On December 20, 2011, the Dutch Senate approved the legislative proposal regarding the introduction of the Gaming Authority. The new independent regulatory body will be operational as of April 1, 2012, and will make enforcement of the Dutch gaming regulations much more effective. A change in government in October 2010 resulted in plans to modernise the Dutch gaming policy. The State Secretary for Safety and Justice now responsible for the gaming dossier sent a policy note to the House of Representatives ("Tweede Kamer") on March 19, 2011, which marked a dramatic shift in the government's thinking on the regulation of all forms of gambling. These plans were fuelled by the final ruling of the Dutch Council of State in the post CJEU case Betfair/Ministry of Justice (Case 258/08). The supreme administrative court held that the Dutch licensing procedure is in breach of EU law because the procedure failed to comply with the principles of non-discrimination and transparency. (...) 2012 will be the year in which the legal landscape for (remote) gaming in the Netherlands undergoes a substantial redesign. While the Dutch government is shaping new remote gaming policy and intending to present a remote gaming bill in the first half of this year, the Gaming Authority will already become operational as of April 2012. These developments will create both opportunities and risks for parties active on the Dutch gaming market such as operators, software companies, PSPs and media companies. The Authority will actually have teeth to effectively enforce current and future Dutch gaming regulations which could particularly affect local-based entities or foreign entities with assets in the Netherlands. Nevertheless, it remains to be seen how the Gaming Authority will behave towards market players in the transitional period until the new remote gaming licensing regime unfolds. Without a transparent, sustainable and viable regulatory framework which is compliant with EU law, difficulties will remain with respect to enforcement.

1. Dutch Gaming Authority
installed ahead of opening
up remote gaming market
O
Frank Tolboom
By Justin Franssen and Frank Tolboom of VMW Taxand
n December 20, 2011, the Dutch consistent, transparent and Introduction of the Gaming Authority
Senate approved the legislative non-discriminatory manner.
proposal regarding the introduction The liberal policy plans were followed by Background
of the Gaming Authority. The new critical debates in parliament whereby
independent regulatory body will be Dutch MPs argued that the government's The main argument behind the
operational as of April 1, 2012, and will plans were too vague and that uncertainty introduction of the Gaming Authority is to
make enforcement of the Dutch gaming prevailed. They were concerned about the improve the effectiveness of the
regulations much more effective. possible harmful side effects of regulating enforcement of the Dutch Betting and
A change in government in October 2010 remote gaming such as the impact on the Gaming Act. According to the Explanatory
resulted in plans to modernise the Dutch prevalence of gambling addiction and on Memorandum there is a lack of
gaming policy. The State Secretary for revenues generated for good causes enforcement activities against unregulated
Safety and Justice now responsible for the and sports. gaming activities, especially regarding
gaming dossier sent a policy note to the Subsequently, the Ministry has remote gaming, despite there being a total
House of Representatives ("Tweede instructed external parties to conduct ban on such offerings in the Netherlands.
Kamer") on March 19, 2011, which marked studies into remote licensing/taxation Neither a B2C nor a B2B remote gaming
a dramatic shift in the government's scenarios, potential cannibalisation effects, operator has ever been criminally
thinking on the regulation of all forms of gambling addiction, technical and prosecuted for a violation of the Act.
gambling. These plans were fuelled by the operational compliance requirements for This can be explained in a number of
final ruling of the Dutch Council of State in remote gaming licences and finally a study ways. Firstly, because the Act was only
the post CJEU case Betfair/Ministry of into scenarios for the effective digital enforceable through means of criminal law
Justice (Case 258/08). The supreme enforcement of illegal remote gaming. In which is considered as impractical,
administrative court held that the Dutch some of these studies our firm plays an especially regarding foreign-based parties.
licensing procedure is in breach of EU law important role by providing legal expertise The former Minister of Justice
because the procedure failed to comply from the sector's perspective. A bill for the acknowledged in parliament that it is
with the principles of non-discrimination regulation of remote gaming is now disproportionate and too time-consuming
and transparency. expected in the first half of 2012. to try such matters before the courts.
The existing objectives of Dutch gaming Nevertheless, a legislative proposal Strikingly the State Secretary even
policy, namely consumer protection and regarding the introduction of a Gaming mentioned in parliament in 2011 that the
combating criminality and illegality, will Authority (submitted back in December Public Prosecution Department is unwilling
remain the same. However, the manner in 2009) was pending and there was strong to prosecute B2C operators.
which these objectives are given effect is consensus in parliament that the Gaming Secondly, until April 2012, the national
now subject to reform. The State Secretary Authority should be installed as soon as market is regulated directly and solely by
announced plans to: i) introduce a licensing possible. The legislative proposal was the Ministry of Safety and Justice and other
system for remote gaming in 2012 adopted in the Dutch Senate without any ministries according to the monopoly in
(currently subject to a total ban); and ii) in votes being cast. The Gaming Authority will question and the national Gaming Control
2015 to shift away from monopolies in the formally be operational as of April 1, 2012. Board ("College van Toezicht op de
offline sector (and possibly the privatisation Therefore, this article will focus on the Kansspelen"), the latter being limited to
of state-owned Holland Casino) to enable objectives, structure and enforcement providing advice to the government and
competition between operators. Under powers of the new regulatory body and the generally regarded as a ‘toothless tiger’.
these plans all operators will function on potential implications for both the offline Both the Ministry and the Gaming
the basis of licences awarded in a and remote sector. Control Board do not have any actual
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2. enforcement instruments. and will act as knowledge centre for both Netherlands. Both the Gaming
Therefore, as indicated in the the public and other authorities such as Authority and the municipalities will be
Explanatory Memorandum to the law addiction care institutes. allowed to order physical changes to
introducing the Gaming Authority, for In this respect the State Secretary end violations of the gaming
effective enforcement it is necessary that explicitly mentioned in the parliamentary regulations. It can also set a term
the Authority is equipped with adequate debate that high priority will be given to the for the violator to undo a violation,
and proportionate administrative introduction of a central register with enter and seal buildings and
enforcement instruments. problem players. In addition, the Authority confiscate goods.
will keep and regularly update a register
Main tasks with self-excluded players which is linked • Incremental penalty payment: both the
to both the offline and online sector (not Gaming Authority and municipalities
The Gaming Authority will be awarded including lotteries). As you can imagine, will be able to impose an order for
the status of an independent administrative these registers will raise many privacy incremental penalty payments to
regulatory body with operational tasks related issues and it remains to be seen enforce the gaming regulations. A
whereby the Ministry will maintain ultimate how this will be worked out in violator failing to cease the illegal
responsibility for instigating overall greater detail. activities will be subject to a penalty for
gambling policy. It cannot be excluded that non-compliance. This order cannot be
there will remain the risk of a dependent Enforcement powers imposed if an administrative order is
relationship by the Authority leaning heavily also imposed. These incremental
upon the government, or the risk that it Whereas originally only criminal penalty payments will mainly be
provides (indirect) protection to certain measures could be used against imposed if a licensee does not comply
(incumbent) market players. unlicensed gaming operators that exploit with the rules in relation to the age of
The Gaming Authority will be staffed with their activities in the Dutch market, the the participants of games of chance.
35 full-time employees and an additional amendment of the Act attributes to the Participants of the instant lottery,
13 full-time employees from "Verispect". Gaming Authority the power to use sports betting, lottery, casino and
This organisation was previously administrative measures against both amusement arcades must have
responsible for monitoring the slot licensed operators, (locally) unlicensed reached the age of 18. Secondly,
machine sector. The Dutch Gaming Control B2B and B2C operators, PSPs/ISPs and incremental penalty payments can be
Board ("College van Toezicht op de also affiliates. These administrative imposed if there is an infringement
Kansspelen"), which advised the Ministry enforcement instruments should make with respect to specific provisions
inter alia regarding the allocation of enforcement more effective and efficient. relating to gaming machines. This
licences, has already been wound up. The measures consist of: instrument can also be seen as an
The Gaming Authority will be the body effective tool regarding violations of
that issues, enforces and revokes licences • Administrative fines: most importantly advertising provisions.
and supervises all Dutch licensees. Once both the Gaming Authority as well as
remote gaming regulations are adopted, municipalities will be entitled to Criminal enforcement still possible
the Authority will be required to grant impose an administrative fine upon
remote gaming licences in an open, fair both unlicensed and licensed entities Although the Gaming Authority primarily
and non-discriminatory manner. which infringe the Act. The proposed enforces the Act by administrative
Importantly, following the above mentioned fines could be as high as €760,000 and measures as mentioned above, regular
Betfair ruling, the Authority is not entitled can be raised by 10 per cent of the criminal prosecution cannot be excluded.
to automatically allocate and renew annual revenue. It’s not clear whether Criminal prosecution by the Public
licences in favour of incumbent operators the total revenue of the company or Prosecution Service would generally be
without an open and fair process unless only revenues generated in the Dutch used in the case of serious offences of the
such operators are subject to very strict market will be taken into account. Next Gaming Act and are considered as the
government control. Therefore, in our view to that the Gaming Authority or ‘ultimum remedium’. The Authority and the
a preferable position for, or preferential municipalities could in certain Public Prosecution Service will set up a
treatment of, incumbent operators in the circumstances impose multiple fines cooperation agreement to divide
licensing process will no longer for the same offence. Failure to object competences for different offences under
be possible. to the administrative fine means that it the Act.
The Authority will undertake executive, becomes irreversible. A fixed rate of However, the State Secretary already
enforcement and supervisory tasks €370 will apply in respect of minor mentioned instances during discussions in
concerning the gaming market in the offences, such as failure to comply with the Senate in which criminal enforcement
Netherlands. The State Secretary stated the prohibition on minors being present is required and desirable, such as: i)
that the Authority will need to closely in amusement arcades. repeated serious infringements where
cooperate with foreign regulators and administrative enforcement fails to have
mentioned in parliament those in Malta • Administrative orders: administrative the desired effect; ii) where the
and Italy as examples. In addition, the orders may be imposed on entities that infringement of the Act is also related to
Authority will provide educational services have a physical presence in the other criminal activities (such as money
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3. laundering); and iii) in cases whereby a There is, however, no basis in the alternative was to revoke the licence which
precedent is needed because criminal legislative history of the Act nor in any case was considered as disproportionate. Next
prosecution will have a serious deterrent law for such a broad interpretation. In our to that it was not practicable to revoke the
effect for the rest of the sector. opinion, the promotion of participation in licence of a monopoly player because it
games of chance pursuant to Section 1(b) would then create a large vacuum in terms
Blacklisting of the Act pertains solely to publicity and of supply and revenue generation.
advertisements for games of chance and The State Secretary explicitly mentioned
As mentioned before, the State Secretary not to the provision of financial services. It that specific attention will be given to
is facing considerable resistance from seems that in the current situation the marketing activities. An amendment to the
within parliament as to his liberal plans for Ministry is stretching the connotation of Gaming Authority bill has been tabled and
the regulation of remote gaming. In the Article 1(b) of the Act beyond its original approved which states that the Authority
latest debate on September 7, 2011, in the intent in order to be able to tackle remote must provide specific regulations relating
House of Representatives, which was gaming operators. to the careful and balanced marketing and
scheduled to discuss the Gaming Authority, Also quite remarkable is the fact that the promotional activities by licensees. In this
several MPs took the opportunity to State Secretary in the same discussions context it is possible that the Authority will
question the State Secretary regarding the stated that he would consider the undertake targeted actions against
regulation of remote gaming. possibility of implementing provisions into excessive advertising of the incumbents.
Several MPs pushed the State Secretary the Act that would enable ISP and PSP- Next to that it must also be noted that
on enforcing the current prohibition against blocking. The fact that ISP and PSP- we are still awaiting a final decision from
unlicensed operators and ensuring that blocking need a legal basis in the the Dutch Supreme Court in the post CJEU
such operators will not qualify for remote announced reform of the Act could be case De Lotto/Ladbrokes (C-258/08), which
gaming licences in the future. It is within understood as suggesting that there is essentially deals with the question to what
this context that the State Secretary stated indeed no such legal basis at the moment. extent a monopoly operator can advertise
that he would undertake blacklisting as Another legal ground for the blacklisting and make games attractive when the aim
soon as possible as a means to ensure the process would be Customer Due Diligence of the restrictive legislation is to prevent
blocking of financial transactions between regulations. Based on general KYC- crime and problem gambling.
Netherlands-based financial service requirements established in financial
providers and unlicensed operators. regulations, banks are entitled to Remote sector
Currently many remote operators have (voluntarily) break off their relationship
been receiving so-called "cease and desist" with 'illegal' operators. According to the former Minister of
letters. These actions are being taken Justice, Mr Donner, action against
before the opening up of the remote Implications for the sectors operators of online games of chance will
gaming market, which theoretically means be one of the highest priorities for the
that any remote gaming operator targeting As we have experienced with the Gaming Authority. Although some MPs are
the Dutch market and accepting Dutch introduction of similar regulators in the pressuring the State Secretary to take
players could be addressed. Operators Netherlands (such as the "OPTA": immediate enforcement action against
failing to comply with the conditions set out regulator for the electronic communication current "illegal" unlicensed remote gaming
in the letter will be included on the blacklist. sector), it’s not inconceivable that the operators and to disqualify them from
The Gaming Authority will maintain and Gaming Authority will show its teeth from future licensing procedures, it must be
regularly update the actual list of the very beginning to make a statement noted that regarding the latter the State
operators. Details of operators listed will and anchor its position in the political and Secretary was hesitant to comply with
be sent to the Nederlandse Vereniging van regulatory landscape. Although of course it these calls. Nevertheless, currently the
Banken ("Dutch Banking Association") is difficult to predict, it cannot be excluded Ministry (and as from April 1 the Authority)
which will forward this information to its that the Authority will be particularly active will maintain a blacklist with "illegal"
members so that they can take measures from the start, possibly through especially operators on the basis of which
to stop providing financial transaction targeting entities with a local presence enforcement could take place.
services to unlicensed operators. which clearly act in violation of gaming It remains to be seen how the Authority
However, there is considerable regulations and which could be addressed will react to currently unlicensed operators
controversy with respect to the legal basis easily and effectively. until a new remote licensing regime is in
for the black-listing process and its place. Hopefully, there is an awareness
enforceability. There is currently no specific Offline sector that, apart from a legal point of view that at
act or legislation prohibiting the facilitation this moment this sanctioning policy cannot
of financial services to unlicensed gaming In the last couple of years the incumbent be considered legitimate in view of the
operators. Although the State Secretary is monopoly players faced much criticism Betfair ruling, a blackout approach has the
inconsistent in his statements, he seeks to from parliament regarding their extensive potential to be highly counterproductive.
include the provision of financial services advertising activities and policy regarding The objectives behind regulating the
through a broad interpretation of the term consumer protection. However, it was remote gaming market will be frustrated if
‘promotion’ in the prohibition of the difficult for the government to effectively either the majority of operators are
promotion of illegal games of chance monitor and control the incumbent unsuccessful in future license applications
(Section 1(b) of the Act). operators because their only enforcement or if operators are required to stop serving
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4. Dutch consumers in the run-up to licensing. Nevertheless, administrative shaping new remote gaming policy and
There is a danger that their current enforcement instruments may easily be intending to present a remote gaming bill
consumers will fall into the hands of those imposed and enforced towards local in the first half of this year, the Gaming
who have no intention of obtaining a entities or foreign entities with any assets, Authority will already become operational
licence. The Authority is, however, a subsidiary or agency in the Netherlands. as of April 2012. These developments will
designed as a body independent from the Such entities with a presence in the create both opportunities and risks for
Ministry and it remains to be seen how Netherlands could face severe parties active on the Dutch gaming market
the Authority will actually act in the administrative penalties and fines when such as operators, software companies,
transitional period up to the new remote infringing the Act. In this context marketing PSPs and media companies.
licensing regime. of gaming related businesses (affiliate The Authority will actually have teeth to
If and when the Authority will use its marketing) will likely be more complicated. effectively enforce current and future Dutch
administrative enforcement powers, it must Apart from administrative enforcement, gaming regulations which could
be noted that the administrative measures regular criminal prosecution by the Public particularly affect local-based entities or
cannot be easily executed abroad. Prosecution Service cannot be excluded, foreign entities with assets in the
Therefore, we anticipate at this moment but the chance of such action is not Netherlands. Nevertheless, it remains to
that foreign-based entities cannot be affected by the introduction of the Authority. be seen how the Gaming Authority will
effectively addressed by the Authority. The behave towards market players in the
State Secretary, however, announced that Conclusion transitional period until the new remote
an external party is currently conducting gaming licensing regime unfolds. Without a
research into different scenarios for 2012 will be the year in which the legal transparent, sustainable and viable
effective and efficient digital monitoring landscape for (remote) gaming in the regulatory framework which is compliant
and enforcement of (cross-border) illegal Netherlands undergoes a substantial with EU law, difficulties will remain with
remote gaming activities. redesign. While the Dutch government is respect to enforcement.
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