Explainer: How Austria’s litigations could shake up Malta’s iGaming industry

Explainer: How Austria’s litigations could shake up Malta’s iGaming industry

14 December 2022

Over the past two years, Malta (along with other European Member States) has been in the spotlight for facing over €40M in claims from Austrian-based players for reimbursement of allegedly illegal online gambling losses.

Malta was the first European Member State to regularise the iGaming industry back in 2004. Since then, the European iGaming market has developed rapidly. According to the European Gaming and Betting Association, today, the great majority of European Member States have adopted a multi-licensing regulatory system, allowing companies to obtain a license to offer online gaming services within the relevant jurisdiction. This comes as a move to end existing local gambling monopolies.

Austria, however, opted to operate under a mixed licensing system with a long-standing monopoly for online poker and casino gambling. Truthfully, the Austrian Gambling Act holds that online casino gambling can be solely offered by licensed operators in the country, which at present is Casinos Austria alone and therefore any other operator offering such services under a foreign license is deemed to be doing so illegally. This is the allegation put forward by Austria-based litigation financing firm Advofin, as it processed over 2,000 claims from players who lost bets to more than seventy-one international operators, amounting in total net losses of €40m. Malta based William Hill, Betfair and LeoVegas are among the implicated operators. Advofin launched a robust campaign in its fight to acquire the refunds on behalf of Austrian players, even posting a short 1-minute video on YouTube to explain the process.

So far, Advofin has been successful in winning every one of its cases in Austrian courts. However, in line with EU law, disputes between member states are subject to the law of the member state of the court where the question arises. A number of these cases can be traced back to Malta-based web domains, which makes Malta the applicable state. For this reason, we are now seeing several of these Austrian claims being disputed in Maltese courts.

When contacted by Maltese lawyers for advice, Swedish iGaming lawyer, Ola Wiklund described the situation as a “jurisdictional overreach”. He went on to state “the Maltese gaming operators are relying on the fundamental EU law principles of freedom of establishment and the freedom to provide services. The Maltese marketplace is also constitutionally protected by WTO-law and the Maltese constitution.” The WTO-law, refers to the World Trade Organisation (WTO) law which forbids any unnecessary trade barriers between European Member States. In response, Advofin is combatting this claim by responding that, in line with EU law, the freedom to promote and deliver goods and services across European Member States can be overridden in cases involving consumer/player protection and the fight against crime amongst others. Advofin further submitted that when gamblers were being targeted by the offending operators it consisted in unethical marketing practices which were a threat to the public at large.

In light of this, the Malta Gaming Authority recently issued a notification asking all licensees to notify the authority of any ‘material litigation’ established against an MGA licensee. It goes on to define a ‘material litigation’ as any proceedings which seek to enforce Austrian (or German) player claims through the courts of Malta.

All of this begs the question of what effect this tension will have on the future of the Malta iGaming industry. In this regard, Mr Wiklund added “In these situations, legal history tells us that domestic preferences will prevail. Do you really believe that Maltese courts will serve as Austrian partisans in an attempt to take down the entire Maltese gaming industry? I think not”.

How we can help

The team within AE Legal has, for the past fifteen years, been working closely with the general counsel of iGaming companies, regulators, affiliates, integrators, heads of sales and specialised accountants. Through them, we have come to know and understand the industry very well. These insights have made it possible for us to master many legal briefs in this field and to deliver the desired result. We have acted for some of the biggest iGaming companies in Europe and Australia.

Engage with lead partner Kris Scicluna if you require a firm to defend or prosecute your cases in the Maltese courts, tribunals and arbitration centres. We can be reached on info@ae.com.mt or kscicluna@ae.com.mt