CELEX: 62001CJ0243
Right of establishment
Freedom to provide services
Collection of bets on sporting events in one Member State and transmission by internet to another Member State
Prohibition enforced by criminal penalties
Legislation in a Member State which reserves the right to collect bets to certain bodies

By order of 30 March 2001, received at the Court on 22 June 2001, the Tribunale di Ascoli Peceno referred to the Court for
a preliminary ruling under Article 234 EC a question on the interpretation of Articles 43 and 49 EC.
The question was raised in criminal proceedings brought against Mr Gambelli and 137 other defendants (hereinafter
Gambelli and others), who are accused of having unlawfully organised clandestine bets and of being the proprietors of centres carrying on the
activity of collecting and transmitting betting data, which constitutes an offence of fraud against the State.
Legal background
Community legislation
Article 43 EC provides as follows:- Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member
State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the
setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member
State.Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and
manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, under the
conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the
provisions of the Chapter relating to capital.
The first paragraph of Article 48 EC provides that
companies or firms formed in accordance with the law of a Member State and having their registered office, central administration
or principal place of business within the Community shall ... be treated in the same way as natural persons who are nationals
of Member States.
Article 46(1) EC provides that
the provisions of this Chapter and measures taken in pursuance thereof shall not prejudice the applicability of provisions
laid down by law, regulation or administrative action providing for special treatment for foreign nationals on grounds of
public policy, public security or public health.
The first paragraph of Article 49 EC provides that
within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall
be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of
the person for whom the services are intended.
National legislation
Under Article 88 of the Regio Decreto No 773, Testo Unico delle Leggi di Pubblica Sicurezza (Royal Decree No 773 approving
a single text of the laws on public security), of 18 June 1931 (GURI No 146 of 26 June 1931, hereinafter
the Royal Decree), no licence is to be granted for the taking of bets, with the exception of bets on races, regatta, ball games or similar
contests where the taking of the bets is essential for the proper conduct of the competitive event.
Under Legge Finanziaria No 388 (Finance Law No 388) of 23 December 2000 (ordinary supplement to the GURI of 29 December 2000,
hereinafter
Law No 388/00), authorisation to organise betting is granted exclusively to licence holders or to those entitled to do so by a ministry
or other entity to which the law reserves the right to organise or carry on betting. Bets can relate to the outcome of sporting
events taking place under the supervision of the Comitato olimpico nazionale italiano (Italian National Olympic Committee,
hereinafter
the CONI), or its subsidiary organisations, or to the results of horse races organised through the Unione nazionale per l'incremento
delle razze equine (National Union for the Betterment of Horse Breeds, hereinafter
the UNIRE).
Articles 4, 4a and 4b of Law No 401 of 13 December 1989 on gaming, clandestine betting and ensuring the proper conduct of
sporting contests (GURI No 294 of 18 December 1989 as amended by Law No 388/00, (hereinafter Law No 401/89), Article 37(5)
of which inserted Articles 4a and 4b into Law No 410/89, provide as follows: Unlawful participation in the organisation of games or betsArticle 4
1.
Any person who unlawfully participates in the organisation of lotteries, betting or pools reserved by law to the State or
to entities operating under licence from the State shall be liable to a term of imprisonment of 6 months to 3 years. Any person
who organises betting or pools in respect of sporting events run by CONI, by organisations under the authority of CONI or
by UNIRE shall be liable to the same penalty. Any person who unlawfully participates in the public organisation of betting
on other contests between people or animals, as well as on games of skill, shall be liable to a term of imprisonment of 3
months to 1 year and a minimum fine of ITL 1 000 000.
2.
Any person who advertises competitions, games or betting organised in the manner described in paragraph 1 without being an
accomplice to an offence defined therein shall be liable to a term of imprisonment of up to 3 months and a fine of between
ITL 100 000 and ITL 1 000 000.
3.
Any person who participates in competitions, games or betting organised in the manner described in paragraph 1 without being
an accomplice to an offence defined therein shall be liable to a term of imprisonment of up to 3 months or a fine of between
ITL 100 000 and ITL 1 000 000.
...Article 4aThe penalties laid down in this article shall be applicable to any person who without the concession, authorisation or licence
required by Article 88 of [the Royal Decree] carries out activities in Italy for the purpose of accepting or collecting, or,
in any case, assisting in the acceptance or collection in any way whatsoever, including by telephone or by data transfer,
of bets of any kind placed by any person in Italy or abroad.Article 4b... the penalties provided for by this article shall be applicable to any person who carries out the collection or registration
of lottery tickets, pools or bets by telephone or data transfer without being authorised to use those means to effect such
collection or registration.
The main proceedings and the question referred for a preliminary ruling
The order for reference states that the Public Prosecutor and the investigating judge at the Tribunale di Fermo (Italy) established
the existence of a widespread and complex organisation of Italian agencies linked by the internet to the English bookmaker
Stanley International Betting Ltd (
Stanley), established in Liverpool (United Kingdom), and to which Gambelli and others, the defendants in the main proceedings, belong.
They are accused of having collaborated in Italy with a bookmaker abroad in the activity of collecting bets which is normally
reserved by law to the State, thus infringing Law No 401/89.
Such activity, which is considered to be incompatible with the monopoly on sporting bets enjoyed by the CONI and which constitutes
an offence under Article 4 of Law No 401/89, is performed as follows: the bettor notifies the person in charge of the Italian
agency of the events on which he wishes to bet and how much he intends to bet; the agency sends the application for acceptance
to the bookmaker by internet, indicating the national football games in question and the bet; the bookmaker confirms acceptance
of the bet in real time by internet; the confirmation is transmitted by the Italian agency to the bettor and the bettor pays
the sum due to the agency, which sum is then transferred to the bookmaker into a foreign account specially designated for
this purpose.
Stanley is an English capital company registered in the United Kingdom which carries on business as a bookmaker under a licence
granted pursuant to the Betting, Gaming and Lotteries Act by the City of Liverpool. It is authorised to carry on its activity
in the United Kingdom and abroad. It organises and manages bets under a UK licence, identifying the events, setting the stakes
and assuming the economic risk. Stanley pays the winnings and the various duties payable in the United Kingdom, as well as
taxes on salaries and so on. It is subject to rigorous controls in relation to the legality of its activities, which are carried
out by a private audit company and by the Inland Revenue and Customs and Excise.
Stanley offers an extensive range of fixed sports bets on national, European and world sporting events. Individuals may participate
from their own home, using various methods such as the internet, fax or telephone, in the betting organised and marketed by
it.
Stanley's presence as an undertaking in Italy is consolidated by commercial agreements with Italian operators or intermediaries
relating to the creation of data transmission centres. Those centres make electronic means of communication available to users,
collect and register the intentions to bet and forward them to Stanley.
The defendants in the main proceedings are registered at the Camera di Commercio (Chamber of Commerce) as proprietors of undertakings
which run data transfer centres and have received due authorisation from the Ministero delle Poste e delle Comunicazioni (Minister
for Post and Communications) to transmit data.
The judge in charge of the preliminary investigations at the Tribunale di Fermo made an order for provisional sequestration
and the defendants were also subjected to personal checks and to searches of their agencies, homes and vehicles. Mr Garrisi,
who is on the Board of Stanley, was taken into police custody.
The defendants in the main proceedings brought an action for review before the Tribunale di Ascoli Piceno against the orders
for sequestration relating to the data transmission centres of which they are the proprietors.
The Tribunale di Ascoli Piceno makes reference to the case-law of the Court, in particular its judgment in Case C-67/98
Zenatti
[1999] ECR I-7289. However, it considers that the questions raised in the case before it do not quite correspond to the facts
already considered by the Court in
Zenatti
. Recent amendments to Law No 401/89 demand re-examination of the issue by the Court of Justice.
The Tribunale di Ascoli Piceno refers in this context to the parliamentary working papers relating to Law No 388/00 which
show that the restrictions inserted by that law into Law No 401/89 were dictated chiefly by the need to protect sports
Totoricevitori, a category of private sector undertakings. The court states that it cannot find in those restrictions any public policy
concern able to justify a limitation of the rights guaranteed by Community or constitutional rules.
The court emphasises that the apparent legality of collecting and forwarding bets on foreign sporting events, on the initial
wording of Article 4 of Law No 401/89, had led to the creation and development of a network of operators who have invested
capital and created infrastructures in the gaming and betting sector. Those operators suddenly find the legitimacy of their
position called in question following amendments to the rules in Law No 388/00 prohibiting on pain of criminal penalties the
carrying on of activities by any person anywhere involving the collection, acceptance, registration and transmission of offers
to bet, in particular on sporting events, without a licence or permit from the State.
The national court questions whether the principle of proportionality is being observed, having regard first to the severity
of the prohibition, breach of which attracts criminal penalties which may make it impossible in practice for lawfully constituted
undertakings or Community operators to carry on economic activities in the betting and gaming sector in Italy, and secondly
to the importance of the national public interest protected and for which the Community freedoms are sacrificed.
The Tribunale di Ascoli Piceno also considers that it cannot ignore the extent of the apparent discrepancy between national
legislation severely restricting the acceptance of bets on sporting events by foreign Community undertakings on the one hand,
and the considerable expansion of betting and gaming which the Italian State is pursuing at national level for the purpose
of collecting taxation revenues, on the other.
The court observes that the proceedings before it raise, first, questions of national law relating to the compatibility of
the statutory amendments to Article 4 of Law No 401/89 with the Italian constitution, which protects private economic initiative
for activities which are not subject to taxes levied by the State, and secondly questions relating to the incompatibility
of the rule laid down in that article with the freedom of establishment and the freedom to provide cross-border services.
The questions of national law raised have been referred by the Tribunale di Ascoli Piceno to the Corte costituzionale (the
Italian Constitutional Court).
In those circumstances, the Tribunale di Ascoli Piceno has decided to stay proceedings and to refer the following question
to the Court of Justice for a preliminary ruling: Is there incompatibility (with the repercussions 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 on the other domestic legislation such as the provisions contained in Article 4(1) et seq., Article 4a and Article 4b
of Italian Law No 401/89 (as most recently amended by Article 37(5) of Law No 388/00 of 23 December 2000) which prohibits
on pain of criminal penalties the pursuit by any person anywhere of the activities of collecting, taking, booking and forwarding
offers of bets, in particular bets on sporting events, unless the requirements concerning concessions and authorisations prescribed
by domestic law have been complied with?
The question
Observations submitted to the Court
Gambelli and others consider that by prohibiting Italian citizens from linking up with foreign companies in order to place
bets and thus to receive the services offered by those companies by internet, by prohibiting Italian intermediaries from offering
the bets managed by Stanley, by preventing Stanley from establishing itself in Italy with the assistance of those intermediaries
and thus offering its services in Italy from another Member State and, in sum, by creating and maintaining a monopoly in the
betting and gaming sector, the legislation at issue in the main proceedings amounts to a restriction on both freedom of establishment
and freedom to provide services. No justification for the restriction is to be found in the case-law of the Court of Justice
stemming from Case C-275/92
Schindler
[1994] ECR I-1039, Case C-124/97
Läärä and Others
[1999] ECR I-6067 and
Zenatti
, cited above, because the Court has not had occasion to consider the amendments made to that legislation by Law No 388/00
and it has not examined the issue from the point of view of freedom of establishment.
The defendants in the main proceedings emphasise in that regard that the Italian State is not pursuing a consistent policy
whose aim is to restrict, or indeed abolish, gaming activities within the meaning of the judgments in
Läärä
, paragraph 37, and
Zenatti
, paragraph 36. The concerns cited by the national authorities relating to the protection of bettors against the risk of fraud,
the preservation of public order and reducing both opportunities for gaming in order to avoid the damaging consequences of
betting at both individual and social level and the incitement to spend inherent therein are groundless because Italy is increasing
the range of betting and gaming available, and even inciting people to engage in such activities by facilitating collection
in order to increase tax revenue. The fact that the organising of bets is regulated by financial laws shows that the true
motivation of the national authorities is economic.
The purpose of the Italian legislation is also to protect licensees under the national monopoly by making that monopoly impenetrable
for operators from other Member States, since the invitations to tender contain criteria relating to ownership structures
which cannot be met by a capital company quoted on the stock exchange but only by natural persons, and since they require
applicants to own premises and to have been a licence holder over a substantial period.
The defendants in the main proceedings argue that it is difficult to accept that a company like Stanley, which operates entirely
legally and is duly regulated in the United Kingdom, should be treated by the Italian legislation in the same way as an operator
who organises clandestine gaming, when all the public-interest concerns are protected by the United Kingdom legislation and
the Italian intermediaries in a contractual relationship with Stanley as secondary or subsidiary establishments are registered
as official suppliers of services and with the Ministry of Post and Telecommunications with which they operate, and which
subjects them to regular checks and inspections.
That situation, which falls within the scope of freedom of establishment, contravenes the principle of mutual recognition
in sectors which have not yet been harmonised. It is also contrary to the principle of proportionality,
a fortiori
because criminal penalties ought to constitute a last resort for a Member State in cases where other measures and instruments
are not able to provide adequate protection of the interests concerned. Under the Italian legislation, bettors in Italy are
not only deprived of the possibility of using bookmakers established in another Member State, even through the intermediary
of operators established in Italy, but are also subject to criminal penalties.
The Italian, Belgian, Greek, Spanish, French, Luxembourg, Portuguese, Finnish and Swedish Governments, as well as the Commission,
cite the case-law of the Court of Justice, in particular the judgments in
Schindler
,
Läärä
and
Zenatti
.
The Italian Government relies on the judgment in
Zenatti
to show that Law No 401/89 is compatible with the Community legislation in the sphere of freedom to provide services, and
even in that of freedom of establishment. Both the matter considered by the Court in that case, namely administrative authorisation
to pursue the activity of collecting and managing bets in Italy, and the question raised in the main proceedings, namely the
existence of a criminal penalty prohibiting that activity where it is carried on by operators who are not part of the State
monopoly on betting, pursue the same aim, which is to prohibit such activities and to reduce gaming opportunities in practice,
other than in situations which are expressly provided for by law.
The Belgian Government observes that a single market for gaming will only incite consumers to squander more and will have
significant damaging effects for society. The level of protection introduced by Law No 401/89 and the restrictive authorisation
scheme serve to ensure the attainment of objectives which are in the general interest, namely limiting and strictly controlling
the supply of gaming and betting, is proportionate to those objectives and involves no discrimination on grounds of nationality.
The Greek Government considers that the organisation of games of chance and bets on sporting events must remain within the
control of the State and be operated by means of a monopoly. If it is engaged in by private entities, that will have direct
consequences such as disturbance of the social order and incitement to commit offences, as well as exploitation of bettors
and consumers in general.
The Spanish Government submits that both the grant of special or exclusive rights under a strict authorisation or licensing
regime and the prohibition on opening foreign branches to process bets in other Member States are compatible with the policy
of limiting supply, provided that those measures are adopted with a view to reducing opportunities for gaming and stimulation
of supply.
The French Government maintains that the fact that in the main proceedings the collection of bets is effected at a distance
by electronic means and the sporting events to which the bets relate take place exclusively in Italy ─ which was not the case
in
Zenatti
─ does not affect the Court's case-law under which national laws which limit the pursuit of activities relating to gaming
or lotteries and cash machines are compatible with the principle of the freedom to provide services where they pursue an objective
that is in the general interest, such as the prevention of fraud or the protection of bettors against themselves. Member States
are therefore justified in regulating the activities of operators in the area of betting in non-discriminatory ways, since
the degree and scope of the restrictions are within the discretion enjoyed by the national authorities. It is thus for the
courts of the Member States to determine whether the national authorities have acted proportionately in their choice of means,
having regard to the principle of freedom to provide services.
As regards freedom of establishment, the French Government considers that the restrictions on the activities of the independent
Italian companies in a contractual relationship with Stanley do not undermine Stanley's right to establish itself freely in
Italy.
The Luxembourg Government considers that the Italian legislation constitutes an obstacle to the pursuit of the activity of
organising bets in Italy because it prohibits Stanley from carrying on its activities in Italy either directly, under the
freedom to provide cross-border services, or indirectly through the intermediary of Italian agencies linked by internet. It
also constitutes a restriction on the freedom of establishment. However, those obstacles are justified in so far as they pursue
objectives which are in the general interest, such as the need to channel and control the desire to engage in gaming, and
are appropriate and proportionate for the attainment of those objectives inasmuch as they do not discriminate on grounds of
nationality, because both Italian entities and those established abroad have to obtain the same permit from the Minister for
Finance to be allowed to engage in the organisation, taking and collecting of bets in Italy.
The Portuguese Government notes that the main proceedings have serious implications as regards the maintenance not only in
Italy but in all the Member States of a system for running lotteries by public monopoly and as regards the need to preserve
a significant source of revenue for the States, which replaces the compulsory levying of taxes and serves to finance social,
cultural and sporting policies. In the activity of gaming, the market economy and free competition operate a redistribution
of sums levied in the context of that activity which is contrary to the social order, because they are likely to move from
countries where overall involvement is low to countries where it is higher and the amount of winnings more attractive. Bettors
in the small Member States would therefore be financing the social, cultural and sporting budgets of the large Member States
and the reduction in revenue from gaming would force governments in the smaller Member States to finance public initiatives
of a social nature and other State social, sporting and cultural activities by other means, which would mean an increase in
taxes in those Member States and a reduction in taxes in the big States. Furthermore, dividing up the State betting, gaming
and lotteries market between three or four large operators in the European Union would produce structural changes in distribution
networks for gaming lawfully carried on by those States, destroying an enormous number of jobs and distorting unemployment
levels in the various Member States.
The Finnish Government cites in particular the judgment in
Läärä
, in which the Court acknowledged that the need for and proportionality of provisions adopted by a Member State are to be
assessed solely in the light of the objectives pursued by the national authorities in that State and the level of protection
they seek to provide, so that it is for the national court to determine whether, in the light of the specific detailed rules
for its application, national legislation enables the aims relied on to justify it to be attained and whether the restrictions
are proportionate to those aims, having regard to the fact that the legislation must be applied to all operators alike, whether
they are from Italy or another Member State.
The Swedish Government observes that the fact that restrictions on the free movement of services are introduced for tax purposes
is not sufficient to support the conclusion that those restrictions are contrary to Community law, provided that they are
proportionate and do not involve discrimination as between operators, a matter for the national court to determine. The amendments
to the Italian legislation made by Law No 388/00 enable an entity which has been refused authorisation to collect bets in
Italy to circumvent the legislation by carrying on its activity from another Member State and prohibit foreign entities which
organise bets in their own country from pursuing their activities in Italy. As the Court held at paragraph 36 of the judgment
in
Läärä
and at paragraph 34 of the judgment in
Zenatti
, the mere fact that a Member State has opted for a protection scheme which is not the same as that adopted in another Member
State cannot influence the assessment of the need for and proportionality of the provisions adopted in that area.
The Commission of the European Communities takes the view that the legislative amendments effected by Law No 388/00 merely
make explicit what was already contained in Law No 401/89 and do not introduce a genuinely new category of offences. The public-order
grounds for limiting the damaging effects of betting activities relating to football matches which are relied on to justify
the fact that the national legislation reserves the right to collect those bets to certain organisations are the same regardless
of the Member State in which those activities take place. The fact that the sporting events to which the bets related in the
case of
Zenatti
took place abroad whereas in the main proceedings here the football matches take place in Italy is irrelevant. The Commission
adds that Directive No 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) (OJ 2000 L 178, p. 1) does not apply to bets, so that the outcome should be no different to that in
Zenatti
.
The Commission considers that the issue is not to be examined from the point of view of freedom of establishment because the
agencies run by the defendants in the main proceedings are independent and act as collection centres for bets and as intermediaries
in relations between their Italian customers and Stanley, and are not in any way subordinate to the latter. However, even
if the right of establishment were to apply, the restrictions in the Italian legislation are justified on the same grounds
of social policy as those accepted by the Court in
Schindler
,
Läärä
and
Zenatti
with regard to the restriction on the freedom to provide services.
At the hearing the Commission informed the Court that it had initiated the procedure against the Italian Republic for failure
to fulfil obligations in regard to the liberalisation of the horse-race betting sector managed by the UNIRE. As regards the
lottery sector, which is liberalised, the Commission referred to the judgment in Case C-272/91
Commission
v
Italy
[1994] ECR I-1409, in which the Court held that by restricting participation in an invitation to tender for the concession
of a lottery computerisation system to bodies, companies, consortia and groupings the majority of whose capital, considered
individually or in aggregate, was held by the public sector, the Italian Republic had failed to fulfil its obligations inter
alia under the EC Treaty.
The Court's reply
The first point to consider is whether legislation such as that at issue in the main proceedings (Law No 401/89) constitutes
a restriction on the freedom of establishment.
It must be remembered that restrictions on freedom of establishment for nationals of a Member State in the territory of another
Member State, including restrictions on the setting-up of agencies, branches or subsidiaries, are prohibited by Article 43
EC.
Where a company established in a Member State (such as Stanley) pursues the activity of collecting bets through the intermediary
of an organisation of agencies established in another Member State (such as the defendants in the main proceedings), any restrictions
on the activities of those agencies constitute obstacles to the freedom of establishment.
Furthermore, in reply to the questions put to it by the Court at the hearing, the Italian Government acknowledged that the
Italian legislation on invitations to tender for betting activities in Italy contains restrictions. According to that Government,
the fact that no entity has been licensed for such activities apart from the monopoly-holder is explained by the fact that
the way in which the Italian legislation is conceived means that the licence can only be awarded to certain persons.
In so far as the lack of foreign operators among licensees in the betting sector on sporting events in Italy is attributable
to the fact that the Italian rules governing invitations to tender make it impossible in practice for capital companies quoted
on the regulated markets of other Member States to obtain licences, those rules constitute prima facie a restriction on the
freedom of establishment, even if that restriction is applicable to all capital companies which might be interested in such
licences alike, regardless of whether they are established in Italy or in another Member State.
It is therefore possible that the conditions imposed by the legislation for submitting invitations to tender for the award
of these licences also constitute an obstacle to the freedom of establishment.
The second point to consider is whether the Italian legislation in that respect constitutes a restriction on the freedom to
provide services.
Article 49 EC prohibits restrictions on freedom to provide services within the Community for nationals of Member States who
are established in a Member State other than that of the person for whom the services are intended. Article 50 EC defines
services as services which are normally provided for remuneration, in so far as they are not governed by the provisions relating to
freedom of movement of goods, capital and persons.
The Court has already held that the importation of lottery advertisements and tickets into a Member State with a view to the
participation by residents of that State in a lottery operated in another Member State relates to a
service (
Schindler
, paragraph 37). By analogy, the activity of enabling nationals of one Member State to engage in betting activities organised
in another Member State, even if they concern sporting events taking place in the first Member State, relates to a
service within the meaning of Article 50 EC.
The Court has also held that, on a proper construction, Article 49 EC covers services which the provider offers by telephone
to potential recipients established in other Member States and provides without moving from the Member State in which he is
established (Case C-384/93
Alpine Investments
[1995] ECR I-1141, paragraph 22).
Transposing that interpretation to the issue in the main proceedings, it follows that Article 49 EC relates to the services
which a provider such as Stanley established in a Member State, in this case the United Kingdom, offers via the internet ─
and so without moving ─ to recipients in another Member State, in this case Italy, with the result that any restriction of
those activities constitutes a restriction on the freedom of such a provider to provide services.
In addition, the freedom to provide services involves not only the freedom of the provider to offer and supply services to
recipients in a Member State other than that in which the supplier is located but also the freedom to receive or to benefit
as recipient from the services offered by a supplier established in another Member State without being hampered by restrictions
(see, to that effect, Joined Cases 286/82 and 26/83
Luisi and Carbone
[1984] ECR 377, paragraph 16, and Case C-294/97
Eurowings Luftverkehr
[1999] ECR I-7447, paragraphs 33 and 34).
In reply to the questions put by the Court at the hearing, the Italian Government confirmed that an individual in Italy who
from his home connects by internet to a bookmaker established in another Member State using his credit card to pay is committing
an offence under Article 4 of Law No 401/89.
Such a prohibition, enforced by criminal penalties, on participating in betting games organised in Member States other than
in the country where the bettor is established constitutes a restriction on the freedom to provide services.
The same applies to a prohibition, also enforced by criminal penalties, for intermediaries such as the defendants in the main
proceedings on facilitating the provision of betting services on sporting events organised by a supplier such as Stanley,
established in a Member State other than that in which the intermediaries pursue their activity, since the prohibition constitutes
a restriction on the right of the bookmaker freely to provide services, even if the intermediaries are established in the
same Member State as the recipients of the services.
It must therefore be held that national rules such as the Italian legislation on betting, in particular Article 4 of Law No
401/89, constitute a restriction on the freedom of establishment and on the freedom to provide services.
In those circumstances it is necessary to consider whether such restrictions are acceptable as exceptional measures expressly
provided for in Articles 45 and 46 EC, or justified, in accordance with the case-law of the Court, for reasons of overriding
general interest.
With regard to the arguments raised in particular by the Greek and Portuguese Governments to justify restrictions on games
of chance and betting, suffice it to note that it is settled case-law that the diminution or reduction of tax revenue is not
one of the grounds listed in Article 46 EC and does not constitute a matter of overriding general interest which may be relied
on to justify a restriction on the freedom of establishment or the freedom to provide services (see, to that effect, Case
C-264/96
ICI
[1998] ECR I-4695, paragraph 28, and Case C-136/00
Danner
[2002] ECR I-8147, paragraph 56).
As stated in paragraph 36 of the judgment in
Zenatti
, the restrictions must in any event reflect a concern to bring about a genuine diminution of gambling opportunities, and
the financing of social activities through a levy on the proceeds of authorised games must constitute only an incidental beneficial
consequence and not the real justification for the restrictive policy adopted.
On the other hand, as the governments which submitted observations and the Commission pointed out, the Court stated in
Schindler
,
Läärä
and
Zenatti
that moral, religious and cultural factors, and the morally and financially harmful consequences for the individual and society
associated with gaming and betting, could serve to justify the existence on the part of the national authorities of a margin
of appreciation sufficient to enable them to determine what consumer protection and the preservation of public order require.
In any event, in order to be justified the restrictions on freedom of establishment and on freedom to provide services must
satisfy the conditions laid down in the case-law of the Court (see, inter alia, Case C-19/92
Kraus
[1993] ECR I-1663, paragraph 32, and Case C-55/94
Gebhard
[1995] ECR I-4165, paragraph 37).
According to those decisions, the restrictions must be justified by imperative requirements in the general interest, be suitable
for achieving the objective which they pursue and not go beyond what is necessary in order to attain it. They must in any
event be applied without discrimination.
It is for the national court to decide whether in the main proceedings the restriction on the freedom of establishment and
on the freedom to provide services instituted by Law No 401/89 satisfy those conditions. To that end, it will be for that
court to take account of the issues set out in the following paragraphs.
First of all, whilst in
Schindler
,
Läärä
and
Zenatti
the Court accepted that restrictions on gaming activities may be justified by imperative requirements in the general interest,
such as consumer protection and the prevention of both fraud and incitement to squander on gaming, restrictions based on such
grounds and on the need to preserve public order must also be suitable for achieving those objectives, inasmuch as they must
serve to limit betting activities in a consistent and systematic manner.
In that regard the national court, referring to the preparatory papers on Law No 388/00, has pointed out that the Italian
State is pursuing a policy of substantially expanding betting and gaming at national level with a view to obtaining funds,
while also protecting CONI licensees.
In so far as the authorities of a Member State incite and encourage consumers to participate in lotteries, games of chance
and betting to the financial benefit of the public purse, the authorities of that State cannot invoke public order concerns
relating to the need to reduce opportunities for betting in order to justify measures such as those at issue in the main proceedings.
Next, the restrictions imposed by the Italian rules in the field of invitations to tender must be applicable without distinction:
they must apply in the same way and under the same conditions to operators established in Italy and to those from other Member
States alike.
It is for the national court to consider whether the manner in which the conditions for submitting invitations to tender for
licences to organise bets on sporting events are laid down enables them in practice to be met more easily by Italian operators
than by foreign operators. If so, those conditions do not satisfy the requirement of non-discrimination.
Finally, the restrictions imposed by the Italian legislation must not go beyond what is necessary to attain the end in view.
In that context the national court must consider whether the criminal penalty imposed on any person who from his home connects
by internet to a bookmaker established in another Member State is not  disproportionate in the light of the Court's case-law
(see Case C-193/94
Skanavi and Chryssanthakopoulos
[1996] ECR I-929, paragraphs 34 to 39, and Case C-459/99
MRAX
[2002] ECR I-6591, paragraphs 89 to 91), especially where involvement in betting is encouraged in the context of games organised
by licensed national bodies.
The national court will also need to determine whether the imposition of restrictions, accompanied by criminal penalties of
up to a year's imprisonment, on intermediaries who facilitate the provision of services by a bookmaker in a Member State other
than that in which those services are offered by making an internet connection to that bookmaker available to bettors at their
premises is a restriction that goes beyond what is necessary to combat fraud, especially where the supplier of the service
is subject in his Member State of establishment to a regulation entailing controls and penalties, where the intermediaries
are lawfully constituted, and where, before the statutory amendments effected by Law No 388/00, those intermediaries considered
that they were permitted to transmit bets on foreign sporting events.
As to the proportionality of the Italian legislation in regard to the freedom of establishment, even if the objective of the
authorities of a Member State is to avoid the risk of gaming licensees being involved in criminal or fraudulent activities,
to prevent capital companies quoted on regulated markets of other Member States from obtaining licences to organise sporting
bets, especially where there are other means of checking the accounts and activities of such companies, may be considered
to be a measure which goes beyond what is necessary to check fraud.
It is for the national court to determine whether the national legislation, taking account of the detailed rules for its application,
actually serves the aims which might justify it, and whether the restrictions it imposes are disproportionate in the light
of those aims.
In the light of all those considerations the reply to the question referred must be that national legislation which prohibits
on pain of criminal penalties the pursuit of the activities of collecting, taking, booking and forwarding offers of bets,
in particular bets on sporting events, without a licence or authorisation from the Member State concerned constitutes a restriction
on the freedom of establishment and the freedom to provide services provided for in Articles 43 and 49 EC respectively. It
is for the national court to determine whether such legislation, taking account of the detailed rules for its application,
actually serves the aims which might justify it, and whether the restrictions it imposes are disproportionate in the light
of those aims.
Costs
The costs incurred by the Italian, Belgian, Greek, Spanish, French, Luxembourg, Portuguese, Finnish and Swedish Governments
and the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for
the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter
for that court.
On those grounds,
THE COURT,
in answer to the question referred to it by the Tribunale di Ascoli Piceno by an order of 30 March 2001, hereby rules:
Skouris
Jann
Timmermans
Cunha Rodgrigues
Edward
Schintgen
Macken
Colneric
von Bahr
Delivered in open court in Luxembourg on 6 November 2003.
R. Grass
V. Skouris
Registrar
President
–
Language of the case: Italian.