Islj 2009 3-4 - TMC Asser Instituut

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Estonia: Regulation of Sports Betting under the New Gambling Act by Katarina Pijetlovic* 1. Introduction One has to appreciate the history of Estonia when it comes to the subject of sports betting. Gambling of any kind was prohibited in the Soviet Union, although in all bigger cities the casino businesses were illegally organized even during the darkest days of communism. Therefore, the historical account of the legal regulation of gambling can be taken with regard to the past 14 years only, i.e., since the adoption of the first Lottery Act in 1994 (Loteriiseadus) and the first Gambling Act in 1995 (Hasartmänguseadus) by Estonian Parliament (Riigikogu). Whether as a consequence of the mentality imposed by this history or due to certain other factors, the problem of gambling addiction is routinely overstated in Estonian society. Casino operators are frowned upon and it is not uncommon to hear the word ‘mafia’ used as an adjective to describe the gambling business, casinos in particular. The legal regulation of gambling was insufficient and inadequate up until 2009 when the new Gambling Act entered into force. Taking into consideration that the legislation was widely opened to criticism, and the social attitudes, the lack of any more comprehensive academic writing on the matter is surprising. The only substantial treatment of the subject is provided by the student Master Thesis submitted by Peedu in 2008, alas, dealing mostly with the provisions of the old Gambling Act of 1995 and the cases decided under it. 1 With a population of 1.4 million, and the short history of legislative action and enforcement in the field, Estonian courts have not had many opportunities to rule on this subject either. There are no English or any foreign language translations available for the new Gambling Act or for any of the national court decisions. On May 1, 2004, Estonia joined the European Union. Gambling activity is an area that was not directly discussed at the accession negotiations. However, it is an economic activity within the meaning of the EC Treaty and is as such is affected by the accession. This means that the gambling legislation of the Member States should be in conformity with the Community legislation, in particular the internal market and competition rules. This article will focus on the provisions of, and requirements placed upon, the organizers of gambling under the new Gambling Act and will, inter alia, place the emphasis on licensing of remote gambling and the activities of several offshore companies that create the legal problems for supervisory officials in Estonia. Other types of gambling and the key changes in their legal regulation will also be discussed. Lotteries, in respect to which the state has reserved a monopoly for itself, 2 are outside of the scope of this chapter but will be mentioned to the extent necessary for general understanding of their place in the organization of gambling. 2. The Problem of Gambling in Estonian Society Due to several media scandals and the lack of proper lobbying in the government, the status of gambling, in particular the casino business in Estonia, is quite low in the eyes of the general public. There are two lobbying groups working at the opposite ends of the cause: Eesti Kasiinovastased (Estonian Anti-Casino Movement, hereinafter Kasiinovastased) supported by Eesti Hasartmängusõltlaste Ühing (Estonian Union of Gambling Addicts); and Eesti Hasartmängude Korraldajate Liit (Estonian Association of Gambling Operators, hereinafter EHKL). Statistics about the number of the addicted gamblers differ substantially between the two interest groups. Whereas the biggest casino owner in Estonia says that the number amounts to 26,000 and that this is the number that includes not just casino gambling, it also those addicted to all other forms of gambling, Kasiinovastased puts that number at 50,000 compulsive casino gamblers. The respectable daily business newspaper Ärileht talks of 70,000 casino addicts. They also point out that “casinos have caused the suicide of hundreds of people in Estonia, even murders of members of their family, including children. 42% of the dependants are considering suicide. In 2007 the research carried out by AS Turuuuring (Market Research) showed that 76% of Estonians and 81% of residents of Tallinn are in favour of banning casinos.” 3 Whereas it is not difficult to sympathise with the cause, there is another equally valid side of the story. Gambling, much like drinking alcohol and smoking cigarettes is a personal choice. As long as properly regulated and supervised in order to prevent the illegal use of profits and money laundering, there is no compelling reason to create further pressures on the government. In a letter addressed to the Minister of Finance in March 2008 Kasiinovastased expressed a serious concern in relation to the repercussions that may materialize because, in its view, the new Gambling Act favors casino interest groups. In mid-April 2008 they visited EU Parliament, European Commission representatives and NATO headquarters trying to draw the attention to their concern that there is no adequate control over the casino business and gambling market in many new EU and NATO Member States. This, in their opinion, leads to money laundering and other crimes, and possibly even provides support for terrorist activities. 4 On April 29, 2008, in the center of Tallinn Estonian anti-casino protest was organized with the purpose of bringing the entire casino business in Estonia under the control of the state. 5 It is important to mention that sports betting and the lottery have not been the direct cause for these kinds of concerns and attacks as they are considered less socially harmful. * LL.M, LL.Lic. Lecturer in EU Law, Law School of the International University, Audentes Tallinn University of Technology. 1 The work is available at http://dspace.utlib.ee/dspace/bitstream/10062/6835/1/peeduagris.pdf. Its author is a senior lawyer at the Estonian Tax and Customs Board, the authority in charge of licensing gambling operators. 2 This follows from the Article 9(5) which provides that ‘Lotteries, except for promotional lotteries, may be organised by a completely state-owned public limited company founded for that purpose by the Government of the Republic whose share capital is at least 1,000,000 Euros and whose shares are completely stateowned’. 3 Source: http://www.arileht.ee/ uudised/434954. 4 Source: maxkaur.blogspot.com/2008/ 04/uus-hasartmnguseadus-snnib.html. 5 The video of a later Kasiinovastased protest which took place in July 2008 in front of the building of Olympic Entertainment Group, the owner of Olympic Casino, is available at http://www.nuffi.ee/video/hlzc88eG- QM. 6 State Gazette RTI, 06.11.2008, 47, 261. Available at www.riigiteataja.ee/ert/ act.jsp?id=13060644. 3. Relevant Legislation Prior to the adoption of the new Gambling Act (‘the Act’) 6 two separate laws used to regulate the field: the Lotteries Act of 1994 and the Gambling Act of 1995. They provided for imperfect mechanisms of regulation and control in particular due to their inability to cope with the changes in the organization of the gambling industry. The practical problems that were unresolved were many, most notably the lack of regulation of remote gambling. The new Gambling Act was in the form of a draft proposal and a subject of debate over four years. The European Commission was informed of the draft legislation in the beginning of 2008 and Riigikogu finally adopted the new Gambling Act on October 15, 2008. The objectives of the new Gambling Act are to impose stricter requirements for organizing gambling games in order to improve the quality of gambling services, enact measures for protection of players, and to decrease the negative consequences of the gambling and its 112 2009/3-4 A RT I C L E S
influence on the society. 7 Amendments where made in order to effectively cope with the changed situation in the gambling sector and to make use of novel possibilities to supervise gambling organizers. Entry into force of the act is split into three stages. Most of the provisions are already in force as of January 1, 2009. The next set of provisions, which will become effective on January 1, 2010, is the most important in the context of online sports betting. The organizers of remote gambling are given more time to study the impact of the new legal regime. For offshore companies offering online sports betting services to their clients in Estonia the impact will be profound. These provisions and their contribution to the regulation of remote gambling will be addressed later in detail. 8 Finally, provisions regulating electronic reporting and supervision of gambling systems, as well as those that set forth the requirements for games of chance machines will enter into force on January 1, 2011. Apart from the new Gambling Act, which repealed the 1994 Lottery Act and 1995 Gambling Act, the relevant legislation includes a new Advertising Act 9 and a Gambling Tax Act that is currently undergoing review. 10 4. Definition, Categories and Sub-Categories of Gambling 4.1. Definition The Act defines gambling as having all of the following characteristics: a stake made by the player is the condition for participating in a game; players may win prizes as a result of the game; the result of the game is determined completely or partially by actions based on chance; or depends on the occurrence of an event not known in advance. 11 So there are three elements that need to be present; stake, prize and chance. If one of the elements is not present then we are not dealing with gambling. Additionally, Article 2(5) excludes games of skill in which the only prize is the opportunity to play again in the same game, as well as sports competitions, lotteries whose prize has a value of up to EUR1000, and promotional lotteries with a prize fund of up to EUR10.000. All are excluded from the definition of gambling within the meaning of the Article 2(1) of the Act. All other lotteries must be organized by state-owned monopoly. 12 The basic three-element definition has not changed substantially in comparison to the old Gambling Act, thus, the Supreme Court decisions on the definition of gambling are applicable in relation to the new Act as well. 4.1.1. Stake The Act defines a stake as “a sum of money paid for participation in a game or a monetarily appraisable obligation taken in return for the right to participate in gambling.” 13 Before the Act came into force, the same concept was defined by the Supreme Court in the case 3-1-1-7- 06 (p-d 9.3-9.5). 14 Accordingly, a stake, within the meaning of Article 3 of the old Gambling Act, is the value of the object that the participant bets, in return for the right to participate in the game, and that he or she will lose on the basis of chance in case they do not get the said prize. The sums paid to acquire the right to participate in a draw do not amount to stake within the meaning of Article 3 of the old Gambling Act, if as a consequence of the draw the value of the personal assets placed as stakes to obtain the right to participate cannot 7 Article 1 of the Act. 8 See the paragraphs on online sports betting infra. 9 State Gazette RT I 2002, 28, 158. Available at https://www.riigiteataja.ee/ert/act.jsp?id= 13061981. 10 State Gazette RT I 2008, 15, 108. Available at http://www.riigiteataja.ee/ert/act.jsp?id=1 040649. 11 Article 2(1) of the Act. 12 Eesti Loto is the state-owned public limited company that organises lottery games in Estonia. For more on the company see www.eestiloto.ee. 13 Article 2(2) of the Act. 14 The decision is available at http://www.riigikohus.ee/?id=11&tekst= RK/3-1-1-7-06. It is worth mentioning that the concept of stake in this particular case was defined in relation to lotteries. 15 State Gazette RT I 2002 , 35, 216. Available at https://www.riigiteataja.ee/ert/act.jsp?id= 13111425. 16 Article 48 of the General Part of the Civil Code Act. 17 Article 2(3) of the Act. be reduced. Only if there is a risk of reducing the value of assets of a player will there be a “stake.” Furthermore, according to the General Part of the Civil Code Act of 2002 15 , Article 66, property is “a set of monetarily appraisable rights and obligations belonging to a person unless otherwise provided by law.” Article 65 of this Code provides that the value of an object is its usual value, meaning its average local selling price (market price). Furthermore, “objects are things, rights, and other benefits which can be the object of a right.” 16 Therefore, betting a sum of money in return for which a participant receives the object or rights of the same value, or the exception from obligations of the same value, will not constitute the decrease in the value of asset and will not constitute a “stake.” 4.1.2. Chance The concept of chance under the new Gambling Act does not rely on a predominance test; instead, not only in the games in which the result is entirely dependant on chance (such as slot machines), but also in the games in which the result depends partly on chance (and partly on skill), will there be a “chance” within the meaning of the Act. In addition, the element of chance does not have to dominate over the skill to determine its outcome. This approach is reflected in the express language of the Article 3(4) that defines games of skill as games whose outcome depends predominantly on the physical skilfulness or skills and knowledge of the player. Thus, only a certain element of chance needs to be present for there to be a “chance.” However, sports competitions (which by nature of sport industry always contain a certain degree of chance) are excluded from the categories of gambling. 4.1.3. Prize The Act defines the prize as the right of a player to acquire money or other benefits having a monetarily appraisable value. 17 As should already be clear from the definition of gambling, Article 2(5) excludes certain types of prizes from the scope of the Act. In addition, Article 41 provides that the prize for a game of skill organized on a machine for a game of skill shall be an object that is not money and whose value is a maximum of EUR 50. The prize in an online game of skill cannot exceed EUR 50. Once it has been ascertained that all the elements are present and that the case involves gambling within the meaning of Article 2 of the Act, the next step is to identify the category and sub-category of gambling in question. 4.2. Categories and sub-categories of gambling The Act encompasses types of gambling that were previously insufficiently regulated or not regulated all. As a novel element lotteries and games based on “mental skills” are included in the Act as forms of gambling. Remote gambling is now specially regulated, and so are promotional lotteries. According to Article 3 the categories of gambling are: 1) games of chance - games whose result depends on chance and which take place using a mechanical or electronic apparatus or through the agency of a game organiser; 2) lotteries - games whose result is determined completely by chance, where the prize fund forms up to 80 per cent of the sales price of the lottery ticket print run and results are revealed a maximum of three times a day or results or are revealed upon uncovering a field on a lottery ticket; 3) totos - games whose result depends on the prediction by the player of the occurrence, non-occurrence, or the manner of occurrence of an event, where the event with regard to which the player enters a stake is beyond the control of the organizer of the gambling, receiving the prize depends on whether the prediction comes true, the amount of the prize depends on the size of the stake and on the winning coefficient determined before the stake was placed (betting), or on the percentage of the stake pool determined by the organiser of gambling, the number of persons making the correct prediction, and the sizes of their stakes (totalisator), and; 4) games of skill - games whose outcome depends predominantly on the physical skilfulness or skills and knowledge of the player, and that are organized by using a mechanical or electronic tool. A RT I C L E S 2009/3-4 113
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2009/3-4 EU Sports Policy FIFA Tran
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EDITORIAL 2 ARTICLES The Future EU
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The Future EU Sports Policy: Hollow
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Community a new dimension, such as
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Sports Ministers Conference, The Ha
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and 15) that the provisions of Comm
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The Case against the Applicability
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not fall within the wording “tran
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4 See also in support of this argum
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This is not an unrealistic career p
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cerned, the specificity of sport, a
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compensated for the income it could
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A more basic question is what weigh
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Article 17 (6) For a player over 23
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live sports rights in many other co
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equired coverage of 90% is not met.
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letes in any form, even including a
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Article 95 of the CHL Rules governs
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The RFL may declare that a player w
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ices acquired by the clubs in the r
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competition (thereby enhancing the
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Each country of the Kingdom has all
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2.2.The objectionable NAOC intentio
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Sub Rule 29.5 It reads “The area
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To secure the appreciation of CAS i
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5.3 Recognition by the internationa
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however it will all come to the lev
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Page 63: or serious bodily harm. Such prepar
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Page 68 and 69: to the amount of regulations in the
Page 70 and 71: 4.1. The relationship between sport
Page 72 and 73: 5. Conclusion In this article I hav
Page 76 and 77: ing a player. In order to create an
Page 78 and 79: 9 The ‘reserve clause’ gave clu
Page 80 and 81: In this research, the focus will be
Page 82 and 83: sports agent will not bargain at ar
Page 84 and 85: have a dominant position. Thereafte
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Page 90 and 91: Siekmann, R.C.R., Parrish, R., Bran
Page 92 and 93: limit on the number of times a play
Page 94 and 95: to these regulations. This refers,
Page 96 and 97: Article 4 of the Act No. 401/1989 p
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Page 119 and 120: ting market is the fact that most o
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Page 155 and 156: extraterritoriality nor a division
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Page 159 and 160: Thus, International Law, once a law
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en. 248 Typically, two separate con
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Guarantors would have undertaken to
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ing a professional football club or
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“TRANSLATING IS THINKING WITH ANO
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