Not only did a French appeal court triple the daily fine against Maltese remote gaming company Zeturf Ltd, but Zeturf's request to the French court to refer the matter to the European Court of Justice for a preliminary ruling was also turned down. The French court of appeal held that French law on the matter is not incompatible with European law.
Zeturf's spokesman expressed outrage that "nowhere in the judgment was reference made to the fact that Zeturf has a remote gaming licence issued by another sovereign state through the Malta Lotteries and Gaming Authority. We feel that we have been cheated by the French courts."
On the timing of the notification of the original court case, the spokesman said: "The court did not even relent on the fact that Zeturf was not properly notified of the original proceedings in time to be able to prepare its defence.
"The French court considered a notice served in Malta three hours before the court hearing in Paris on the same day as sufficient for us to appear and propose and prepare a defence. This is nothing short of obscene."
Zeturf now faces a fine of over €18 million (Lm7.7 million) a year. "This latest ruse by PMU to secure a hefty fine is merely intended to strangle Zeturf before we even get the opportunity to vindicate our rights and set matters right before the European Court of Justice, where caselaw is in our favour," the spokesman said.
Zeturf had earlier filed a complaint with the European Commission against PMU. The complaint has been officially registered.
Asked to comment about PMU's assertions, Dr Anthony Axisa, Legal and Enforcement Director at the Lotteries and Gaming Authority, said that in 2004, wagers taken by PMU amounted to over €7,500 billion (Lm3,220 billion). Of that amount, 72.5 per cent were paid back in winnings, after the deduction of 27.5 per cent in levies.
"While 14.2 per cent of the levies were received by racing associations and the joint breeding fund, the remaining €1,083 billion (Lm465 billion - 13 per cent) went directly to government coffers," Dr Axisa said. "This in itself clearly contradicts PMU's assertion as endorsed by the court, that it is a non-profit organisation."
Dr Axisa also highlighted the fact that the French Government has a strong presence in PMU. "PMU was established in 1930 and has been an economic interest group since 1985. The group is run by a general assembly, whose chairman and vice-chairman must be endorsed by the ministry of agriculture and the ministry in charge of the budget.
"The board of directors, appointed by the general assembly, is empowered to make decisions relating to the overall strategic, financial, economic and technological orientations, and is composed of ten administrators, including the chairman and the vice-chairman. Four of the remaining administrators are state representatives," Dr Axisa said.
Zeturf also complain that PMU appeared to be throwing its weight against a small company in a small country while it was entering into agreements with big companies.
Dr Axisa explained that, to date, PMU claims to have agreements for common pool betting or separate pool betting with bookmakers, companies or other organisations in 27 countries.
"As from 1997 PMU have also been taking bets on foreign races," Dr Axisa said. "The card enables punters to wager on the world's most renowned races, including 90 per cent of the Group 1 races in Europe, North America, the United Arab Emirates and Asia.
"These include top races from Cheltenham, Epsom, Royal Ascot, the Hong Kong Cup, the Japan Cup and all the events in the World Series Racing Championship. Last year alone punters were able to bet on around 100 races from 15 countries."
Once again, this clearly conflicts with PMU's claim that it tries to limit gaming opportunities and discourage the growth of gaming activities.
Zeturf reiterated that they are in full compliance with Malta's Remote Gaming Regulations. A Maltese remote gaming licence allows the licensee to operate in cyberspace.
The LGA is confident of the unquestionable legality and equity of the Remote Gaming Regulations. It considers the regulations to be in complete harmony with the principle of freedom of movement of services enshrined in the EC Treaty.
Zeturf's operations are entirely based in Malta. All servers are here and transactions are concluded in Malta. Zeturf does not have any intermediaries on French territory, nor is its client base exclusively French. Zeturf's operation is entirely in cyberspace and they have no physical presence on French territory.
Zeturf's spokesman said that the company hopes that the situation will be redressed by the Maltese courts.
"PMU will seek to enforce the judgment in Malta," the spokesman said. "We are optimistic that Maltese courts will mete out the justice denied to us by French courts.
"At a time when Malta is demonstrating its full commitment to free competition within the European Union internal market and Government has virtually divested itself of all monopolies, it would be incongruous for our courts to allow a foreign monopoly to reinforce its dominant and abusive position, by closing us down."
The outcome of the Zeturf case is seen to have a determining impact on Malta's remote gaming industry. The remote gaming industry in Malta has assumed a significant importance over the past 19 months, generating hundreds of jobs and increased revenue for service providers. The imminent threat to this industry is nothing short of a matter of national interest.
Chronology of events
January 7, 2005: Zeturf Ltd, a Maltese-registered company, applies for a Class 2 (Remote Betting) licence to the Lotteries and Gaming Authority (LGA).
June 17, 2005: Zeturf Ltd, having been authorised by the LGA, launches its operation.
July 4, 2005: a writ by the Groupement d'Internet Economique Pari Mutuel Urbain (PMU) requesting interim proceedings is served on Zeturf Ltd. The writ is served at two addresses in Malta at 1.45 p.m. and 1.57 p.m., and the hearing is scheduled, by the Tribunal de Grande Instance of Paris, for the same day at 4 p.m. Zeturf Ltd are not represented at the hearing.
July 8, 2005: An interim order is issued by the French tribunal in which Zeturf Ltd was ordered "to cease online bet-taking operations on horse races organised in France".
July 22, 2005: Zeturf Ltd files an appeal from the interim order.
September 9, 2005: Zeturf Ltd lodges a complaint against France and PMU with the EU Commission.
November 2, 2005: A French court orders Bellmed, who provides co-location services to Zeturf, to pull out the plug on Zeturf or pay a daily fine running into thousands of euros.
January 4, 2006: Zeturf loses its appeal before the French Court of Appeal.