The implications of the CJEU’s ruling on Hungary’s licensing laws

The European Court of Justice’s (CJEU) judgment in the Unibet vs Hungary case may well have a huge impact on the currently closed Hungarian online gambling market. The National Tax and Customs Administration of Hungary – which was in charge of the supervision of gambling activity in Hungary – had temporarily closed off access to Unibet’s websites.

The Court’s standpoint was clear: the current legislation (as of June 2014) was against Article 56 of the Treaty on the Functioning of the European Union (TFEU), as it introduced a system of concessions and licences for the organisation of online games of chance, which contained discriminatory rules against foreign operators.

It also laid down non-discriminatory rules either applied in a non-transparent manner, or implemented in such a way as to prevent or hinder an application from certain tenderers established in other member states.

Moreover, penalties imposed for the infringement of national legislation introducing a system of concessions and licences for the organisation of games of chance contrary to Article 56 of the TFEU must be interpreted as against EU principles.

However, the legal context of the case is more complex. The dispute was started in the middle of 2014 and the questionable regulation criticised by the Court has changed since then. The regulation has not become more permissive, but rather completely different.

Compared to the original version, sports betting is now only permitted to the Hungarian state gambling organiser (i.e. it is not allowed for privately owned market players) and online casino licences are only available to land-based casino concessionaires.

Room for manoeuvre?

In short, the applicable rules on granting concessions are still very strict. Today they are based on different provisions to those criticised by the Court, but foreign operators can still barely obtain a concession and gambling licence in Hungary.

It is also worth mentioning that the Court did not prohibit the Hungarian state from wholly or partially prohibiting online gambling in Hungary as there may be objectives and overriding reasons in the public interest (e.g. consumer protection) to justify the restrictions of fundamental freedoms.

Nevertheless, such objectives and reasons must satisfy the principle of proportionality and the means used shall be consistent and systematic.

The main question now is how the Hungarian State will respond to these challenges following the ECJEU’s ruling. No doubt it would be somewhat surprising if, after such longstanding resistance, the state suddenly changes its direction and lets foreign operators in.

Instead it may argue that the legislation has changed and is now proportional, consistent and systematic. Or it will adopt additional amendments to fine-tune the rules in order to pass the test of compliance with the EU principles.

Irrespective of future legislation, it’s a fact that a huge number of decisions were taken by the Hungarian tax authority against foreign operators based on the contested rules of the time.

Now it seems that those operators, who have still not yet fulfilled the sanctions, do not have to fear the enforcement actions and the ones who have already paid the fines may have the chance to reclaim them.

Moreover, a more significant question arose based on the ruling of the Court: does this mean that foreign operators can resume providing a service to Hungarian players now?

As I detailed above, the answer from a legal standpoint is not so unambiguous, but this decision by the Court is a clear sign to certain member states that they have to reconsider their standpoint on restricting the national online gambling market and changing their conservative attitude towards the topic.

Gábor Helembai, senior associate at Bird & Bird