Uncertainties About Romania’s Draft Gambling Law: an Agenda

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Published in “Word Online Gambling Law Report”, 2011

Online gambling on Romanian quicksand

At the end of 2010, players on the Romanian gambling market have turned their attention to the Official Gazette, expecting the publication of the long awaited law that was to radically change the legal framework governing the online gambling market.

While the proposed draft legislation had indeed been notified by Romania to the European Commission (EC) on July 2, 2010 (the “Draft Law”), certain provisions of the law finally approved by the Parliament (Law no. 246/2010 for the approval of the Emergency Government Ordinance no. 77/2009 regarding organization and operation of gambling activities – “Law 246/2010”) and published in the Official Gazette on December 21, 20100, still came as a surprise for most of the players on the international online gambling market.

Online gambling on a roll

Starting with 2009, the Romanian gambling legislation qualified as criminal offence organization of gambling activities through the Internet or Intranet communication systems, as well as through other communication systems (landline or mobile telephony) or similar systems, transforming, thus, the already existing de facto passive prohibition of online gambling into a regulated active prohibition.
However, this restriction (which, to the best of our knowledge, have never been enforced), is now expressly removed, most probably as a result of the lobby of certain influential interested parties.
Thus, pursuant to Law 246/2010, the classification of gambling activities provided under the former legislation, namely (i) lotto games; (ii) betting, namely mutual betting and fixed odds betting; (iii) gambling specific to casino activities; (iv) slot-machine games; (v) bingo games performed in game rooms; and (vi) bingo games organized through television network systems, is completed with the online gambling, as follows:

  • bingo games organized through communication systems such as internet, landline or mobile telephony systems;
  • online betting representing the fixed odds betting activity, organized through communication systems such as internet, landline or mobile telephony systems;
  • online gambling representing all gambling activities, other than lotto games and bingo games taking place in game rooms or organized through television network systems and the gambling activities mentioned under items (a) and (b) above, that are carried out by methods other than those which require the physical presence of the gamblers, organized and transmitted by communication systems such as internet, landline or mobile telephony systems and for which an organizer of gambling activities has obtained authorization and license – respectively online gambling specific to casino activities and slot machine games.

Thus, at least for the moment, betting exchange is kept outside the Romanian online gambling market.
Out of permitted gambling activities, lotto games and mutual betting, both offline and online, are placed under the legal monopoly of the National Company “Loteria Romana” – S.A.
Another novelty of Law 246/2010 is that it allows holders of license and authorization for casino gambling activities to organize poker tournaments (apparently exclusively offline), subject to payment of an annual fee in amount of approx. EUR 50,000.

Free movement of services?

Despite the detailed opinion issued by EC, Law 246/2010 maintained the condition for the gambling organizer to be a Romanian legal entity, and also required that all the technical support equipment for organizing and transmitting online gambling activities be located in Romania. There is however an exception from the latter rule, applicable in case of operators authorized for online gambling in another Member State, which are allowed to have this equipment located anywhere in the European Union, provided that it is connected to the public or private bodies that will monitor the online gambling activities in Romania.
For us, it is still unclear how are these legal provisions to be construed and implemented in practice. Will the detention of the equipment in another Member State by an affiliate of the Romanian entity suffice, if the respective affiliate is already licensed in the European Union, or will the Romanian entity applying for a license be also obliged to obtain the license to operate in another Member State?

Fees, fees, fees…

It seems that the Romanian authorities have envisaged the authorization of online gambling as a new source of incomes to the state budget. Thus, the online gambling organizers must pay an annual license fee ranging between approximately EUR 25,000 and EUR 125,000, as well as an annual authorization fee expressed as a fixed amount or as a percentage of the amounts effectively collected by the organizer (but not less than a certain amount), depending on the specific gambling activity to be operated. Moreover, Law 246/2010 establishes a minimum share capital that must be subscribed and paid up by the organizer (approximately EUR 125,000 or EUR 250,000) and also the obligation of the applicant to create a security fund ranging between approximately EUR 100,000 and EUR 250,000.
However, the fees collected from the gambling organizers appear to be insufficient for the authorities, which have, thus, decided to charge an additional fee from the participants as well. Thus, Emergency Government Ordinance no. 117/2010 for the amendment and completion of Law no. 571/2003 regarding the Fiscal Code and the regulation of certain financial-fiscal measures introduced the obligation of organizers of gambling specific to casino activities and of slot machine-type gambling to collect from the gamblers and pay to the state budget an access fee, by means of an entrance ticket.
The amount of the access fee is approximately EUR 5 in case of gambling specific to casino activities and is collected from every person entering the casino, and approximately EUR 1.25 for slot machine-type gambling, due only by the players.

Breaching the rules of the game?

Marketing, advertising, publicity or other promotional activities regarding online gambling or related activities, not authorized in Romania, are qualified as minor offence and sanctioned with an administrative fine ranging from approx. EUR 12,500 to EUR 25,000. Under the same sanction, Law 246/2010 expressly forbids the promotion, through permitted online gambling activities, of any services, means or activities that are forbidden, or (interesting enough) are not regulated by the Romanian legislation. In the latter situation, the authority may also revoke the license granted for the organization of the respective activity.
Also, Law 246/2010 expressly provides the prohibition of natural persons to participate from Romania to online gambling activities not authorized on the Romanian territory. Intriguingly, such act is qualified as criminal offence and sanctioned with imprisonment for a period of six months to two years or criminal fine.

Surprising secondary legislation

On November 30, 2010, the Romanian authorities have notified to EC the Draft of the Government Decision for amending and supplementing the Methodological Guidelines for application of the law approving the Government Emergency Ordinance No. 77/2009 on the organization and operation of gambling activities (the Draft GD) (http://ec.europa.eu/enterprise/tris/pisa/cfcontent.cfm?vFile=120100747RO.DOC).
The Draft GD must be adopted by the Romanian Government before it comes into force. Such adoption is not expected until the expiry of the standstill period (i.e., March 1, 2011) and at this moment no one seems to know if it will be adopted in the form notified to EC, or surprises are still to come.
The main point of interest for online gambling industry should be the fact that Draft GD provides that, in order to be licensed to organize and authorized to operate online gambling activities, the applicant must hold, either directly or through a shareholder/associate, a license to organize and authorization to operate gambling specific to casino activities with at least 20 authorized tables, or slot-machine games, having at least 500 posts, or fixed odds betting having at least 100 agencies, or bingo games organized through television network systems.
Thus, it appears that the Draft GD conditions the licensing/authorization for online gambling upon already holding a license/authorization for offline gambling.
Also, prior to applying for a license / authorization, the online gambling organizer must conclude a monitoring agreement with an authorized monitoring and reporting operator. So far, no private body has applied for such an authorization, and no State institution has been assigned the monitoring obligation. Until that happens, Romanian online gambling market is closed.
While the fact that the Draft GD has not yet been adopted may be an explanation of why no request for obtaining the authorization for the monitoring activity has yet been filed, another explanation seems to be the quite burdening conditions imposed to such companies. Thus, in addition to obligation to create a security fund amounting to approximately EUR 2,500,000 (in order to cover the risk of non-payment of their financial obligations to the Romanian state), the Draft GD requires these applicants to be Romanian legal entities with a minimum subscribed and paid up share capital of approximately EUR 500,000 and with a direct or indirect experience of minimum three years in providing similar monitoring services to regulatory authorities of governmental agencies within the European Union or the European Economic Area and minimum five years within online area regarding the provision of network solutions to online gambling organizers.

Case closed?

It appears that the long awaited Law 246/2010, although meant to adapt the legislative framework to the Romanian gambling market reality includes a wide range of equivocal and unclear provisions. Such are doubled by the provisions of the Draft GD, which, if adopted in this form, will only tighten the conditions for the licensing and authorization of online gambling operators, and will raise new questions with respect to an eventual infringement by Romania of the EU legislation.

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