The rapid expansion of online gambling across the European Union has given rise to complex legal disputes, particularly where gambling operators licensed in one Member State target consumers in another Member State.
A case referred to the Court of Justice of the European Union (CJEU) by the Austrian Supreme Court (Oberster Gerichtshof) in Case C-77/24 (the "Titanium Brace" case) exemplifies these challenges.
An Austrian consumer (TE) brought a civil claim in Austria against the former directors of Titanium Brace Marketing Limited, a Maltese-registered online gambling company. Like many before him, TE sought to recover his gambling losses, however, because the company was insolvent, TE's claim was not based on the invalidity of his contract with the company, but rather on the tortious liability of the company's former directors.
In this context, the Austrian courts were faced with two key questions, which they referred to the CJEU: (1) whether the claim against the directors fell within the scope of the Rome II Regulation (Regulation (EC) No 864/2007) or was excluded as a matter of company law, and (2) if Rome II applied, whether Austrian or Maltese law governed the claim.
On the first question, the Advocate General for the CJEU (AG) concluded that the exclusion in Article 1(2)(d) of Rome II (covering "non-contractual obligations arising out of the law of companies") does not apply to claims against company directors based on the infringement of duties or prohibitions imposed independently of their appointment, such as the prohibition on offering unlicensed games of chance under Austrian law. The AG reasoned that this exclusion is limited to liabilities arising specifically from company law, not from general tortious duties imposed on all persons.
Turning to the applicable law, the AG interpreted Article 4(1) of Rome II to mean that the law of the country where the "damage" occurs governs the non-contractual obligation. In the context of online gambling, the AG found that the "damage", i.e. the loss suffered by the consumer, occurs in the state from which the consumer participates in the games (in this case, Austria), not where the company or its bank accounts are located.
The AG also rejected the argument that the law designated by Article 4(1) of Rome II should be displaced by the "escape clause" in Article 4(3), which allows for another law to apply if the tort is manifestly more closely connected with another country. The AG found that, while the case had connections to Malta, these were not manifestly stronger than those with Austria.
While it remains to be seen what the CJEU's position will be, if the CJEU endorses the AG's opinion, this will have serious implications for company directors within the EU as it will expose directors to consumer tort claims.
Malta's public policy on gaming and gambling (as confirmed in two first instance decisions delivered earlier this year currently subject to appeal – see here) will continue to allow Maltese courts to refuse enforcement of these types of judgments against Maltese gaming companies and their directors, however, if the CJEU endorses the AG's opinion, this will have serious implications for company directors within the EU who may face a barrage of consumer tort claims in various countries and not be afforded any protection whatsoever.
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