Where Do Gamblers Lose their Money? Lessons from an Austrian-Maltese Conflict

Many Member States try to limit gambling through strict prohibitions, with the sole exception for governmental monopolies. Malta, however, has a burgeoning online gambling industry with pan-European reach, which it deems to be protected by the freedom of services enshrined in primary EU law. The island state resists the enforcement of judgments from courts in other Member States that take a different view; to this end, it even plans to adopt an explicit legislative provision prohibiting the enforcement of such judgments by Maltese courts (see here). [image by frepik]

The Recent Episodes in Austria

Meanwhile, gamblers in Austria who have lost money have found a lucrative alternative. Instead of bringing their claims themselves, they sell and assign them to a Swiss company, which then tries to enforce these claims before Austrian courts. This raises the question of the latter’s international jurisdiction. In a number of decisions, the Austrian Supreme Court (OGH) has answered it in the affirmative (22 June 2023, 27 June 2023, and 25 September 2023). The reasoning of those judgments is of general interest. Not only does the court address various aspects of the case law of the CJEU in the area of international civil procedure law in recent years, but it also adds a further wrinkle to the complex discussion on the localisation of financial loss under Article 7 No 2 Brussels I bis Regulation (see already here and here).

Consumer Protection is Out

To the uninitiated, Article 18 Brussels I bis seems to provide a basis of jurisdiction for the gamblers’ claims. Yet in the eyes of the Austrian Supreme Court, this provision is inapplicable because the plaintiff is not asserting his own claims but assigned ones. This is in line with the case law of the CJEU, who excluded assigned claims from the scope of the consumer protection provisions (see Schrems, C-498/16, paras 42–49).

Choice of Forum

Another potential stumbling block could be a jurisdiction agreement contained in the contracts between the gamblers and the operator. According to it, all disputes should be decided by the courts of Malta. Yet the Austrian Supreme Court rightly denies any effects of this clause against the Swiss litigation vehicle. As the CJEU had ruled in DelayFix (C-519/19, para 42), such a clause produces effects only between the parties to the initial agreement.

Where Are Gambling Contracts Performed?

We are getting closer to the meat of the case, which is Article 7 Brussels I bis. First, the contractual head of jurisdiction under Article 7 No 1 Brussels I bis was analysed by the Austrian Supreme Court. Undoubtedly, the parties had entered into a contract, more precisely a service contract in the (European-autonomous) sense of lit b. But where was the service to be performed?

The Austrian Supreme Court, in line with the case law of the CJEU (see Wood Floor Solutions, C-19/09, para 42), locates the place of performance within the meaning of Article 7 No 1 lit b Brussels I bis in the state of the service provider, i.e. in Malta. The courts there would also have jurisdiction to hear claims for the restitution of money paid under the gambling contracts. Hence, this head of jurisdiction does not allow bringing a claim in Austria.

Where does Harm from Gambling Occur?

We have arrived at the last and thorniest question, the tort/delict jurisdiction under Article 7 No 2 Brussels I bis.

In confronting the choice between the place where the damage was caused and the place where the damage occurred, the decisions by the Austrian Supreme Court tend to focus on the latter. They strive to assess the place of damage in line with the CJEU’s decision in Kolassa (C-375/13) and in VEB v BP (C-709/19). In this context, they consider a gaming account opened by the gamblers in Malta to be irrelevant for determining international jurisdiction. Instead, they emphasise that an additional element is required to consider the gambler’s domicile as the place where the damage occurred.

At this point, there is a veritable novelty in the present decisions compared to the previous case law of the CJEU. The Austrian Supreme Court adds a wholly new element to the localisation of damage by referring to the violation of the Austrian gambling laws. The decision of 22 June 2023 creates this nexus in the following way:

Above all, however, the damage materialised in Austria because the damage asserted results from alleged violations of Austrian gambling law by the defendant and therefore from violations of Austrian public policy rules.

The decision of 25 September 2023 does not even attempt a classic localisation approach at all, but puts the violation of public law front and centre of its reasoning:

The breach of duty relevant to the damage is located in Austria, which is why the international jurisdiction of the court of first instance for the tortious claims for damages asserted is to be affirmed pursuant to Art 7 No 2 Brussels I bis Regulation.

Assessment

The quoted passages merit criticism. They tend to blur the line between the place of the tortious conduct and the place of the damage occurred.

The conduct in this case clearly took place in Malta, the only place where the defendant company acted. The offering of their services in Austria may have breached Austrian law, even public policy rules. Yet this does not change the fact that all actions giving rise to the damage took place in Malta. This is where the website was operated and therefore where the conduct causing the harmful event occurred.

Also the damage itself does not lie in the violation of Austrian rules. The two are not the same, but must be distinguished. The Austrian Supreme Court may have been led astray by some utterances of the CJEU in the VEB decision, which referred, in determining the place of damage, to the place where a securities issuer company had to comply with statutory reporting obligations (VEB v BP, C-709/19, para 359). However, this was done to ensure the foreseeability of the competent court, not to locate the damage itself.

As a result, the violation of a state’s public policy provisions alone does not allow its courts to exercise jurisdiction. By focusing on the – potential – violation of the Austrian gambling law, the Austrian Supreme Court abandons the attempt to physically localise the damage. Yet the harm under Article 7 No 2 Brussels I bis must still be determined by a localisation exercise.

— Thanks to Paul Eichmüller, Felix Krysa and Verena Wodniansky-Wildenfeld for critically reviewing this post.