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Malta’s attempt to shield its licensed gambling companies from liability from lawsuits in Germany and Austria is drawing both backing and condemnation.
This is a high-stakes battle — Austrian companies in particular have lost tens of millions of euros in player refund lawsuits since the Austrian Supreme Court said an Austrian online casino monopoly is not incompatible with European Union law.
Malta is taking what some view as a risky step in defending its licensees against the suits, only a year after it was removed from the Financial Action Task Force greylist after improving its financial oversight.
According to some, the bill goes against EU rules that call for judgments from one member country to be enforceable in another in most cases, although it would buy time for the industry to develop a legal response.
It relies upon an exception which would allow foreign judgments to be barred if they contradict public policy, plus the overall concept of the European Union as a single market for services.
“I am very convinced it is fully in line with what legislation allows countries to do,” Malta Gaming Authority (MGA) chief executive Carl Brincat said this week at the CasinoBeats Summit 2023 in Malta.
“Single market is the raison d’etre for the EU,” he said.
The litigation-finance companies that fund the player lawsuits have reacted with fury and at least one set of lawyers has already written to the European Commission complaining Malta is seeking to “blatantly undermine EU law”.
An industry lawyer speaking anonymously said a key issue will be whether Malta tries to apply the provisions retroactively.
Another gambling industry official found Malta’s move stunning and warned it could fly against Malta’s efforts to rid the island of its previous image as a “pirate’s nest”.
During debates in Germany, Sweden, Norway and the Netherlands over the years, it has been common for politicians to denounce Malta-based companies without a local licence, or those with a licence who get fined.
“Being part of the EU is not pick and choose,” the official said. “You’re either in or out. I’m absolutely convinced that this will not fly.”
The Maltese amendment says courts “shall refuse recognition and, or enforcement in Malta of any foreign judgment and, or decision” if it “conflicts with or undermines the legality of the provision of gaming services in or from Malta by virtue of a licence issued by the [Malta Gaming] Authority”.
The Malta bill, introduced by economy minister Silvio Schembri, seeks to rely on a potential public-policy exception to mutual recognition of judgments among EU member states that are otherwise considered difficult to overcome.
The Gaming Amendment Bill passed its second reading on May 23 and is in committee awaiting a third reading.
Both major parties have expressed support for the bill, which would suggest passage is assured.
It is meant to to “codify in law the longstanding public policy of Malta encouraging the establishment of gaming operators in Malta who offer the local and cross-border supply of their services in a manner compliant with local legislation, in an effort to encourage private enterprise in line” with Malta’s constitution, according to the bill’s description.
The Ministry for the Economy, European Funds and Lands did not respond to a request for comment, but it previously told VIXIO: “In the absence of harmonisation of regulation of this service, the government has given regulated operators the necessary assurance against unfounded challenges, as a matter of public order for the country.”
The bill’s impact may not be limited to Germany and Austria.
In the Netherlands, lawyer Benzi Loonstein has filed cases seeking refunds for players based on the fact that online casino was illegal until licensing launched, according to the de Volkskrant newspaper.
As of December, more than a dozen cases had been filed in Malta against Malta-based companies seeking to enforce the Austrian judgments.
Austria and Germany react
“Malta may well be within its rights with this move,” said the Austrian Association for Betting and Gambling (OVWG), which represents the online industry in that country, and thus many of the defendants being hit with judgments.
The online gambling trade group has previously complained to the EU that many of the loss reclamation lawsuit hearings have been cursory, lasting as little as ten minutes.
The Court of Justice of the European Union requires individual examination of each case, according to the OVWG.
“The continuous violation of the right to a fair trial denies providers from other EU member states, despite valid licences, access to legal protection in Austria,” the group said.
The OVWG is using the Maltese initiative to renew its signature cause, asking the Austrian government to dismantle what it calls the “outdated” online casino monopoly and develop a licensing system.
"The debate surrounding the Maltese bill once again demonstrates that an end to the gambling monopoly is long overdue," said Claus Retschitzegger, president of the OVWG.
“The monopoly leads to legal uncertainties and disadvantages for all stakeholders, especially consumers,” he said in a statement. “It is incomprehensible to me why Austria, as virtually the last country in the EU, clings to a monopoly that is no longer even majority-owned by the state."
In Germany, a gambling lawyer said the Malta law has already had an impact, prior to its passage.
Negotiation demands from players seeking refunds have dropped precipitously from, in some cases, 90 percent of losses, and some operators have completely stopped negotiating with the plaintiffs, said Fabian Masurat of Taylor Wessing.
Whether the Maltese law finds EU favour or not, it buys time for the gambling defendants, he said.
“Lawyers are realising it won’t be easy in Germany,” Masurat told VIXIO.
