A little over 10 years ago, the remote gambling industry was a relatively unknown sector in Gibraltar. Granted – we had already witnessed the arrival of Victor Chandler and Ladbrokes undertaking telephonic betting from the jurisdiction but this activity was relatively contained. This was the time of the dot.com debacle. Entrepreneurs were looking at alternative business propositions, albeit, using the medium that had grown so popular during this time, the internet. At this juncture, however, only a very few recognised the exceptional possibilities that the internet offered in relation to one of the oldest forms of entertainment, gambling.
Indeed, perhaps no one could have anticipated the accelerated growth of this sector over the last decade. It, however, became increasingly apparent in Gibraltar that the unique features of this jurisdiction could provide an excellent base from which business could expand into mainstream economic models, especially as a precursor to IPO ambitions. The sector was accordingly carefully nurtured by the Government within a framework that was coherent, streamlined and from a regulatory point of view, sound. Reputation was, and continues to be, of paramount importance to Gibraltar and this set the tone for how the industry was allowed to develop.
Gibraltar continues to adopt a selective and conservative approach to the licensing of gaming companies. We still only have 19 licensed operators, but these have real critical mass, directly employing just over 2,000 persons (a significant proportion considering the total Gibraltar workforce is around 20,000). The Government's policy has been to licence and regulate only the most established operators in the industry. Such operators are required to have sound corporate management processes, clear regulatory oversight and accountability in Gibraltar and adopt thorough compliance processes.
We believe the Gibraltar approach continues to work both for the jurisdiction and our operators. Gibraltar's membership of the EU, competitive tax regime (headline corporate tax rate of 10%) and strict regulatory framework remain key factors. The development over the last decade of a critical mass of expertise in the jurisdiction also opens up real opportunities for synergies and collaboration between operators.
But, if these past 10 years have allowed Gibraltar to consolidate as a jurisdictional leader in this sector, the next few years may prove the most testing for the industry globally. The recent EU Commission Green Paper on on-line gambling in the Internal Market highlights the difficulties that the sector has been facing. The Paper rightly noted that: "in the absence of harmonisation in the field, it is for each Member State to determine in those areas, in accordance with its own scale of values, what is required in order to ensure that the interests in question are protected..." The licensing framework within the EU is, therefore, likely to remain fragmented in the short to medium term before it inevitably starts to converge under the pressures of economics and consumer-led need for regulatory certainty. We have seen Italy and France move in broadly similar directions in this regard, and more recently Spain seems to be adopting a not dissimilar approach. More EU member states may inevitably follow – notwithstanding that this form of regime is difficult to reconcile with the treaty right of inter state free movement of services (Article 56 TFEU).
But, how will all this impact on Gibraltar and the industry established here? Certainly, the Green Paper is not going to provide immediate resolution to the many issues that need to be addressed. Indeed, the Paper may be regarded as an admission that the Commission needs much more information before it determines what is likely to be a suggested way ahead – even assuming it has the political will to play such a role. Although there is much in the Commission Paper that may be disappointing to operators, we should not, however, fail to note the clear reference to the importance of establishing coherence with community rights. Article 56 TFEU enshrines the freedom of services and the Green Paper clearly confirms that this freedom applies to gaming. The basis upon which this freedom will be reconciled with other competing interests is yet to be determined but there is no doubt that EU jurisdictions adopting an approach in which a substantive presence and regulatory accountability are paramount, should be well-placed to benefit from the opportunities that will arise in a more converged and coherent regulatory regime in the future.
The Gibraltar licensing approach has been based on the fundamental premise of freedom to provide services but in a way that demonstrates sensitivity and respect for the laws of other European territories. Whilst the developing scenario within Europe will remain a challenge to both operators and regulators in striking the right balance, Gibraltar's approach will continue to be one in which regulatory cooperation will play a vital role in the way forward.
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