transfer without being was considered to be in breach of the authorised to use those means to monopoly held by CONI in respect of effect such collection or registration. sports betting and therefore deemed to infringe Article 4 of Law N o 401/89.

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GAMBELLI AND OTHERS

duty, VAT and corporation tax), as well as transmit data (within the meaning of the taxes on and deductions from salaries, Decision 467/2000/Cons of 19 July 2000 and pays out any winnings. The company is a n d P r e s i d e n t i a l Decree N o 3 1 8 of subject to strict scrutiny from both internal 19 September 1997). and private sector auditors and from the tax authorities.

13. The referring court takes the view that Community law confers on Stanley the right to set up principal places of business or branches in the Member States of the 11. The British undertaking trades on the European Community. Those principal Italian market by concluding with oper- places of business or branches make it ators established there contracts for the possible for users to transmit data to the setting-up of data transfer centres under bookmaker. It is also of the opinion that which those Italian undertakings become the defendants not only assisted the book- agents for sports betting. According to the maker in collecting bets but also carried out order for reference, these centres 'give users an economic activity and performed a an electronic means of contacting the service for the foreign undertaking. It states bookmaker, collect and register the inten- that the application for review before it tions to bet and forward them to Liver- raises preliminary issues regarding the pool'. The British bookmaker offers an compatibility of national provisions with extensive range of sports bets, that is to say Community law. In its view, it is note- not only on events managed by CONI or its worthy that many Italian courts have subsidiary organisations, but also on other reached conflicting and opposing decisions foreign and international sporting events. on this issue. Italian nationals can also place sports bets from home, which the bookmaker organ- ises and markets by various means such as the internet, fax, telephone and the like.

15. In the light of the judgment of the Corte di Cassazione (Italian Court of Cassation) in Case N o 1680/2000, the referring court considers that, with regard to the potential risk to public order that 18. The lawfulness of collecting and for- could result from the unrestricted exercise warding bets on foreign sporting events of activities connected with gambling, such which can be inferred from the original requirements can be adequately taken into wording of Article 4 has, the referring court account where the operator is an under- goes on to state, 'led to the development of taking already subject in its own country to a network of operators which have invested supervision which guarantees the propriety capital and resources in this sector'. Those of its operations. operators have been deprived of the legit- imacy and lawfulness of their position by a change in the law which they could not have anticipated. In its view, there is a clear conflict between Article 4 and the protec- tion of the Community law principles of freedom of establishment and freedom to provide services where private sector econ- 16. With regard to the risk feared by the omic initiatives are pursued in the context Corte di Cassazione of a further incitement of activities that do not generate revenue to wager, the referring court pointed out for the Italian State, such as betting on that gambling and betting opportunities are foreign sporting or non-sporting events. progressively increasing in Italy. However, the 'phenomenon' of placing bets with foreign operators is 'marginal' in compari- son with the national gambling market. An 'analysis of taxation revenues deriving from authorised national gambling', it states, confuses the issue even further. Under the 19. The referring court is unsure on two new rules contained in subparagraphs 4a points. First, it considers it necessary to and 4b [of Article 4] of Law N o 401/89, the raise the question whether the principle of collection of bets on international sporting proportionality can be said to have been events, world events or events of other observed when 'the extreme nature of the kinds, in which the State has no fiscal prohibition (it is enforced by a criminal interest, is also penalised. penalty)' chosen by the national legislature

A — Mr Gambelli 'Is there incompatibility (with the reper- cussions that that has in Italian law) between Articles 43 et seq. and Article 49 et seq. of the EC Treaty regarding freedom of establishment and freedom to provide cross-border services, on the one hand, and 22. Mr Gambelli points out that the betting on the other domestic legislation such as activity carried on by CONI and UNIRE the provisions contained in Article 4(1) et exhibits a typical monopolistic structure. seq., Article 4a and Article 4b of Italian An undertaking such as the foreign com- Law N o 401/89 (as most recently amended pany Stanley offers those who enter into by Article 37(5) of Law N o 388/00 of contracts with it a guarantee of quality and 23 December 2000) which prohibits on reliability. The undertaking, which trades pain of criminal penalties the pursuit by through centres which it organises itself, any person anywhere of the activities of holds a certificate and a licence, is subject collecting, taking, booking and forwarding to supervision, operates on the basis of the offers of bets, in particular bets on sporting latest technology and in accordance with events, unless the requirements concerning United Kingdom legislation and Commu- concessions and authorisations prescribed nity law, and does not infringe the Italian by domestic law have been complied with?' rules.

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OPINION OF MR ALBER — CASE C-243/01

25. With regard to the freedom of estab- lishment, Mr Gambelli submits that the d a t a transfer c e n t r e s are d e p e n d e n t agencies or branches which are contrac- tually bound to Stanley. A Member State 27. Next, in the light of the judgments in may not refuse a national of another Schindler, Läärä and Zenatti, Mr Gambelli Member State the right to establish himself examines what grounds would be capable in such a way. He contends that, by of justifying a restriction of the fundamen- requiring authorisation in the context of a tal freedoms. He submits that, although the system of concessions, the Italian legis- political objective of Member States to lature confuses the activity of the data regulate gambling activities is not necess¬

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28. However, Mr Gambelli submits, the Italian State is undoubtedly stimulating and 30. With regard to possible risks to public supporting its fiscal policy. The monopoly policy, Mr Gambelli contends that other that it grants to the system comprising suitable and effective means of monitoring CONI and its bookmakers does not serve foreign service providers can be found to overriding reasons in the general interest. ensure that the European market is opened By refusing to give any recognition to the up in a forward-looking and natural legislative measures of other Member fashion. In the light of developments in States — in this case the United Kingdom, technology, changes in legislation and the whose legislation is regarded as strict and is objectives of the Community in the field of widely respected — the Italian legislation online communications and trade, M r is discriminatory and infringes the prin- Gambelli contends that a fresh examination ciples fundamental to the establishment of of this issue by the Court is essential. the common market.

31. Mr Gambelli proposes that the ques- tion referred for a preliminary ruling be 29. In addition to the doubts raised by the answered as follows: referring court — with regard to the pro- portionality of the penalty and the contra- diction between the legal restriction on betting outside Italy and the encourage- ment of gambling within Italy — M r Gambelli contends that this case raises issues hitherto unresolved by the Court. (1) The legislation enacted by the Italian For example, the Court has not yet exam- Republic in Article 88 of Royal Decree ined the compatibility with Community N o 773 of 18 June 1931 (Teste Unico law of the Italian provisions laying down delle Leggi di Pubblica Sicurezza), as

amended on several occasions, and B — Mr Garrisi A r t i c l e 4 of L a w N o 4 0 1 of 13 December 1989, as amended on several occasions (most recently by Article 37(4) and (5) of Law N o 388 of 23 December 2000), is incompatible with Article 43 et seq. of the EC Treaty concerning freedom of establishment 32. Mr Garrisi is a member of Stanley's and/or Article 49 et seq. of the EC board of directors and is responsible for the Treaty concerning freedom to provide group's activities in the field of sports services; discriminates against Commu- betting. He adds to Mr Gambelli's sub- nity operators; infringes the principles missions that the amendments made to the of proportionality, mutual recognition, Italian legislation in 2000 made the Italian legal certainty and the protection of market for services in the collection and legitimate expectations; infringes Com- taking of sports bets absolutely impen- munity directives on the freedom to etrable to operators from other Member offer online and telecommunications States. services; infringes the principle of rea- sonable cooperation and the obligation under Article 10 of the EC Treaty; conflicts with the general interest; is not justified by the principles of public security and public policy; must not pursue fiscal objectives; limits the free- dom of Community citizens and under- 33. Mr Garrisi points out in this regard takings; and discriminates against Ita- that the conditions for participating in the lian nationals. invitations to tender issued by CONI in connection with 1 000 new concessions for the organisation of betting on sporting events other than horse racing could in practice be met only by those bookmakers which already belonged to the UNIRE or CONI system, since only natural persons or partnerships who were able to exhibit the different structures required and w h o already had business premises in Italian territory could be awarded concessions. (2) In the alternative, national legislation Moreover, he contends, both before and such as that at issue is incompatible after that process, many Italian book- with Article 43 et seq. or Article 49 et makers received concessions for betting on seq. of the Treaty and with the prin- horse racing and on sporting events other ciples of Community directives in so than horse racing without having to take far as it is not disapplied by the auth- part in public invitations to tender. They orities or national courts or in so far as thus received firm concessions for new it is not applied in a manner which is betting, while other Community operators compatible with the principles, direc- were unable to acquire that 'status', which tives and abovementioned Community bookmakers operating under concession measures. from UNIRE were assumed to have.

35. According to M r Garrisi, a study carried out by the London-based, indepen- dent economic consulting firm, NERA (National Economic Research Associates), entitled 'Expansion of the Italian betting industry', which was updated in 2 0 0 1 , shows that the Italian State is resolutely 37. Mr Garrisi takes the view that the pursuing a policy of large-scale expansion legislative amendments introduced in 2000 with the aim of increased revenue for the also infringe the legitimate expectations public purse. He submits that, far from and legal certainty of persons who, like the actually reducing gambling opportunities, defendants in the main proceedings, were, the Italian State intends to develop them at the time when Law N o 388/00 entered further. The extensive restrictions which into force, operating in Italy as agents the Italian legislation imposes on the fun- responsible for transferring data in con- damental freedoms relating to the provision nection with sports betting other than that of services and establishment, he contends, reserved to C O N Iand UNIRE. In addition, were adopted on fiscal rather than social he contends, Directive 1999/42/EC 14 is policy grounds. also infringed.

11 — J u d g m e n t in Case C-398/95 SETTG [1997] ECR I-3091, 14 — Reference is made here to Directive 1999/42/EC of the paragraph 2 3 . European Parliament and of the Council of 7 June 1999 establishing a mechanism for the recognition of qualifi- 12 — Judgment in Case 352/85 Bond van Adverteerders and cations in respect of the professional activities covered by Others [1988] ECR 2085, paragraphs 32 to 34. the directives on liberalisation and transitional measures 13 — Judgment in Case C-288/89 Gouda and Others [1991] and supplementing the general systems for the recognition ECR I-4007, paragraph 11. of qualifications (OJ 1999 L 2 0 1 , p. 77).

(C) It conflicts with the directives on the freedom to offer liberalised telecom- munications services other than voice telephony. (A) It constitutes positive discrimination to the detriment of Community operators who are not Italian nationals and/or, although applicable without distinction in theory, gives rise, in fact or in law, to obstacles which make it impossible or disproportionately difficult for oper- ators from other Member States to In the alternative, the Italian legislation on s p o r t s b e t t i n g is i n c o m p a t i b l e w i t h Articles 43 et seq. EC and 49 et seq. EC 15 — Commission Directive 90/388/EEC of 28 June 1990 on and/or with the provisions of Directive competition in the markets for telecommunications ser- 1999/42 and/or the provisions of Directive vices (OJ 1990 L 192, p. 10), in the version contained in Commission Directive 96/19/EC of 13 March 1996 90/388, Directive 97/13 and Directive amending Directive 90/388/EEC with regard to the implementation of full competition in telecommunications 97/66, in so far as it is not applied by the markets (OJ 1996 L 74, p. 13). national authorities and courts in a manner 16 — Directive 97/13/EC of the European Parliament and of the Council of 10 April 1997 on a common framework for consistent with the principles of non-dis- general authorisations and individual licences in the field crimination, proportionality, mutual recog- of telecommunications services (OJ 1997 L 117, p. 15). 17 — Directive 97/66/EC of the European Parliament and of the nition, consistency with other national Council of 15 December 1997 concerning the processing of policies, legal certainty and the protection personal data and the protection of privacy in the telecommunications sector (OJ 1998 L 24, p. 1). of legitimate expectations.

C — The Italian Government Court, the activity carried on by the centres is to be regarded as an economic activity within the meaning of the EC Treaty. It submits, however, that a common market 40. The Italian Government takes the view for gambling can only incite consumers to that, in the light of the principles developed waste more money and give rise to the in the judgment in Zenatti, the Italian damaging social consequences which that legislation is compatible with the provi- entails; it refers in particular in that con- sions of Community law on freedom to nection to paragraphs 60 and 61 of the provide services and freedom of establish- judgment in Schindler. With reference to ment. The judgment in Zenatti concerns the judgments in Kraus 18 and Gebhard, 19 the provisions relating to a licence issued the Belgian Government points out that the under administrative law for the activity of Italian legislation falls outside the prohib- collecting and managing bets in Italy ition contained in Article 49 EC if the four (Article 88 of the Royal Decree). This case conditions laid down in those judgments as concerns the enforcement in criminal law having to be fulfilled in order for a of the prohibition on the collection and restriction on the freedom to provide ser- management of bets. Both rules, it con- vices to be permissible are met. The Belgian tends, pursue the same aim, that is to say to Government submits that the attempt to prohibit the activity in question in circum- curb gambling and its damaging con- stances other than those expressly per- sequences can be regarded as an objective mitted by law. in the general interest within the meaning of the judgments in Schindler, Läärä and Zenatti. Moreover, the fact that gambling is not completely prohibited does not mean that that objective is not being pursued. In its view, the Italian legislation is not 4 1 . The Italian Government points out discriminatory either. Only operators who that, in judgment N o 1680 of 28 April hold an authorisation from the Italian 2000, the Corte di Cassazione examined Ministry of Finance may organise gamb- the legislation in the light of the principles established in Zenatti and came to the ling. This, it says, applies to both Italian conclusion that it was lawful in so far as it and foreign operators. It states that the is intended to restrict gambling opportun- Italian legislation is also proportionate. ities and to protect public policy. Even if it proves ultimately to be a restric- tion on the freedom of establishment, it is justified on the same grounds as the restriction on the freedom to provide ser- vices.

H — The Portuguese Government F — The Spanish Government

46. The Portuguese Government points out that there is evidence in all Member States of conduct that infringes the relevant laws restricting gambling, be it the sale of tickets 44. The Spanish Government also con- for foreign lotteries or the collection of bets siders that, in the light of existing case-law, on horse racing. That conduct pursues a the Italian legislation is justified on grounds strategy of liberalising and privatising the relating to the general interest. Both the gambling market which was expressly granting of special or exclusive rights by rejected at the Edinburgh European Coun- means of a strict system of authorisations cil in 1992. The Portuguese Government or concessions and the prohibition on the submits that the significance of this case lies operation of branches belonging to foreign in the fact that, in Italy, as in other Member operators are compatible with Community States, the organisation of lotteries is kept law if those measures were adopted with under the control of a State monopoly in the aim of reducing gambling opportun- order to ensure for Member States an ities. It submits that gambling opportunities important source of income which takes must be regulated in order to prevent the the place of other taxes and which serves to risks associated with that activity. Member finance social, cultural and sports policies States have latitude in determining how in all Member States and to secure a high they organise lotteries and gambling and level of prosperity for the citizens of the how they allocate the profits they yield. Union.

5 1 . The Portuguese Government further submits that the effect of open competition on the market in gambling would be to shift income from the poorer to the richer 48. In the Portuguese Government's view, countries. Gamblers would play wherever lenient gambling legislation could lead to there were higher winnings to be had. As a serious social problems caused by loss of result, gamblers from the smaller States individual or family wealth. In general would co-finance the social, cultural and terms, gambling harbours risks of fraud sports budgets of the larger States. This and other criminal activities, such as money laundering. The unproductive nature of 20 — See the judgments in Schindler (cited above in footnote 4), gambling precludes arguments based on Läärä (cited above in footnote 5) and Zenatti (cited above entrepreneurial freedom and free compe- in footnote 3), and the judgments in Case 120/78 Cassis de Dijon [1979] ECR 649, paragraph 8, Case C-76/90 Säger tition. Since gambling is not a productive [1991] ECR I-4221, and Gouda (cited above in footnote 13). activity, the freedoms which operate for the 21 — See Case C-6/01 [2003] ECR I-8621, paragraph 90 of good of the Community cannot apply here. those observations.

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would cause revenue in the smaller States criminal penalties, protects a monopoly to fall and force those States to make compatible with Community law, subject further tax increases. Moreover, it submits, to certain conditions, which prevents oper- dividing up the lottery and betting market ators from other Member States from in each State between three or four large establishing themselves or offering services operators in Europe could bring about in Italy. It points out that the Court accords structural changes which would lead to Member States extensive discretion as job losses and a greater social divide regards the free movement of goods, the between States. freedom to provide services and the free- dom of establishment. In its view, the legislation at issue is justified provided that it is not discriminatory and is applied without distinction to national and foreign operators.

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57. With regard to the freedom of estab- lishment, the Commission points out that the agencies managed by Mr Gambelli are K — The Commission technically independent and are not sub- ordinate to Stanley. The Commission con- tends that it is appropriate, therefore, to consider the issue henceforth from the

56. The Commission submits that the issue 22 — Directive 2000/31/EC of the European Parliament and of in this case was disposed of by the judg- the Council of 8 June 2000 (OJ 2000 L 178, p. 1).

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point of view of the freedom to provide (b) It is a matter for the national court to services, particularly as, according to the examine, in the light of those con- case-law of the Court, 23 that freedom ditions of application, whether the includes the freedom of the person for national legislation pursues the objec- whom a service is provided to go to the tives which justify it, and whether the Member State where the service is provided restrictions which it imposes are dis- or to contact a service provider in another proportionate to the objective pursued. Member State by electronic means. Even if the provisions on the freedom of establish- ment were applicable, the Commission submits that the Italian legislation would be justified on the same grounds as those applicable in the context of the freedom to provide services.

V — Assessment

60. Even the judgment in Zenatti, which applicable to cross-border gambling dep- has been said to offer a solution to this ends on the specific circumstances of each dispute, was unable to provide definitive case. That is what must be examined here. clarity in the Italian legal system, particu- larly since the action in the main proceed- ings in Zenatti was withdrawn after the Court delivered its judgment. A declarative judgment by the Court, based on previous case-law but taking into account the par- Nor has the criminal law aspect of the issue ticular features of the dispute at issue, is of been assessed by the Court before. The fact fundamental importance in each case. It that a prohibition is enforced by criminal should therefore make clear the approach penalties cannot be disregarded when con- to be taken both to the referring court and sidering whether the provision is in prin- to all other national courts dealing with the ciple permissible or potentially incompat- same issue. ible with Community law. Consequently, what must be clarified first of all, in any event, is the fundamental question of the permissibility of national prohibitions under Community law. Then comes the further and separate question of the pro- portionality of the provision imposing penalties.

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OPINION OF MR ALBER — CASE C-243/01

A — The Schindler, Läärä and Zenatti held in that respect in paragraph 62 of its judgments judgment that:

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judgment in Schindler, and the Court has the light of the specific social and cultural itself made reference to them in its case- features of each Member State, to maintain law. 2 8 They should therefore be cited order in society, as regards the manner in verbatim here: which lotteries are operated, the size of the stakes, and the allocation of the profits they yield. In those circumstances, it is for them to assess not only whether it is necessary to restrict the activities of lotteries but also whether they should be prohibited, pro- vided that those restrictions are not dis- criminatory.' 'First of all, it is not possible to disregard the moral, religious or cultural aspects of lotteries, like other types of gambling, in all the Member States. The general tendency of the Member States is to restrict, or even prohibit, the practice of gambling and to prevent it from being a source of private 2. The Läärä judgment profit. Secondly, lotteries involve a high risk of crime or fraud, given the size of the amounts which can be staked and of the winnings which they can hold out to the 67. The case at issue in the judgment in players, particularly when they are oper- Läärä was different in many respects. It ated on a large scale. Thirdly, they are an concerned Finnish legislation on gambling incitement to spend which may have by means of slot machines — the organi- d a m a g i n g individual and social con- sation of which was reserved to undertak- sequences. A final ground which is not ings by way of a monopoly — which was without relevance, although it cannot in also capable of being regarded as a game of itself be regarded as an objective justifi- skill. The Court's ruling in that case too cation, is that lotteries may make a sig- was based on the provisions on the freedom nificant contribution to the financing of to provide services and not, for instance, on benevolent or public interest activities such the free movement of goods, even though as social works, charitable works, sport or the case concerned the import of slot culture. machines and an examination of the free movement of goods would have been appropriate. 29

ary to take together (paragraph 33), the Contrary to the arguments advanced by the Court expressly took into account the appellants in the main proceedings, the fact crucial fact that the activity in question that the games in issue are not totally was not totally prohibited but was in prohibited is not enough to show that the certain circumstances to be regarded as n a t i o n a l legislation is n o t in reality authorised (paragraph 34). It therefore intended to achieve the public interest granted the national authorities extensive objectives at which it is purportedly aimed, powers of assessment, which it did in the which must be considered as a whole. following terms in paragraph 35 of its Limited authorisation of such games on judgment in Läärä: an exclusive basis, which has the advantage of confining the desire to gamble and the exploitation of gambling within controlled channels, of preventing the risk of fraud or crime in the context of such exploitation, 'However, the power to determine the and of using the resulting profits for public- extent of the protection to be afforded by interest purposes, likewise falls within the a Member State on its territory with regard ambit of those objectives.' to lotteries and other forms of gambling forms part of the national authorities' power of assessment.... It is for those authorities to assess whether it is necessary, in the context of the aim pursued, totally or 69. As regards the grant of a monopoly for partially to prohibit activities of that kind the authorised exploitation of gambling, or merely to restrict them and, to that end, the Court held in paragraph 39 of its to establish control mechanisms, which judgment in Läärä that: may be more or less strict.'

70. It is in fact Zenatti which bears the closest resemblance to this case. It con- cerned the original prohibition on the taking of sports bets in Italy under Article 88 of the Royal Decree, which is also of relevance here. The reference for a 72. In paragraph 18 of its judgment in preliminary ruling in Zenatti arose from Zenatti, the Court held as follows with administrative proceedings and concerned regard to that issue: the question whether it was permissible for a company established in the United King- dom and specialising in the taking of bets on sporting events to act as an intermediary in Italy. The Italian legislation — like the Finnish legislation in Läärä — imposed a prohibition qualified by a reservation of authorisation for a sales organisation with 'In this case... bets on sporting events, even a monopoly on sports betting. if they cannot be regarded as games of pure chance, offer, like games of chance, an expectation of cash winnings in return for a stake. In view of the size of the sums which they can raise and the winnings which they can offer players, they involve the same risks of crime and fraud and may have the same damaging individual and social con- sequences.' 7 1 . Sports bets are not dependent on chance in the same way as lotteries. A bettor's chances of winning may also be affected by his skill and, above all, his knowledge. There is therefore some debate among legal commentators as to whether betting is to be classified as a game of skill or a game of chance. The fact that the events involved are largely dependent on 73. The Court nevertheless pointed out chance, particularly in the case of bets some essential differences between Zenatti placed on entire blocks of games, would and Schindler. Firstly, as indicated above, suggest that it is a game of chance. The Zenatti concerned only a partial rather question of classification can ultimately than a total prohibition and, secondly, the remain unresolved for the purposes of the freedom of establishment was conceivably examination to be carried out here, how- applicable in the latter case (paragraphs 21 ever, since the Court adopted the same and 22 of the judgment in Zenatti).

74. Notwithstanding the fact, as provided Schindler (paragraph 30), the Court further for by the Treaty, 30 that the freedom to held in paragraphs 34 to 37 of its judgment provide services is subordinate to the free- in Zenatti: dom of establishment, the Court was unable to consider the freedom of establish- ment since the question referred by the national court was expressly limited to the freedom to provide services (paragraph 23). As regards the prohibition, which was partial and did not therefore apply to everybody (paragraph 32), the Court held as follows in paragraph 33: 'In those circumstances, the mere fact that a Member State has chosen a system of protection different from that adopted by another Member State cannot affect the appraisal as to the need for and propor- tionality of the provisions adopted. They must be assessed solely in the light of the 'However, determination of the scope of objectives pursued by the national auth- the protection which a Member State orities of the Member State concerned and intends providing in its territory in relation of the level of protection which they seek to to lotteries and other forms of gambling ensure. falls within the margin of appreciation which the Court, in paragraph 61 of Schindler, recognised as being enjoyed by the national authorities. It is for those authorities to consider whether, in the context of the aim pursued, it is necessary to prohibit activities of that kind, totally or partially, or only to restrict them and to lay As the Court pointed out in paragraph 37 down more or less rigorous procedures for of its judgment... in Läärä..., the fact that controlling them.' the games in issue are not totally prohibited is not enough to show that the national legislation is not in reality intended to achieve the public-interest objectives at which it is purportedly aimed, which must be considered as a whole. Limited auth- orisation of gambling on the basis of 75. In examining whether the national special or exclusive rights granted or legislation deemed to restrict the freedom assigned to certain bodies, which has the to provide services was justified, the argu- advantage of confining the desire to gamble ments raised by the Italian Government to and the exploitation of gambling within support its justification having been based controlled channels, of preventing the risk on pursuit of largely the same objectives as of fraud or crime in the context of such those pursued by the legislation at issue in exploitation, and of using the resulting profits for public-interest purposes, like- wise falls within the ambit of those objec- 30 — See Article 50 EC and also the judgment in Gebhard (cited above in footnote 19), paragraph 22. tives.

78. According to the judgment of the Court in Factortame and Others, 32 establishment consists in 'the actual pursuit of an econ- B — Freedom of establishment omic activity through a fixed establishment in [a] Member State for an indefinite period'. Under Article 43 EC, restrictions on the freedom of e s t a b l i s h m e n t of 76. It must now be examined whether and nationals of a Member State in the territory how the principal findings contained in those three judgments can be applied to this case. As the question referred by the 31 — See Article 50 EC and the judgments in Gebhard (cited above in footnote 19), paragraph 22, and in Case 205/84 national court relates expressly to the Commission v Germany [1986] ECR 3755, paragraph 2 1 , last sentence. application of the freedom of establishment 32 — Case C-221/89 Factortame and Others [1991] ECR and to how the application of that freedom I-3905, paragraph 20.

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80. Under the broad definition which the 83. In some circumstances, reliance on one Court gave to the scope of freedom of or other of the freedoms may therefore also establishment in Commission v Ger- make a difference to the conditions appli- many', 33 an undertaking 34 which main- cable to the pursuit of an economic activity tains a permanent presence in another in the market of the country of destination, Member State is covered by the provisions in so far as any special conditions govern- of the Treaty on the right of establishment, ing authorisation to pursue the activity in 'even if that presence does not take the

35 — See the judgment in Commission v Germany (cited above in footnote 31), paragraph 2 1 ; see also the judgment in 33 — Judgment in Commission v Germany (cited above in Gebhard (cited above in footnote 19), paragraph 20, footnote 31), paragraph 2 1 . which states that the chapters on the right of establishment 34 — In that case, an insurance undertaking. and the freedom to provide services are mutually exclusive.

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36 — See the requirement laid down in the judgment in Commission v Germany (cited above in footnote 31), paragraph 2 1 . 85. The data transfer centres are very likely 37 — See the judgment in Commission v Germany (cited above to be fixed establishments. Whether they in footnote 31), paragraph 2 1 .

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relationship, in which case there is no 90. It must further be observed, first of all, dependence upon the central organisation. that the restrictions at issue do not con- It is apparent from the documents before stitute special treatment on grounds of the Court that the data transfer centres public policy or public security within the offer a wide range of services in the data meaning of Article 46(1) EC. In its judg- transfer sector, only one of which is to act ment in Zenatti, the Court held that, by as an intermediary for Stanley. virtue of Article 55 EC, Article 46 EC is also applicable in the context of the provi- sions on the freedom to provide services. However, it drew no conclusions from that with regard to the assessment of the 87. In those circumstances, I am inclined provisions at issue in t h a t case, but towards the view that the data transfer addressed itself directly to an examination centres are not secondary establishments of of the overriding reasons in the general the firm Stanley, but operate by providing interest. Consequently, in accordance with services. Ultimately, however, this is a the approach adopted by the Court in that matter for the national court to decide. In case, it must be assumed here too that the reaching that decision, the national court national provisions are not justified under should not fail to take account of the Article 46 EC. national authorities' perception of the centres in the preliminary investigation pending.

they must not go beyond what is necessary take this to mean that it exhibits traits in order to attain it'. 40 Furthermore, any associated with a monopoly but is never- equivalence on the part of the knowledge theless not to be regarded as a monopoly in acquired 41 and guarantees given 42 in the the narrower sense of the term. The dis- State of origin must be taken into account. criminatory effects of a monopoly can be Consequently, the fact that a Member State viewed in two ways. On the one hand, it regulates its gambling sector by means of a can be said that a monopoly does not have system of concessions is not objectionable a discriminatory effect for the purposes of per se. However, a foreign economic oper- the second paragraph of Article 43 EC, ator must be able to apply for a concession since both national and foreign economic in the same way as a national of that operators are excluded from the activity in Member State, 43 and the system of con- question in the same way. On the other cessions itself must meet the four con- hand, however, it is also argued that ditions applicable to national legislation discrimination on grounds of nationality restricting the pursuit of an economic exists where foreign economic operators activity. are automatically excluded from the activ- ity in the Member State concerned. The question is whether the same is true of a 'monopolistic structure'.

(a) Discrimination

nation, which is likewise prohibited under mission does not consider such an exclu- Community law. sion to be a necessary part of the effort to combat fraud and other crimes. What is more, Italy has renewed around 300 horse- race betting concessions without issuing a call for competition. When a major public concession is awarded without the contract 95. There are several factors which support being opened up to all potential European the claim that the conditions governing the tenderers (as required by the EC Treaty and award of concessions for accepting sports the public procurement directives), Euro- bets in Italy are discriminatory in nature. pean enterprises are unfairly deprived of The very condition mentioned above their right to submit a bid. Moreover, the (which has been criticised in these proceed- public authorities awarding the conces- ings), to the effect that the potential con- sion — and in this case the punters cession holder must already have business too — run the risk of receiving a service premises in Italian territory, has a discrimi- of a lower quality than might have been natory effect. That is all the more so provided by a tenderer who has been because it is illegal to take up and pursue improperly excluded from the award pro- the activity in question without a conces- cedure....' sion and because previous experience of it in a relevant context — in Italian business premises — is impossible in any event.

natory, the legislation at issue still con- to be taken into consideration in the stitutes a restriction which can be justified concession award procedure. 45 Mr Garri- only if it fulfils the four stringent conditions si's submission that lottery activities are laid down by the Court and set out in also covered by Directive 1999/42 is of point 91 above. The Court has already interest in this context. 46 Article 1 of that recognised the protection of consumers and directive requires the Member States to the maintenance of order in society as being adopt certain measures in respect of estab- overriding reasons in the general interest lishment and the provision of services. The which are capable of justifying very exten- directive applies to the activities listed in sive national rules governing the gambling Annex A, Part 1, list VI, point 3 of which sector. 44 Consequently, even if the legis- contains, inter alia, the following entry: lation at issue is exclusively concerned with the pursuit of legitimate objectives aimed at ensuring that concession holders are not involved in criminal or fraudulent prac- tices, the question nevertheless arises whether the specific exclusion of com- panies limited by shares is capable of 'ex 84 Recreation services serving that objective in the first place.

843 Recreation services not elsewhere 99. The integrity of a company limited by classified: shares can be established by means of checks such as obtaining information on the integrity of the undertaking's represen- tatives and major shareholders. The com- plete refusal of access seems in any event to be disproportionate. However, if complete exclusion is contrary to Community law, its — sporting activities (sports grounds, enforcement by criminal penalties will to organising sporting fixtures, etc.), that extent be all the more conclusively so. except for the activities of sports instructors

'[The Commission] will not, for instance, be going ahead with... the regulation of gambling.' 47 101. It is true that that provision does not contain the express references to 'book- makers' and 'betting offices' which Mr Garrisi claims it does. As can be seen, the activities most closely resembling such activities are classified not under 'ex 859' 103. It is not unlikely that that decision, to of the ISIC nomenclature, as stated by Mr which reference has been made on a Garrisi, but under 843. number of occasions in these proceedings, will have an impact on the interpretation of the directive adopted in 1999 on the recognition of qualifications. The Member States are in any event required, whether pursuant to the procedures provided for in Directive 1999/42 or directly under pri- mary law, to take account of 'knowledge and qualifications' acquired in another 102. A broad interpretation of the group in Member State, 48 that is to say 'checks question would support the view held by and guarantees', 49 professional qualifi- Mr Garrisi. However, the fourth recital in cations, authorisations to practise and the preamble to the directive reads: supervision.

104. It can therefore be stated, by way of a preliminary conclusion, that, in the event that pursuit of the activity at issue con- 'Whereas the main provisions of the said stitutes establishment, a question which the directives should be replaced in line with national court must determine, the prohib- the conclusions of the European Council ition contained in the Italian provisions at held in Edinburgh on 11 and 12 December 1992 regarding subsidiarity, simplification 4 7 — See Bulletin of the European Communities, N o 12/1992, of Community legislation and, in particu- p. 18. lar, the reconsideration by the Commission 48 — Judgment in Case C-340/89 Vlassopoulou [1991] ECR I-2357. of the relatively old directives dealing with 49 — Commission v Germany (cited above in footnote 31), professional qualifications...;' paragraph 47.

1 0 5 . If, h o w e v e r , on p u r e l y factual grounds, the data transfer centres are not 107. Obstacles to the freedom to provide to be regarded as establishments of the services are acceptable as such only where undertaking Stanley, they are in any event they are permissible under the exceptions involved in providing the services offered expressly provided for by the EC Treaty — by Stanley. Assuming that Stanley has no in which case even discriminatory legis- representation in Italian territory which can lation is possible — or are justified, in be regarded as the maintenance of an accordance with the case-law of the Court, establishment on its part, the business by imperative requirements. 5 2 As indicated activities it pursues are a classic example above in point 90, the Court made refer- of a service provided by correspondence. ence in Zenatti to Articles 45 EC, 46 EC The provider of the service and the recipi- and 55 EC, which permit restrictions where ent of the service are established in two the activity is connected, even only occa- different Member States, and the service sionally, with the exercise of official auth- alone is cross-border in character. ority or in so far as those restrictions are justified on grounds of public policy, public security or public health. However, it did not examine those articles but proceeded directly to an assessment of the overriding reasons in the general interest. It may be concluded from this that, in the view of the 1. Obstacles to the freedom to provide Court, betting activities, irrespective of services and their justification how they are regulated by the State, are not connected with the exercise of official authority and do not jeopardise public policy, public security or public health in 106. The Court has already recognised that enabling people to participate in gambling 50 — See the judgment in Zenatti (cited above in footnote 3), (deemed by the Court to include sports paragraph 24 et seq. betting) in return for remuneration con- 51 — See the judgment in Zenatti (cited above in footnote 3), paragraph 27. stitutes a service, and this should no longer 52 — Judgment in Zenatti (cited above in footnote 3), paragraph be called into question for the purposes of 28.

109. It is therefore necessary, following the example of the Court, 55 to proceed directly to an examination of whether national legislation which is applicable without distinction — and is therefore non-dis-

111. The objective of the legislation at 53 — See the general remarks of Advocate General Gulmann in issue in Läärä was, according to paragraph his Opinion in Schindler (cited above in footnote 24), point 1 et seq. 32 of the judgment in that case, 'to limit 54 — See the judgments in Schindler (cited above in footnote 4), paragraph 57; in Läärä (cited above in footnote 5), exploitation of the human passion for paragraph 32; and in Zenatti (cited above in footnote 3), gambling, to avoid the risk of crime and paragraph 30. fraud to which the activities concerned give 55 — See the judgment in Zenatti (cited above in footnote 3), paragraph 29. rise and to authorise those activities only

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with a view to the collection of funds for order in society', 58 which can be regarded charity or for other benevolent purposes'. as constituting overriding reasons relating to the public interest.

115. Limited authorisation of gambling, which has the aim of 'confining the desire to gamble and the exploitation of gambling within controlled channels, of preventing the risk of fraud or crime in the context of such exploitation, and of using the resulting profits for public-interest purposes', also 113. N o new or different grounds for the serves public-interest objectives. The Court legislation have been put forward in these nevertheless held that 'such a limitation is proceedings. The C o u r t has to date acceptable only if, from the outset, it refrained from examining each ground reflects a concern to bring about a genuine individually. It has instead expressly con- diminution in gambling opportunities and sidered them together. 5 7 It considers that if the financing of social activities through a they 'concern the protection of the recipi- levy on the proceeds of authorised games ents of the service and, more generally, of constitutes only an incidental beneficial consumers as well as the maintenance of consequence ...'. 59

56 — See the judgment in Zenatti (cited above in footnote 3), paragraph 30. 58 — See the judgment in Zenatti (cited above in footnote 3), 57 — See the judgments in Schindler (cited above in footnote 4), paragraph 3 1 . paragraph 58, and in Zenatti (cited above in footnote 3), 59 — See the judgment in Zenatti (cited above in footnote 3), paragraph 3 1 . paragraphs 35 and 36; emphasis added.

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116. It therefore seems entirely consistent funds for the public purse or in any event with the case-law of the Court to subject for public-interest purposes. the objectives pursued and the means employed to attain them to closer inspec- tion, even though the Court has hitherto left that task to the national courts. 6 0 As indicated above, it is a task which they clearly find difficult.

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(b) Prevention of the passion for gambling conduct of gambling operators in the Member State. This is borne out by the fact that, in Zenatti, the Court left that assessment to the national court. Where, however, the Court has sufficient facts at its disposal to enable it to make an assess- ment, it is not prevented from doing so.

119. As regards the dangers feared to be posed by the diversification and extension of gaming opportunities, it must be exam- ined whether the Member State has a coherent policy on the subject, particularly where the prohibition in question is not absolute but is qualified by a reservation of 121. It has been submitted in these pro- authorisation. A total prohibition on a ceedings that sports betting operators trad- particular branch of the gambling sector ing under a concession make themselves clearly has the effect of limiting those known by means of aggressive advertising. gambling opportunities. However, where Such conduct is intended to instil and foster gambling — in this case sports betting — a desire to gamble. That is not all, however. is permitted, albeit within clear limits laid The Italian State itself has made it possible, down by law, the stated objective of through the legislation it has adopted, for producing a limiting effect must be exam- the range of gambling opportunities on the ined much more closely. Limited authori- I t a l i a n m a r k e t t o be s u b s t a n t i a l l y sation cannot, as the Court held in para- extended. 6 3 It has further been submitted, graph 35 of its judgment in Zenatti, serve without contradiction, that the Italian State to show that national legislation is not in has also made it easier to collect bets. reality intended to achieve public-interest Reference was made earlier to the fact that objectives. Nor can regulation alone serve the infrastructure has been expanded to show that the stated objective is being through the award of 1 000 new conces- pursued, for, as the Court again held (in sions. paragraph 36 of its judgment in Zenatti), such regulation is acceptable 'only if, from the outset, it reflects a concern to bring about a genuine diminution in gambling opportunities'.

freedom to provide services enjoyed by 125. In paragraph 60 of its judgment in service providers established and duly auth- Schindler, the Court held it to be 'not orised in other Member States. without relevance' — although incapable of being regarded as justification — 'that lotteries may make a significant contribu- tion to the financing of benevolent or public-interest activities such as social works, charitable works, sport or culture'. 123. As regards the amendments made to Although that finding might support the the Italian legislation in 2000 by the assumption in certain circumstances that Finance Law, and the circumstances sur- economic grounds — at least when com- rounding the adoption of that law, which bined with other grounds — are recog- reinforced the provisions previously appli- nised as reasons in the general interest, cable (as examined by the Court in Zen- the Court dispelled such speculation in its atti), it should be pointed out that, accord- judgment in Zenatti, which was consistent ing to the legislation cited in the written with its previous case-law to the effect that observations, those a m e n d m e n t s were economic grounds are incapable of justify- made at least partly in order to protect ing restrictive measures. 6 4 The Court held Italian concession holders. These are in paragraph 36 of that judgment that 'the clearly protectionist motives which are financing of social activities through a levy not capable of justifying the legislative on the proceeds of authorised games [may amendments in question and, what is more, constitute] only an incidental beneficial cast doubt on the legislation as a whole. In consequence and not the real justification so far as the original legislation must in any for the restrictive policy adopted'. event be regarded as no longer being underpinned by the objectives which the legislature may or may not have had in mind at the time of its adoption, because the legal and factual situation has changed, those provisions should not under any circumstances have been reinforced as they were.

127. However, it is clear from the sub- missions of the Member States that what they fear most is the economic con- sequences of changes within the gambling sector. Little reference is made in this 130. The legislative amendments intro- context to any dangerous effects that duced in 2000, which were apparently gambling might have on gamblers and their intended only to enforce the existing pro- social environment. Consequently, such hibitions, must also be viewed, at the very fears likewise cannot be regarded as an least, in the context of technological interest in the protection of consumers that advances. It is common ground that such would constitute an overriding reason in advances are making it increasingly diff- the general interest. icult to monitor whether legitimate systems of regulation are being complied with. Even without the intervention of an intermedi- ary, a person who wishes to gamble can place a bet with a European service pro- vider of his choice by phone, fax, or internet. Those media, which mean that a change of location is no longer a prerequi- 128. If fears of a shift in the sources of site for participating in foreign gambling State revenue were realised as a result of a activities, have prompted a variety of partial opening-up of national gambling reactions from national legislatures. For markets, other suitable measures would, if example, the United Kingdom passed the necessary, have to be taken in order to Lotteries Act 1993, referred to in Schindler counter this. Economic considerations but not directly relevant to that case, which alone, however, cannot serve to prevent introduced a national lottery in order to outright the exercise of the freedom to make available in the United Kingdom a provide services by operators authorised in facility similar to those offered by foreign another Member State. service providers. In other Member States,

4. Consequences 133. Finally, for the sake of completeness, it is necessary to examine the defendants' submission that the Italian legislation in question infringes secondary Community 131. However, the acceptability of those law concerning electronic commerce and criminal penalties stands or falls by the the directives listed in point 39. In that lawfulness of the restrictions and prohib- connection, it is sufficient to refer first of all itions on which they are based, their to Directive 2000/31 on electronic com- assessment under Community law being merce, 6 6 the third indent of Article 1(5)(d) dictated entirely by the objectives pursued. of which provides that the directive must Where, as in this case, the alleged objectives not apply to 'gambling activities which of the relevant legislation are called into involve wagering a stake with monetary question by the inconsistent conduct of the value in games of chance, including lot- national authorities themselves, that is to teries and betting t r a n s a c t i o n s ' . Fur- say, where those objectives cannot be t h e r m o r e , as regards Directive 96/19 regarded as imperative requirements in the amending Directive 90/388 with regard to public interest, legislation which reinforces the implementation of full competition in such measures by means of criminal pen- telecommunications markets, Directive alties must be considered disproportionate. 97/13 on a common framework for general authorisations and individual licences in the field of telecommunications services and Directive 97/66 concerning the pro- cessing of personal data and the protection of privacy in the telecommunications sec- 132. It must therefore be concluded that tor, it should be noted that these directives national legislation like the Italian legis- have no bearing, either explicitly or impli- lation at issue in these proceedings, which citly, on the organisation of gambling. imposes prohibitions enforced by criminal Consequently, it cannot be assumed that penalties on the pursuit, by any person and the field at issue is governed by secondary at any place, of the activities of collecting, law. The assumption must therefore be that taking, booking and forwarding offers of no specific Community legislation is appli- bets, in particular bets on sporting events, cable, and that the field at issue is governed is, in the circumstances obtaining in this by primary law, in the light of which, moreover, secondary law too must be interpreted. 65 — See the Sechstes Gesetz zur Reform des Strafrechts (Sixth Law Reforming the Criminal Code) of 26 January 1998, BGBl. I, p. 164, Paragraph 287 of which extended the grounds for prosection under the criminal offence of operating a lottery or draw without authorisation. 66 — Cited above in point 56.