Internet Gaming: A new Jurisdictional Approach
By Jason Lane

Background and History

Jersey is a relative newcomer to gaming. Gambling was legalised in 1964 as a response to the popularity of illegal betting, but was considered until comparatively recently more as a vice to be tolerated than an industry to be encouraged. This perception is now changing with the passing of the first new gambling legislation for some forty years, the Gambling (Remote Gambling Disaster Recovery) (Jersey) Regulations 2008.

For those unfamiliar with Jersey, the Island is located in the Bay of St. Malo northwest of France and is the largest of the Channel Islands. Jersey has given its allegiance to the Crown of England since 1204 and in return has received successive royal charters confirming local customs and civil liberties. Of particular importance to the Island has been the confirmation of its own judicial system and freedom from the process of English courts and other important privileges, including fiscal autonomy. Today, the lieutenant governor of Jersey is the personal representative of Her Majesty the Queen.

After the separation of the Islands from Normandy and its administration, the local institutions were gradually molded—from time to time largely on local initiative to meet changing circumstances—until their present constitutions evolved. The evolution did not at any time involve amalgamation with, or subjection to, the government of the United Kingdom, and even today the Islands’ link with the United Kingdom and the remainder of the Commonwealth is through the Sovereign as latter-day successor of the Duke of Normandy. The Channel Islands have never been conquered by, or ceded territories to, the United Kingdom, nor have they ever been colonies or dominions.

The agreed political and legal status of the Island is a British Crown Dependency. Jersey is not part of the European Union, but does have some obligations in accordance with Protocol 3 to the 1972 Treaty of Accession under which the United Kingdom joined the European Communities. Since Jersey is not part of the United Kingdom or part of the European Union, it has no representation in the United Kingdom Parliament at Westminster or in the European Parliament. Islanders are not entitled to vote in U.K. or European elections.

Legal System

The non-statutory or customary law of the Bailiwick of Jersey derives from Norman customary law, although it has not in all respects developed in an identical fashion. The legislation passed by the states of Jersey frequently draws on English legislation as a blueprint for enactment, with such local variations as are appropriate, but at different times has also drawn on developments in the Civil Code in France and on legislation adopted in France and in Commonwealth countries.

Jersey has a Royal Court, which serves both criminal and civil matters. It also exercises an administrative jurisdiction similar to that in the Divisional Court and receives statutory appeals from executive decisions of the states. It exercises a supervisory and an appellate jurisdiction over the Island’s lower criminal and civil courts. Appeals from the Royal Court of Jersey lie to the Channel Islands Court of Appeal and therefrom to the Judicial Committees of the Privy Council.

Representation

Responsibility within government for the gaming industry currently rests with the Economic Development Ministry as part of the portfolio of the assistant minister, Deputy Alan Maclean. As part of plans to separate the regulatory functions from economic development functions, the assistant minister established a Shadow Gambling Commission in December 2006 under the chairmanship of Graham White, OBE, formerly chief inspector of the U.K. Gambling Commission and previously the Gaming Board for Great Britain. Draft legislation is currently being prepared to place the commission on a full statutory footing later this year.

The role of the Shadow Commissioners is to prepare for the transition to a statutory Gambling Commission and to advise the Minister for Economic Development on changes to the Island’s gambling laws. Their terms of reference are to ensure that:

• Jersey retains its excellent international reputation as a well regulated jurisdiction;
• Business growth and investment is encouraged; and
• Potential harm is minimized and programs are introduced to protect the young and the vulnerable.

The Effect of the Regulations

A disaster recovery (DR) provision as part of a company’s business continuity planning is now mainstream, and this new regulation allows companies licensed to operate remote gambling services in other jurisdictions to place their disaster recovery systems in Jersey. "Disaster" is defined in the regulations, but is regarded as a major disruption that renders the gambling site inoperable from any legitimate cause.

The regulations place two types of control upon companies wishing to have a DR presence in the island. The first is a series of controls upon local companies that offer hosting facilities. These companies have a number of duties and obligations placed upon them to show that they are "fit and proper" and report gambling activity to the minister (or commission in the future). The hosting companies need a "hosting facilities" licence and must undergo a probity investigation. In order to ensure that the minister/commission has full access to all relevant information, the regulation provides for access to information relating both to the company applying for the licence and its linked or subsidiary companies. Probity is undertaken on a cost-recovery basis.

The second control is on the companies that want to have DR systems in Jersey. These controls ensure that the minister can have confidence that a licensee can only undertake sanctioned gambling activities. The same probity checks as for a hosting company apply, but the minister has the power to add conditions to the licence. The operator will comply with the conditions of their overseas gambling licence and any reasonable additional conditions to ensure the highest standards of regulation and protect the island’s international reputation. An overseas licensee will also have to incorporate locally in order to ensure that there is a local company presence.

Once licensed, a gambling operator may invoke legitimate DR for three months. To ensure that the invocation is legitimate, the hosting provider must, within eight hours, inform the minister that gambling is taking place. Independently, the operator must also inform the minister in writing that DR has taken place and provide documentary evidence that the invocation is legitimate. As soon as the minister has been informed, staff of the department (and thereafter the Gambling Commission) will attend the hosting provider facility and inspect and verify compliance with the regulation. Once the legitimacy of the disaster has been verified, the minister has authority to extend the length of the invocation to a maximum of nine months.

When the gambling operator is ready to stop its disaster recovery operations in Jersey, they must inform the minister before ceasing activity. The hosting provider must also inform the minister once the gambling provider has ceased their disaster recovery operations in the island. Failure to notify the minister is a breach of the regulations. This provision allows for a managed handover of responsibility from the Jersey regulator back to the original overseas licensing authority.

Benefits of the Regulation

Jersey has been investing for a number of years in new telecommunications infrastructure and fibre-optic and power cables providing multiple, independent resilience. This makes it an ideal location as it develops its online gambling legislation. International businesses typically take advantage of:

• Lower taxes
• A regulatory regime designed to encourage e-business
• Enhanced portability of their offshore operations
• Low incremental cost
• A well-regulated, internationally recognized and respectable business location
• An excellent geographical location

These are just some of the reasons why Jersey is now more famous for its excellent reputation as a finance and e-business offshore center than it is for producing a much-loved breed of cattle! Jersey’s experience has shown that effective regulation, even at a cost, is both something that the industry is willing to pay for and something that marks out a jurisdiction as a worthy place for investment.

A new gambling law is being prepared for 2009, together with new subordinate legislation, to allow a full Internet licensing regime. Other land-based developments are also being considered. In developing these measures, however, the government in Jersey has been mindful of its international commitments, particularly with regard to ensuring that gambling is kept free of crime and that measures are put in place to protect the young and the vulnerable.

On Oct. 31, 2006, at the International Summit on Remote Gambling held at Ascot in the United Kingdom, it was agreed that in enacting legislation in relation to remote gambling, the principal and over-riding priorities should be:

• That remote gambling should be conducted responsibly and with safeguards necessary to protect children and vulnerable people;
• That remote gambling should be regulated in accordance with generally accepted international standards to prevent fraud, money laundering and other crime, and should not be permitted to be a source of crime; and
• That, where offered, remote gambling should be verifiably fair to the consumer.

Governments also agreed to actively explore the scope for greater international cooperation in the regulation of remote gambling, such as:

• Effective measures to protect children and vulnerable people
• Sharing research and expertise on remote gambling and methods of preventing problem
• Promoting public awareness of how to gamble responsibly
• Developing effective licensing regimes
• Working with the financial sector to secure these priorities

These regulations are the first step by Jersey in putting these commitments into effect.

Dr. Jason Lane is Director of Regulatory Services for the Shadow Jersey Gambling Commission.