The European Court of Justice (ECJ) has ruled that Portugal is within its rights to pass laws awarding a lottery and sports betting monopoly to a state-controlled non-profit company.
Gibraltar's BWIN International and the Portuguese football league had been fined €74,500 and €75,000 respectively for promoting and advertising BWIN's on-line gambling services.
BWIN and the league challenged the ruling, arguing that EU rules on the free movement of services gave BWIN the right to offer its services in Portugal. The ECJ rejected that argument.
"The legislation at issue in the main proceedings gives rise to a restriction of the freedom to provide services enshrined in Article 49 [of the EU Treaty]," said the ECJ's ruling. It said that the Treaty "allows restrictions justified on grounds of public policy, public security or public health."
"In addition, a certain number of overriding reasons in the public interest have been recognised by case-law, such as the objectives of consumer protection and the prevention of both fraud and incitement to squander money on gambling, as well as the general need to preserve public order," said the ruling.
The Court recognised that the standards to be applied will be different from country to country, and that on an issue such as gambling this was justified.
"The legislation on games of chance is one of the areas in which there are significant moral, religious and cultural differences between the Member States. In the absence of Community harmonisation in the field, it is for each Member State to determine in those areas, in accordance with its own scale of values, what is required in order to ensure that the interests in question are protected," it said.
The Portuguese government said that its monopoly-creating legislation had as its main objective the fighting of crime and the restriction of operators' ability to commit fraud.
The Court said that the system set up by Portugal was in line with its stated objective.
"It must be acknowledged that the grant of exclusive rights to operate games of chance via the internet to a single operator, such as Santa Casa, which is subject to strict control by the public authorities, may, in circumstances such as those in the main proceedings, confine the operation of gambling within controlled channels and be regarded as appropriate for the purpose of protecting consumers against fraud on the part of operators," it said.
The Court said that Portugal was entitled to pass laws creating that gambling monopoly.
The ruling will be a blow to BWIN and other online gambling operators who have tried to break state monopolies elsewhere in the EU, including in France, Germany and Italy.
National courts have given mixed results, with French courts first upholding then partially overturning France's monopoly and a German regional court ruling monopoly's in breach of EU rules.
Italy has stood by its control of the sector and has also asked the ECJ to rule on whether its laws clash with the EU Treaty.
Gambling law expert Antoinette Jucker of Pinsent Masons, the law firm behind OUT-LAW.COM, said that the law will undermine companies' arguments that monopolies breach EU law.
"This ruling is not a great surprise. It reflects that there is no harmonisation on games of chance across member states," she said. "Provided a member state has a public interest reason for doing so, and behaves proportionately, it can regulate the conduct of gambling as it sees fit."
"This reflects the fact that there are social reservations about permitting gambling to operate in an unfettered form and that the EU respects the fact that many member states will want to prohibit or regulate the conduct of gambling within their territory," she said. "There may well be religious or other social or cultural reasons why they don't want to permit their citizens to be able to gamble at will."