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POSITIVE EU DECISIONS GIVE CAUSE FOR OPTIMISM Paull Khan
T
here have now been no fewer than fi five fiv European Commission decisions, over the past five years, which have fiv fi given the green light to member states wiisshing to introduce state aid in favour of their horseracing industries and which should be of great interest and encouragement to a number of other European racing industries. If lessons can be learnt from these cases, this may help the racing industries in other European countries construct the arguments necessary to follow suit, thereby improvi ving the fi vin financial health of fin our sport across the region. Racing authorities the world over are engaged in conversations wi with their wit governments, seeking to establish, protect, or maximise statutory funding for horse racing as well as to safeguard the future health and stability ty of the industry and that of the breed. Normally, this funding takes the form of a statutory return to horseracing from bett tting. tti So, tyyp pically, the racing authority must pi firs i st provid ide good arguments to answer the question of why government should support such a guaranteed return to horseracing from betti ting (which would normally constitute special treatment for the sport). Then, in many cases, a further question has to be successfully answered: “Why should Government feel confi fident fid that objections on the grounds of state aid will be overcome?” wil wi These fiv ive decisions – relating to France and Germany (in 2013) and to the UK, Finland, and Denmark (last year), are examples of racing authorities not only havin ing convin inced their governments to provi vide such assistance, but also of their vid governments havin ing successfully argued before the European Commission that the measures introduced constituted ‘compatible’ (i.e. admissible) forms of state aid. These decisions should be of interest to those racing industries that either:
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• have no current statutory support, but where their government either allows, or is contemplating allowing, betting operators independent of the sport to take bets on their racing, or • have statutory support, but where the level of that support can be demonstrated to be insufficient to sustain the country’s racing industry, and/or the terms of that support can be shown to be in some way unfair.
The causal factors behind the measures being introduced varied substantially betwe ween the fiv ive countries, as indeed did their context, in terms of each country’s betti ting and racing ‘ landscape.’ In three countries – France, Germany, and Denmark – the catalyst was a liberalisation of bett tting to end a tti previo iously existing monopoly. Of these, in the cases of France and Germany, the trigger for this liberalisation had been an adverse vi view taken by the European vie Commission of the restriction on trade that the monopolies had created; in Denmark, the move was voluntary and sought to revit italise bett tting interest in tti horse racing. By contrast, in Finland the pre-existing monopoly was retained – but the scope of bett tting activit tti ity wit ithin that monopoly was wi widened. An wid And, by contrast And again, in Britain there already existed a highly liberalised gambling regime – it was the circumvention of the rules by bett tting operators that provid tti ided the impetus for change. The level of support approved has varied somewhat. In the pioneering French case, a levy of 5.6% of stakes was applied to online bets on domestic horse racing, divid ided up pro-rata betw tween the twe three codes – Flat, Jumps, and Trotti ting. In Germany a tax was placed on domestic and foreign bett tting operators (fi tti fixed odds fix and Tote) of 5% of stakes on German horse racing (Flat, Jumps, and Trott tting). tti In Great Britain, a levy vy of 10%, not of stakes but of ‘Gross Gambling Yield’ – i.e. the diff fference betw ffe tween stakes placed and twe win innings returned to punters, above a
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de minimis threshold of £500,000 per annum – was applied to all bets placed by UK residents on British horseracing, whether processed in Britain or elsewhere. In Finland, an allocation of 4% of the proceeds of a newly formed state monopoly (which covers all forms of legal gambling – lott tteries, pools, bett tte tting tti games, slot machines, casino games, and totalisator bets) was directed to horse breeding and equestrian sports (of which the horseracing element only comprised trott tting, since there is no gallop racing tti in Finland). And nd in Denmark what has been introduced wi with eff wit ffect from January ffe 1st of this year is an 8% levy vy on all bett tting companies’ turnover from bett tti tting tti on Danish horse racing. Al All Danish All racecourses (the only gallop track being Kla lampenborg) benefi fit. This is to replace, fit in a phased manner over fi five years, the fiv current 21.25% cut of on-course turnover which each course has been receivi ving. vin Without exception, all fi five fiv arrangements were deemed to constitute ‘State aid.’ The defi finition of state aid that fin was applied can be found in Art rticle 107(1) of the Treaty ty on the Functioning of the European Union (TFEU). This states that “any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it aff ffects trade ffe betwe ween Member States, be incompatible with the internal market.” wit wi None of the fi five governments contested fiv the fact that the measures they were proposing indeed constituted state aid. Why, then, did the commission approve them? For the answer, in all fi five cases, we fiv must look fi first to the pioneering French fir case, which has profoundly infl fluenced all flu those that have followed. As Christian Maigret, the fi finance fin director of France Galop, recalls, it was a protracted process: “In fact, the parafi fiscal fis levy vy on online horse racing bett tting took tti