Zeturf fights on in French courts

The Maltese-registered Internet betting company at the centre of a legal wrangle with France's largest betting syndicate is facing further court action, with two cases being heard in France this week. Zeturf Ltd faces a potential fine of €1 million.

Zeturf's appeal against an interim order handed down in its absence by a Paris tribunal last July, fining the Maltese company €15,000 a day unless it stopped taking online bets on horse races organised in France, is being held on Tuesday.

Concurrently with this case, the Groupement d'Internet Economique Pari Mutuel Urbain (PMU), which obtained the interim order, is suing Zeturf for damages of up to €1 million. This case to liquidate the damages is being heard in Paris on Friday. Should the judgment be in favour of PMU, it will still need to seek enforcement of that judgment in Malta.

In the latest onslaught on Zeturf's operation, PMU has taken a local Internet service provider (ISP), Bellmed, to a French court for providing its services to Zeturf. In a judgment handed down on the November 2, the French court found in favour of PMU and ordered Bellmed to pay a daily fine running into thousands of euros.

Before PMU instituted the case, Bellmed had already attempted to defend its position by filing a jactitation suit (a suit calling on PMU to institute proceedings or cease its threats to the company) in the local courts and has filed a writ of summons in Malta requesting a declaratory judgment that Zeturf is operating according to Maltese law.

Given that PMU had already been notified about these legal proceedings, Bellmed pleaded that the French court has no competence to pass a judgment on the case, since there are already proceedings, on the same merits and between the same parties, in Malta.

According to a lawyer who is familiar with this case, in similar situations no other court is competent to seize the case - a principle that is even enshrined in EU legislation.

Notwithstanding this, the French court took cognizance of the case and delivered judgment. Bellmed have filed an appeal from this judgment. The cases originally filed by Bellmed in the Maltese courts are still ongoing.

A spokesman for Zeturf refused to discuss the merits of cases that are sub judice. However, he expressed the utmost trust in the integrity and equity of Maltese courts. "We are sure that in the circumstances, the French court did not have jurisdiction over Bellmed's case. We are confident that Maltese courts will vindicate our rights," the spokesman said.

In the latest development, the complaint that Zeturf filed with the European Commission in September against PMU, has now been officially registered. "Although this does not mean that the Commission is going to take further action on our complaint, it is a first step in the right direction that is encouraging for us," a spokesman for Zeturf said.

The European Commission, through its Internal Market spokesman, would only confirm to The Sunday Times that the Commission has received Zeturf's complaint (reported in The Sunday Times of September 18) and various services of the directorate are looking at it.

He also said that when such legal matters are involved the Commission doesn't like to comment until some kind of final outcome is achieved.

Asked whether an investigation is going to begin, the spokesman said only that if some irregularities are found there will be contacts with all concerned. However, he could not specify when this will start.

EU Commissioner Charlie McCreevy, who is responsible for Internal Market and Services, is calling for a debate on the issue within the Commission, but this depends on majority acceptance.

Malta's Permanent Representative at the EU, Richard Cachia Caruana, said: "The company involved (Zeturf) has filed a complaint with the Commission, as is its right, and sometime after they copied the complaint to the government. The government through its permanent representation in Brussels will follow the progress of the complaint through the Commission."

Referring to Zeturf's appeal from the French court's interim order, a spokesman for Zeturf said that so far PMU have presented their submissions for the appeal. Zeturf are expected to make more submissions on Tuesday. "It is surprising that the main thrust of PMU's arguments is based on their claim that PMU is not a monopoly," the spokesman said.

Zeturf strongly rebut PMU's claim. Facts show that the French Statute of June 2, 1891, as amended by the Act of March 9, 2004, prohibits bets on horse races.

By way of exception, the 1891 Act provides that horse racing associations (sociétés de courses) which satisfy the requirements of the same law may, by virtue of a special permit, organise pari-mutuel betting on horse races.

A 1997 ordinance provides that horse racing associations authorised to organise pari-mutuel betting outside racecourses, may entrust their management, for their own account, to an economic interest group (EIG) that they may set up among themselves, which is called "le Pari Mutuel Urbain".

PMU which, to date, is made up of 71 horse racing associations, is the only entity authorised to collect bets outside racecourses.

The group is run by a General Assembly in which the state features prominently, given that the chairman and vice-chairman have to be endorsed by the state and four of the remaining eight directors of the board are state representatives. PMU takes bets 365 days a year either online or through one of its 8,530 outlets.

Besides engaging in extensive marketing campaigns, PMU has entered into agreements with large betting companies in other European countries, in which it is offering horse races in these companies' betting shops across the EU. Monies generated through these cross-border activities go to a common pool after PMU deducts its commissions and taxes due to the French state coffers.

One observer said PMU appeared to be throwing its weight against a small company in a small country while it was entering into agreements with big companies. "This is also an issue of restricting free competition within the EU internal market," the observer said. Zeturf considers PMU's tactics contrary to the free market principles engendered by the European Union and a threat to Malta's fledgling remote gaming industry.

The Zeturf case has attracted attention from the gaming industry worldwide, with many trade magazines and periodicals following proceedings closely. The outcome will clearly have an impact of the industry not just in Malta but in all other countries in the EU.

Meanwhile, the Maltese government continues to take the case very seriously, with the task force made up of four Cabinet ministers, headed by Deputy Prime Minister Tonio Borg, being constantly updated on developments.

Foreign Minister Michael Frendo yesterday told The Sunday Times: "The Government has followed the complaint which Zeturf made to the European Commission. This is a very important matter for Malta and we will be actively following and pursuing the case. "

Dr Frendo said a key case that set out certain principles that had to be followed in the Zeturf case was that of Gambelli in Italy, where the European Court of Justice ruled that gambling monopolies are legal if they serve to curtail unhealthy gambling habits in society, and protect consumers from organised crime and gambling addiction, but illegal if they serve exclusively as a means of generating public sector revenues.

"The Gambelli case is a clear indication that economic considerations to block the functioning of the internal market in online betting services are not acceptable justification."

Zeturf's spokesman commended the Government's commitment to support Zeturf's cause in more ways than one, and observed that the ongoing support afforded to the company will help to send across the right message to the industry.

"Government's involvement in this issue is reassuring to this industry that wants to grow in a well-regulated environment that has the right to exist in a free European Union internal market," the spokesman said.

"Zeturf's operation is above board and, right now, we feel that equitable justice has not been meted out by the French courts' judgments. It is contrary to the most fundamental, basic tenets of human rights that Zeturf got its first chance to defend itself only at the appeal stage.

"In the Bellmed case we find it deeply disturbing that a French court has once again ignored procedural law and handed down judgment, when a Maltese court was already seized with the case," Zeturf's spokesman concluded.

The stage is set for Zeturf's defence. Amid the continuous tribulations, Zeturf is adamant not to go out in silence.

Additional reporting by Ivan Camilleri in Brussels.