The contract winners responsible for the implementation of the Italian state-sanctioned gaming machine network have recently successfully challenged a €98 billion fine as a result of allegations of ‘public damage’ due to delays and mismanagement in the set-up of the network.
The Administrative Court of Rome1 has recently ruled that the Italian gambling regulator may not prosecute the ten concessionaires concerning their connection and management activity of the NewSlot gaming machine network. Let’s put things in context in order to understand the real implications of this ruling. In Italy, the installation and use of gaming machines and/or automatic and semi-automatic devices is generally banned from public places as well as from clubs or in any kind of association. Only the gaming machines envisaged by article 110, paragraphs 6 and 7 of the Public Security Act2 are considered as being suitable and legal.
The machines under article 110, paragraph 6, letter a) of the above mentioned Act, better known as ‘NewSlot’ (of which there are more than 250,000 in operation), are the only AWP machines authorised by the competent Autonomous Administration of State Monopolies (AAMS) and where the player’s skills and the entertainment value play a much greater role in the game’s outcome than mere chance actually does. Winnings are in money prizes and cannot exceed €100. These are calculated by the machine on an overall cycle of not more than 140,000 matches and cannot be less than 75% of the total amount wagered. The minimum duration of a game is four seconds. NewSlot cannot reproduce the game of poker or its key rules, either in all or in part. Minors under the age of 18 are banned from using these machines.
In order to supervise the operation of the games and to ensure the respect of the above mentioned requirements, these machines are connected to the AAMS computerised network and have been certified by one of the certificate and inspection companies to verify their compliance with the law and with the technical criteria published by the AAMS and the Ministry of Internal Affairs.
In 1994, the AAMS granted, through call for tender, the public service concession for the direction and management of the NewSlot network. All the concessionaires executed the relevant concession agreement so as to offer NewSlot, taking into account the transitional period granted.
At the start of 2007, the Italian Court of Accounts argued to the AAMS and to the concessionaires that a public damage had occurred due to the delays in the connection and management of the NewSlot network. According to the Court, the fines provided with the concession agreement – amounting to €98 billion – are to be requested.
Consequently, between March and June 2007, the AAMS directed these delays to the concessionaires and ordered them to make payment of these fines within 45 days, giving a term of 30 days to file counterparts’ observations. The concessionaires challenged the above provision before the Administrative Court of Rome.
In light of the above, the Court was called upon to determine whether the contractual obligations between the AAMS and the concessionaires had been fulfilled and if the requested fines had to be paid.
The ruling
The Court ruled that the terms stated in the provision requesting the payment of the above mentioned fines were not compliant with the principles of reasonableness and proportionality in such proceedings3. Indeed, those terms did not allow the consideration of counter arguments, verification of the concession agreement fulfillments and consideration of the public damage sustained.
The Court also held that the amount of the fines requested is not proportionate and fails to be supported by a strict verification process. As a matter of fact, it represents a mere addition of the fines established by the agreement and the time elapsed (50 per hour for lack of connection/ detachment to the network), without taking into account the objections already claimed to the precedent distributors and due to the transitional period.
In accordance with the above procedural considerations, on Tuesday 1 April 2008, the Administrative Court published its decision to render null and void the demand provision.
Nevertheless, the Italian authorities will probably appeal the above ruling before the State Council. On the other hand, the proceeding initiated by the Court of Accounts is still running and the first hearing will be fixed for the next few months.
1. TAR Lazio, II section, case no. 6406/2007 and others.
2. Royal Decree 18 June 1931, no 773 (Testo Unico delle Leggi di Pubblica Sicurezza – TULPS)
3. Article 10 lett b) Law of 7 August 1990, no. 241 (Nuove norme in materia di procedimento amministrativo e di diritto di accesso ai documenti amministrativi).