Gibraltar: Gibraltar – E-Gaming Licensing And Regulation In A Unique Jurisdiction

INTRODUCTION

The passing of the Security and Accountability For Every Port Act ("the SAFE Port Act") by the US Congress on 30 September 2006 was described by the Chief Executive Officer of a major internet gaming company as a 'significant setback for our company, our customers and our industry'. The SAFE Port Act incorporated the provisions of the Unlawful Internet Gambling Enforcement Act of 2006 ("the Act") making it unlawful for gaming companies to receive monies in connection with unlawful internet gambling.

The Act is the first piece of Federal legislation in the USA that specifically targets internet gambling and suggests a more determined approach by the US Government against internet gaming operators based in jurisdictions such as Gibraltar.

The effect of the Act was immediate; £3 billion was reported to have been wiped off the value of gaming companies listed on the London Stock Exchange on the first day of trading after the passing of the Act. Following the signing of the Act by the US President on 13 October 2006, several companies suspended gambling activities by persons based in the USA. A substantial proportion of the income those companies derived from internet gaming suddenly dried up.

Although undoubtedly a blow to the internet gaming industry, the Act will not prevent the continuing growth that e-gaming companies have experienced from players in jurisdictions other than the USA. The Act has set some companies back several years but most will recover by refocusing their efforts on those other markets.

In the long term, it is expected that most jurisdictions, including the USA, will go down the path of regulation rather than prohibition. Companies operating in well regulated jurisdictions will benefit from global expansion, consolidation and growth in the industry.

GIBRALTAR – A UNIQUE JURISDICTION

Gibraltar, as a jurisdiction that licences and regulates internet gaming companies, is well poised to capitalise on that growth. It is in many ways a unique jurisdiction. Over its 300 year history, a mixed cocktail of peoples and cultures have welded into a community distinct from Britain and Spain with a modern, vibrant and adaptable economy. The diversity of the Rock, as Gibraltar is popularly described, its fiscal and legislative independence and its skills base, has produced an extraordinary economic story. The latest and probably the fastest growing chapter in this unfolding tale has been the development of international gaming and betting activities.

Gibraltar is the only UK overseas territory that is part of the EU. By virtue of the UK's Treaty of Accession to the EU, Gibraltar was excluded from certain parts of the Treaty of Rome 1957 (EC Treaty). Gibraltar does not form part of the customs territory of the EU, it is treated as a third country for the purposes of the common agricultural policy, it is excluded from the common market in agriculture and trade in agricultural products and from EU rules on value added tax and other turnover taxes, and it makes no contribution to the EU budget. For all other purposes, including the freedom to provide services, Gibraltar forms part of the EU.

This was recently recognised in the UK's Gambling Act 2005 which confirms that Gibraltar is part of the European Economic Area (EEA) (effectively the EU and a few additional countries) for the purposes of the new UK gaming legislation.

An example of a services provision which applies to Gibraltar is the Electronic Commerce Directive1 which has been transposed into Gibraltar law as the Electronic Commerce Ordinance 2001. The Directive does not apply to gaming. However, this exclusion has not been incorporated in the Electronic Commerce Ordinance 2001 resulting in gaming companies being able to take advantage of the provisions of the Ordinance. It also means that customers of internet gaming companies established in Gibraltar will have the rights and protection provided by the Ordinance. These include conditions relating to commercial communications and the right to certain information concerning the conclusion of electronic contracts.

Gibraltar has competence in tax, company and trade related matters, including responsibility for gaming. The legal system is entirely common law and there is a wealth of professional and commercial expertise. Furthermore, not being an island, Gibraltar is able to work with the Spanish hinterland, thereby affording opportunities for economic interaction, which would not be open to a sea-locked territory. Not only, therefore, do millions of tourists cross from southern Spain every year, but thousands (including many engaged in the gaming sector) are employed in Gibraltar and live in the surrounding municipalities. This reciprocity also enhances the leisure and social appeal of Gibraltar. It is often an important factor when gaming, financial services or other international businesses are seeking to establish a base.

The combination of British common law, EU membership, tax competitiveness and attractive lifestyle make Gibraltar a powerful proposition.

GAMING SECTOR FLOURISHES

The international gaming sector has developed over the last 7 or 8 years with careful nurturing. The initial interest (spurred by the increase in UK betting tax in the mid 1990s) mushroomed shortly thereafter into a veritable flood of applicants seeking to establish a presence. The great majority of these applications did not prosper due to the regulatory standards Gibraltar imposed and the avowed policy objective to allow in only the best-resourced and established operators.

The result of this stringent approach applied pragmatically by Gibraltar's regulator, has been to carve out a quality and first class gaming sector. The pioneering presence of Victor Chandler and Ladbrokes has now given way to a diversified and much larger gaming sector including the likes of Casino-on-Net, Stan James, PartyGaming and 888 Holdings. Gaming companies now employ approximately 10% of the workforce in Gibraltar. We are likely to witness a continued but controlled expansion of the sector, especially in e-gaming.

NEW LEGISLATION

Regulation and transparency are key to Gibraltar's drive to consolidate itself as important jurisdiction for e-gaming companies. This led to a recognition that Gibraltar needed a modern legislative framework to replace the Gaming Ordinance which was enacted on 6 June 1958 when the possibilities of the internet as a World Wide Web could only have been the subject of dreams.

After various months of consultation between the Government of Gibraltar and the industry, the Gibraltar House of Assembly passed in December 2005 the Gambling Ordinance 2005. This new legislation is now in force and has replaced in its entirety he Gaming Ordinance.

The Gambling Ordinance 2005 builds on the pragmatic approach to regulation Gibraltar has adopted over the years. It provides a streamlined application, licensing and regulatory framework for Gibraltar's growing gaming business. In particular, it makes specific provision for the requirements of e-gaming, striking a balance between regulatory and reputational concerns and the need for the industry to respond rapidly to a highly competitive and fast moving environment.

E-gaming is described in the Gambling Ordinance 2005 as 'remote gambling'. emote gambling in turn is described to mean:

'gambling in which persons participate by means of remote communication, that is to say, communication using—

  1. the internet,
  2. telephones,
  3. television,
  4. radio or,
  5. any other kind of electronic or other technology for facilitating communication;'

Specific requirements are introduced in relation to remote gambling, distinguishing these from those applicable to non-remote, domestic gaming and betting activities.

Licensing and regulatory structure

The Gambling Ordinance 2005 provides for both a Licensing Authority and a Gambling Commissioner. The duties of the Licensing Authority are essentially to grant, on such terms as appear to be appropriate, licences to applicants. Licences are personal to licence holders and are not transferable. The responsibilities of the Licensing Authority also extend to renewal of licences and indeed suspension or revocation in appropriate circumstances.

The Gambling Commissioner (established under the auspices of the Gibraltar Regulatory Authority) is responsible for ensuring that the holders of licences conduct their undertakings:

  1. in accordance with the terms of their licences;
  2. in accordance with any other provisions made under the Gambling Ordinance 2005 or;
  3. in such a manner as to maintain the good reputation of Gibraltar.

The Gambling Commissioner is empowered (with the consent of the Minister responsible for gaming and in consultation with the Licensing Authority and industry) to draw up and publish codes of practice for the conduct of gambling undertakings by licence holders.

Both the Licensing Authority and Gambling Commissioner have a variety of powers to ensure proper enforcement of their respective duties. These include the powers to investigate and seek information in appropriate circumstances from operators.

The intention throughout has been to ensure that the regulatory balance is appropriate, given the need to maintain the good reputation of Gibraltar whilst not imposing unduly onerous obligations on licence holders.

Provisions related to remote gambling

It is an offence under the Gambling Ordinance 2005 for any person in or from within Gibraltar to provide facilities for remote gambling of any description, unless he is the holder of a remote gambling licence.

An application for a remote gambling licence is made to the Licensing Authority in the form provided for under the Gambling Ordinance 2005.

It is usual as a first step in the application process to prepare a synopsis of the proposal for the establishment of a presence in Gibraltar. A synopsis should include the following information:

  1. general background to the company, its promoters and the nature of the business;
  2. information on the nature of the activities that the company seeks to carry out from Gibraltar;
  3. reasons why the company wishes to relocate to and operate from Gibraltar;
  4. reasons why its relocation to Gibraltar would be of benefit to Gibraltar's economy;
  5. details of the company's proposed presence in Gibraltar;
  6. a general conclusion summing up the reasons for the application for a gaming licence.

A number of specific matters are required to be taken into account by the Licensing Authority in determining whether to grant or refuse a licence. The Licensing Authority is required to refuse a licence if:

  1. it considers that it would be in the public interest to do so;
  2. it is not satisfied that the applicant for the licence and, where applicable, each shareholder, director and each executive manager is a fit and proper person, or;
  3. it is not satisfied as to a number of various factors with regard to character, honesty, integrity, business reputation, financial business and the business plan of the proposed operators.

The Authority will also have regard to the experience of the operator or promoters, the actual or proposed ownership and structure of the business and its technical infrastructure.

Appropriate due diligence will be undertaken. This will include ensuring that the proposed licence holder has measures and procedures in place to identify money laundering and other suspicious transactions.

Responsible gambling

Gibraltar is sensitive to the need to ensure operators avoid the undesirable excesses of gambling to the greatest extent possible. Various provisions are therefore contained in the Gambling Ordinance 2005 to require a licence holder to provide some assistance to problem gamblers that may be attracted to Gibraltar sites.

A remote gambling website operated by or on behalf of a licence holder is required to contain on the home page a direct link to the websites of at least one organisation dedicated to assisting problem gamblers. Furthermore, a licence holder is required to have systems in place to enable a person to request to be self excluded from gambling, warn persons that they should not gamble beyond their means and to discourage them from so doing.

Licence holders are required to designate a person to be responsible for formulating responsible gambling policies and to provide training for staff on the implementation of those policies. They are also required to cooperate and work with the authorities in establishing and refining techniques to identify and discourage problem gambling.

Minimum ages for gambling

There is an obligation under the Gambling Ordinance 2005 for licence holders to take all reasonable steps to prevent any person from participating in gambling activities unless that person is at least of the minimum permitted age. The minimum permitted age for remote gambling is 18 (for lotteries where there are no money prizes the minimum permitted age is 16).

A licence holder that fails to comply with this obligation commits an offence under the Gambling Ordinance 2005.

Safeguarding and integrity of equipment

An important aspect of the Gambling Ordinance 2005 is the requirement with regard to the integrity of computer equipment. The legislation requires that a licence holder shall in the year following the grant of a licence, and thereafter at such intervals as are required by the Licensing Authority, produce a certificate as to the integrity of its computer equipment. It is envisaged that after the initial accreditation, subsequent requests for certification will be made on an adhoc and periodic basis.

CONCLUSION

It is vital that the e-gaming sector should increasingly adopt the highest standards of good governance within a well-structured regulatory framework. The new legislation in Gibraltar is designed to achieve precisely that and to encourage further developments in the industry.

Clearly, there are a number of international factors which will impinge significantly on the future of e-gaming. However, there is every reason to be optimistic for sustained future growth. The International Governmental Remote Gambling Summit organised by the UK's Department of Media, Culture and Sport which took place on 31 October 2006 and the Study of Gambling Services in the Internal Market of the European Union finalised in June 2006 and which is currently being considered by the EU highlight the importance which is being given to the issues connected with gambling generally and with remote gambling in particular. The prospect of more liberalised markets, better regulation and governance will ensure a competitive and dynamic environment in which many opportunities will arise.

Footnotes

  1. Directive of the European Parliament and of the Council 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Electronic Commerce Directive) (2000) OJ L 178/1.

www.gibraltarlaw.com/

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions