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Legal Developments in Europe

By: Francis Kemp, Tuesday December 23rd 2008
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There have been two noteworthy legal developments in Europe and the United Kingdom is obliquely involved in them both.

The first is the culmination of a chain of events that started way back in 2002. Then, Peter Caruana, the Chief Minister of Gibraltar, had proposed a new corporate tax regime. He had decided to levy a corporate tax of only 15% on offshore companies that included online gambling companies licensed by the jurisdiction of Gibraltar. The European Commission alleged that this tax structure gave Gibraltar based online gambling sites an unfair advantage. The Commission claimed that for taxation purposes Gibraltar should be considered a part of the United Kingdom and the tax rates prevalent in the United Kingdom should apply to the Gibraltar licensed online gambling companies. Caruana did not agree with this point of view. He referred to the 1969 constitution of Gibraltar, which gave the territory the right to frame its fiscal laws.

In 2004 the European Commission ruled against Gibraltar and the matter went to the courts of the European Union. Last week a European Union court in Luxembourg gave an order in favor of Gibraltar, dismissing the stand taken by the European Commission. The court accepted a precedent set in a 2006 case of the Azores archipelago belonging to Portugal. It was then ruled that Azores could have an independent tax regime. The court saw marked similarities between the cases of Azores and Gibraltar. Therefore the online gaming companies licensed in Gibraltar will pay a corporate tax of 15% of profits earned. This will add to the competitive advantage of Gibraltar as an online gaming jurisdiction. Gibraltar is already one of the most popular gaming jurisdictions thanks to its stringent probity checks. This ensures that only the best online gaming companies operate from Gibraltar.

The second development pertains to the UIGEA like bill proposed by Norway and the Remote Gaming Association (RGA). The RGA is a United Kingdom trade body that represents a number of major online gambling groups. The RGA has announced that it has lodged a formal complaint with the European Surveillance Agency against the proposed Norwegian legislation. Under the proposed legislation it would be an offence to transact with any online gambling operator other than the state owned gambling monopoly Norske Tipping. Financial transactions would particularly be forbidden. Clive Hawkswood, Chief Executive Officer of the RGA said that the Norwegian action was in breach of its treaty obligations under the European Free Trade Association (EFTA). Since the European Surveillance Agency had influence over the EFTA and therefore the complaint had been made to it. Hawkswood was also hopeful that the proposed legislation would not be converted to an Act before the Norwegian general elections due in September 2009.

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