Markku Juhani Läärä, Cotswold Microsystems Ltd and Oy Transatlantic Software Ltd v Kihlakunnansyyttäjä (Jyväskylä) and Suomen valtio (Finnish State).
Date: 1999-09-21
13 In paragraph 60 of the Schindler judgment, the Court drew attention to the moral, religious and cultural considerations which attach to lotteries, like other forms of gambling, in all the Member States.  The general tendency of the national legislation is to restrict, or even prohibit, the practice of gambling and to prevent it from being a source of private profit.  The Court also held that lotteries involve a high risk of crime or fraud, given the potentially high stakes and winnings, particularly when they are operated on a large scale.  Furthermore, they are an incitement to spend which may have damaging individual and social consequences.  A final ground which, according to the Court, is not without relevance, although it cannot in itself be regarded as an objective justification, is that lotteries may make a significant contribution to the financing of benevolent or public interest activities such as social works, charitable works, sport or culture.
14 As is apparent from paragraph 61 of the judgment in Schindler, the Court held that those particular factors justify national authorities having a sufficient degree of latitude to determine what is required to protect the players and, more generally, in the light of the specific social and cultural features of each Member State, to maintain order in society, as regards the manner in which lotteries are operated, the size of the stakes, and the allocation of the profits they yield.  In those circumstances, it is for them to assess not only whether it is necessary to restrict the activities of lotteries but also whether they should be prohibited, provided that those restrictions are not discriminatory.
15 Although the judgment in Schindler relates to the organisation of lotteries, those considerations are equally applicable - as is apparent, moreover, from the very wording of paragraph 60 of that judgment - to other comparable forms of gambling.
16 It is true that, in its judgment in Case C-368/95 Familiapress v Bauerverlag [1997] ECR I-3689, the Court declined to equate certain games with lotteries of the type considered in Schindler.  However, that case concerned competitions published in magazines in the form of crosswords or puzzles, giving readers who had sent in the correct solutions the chance of being entered in a draw from which a number of them were selected as prize-winners. As the Court noted, particularly in paragraph 23 of that judgment, such games, organised only on a small scale and for insignificant stakes, do not constitute an economic activity in their own right but are merely one aspect of the editorial content of a magazine.
18 In those circumstances, games consisting of the use, in return for a money payment, of slot machines such as those at issue in the main proceedings must be regarded as gambling which is comparable to the lotteries forming the subject of the Schindler judgment.
19 However, the present case differs from Schindler in a number of respects.
20 First of all, the lotteries at issue in Schindler are not activities relating to `goods', falling, as such, under Article 30 of the Treaty; instead, they must be regarded as `services' within the meaning of the EC Treaty (judgment in Schindler, paragraphs 24 and 25).  Slot machines, by contrast, constitute goods in themselves which may be covered by Article 30 of the Treaty.
21 Next, whereas the national legislation at issue in Schindler prohibits the holding of lotteries on the territory of the Member State concerned, subject to certain exceptions laid down therein, the legislation at issue in the present case does not prohibit the use of slot machines but reserves the running of such machines to a public body holding a licence issued by the administrative authorities (`the licensed public body').
22 Finally, as has been pointed out in certain of the observations submitted to the Court, other provisions of the Treaty, such as those relating to the right of establishment or the competition rules, may be applicable to legislation of the kind at issue in the main proceedings.
23 As regards the latter point, however, since the national court has merely added to the reference to Articles 30, 36, 59 and 60 of the Treaty in its third question the words `or any other article of the ... Treaty', without providing any further details in that regard, either in the reasoning or in the operative part of its order, the Court is unable to rule on the question whether any provisions of the Treaty other than those relating to the free movement of goods and services preclude national legislation of the type at issue in the main proceedings.
24 First of all, as stated in paragraph 20 of this judgment, the provisions of the Treaty relating to the free movement of goods may be applicable to slot machines, which constitute goods capable of being imported or exported.  It is true that such machines are intended to be made available to the public for use in return for payment. However, as the Advocate General has stated in point 19 of his Opinion, the fact that an imported item is intended for the supply of a service does not in itself mean that it falls outside the rules regarding freedom of movement (see, to that effect, Case C-158/94 Commission v Italy [1997] ECR I-5789, paragraphs 15 to 20).
25 It should be noted in that regard that national legislation of the kind at issue in the main proceedings may hinder the free movement of goods, inasmuch as the licensed public body is, in law, the only possible operator of slot machines intended to be used in return for payment, and has the right to manufacture such machines itself.
26 However, in the absence of adequate detailed information concerning the practical effect which the legislation in issue has on the importation of slot machines, the Court is unable, in the present proceedings, to rule on the question whether Article 30 of the Treaty precludes its application.
27 Second, as the Court held in Schindler in relation to the organisation of lotteries, the provisions of the Treaty relating to freedom to provide services apply to activities which enable users, in return for payment, to participate in gaming.  Consequently, such activities fall within the scope of Article 59 of the Treaty, since at least one of the service providers is established in a Member State other than that in which the service is offered.
28 As the referring court points out, national legislation on slot machines such as the Finnish legislation prohibits any person other than the licensed public body from running the operation of the machines in question; it therefore involves no discrimination on grounds of nationality and applies without distinction to operators who might be interested in that activity, whether they are established in Finland or in another Member State.
29 However, such legislation constitutes an impediment to freedom to provide services in that it directly or indirectly prevents operators in other Member States from themselves making slot machines available to the public with a view to their use in return for payment.
31 In that regard, Articles 55 (now Article 45 EC) and 56 of the EC Treaty, which are applicable pursuant to Article 66 of the EC Treaty (now Article 55 EC), permit restrictions which are justified by virtue of a connection, even on an occasional basis, with the exercise of official authority or on grounds of public policy, public security or public health.  Furthermore, it is clear from the Court's case-law (see, to that effect, Case C-288/89 Collectieve Antennevoorziening Gouda [1991] ECR I-4007, paragraphs 13 to 15) that obstacles to freedom to provide services arising from national measures which are applicable without distinction are permissible only if those measures are justified by overriding reasons relating to the public interest, are such as to guarantee the achievement of the intended aim and do not go beyond what is necessary in order to achieve it.
32 According to the information contained in the order for reference and in the observations of the Finnish Government, the legislation at issue in the main proceedings responds to the concern to limit exploitation of the human passion for gambling, to avoid the risk of crime and fraud to which the activities concerned give rise and to authorise those activities only with a view to the collection of funds for charity or for other benevolent purposes.
33 As the Court acknowledged in paragraph 58 of the Schindler judgment, those considerations must be taken together.  They concern the protection of the recipients of the service and, more generally, of consumers, as well as the maintenance of order in society.  The Court has already held that those objectives are amongst those which may be regarded as overriding reasons relating to the public interest (see Joined Cases 110/78 and 111/78 Ministère Public v Van Wesemael [1979] ECR 35, paragraph 28; Case 220/83 Commission v France [1986] ECR 3663, paragraph 20; and Case 15/78 Société Générale Alsacienne de Banque v Koestler [1978] ECR 1971, paragraph 5).  However, it is still necessary, as stated in paragraph 31 of this judgment, that measures based on such grounds guarantee the achievement of the intended aims and do not go beyond that which is necessary in order to achieve them.
35 However, the power to determine the extent of the protection to be afforded by a Member State on its territory with regard to lotteries and other forms of gambling forms part of the national authorities' power of assessment, recognised by the Court in paragraph 61 of the Schindler judgment.  It is for those authorities to assess whether it is necessary, in the context of the aim pursued, totally or partially to prohibit activities of that kind or merely to restrict them and, to that end, to establish control mechanisms, which may be more or less strict.
36 In those circumstances, the mere fact that a Member State has opted for a system of protection which differs from that adopted by another Member State cannot affect the assessment of the need for, and proportionality of, the provisions enacted to that end.  Those provisions must be assessed solely by reference to the objectives pursued by the national authorities of the Member State concerned and the level of protection which they are intended to provide.
37 Contrary to the arguments advanced by the appellants in the main proceedings, the fact that the games in issue are not totally prohibited is not enough to show that the national legislation is not in reality intended to achieve the public interest objectives at which it is purportedly aimed, which must be considered as a whole.  Limited authorisation of such games on an exclusive basis, which has the advantage of confining the desire to gamble and the exploitation of gambling within controlled channels, of preventing the risk of fraud or crime in the context of such exploitation, and of using the resulting profits for public interest purposes, likewise falls within the ambit of those objectives.
39 The question whether, in order to achieve those objectives, it would be preferable, rather than granting an exclusive operating right to the licensed public body, to adopt regulations imposing the necessary code of conduct on the operators concerned is a matter to be assessed by the Member States, subject however to the proviso that the choice made in that regard must not be disproportionate to the aim pursued.
40 On that point, it is apparent, particularly from the rules on slot machines, that the RAY, which is the sole body holding a licence to run the operation of those machines, is a public-law association the activities of which are carried on under the control of the State and which is required, as noted in paragraph 5 of this judgment, to pay over to the State the amount of the net distributable proceeds received from the operation of the slot machines.
41 It is true that the sums thus received by the State for public interest purposes could equally be obtained by other means, such as taxation of the activities of the various operators authorised to pursue them within the framework of rules of a non-exclusive nature; however, the obligation imposed on the licensed public body, requiring it to pay over the proceeds of its operations, constitutes a measure which, given the risk of crime and fraud, is certainly more effective in ensuring that strict limits are set to the lucrative nature of such activities.
42 In those circumstances, in conferring exclusive rights on a single public body, the provisions of the Finnish legislation on the operation of slot machines do not appear to be disproportionate, in so far as they affect freedom to provide services, to the objectives they pursue.