The U.K. Parliament and the Three Planks
By Tony Coles

Those who are following the gambling regulatory developments in the United Kingdom and elsewhere in Europe have, no doubt, been surprised by some of the recent developments.

It is well known that the U.K. has been engaged in a lengthy process of revising and modernizing its gambling regulatory laws. Initially, three of the main planks of this re-regulation were: to expand the availability of casinos in the U.K.; to regulate online gambling (or remote gambling), so as to make the U.K. the "world center for online gambling;" and to keep the U.K.'s existing casinos outside the loosening of controls that reforms would introduce. With the passage of time, it is interesting to see how these plans have developed.

Casino Expansion

In relation to casinos, the original intention of the U.K. government was to let the market regulate where and how many casinos would be built. Of course, the operation of a casino was to be properly controlled, but not the siting or the number of new casinos that could be opened. As the law passed through Parliament, this changed radically. When it was enacted in 2005 as the Gambling Act, the number of new casinos was limited to 17. Eight were to be so-called "large" casinos, eight were to be "small" casinos and only one was to be a "regional" casino, though this in itself was a misnomer because, in reality, it had become a national casino.

The location of the 17 new casinos was to be decided by Parliament; the act provided that the relevant government minister (the secretary of state for culture, media and sport) would, after being advised, make recommendations to Parliament on where they should be located. Many expected Parliament would "rubber stamp" those recommendations.

After a lengthy investigation process involving an independent casino advisory panel, the government recommended the locations for the 17 casinos. Most of these recommendations were not too contentious, but the site for the regional casino was. Many had expected it would either be in Blackpool or the Dome (the iconic structure built in the outskirts of London for the millennium), but in the end the panel recommended - as did the government - that the Las Vegas-style casino be built in Manchester.

This was too much for a number of Parliamentarians. As a result, the draft legislation under which the sites of the 17 new casinos would be decided was not passed. Parliament was presented with a "take it or leave it" choice and chose the latter. Thus, at the time of this writing, there are no sites for any of the 17 new casinos.

The government has now retrenched, saying it needs to re-think the whole process, but even this has been complicated by two factors. First, Parliamentary rules prohibit the same proposal from being made more than once. Second, the U.K. has been holding municipal elections and Parliament has not been dealing with contentious matters during this period. However, future proposals will presumably be made, and it is not impossible that, by the time this article is published, the locations may have already been decided.

The whole process is further complicated by the fact that a significant number of applications for new casinos have been made under the old law (the Gaming Act 1968), which is being phased out. Well over 50 applications have been made. Some have been permitted, and these casinos are now beginning to open. Exactly how many "old-style" new casinos will be permitted and built is not yet certain, but it is clear they have nothing to do with the 17 new casinos that will one day be opened under the aegis of the Gambling Act 2005.

Online Gambling Regulation

The second plank in the government's plans - Internet gambling regulation - has also hit a snag. With the passing of the Gambling Act 2005, new detailed Internet gambling regulations were put in place and, generally speaking, are regarded as sound. However, the U.K. Finance Ministry (H M Treasury) has recently announced that the tax on Internet gaming hosted under U.K. regulations will be fixed at 15 percent of the operator's profit. This is much higher than the rate in all other leading online gaming jurisdictions, and is likely to prove unattractive to the online gaming industry. Thus, the U.K.'s chances of becoming a center for online gaming are "remote."

Excluding Existing Casinos

The U.K. government's third plank, keeping all existing casinos outside the new freedoms, is also under attack. The British Casino Association, representing many of these existing casinos, has been granted the leave of the U.K. courts to challenge, on competition grounds, restrictions that the 2005 act says must continue to apply to existing and new old-style casinos, but not to the 17 new ones. This is only the first stage of what is expected to be long and contentious litigation.

It is sad that these three main planks in the government's legislative reforms seem to be in such trouble, and it is not an isolated issue. Elsewhere in Europe the ongoing conflict remains unresolved between the domestic laws of the individual countries and the commitments those countries agreed to in joining the European Union. The latest case regarding this conflict, Placanica, recently came before the European Court of Justice (ECJ). The court refined its rulings on the extent to which an individual country can derogate from its duties under the EU Treaty to permit the free movement of goods and services (including gambling services) within Europe, and it is now thought that only moral, religious or cultural factors may allow a country to block legitimate online gambling offers from elsewhere in the EU.

However, because the ECJ is not really a Supreme Court of Europe, it will be awhile before the impact of this latest decision is known. The ECJ, in effect, gives advice to the Supreme Court in the relevant country, and it is up to that court to make the final judgment. Because the latest ECJ case again involves Italy, it will be interesting to see the extent to which the Italian court interprets the new ECJ guidance. In an earlier case, Gambelli many of us were surprised at the way in which the Italian courts were able to reconcile the ECJ decision with the status quo, but it is unknown if this tactic will be repeated when the Placanica case returns to the Italian courts.

It is clear that developments in Europe (including those in the U.K.) are moving much more slowly than many anticipated. Years ago, I said that I doubted the U.K. reforms would be implemented before the end of the current decade and, although the 2005 Gambling Act is in place, its implementation doesn't start until September. With the 17 new casinos on hiatus, it is likely to be the end of the decade before any new casino opens. Not that being right about this is anything to be proud of; it would have been much better if the U.K. reforms were implemented in an orderly manner, just as it would be good for the EU to come to a clear and final decision regarding gambling regulation. Regardless, both still seem a long way off.