Mr. Nicholas Aquilina
Partner

Nicholas Aquilina is a partner at BRANDL TALOS specialising in, international gaming, betting and entertainment law, EU law as well as new gaming products including loot boxes, social, skill and fantasy gaming and e-sports.

Nicholas provides regulatory, corporate and transactional advice, and regularly represents clients before national courts and regulators, European associations, EU institutions and the CJEU. He has assisted clients in several licensing procedures across Europe and the US and advised on large-scale transactions in the gaming and betting sector. He is a co-author of Social Gaming in Europe, and frequently contributes to legal publications and international conferences.

Chambers Global ranks Nicholas as a leading gaming lawyer: “Nicholas Aquilina has played significant roles in corporate and regulatory mandates relating to high-profile transactions and international online sports betting.”

“Nicholas is a first-class legal and regulatory professional.”

Ms. Angela Yonkova-Markov
Attorney

Angela Yonkova-Markov is an attorney at BRANL TALOS. She specialises in international gaming, betting and entertainment law, EU law and gaming litigation.

Angela provides regulatory and compliance advice, including on EU law aspects, and advises and represents leading international companies before the courts in high-profile gaming litigation.

AUSTRIAN PLAYER REFUND CLAIMS: MASS LITIGATION SHAPING THE INTERPRETATION OF NATIONAL AND EU-LAW

How it all started

For the last couple of years, online casino refund proceedings by Austrian players backed up by litigation funding companies have been the “trending” topic in Austrian gambling law. We have been advising most of the top international gambling companies on the market from the early days of these proceedings. Thus, we have gained substantial knowledge on the player refund claims and the way they shape the interpretation of Austrian and EU law.

While it is quite likely that you have heard or read about player refund claims in Austria (and other jurisdictions, such as Germany), it is quite astonishing how multi-dimensional these mass proceedings have developed to be. While the player claims remain complex to navigate as they touch multiple areas of national and EU law, inter alia, civil law, civil procedural law, enforcement law, intellectual property law and of course gambling law, this level of complexity also allows operators to challenge the claims and judgments from various angles.

It all started with the argument that players’ online casino losses with EU-licensed online gambling operators are refundable because the operators violate the Austrian gambling monopoly by offering without a license issued pursuant to the Austrian Gambling Act (Glücksspielgesetz). In a nutshell, the players argue that the concluded gambling contracts are considered null and void and their losses are, thus, refundable. EU-licensed operators refute such claims, claiming that their offers in Austria are

justified based on their gambling licenses issued in other EU Member States (in most cases: Malta) and the EU freedom to provide services pursuant to Art 56 TFEU taking precedence over the Austrian gambling monopoly due to the Austrian Gambling Act violating EU law and CJEU case-law.

The compliance of the Austrian Gambling Act with EU law, in particular the freedom to provide services pursuant to Art 56 TFEU, has been heavily disputed for years as the Austrian gambling regulation is argued not to comply with overriding EU law and the criteria for justification of restrictive measures such as a monopoly established by the CJEU. One of the main arguments for the inconsistency of the current Austrian gambling regulation is the fact that it provides several different licensing options varying as regards the qualitative and quantitative licensing criteria and restrictions for various types of gambling products, which cannot be justified by varying risk potential. For instance, the current framework stipulates a monopoly for lotteries and online games of chance (including online casino, slots, and poker), but up to 15 licenses are available for land-based casinos, several licenses are available for slot machines, and betting licenses, including for online betting, are available without quantitative restrictions on the number of licenses.

In the past, the CJEU has issued several rulings on Austrian gambling legislation (such as CJEU 9 September 2010, C-64/08, Engelmann; CJEU 15 September 2011, C-347/09, Dickinger und Ömer; CJEU 12 July 2012, C-176/11, HIT und HIT Larix; CJEU 30 April 2014, C-390/12, Pfleger, CJEU 30 June 2016, C-464/15, Admiral Casinos and CJEU 14 June 2017, C-685/15, Online Games). In the most recent CJEU decision on the Austrian gambling framework, the CJEU highlighted that every national court is obliged to autonomously assess the compatibility of the national framework with EU law, irrespective of existing case-law having confirmed a monopoly’s compliance with EU law (CJEU 18 May 2021, C-920/19, Fluctus und Fluentum).

Up until today, approximately five years after the commencement of the player refund claims as a mass phenomenon in Austria, most Austrian courts – from district courts up to the Austrian Supreme Court (Oberster Gerichtshof) – have rendered decisions, the majority of which grant players refund claims on the mere basis of finding the Austrian gambling monopoly to be in line with EU law. However, the player refund claims continue to keep the courts busy. The litigation funders and the operators continuously (have to) explore new arguments under national and EU law, whereby we have outlined some of the latest “trends” below. In addition, the litigation funders have explored various business models and litigation strategies over the last years, many of which remained unsuccessful.

Once a judgement against an operator is binding, the players may enforce such judgment against the operator, generally wherever that operator has assets. Hence, many players have chosen to initiate enforcement proceedings in Malta, where many of the operators have their registered seat. In this regard, it is still questionable how Maltese courts will apply the recent changes to the Maltese Gaming Act (so called “Bill 55” that has led to the introduction of Art 56A of the Malta Gaming Act), according to which they may refuse the recognition of judgements that are considered to infringe Maltese public order. At the time of finalising this article, there have not yet been any decisions by Maltese courts on this matter, but several pending proceedings.

New business models and developments in Austrian and EU courts

In addition to their “standard” business model of funding proceedings, including lawyers’ costs and court fees and retaining a substantial part of the amount that a court ruling grants to the player in case of prevailing against the operator (even though the actual payment of money is often stalled if enforcement is sought in Malta, as described above), some litigation funders implemented an additional model, based on which they acquire the players’ claims for a fraction of the actual claim value and initiate civil proceedings against the online casino operators in their own name. Austrian courts quickly realised that the plaintiff in such proceedings cannot be treated

as a consumer pursuant to the applicable EU Brussels Ia and Rome I Regulations. However, as the funders used a non-Austrian entity to acquire and bring such claims, this prompted the key question: Do Austrian courts have international jurisdiction to decide claims made by a foreign litigation funding company against a foreign online casino operator, merely because they relate to online casino losses incurred by Austian customers?

While the majority of Austrian courts, including all Higher Regional Courts, held that Austrian courts do not have international jurisdiction to decide such claims, the Austrian Supreme Court took a different view and held that the tort jurisdiction, as stipulated under the EU Brussels Ia Regulation, applies and can be established in Austria merely because the foreign operator’s offer is accessible in Austria. While Austrian case-law on the question on international jurisdiction may be considered established at this point, Austrian courts still have to determine whether Austrian law applies and whether the alleged damages claims are indeed justified on their merits.

The question on the law applicable to damages claims based on losses incurred by Austrian customers with foreign online casino operators is relevant not only in the above-mentioned scenario, but also for claims initiated by Austrian customers directly against the directors of foreign casino operators, as these claims are also based on tort law.

In a tort case against foreign operators’ directors, the Austrian Supreme Court has recently referred questions to the CJEU on the applicable national law. In January 2024, the Supreme Court submitted a request for a preliminary ruling to the CJEU, where the case is now pending (case number C-77/24, Wunner). The CJEU’s decision will most certainly be relevant not only in proceedings against directors and not only as regards the question on applicable law.

Upon a closer look at the CJEU case-law, the CJEU seems to draw a parallel conclusion when assessing the questions on international jurisdiction and applicable law as it carries out its legal assessment based on the same point of reference: the place where the alleged damages have (first) occurred.

However, while the Supreme Court has already carried out an assessment on international jurisdiction as regards tort claims concerning online casino losses (i.e., in the proceedings initiated by litigation funders against operators), it refrained from applying such to the question of applicable law and referred questions for preliminary ruling to the CJEU instead. Thus, the CJEU’s decision may have a broader impact, potentially changing the Austrian courts’ interpretation of the Brussels Ia and Rome II Regulations.

And to add yet another dimension to the complex interrelation between national and EU law, in particular the Brussel Ia Regulation, the Rome I Regulation and the Rome II Regulation relevant in civil proceedings, the GDPR also plays a vital role in player refund proceedings: The usual approach Austrian players and their representatives take prior to initiating civil proceedings is to contact the operators with Data Subject Access Requests pursuant to the GDPR, in particular requesting the provision of transactional overviews of deposits and withdrawals.

Some operators have stopped providing transactional overviews, arguing that they legitimately may refuse the provision of such information when the sole purpose of obtaining such information is to prepare a claim against the operator. As a result, players often bring claims requesting a judgment that the operator has to provide the transactional overviews. While these proceedings are still in early stages and, to date, there are no decisions by the Austrian Supreme Court on this matter, such claims prompt several further questions (such as whether and to which extent operators may refuse providing transactional overviews if such information is requested with the sole purpose of preparing a court claim), which will potentially require further involvement of the CJEU.

Finally, only very recently, a matter was solved that had also irritated gambling operators in the past, who were confronted with refund claims for losses that Austrian players incurred while using the online casino offers outside of Austria. Recently, the Supreme Court held that losses that players generally residing in Austria incur while abroad are not refundable under the Austrian Gambling Act as the applicability of the Austrian Gambling Act is limited to the Austrian territory. In addition, the Supreme Court held that the burden of proof as regards whether losses may be refundable pursuant to the laws applicable in the (foreign) country is on the players.

Reform of Austrian gambling regulation on the horizon?

In the midst of these developments, there have been hardly any developments regarding the Austrian regulation of gambling and sports betting in the past few years. Potential amendments to the Austrian Gambling Act have been addressed in a paper issued by the former Austrian Minister of Finance in early 2021 and have since then been tackled in a number of parliamentary enquiries, but no details on envisaged changes and/or timelines have been communicated to date.

The Austrian federal elections in autumn 2024 are likely to change the political powers in Austrian government and, thus, a reform of Austrian gambling legislation may become more likely in the next years. However, as of now, the Austrian administration is preparing the license tender for the land-based casino licenses as well as the single lottery license pursuant to the Austrian Gambling Act, which also covers the provision of online casino and that is currently held by the Austrian Lotteries (Östereichische Lotterien GmbH) as a de facto monopolist. The current license expires on 30 September 2027 and, thus, the license tender will have to commence in the next months.

While most EU Member States have shown that liberalising the market and implementing licensing systems are more suitable and less restrictive means for ensuring a high level of player protection and preventing gambling addiction, the Austrian monopoly remains one of the last state monopolies for online gambling in the EU. Several Member States, such as Sweden, the Netherlands or Germany have taken years, if not decades, to reform their gambling legislation and ultimately reform their laws to introduce licensing frameworks for online gambling. Recently, even Finland, being the only other Member State with a full monopoly system in place, has committed to introducing a licensing model for online gambling by 1 January 2026 the latest. Will Austria decide to follow?