milestone_report_gibraltar2012_digital2

Online Gaming
Carefully Managed Growth
Quality over quantity
Interview with Mr Peter Montegriffo, Team Leader & Partner, Hassans International Law Firm
Peter Montegriffo’s area of expertise is in commercial and private client matters, and he has also advised on numerous financial
services, regulatory and trust related matters. He was closely involved in the IPOs of various Gaming companies established
in Gibraltar, which have been listed on the London Stock Exchange. Peter has also been closely involved in drafting numerous
changes to Gibraltar's legislation in trusts, financial services and gaming areas. Mr Montegriffo was also Gibraltar's Minister
for Trade and Industry, with responsibility for economic development and financial services, between May 1996 and February
2000. He met with Milestone GRP to go over the evolution of Gibraltar’s Online Gaming sector and the jurisdiction’s approach
to its steady and stable growth.
Milestone GRP - What brought about the development of the
Online Gaming industry in Gibraltar? What are the main highlights
in the history of this still relatively young industry?
Mr Peter Montegriffo - The history of remote gambling in Gibraltar
goes back to the early to mid-nineties when initially a
number of betting operations relocated to Gibraltar in order
to take advantage of Gibraltar’s competitive taxation rates
and also our position within the EU. This initial activity was
effectively one undertaken via bets placed telephonically but
it is probably true to say that it provided the springboard
for what was then the much more extensive development of
online gaming in the late nineties and especially in the early
2000’s.
The history of this sector is one that has been marked by a
prudent and conservative approach to its growth. Respective
Governments have not sought to grow this sector beyond
what is appropriate at any given time. The authorities have
needed to carefully consider reputational risk and also the
fact that such a growing and strong sector inevitably focuses
resources, such as manpower, telecommunications and professional
services, away from other important sectors of the
economy, such as financial services.
Milestone GRP - What legislation governs the industry in
Gibraltar?
Mr Montegriffo - The legal system in Gibraltar is entirely based
on that of England and Wales. Whilst we are a separate jurisdiction,
our statutes and the common law are very similar to that
which applies in England and Wales. Gibraltar legislation in the
areas of gaming, taxation and company matters therefore follows
in many respects aspects of the relevant legislation across
the United Kingdom.
In the area of gaming specifically, the Gibraltar Gambling Act
2005 closely mirrors the provisions of the United Kingdom Act
on which it is modelled. The Gibraltar regulator also imposes
standards of conduct and regulation that are among the very
best in the world and which are constantly evolving having regard
to the fast development of the industry. The Act sets out
the requirements in relation to licensing. A full business plan,
details of the promoters, management arrangements and proposed
technical infrastructure are all necessary ingredients of
an application.
As noted earlier, Gibraltar has adopted a selective approach in
determining who to grant a licence to. In order to avoid unnecessary
expenditure and time, it is usually possible to obtain a
fairly early indication from the regulator as to whether a licence
application is likely to succeed.
Milestone GRP - What distinguishes Gibraltar’s Gaming companies
from others in terms of their operations?
Mr Montegriffo - Most of the e-gaming companies based in
Gibraltar are in fact the largest and some are publicly quoted
companies in the sector. In this respect, (although the operation
of online gaming companies is similar in many jurisdictions), it
is probably true to say that those based in Gibraltar include the
best resourced in terms of the different elements of the business
that constitute an online gaming activity.
One feature of the Gibraltar licensing model has always been that
Gibraltar operators are required to have a physical and substantive
presence in Gibraltar. Gibraltar has never adopted a model that
allows most or the entirety of the operation to be outsourced to
third countries. Whilst, therefore, the number of operators in Gibraltar
is relatively low (currently just over 20) compared to other
jurisdictions, the employment base represented by this sector is
reasonably large both as an empirical figure (over 2,000 individuals)
and as a percentage of Gibraltar’s overall employment base.
It should be noted that Gibraltar has very low unemployment and
in fact provides employment for many EU and non-EU nationals
that are attracted to Gibraltar for work. The reason Gibraltar’s licensing
model requires a substantive presence is to ensure that
there is regulatory accountability to the authorities in this jurisdiction
in relation to activities undertaken from Gibraltar.
Milestone GRP - What distinguishes Gibraltar in terms of
legislation of protections and guarantees available for gamers
on issues such as gains, anonymity and addiction, for
instance?
Mr Montegriffo - Gibraltar’s legislation makes provision for
detailed rules and codes of conduct. The Gibraltar regulator
has published a series of codes relating to online gambling.
These can be requested from the Licensing Authority. Gibraltar,
in line with the other leading international regulators,
constantly reviews its codes of conduct and regulatory requirements.
Its operators are also required to adhere to best
practice and to ensure the highest levels of consumer protection
in every respect. In this regard, both Gibraltar and
many of its operators are at the cutting edge of best practice
and industry developments.
Milestone GRP - What impact has the online gaming industry
made in Gibraltar and on its economy in general?
Mr Montegriffo - There is no doubt that the online gaming sector
now represents a major sector of Gibraltar’s economy. It is
probably true to say the industry accounts today for about 20%
of Gibraltar’s GDP and a significant amount of direct revenue to
Government and, as noted earlier, a good portion of Gibraltar’s
employment base. Just as significantly, the employment base in
question is one that is highly diversified and has brought skills
to Gibraltar in the area of e-commerce, payment processing and
technology, which did not exist 10 years ago. This provides an
excellent base for the development of an e-commerce economy
given that many of the skills are transferrable across a number
of different sectors using interactive means of communication.
Milestone GRP - How is Gibraltar looking to expand its e-gaming
industry?
Mr Montegriffo - Gibraltar already has a reasonably diversified
e-gaming industry although it is true to say that most of our
operators have a European client base, in the United Kingdom,
in particular. As you know, there are a number of very interesting
and potentially huge opportunities opening up in various
jurisdictions including the United States and also more broadly
in Europe, as Europe’s fragmented regulatory regime becomes
more cohesive. Other opportunities in Asia and Latin America
are also noteworthy. I understand the recently elected Gibraltar
Government is keen to explore further how Gibraltar’s industry
will be diversified but very much within the framework of
the conservative and prudent approach which has historically
been adopted. There is no doubt that the extension of gaming
services into broader entertainment and social gaming will also
provide a huge boost to the industry in Gibraltar and to operators
based here.
Milestone GRP - How does the gaming sector contribute to
Gibraltar’s international image?
Mr Montegriffo - There is no doubt that historically gaming
has been regarded as a sensitive area raising particular public
policy considerations in various countries. This has also
been the case in Gibraltar and the care taken is reflected in
the approach adopted in licensing and the measured growth
of the sector. It is true, however, that gaming as a social phenomenon
is changing dramatically. The proliferation of channels
of availability, and also the explosion in social games
more broadly, is making the gaming experience much more
part of mainstream entertainment than might have been the
case, other than for soft gaming such as lotteries or bingo,
two or three decades ago.
In terms of international image, therefore, a properly licensed
and regulated gaming sector should enhance and in no way
detract from the credibility and reputation of a jurisdiction.
In any activity, excess and exuberance will lead to difficulties
and reputational damage. One of the safeguards of an
e-gaming operation is the fact that all transactions are recorded
and therefore open to constant monitoring and verification.
Gibraltar’s association with some of the leading publicly
quoted online entertainment groups has also been extremely
important in enhancing the jurisdiction’s reputation as one
open to serious, well regulated business enterprise.
Milestone GRP - How much work needs to be put in to defend
the right of Online Gaming companies established in
Gibraltar in the context of EU threats and access to new
markets?
Mr Montegriffo - The industry has always worked very closely
with the authorities in defending the rights that exist under
European law and more broadly to provide services to clients
around the world. This is an uncertain and evolving area and until
legislation in various countries, and indeed at a broader European
level, becomes clearer, a great deal of caution is required.
Gibraltar’s attitude is to fully cooperate with all other reputable
international regulators. It has, however, always been the view
of the Gibraltar authorities that it is vital to defend the legitimate
interests of Gibraltar and any economic operator based in our
jurisdiction. To this end, the Gibraltar Government and industry
have worked over the years in various areas, including financial
services and gaming, to properly defend Gibraltar’s EU and
broader rights of access to international clients.
64 Gibraltar 2012 65
milestone GRP