For nearly three years, gambling companies based in Malta have been entangled in a legal battle over refund claims – involving a staggering volume estimated in the hundreds of millions of euros – brought by players in German courts.
The magnitude of these claims has posed an existential threat to operators licensed by the Malta Gaming Authority (MGA) who have historically targeted German players.
At the heart of these claims lies a contentious argument. Players contend that they staked and lost their money without realising that the MGA licence did not establish a sufficient legal basis for a betting contract in Germany.
Furthermore, claims that the relationship between the parties were established in accordance with Maltese law as per the end-user terms and conditions, which the player had accepted, and that the German court accordingly had no jurisdiction, were also rejected by the German courts, which had no issue in asserting their jurisdiction over the claims.
Consequently, the players argued that the contracts were void and their losses should be refunded.
Despite the debatable nature of this argument under German civil law, the majority of German civil courts have favoured the players in granting refund claims. Curiously, no player reciprocated by compensating the casinos for winnings, given the absence of a German licence.
While the primary defence of Maltese companies has rested on European law and their right to rely on the MGA licence, German civil courts have generally dismissed or ignored these arguments. The resulting judgments could be enforced relatively seamlessly in Malta under relevant European instruments.
This predicament prompted the Maltese government to enact the politically and legally contentious Article 56A, aimed at shielding MGA-licensed operators against cross-border enforcement. Many critics, however, viewed this measure as protectionist, failing to grasp the background and implications of players’ claims.
Last month, in a decisive move on January 10, 2024 (case I ZR 53/23), the German Federal High Court stayed a player claim based on the principle that if the decision of a legal dispute depends on a higher court’s decision in a parallel proceeding, the case can be suspended until the parallel case is decided. In this, the German High Court is referring to a case pending before the European Court of Justice (C-440/23) based on a referral by Maltese Justice Grazio Mercieca.
The court’s stance indicates acceptance of the Maltese referral to the European Court of Justice– Simona Camilleri
This decision underscores the German Federal High Court’s recognition of the questions referred by the Maltese court as crucial to the player claims pending in Germany. The court’s stance indicates acceptance of the Maltese referral to the European Court of Justice (ECJ) and aligns with the belief that the questions referred are pertinent in determining the validity of the German player claims.
The significance of this decision extends to Malta on several fronts. It not only lends weight to Article 56A of the Gambling Code, often criticised as a protectionist measure, but also suggests that the German Federal High Court shares concerns about the compatibility of the past German ban on online casinos with European law. This ban, which served as the legal basis for MGA licence acceptance of German players, is now under scrutiny.
The enactment of Article 56A by the Maltese legislator and the referral of preliminary questions to the ECJ by a Maltese judge (in re RAMGE vs ELBL Ltd case 95/2023) are portrayed not merely as actions in the interest of the Maltese gaming industry but as upholding fundamental principles of EU law.
The lower German courts’ disregard for these principles is implicitly acknowledged. The awaited decision from the ECJ on the Maltese referral questions may well challenge the legality of the previous German ban on online casinos, exposing potential violations of EU law based on past jurisprudence.
Simona Camilleri, LLD LLM, is chief legal officer for Sportingtech and has been advising gaming companies since 2004.