Regulatory Framework on Internet Gambling and Advertising on Internet Gambling in The Netherlands

It is unlawful in the Netherlands to organise games of chance[1] (whether off-line or on-line), or to promote any participation in them[2], without an official license. To obtain such a license the applicant must (amongst other things) ensure that part of the revenue from the game must vest in a public fund. In addition, the applicant is bound by maximum possible losses and stakes that a participant may face playing the game.

Currently, only a few existing Dutch license holders are allowed to provide games of chance on the Internet, and then only on a limited scale and under strict conditions. For example, the foundation Stichting Nationale Sporttotalisator, who are licensed to organise lotteries and betting on sports contests, are also permitted to organise sports contests and lotteries via on-line registration at points of sale or by a direct, electronic application. Also Autotote Nederland B.V., who administer betting on harness and horse races, are licensed to allow electronic betting on these races. On the other hand, Holland Casino (the sole Dutch license holder for casino games) is still not allowed to offer casino games on the Internet.

However, this situation may change. In a letter of 5 June 2002[3] the State Secretary of Justice announced that she wished to widen the scope for regulated games of chance on the Internet. As a first step in this process, she intends to give the existing license holders the opportunity to provide their own games of chance on the Internet for a limited period and under strict conditions.

It should be noted however that the legislation necessary to effect this change has not yet been made public. Furthermore, it has been said that the new government is unlikely to proceed with this particular proposal.

Legal Actions against Offshore Operators and Enforcement

The prosecution of unlicensed providers of games of chance on the Internet (other than via so-called Internet gambling machines[4]) is exceptional. Indeed, we are not aware of any cases in the Netherlands where unlicensed foreign providers of games via the Internet by have been prosecuted. However, we were informed in February 2003 by the information service department of the Ministry of Justice that the Digital Investigation Department of the National Police Agency (‘Korps Landelijke Politiediensten’) is investigating how the 1964 Gambling Act may be enforced against such parties.

As things currently stand, unlicensed providers have more to fear from existing license holders than from the enforcement of the 1964 Gambling Act. In civil proceedings the license holders have adopted the standpoint that illegal providers have an unfair commercial advantage as they are not bound by these licenses' innumerable prescriptions and restrictions[5]. Recently this has lead to a remarkable judgment, in which a foreign provider was ordered to make the access to its site impossible to Dutch residents[6].

It concerned preliminary proceedings between Stichting Nationale Sporttotalisator (“SNS”), and Ladbrokes, a British company who provide sports-related games of chance on www.ladbrokes.com.

SNS alleged that in providing this service in the Netherlands Ladbrokes were acting unlawfully. The presiding Judge of the proceedings determined that he had jurisdiction and that Dutch law was applicable. Furthermore, he held that even though Ladbrokes were based in the United Kingdom they were nonetheless providing games of chance in the Netherlands because:

(i) Dutch citizens can participate in the games via their computer, and without any restrictions;

(ii) the prizes available could be paid out to a Dutch bank account; and

(iii) the Netherlands are included in the list of countries whose residents Ladbroke's explicitly state are eligible to participate in the games.

The fact that the website was in English did not alter this preliminary finding as, in the opinion of the Judge, English is the generally recognised and usual language of the Internet and computing generally.

The Judge held that SNS are subject to the strict conditions attached to their license set out in the Gambling Act[7], but Ladbrokes (who are subject to English law) are not. Consequently, Ladbrokes have a substantial and unfair competitive advantage over SNS in the Netherlands in the provision of Internet games of chance.

Accordingly, the Judge ordered Ladbrokes to block the participation by Dutch residents in lotteries, instant lotteries and sports contests that they provide via the Internet in the same way as Ladbrokes had done for residents of the United States - in the hearing it had become clear that Ladbrokes had software capable of excluding the residents of particular countries from participating in Internet gambling games.

Subsequently the decision in the Ladbrokes case has been confirmed in a lawsuit initiated by Holland Casino, licensed in the Netherlands to organise casino games and operating gambling machines in their casinos, against Paramount and Universal (incorporated under the laws of the Netherlands Antilles and the United States)[8].

At this stage it is too early to say how these cases will affect future proceedings, particularly as Ladbrokes has announced its intention to appeal the judgment. Moreover, criticism has risen in the press over the fact that the "country of origin" principle does not apply to gaming sites.

If the decisions in the Ladbrokes and Paramount/Universal-cases are indicative, however, then arguably foreign providers of on-line games of chance are not permitted to target the Dutch market, unless they are bound within their own jurisdiction by constraints similar to those faced by Dutch license holders. Furthermore, an implication of these cases will be that it is very easily established that a game is aimed at Dutch residents. Only if Dutch citizens are explicitly excluded from participation and this is actually enforced it can be reasonably assumed that a website is not aimed at the Dutch market.

Footnotes

[1] This is defined as a game where the winner is decided by lottery or chance: article 1(a) of the 1964 Gambling Act (Wet op de kansspelen).
[2] Article 1(a) and article 1(b) of the 1964 Gambling Act and article 1(3) of the Economic Offences Act (Wet economische delicten).
[3] Parliamentary documents II, 2001-2002, 24 036, 257.
[4] For examples where the presence of an Internet gambling machine lead to prosecution, see Economic Offences Police Judge Zutphen, 17 May 2002, LJN-number: AE4680, case no: 06/035799-01, Economic Offences Police Judge Zutphen , 1 July 2002, LJN-number: AE5005, case no: 06/035800-01, District Court Arnhem, Criminal Section, 20 December 2001, LJN-number: AD8104, case no.: 05/087842-00 (to be found via www.rechtspraak.nl).
[5] Stichting Nationale Instant-loterij / Euroscratch BV, President District Court The Hague, 16 January 2001, KG 2001/68; Stichting Nationale Sporttotalisator / Luckysms.nl BV, LJN-number AE2131, case no.: KG02/617; Stichting Nationale Sporttotalisator / Ladbrokes Ltd LJN-number: AF3374, case no. 93896 / KG ZA 02-798 (to be found via www.rechtspraak.nl).
[6] Stichting Nationale Sporttotalisator / Ladbrokes Ltd, LJN-number: AF3374, case no.: 93896 / KG ZA 02-798 (to be found via www.rechtspraak.nl).
[7] Such as the accrual to the general interest of a part of the proceeds from the game of chancery, limitations in the number of games of chance provided and maximum loss amounts and stakes.
[8] District Court Utrecht, 27 February 2003, LJN-number AF5121, case no.: 156428/KG ZA 03-46/WV (to be found via www.rechtspraak.nl).

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