Lack of the Irish

Without clear legislation, Ireland’s gambling industry is not as developed as it might be. But the time for change is now, claims Deirdre Kilroy

In Ireland having a wager on a horse or a greyhound is part of a long social tradition – so one would wonder why the gambling fraternity has not also sought to take advantage of the jurisdiction in the same way as the software and hardware giants.

The reason for the stunted growth of the gambling industry in Ireland is sometimes attributed to the legal uncertainties involved in trading from or into Ireland. Gambling in Ireland is principally regulated by the Betting Act 1931 and the Gaming and Lotteries Act 1956. The legislation pre-dates many of the new developments in the industry and there is little case law to provide guidance on its application to those developments.

Let the chips fall where they may

While the UK is in the midst of adapting to the Gambling Act 2005 that has just come into force, the laws of Ireland and Northern Ireland have yet to receive such a revamp. Irish law starts from the point of prohibition, with certain express exceptions. It is fair to say that the gambling industry in Ireland is principally built around sports gambling, and the national lottery. A bookmaker must have a licence and the premises where the business of bookmaking is carried on must be registered if not ‘on course’. The Irish government also operates a popular state national lottery, introduced by the National Lottery Act 1986. The only other permitted lotteries in Ireland are those run on a not-for-profit basis.

What about internet betting? Previously the Betting Act 1931 made it illegal for an Irish resident to place a bet with a person operating outside the Irish State. This was nearly impossible to enforce and implement. The Horse and Greyhound Racing Act 2001 abolished the prohibition on the placing of bets by people within Ireland with people outside Ireland, but the position regarding running an online business from within the jurisdiction is still not clear. For this reason relatively complex structures are used for compliance reasons. Generally, a group company operates a gaming server outside of Ireland to deliver services to group entities within the state. These structures have not been tested from a legal perspective, but are operated with the government’s knowledge.

Making casino gambling available to the public is illegal under the ban in the 1956 Act. However, Irish casino clubs have managed to operate in a grey area. Their legality or otherwise has been publicly contested between the relevant government minister and the industry. The casino clubs function by establishing a private members’ club. To gamble in a casino club a customer needs sign up as a member at the door. They can then gamble freely, as often as they want. Evidence of their membership is generally checked each time they enter the club. Membership is typically free. The numbers of clubs involved are rapidly increasing, with new casinos opening around the country.

There is a dearth of case law on gambling in Ireland. Clients and lawyers alike wrestle with the application of such archaic laws to online gambling, and other relatively new gambling products and technology. Such struggles are evident, for example, in relation to the introduction of sports betting websites, peer-to-peer betting and the introduction of fixed-odds betting terminals (FOBTs). Again the legality of introducing FOBTs in Ireland has been debated publicly between government ministers and the industry. It is no wonder that there is a marked lack of enforcement in the face of such legal uncertainty.

Reports suggest that, legal or not, the newer forms of gambling are catching up on the more traditional formats. Irish clients in traditional gambling businesses grapple with this competition, often coming from overseas operators. They perceive the lack of clarity in Irish law to stunt their ability to compete without putting in place fairly complex business models. Whether such business models would be accepted by the Irish courts is also, on occasion, a matter of debate.

The only sure thing about luck and the law is that they will both change
In 2000 an inter-departmental group set up by the Irish government produced a report reviewing Irish gambling laws. It proposed the establishment of a regulator to oversee registration and gambling, charitable lotteries and commercial sales promotions. No legislation, however, was introduced to support the proposal.

In March 2006 the then-minister for justice and law reform, Michael McDowell, stated that casino clubs were illegal in Ireland under Irish law. He also said that he envisaged bringing in new laws to allow the Gardai Síochána (Irish police force) to close the casino clubs. The minister’s comments followed a report from the Financial Action Task Force (FAFT). An inter-governmental body, the FAFT is a charged with the responsibility for developing and promoting national and international policies combating money laundering and terrorist financing. The FAFT had highlighted the risk of money laundering and financial terrorism in Ireland associated with these types of operations.

Mr McDowell’s announcement was premature, however. Lobbying by other members of government played a part in seeing the minister change his stance. Instead of a complete prohibition, the minister announced the establishment of the Casino Regulation Committee, which would report on the possibilities for a legislative basis for the strict regulation of ‘casino-style operations’ in Ireland. The committee comprises solely of representatives of public bodies, although it is chaired by an independent barrister.

A ‘casino-style operation’ appears to be broadly defined in the terms of reference. It captures the idea of internet casinos, for example. Interested parties were invited to make submissions and many chose to do so despite the very short timeframe allowed for.

Industry sources indicate that the committee report has been finalised and is with the current Minister for Justice Brian Lenihan. A journalist from The Sunday Times claims to have seen the report. His article maintained that the committee recommends that casinos should be legalised under a licensing regime; ‘super casinos’, however, should be banned until their social and economic effects can be measured. Measures apparently included in the committee’s report include hefty licence fees, rigorous checks on legal standing and consumer protection measures.

That Irish law in this area needs an overhaul is beyond doubt. Lack of regulatory uncertainty undermines confidence in a jurisdiction. Recent indicators that changes are imminent have prompted an increase in interest in the Irish market, particularly from those overseas. No doubt the interest is prompted in part by the fact that Irish casino club revenue is estimated to be a smaller share of gross gaming revenue than that in other jurisdictions.

Should the legal position be clarified along the lines of the leaked committee recommendations there are likely to be increased opportunities to do business and increase revenue in the sector. Mr Lenihan has yet to publicly indicate his intentions in terms of any law reform. Many industry sources believe, however, that he will preside over change in the area and that this will occur sooner rather than later. In other words: watch this space!

Deirdre Kilroy is a partner at LK Shields Solicitors