Landmark decisions of Austrian courts in 2023

Introduction

This year, Austria has seen a number of judgments in the High Courts as well as courts of lower instance that are of special importance to games of chance and betting operators offering their services to Austrian consumers.

This article aims to highlight the most relevant rulings as well as their potential impact on the gaming industry.

Directors of online games of chance operators

The Austrian Supreme Court has previously ruled that there is a separate and independent claim against the “Geschäftsführer” (managing directors) of games of chance operators due to a violation of a protective law. The legal basis for this separate claim is the law of damages (tort law) due to violation of protective law. This claim may be filed regardless of whether a claim was also and/or first filed against the company itself.

Previously the main argument in such tort cases against directors directly was that Austrian courts do not have jurisdiction, as neither the damaging action nor the damage occurred in Austria.

This line of argumentation was successful until Summer 2023 in more than a hundred first and second instance rulings. However, the Austrian Supreme Court has now made two rulings in similar cases regarding jurisdiction.

In these cases, a well-known process cost financier from Switzerland had claims from Austrian players assigned to them and then made the claim against the games of chance operator in their own name at an Austrian court. The games of chance operator argued especially that the Austrian courts do not have jurisdiction, as the place of damage and the place of the damaging act is not in Austria. The Austrian Supreme Court – in a nutshell – did not follow this reasoning and stated that the place of damage is in Austria and thus Austrian courts do have jurisdiction.

This case law is highly likely to affect the reasoning applied in cases of directors (Geschäftsführer) and the cases regarding directors that are currently pending at the Austrian Supreme Court will need to be monitored closely.

Lootboxes

The authors are aware of two first instance civil court rulings regarding “lootboxes” in Austria. Two judgments of courts of first instance dealt with the question of whether lootboxes are to be considered games of chance. A game of chance according to the Austrian Gaming Act is a game in which the decision on the outcome of the game depends exclusively or predominantly on chance.

The two courts (Hermagor and Floridsdorf) came to dissenting results:

the District Court Hermagor ruled that the lootbox under review there was to be qualified as a game of chance; however

the District Court Floridsdorf ruled that the lootbox under review there was not to be qualified as a game of chance.

At the District Court Hermagor, the main consideration of the court concerned the question of whether the stake was matched by a winning.

Here the court especially focused on whether the content of the lootbox was tradable as an economic good in the ordinary course of business and thus whether a profit can be made. Legally, the court considered that – despite the prohibition contained in the terms of use – there is nevertheless an actual market that is used by game participants to trade in the content of the lootbox. For this reason, the court came to the conclusion that the digital contents of the lootbox have an economic value. The court of first instance considered the fact that the operator does not offer the prospect of winning the prize itself to be irrelevant, “since according to the wording of the law it is also sufficient if someone else does so”.

Consequently, the court ruled that the lootbox in question constituted a game of chance for which there was no licence under the Austrian Gaming Act. Therefore, the contracts concluded between the parties were deemed null and void, which is why the claim was granted to the extent of the amount actually spent on lootboxes. However, in the course of the reversal, the player has to hand over the contents acquired with the lootbox.

Both judgments are not published. The decision of the District Court Hermagor in favour of the player has become legally binding. However, the decision of the District Court Floridsdorf was appealed by the claimant and the court of second instance reversed the decision of the court of first instance. Whether a legal remedy was also filed against the second instance ruling is unknown at the time of submission of this article.

New cases regarding lootboxes are already pending and will need to be followed closely.

Online sports betting

Legal framework of online sports betting

The Austrian legal system differentiates between games of chance, which are primarily subject to the Gaming Act and the monopoly on gambling established therein, and betting, which is regulated at the state level by nine state betting laws.

In the absence of a nationwide betting regulation and the resulting fragmentation into nine state betting laws, the regulation of online betting has developed differently in the individual states. At the time of writing, only five state betting laws contain explicit provisions for online betting. The remaining four state betting laws do not contain explicit provisions for online betting, although they have all been amended or rewritten in recent years.

Judgment of the Austrian Supreme Court – Styria Betting Act

The Supreme Court dealt with the following facts and questions:

Between October 2019 and April 2020, a Styrian betting customer placed online bets via his smartphone with a licensed provider domiciled in Malta on its website. The betting customer always carried out his betting activities in Styria.

With his lawsuit, the betting customer now demanded the repayment of his sports betting losses.

The betting customer justified the claim for repayment in particular as follows:

The Maltese provider had offered the online bets without a valid licence and thereby violated the provisions of the Styrian Betting Act, which is why the betting contracts were unlawful and void.

The Maltese provider was also accused of a breach of protective duties, as it had violated individual (player protection) provisions of the Styrian Betting Act, for example, as live sports betting was prohibited under the Styrian Betting Act.

The Maltese provider essentially countered that the Styrian Betting Act was not applicable because it did not regulate online betting, which is why there could be no violation of its protective provisions. The court of first instance dismissed the claim because the Styrian Betting Act did not regulate online betting and there was also no unintended loophole.

The Court of Appeal confirmed the decision of the court of first instance and stated that online betting was not regulated by the Styrian Betting Act. Furthermore, the obligation to obtain a licence and to notify under the Styrian Betting Act requires a betting shop, which is a fixed place of business that can be entered by betting customers. “A betting operator who, like [the Maltese provider], has no physical presence in Styria is therefore not subject to the Styrian Betting Act”.

The betting customer appealed to the Supreme Court, which deemed the appeal admissible because it had not yet issued an opinion on the Styrian Betting Act in connection with online betting.

Legal assessment of the Supreme Court

In legal terms, the Supreme Court considered the following in particular when assessing the betting customer’s appeal:

At the outset, the Supreme Court clarified that sports betting is not covered by the federal monopoly on gambling, but falls within the competence of the nine states in terms of legislation and enforcement.

The Supreme Court then found that neither the Styrian State Betting Act itself nor the materials refer to online betting or specify the territorial scope of application.

With regard to a licensing requirement, the Styrian State Betting Act stipulates that the activity as a betting operator may only be carried out after a licence has been granted and that every betting operator must permanently operate at least one betting shop. According to the definition in the Styrian Betting Act, a betting shop is a place of business where bets are offered, betting offers are accepted, bets are placed or brokered, or betting customers are referred.

The Supreme Court also found that the state betting laws of all states have been amended or revised in recent years and that Styria (as well as Burgenland, Carinthia and Vienna) is one of the states that do not explicitly provide for online betting. The other federal states, however, contain provisions on online betting and cover it if the server is located in the respective state, “so that only then is a licensing obligation given”.

In the next step, the Supreme Court analysed a multitude of literature, including the commentary by the two authors, and dealt intensively with the interpretation of the term “exercise” in order to be able to assess which activity is subject to a licensing requirement under the Styrian Betting Act. In this context, the Supreme Court stated that a broad interpretation of the term “exercise” does not correspond to the will of the legislator and that enforcement would not be possible in practice if the term were understood in a broader sense. Nor can the state legislator be presumed that its state betting law is intended to regulate conduct outside its state territory, i.e. in other federal states or in other member states of the EU or in other third countries, solely because of possible effects in its state territory.

The Supreme Court then came to the interim conclusion that “the Styrian Betting Act only regulates the offering, conclusion and brokering of bets by means of conduct within the state territory. Sports bets offered by a betting company from a location outside the state territory via the internet are not covered by this, because this does not constitute a betting activity in the sense of the law. It follows that the law does not apply to this form of activity as a betting operator. The offering and acceptance of online sports bets by [the Maltese provider] without a licence in accordance with these provisions does not therefore constitute nullity”.

With regard to the alleged violation of protective obligations, the Supreme Court then stated that an analogous application of individual provisions of the Styrian Betting Act requires the existence of a genuine (unplanned) legal loophole. The Supreme Court further concluded that the “state legislator [had to be] aware of the offering of online betting at the time of the enactment of the Styrian Betting Act 2018 and nevertheless decided against the inclusion of a regulation of betting offered via the internet”, which is why an unplanned loophole is excluded. Consequently, an (analogous) application of individual provisions of the Styrian Betting Act is ruled out and the betting customer cannot invoke individual (protective) provisions.

Consequently, the appeal of the betting customer was not upheld by the Supreme Court.

Decision of the Austrian Constitutional Court – Vorarlberg Betting Act

Only recently, the Austrian Constitutional Court dealt with the constitutionality of the provision of Section 1 (4) second sentence of the Vorarlberg Betting Act in the context of a party application for a judicial review.

This provision states that the place of business for online betting is “the place from which the betting operator provides the data for the medium”. In accordance with the legal materials, this place is regularly understood to be the server location.

The applicant claimed that the definition of the place of business for online betting in the Vorarlberg State Betting Act was unconstitutional, as “the Vorarlberg Betting Act does not apply if the server from which the data for the electronic medium is provided is not located in Vorarlberg”.

The Constitutional Court refused to deal with the application due to a lack of prospects of success, as in particular the state legislator is not to be opposed “if, in the case of enabling betting activities via an electronic medium, it defines as a place of business that place from which the betting operator provides the data for the medium”.

The Austrian Constitutional Court thus clarified that the connecting factor to the server location (location “from which the betting operator provides the data for the medium”), which is common to the five state betting laws that provide for explicit online regulations, is constitutional.

Conclusion

The above described jurisprudence affects integral questions for gaming operatory in Austria. The first step for director cases, namely the competence of Austrian courts, is still undecided, but reasoning applied to comparable cases based on tort may already now indicate the line of argumentation that the Supreme Court may apply. This could lead to the competence of Austrian courts for claims against directors directly, which, in light of existing Supreme Court case law and general attitude of Austrian courts towards games of chance operators, being taken into consideration by all stakeholders.

Nevertheless, specific areas such as lootboxes are still dynamic and are to be monitored closely.

Furthermore, the latest Supreme Court and Constitutional Court rulings have led to a welcome increase in legal certainty for online sports betting operators. The legal assessment of the High Courts may also be used for arguing the legality of online sports betting offerings in the other Austrian states. At the end of the day, every specific set up will need to be evaluated.