CJEC, 2nd chamber, October 26, 2006, No C-65/05

THE COURT (Second Chamber)

1 By its application, the Commission of the European Communities requests the Court to declare that, by inserting into Article 2(1), the second paragraph of Article 3, Article 4 and Article 5 of Law No 3037-2002 (FEK A' 174-30.7.2002) a prohibition on the installation and operation of all electrical, electromechanical and electronic games, including technical recreational games and all computer games, on all public or private premises apart from casinos, the Hellenic Republic has failed to fulfil its obligations under Articles 28 EC, 43 EC and 49 EC and Article 8 of Directive 98-34-EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on Information Society services (OJ 1998 L 204, p. 37), as amended by Directive 98-48-EC of the European Parliament and of the Council of 20 July 1998 (OJ 1998 L 217, p. 18, 'Directive 98-34').

Legal context

Community law

2 Article 1(11) of Directive 98-34 provides:

'For the purposes of this Directive, the following meanings shall apply:

...

11. "technical regulation", technical specifications and other requirements or rules on services, including the relevant administrative provisions, the observance of which is compulsory, de jure or de facto, in the case of marketing, provision of a service, establishment of a service operator or use in a Member State or a major part thereof, as well as laws, regulations or administrative provisions of Member States, except those provided for in Article 10, prohibiting the manufacture, importation, marketing or use of a product or prohibiting the provision or use of a service, or establishment as a service provider.

...'

3 The first subparagraph of Article 8(1) of Directive 98-34 is worded as follows:

'1. Subject to Article 10, Member States shall immediately communicate to the Commission any draft technical regulation, except where it merely transposes the full text of an international or European standard, in which case information regarding the relevant standard shall suffice; they shall also let the Commission have a statement of the grounds which make the enactment of such a technical regulation necessary, where these have not already been made clear in the draft.'

4 Under the provisions of Article 9(1) to (5) of Directive 98-34, Member States are to postpone the adoption of a draft technical regulation for three months from the date of receipt by the Commission of the communication referred to in Article 8(1) of the same directive, if the Commission or another Member State delivers a detailed opinion to the effect that the measure envisaged may create obstacles to the free movement of goods, to the free movement of services or to the freedom of establishment of service operators within the internal market. That postponement may be for a longer period in some other situations specifically set out by those provisions.

5 Article 9(7) of Directive 98-34 provides:

'Paragraphs 1 to 5 shall not apply in cases where:

- for urgent reasons, occasioned by serious and unforeseeable circumstances relating to the protection of public health or safety, the protection of animals or the preservation of plants, and for rules on services, also for public policy, notably the protection of minors, a Member State is obliged to prepare technical regulations in a very short space of time in order to enact and introduce them immediately without any consultations being possible ...

...

In the communication referred to in Article 8, the Member State shall give reasons for the urgency of the measures taken. The Commission shall give its views on the communication as soon as possible. It shall take appropriate action in cases where improper use is made of this procedure. The European Parliament shall be kept informed by the Commission.'

National legislation

6 Article 1 of Law No 3037-2002, entitled 'Categories of game', is worded as follows:

'For the purposes of the provisions of this law, the following meanings shall apply:

(a) "mechanical game", a game the operation of which requires the player to exert physical force;

(b) "electrical game", a game the operation of which requires electrical support systems;

(c) "electromechanical game", a game the operation of which requires both electrical support systems and the exertion of physical force by the player;

(d) "electronic game", a game the operation of which requires, in addition to electrical, electronic or other support systems, the presence and the running of software (a computer program);

(e) "recreational game of skill", a game the outcome of which depends solely on the player's skill and mental abilities and which is played solely for recreational purposes.

Card games considered to be "games of skill" under the provisions of Royal Decree [consolidated] No 29-1971 shall be included in the category of recreational games of skill.'

7 Article 2(1) of that law, entitled 'Prohibition on the use or installation of games', provides:

'The use of the games referred to in Article 1(b), (c) and (d), including computers, is prohibited on public premises in general, such as hotels, cafés and meeting rooms recognised as being for any kind of public use or on any other public or private premises. The installation of those games is also prohibited.'

8 Article 3 of the same law, entitled 'Undertakings providing internet services', provides:

'The installation and operation of computers in undertakings providing internet services is not subject to the prohibition in Article 2. However, operating games on those computers, irrespective of the method used, is prohibited.

The operation of an undertaking providing internet services is subject to special authorisation issued by the municipality in which the undertaking is situated and, where it is operated from a ship, the port authority of the port of departure. When this measure is first implemented, the undertaking must be equipped with that authorisation within a period of three months of the entry into force of this law.'

9 Under Article 4 of Law No 3037-2002, entitled 'Criminal penalties':

'1. Any person operating or managing the centres or other premises covered by Article 2(1) in which games prohibited under the provisions of the earlier articles are used or installed shall be punished by a term of at least three months' imprisonment and a fine of at least EUR 5 000. A second or subsequent offence shall be punished by a term of at least one year's imprisonment and a fine of EUR 25 000 to EUR 75 000. The Court shall also order the confiscation of the games machines.

2. The provisions of Article 7(1)(c) or Article 7(3) and (4) of consolidated Royal Decree No 29-1971 shall apply mutatis mutandis.'

10 Article 5 of that law, entitled 'Administrative penalties', provides:

'1. In addition to the criminal penalties provided for in the event of the use or installation of a game prohibited under the provisions of the earlier articles, a fine of EUR 10 000 per game shall be imposed and the undertaking's licence to operate shall be withdrawn definitively, in accordance with the provisions of Article 7.

2. The fine shall be imposed by the decision of the head of the competent authority, referred to in Article 6(1), which records the offence. That decision shall describe the offence, state the fine imposed and the provision applied. At the same time, a copy of the relevant control report shall be communicated to the offender.'

11 Lastly, Article 9(1) of Law No 3037-2002 specifies that 'the provisions of this law shall be without prejudice to the provisions of Law No 2206-1994 or to the other provisions relating to casinos.'

Pre-litigation procedure

12 Following complaints which it had received about the prohibition, at the national level, on the installation and operation in Greece of electrical, electromechanical and electronic games, including recreational games of skill and all computer games, on all public or private premises apart from casinos, the Commission examined Law No 3037-2002, which had entered into force on 30 July 2002. It concluded that that law was compatible with the requirements of Community law.

13 After giving the Hellenic Republic formal notice to submit its observations by letters of 18 October 2002 and 11 July 2003, the Commission, on 30 March 2004, delivered a reasoned opinion.

14 Since the Commission did not consider the Greek Government's reply to that reasoned opinion to be satisfactory, the Commission, taking the view that the infringement was ongoing, decided to bring the present action.

The action

15 The Commission raises three heads of claim in support of its action. First, it claims that the general prohibition on electrical, electromechanical and electronic games inserted by Law No 3037-2002 is contrary to the provisions of Articles 28 EC and 30 EC. Secondly, it alleges that that law is incompatible with the Hellenic Republic's obligations under Articles 43 EC and 49 EC. Thirdly, the Commission alleges that that Member State did not observe the procedure for the provision of information provided for in the first subparagraph of Article 8(1) of Directive 98-34.

The first head of claim, alleging the infringement of Articles 28 EC and 30 EC

Arguments of the parties

16 The Commission submits that Article 28 EC is infringed by the prohibition provided for in Article 2(1) of Law No 3037-2002 on the installation and operation of all electrical, electromechanical and electronic games, including technical recreational games and all computer games, on all public or private premises apart from casinos. In its opinion, that law is an unjustified measure in the light of the provisions of Article 30 EC and of the overriding public interest requirements recognised by the Court and is also disproportionate as regards the objective of the protection of the public interest.

17 It maintains that the Greek authorities have not clearly shown what the relationship is between that prohibition and the problem they wish to solve, because they focus in their assessment solely on the negative effects of the uncontrolled use of gaming machines. In that connection, the Commission states that it is possible to put in place other forms of control, such as adding special protection systems to the recreational or skills-based games machines so that those games cannot be converted into games of chance.

18 The Hellenic Republic concedes that Law No 3037-2002 may create barriers to the intra-Community marketing of electric, electromechanical and electronic games and, as a result, undermine the principle of the free movement of goods set out in Article 28 EC.

19 However, it submits that, since the pre-litigation procedure, it has maintained that such a general prohibition, which is applicable without distinction to both Greek and foreign traders, was considered, from the date when Law No 3037-2002 was adopted and promulgated, to be necessary and justified for the reasons, first, of protection of public morality and public policy set out in Article 30 EC, and, secondly, for the protection of consumers and for social reasons, which are overriding public interest requirements which have been recognised by the Court's case-law.

20 The Hellenic Republic maintains, specifically, that because of technological developments, the games concerned by Law No 3037-2002 are easily convertible into games of chance, which are still illegal in Greece outside casinos, and that the situation has become impossible to police, leading to serious social problems such as, inter alia, the addiction of the players, the waste of considerable economic resources, and the easy and illegal enrichment of persons involved in the operation, installation and trade of electronic games and the loss of large sums of money by the players and of considerable tax revenue.

21 In its rejoinder, that Member State alleges that the specific, less restrictive measures which, it states, were implemented between 1996 and 2000, that is to say, before the complete prohibition of electrical, electromechanical and electronic games by Law No 3037-2002, were held to be insufficient for the purpose of countering effectively the problem created by those games, as a result of the human passion for games of chance.

Findings of the Court

22 First of all, it is apparent from a combined reading of the provisions of Articles 1 and 2(1) of Law No 3037-2002 that the recreational games of skill referred to in Article 1(e) are not covered by the prohibition introduced by that law. As a result they must be excluded from the subject-matter of this action.

23 As regards the Commission's first head of claim, 'goods' are defined as products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions (Case 7-68 Commission v Italy [1968] ECR 617, 626 and Case C-97-98 Jägerskiöld [1999] ECR I-7319, paragraph 30).

24 In this respect, electrical, electromechanical and electronic games, including computer games, in so far as they have a commercial value and can form the subject of commercial transactions, be imported or exported and made available to the consumer in consideration of payment, satisfy those criteria and constitute goods for the purpose of the EC Treaty.

25 It should also be borne in mind that the free movement of goods is one of the fundamental principles of the Treaty (Case C-265-95 Commission v France [1997] ECR I-6959, paragraph 24, and Case C-112-00 Schmidberger [2003] ECR I-5659, paragraph 51) which is expressed in the prohibition in Article 28 EC of quantitative restrictions between Member States and all measures having equivalent effect.

26 In the absence of harmonised rules at Community level in the games sector, the free movement of games is guaranteed by Articles 28 EC and 30 EC.

27 According to the Court's case-law, all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be regarded as measures having an effect equivalent to quantitative restrictions and are thus prohibited by that article (see Case C-41-02 Commission v Netherlands [2004] ECR I-11375, paragraph 39 and the case-law cited).

28 In the present case, national legislation such as Law No 3037-2002 must be held to constitute a measure having equivalent effect to a quantitative restriction within the meaning of Article 28 EC and this is true even if that law does not prohibit the importation of the products concerned or their placing on the market.

29 First, the prohibition laid down by Article 2(1) of that law on the installation of all electric, electromechanical and electronic games, including all computer games, on all public or private premises apart from casinos, subject to the criminal and administrative sanctions set out in Articles 4 and 5 of that law, is such as to lead, from the time of that law's entry into force on 30 July 2002, to a reduction in the volume of imports of such games from other Member States.

30 Secondly, it is apparent from the file that, in fact, the importation of games machines such as those referred to in the preceding paragraph with a view to their installation on public or private premises in Greece, apart from in casinos, stopped when that prohibition came into force, even though those machines are lawfully manufactured and made available to consumers in other Member States.

31 However, the Court has consistently held that a national rule which hinders the free movement of goods is not necessarily contrary to Community law if it can be justified by one of the public interest grounds set out in Article 30 EC or by one of the overriding requirements laid down by the Court's case-law (see Case C-366-04 Schwarz [2005] ECR I-10139, paragraph 30 and the case-law cited).

32 It is to be recalled that the Hellenic Republic submits that, for the reasons explained in the summary of the grounds for Law No 3037-2002, the general prohibition on the installation of all electric, electromechanical and electronic games, including all computer games, was necessary for the purpose of protecting public morality, policy and security. It maintains specifically that, because of technological developments, the games concerned by Law No 3037-2002 are easily convertible into games of chance and that the situation has become impossible to police, leading to serious social problems such as those listed in paragraph 20 of this judgment.

33 According to the Court's case-law, these considerations, which must be taken together, concern the protection of the recipients of the service and, more generally, of consumers, as well as the maintenance of order in society, and those objectives are amongst those which may be regarded as overriding reasons relating to the public interest (see, to that effect, Case C-275-92 Schindler [1994] ECR I-1039, paragraph 58, and the case-law cited, and Case C-124-97 Läärä and Others [1999] ECR I-6067, paragraph 33).

34 The Court has also held that those grounds are capable of justifying, in the light of Article 28 EC and taking account of the specific social and cultural features, restrictions which may go so far as to prohibit lotteries and other forms of gambling in a Member State (see, to that effect, Schindler, paragraph 59).

35 It is true that, in the judgments in Schindler and Läärä, the Court drew attention to the fact that the moral, religious and cultural considerations which attach to lotteries, like other forms of gambling, in all the Member States may allow national legislation to restrict, or even prohibit, the practice of gambling and to prevent it from being a source of private profit. The Court also held that lotteries involve a high risk of crime or fraud, given the potentially high stakes and winnings, particularly when they are operated on a large scale. Furthermore, they are an incitement to spend which may have damaging individual and social consequences (Schindler, paragraph 60, and Läärä, paragraph 13).

36 However, these proceedings can be distinguished from the two cases which led to the judgments in Schindler and Läärä in so far as it is common ground that the present case concerns electrical, electromechanical and electronic games which do not have any characteristics comparable to those of the games at issue in those cases. In fact, the games which are the subject of the prohibition laid down by Article 2(1) of Law No 3037-2002 are not by nature games of chance, because they are not played for the prospect of winning a sum of money (see, in contrast, Läärä, paragraph 17).

37 It follows that, since the electrical, electromechanical and electronic games cannot be considered to be games of chance, it cannot be accepted, in contrast to the contention of the Hellenic Republic, that the findings regarding games of chance upheld by the Court in Schindler and Läärä may be applied to electric, electromechanic and electronic games.

38 Even if that case-law may not be applied in the present case, the overriding public interest reasons put forward by the Hellenic Republic may justify the barrier to the free movement of goods. However, it is also necessary for the national legislation at issue to be proportionate to the objectives being pursued.

39 In that regard, the Hellenic Republic has not established that it implemented all the technical and organisational measures likely to have achieved the objective pursued by that Member State using measures which were less restrictive of intra-Community trade.

40 The Greek authorities not only could have had recourse to other measures which were more appropriate and less restrictive of the free movement of goods, as the Commission suggested during the pre-litigation procedure, but also could have ensured that they were correctly and effectively applied and/or executed in order to achieve the objective pursued.

41 It follows that the prohibition laid down by Article 2(1) of Law No 3037-2002 on the installation in Greece of all electrical, electromechanical and electronic games, including all computer games, on all public and private premises apart from casinos, constitutes a measure which is disproportionate in view of the objectives pursued.

42 As a result, Law No 3037-2002 is incompatible with Article 28 EC.

43 In the light of the foregoing, the first head of claim advanced by the Commission in support of its action must be considered to be well founded.

The second head of claim, alleging infringement of Articles 43 EC and 49 EC

Arguments of the parties

44 The Commission maintains that Articles 2(1) and 3 of Law No 3037-2002 prohibit traders established in other Member States from providing their services in order to make available or supply games machines on the Greek market, or merely to provide their services there from the Member State in which they are established. It is submitted that, since such national provisions are not sufficiently justified on grounds of necessity or proportionality, they infringe Articles 43 EC and 49 EC.

45 In that context, the Commission submits that the Greek authorities should have given priority to more specific tangible measures which restricted or aimed to prevent the conversion of recreational games into games of chance. In its opinion, such measures could have, for example, taken the form of more specific prohibitions, stricter and more precise controls and-or stricter and more effective sanctions. It adds that such measures did not have to consist in a general prohibition with an adverse impact on other economic activities not linked to games of chance.

46 The Hellenic Republic claims that the measures thus proposed are insufficient and it submits that the more radical measures which were applied were a response to overriding reasons relating to the public interest in order to achieve the objective pursued and that they were the only effective means of addressing the serious social problem created. To rebut that second head of claim, it essentially puts forward arguments identical to those it relies on to dispute the Commission's head of claim concerning the restriction on the free movement of goods.

Findings of the Court

47 As a preliminary point, it should be noted that although, in the absence of harmonised rules at Community level in the games sector, Member States remain, in principle, competent to define the conditions for the pursuit of the activities in that sector, they must, when exercising their powers in this area, respect the basic freedoms guaranteed by the Treaty (see, to that effect, Case C-58-98 Corsten [2000] ECR I-7919, paragraph 31, and Case C-514-03 Commission v Spain [2006] ECR I-963, paragraph 23).

48 According to the Court's case-law, Articles 43 EC and 49 EC require the elimination of restrictions on the freedom of establishment and the freedom to provide services and that all measures which prohibit, impede or render less attractive the exercise of such freedoms must be regarded as constituting such restrictions (see Case C-439-99 Commission v Italy [2002] ECR I-305, paragraph 22, and Case C-451-03 Servizi Ausiliari Dottori Commercialisti [2006] ECR I-2941, paragraph 31).

49 The Court has also held that national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty can be justified only if they fulfil four conditions: they must be applied in a non-discriminatory manner; they must be justified by overriding reasons based on the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain that objective (see Case C-424-97 Haim [2000] ECR I-5123, paragraph 57, and the case-law cited).

50 In that regard, it is apparent from Article 2(1) of Law No 3037-2002 that it is prohibited in Greece, subject to the criminal or administrative sanctions provided for in Articles 4 and 5 of that law, to operate electric, electromechanical and electronic games on all public or private premises apart from casinos. The provisions of Article 2(1) of Law No 3037-2002 are not applicable so far as computers in undertakings providing internet services are concerned and, under Article 3 of that law, operating games on those computers is prohibited.

51 As regards the freedom of establishment, such national legislation is liable to make more difficult, or even completely prevent, the exercise by traders from other Member States of their right to establish themselves in Greece with the aim of providing the services in question.

52 In those circumstances, such a prohibition constitutes a barrier to the freedom of establishment.

53 As regards the freedom to provide services, it is settled case-law that, first, the activity of operating gaming machines must, irrespective of whether or not it is separable from activities relating to the manufacture, importation and distribution of such machines, be considered a service within the meaning of the Treaty provisions and, secondly, national legislation which only authorises the operation and playing of games in casinos constitutes a barrier to the freedom to provide services (see, to that effect, Case C-6-01 Anomar and Others [2003] ECR I-8621, paragraphs 56 and 75).

54 The Court has also held, concerning Information Society services specifically, that Article 49 EC relates to the services which a provider established in a Member State offers via the internet - and so without moving - to recipients in another Member State, with the result that any restriction of those activities constitutes a restriction on the freedom to provide services (Case C-243-01 Gambelli and Others [2003] ECR I-13031, paragraph 54).

55 However, on the same grounds as those upheld in paragraphs 36 to 41 of this judgment, the arguments put forward by the Hellenic Republic in order to justify the barrier to the freedom of establishment and to the freedom to provide services cannot be accepted.

56 It follows from this that Law No 3037-2002 is also contrary to Articles 43 EC and 49 EC.

57 In those circumstances, the second head of claim advanced by the Commission in support of its action must be considered to be well founded.

The third head of claim, alleging infringement of Directive 98-34

Arguments of the parties

58 The Commission criticises the Hellenic Republic for not having communicated to it, when it was being drawn up, Law No 3037-2002 which contains, in Articles 2(1) and 3 thereof, technical regulations on products within the meaning of Article 1(11) of Directive 98-34, which is contrary to the requirements of the first subparagraph of Article 8(1) of that directive, which provides for a procedure for the provision of information in the field of technical standards and regulations and of rules on Information Society services.

59 That Member State concedes, in its defence, that the Greek authorities appear not to have observed the procedure for the provision of information during the preparation of the draft for Law No 3037-2002 and states that that failure to fulfil obligations was committed in error and not intentionally. In its opinion, that infringement was due to the urgent need to deal rapidly and directly with the social problem and to safeguard public policy.

Findings of the Court

60 The Court has already held that provisions such as Article 8(1) of Directive 98-34 impose on Member States the duty to notify the Commission immediately of any draft technical regulation (judgment of 8 September 2005 in Case C-500-03 Commission v Portugal, not published in the ECR, paragraph 39 and, as regards provisions similar to those of that directive, Case C-139-92 Commission v Italy [1993] ECR I-4707, paragraph 3, and Case C-273-94 Commission v Netherlands [1996] ECR I-31, paragraph 15).

61 However, measures such as those provided for in Articles 2(1) and 3 of Law No 3037-2002, in so far as they prohibit the installation in Greece of all electrical, electromechanical and electronic games, including all computer games, on all public and private premises apart from casinos, and the use of games on computers in undertakings providing internet services, and make the operation of such undertakings subject to the issue of a special authorisation, must be considered to be technical regulations within the meaning of Article 1(11) of Directive 98-34 (see, to that effect, Case C-267-03 Lindberg [2005] ECR I-3247).

62 In those circumstances, the Hellenic Republic was required to notify such technical regulations in draft form under the first subparagraph of Article 8(1) of Directive 98-34 (see, inter alia, Commission v Portugal, paragraph 40).

63 However, in the present case, it is common ground that there was no such notification.

64 That obligation cannot be called into question by the need to adopt Law No 3037-2002 urgently in order to deal rapidly and directly with the social problem created by the operation of electric, electromechanic and electronic games and to thus safeguard public policy.

65 In fact, the Hellenic Republic cannot rely on the exception provided for in the first indent of Article 9(7) of Directive 98-34 because it is common ground that none of the situations referred to in that provision existed in Greece at the date when that law was adopted.

66 As a result, it must be found that, by having adopted Law No 3037-2002 without having notified it to the Commission at the draft stage, the Hellenic Republic has failed to fulfil its obligations under the first subparagraph of Article 8(1) of Directive 98-34.

67 Therefore, the third head of claim advanced by the Commission in support of its action is also well founded.

68 It follows from all of the foregoing that, by inserting into Articles 2(1) and 3 of Law No 3037-2002 the prohibition, subject to the criminal and administrative penalties set out in Articles 4 and 5 of the same law, on the installation and operation of all electrical, electromechanical and electronic games, including all computer games, on all public or private premises apart from casinos, the Hellenic Republic has failed to fulfil its obligations under Articles 28 EC, 43 EC and 49 EC and Article 8 of Directive 98-34.

Costs

69 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for costs and the Hellenic Republic has been unsuccessful, the latter must be ordered to pay the costs.

On those grounds, the Court (Second Chamber) hereby:

1. Declares that, by inserting into Articles 2(1) and 3 of Law No 3037-2002 the prohibition, subject to the criminal and administrative penalties set out in Articles 4 and 5 of the same law, on the installation and operation of all electrical, electromechanical and electronic games, including all computer games, on all public or private premises apart from casinos, the Hellenic Republic has failed to fulfil its obligations under Articles 28 EC, 43 EC and 49 EC and Article 8 of Directive 98-34-CE of the European Parliament and of the Council laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on Information Society services, as amended by Directive 98-48-EC of the European Parliament and of the Council of 20 July 1998;

2. Orders the Hellenic Republic to pay the costs.