Betfair International PLC and Republic of Cyprus - Judgement - Online Gambling

(translated from original Greek text)

IN THE SUPREME COURT OF CYPRUS

REVISIONARY JURISDICTION                                                                                                                  (Case No.: 492/2013)


30 April, 2013
[PANAYI, J.]


IN THE MATTER OF ARTICLES 1A, 12, 17, 25, 26, 28, 33, 35, 169(3) AND 179(2) AND 146 OF THE CONSTITUTION AND ARTICLES 49, 56, 101 AND 102 OF THE TREATY ESTABLISHING THE E.U., DIRECTIVE 98/34/EC FOR LAYING DOWN A PROCEDURE FOR THE PROVISION OF INFORMATION IN THE FIELD OF TECHNICAL STANDARDS AND REGULATIONS AND OF RULES ON INFORMATION SOCIETY SERVICES AND ON THE CORRESPONDING LAW ON THE PROCEDURE FOR THE PROVISION OF INFORMATION IN RELATION TO CERTAIN TECHNICAL RULES OF 2003 L. 72(I)/2003 AND ON THE GAMBLING LAW OF 2012 [L. 106(I)/2003 (erratum)]


BETFAIR INTERNATIONAL PLC’S
                                                                                                Applicants

AND

THE REPUBLIC OF CYPRUS THROUGH
THE INDEPENDENT GAMBLING AUTHORITY
                                                                                                Respondents


________________________

EX-PARTE APPLICATION FOR THE ISSUE OF AN INTERIM ORDER DATED 13.3.2013

 

Andros Pelecanos and Yiannis Polychronis for the applicants.

No appearance for the respondents [the application was served on the respondents, following the directions of the Court].

________________________

 

JUDGMENT

 

P. PANAYI, J.: The applicants, with a recourse filed on 13.3.2013, seek the annulment of the decision of the respondents dated 26.2.2013, whereby the latter placed on the website “http: blocking.nba.com.cy” a list which included the electronic addresses of the applicants, http://sports.betfair.com and “http: www.betfair.com/exchange”, whereby CYTACOM Solutions Ltd, a company that provides internet services to the clients of the applicants, was obliged to apply a blocking system on the website of the applicants, thus preventing the clients-users of the applicants from accessing the services provided by the applicants. On the same day, the applicants filed an ex-parte application seeking the issue of orders staying the execution of the abovementioned decision of the respondents “until the hearing and completion of the recourse of the applicants and/or until the hearing of the present interim application”.


The Court, in exercising its discretionary power, ordered that notice of the application be given to the other party and for this purpose fixed the application on 28.3.2013. Despite the fact that the application was served on the respondents they chose not to appear in Court. Furthermore, they did not appear on 16.4.2013, when the application was fixed yet again, following the filing of a supplementary affidavit in further support of the present application, with directions of the Court that this is served on the respondents so that they were notified of the new date, which duly took place. As a result, the Court does not have all the constituent elements that compose the decision before it, whereas the allegations and the contention of the applicants, as set out in the affidavits that support the application, with their attached exhibits, remain undisputed.


The applicants, as set out in their initial affidavit, are a public company, a member of the group of companies known as “Betfair group of companies”. Following their operations in June 2000, they provide online games of chance through the internet on an international basis. For the provision of their services they obtained a relevant licence from their country of origin, Malta, and at the material time, these services were provided exclusively through the internet and directly, through personal internet accounts of each of their clients. The complaint of the applicants, as clarified in the said affidavit, does not concern any decision of the respondents with regard to imposing a blocking system on slot machines, online casino games of chance and electronic horse racing betting, but only the block on electronic betting services made available by the applicants. They state that “they offer/provide two products/services on electronic sports bets, in particular sportsbook and exchange”.


The terms and conditions for a player to participate in a bet are varied, depending on the country of origin of the registered player. The bet in itself is not placed directly between the clients because the clients of the applicants, in essence, enter into a contract with the applicants, as set out in the form (Exhibit 5) found on the website of the applicants and which contains the special Terms and Conditions and establishes the contractual relationship between the applicants and their client.


On 11.7.2012 the Gambling Law, L. 106(I)/2012, was published in the Official Gazette of the Republic and on 2.8.2012 the Council of Ministers appointed the National Gambling Authority, the respondents.


The respondents, in their letter sent on or about 8.2.2013, informed internet service providers that operate in the Republic (Exhibit 20) that they had created the website “http:blocking.nba.com.cy” for the purpose of posting a list of the “urls” that had to be blocked according to section 65 of L. 106(I)/2012. Subsequently, on or about 12.2.2013, the respondents posted a list on the abovementioned website which included the website of the applicants with the following electronic address http://www.betfair.com/exchange, and they posted a final list on or about 26.2.2013 on which they placed inter alia various electronic addresses of the applicants through which they provide their services and/or products in the Cyprus market. Two of the electronic addresses of the applicants that were included on the final list were http://www.betfair.com/exchange and “sports.betfair.com”.  By posting the list in question, the providers imposed an access block on the said websites of the applicants, in compliance with the decision of the respondents.


It is the contention of the applicants that the respondents, in this manner, have in essence imposed an absolute prohibition on the applicants to provide any services and/or products in the Cyprus market, as established in section 12(2)(b) of Law 106(I)/2012. There is flagrant illegality in the taking of the decision challenged because in accordance with the transitional provisions of the Gambling Law, the applicants may, until the issue of regulations, continue to provide their services and despite this, clients of the applicants have been prohibited access to “SPORTS BOOK” and “BETTING EXCHANGE” services, without the applicants having had the opportunity to be heard. The applicants also contend that with the voting and publication of the said Law, specific provisions of European directives are infringed – reference to which is made herein below – and of articles of the Constitution of the Republic of Cyprus.


It is the applicants’ contention that in the event the order sought is not issued they shall incur irreparable damage, an allegation which is developed in detail in the supplementary affidavit of the applicants.


According to the principles developed in our case law – see Moyo and Another v. Republic (1983) 3 C.L.R. 1203, 1208, Sofocleous v. Republic (1971) 3 C.L.R. 345, Georghiades (no. 1) v. Republic (1965) 3 C.L.R. 392 – provisional orders under Rule 13 of the Supreme Constitutional Court Rules (as amended), on which the application is based, may be issued in the following two cases:


(a) Where there is flagrant illegality or


(b) Where there is evidence of irreparable damage, provided in the second case it does not place insuperable obstacles in the way of the Administration, when grounds of public interest are in opposition to issuing the interim order.


These two conditions however need not exist concurrently (Antoniou v. The Kofinou Central Abattoir Council (2001) 3 C.L.R. 164, 167). The satisfaction of either of them is sufficient to activate the power of the Court in a positive manner for the applicant.


In Loizides v. The Minister of Foreign Affairs (1995) 3 C.L.R. 233, flagrant illegality was summed up (on page 249) as “ ..... that which, if it does not come about automatically it arises upon actuarial calculation as to the impact on elements occurring in the available material provided of course whatever arises remains objectively undisputed and not subject to weighty expression of judgment”.


Also of relevance is the judgment of the Full Plenary in Securities and Exchange Commission v. Marfin Popular Bank (2007) 3 C.L.R. 32, 36 which adopted the interpretation of the term given in Loizides (above) with explicit reference.


In Polyvios Nicolaou v. PSC (1992) 4 (E) C.L.R. 3959, it was stressed that flagrant illegality might take the form of clear infringement of a procedure established by law or the blatant violation of the principles of administrative law.


On the basis of the above principles I shall proceed and examine as to whether the conditions for issuing the orders sought in the application are satisfied.


As set out in the letter of the respondents dated 8.2.2013 (Exhibit 20) to internet service providers operating in the Republic, they (the respondents) acted under section 65 of the Gambling Law of 2012 (L. 106(I)/2012), subsection (1) of which provides that internet service providers are obliged to apply a blocking system preventing their client-users, among other things, from accessing betting service providers who do not have a Class B bookmaker’s licence.


According to sections 12 and 13 of the same Law, betting services are only provided by a person who holds a Class A or Class B bookmaker’s licence, which is issued by the respondents having submitted the relevant application, and which authorises, depending on the Class of every licence, the provision of betting services, as these are determined in subsection (2) of section 12.  Subsection (2)(b) of the said section provides the issue of a Class B bookmaker’s licence by the Authority, which authorises the provision of “ ..... electronic betting services excluding slot machines, on-line casino games of chance provided with a direct link and electronic horse racing”.


Section 13 provides for the type of Class A or B bookmaker’s or authorised representative’s licence which “ .... is issued in the form determined by the regulations issued by the Authority”. The drafting of Regulations falls within the jurisdiction of the respondents – see section 11(a) of the Law – which are submitted to the Council of Ministers through the competent Minister and are submitted to the House of Representatives. According to section 11(b) it is also within the jurisdiction of the Authority to draft and issue regulations for the better application of the Law, with the following proviso:


Provided that the said regulations and directives are binding and obligatory as to their application to the persons to which they are addressed and the Authority supervises their application by the Class A or B licensed bookmakers and authorised representatives”.


The applicants raised the point that the respondents, to date, have not promoted the drafting of regulations, as established in section 11 of the Law; this has been confirmed by a relevant investigation carried out by the Court.  This fact brings into play the provisions of section 91 of the Law which provides:


91. (1) Every application for which the Authority requires a particular form, the form is specified by the Authority with by-laws.


(2) The Regulations, orders, licenses and notifications, issued under the Collective Bets (Regulation and Tax) Law are deemed to have been issued under the present Law and continue to apply until repealed or replaced.


(3) Legal persons who, at the time the present Law came into force, are in possession of a licence to process electronic bets which was issued by a member state in the European Union, may continue to provide betting services only in respect of bets permitted under the provisions of the present Law and are deemed to operate within the context of this law until the relevant licence is issued by the Authority, provided that they have submitted an application to obtain a licence in accordance with the provisions of the present Law within one (1) month from the notification of the date the Authority accepts applications”.


It is the contention of the applicants that flagrant illegality in this case consists in the fact that whereas the respondents have not drafted regulations and have not even announced that they accept the submission of applications for a Class B bookmaker’s licence, as they were obliged under the Law, nevertheless, they proceeded and blocked the betting services that the applicants were lawfully providing because, as legal persons they held a licence to carry on electronic bets, issued by a member state of the European Union, namely Malta, they are covered, under the circumstances, by the transitional provisions of section 91(3) of the Law.  They further contend that the prohibition as to carrying on providing betting services placed on the applicants by the respondents, infringe article 56 of the Treaty for Establishing the European Union according to which:     


“... restrictions of freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended”.


The applicants refer to the letter dated 10.12.2010 of the European Commission to the then Minister of Foreign Affairs and the Ministry of Commerce and Industry (Exhibit 8) indicating, with regard to the bill on the Regulation of Bets, with reference to the relevant case law of the ECJ, that:


The European Court of Justice, according to settled case law has resolved that Article 56 of the “TFUE” requires the abolition of restrictions on the freedom to provide services. All measures which prohibit, impede or render less attractive the exercise of such freedoms must be regarded as constituting such restrictions [Judgment of the Court (Fifth Chamber) of 15 January 2002, case C-439/99, Commission against Italy, [2002] ECR I-00305, paragraph 22; See also, to that effect, with regard to the freedom to provide services Case C-205/99 Analir and Others [2001] ECR 1-1271, paragraph 21.


The Court of Justice has further resolved that with regard to services of sports betting, Article 56 of the TFEU relates to services provided through the internet by a provider established in a Member State – without moving – to recipients in another Member State ...”.


The Court is in agreement with this contention of the applicants. According to the evidence and other particulars presented to the Court, the applicants are legal persons who when the law was put into effect held a licence to carry on electronic bets, issued by a Member State of the European Union, and appear to be lawfully operating within the scope of Law 106(I)/2012 (see section 91(3)). No other material has been presented to the Court to justify in any way the action of blocking the access to the website of the applicants, especially when the applicants were not given the right to be heard and present their arguments to the respondents with regard to the said blocking or that indicates that the case of the applicants falls within the exceptions of Article 56 of the TFEU, which are established in Articles 51 and 52 of the Treaty.  On the contrary, from the material before the Court and from a first examination of the case, the illegality appears as self-evident and instantly recognisable.


The other reason which advocates in favour of issuing an interim order is the serious possibility of causing irreparable damage to the applicant if the order is not sought.  Details of the contention of the applicants that they shall incur irreparable damage in the event the orders sought in the said application are not granted, are set out in the supplementary affidavit, which was filed following the relevant leave of the Court. In this the applicants, in essence, make reference to the “huge blow” that their reputation has sustained, and that companies cooperating with them, following the publications with regard to the intention of the National Gambling Authority to impose a blocking system, gave notice to terminate the agreements between them, which they subsequently withdrew following the intervention of the advocate of the applicants. Furthermore, following the said publications, the shares of the applicants, which are traded on the London Stock Exchange, had an immediate drop and as a result the applicants sustained irreparable damage.


According to case law, irreparable damage is damage that cannot be restored with any of the remedies that may be granted when annulling the specific administrative act. This is indicated in Frangos and Others v. Republic (1982) 3 C.L.R. 53:


Irreparable damage encompasses damage of a kind that is irretrievable by subsequent legal or administrative action, such as the destruction of the res and irreversible physical deterioration”. 


The burden of proof as to irreparable damage rests on the applicant, who must specify the damage that will result from the imminent implementation of the administrative act in question in his application in a particular manner (see Sofocleous v. The Republic (1971) 3 C.L.R. 345). Causing financial damage does not necessarily imply “irreparable damage” within the meaning of Rule 13. (Markoulidou a.o. v. Republic a.o. (1989) 3 C.L.R. 3413).


Having carefully examined all the particulars presented before the Court on the matter in question, I am of the opinion that they have substantiated their allegation.  Apart from the fact of the drop in the shares of the applicants, the damage presented appears to have already been caused and will not depend on whether or not the orders are issued, I am not satisfied that any damage that might be caused to the applicants shall be irreparable or of such a kind that it cannot be evaluated at a later stage.


Consequently, I find there is flagrant illegality. This finding also seals the legitimacy of the challenged decision without hearing the recourse. (see Hellenic Petroleum Cyprus Ltd. v. The Republic of Cyprus a.o. (2007) 3 C.L.R. 602).


The recourse is successful. The challenged decision is annulled. The costs are awarded in favour of the applicants and against the respondents, to be assessed by the Registrar and approved by the Court.


P. Panayi, J.

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