The Betfair case
Art. 23, paragraph 3, of the concession contract related to the license on horse-racing and sports betting under article 38, paragraph 2 of the Law Decree n. 223 of July 4, 2006, amended and modified and converted into law n. 248 of August 4, 2006, rules that: “AAMS (…) withdraws the license upon immediate precautionary suspension of the effects if the licensee markets on its own or through companies anyhow associated to it, on the Italian territory or via the online system connected to sites across the domestic borders, games assimilable to public gambling or other games managed by AAMS, or games prohibited by the Italian legal system”, and also art. 17 of the concession contract states that: “furthermore AAMS, withdraws the license, upon immediate precautionary suspension of its effects, if the licensee markets, on its own or through companies anyhow associated to it, on the Italian territory or via the online system connected to sites across the domestic borders, games assimilable to fixed-odds betting or other games managed by AAMS, or games prohibited by the Italian legal system”.
A primary legislation – law n. 88/09 (the so-called Comunitaria for 2008) provided for the obligation for operators having a license in Italy for lawful gambling that shall not allow consumers residing in Italy to access and then play on sites which are different from those managed by the operator/licensee that has acquired the new license, even if managed by the same licensee, directly or through controlling, controlled or sister companies.
These prescriptive and also regulating rules oblige the licensee-operator to take measures and not to offer gambling through systems that are not subjected to the supervision and control of the Authority. In this very connection, recently, the gambling licensee has been withdrawn to a much renowned foreign bookmaker. And the Italian Monopolies Authority (in short AAMS), in early November 2010 promulgated a provision ruling the disconnection of the totalizer and withdrawal of licensee to the above-mentioned licensee that had breached the provisions set in the concession contract and particularly the above-mentioned art. 23. The licensee appealed to the Regional Administrative Court (TAR). In the first instance, on November 26, it issued a precautionary decree to suspend the challenged provision and then remitted the case to the jury room that on December 17, 2010 issued order n. 5457/2010 with which the Regional Administrative Court did not confirm the precautionary provision because: “(…) what is at stake is not unlawful computerized betting with which bets are re-oriented from the portal of the claimant to the digital platform of a foreign company which is not an AAMS-licensee” and considering that “the claim seems to be groundless since no subjects supporting the claimant’s hypothesis derive from the clearly a-technical usage of the wording “controlling ….. companies” as in art. 23, paragraph 3 of the contract within the legal framework regulating every relationship between the licensee and any other company marketing in an unlawful way games not licensed by AAMS”, and also considering that: “(…) the real meaning of the wording itself is to give the claimant – within the limits of reasonableness and proportionality – the burden of avoiding unlawful actions or actions exploitable by companies that, in a special relationship with them, take advantage of his position to attract clients to unlawful gambling or, rather, not licensed by the laws of the Republic”.
Then the bookmaker appealed to the Council of State that on January 25, 2011 issued an order which confirmed the position of the judge of first instance and stated that “within the limits of the simplified decision which is peculiar to the precautionary phase, the challenged contract clause shall be interpreted according to the bona fide rules, meaning the commitment of the licensee to avoid that any unlawful activity is carried out by subjects that are anyhow connected legally to the licensee itself and that, in the case at hand, even if it is not true that users were re-oriented from the site at the right moment in which the unlawful activity took place, under present condition that is the situation recognized by the Authority (…)”. In light of the above, it is clear that if the licensee markets on its own or through companies anyhow associated to it, on the Italian territory or via the online system connected to sites across the domestic borders, games assimilable to public gambling or other games managed by AAMS, or games prohibited by the Italian legal system the Council of State agrees with the sanctions imposed by AAMS. Beyond any possible interpretations of the contract clause (that is to say art. 23 of the concession contract) related to the so-called “Bersani” licenses, the dispositions of the TAR and the Council of State deserve our attention since they reassert the legitimacy of the licensing system. It is also worthwhile mentioning the fact that the Council of State mentioned the principle of bona fide in relation to the contract execution. Under art. 1375 of the Italian civil code “the contract shall have a bona fide execution” according to the case law the obligation of bona fide execution of a contract is considered as violated “not only in the case when a party acts with the malicious intention to prejudice the other party, but also when his behavior was not permeated with the diligent fairness and sense of social solidarity that indeed integrate the bona fide content”. Under the principle set by art. 1375 c.c. the Council of State has therefore recognized that the bookmaker has violated the contract execution because of inaction and negligence and its activity was then censored even if the Judge of the Council of State stated that “(…) that users were not re-oriented from the site at the right moment in which the unlawful activity took place” (cf. order of January 25, 2010). Considering these assumptions and taking into account that the judgment at hand is still in its precautionary phase, it will be interesting to see how the Judge will consider the bookmaker’s behavior in a more detailed analysis of the merits where it will be possible to consider other further elements.
According to art. 17, paragraph 3 of the concession contract related to the gambling licensee providing for fixed-odds betting on sports events different from horse racing and on non-sports events, approved with directorial decree n. 22503 of June 30, 2006 also provided for the Italian monopolies authority to “withdraw the license, upon immediate precautionary suspension of its effects, if the licensee markets, on its own or through companies anyhow associated to it, on the Italian territory or via the online system connected to sites across the domestic borders, games assimilable to fixed-odds betting or other games managed by AAMS or games prohibited by the Italian legal system”.
Art 24, paragraph 17 lett. d of law n. 88/09 rules “the exclusion of consumers residing in Italy from gambling as in paragraph 11, letters from a) to f), through sites that are different from those managed by the licensees complying with the license provision, even though managed by the same licensee, directly or through its controlling, controlled or sister companies”.
AAMS The Amministrazione autonoma dei monopoli di Stato – Italian Monopolies Authority carries out activities aimed at regulating and controlling the entire gaming compartment, after having acquired state functions in 2002. The Royal Legislative Decree no. 2258 of 8 December 1927 created the Italian Monopolies Authority for the performance of “monopoly services involving the production, import and sale of salt and tobacco, as well as the production and sale of State-sponsored quinine”. In the 1980′s and 90′s, the groundwork was laid for changes that were to lead to a radical transformation in the activities of AAMS.
Under a strategy meant to rationalize the different sectors, AAMS took over the management of national lotteries in 1988 and of the Lotto and instant lottery games (so-called “Gratta e vinci” – scratch cards) in 1994, followed by Bingo in 2000 and Superenalotto in 2002. During the years 2001 and 2002, the AAMS was gradually assigned responsibility for the other games that make up its current portfolio.
The reason for the presence of the State, in the gaming sector, is to ensure the collection of taxes at a level compatible with the protection of the other relevant public interests: consumer protection, that of minors and the weaker population brackets, and the fight against illegality.
With Decree n. 5090/10 of November 26, 2010, it accepted ex parte the precautionary measure because the requirements to grant the precautionary measure did exist also on account of the damage suffered by the licensee.
Precautionary decree n. 270/11 filed with the office of the clerk on January 25, 2011
Cass. October 16, 2002 n. 14726
And the Court of Cassation (Cass. sec. II, April 10, 1986 n. 2500) also pointed out that “a voluntary and deliberate inaction in the contract execution capable of hindering the other party’s enjoyment of right, thus having negative consequences on the final result focused by the contract terms which is in contrast with the obligation of the diligent fairness and bona fide and acquires importance if it is the cause of a non-execution or the supervened impossibility to execute the contract”.