Islj 2009 3-4 - TMC Asser Instituut

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the competent authorities, among all the possible gambling types, usually sports’ betting organizers are the ones that are involved in the violations of the said restriction. The industry has also developed certain practices to deal with the restrictions and enforcement authorities are facing certain issues to strike them down effectively. The Gambling Law only provides the general restriction on “gambling advertising.” It does not elaborate on the meaning of the term “advertising.” In those circumstances the general definition of advertising from the Advertising law 28 has to be applied to understand how extensive the restriction on gambling advertising is. Advertising is defined as any form or any mode of announcement or endeavour associated with economic or professional activity, intended to promote the popularity of or demand for goods or services. 29 Given the broad wording, the definition could apply to anything the organizer does outside its registered gambling site, as long as it can be shown that the actual purpose of the particular activity is to promote the gambling services rendered by the gambling organizer. For the detriment of the organizers, the competent authorities tend to look at the restriction in its broadest way. Usually the sports betting organizers would place a banner in the most popular Latvian online sports portals, in the sports federation web page or in the sports halls/arenas during sporting events. In all the publicly available violation cases 30 so far, it has always been a sports betting site registered abroad that is advertised. The compliance with the Advertising law is enforced by the Consumer Rights Protection Centre (hereinafter the CRPC). 31 The CRPC is entitled to initiate a case either on the basis of a third party application (i.e. complaint), information provided by another institution, or on its own initiative. 32 Of the five sports betting advertising cases, three were initiated by third party applications, and two of these by the only Latvian sports betting organizer. Hence, the locally licensed operator is keeping an eye on the activities of competitors. Given the involvement of foreign online operators, which brings up jurisdictional and enforcement issues, none of the cases have been initiated against the actual gambling organizer, instead they are all against the advertising channel. Four cases deal with Internet portals containing sports betting banners and one case was against the operator of the largest sports arena in Latvia. These decisions are relatively recent, i.e. in the period from May 2007 until November 2008. In all the cases CPRC established a violation, in two instances a monetary fine of LVL 2000 was imposed, and in the remaining three an order was issued to terminate the violation. In all cases the parties who were accused of violating the advertising prohibition used similar defense arguments. The CRCP rebutted the argumentation in the same manner. A case against the largest sports hall “Arena Riga” illustrates the common argument that advertising of the brand or trademark of the sports betting organiser itself does not amount to “gambling advertising.” 33 “Arena Riga” claimed that no particular gambling activity was being advertised and a restriction on advertising the logo of the company would be too broad. They argued that the company could also be rendering non-gambling services that are not subject to advertising restrictions. The CRPC did not uphold this argument, instead it explained that the trademark “betway| COM” indicates a link to a certain Internet domain and such practice falls within the advertising definition. The main economic activity of the Internet site is gambling services, which are prohibited from being advertised. Another interesting aspect in a similar case against one of the largest Internet news portals “Delfi” indicates that the same offense may lead to a double penalty. 34 The CPRC imposed a penalty of LVL 28 Advertising law of Republic of Latvia, adopted 20 December 1999; 29 Ibid., article 1; 30 CPRC Decisions No 2-r (11 May 2007); No 5-r (16 May 2007); No 15-r (20 July 2007); No. E03-RIG-372 (01 September 2008); and No. E03-RIG-453; 31 Supra note 28, article 13; 32 Ibid., article 14; 33 See CRPC Decision No. 2-r on advertisement, 11 May 2007; 34 See CPRC Decision No. E03-RIG-372, 01 September 2008; 35 Code of Administrative offenses of Republic of Latvia, adopted 07 December 1984, articles 166.13 and 204.5; 36 Supra note 28, article 12.4; 2000, despite the fact that the Inspection had already imposed a penalty in of LVL 100. As noted before, the CPRC is the competent authority with regard to enforcement of the Advertising law, whereas the Inspection is the competent authority with regard to the Gambling law. The Code of Administrative offenses allows the Inspection to impose a penalty up to LVL 1000 for violations of the Gambling law, whereas the CPRC is entitled to impose a penalty of up to LVL 10`000 for breach of the Advertising law. 35 Although the gambling advertising restriction is stipulated in the Gambling law, the Advertising law contains a more general prohibition - to disseminate legally prohibited advertising. 36 Hence, each authority qualified the same event as a violation of the law that was in its competence to enforce. Clearly, Delfi was not satisfied with such a resolution and the CRPC has informally confirmed that not only Delfi, but all other decisions with respect to sports betting advertising, have been appealed in the administrative courts. None of the cases have yet been examined. While the rulings are pending, the conclusion is that the CPRC decisions have not resulted in the desired effect. Some of these websites are still carrying banners with sports betting sites and promotional activities can still be noticed during sports events. Hence, either the Internet portals and the sports betting organizers are simply buying time with the appeals, hoping that the penalties would outweigh the gains during the litigation period, or they are strongly convinced that the practice indeed does not amount to gambling advertising. The court rulings are keenly awaited to cast certainty on this issue. Another trend, which shows at least some respect to the advertising ban by the betting organizers, is the practice of “alibi sites.” To avoid the advertising prohibition, a double link advert is created. The banner on a popular Latvian portal (.lv) advertises a “.com” or “.net” site which itself does not contain any games of chance, however its main purpose is to bring the person to a site that does. The “alibi site” may contain some games of skill or similar entertainment, but not sports betting, only its advertisements. Taking into account that these are “.com” or “.net” sites, the Latvian authorities cannot control their advertising content. Furthermore, given that they are not providing sports betting services themselves, these sites cannot be restricted from advertising in Latvia. So far there have been no cases where the legality of this practice would be analyzed and the view of the Inspection and the only Latvian sports betting organizer regarding this practice is also unknown. The advertising restriction is in fact a two-fold issue. On the one hand, the government tries to protect the general public from the potential harms of gambling; on the other hand, the restriction leads to complications that make Latvia less attractive as a potential venue for international sporting events. The sports betting organizers tend to be frequent sponsors of international sporting leagues and they reasonably expect that their logo will at least be displayed during the events the league organizes. The intentional nature of these events allows for significant attention, revenues from ticket sales, increased tourism and publicity. Hence, not only the sports industry, but also municipalities and the State itself are interested in encouraging major international sports events to be hosted in Latvia. However, if the league cannot ensure that its sponsors’ logo is displayed, it risks losing the sponsor and may not consider Latvia as a one of the possible locations for the venue. Loosing these events also would not be in best interest of the general public. Latvia’s case shows that despite the restriction, sports betting sites are still being promoted on Internet portals and during sporting events either directly or through “alibi sites.” The competent authorities, despite viewing this as violation, have not managed to make these advertisements disappear. As a result, foreign online gambling organizers gain competitive advantage over the ones that are locally licensed. The Inspection cannot ensure that consumer interests are fully protected and possible tax revenues flow out of the country. Hence, the current inability to effectively enforce the restriction, which puts the local companies in a disadvantageous position, calls at least for a debate as to whether the restriction should not be reassessed. A reasonable balance must be found. Interpreting the 120 2009/3-4 A RT I C L E S
estriction in the most extensive way after all may not be in the best interests of the general public. 4. The market Given the comparatively “heavy” regulation of the industry and taking into account the overall population (i.e. size of the market) of Latvia, it comes as no surprise that there is only one operator of sports betting licensed in Latvia. 37 The general trend in the sports betting market is that betting is done interactively, i.e., via Internet, telephone, television, radio, or by any other type of electronic communications means. Thus, the only sports betting organizer in Latvia, in addition to the 17 fixed locations it runs, has also taken out the interactive gambling licence. Unlike in several other countries, Latvia imposes no prohibitions in relation to online gambling. There is an explicit regulation, which shows that Latvia considers it to be a legitimate business activity. Furthermore, despite that the E-Commerce directive 38 allows restricting online gambling services originating from other EU Member States, Latvia has neither restricted its residents from gambling on foreign websites, nor has it restricted access to such sites. Consequently, not only sports betting organizers from other EU Member States, but also from third countries, are able to render and target their services to the Latvian public. Given that these websites operate according to the laws of their registration countries and are not controlled by the Inspection, the Latvian consumers using these services do so at their own risk. Nevertheless, judging from the frequency of the advertisements these foreign gambling sites place in the Latvian portals, it must be concluded that consumers do not find the lack of Inspection back-up as a major factor and are using these services at least to the extent that it makes economic sense for the operators to be present on the market. In fact there has not been much public turmoil regarding any fraudulent cases by these foreign operators and, although the Inspection might have received some complaints from consumers, as of today it has not published any “black lists” or warnings regarding particular sites which should be avoided. Hence, it would be fair to say that the Latvian sports betting market consists of two parts - the locally licensed and the foreign online operators. In these circumstances it is hard to tell the actual value and size of the market. Although the Inspection publishes statistics on the betting market, given that there is only one licensed operator in Latvia, these figures basically reflect the revenues of this company. It would be incorrect to assume that the company has a 100% market share, but on the other hand, it is also difficult to tell what the actual market share might be. There is no information as to the total market share the foreign operators have managed to obtain. Nevertheless, according to the most recent data published by the Inspection, 39 in the first quarter of 2009 (January-March), the turnover of the one betting organizer in Latvia was 2,7 [PA1]million LVL. Such turnover makes it the third largest gambling company by turnover in the whole industry. In year 2008 the total turnover from games of chance was 154 million LVL, of which betting accounted for 10 million LVL. It was the fourth largest turnover by companies in the gambling sector. In fact, given the economic downturn, out of all games of chance only the betting sector has demonstrated an increase if compared to results of 2007 (8,2 [PA2]million LVL). The same tendency is visible comparing the turnovers in the first quarter of 2008 (2,3 [PA3]million 37 SIA Tele Toto, Br v bas iela 99, R ga LV- 1001, Latvia, www.optibet.lv; 38 Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’), Official Journal L 178 , 17/07/2000 P. 0001 - 0016, article 1.5.c; 39 Supra note 6, Annual Public Report 2008; 40Amendments to the Law „On Lotteries and Gambling Tax and Fee”; adopted 16 June 2009; 41 Latvian Law on Lotteries and Gambling Tax and Fee, adopted on 16 June 1994, articles 13 and 14; 42 Supra note 6, Annual Public Report 2008; 43 Law on Personal Income tax of Republic of Latvia, adopted 11 May 1993, article 3.16 and art. 17.10.10; 44 Cabinet of Ministers Regulations No 233, adopted 01 July 1997, „Procedures how personal income tax is levied on persons’ income from lotteries and gambling”, article 3.2; LVL) to the first quarter of 2009 (2,7 [PA4]million LVL). Given the ~ 10 million LVL annual turnover for a single company, and the number of foreign online sites actively advertising on the market (bwin.com, betway.com, triobet.com, expekt.com, betsafe.com, etc), the actual size must be at least double of that. 5. Taxation Currently in Latvia the gambling tax and its payment order is regulated by the law “On Lotteries and Gambling Tax and Fee” (hereinafter the Law on Gambling Tax), adopted on June 16, 1994. The Law on Gambling Tax has had thirteen amendments, which together determine the tax and duties rates to be paid by enterprises that have received gambling licenses. The quantity of the amendments is interrelated with the growth of the gambling industry and its turnover. Initially the gambling tax was levied as a fixed rate on particular type of gambling. However with amendments adopted on September 19, 2003, the tax on the organization and operation of totalizator and betting was set as a percentage of the income from the activity. The gambling tax, along with the excise tax for tobacco and alcohol, is usually the first to be reviewed when the government needs to raise revenue for the state budget. On the other hand, even when the economy is in a decent shape, the tax rates are still increased to implement the defined Latvia’s policy - i.e. to control the growth of the industry. Considering the present economical downturn, Saeima has adopted yet another amendment to the Law on Gambling Tax, which came in force on July 1, 2009. 40 The tax rate for sports betting has been raised to 15% from the organizers income, instead of the 10% rate that was applicable before. The Law on Gambling Tax prescribes that the tax payment is made on a monthly basis as 1/12 of the total yearly tax rate. In the case if the tax amount is indicated incorrectly or the tax payment is delayed the State Revenue Service is empowered to impose strict sanctions, e.g., including disputeless tax recovery, legal penalties up to 250% from the payable tax amount and the annulment of gambling organizers’ licence. 41 Unfortunately there are no statistics available as to the taxes collected in particular from betting activities, however, in the first quarter of 2009 the collected gambling tax from the whole gambling industry amounted to 5,2 [PA5]million LVL in the state budget and additional 1,5 [PA6]million LVL in the municipality budgets. In addition to the gambling tax the companies also pay corporate income tax, social contributions, VAT and other taxes which in the first quarter of 2009 amounted to 2,8 [PA7]million LVL. Altogether in 2008 the industry paid 23,8 [PA8]million LVL as a gambling tax in the state budget, 6,9 [PA9]million in municipality budget and the other taxes amounted to 18,2 [PA10]million LVL. 42 Comparing the 2008 results to 2007 results there is a slight drop and the same is true if comparing the first quarter of 2009 and the first quarter of 2008. The results of the third quarter of 2009 should indicate whether the new tax rates in force as of July 1, 2009, will increase the tax revenues or will slow down the industry even more. The last taxation aspect to be mentioned is that any winnings from a gambling activity are taxable personal income (23% rate). 43 In accordance with Latvian tax law, the gambling organizers are obliged to withhold personal income tax and make respective contributions into the state budget on behalf of that person for any winnings above 500 LVL. 44 Although the average winnings from sports betting might not reach 500 LVL, if they do, the foreign online sports betting organizers are once again in an advantageous situation if compared to the local organizer. That is, they are not bound by this obligation and are able to remit the whole winning to the person without any withholdings. In such case, and also in cases where the winnings do not reach LVL 500, the Latvian resident itself is expected to declare such income and make the tax payments. 6. Conclusion Despite the economic downturn, the results of the sole sports betting organizer show that the market is still reasonably active. The fact that there is only one company licensed should not lead to false assumptions that the market is unattractive for other companies. On the con- A RT I C L E S 2009/3-4 121
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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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ICAS International Council for Arbi
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or serious bodily harm. Such prepar
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cumstances arise, a measure can be
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to the amount of regulations in the
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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
Page 88 and 89: 3.5.2. Regulations of the KNVB The
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
Page 98 and 99: any tax evasions. Added to this is
Page 100 and 101: the machines while, at the same tim
Page 102 and 103: saw sports betting as an easy way t
Page 104 and 105: mulated by football clubs, it was a
Page 106 and 107: tions,” which means that there we
Page 108 and 109: which includes the state monopoly a
Page 110: estricted items” and, together wi
Page 115 and 116: influence on the society. 7 Amendme
Page 117 and 118: 6.4. Compatibility with Article 49
Page 119 and 120: ting market is the fact that most o
Page 121: as local). 7 The amount of the paid
Page 125 and 126: Conditions for organizing sports be
Page 127 and 128: Although Delaware discontinued its
Page 129 and 130: Sports Betting: Law and Policy. A U
Page 131 and 132: deterred because electronic transac
Page 133: lenging time for the industry. As a
Page 137 and 138: CAS Publishes the Decisions Rendere
Page 139 and 140: tickets.com>, , and be transferre
Page 141 and 142: 4. to Tottenham Hostpur Public Lim
Page 143 and 144: Football League after government pr
Page 145 and 146: Football had given them a rare outl
Page 147 and 148: Moseneke wanted everyone to underst
Page 149 and 150: men and to repair the damage that h
Page 151 and 152: a day of jet travel for any competi
Page 153 and 154: television rights to the games, 67
Page 155 and 156: extraterritoriality nor a division
Page 157 and 158: cal matter, deter interference of h
Page 159 and 160: Thus, International Law, once a law
Page 161 and 162: en. 248 Typically, two separate con
Page 163 and 164: Guarantors would have undertaken to
Page 165 and 166: ing a professional football club or
Page 167: “TRANSLATING IS THINKING WITH ANO
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