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Italy: delays in the machine licensing process

In the world of gaming machines, the big question is what will happen with regard to licensing in Italy? Will the pending judgement relating to enormous fines affect the market? How should investors and foreign operators approach it?

The issue stems from the delay in the launch of the Newslot network in 2004. The licensing act provided for the network to be completed by December 31, 2003, but, as the Expert Advice of the Digit PA ( the authority for electronic certification) reported, the first licensees installed at least 90 per cent of the devices in the third quarter of 2005 when approximately 40 per cent of the slot machines were already operational. The remainder where installed in the third quarter of 2006. As a result of this delay, the Regional Public Prosecutor’s Office of Corte dei Conti assessed a loss of revenue to the state equal to €90 bn, for which, together with the licensees, a few individuals were considered jointly liable.

The Corte dei Conti decision of November 11, 2010, made on the basis of the expert advice issued by Digit PA in September 2011 strongly reduced the damages for licensees. Here we summarise up the four questions raised by the Court and the relevant conclusions. The first two concerned the difficulties encountered by the licensees and whether these difficulties where foreseeable. These included the low number of dedicated telephone lines, the reluctance of operators to agree contractual terms with the licensees, the malfunctioning of a few slot machines. The next two questions raised by Corte dei Conti were aimed at ascertaining if licensees had complied with all the necessary technical provisions to launch the network and if the technical features of the AAMS-Sogei central system suited the service..

On February 17, 2012 Corte dei Conti issued decision n. 214/2012 in respect of the following companies: Atlantis World Giocolegale limited s.p.a, now Bplus GIocolegale ltd, Snai spa, Sisal spa, Gmatica srl, Cogetech spa, Gamenet spa, Lottomatica Videolot Rete spa, Cirsa Italia srl, HBG srl and Codere spa, and in respect of individuals involved at the time. The decision found that the requirements ad not been complied whit fully.

These iussues are complicated by the different jurisdictions involved and that were considered as competent. The decision stems from a provision of the Regional Corte dei Conti Public Prosecutor’s Office which had brought a default action against AAMS – the State Monopolies Gaming Authority – because it had not implemented the penalties set out by the conventions with the licensees.

In response, AAMS calculated the penalties, chiefly three of them, and imposed them on the licensees. The licensees appealed the Regional Administrative Court (TAR) against these penalties. The court suspended the penalties and then upheld the appeal. Appeals where then brought by AAMS to the Superior Administrative Court, the Consiglio di Stato. In the meantime, the Regional Public Prosecutor’s Office issued the liability decisions relating to the court summons of December 3 and 4, 2007 and which had been the origin of decision n. 214/12.

The decision, published on February 17, 2012, came when the Consiglio di Stato had already reversed the provisions which AAMS imposing the sanctions. However, the decision was issued by Corte dei Conti on the assumption that the conduct of the licensees and managers at the time had led to inefficiency and not on the principle of the enforcement of penalties. On the basis of the decisions of the Court of Cassation, Corte dei Conti considered the matter to be within their jurisdiction. In April 2012, the subjects appealed the central seat of Corte dei Conti against the decision. It is peculiar peculiar that following the submission of the appeal, the effect of the decision n. 214/2012 was suspended. In civil decisions, the fact of presenting an appeal does not suspend the effect of the challenged decision.

In fact, the decision in question is not to not be enforced. It will instead be replaced by the second decision, presumably imposing lower amounts, even if maintaining a conviction. There is another factor that could further modify the scope of the sanctions: the accounting amnesty.

Clearly, in this case, the parties should renounce to the appeal. Even if within a defined scope, the issue is still to be adequately “quantified”. Paradoxically, convicted licensees might be required to pay sums set imposed set out in the Corte dei Conti decision in addition to what eventually imposed by the TAR (or presumably the Council of State, in case of appeal).

 Paragraphs 35 and 36 of article 24 of the Law Decree n. 98 of July 6, 2011, define provide September 30, 2011 as the deadline for commencing procedures to license the new slot machines operators (network for the computerised management of legal gaming) as provided in article 14bis, paragraph 4 of the Decree of the President of the Republic n. 640 of October 26, 1972 by the Ministry of Finances – State Monopolies Authority. Therefore the official call for bids was issued on August 8, 2011 and published on the Official Journal of the European Union on August 11, 2011.

On December 23, 2011 the tentative list of 13 allottees was published: 10 renowned licensees plus R.T.I. R.B.Holding s.r.l., R.T.I. Merkur Interactive Italia s.p.a., and R.T.I. Jackpot s.p.a. / Intralot S.A.

At present all 13 licensees have passed the technical tests, but the three new licenses have not been signed or activated yet, while the “old” ones are still operational on the basis of previous licenses.

Certainly the judicial events to date have slowed the process to activating the new networks. Nevertheless, the industry is alive and kicking.