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09 February 2011

Malta as an i-Gaming hub is world class, by Greg Tingle - February 2011

Malta is one of the world's foremost international hubs that regulate remote gaming effectively and responsibly, perhaps only second to Gibraltar. The beautiful island has become a classic example of how i-Gaming should and can be regulated. Its professional approach to remote gaming regulation is well known, hence the country has become a jurisdiction of choice for the industry. The island is a microcosm of Europe and as such is place to test concepts and the like, before pushing them to the masses. This approach works well for the ICT sector.

Malta currently has in excess of 300 active licensees.

The i-Gaming industry is encouraged by government initiative and state-of-the-art telecoms infrastructure, which the island is maintains its status as one of the most progressive environments in the world for IT, remote gaming and e-Business activities. Investment in ICT is especially strong.

For a real word example of an ICT development working well look up SmartCity. Born from Dubai Internet City, Tecom Investments is investing US$300 million in an ICT hub. This reaffirms the island’s initiative to become the European outpost for global ICT or i-Gaming companies that want to establish a presence in Europe. This project compliments with Malta’s aspirations in the ITC sector given that Microsoft, Cisco and Oracle have all established a significant presence on the island.

They aim to soon establish research and development testing ground for ICT related companies. Another major advantage of choosing Malta is secure and reliable links to the Internet for passing huge packets of data and traffic. Vodafone Malta took a strategic decision in 2003 to have its own submarine data cable between Malta and Sicily. Commissioned in 2004, this doubled the number of international data links connecting Malta to the rest of the world. Data traffic at the start of i-Gaming community in 2001 was rather small - a few tens of megabits - but has surged since then. 3 operators are competing to provide quality and reliable bandwidth via a submarine cable to the Italian mainland. In terms of technology, the fibre-optic submarine data cable remains an important link between Malta and the rest of the world, an extremely sensitive link without which the i-gaming industry would not exist in Malta. But another important ingredient for the island’s success is regulation. The industry is strictly regulated by an efficient team at the Malta Lotteries and Gaming headed by Rueben Portanier, a veteran in the ICT and i-Gaming sector. The regulation is fair but strictly enforced to ensure total protection to players while offering a competitive gaming and corporate tax structure.

2009 Allocation of licensees...

But the industry is facing challenges in cross-border issues particularly as other EU countries wish to restrict the provision of gaming services to their citizens. Thus Malta welcomes any rationalization of the online gaming sector that is generating a generous contribution to its GDP. But as always, our continued success to be the leading hub in Europe is not guaranteed and we have seen many EU members gearing up to compete and of course enacting restrictions to protect their own gambling state monopolies. Typically, we note how various Members of Parliament stressed that online gambling operators must comply with the gambling legislation of the member state in which they provide their services and in which the consumer resides. In their opinion, most online gambling licence holders operate from favourable tax jurisdictions and respect ‘country of origin’ rules regarding the provision of services.

Under the thinly veiled guise of protecting consumers, we note that gambling activities have traditionally been strictly regulated at national level. Again, it is customary to cite the rationale of such restrictions as the duty of each state to protect consumers against addiction, fraud, money laundering and fixed games. Of course these barrages of restrictions go against the spirit and law of free movement of services in the unified market. This led to a number of European Court of Justice rulings on the issue and several Commission infringement procedures posted against member states to verify whether national measures limiting the cross-border supply of online gambling services are compatible with Article 49 of the EC Treaty, which guarantees the free movement of services.

The European Commission “does not exclude” alternative solutions to individual infringement procedures against member states on gambling, Last year, internal Market Commissioner Michel Barnier, addressing a European Parliament plenary debate in Strasbourg, revealed his future approach to the topic during his term. Thus it seems that some clarification is very much overdue in this sensitive sector where member states naturally protect their interests by blocking players from gambling on foreign unlicensed websites. There are currently nine Commission infringement procedures targeting cross-border betting on sports events online with countries, including Germany, Hungary, France, Belgium, Sweden, Italy and The Netherlands. In this context, Barnier said, “I want to launch a constructive dialogue [on gambling] with the Parliament and member states and concerned stakeholders.” He launched a EU Green Paper that would act as a first step forward. The most interesting question in the Green Paper is whether online gaming market is more tightly regulated or liberalized in the different EU member states. The paper will cover recent cases in the European Court of Justice due to the fact that in the past a series of infringement procedures were opened against member states’ gaming legislation for not complying with the freedom to provide services of the EU Treaty.

The legal landscape for online gambling aka igaming is dynamic to say the least, and prospective changes are altering the shape of the pan-European market. Britain, for instance, could move from a highly liberalised and commercial licensing system to a more restrictive territory based system. According to a British government policy paper, which, if enacted, proposes that it would be a criminal offence to provide online gambling services to British residents and to advertise online gambling in the UK without a licence issued by the Gambling Commission. If the final version of the proposal is implemented and is tested to be compliant with EU law, then all operators licensed in EEA member states and Gibraltar, as well as licensees based in the white list territories, will have to apply for an additional operating licence in the UK. Likewise, Ireland’s Prime Minister Brian Cowen announced that the Irish government wants to introduce legislation that would require offshore gaming companies to obtain licences in order to operate in the Irish online market. In Belgium, one expects significant changes to existing regulation on betting and gaming which in some parts are considered incompatible with EU law as licences are only issued to existing operators. However, under the requirements it seems next to impossible, for a foreign EU operator to obtain an online licence in Belgium.

In The Netherlands online gambling is legal, but the government has not yet issued any licences for online poker, online bingo and online casinos. When that may change is anyone's guess, but governments around the world are keen to get their slice of revenue, as the secret is out that igaming is one of the world's most lucrative and profitable sectors.

Malta as an EU member has a number of key strengths that have enabled it to grow as a hub for the iGaming industry it is today. The future is looking fantastic, and its tipped to only get better, as the world watches Malta to see how it's done.

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