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Are gambling agreements concluded in violation of the Gambling Act legally valid?

The Supreme Court must address this question, as indicated by the case law.

Conflicting Rulings

The rulings of the various courts, although virtually the same legal arguments were presented, thus lead to different legal outcomes. Case law is, so to speak, ambivalent. Several cases are currently pending before the Dutch courts. In a preliminary ruling, the Amsterdam District Court[3] and the North Holland District Court[4] also qualify these as void agreements, but they too have doubts and are submitting questions to the Supreme Court.

This is possible by submitting preliminary questions. As soon as the Supreme Court has answered these legal questions, clarity will emerge on how to civilly deal with gambling agreements concluded in violation of the law. This will therefore lead to more uniform jurisprudence on this matter, which in our view is desirable for both the provider and the consumer, so that they effectively know where they stand.

Preliminary Questions:

The questions submitted to the Supreme Court are the following:

  1. Did the Gambling Act initially intend to affect the validity of legal acts contrary to it?

  2. If so, has that intention – after initially being present – been lost under the influence of societal developments and/or in view of the enforcement policy of the Gambling Authority?

  3. Is a gambling agreement between a consumer residing in the Netherlands and an online gambling provider who does not have a license within the meaning of the Gambling Act a void agreement within the meaning of Article 3:40 of the Dutch Civil Code?

  4. Does it matter for the answer to question 3 whether the gambling provider (or an affiliated entity) met the prioritization criteria of the Gambling Authority?

  5. If the answer to question 3 is affirmative, what are the legal consequences? Is a claim for repayment of the incurred loss on the grounds of undue payment admissible?

Consequences

The consequences of such nullity are enormous and also lead to additional side effects. In fact, it could mean that consumers who enter into a gambling agreement with an unlicensed provider can play without risk.

If they were to lose, they could enforce the nullity of the agreement and reclaim their losses. This could have the effect that players would specifically enter into gambling agreements with providers who do not have a license. Such a civil law qualification could thus undermine the objectives of the Gambling Act (channeling, protecting consumers, and preventing crime). This is especially true now that the battle between legal and illegal gambling offerings has flared up more fiercely than ever.

If you have questions or require support regarding the above article, please contact us. Our firm supports various gambling companies (both land-based and online) in handling player claims. We also advise on strategic choices that you, as an entrepreneur, must make.

Preliminary Questions Regarding the Legal Validity of Gambling Agreements

In the Netherlands, offering gambling is prohibited unless a license has been granted. Dutch legislation is, simply put, prohibitive legislation. For online gambling, it was not possible to apply for a license until April 1, 2021.

However, Dutch consumers had for years (even before licensed offerings were available in the Netherlands) found their way to foreign licensed offerings. Partly due to the demand for gambling (including online), the Gambling Act was amended, after which it became possible to apply for a license in the Netherlands. In that sense, it was widely accepted socially that online gambling could be participated in, and the absence of a Dutch license for providers made no difference. Although the law was strictly speaking violated due to the offering and the conclusion of gambling agreements with unlicensed providers, the question is what civil law consequences this has for the gambling agreement itself and whether this should lead to civil law nullity.

Recent Developments

There have recently been three rulings in this area, where two courts from the east of the country (Overijssel[1] and Groningen[2]) have ruled that a violation of Article 1 of the Gambling Act leads to the nullity of the civil law agreement.

Shortly thereafter followed the ruling of the Zeeland-West Brabant District Court, which, on the contrary, ruled that a violation of the Gambling Act does not lead to the nullity of the gambling agreement. In short, the Breda court ruled that insofar as Article 1, paragraph 1, under a of the Gambling Act intended to affect the validity of legal acts between consumers and the gambling provider, this intention has now been lost.

On the one hand, because the Act dates back to 1964 and therefore did not provide for the possibility of a license for online gambling offerings, and on the other hand, because the Dutch government has not consistently and unambiguously enforced it. Furthermore, no action was taken against providers who met the so-called enforcement criteria. Finally, the Dutch parliament adopted the Remote Gambling Bill, which provided for this amendment and would thus make the offering possible. This amendment thus met a practical need that had existed in Dutch society for a considerable time.

“That percentage is related to the actual offering under normal economic circumstances. In the explanatory memorandum to Article 3, it was noted that the percentages are derived from administrative data from 2010 and are entirely reasonable. The aim was to align as closely as possible with the actual offering under normal economic circumstances. However, in the periods concerned, the offering was nil due to corona measures. The application of the flat-rate system in those periods is inconsistent with the principle chosen by the legislator that taxation is based on actual offering. That principle is then entirely abandoned.”[2]
In this ruling, the Council of State emphasizes that the principle of gambling taxation is to tax based on the actual offering. The flat-rate percentage was also established to align as closely as possible with the actual offering under normal economic circumstances. The Council of State rules that the economic circumstances in 2020 were particularly exceptional due to corona measures, which makes the levy unreasonably burdensome.
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