The Court of Justice of the European Union (CJEU) ruled that players may rely on the laws of their country of residence when bringing claims against operators lacking a local license, a decision that could have major implications for Malta’s grey-market gambling framework.
CJEU Accepts New Law that Might Undermine Malta’s Model
According to the CJEU, the applicable law is generally that of the country where the harm occurred. This principle applies to cases in which players seek to hold directors liable for violating national laws that prohibit offering gambling without a license. The court explained that if a player loses money gambling online with a company operating in an EU member state where it does not hold a license, the loss is treated as occurring in the player’s place of residence.
The ruling could have significant long-term implications for Malta’s offshore gaming sector. Currently, operators in Malta are protected by local legislation often referred to as Bill 55, which shields all B2C gaming businesses from liability arising from activities licensed by the Malta Gaming Authority (MGA).
What Brought This Law to life?
The new law comes after a string of cases in which players from countries including Germany, Austria, and the Netherlands have sued operators over past or ongoing activity in the European grey market. One particular case from Austria served as a precedent for the adoption of the new law.
The customer of the Maltese operator Titanium Brace Marketing, a subsidiary of SkillOnNet currently in liquidation, sued the company’s two directors in Austrian courts to recover his gambling losses. According to the court, Titanium held a gambling license in Malta but not in Austria, meaning it was operating under Malta’s offshore gaming framework.
However, the customer argued that the gambling contract was invalid and that the two directors should be personally liable under Austrian law, because Titanium had offered illegal gambling in Austria.
The directors contended that the Austrian courts lacked jurisdiction, claiming the harm occurred in Malta. Furthermore, they also argued that Maltese law should apply, which does not impose personal liability on company directors for creditors.
The complex case served as a precedent for the CJEU’s new ruling, which is currently facing legal challenges at the European level from jurisdictions that are unhappy with the decision. However, the precedent and subsequent new law may spur additional legal claims from players seeking to recover losses linked to unlicensed gambling in their home countries.