The 2023 Reform of the Maltese Gaming Act: A Valid Ground to Reject the Issuance of an EAPO?
The author of this post is Carlos Santaló Goris, lecturer at the Centre for Judges and Lawyers of the European Institute of Public Administration (Luxembourg).
On 26 October 2023, the High Regional Court of Karlsruhe (Oberlandesgericht Karlsruhe) rendered a judgment on an appeal confirming a decision of the Regional Court of Baden-Baden refusing to issue a European Account Preservation Order (‘EAPO’). The creditor had invoked a 2023 amendment in the Maltese Gaming Act to justify the periculum in mora required to obtain a EAPO. The judgment is at the crossroads of two issues. On the one hand, the systemic difficulties that creditors across the EU are facing to satisfy the periculum in mora condition. On the other, the Maltese legislative reform referred to, which is currently under the scrutiny of the European Commission for potentially infringing EU law.
Background to the Case
A German creditor requested an EAPO against a debtor domiciled in Malta before the Regional Court of Baden-Baden (Landgericht Baden-Baden). The debtor was a company offering online gambling services. The creditor applied for the EAPO relying on a judgment of that court sentencing the debtor to pay 13.000 euros plus interest to the creditor. The EAPO application was rejected: the court found that the periculum in mora requirement, which is essential to obtain an EAPO, had not been proven. This prerequisite is defined in the EAPO Regulation as ‘an urgent need for a protective measure in the form of a Preservation Order because there is a real risk that, without such a measure, the subsequent enforcement of the creditor’s claim against the debtor will be impeded or made substantially more difficult’ (Article 7(1) EAPO Regulation).
The creditor appealed the decision before the High Regional Court of Karlsruhe, which also considered that the periculum in mora criterion had not been duly satisfied, confirming the decision of the Regional Court of Baden-Baden.
The existence of a title is thus not sufficient to grant an EAPO. Creditors, irrespective of whether or not they have a title, have to prove the periculum in mora. In the case at hand, in order to justify the existence of such risk, the creditor argued that the 2023 amendment of the Maltese Gaming Act would prevent the future enforcement of the claim against the creditor. The reform introduced in the Maltese Gaming Act Article 56A, which states the following:
Notwithstanding any provision of the Code of Organization and Civil Procedure or of any other law, as a principle of public policy:
- no action shall lie against a licence holder and, or current and, or former officers and, or key persons of a licence holder for matters relating to the provision of a gaming service, or against a player for the receipt of such gaming service, if such action:
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- conflicts with or undermines the legality of the provision of gaming services in or from Malta by virtue of a licence issued by the Authority, or the legality of any legal or natural obligation resulting from the provision of such gaming services; and
- relates to an authorised activity which is lawful in terms of the Act and other applicable regulatory instruments.
- The Court shall refuse recognition and, or enforcement in Malta of any foreign judgment and, or decision given upon an action of the type mentioned in sub acticle (i)
The reform would prevent the enforcement in Malta of judgments rendered in other Member States against holders of Maltese licenses to provide online gaming services. This is, precisely, the argument used by the German creditor to substantiate the periculum in mora. The creditor considered that ‘as long as the law is in force, there is a risk that the defendant will move money from Maltese accounts to non-European countries (…), thereby preventing enforcement’. In line with the creditor’s opinion, the German gambling regulator (Gemeinsamen Glücksspielbehörde der Länder) considered that such a solution would contravene the automatic recognition and enforcement regime of the Brussels I bis Regulation. Nonetheless, it should be noted that the Brussels I bis Regulation includes infringement of national public policy among the grounds to contest the recognition and enforcement of judgments granted in other Member States (Article 45(1)(a) Brussels I bis Regulation). Under the EAPO Regulation, it is also possible to contest the enforcement of an EAPO on the ground that it would violate the public policy of the Member State of enforcement (Article 34(2) EAPO Regulation). Had the Regional Court of Baden-Baden granted the EAPO, the debtor could have raised the violation of the Maltese public policy to contest enforcement of the EAPO.
The European Court of Justice (‘ECJ’) has generally interpreted the public policy exemption under the Brussels system in a restrictive manner: a violation of public policy exists only in case of ‘manifest breach of the rule of law regarded as essential in the legal order of the State in which enforcement is sought or a right recognised as being fundamental within that legal order’ (C‑568/20, H Limited, para. 44). The iGaming industry has significant weight in the Maltese economy – it allegedly contributes to around 12% of the Maltese GDP. However, this does not mean that is it essential or fundamental for the Maltese legal order, as the ECJ requires. Accepting the move of the Maltese legislator to protect the iGaming industry would open the door for other Member States to adopt a similar solution to protect relevant sectors of their economies. That abusive use of public policy would result in undermining the proper functioning of the simplified mechanism of recognition and enforcement under the Brussels I bis Regulation.
The controversy surrounding the Maltese legislative reform has not passed unnoticed for the European Commission. Last May, one Member of the European Parliament, Sabine Verheyen, asked the Commission what its stand was towards the reform of the Maltese Gaming Act. The Commission replied that it ‘is in the process of assessing the compatibility of the draft Bill with EU law’.
Karlsruhe High Regional Court’s approach to periculum in mora
For the High Regional Court of Karlsruhe, the Maltese legislative reform was not a reason to acknowledge the existence of the periculum in mora. It expressly relied on the guidance offered by Recital 14 of the Preamble of the EAPO Regulation, which contains certain criteria on how to determine that there is a risk. Recital 14 focuses on concrete actions adopted by the debtor that could show that they intend to hinder the enforcement of a claim such us dissipating, concealing, or destroying the assets. Other circumstances such as ‘the mere non-payment or contesting of the claim or the mere fact that the debtor has more than one creditor’ are not sufficient alone to determine that there is a risk. Therefore, for the court, ‘it follows that there must be concrete signs and not just typical abstract dangers of the risk of thwarting of enforcement or of making enforcement more difficult without the provisional account seizure’. Since the creditor did not show ‘any specific or viable indications that the debtor could use up, conceal, destroy or otherwise sell their assets through unusual actions’, the periculum in mora could not be established. The High Regional Court of Karlsruhe found that it was also irrelevant whether or not the post-reform Maltese Gaming Act is incompatible with EU law.
The interpretation that the High Regional Court of Karlsruhe gave of the EAPO´s periculum in mora is coherent with the strict interpretation other German courts had made of this prerequisite. The High Regional Court of Hamm (Oberlandesgericht Hamm) considered that transferring a debtor’s funds from a German bank account to another outside Germany was not sufficient to establish the periculum in mora. In another EAPO case before the Regional Court of Bremen (Landesgericht Bremen), the creditor justified the periculum in mora arguing that the debtor had failed to make two promised payments. Furthermore, the creditor added that the debtor was experiencing financial difficulties. The court found that both arguments were insufficient to claim the existence of a risk. Citing the Preamble of the EAPO Regulation, the court stated that mere non-payment by the debtor was not enough.
Across the EU, courts in other Member States, which relied on the Preamble of the EAPO Regulation, have also adopted a similar stance towards the periculum in mora as German courts have. In Slovakia and Portugal, the most common case law on the EAPO Regulation are judgments rejecting EAPO applications because creditors failed to satisfy the periculum in mora in light of the standards of the Preamble (see 2020 Prof. Requejo Isidro’s post concerning a Portuguese court judgment on the EAPO). Creditors seem to find it difficult to prove that debtors have adopted specific actions intended to hinder the future enforcement of the claim. The Commission Proposal had a more lenient approach towards the periculum in mora for those creditors with an enforceable title: they were exempted from proving it (some scholars defend the reintroduction of that more lenient approach: Burkhard Hess, Europäisches Zivilprozessrecht (2nd edition De Gruyter 2021), para. 10.141). Had the EU legislator adopted the approach defended by the Commission, the creditor of the present case would not have experienced any issue since he had already obtained an enforceable judgment.
