On the current status of the sports betting concession procedures in Germany

The procedure for awarding sports betting concessions in Germany can only be regarded as a long series of failures. The procedure has now been running for almost three years, without a single concession being awarded. The concession model introduced in 2012 provides for a temporary trial period of seven years, lasting until 2019, during which this model can be tested. However, there is no foreseeable end to the procedure, which renders highly questionable any concession award that may yet occur. The Administrative Court of Wiesbaden recently noted dryly in this connection that an “experimental phase” should not mean that the responsible authorities have seven years to experiment on how to legally structure concession award procedures.

Background information

The current version of the “Interstate Treaty on Gambling” (GlüStV) entered into effect on 1 July 2012; compared to the previous regulations, it was intended to liberalise the sports betting market to some extent. On one hand, the complete internet ban that previously applied pursuant to Section 4 Para. 5 GlüStV (in its previous version) was lifted. Accordingly, the organization and brokering of sports betting on the internet is only permitted under certain requirements. On the other hand, the sports betting monopoly was deconstructed and replaced by the “experimentation provision” of Section 10a GlüStV, mentioned above. This provides that the state sports betting monopoly is not to be applied for a period of seven years. During this period, it is permissible for sports bets to be offered by private providers with a sports betting concession. The procedure for awarding sports betting concessions is governed in Sections 4a to 4e GlüStV. The maximum number of concessions is set at 20. According to Section 9a Para. 2 No. 3 GlüStV, the Hessian Ministry of the Interior and Sport is responsible for awarding sports betting concessions, while the internal, inter-State decision body is the German Gambling Board (Glücksspielkollegium).

The concession awarding procedure

A Europe-wide call for tenders for sports betting concessions was made in August 2012. The procedure involved two steps. In the first step, the requirements stated in the call for tenders had to be met, while in the second step, applicants were given the opportunity to supplement their respective applications. To clarify the list of requirements in the second step, applicants had to fill out a list of 600 questions; this was intended to assess whether the minimum requirements had been met. Originally 73 applicants applied for a sports betting concession, of which only 41 reached the second stage of the process. In fall 2013, the State of Hessen announced that none of the 41 applicants remaining in the second stage had met the minimum requirements and decided to hold a “makeup round”. Following this “makeup round” the 35 applicants then remaining received an advance notification on 2 September 2014 informing them of how many points they had scored and what their ranking was. The final granting of concessions to the 20 selected applicants was supposed to occur on 18 September 2014. The applicants selected were primarily German-speaking and some were relatively unknown providers. Conversely, well-known providers such as Tipico, Bet365 and Sportingbet were not among the selected providers.

The “provisional order” issued by the Administrative Court of Wiesbaden

Since then the legal battle has been waged before the administrative courts. The Administrative Court of Wiesbaden issued a “provisional order” (case no. 5 L 1428/14.WI) on 17 September 2014. The court thereby ordered the State of Hessen to suspend the concession procedure and not to issue any concessions for the time being. This order was issued in response to the urgent petition filed pursuant to Section 123 Para. 1 VwGO by an applicant who had received a rejection notice. From the court‘s perspective, the applicant‘s only option was to appeal the rejection notice and apply for interim measures; it was not deemed possible at the time to review the selection decision. The court found that neither the rejection notice nor the enclosed evaluation sheet were comprehensive in terms of their justification. The State of Hessen did not provide any further documentation, except for two volumes of general files.

“Provisional order” upheld by the Higher Administrative Court of Hessen

On 7 October 2014, the Higher Administrative Court of Hessen issued an order dismissing the appeal of the State of Hessen, upholding the decision of the Administrative Court of Wiesbaden (case no. 8 B 1686/14). The court found that without the complete files pertaining to the proceedings, which at this point the State of Hessen was refusing to disclose, it was not possible to summarily review the selection decision. Ultimately, not only the criteria used by the authority to make the decision had to be transparent and logical, but also the actual selection procedure itself had to meet these requirements. The court found that such a review was impossible to perform based on the available files. The Higher Regional Court of Hamburg made a similar decision in parallel proceedings.

Subsequent decisions by the Administrative Court of Wiesbaden

In April (order dated 16 April 2014, case no. 5 L 1448/14.WI) and May (order dated 5 May 2015, case no. 5 L 1453/14.WI) of this year, the Administrative Court of Wiesbaden made two additional decisions that contained significant statements regarding the concession procedure. In May the court fully granted the urgent petition of an applicant in the selection process who had been refused, and required the State of Hessen to cease granting concessions until a decision had been made in the proceedings. Regardless of each individual case, the court decision contained representative statements on the errors in the conception and implementation of the concession procedure. In particular, the court criticised the fact that not all criteria required to receive a sports betting concession were known in advance; the applicants were not able to ascertain, either from the call for tenders or the text of the State Treaty on Games of Chance, what exactly was required for their application to succeed. The court found that this deficiency was incompatible with the transparency precept and also that the process of the evaluation itself was not transparent. Even upon request, it was not possible to disclose who performed each evaluation, and what their qualifications were, or the manner in which consistent evaluation according to the same list of criteria for all applicants could be ensured by the individual evaluators. In the interim, the Administrative Court of Frankfurt has now adopted this assessment in parallel proceedings. Other administrative courts, such as the Higher Administrative Court of Berlin-Brandenburg and prior to that, the Administrative Court of Berlin, had been more lenient and “loyal to the state” in their decisions on the fundamental deficiencies of the procedure.

Position of the European Commission

In a position paper in response to a reference request by the Local Court of Sonthofen (case no. C-336/14 – “Ince”) the European Commission also made similar arguments critical of the German procedure for awarding sports betting concessions. The Commission shares the view that the actual implementation of the procedure for awarding sports betting concessions infringed the transparency precept since not all of the minimum requirements were made known in advance. The Commission stated that this was necessary so that interested parties could make an informed decision on whether to participate in the procedure. It also criticised the “inappropriate duration” of the concession granting procedure as well as the involvement of the same law firm that has represented the state lottery corporations for years. The oral proceedings before the ECJ in which the Commission again emphasized its criticism, took place on 10 June 2015.

Conclusion

In its current form, the procedure for awarding sports betting concessions has failed. What is needed now is to look toward the future and consider conceivable ways to resolve this situation. An obvious initial solution could be to repeat the sports betting concession award procedure, taking into account the freedom of service provision pursuant to Art. 56 TFEU as well as heeding the requirements for a transparent and discrimination-free procedure in accordance with Section 4b GlüStV and Art. 3 Para. 1 of the German Constitution. One significant hurdle to this solution, however, is the fact that the concessions are now only valid for a short time, until 30 June 2019 – since one-third of the total period of validity for the new concessions has already elapsed. Alternatively, one could consider granting a (provisional) concession to all applicants that met the minimum requirements. This option is not without drawbacks either, however, since a significant number of sports betting providers did not even participate in the procedure due to how it was structured. Ultimately, these applicants must be considered retroactively according to the principles of fairness. Therefore, the only tenable, long-term alternative for providing both companies and betting customers with legal certainty is a new statutory regulation that adopts the spirit of the short-term “separate path” taken by the State of Schleswig-Holstein – and above all, abandons restrictions on the number of concessions.