JUDGMENT OF THE COURT (Fourth Chamber)

19 July 2012 ( *1 )

‛Article 49 EC — Restrictions on freedom to provide services — Equal treatment — Obligation of transparency — Betting and gaming — Casinos, amusement arcades and bingo halls — Obligation to obtain the prior agreement of the municipality of the place of establishment — Discretion — Substantial impairment of the interests of the State and of the residents of the administrative area concerned — Justifications — Proportionality’

In Case C-470/11,

REFERENCE for a preliminary ruling under Article 267 TFEU from the Augstākās Tiesas Senāts (Latvia), made by decision of 6 December 2010, received at the Court on 14 September 2011, in the proceedings

Garkalns SIA

v

Rīgas dome,

THE COURT (Fourth Chamber),

composed of J.-C. Bonichot, President of the Chamber, K. Schiemann, L. Bay Larsen, C. Toader (Rapporteur) and E. Jarašiūnas, Judges,

Advocate General: Y. Bot,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

— the Latvian Government, by I. Kalniņš, acting as Agent,

— the Portuguese Government, by L. Inez Fernandes, acting as Agent,

— the European Commission, by E. Kalniņš and I. Rogalski, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1 This reference for a preliminary ruling concerns the interpretation of Article 49 EC.

2 The reference has been made in proceedings between, on the one hand, Garkalns SIA (‘Garkalns’), whose seat is in Latvia, and, on the other, the Rīgas dome (Riga City Council), acting on behalf of the Rīgas pilsētas pašvaldības (the Riga municipal authorities; ‘the municipal authorities’), concerning the refusal by the Rīgas dome to authorise Garkalns to open an amusement arcade in a shopping centre in Riga.

Legal context

Latvian law

3 Article 26(1) of the Law on betting and gaming and lotteries (azartspēļu un izložu likums; ‘the Law on betting and gaming’) provides that, in order to open a casino, an amusement arcade or a bingo hall, a special licence is required. Licences are granted to companies which have obtained a general licence for the organisation of roulette or bingo, or gaming with slot machines, cards or dice.

4 Under Article 26(2) of the Law on betting and gaming, in order to obtain the special licence for the opening of a casino, an amusement arcade or a bingo hall, a person seeking to organise betting or gaming is to submit an application to the Inspectorate for lotteries and betting and gaming (Izložu un azartspēļu uzraudzības inspekcija), enclosing a number of documents, including a permit issued by the relevant municipal authorities authorising the opening of such an establishment and the organisation on those premises of the betting or gaming in question.

5 Article 41(2) of that law prohibits the organisation of games of chance in the following: ‘(1) government buildings; (2) churches and places of worship; (3) health-care or educational establishments; (4) pharmacies, post offices or credit institutions; (5) places in which public events are held, throughout the duration of those events, with the exception of the organisation of betting; (6) areas in which the holding of markets has been authorised in accordance with the prescribed procedure; (7) shops, cultural establishments, railway stations, bus stations, airports and ports, with the exception of amusement arcades and betting offices for which a closed space has been set aside, to which access is possible only from the outside of the building, through a separate entry; (8) bars and cafes, with the exception of the organisation of betting; (9) student halls of residence and workers’ hostels and similar establishments; (10) residential buildings to which access is gained by the same entrance as that giving access to the premises in which games of chance are organised.’

6 Article 42(3) of the Law on betting and gaming states that, in the event of a proposal to organise betting or gaming in premises to which the restrictions laid down in Article 41(2) of that law do not apply, the competent municipal authorities are to decide, in each specific case, whether a licence to organise betting and gaming should be granted and must consider whether or not the organisation of such activities in the premises in question will cause ‘substantial impairment of the interests of the State and of the residents of the administrative area concerned’.

The facts in the main proceedings and the question referred for a preliminary ruling

7 Garkalns applied to the municipal authorities for a licence to open an amusement arcade in a shopping centre in the city of Riga. By decision of 12 October 2006, the Rīgas dome refused to issue Garkalns with a licence, on the view that, if it were to do so, the interests of the residents of the municipality would be substantially impaired.

8 Garkalns brought an action before the administratīvā rajona tiesa (District Administrative Court). By judgment of 29 October 2008, that court dismissed the action.

9 By judgment of 13 April 2010, the appeal lodged against that judgment before the Administratīvā apgabaltiesa (Administrative Court of Appeal) was also dismissed.

10 The Administratīvā apgabaltiesa found that the organisation of games of chance in the premises selected was liable to impair not only the interests of the residents of the administrative district in question but also the interests of the residents of other administrative districts, since the shopping centre, which was very busy, was near a main thoroughfare. This meant that the site proposed for the amusement arcade was located in the immediate vicinity of a residential complex and approximately 500 metres away from a secondary education establishment. In the view of the Administratīvā apgabaltiesa, the rationale underlying the municipal authorities’ refusal to issue the licence was therefore the concern to prevent the public from being tempted to favour games of chance over other leisure opportunities.

11 Garkalns appealed on a point of law to the Augstākās Tiesas Senāts (Supreme Court) against the judgment of the Administratīvā apgabaltiesa. It submits, inter alia, that the Administratīvā apgabaltiesa misinterpreted Article 42(3) of the Law on betting and gaming.

12 In support of its appeal, Garkalns — referring to paragraphs 50 and 51 of the judgment in Case C-203/08 Sporting Exchange [2010] ECR I-4695 — argues, in particular, that, although a Member State may impose the requisite level of protection in the betting and gaming sector, it must not exercise its discretion in that respect in such a way as to compromise the freedom to provide services. The rules for authorising betting and gaming must therefore be based on objective, non-discriminatory criteria which are known in advance.

13 The Rīgas dome contends that the appeal should be dismissed and states that the contested decision reflects the municipal authorities’ practice of not issuing licences in order to reduce the number of such gaming establishments in Riga.

14 Although, according to the Augstākās Tiesas Senāts, the imprecise wording of Article 42(3) of the Law on betting and gaming may well be inconsistent with the principle of equal treatment and fail to meet the obligation of transparency which flows from that principle, that court asks whether such a statutory provision is perhaps necessary in order to afford the local authorities a measure of discretion in applying the rules on the organisation of betting and gaming and for the purposes of urban and social planning in the municipality, which would be precluded if more stringent criteria were laid down in that law.

15 In those circumstances, the Augstākās Tiesas Senāts decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling: ‘Must Article 49 EC and the related obligation of transparency be interpreted as meaning that the use, in a law which has been enacted publicly and in advance, of an imprecise legal concept such as “substantial impairment of the interests of the State and of the residents of the administrative area concerned” — a concept which has to be defined, with the help of interpretative guidelines, in each individual case in which it applies, but which at the same time allows a degree of flexibility in the assessment of restrictions on the freedom to provide services — is compatible with the permissible restrictions on that freedom?’

Consideration of the question referred

Admissibility

16 The Latvian Government contends that the reference for a preliminary ruling is inadmissible because all the elements of the dispute before the referring court are confined within a single Member State. In the view of that government, in the absence of any cross-border element, the question raised is hypothetical and has no connection with EU law.

17 In that regard, it should be recalled that, according to settled case-law, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of EU law, the Court is in principle bound to give a ruling (Case C-169/07 Hartlauer [2009] ECR I-1721, paragraph 24).

18 It follows that questions concerning EU law enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court for a preliminary ruling only where it is quite obvious that the interpretation of EU law that is sought is unrelated to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, in particular, Joined Cases C-570/07 and C-571/07 Blanco Pérez and Chao Gómez [2010] ECR I-4629, paragraph 36).

19 That is not the position as regards the present proceedings. In the order for reference, the Augstākās Tiesas Senāts sets out in sufficient detail the legal and factual context of the dispute before it and the information provided makes it possible to determine the full significance of the question raised.

20 It is common ground in the present case that Garkalns is a Latvian undertaking, set up in Latvia, and that all the elements of the dispute before the referring court are confined within one Member State. However, as is apparent from the case-law of the Court, the Court’s answer may be useful to the referring court even in such circumstances, in particular if its national law were to require it to grant a national the same rights as those which a national of another Member State would derive from EU law in the same situation (see, to that effect, Blanco Pérez and Chao Gómez, paragraph 39, and Joined Cases C-357/10 to C-359/10 Duomo Gpa and Others [2012] ECR, paragraph 28).

21 Furthermore, while national legislation such as that at issue in the main proceedings — which applies to Latvian nationals and the nationals of other Member States alike — is, generally, capable of falling within the scope of the provisions relating to the fundamental freedoms established by the Treaty on the Functioning of the European Union only to the extent that it applies to situations connected with trade between the Member States, it is far from inconceivable that operators established in Member States other than the Republic of Latvia have been or are interested in opening amusement arcades in Latvia (see, to that effect, Blanco Pérez and Chao Gómez, paragraph 40 and the case-law cited).

22 In those circumstances, the reference for a preliminary ruling must be held to be admissible.

Identification of the provisions of EU law requiring interpretation

23 The Latvian Government has expressed doubts as to the relevance of the reference to Article 49 EC in the question referred, maintaining that only Article 43 EC can be applied to a situation such as that at issue in the main proceedings.

24 In that regard, it should be noted that, according to consistent case-law, activities which consist in allowing users to participate, for remuneration, in betting or gaming constitute ‘services’ for the purposes of Article 49 EC (Joined Cases C-316/07, C-358/07 to C-360/07, C-409/07 and C-410/07 Stoß and Others [2010] ECR I-8069, paragraph 56 and the case-law cited).

25 Accordingly, services such as those at issue in the case before the referring court may fall within the scope of Article 49 EC, unless Article 43 EC applies.

26 As regards the delimitation of the scope, respectively, of the principles of freedom to provide services and freedom of establishment, it is necessary to establish whether or not the economic operator is established in the Member State in which it offers the service in question (see, to that effect, Case C-55/94 Gebhard [1995] ECR I-4165, paragraph 22). Where that operator is established in the Member State in which it offers the service, it falls within the scope of the principle of freedom of establishment, as defined in Article 43 EC. On the other hand, where the economic operator is not established in the Member State of destination, it is a cross-border service provider covered by the principle of freedom to provide services laid down in Article 49 EC (see Duomo Gpa and Others, paragraph 30 and the case-law cited).

27 In that context, the concept of establishment means that the operator offers its services on a stable and continuous basis from an establishment in the Member State of destination. On the other hand, every provision of services which are not offered on a stable and continuous basis from an establishment in the Member State of destination constitutes a ‘provision of services’ for the purposes of Article 49 EC (see Duomo Gpa and Others, paragraph 31 and the case-law cited).

28 It is also apparent from the case-law of the Court that no provision of the EC Treaty affords a means of determining, in an abstract manner, the duration or frequency beyond which the supply of a service or of a certain type of service can no longer be regarded as the provision of services and, accordingly, ‘services’ for the purposes of the Treaty may cover services varying widely in nature, including services which are provided over an extended period, even over several years (see Duomo Gpa and Others, paragraph 32 and the case-law cited).

29 It follows from the foregoing that a provision such as that at issue in the case before the referring court is, in principle, capable of falling within the scope both of Article 43 EC and of Article 49 EC.

30 In any event, it should be borne in mind that, in proceedings under Article 267 TFEU, which is based on a clear separation of functions between the national courts and the Court of Justice, any assessment of the facts in the case is a matter for the national court (Stoß and Others, paragraph 62 and the case-law cited).

31 It is thus for the national court to determine, in the light of the circumstances of the case before it, whether the situation at issue falls under Article 43 EC or Article 49 EC.

32 Since the terms in which it is framed relate to Article 49 EC, the question referred by the Augstākās Tiesas Senāts must be examined in the light of that provision.

Substance

33 By its question, the Augstākās Tiesas Senāts asks, in essence, whether Article 49 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which confers on local authorities a broad discretion in enabling them to refuse authorisation to open a casino, amusement arcade or bingo hall on grounds of ‘substantial impairment of the interests of the State and of the residents of the administrative area concerned’.

34 First of all, it should be noted that legislation of a Member State, such as that at issue in the main proceedings, which prohibits the pursuit of activities in the betting and gaming sector without prior authorisation from the administrative authorities, constitutes a restriction on the freedom to provide services guaranteed by Article 49 EC (see, to that effect, inter alia Joined Cases C-338/04, C-359/04 and C-360/04 Placanica and Others [2007] ECR I-1891, paragraph 42).

35 In the case under consideration, however, it is necessary to determine whether such a restriction may be allowed as a derogation, on grounds of public policy, public security or public health, as expressly provided for under Articles 45 EC and 46 EC, which are applicable in this area by virtue of Article 55 EC, or justified, in accordance with the case-law of the Court, by overriding reasons in the public interest (see, to that effect, Case C-42/07 Liga Portuguesa de Futebol Profissional and Bwin International [2009] ECR I-7633, paragraph 55, and the order in Case C-102/10 Bejan [2010] ECR, paragraph 44).

36 In that regard, the Court has repeatedly held that the legislation on betting and gaming is one of the areas in which there are significant moral, religious and cultural differences between the Member States. In the absence of harmonisation, it is for each Member State to determine in those areas, in accordance with its own scale of values, what is required in order to ensure that the interests in question are protected (see Liga Portuguesa de Futebol Profissional and Bwin International, paragraph 57 and the case-law cited).

37 However, the restrictive measures imposed by the Member States must satisfy the conditions laid down in the case-law of the Court as regards their proportionality and must be applied without discrimination. Accordingly, national legislation is appropriate for ensuring attainment of the objective pursued only if it genuinely reflects a concern to attain it in a consistent and systematic manner (see, to that effect, Liga Portuguesa de Futebol Profissional and Bwin International, paragraphs 59 to 61 and the case-law cited).

38 As the Court has held, national authorities enjoy a sufficient measure of discretion in that area to enable them to determine what is required in order to ensure consumer protection and the preservation of order in society and — provided that the conditions laid down in the case-law are in fact met — it is for each Member State to assess whether, in the context of the legitimate aims which it pursues, it is necessary to prohibit, wholly or in part, betting and gaming or only to restrict them and, to that end, to lay down more or less strict supervisory rules (see, to that effect, Stoß and Others, paragraph 76, and Case C-46/08 Carmen Media Group [2010] ECR I-8149, paragraph 46).

39 In that connection, it should be noted that the Court has consistently held that restrictions on betting and gaming may be justified by overriding requirements in the public interest, such as consumer protection and the prevention of both fraud and incitement to squander money on gambling (see, to that effect, Carmen Media Group, paragraph 55 and the case-law cited).

40 In the case under consideration, it is not in dispute that the objective pursued by the national legislation at issue — in particular, protection of the interests of local residents and protection of potential consumers against the risks linked to betting and gaming — may constitute an overriding reason in the public interest, capable of justifying the restriction on the freedom to provide services.

41 In those circumstances, it must be ascertained whether the restriction on the freedom to provide services imposed by the national legislation at issue in the main proceedings is appropriate for achieving the objective of protecting consumers against the risks linked to betting and gaming and whether it does not go beyond what is necessary to achieve that objective.

42 In addition, in order to be consistent with the principle of equal treatment and to meet the obligation of transparency which flows from that principle, an authorisation scheme for betting and gaming must be based on objective, non-discriminatory criteria known in advance, in such a way as to circumscribe the exercise by the authorities of their discretion so that it is not used arbitrarily (see, to that effect, Sporting Exchange, paragraph 50).

43 In order to enable the impartiality of the authorisation procedures to be monitored, it is also necessary for the competent authorities to base each of their decisions on reasoning which is accessible to the public, stating precisely the reasons for which, as the case may be, authorisation has been refused.

44 In that connection, the Court has held that it is for the national courts to ensure, in the light, in particular, of the actual rules for applying the restrictive legislation concerned, that that legislation genuinely meets the concern to reduce opportunities for gambling and to limit activities in that domain in a consistent and systematic manner (see, to that effect, Carmen Media Group, paragraph 65 and the case-law cited).

45 In the case under consideration, it cannot be denied that, as is apparent from the order for reference, in allowing authorisation to open an amusement arcade to be refused on grounds of substantial impairment of the interests of the State and of the residents of the administrative area concerned, the national legislation at issue in the main proceedings confers a broad discretion on the administrative authorities, particularly for the purposes of assessing the interests which that legislation is intended to protect.

46 Discretion, such as that at issue in the main proceedings, could be justified if the national legislation itself were genuinely intended to meet the concern to reduce opportunities for gambling and to limit activities in that domain in a consistent and systematic manner, or to ensure that local residents can live in peace or even, generally, to preserve public order, by conferring on the local authorities, for that purpose, a certain discretion in applying the rules relating to the organisation of betting and gaming.

47 In order to assess the proportionality of the national legislation at issue, it is therefore for the national court to verify, in particular, that the State strictly supervises the activities related to betting and gaming; that the refusal of the local authorities to authorise the opening of new establishments of that type genuinely pursues the declared objective of protecting consumers; and that the criterion of ‘substantial impairment of the interests of the State and of the residents of the administrative area concerned’ is applied without discrimination.

48 In the light of the foregoing, the answer to the question referred is that Article 49 EC must be interpreted as not precluding legislation of a Member State, such as that at issue in the main proceedings, which confers on local authorities a broad discretion in enabling them to refuse authorisation to open a casino, amusement arcade or bingo hall on grounds of ‘substantial impairment of the interests of the State and of the residents of the administrative area concerned’, provided that that legislation is genuinely intended to reduce opportunities for gambling and to limit activities in that domain in a consistent and systematic manner or to ensure the maintenance of public order and in so far as the competent authorities exercise their powers of discretion in a transparent manner, so that the impartiality of the authorisation procedures can be monitored, it being for the national court to determine whether those conditions are satisfied.

Costs

49 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. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Fourth Chamber) hereby rules:

Article 49 EC must be interpreted as not precluding legislation of a Member State, such as that at issue in the main proceedings, which confers on local authorities a broad discretion in enabling them to refuse authorisation to open a casino, amusement arcade or bingo hall on grounds of ‘substantial impairment of the interests of the State and of the residents of the administrative area concerned’, provided that that legislation is genuinely intended to reduce opportunities for gambling and to limit activities in that domain in a consistent and systematic manner or to ensure the maintenance of public order and in so far as the competent authorities exercise their powers of discretion in a transparent manner, so that the impartiality of the authorisation procedures can be monitored, it being for the national court to determine whether those conditions are satisfied.

[Signatures]

( *1 ) Language of the case: Latvian.