Avis juridique important

Judgment of the Court of 24 March 1994. - Her Majesty's Customs and Excise v Gerhart Schindler and Jörg Schindler. - Reference for a preliminary ruling: High Court of Justice, Queen's Bench Division - United Kingdom. - Lotteries. - Case C-275/92. European Court reports 1994 Page I-01039 Swedish special edition Page 00119 Finnish special edition Page I-00079

Summary Parties Grounds Decision on costs Operative part

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1. Freedom to provide services - Treaty provisions - Scope - Importation of lottery advertisements and tickets in order to enable residents of one Member State to participate in a lottery operated in another Member State - Inclusion

(EEC Treaty, Arts 59 and 60)

2. Freedom to provide services - Restrictions - National legislation prohibiting lotteries - Justification - Protection of consumers and maintenance of order in society

(EEC Treaty, Art. 59)

1. The importation of lottery advertisements and tickets into a Member State with a view to the participation by residents of that State in a lottery conducted in another Member State relates to a "service" within the meaning of Article 60 of the Treaty and accordingly falls within the scope of Article 59 of the Treaty.

Lottery activities, as services normally provided for remuneration constituted by the price of the ticket, do not, even as regards the cross-border sending and distribution of material objects necessary for their organization or operation, fall within the scope of the rules on the free movement of goods. Nor do they fall within the scope of the rules on the free movement of persons, or of those on free movement of capital, which concern capital movements as such and not all monetary transfers necessary to economic activities.

Moreover, their classification as services is not affected by the fact that they are subject to particularly strict regulation and close control by the public authorities in the various Member States of the Community, since they cannot be regarded as activities whose harmful nature causes them to be prohibited in all the Member States and whose position under Community law may be likened to that of activities involving illegal products.

Finally, neither the chance character of the winnings, as consideration for the payment received by the operator, nor the fact that, although lotteries are operated with a view to profit, participation in them may be recreational, nor even the fact that profits arising from a lottery may generally only be allocated in the public interest, prevents lottery activities from having an economic nature.

2. National legislation which prohibits, subject to specified exceptions, the holding of lotteries in a Member State and which thus wholly precludes lottery operators from other Member States from promoting their lotteries and selling their tickets, whether directly or through independent agents, in the Member State which enacted that legislation, restricts, even though it is applicable without distinction, the freedom to provide services.

However, since the legislation in question involves no discrimination on grounds of nationality, that restriction may be justified if it is for the protection of consumers and the maintenance of order in society.

The particular features of lotteries justify national authorities having a sufficient degree of latitude to determine what is required to protect the players and, more generally, in the light of the specific social and cultural features of each Member State, to maintain order in society, as regards the manner in which lotteries are operated, the size of the stakes, and the allocation of the profits they yield, and to decide either to restrict or to prohibit them.

In Case C-275/92,

REFERENCE to the Court under Article 177 of the EEC Treaty by the High Court of Justice of England and Wales (Queen' s Bench Division) for a preliminary ruling in the proceedings pending before that court between

Her Majesty' s Customs and Excise

and

Gerhart Schindler

Joerg Schindler

on the interpretation of Articles 30, 36, 56 and 59 of the EEC Treaty,

THE COURT,

composed of: O. Due, President, G.F. Mancini, J.C. Moitinho de Almeida and M. Díez de Velasco (Presidents of Chambers), C.N. Kakouris, F.A. Schockweiler, G.C. Rodríguez Iglesias, F. Grévisse (Rapporteur), M. Zuleeg, P.J.G. Kapteyn and J.L. Murray, Judges,

Advocate General: C. Gulmann,

Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

- Gerhart and Joerg Schindler, by Mark Brealey, Barrister,

- the Belgian Government, by Jan Devadder, Principal Director in the Ministry of Foreign Affairs, Foreign Trade and Cooperation with Developing Countries, acting as Agent, and Ph. Vlaemminck, of the Ghent Bar,

- the Danish Government, by Joergen Molde, Legal Adviser at the Ministry of Foreign Affairs, acting as Agent,

- the German Government, by Ernst Roeder, Ministerialrat in the Federal Ministry of Economic Affairs, acting as Agent,

- the Greek Government, by Vassileios Kontolaimos, Assistant Legal Adviser, and Ioannis Chalkias, legal representative, of the State Legal Service, acting as Agents,

- the Spanish Government, by Alberto Navarro González, Director General for Community Legal and Institutional Coordination, and Miguel Bravo-Ferrer Delgado, State Attorney in the Legal Department for Matters before the Court of Justice, acting as Agents,

- the French Government, by Philippe Pouzoulet, Deputy Director in the Legal Affairs Directorate of the Ministry of Foreign Affairs, and Hélène Duchène, Secretary of Foreign Affairs, acting as Agents,

- the Luxembourg Government, by Charles Elsen, Principal Government Adviser, acting as Agent, assisted by René Diederich, of the Luxembourg Bar,

- the Netherlands Government, by A. Bos, Legal Adviser in the Ministry of Foreign Affairs, acting as Agent,

- the United Kingdom, by Susan Cochrane, Treasury Solicitor' s Department, acting as Agent, and David Pannick QC, of the Bar of England and Wales,

- the Commission of the European Communities, by Richard Wainwright, Legal Adviser, and Arnold Ridout, a United Kingdom civil servant on secondment to the Legal Service of the Commission, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of the defendants, the Belgian Government, the German Government, the Greek Government, the Spanish Government, the French Government, the Irish Government, represented by Mary Finlay, Senior Counsel, acting as Agent, the Luxembourg Government, the Netherlands Government, represented by J.W. de Zwaan, Assistant Legal Adviser at the Ministry of Foreign Affairs, acting as Agent, the Portuguese Government, represented by Luis Fernandes, Director of the Legal Service of the Directorate-General of the European Communities of the Ministry of Foreign Affairs, and Rogério Leitão, Professor at the Institute of European Studies of the University of Lusíada, acting as Agents, the United Kingdom, represented by John E. Collins, Assistant Treasury Solicitor, acting as Agent, and Stephen Richards, Barrister, and the Commission of the European Communities, at the hearing on 22 September 1993,

after hearing the Opinion of the Advocate General at the sitting on 16 December 1993,

gives the following

Judgment

1 By order of 3 April 1992, received at the Court on 18 June 1992, the High Court of Justice of England and Wales (Queen' s Bench Division) referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty six questions on the interpretation of Articles 30, 36, 56 and 59 of the Treaty in order to determine whether national legislation prohibiting the holding of certain lotteries in a Member State was compatible with those provisions.

2 Those questions were raised in the course of proceedings between the Commissioners of Customs and Excise (hereinafter "the Commissioners"), plaintiffs in the main proceedings, and Gerhart and Joerg Schindler concerning the dispatch of advertisements and application forms for a lottery organized in the Federal Republic of Germany to United Kingdom nationals.

3 Gerhart and Joerg Schindler are independent agents of the "Sueddeutsche Klassenlotterie" (hereinafter "SKL"), a public body responsible for organizing what are known as "Class" lotteries on behalf of four Laender of the Federal Republic of Germany. As such agents, they promote SKL lotteries and unquestionably sell tickets for those lotteries.

4 Gerhart and Joerg Schindler dispatched envelopes from the Netherlands to United Kingdom nationals. Each envelope contained a letter inviting the addressee to participate in the 87th issue of the SKL, application forms for participating in that lottery and a pre-printed reply envelope.

5 The envelopes were intercepted and confiscated by the Commissioners at Dover Postal Depot on the ground that they had been imported in breach of section 1(ii) of the Revenue Act 1898 in conjunction with section 2 of the Lotteries and Amusements Act 1976, before their amendment by the National Lottery etc. Act 1993.

"The importation of the following articles is prohibited, that is to say:-

(i) ...

(ii) Any advertisement or other notice of, or relating to, the drawing or intended drawing of any lottery, which, in the opinion of the Commissioners of Customs and Excise is imported for the purpose of publication in the United Kingdom, in contravention of any Act relating to lotteries."

7 Section 1 of the Lotteries and Amusements Act 1976 prohibits lotteries which do not constitute gaming within the meaning of the United Kingdom legislation on gaming (in particular the Gaming Act 1968), namely the distribution of winnings in money or money' s worth on the basis of chance where money has been staked by the players. However, by way of exception to that prohibition, the law permits certain types of lottery, mainly small-scale lotteries for charitable and similar purposes.

8 According to the order for reference, the 87th issue of the SKL was prohibited by virtue of those provisions.

9 Section 2 of the Act of 1976 as then in force provided:

"... every person who in connection with any lottery promoted or proposed to be promoted either in Great Britain or elsewhere -

...

(d) brings, or invites any person to send, into Great Britain for the purpose of sale or distribution any ticket in, or advertisement of, the lottery; or

(e) sends or attempts to send out of Great Britain any money or valuable thing received in respect of the sale or distribution, or any document recording the sale or distribution, or the identity of the holder, of any ticket or chance in the lottery; or

...

(g) causes, procures or attempts to procure any person to do any of the abovementioned acts,

shall be guilty of an offence."

10 In proceedings brought by the Commissioners for condemnation of the items seized, Gerhart and Joerg Schindler, defendants in the main proceedings, argued before the High Court of Justice that section 1(ii) of the Revenue Act 1898 and section 2 of the Lotteries and Amusements Act 1976 were incompatible with Article 30, or in the alternative Article 59, of the Treaty since they prohibited the importation into a Member State of tickets, letters and application forms relating to a lottery lawfully conducted in another Member State.

11 The Commissioners contended that tickets and advertisements for a lottery did not constitute "goods" within the meaning of the Treaty, that neither Article 30 nor Article 59 of the Treaty applied to the prohibition on importation in the United Kingdom legislation since that legislation applied to all large-scale lotteries whatever their origin and that in any event the prohibition was justified by the United Kingdom Government' s concern to limit lotteries for social policy reasons and to prevent fraud.

12 Considering that resolution of that dispute required an interpretation of Community law, the High Court of Justice stayed the proceedings and referred the following questions to the Court:

"(1) Do tickets in, or advertisements for, a lottery which is lawfully conducted in another Member State constitute goods for the purposes of Article 30 of the Treaty of Rome?

(2) If so, does Article 30 apply to the prohibition by the United Kingdom of the importation of tickets or advertisements for major lotteries, given that the restrictions imposed by United Kingdom law on the conduct of such lotteries within the United Kingdom apply without discrimination on grounds of nationality and irrespective of whether the lottery is organized from outside or within the United Kingdom?

(3) If so, do the concerns of the United Kingdom to limit lotteries for social policy reasons and to prevent fraud constitute legitimate public policy or public morality considerations to justify the restrictions of which complaint is made, whether under Article 36 or otherwise, in the circumstances of the present case?

(4) Does the provision of tickets in, or the sending of advertisements for, a lottery which is lawfully conducted in another Member State constitute the provision of services for the purposes of Article 59 of the Treaty of Rome?

(5) If so, does Article 59 apply to the prohibition by the United Kingdom of the importation of tickets or advertisements for major lotteries, given that the restrictions imposed by United Kingdom law on the conduct of such lotteries within the United Kingdom apply without discrimination on grounds of nationality and irrespective of whether the lottery is organized from outside or within the United Kingdom?

(6) If so, do the concerns of the United Kingdom to limit lotteries for social policy reasons and to prevent fraud constitute legitimate public policy or public morality considerations to justify the restrictions of which complaint is made, whether under Article 56 read with Article 66 or otherwise, in the circumstances of the present case?"

13 Read in the light of the arguments adduced before it by the parties to the main proceedings and the reasons given in its order for reference, the question put by the national court is essentially whether Articles 30 and 59 of the Treaty preclude the legislation of a Member State from prohibiting, subject to exceptions, lotteries in its territory - as does the United Kingdom legislation - and consequently the importation of material intended to enable its residents to participate in foreign lotteries.

14 The first and fourth questions are put by the national court to ascertain whether the importation of lottery advertisements and tickets into a Member State with a view to the participation by residents of that State in a lottery operated in another Member State constitutes an importation of goods and falls under Article 30 of the Treaty or whether such an activity amounts to a provision of services which as such comes within the scope of Article 59 of the Treaty.

15 In those circumstances, those two questions should be considered together.

The first and fourth questions

18 Finally, the defendants in the main proceedings argue that their activity comes within the scope of Article 30 of the Treaty. They submit that the advertisements and documents announcing or concerning a lottery draw are "goods" within the meaning of the Treaty, that is to say in accordance with the Court' s definition in Joined Cases 60 and 61/84 Cinéthèque v Fédération Nationale des Cinémas Français [1985] ECR 2605 they are manufactured material objects.

20 That being so, it will be sufficient to consider whether lotteries fall within the scope of one or other of the articles of the Treaty referred to in the order for reference.

"Services shall be considered to be 'services' within the meaning of this Treaty where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons."

31 Admittedly, as some Member States point out, lotteries are subject to particularly strict regulation and close control by the public authorities in the various Member States of the Community. However, they are not totally prohibited in those States. On the contrary, they are commonplace. In particular, although in principle lotteries are prohibited in the United Kingdom, small-scale lotteries for charitable and similar purposes are permitted, and, since the enactment of the appropriate law in 1993, so is the national lottery.

33 Some governments stress the chance character of lottery winnings. However, a normal lottery transaction consists of the payment of a sum by a gambler who hopes in return to receive a prize or winnings. The element of chance inherent in that return does not prevent the transaction having an economic nature.

34 It is also the case that, like amateur sport, a lottery may provide entertainment for the players who participate. However, that recreational aspect of the lottery does not take it out of the realm of the provision of services. Not only does it give the players, if not always a win, at least the hope of a win, it also yields a gain for the operator. Lotteries are operated by private or public persons with a view to profit since, in most cases, not all the money staked by the participants is redistributed as prizes or winnings.

37 Consequently, the reply to be given to the first and fourth questions should be that the importation of lottery advertisements and tickets into a Member State with a view to the participation by residents of that State in a lottery operated in another Member State relates to a "service" within the meaning of Article 60 of the Treaty and accordingly falls within the scope of Article 59 of the Treaty.

The second and third questions

38 It is clear from their wording that the national court' s second and third questions are put only if the activity in issue in the main proceedings falls within the scope of Article 30 of the Treaty. Since that is not the case, those questions do not call for a reply.

The fifth question

39 The essence of the national court' s fifth question is whether national legislation which, like the United Kingdom legislation on lotteries, prohibits, subject to specified exceptions, the holding of lotteries in a Member State constitutes an obstacle to the freedom to provide services.

40 The Commission and the defendants in the main proceedings argue that, on any view of the matter, such legislation, being in fact discriminatory, restricts the freedom to provide services.

41 The Spanish, French, Greek and United Kingdom Governments accept that such legislation may restrict freedom to provide services even though it is applicable without distinction.

42 The Belgian and Luxembourg Governments submit that legislation such as the United Kingdom legislation does not restrict freedom to provide services because it is applicable without distinction.

44 It is sufficient to note that this is the case with national legislation such as the United Kingdom legislation on lotteries which wholly precludes lottery operators from other Member States from promoting their lotteries and selling their tickets, whether directly or through independent agents, in the Member State which enacted that legislation.

45 Accordingly, the reply to the fifth question should be that national legislation which, like the United Kingdom legislation on lotteries, prohibits, subject to specified exceptions, the holding of lotteries in a Member State is an obstacle to the freedom to provide services.

The sixth question

48 It is common ground that a prohibition such as that laid down in the United Kingdom legislation, which applies to the operation of large-scale lotteries and in particular to the advertising and distribution of tickets for such lotteries, applies irrespective of the nationality of the lottery operator or his agents and whatever the Member State or States in which the operator or his agents are established. It does not therefore discriminate on the basis of the nationality of the economic agents concerned or of the Member State in which they are established.

52 In those circumstances legislation such as the United Kingdom legislation cannot be considered to be discriminatory.

53 That leads to the question whether Article 59 of the Treaty precludes such legislation which, although not discriminatory, nonetheless as stated above at paragraph 45 restricts the freedom to provide services.

54 All the governments which have submitted observations consider that legislation such as that at issue is compatible with Article 59 of the Treaty. They argue that the legislation must be regarded as justified by overriding public interest considerations of consumer protection, prevention of crime, protection of public morality, restriction of demand for gambling and the financing of public interest activities. They consider, furthermore, that such legislation is proportionate to the objectives pursued thereby.

55 In contrast the Commission considers that although it is based on overriding public interest considerations a prohibition on lotteries such as that provided under United Kingdom law is not compatible with Article 59 of the Treaty since the objectives it pursues may be achieved by less restrictive measures.

56 The defendants in the main proceedings argue for their part that the reasons invoked to justify the prohibition at issue cannot constitute overriding considerations of public interest since legislation such as the United Kingdom legislation does not contain an equivalent prohibition of gambling of the same nature as large-scale lotteries.

62 When a Member State prohibits in its territory the operation of large-scale lotteries and in particular the advertising and distribution of tickets for that type of lottery, the prohibition on the importation of materials intended to enable nationals of that Member State to participate in such lotteries organized in another Member State cannot be regarded as a measure involving an unjustified interference with the freedom to provide services. Such a prohibition on import is a necessary part of the protection which that Member State seeks to secure in its territory in relation to lotteries.

Costs

64 The costs incurred by the Belgian, Danish, German, Greek, Spanish, French, Irish, Luxembourg, Netherlands, Portuguese and United Kingdom Governments and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT,

in answer to the questions referred to it by the High Court of Justice (Queen' s Bench Division, Commercial Court) by order of 3 April 1992, hereby rules:

1. The importation of lottery advertisements and tickets into a Member State with a view to the participation by residents of that State in a lottery operated in another Member State relates to a "service" within the meaning of Article 60 of the Treaty and accordingly falls within the scope of Article 59 of the Treaty;

2. National legislation which, like the United Kingdom legislation on lotteries, prohibits, subject to specified exceptions, the holding of lotteries in a Member State is an obstacle to the freedom to provide services;

3. The Treaty provisions relating to freedom to provide services do not preclude legislation such as the United Kingdom lotteries legislation, in view of the concerns of social policy and of the prevention of fraud which justify it.