IN OBJECTIVE: Law 107/2024 on the approval of Government Emergency Ordinance No 82/2023

IN OBJECTIVE: Law 107/2024 on the approval of Government Emergency Ordinance No 82/2023

By: Lawyer, Teodora Luca

Luca Mihai Cătălin, Law Offices

Although more than 6 months have elapsed since the entry into force of Law 107/2024 on the approval of Government Emergency Ordinance no. 82/2023 for amending and supplementing Government Emergency Ordinance no. 77/2009 on the organization and operation of gambling, as well as for amending Government Emergency Ordinance no. 20/2013 on the establishment, organization and functioning of the National Gambling Office and for amending and supplementing Government Emergency Ordinance no. 77/2009 (Law 107/2024), the controversies regarding the manner in which the normative act was adopted are far from over.

Beyond the uncertainties that the legal text has generated in the field of gambling (for certain specific situations the authorities and organizers alike are still trying to identify the solutions envisaged by the legislator, given the vagueness of the text and its unsystematization in the pre-existing legislative ensemble), the normative act is likely to have been issued in violation of constitutional principles, this issue will be briefly analyzed below.

• In its entirety, Law no. 107/2024 is susceptible of unconstitutionality due to the failure to respect the principle of bicameralism.

The principle of bicameralism is regulated by the Romanian Constitution from an institutional point of view (according to Art. 61 para. 2) and from a functional point of view, by the provisions of Art. 75, which require that the adoption of laws be made by the two Chambers of the Parliament.

• According to 61 para.2 of the Constitution of Romania:

2) Parliament is made up of the Chamber of Deputies and the Senate.

• Article 75 of the Romanian Constitution:

1) The draft laws and legislative proposals for the ratification of treaties or other international agreements and the legislative measures resulting from the application of these treaties or agreements, as well as the draft organic laws provided for in article 31, are submitted for debate and adoption to the Chamber of Deputies, as the first referred Chamber paragraph (5), article 40 paragraph (3), article 55 paragraph (2), article 58 paragraph (3), article 73 paragraph (3) letters e), k), l), n), o), article 79 paragraph (2), article 102 paragraph (3), article 105 paragraph (2), article 117 paragraph (3), article 118 paragraphs (2) and (3), article 120 paragraph (2), article 126 paragraphs (4) and (5) and Article 142 paragraph (5). The other draft laws or legislative proposals are subject to debate and adoption, as the first Chamber referred, to the Senate.

(2) The First Referred Chamber pronounces within 45 days. For codes and other laws of particular complexity, the term is 60 days. If these deadlines are exceeded, it is considered that the draft laws or legislative proposals have been adopted.

(3) After adoption or rejection by the first referred Chamber, the draft or legislative proposal is sent to the other Chamber, which will decide definitively.

(4) If the first referred Chamber adopts a provision which, according to paragraph (1), falls within its decision-making competence, the provision is definitively adopted if the second Chamber also agrees. Otherwise, only for that provision, the law goes back to the first referred Chamber, which will decide definitively in the emergency procedure.

(5) The provisions of paragraph (4) relating to the return of the law shall be applied accordingly also in case the decision-making Chamber adopts a provision for which the decision-making competence belongs to the first Chamber.

According to the case-law of the Constitutional Court, two criteria are considered essential in order to determine when parliamentary procedure infringes the principle of bicameralism, namely: on the one hand, the existence of major differences in legal content between the forms adopted by the two Houses of Parliament and, on the other hand, the existence of a significantly different configuration between the forms adopted by the two Houses. The fulfillment of the two criteria is likely to affect the principle that governs the law-making activity of the Parliament, placing the decision-making Chamber in a privileged position, with the elimination, in fact, from the legislative process, of the first Chamber (Decision no. 710 of May 6, 2009, cited above, Decision no. 413 of April 14, 2010, published in the Official Gazette of Romania, Part I, no. 291 of May 4, 2010, Decision no. 1.533 of November 28, 2011, published in the Official Gazette of Romania, Part I, no. 905 of December 20, 2011, Decision no. 62 of February 7, 2017, published in the Official Gazette of Romania, Part I, no. 161 of March 3, 2017, paragraph 29, Decision no. 89 of February 28, 2017, cited above, paragraph 54, Decision no. 377 of May 31, 2017, published in the Official Gazette of Romania, Part I, no. 586 of July 21, 2017, paragraph 44, Decision no. 561 of September 18, 2018, published in the Official Gazette of Romania, Part I, no. No 922 of November 1, 2018, paragraph 34, Decision No 404 of June 6, 2019, published in the Official Gazette of Romania, Part I, No 580 of July 16, 2019, paragraph 77, and Decision No 154 of May 6, 2020, published in the Official Gazette of Romania, Part I, No 398 of May 15, 2020, paragraph 65).

Considering the fact that, compared to the version adopted by the Senate, the form adopted by the Chamber of Deputies (the Chamber of Deputies) of Law no. 107/2024 includes substantive amendments, which were not subject to the analysis of the first Chamber (such as, for example, the provisions of Art.17 ^1, amending Art. 15 para. 2, letter b), which introduced the condition that the administrative-territorial unit in which the premises in which slot machine gambling games may be established must have at least 15,000 inhabitants), the law as a whole is susceptible of unconstitutionality, given the violation of the principle of bicameralism, provided for by Art. 61 para. 2 and Article 75 of the Constitution.

Amendments and additions to the legislative proposal adopted by the first Chamber of the Deciding Chamber must relate to the subject matter envisaged by the initiator and the form in which it was regulated by the First Chamber. Otherwise, it would lead to a situation where only one Chamber, namely the decision-making Chamber, exclusively legislates, which is contrary to the principle of bicameralism (Constitutional Court Decision No 472 of April 22, 2008 and Decision No 62 of February 7, 2017, paragraph 28).

The law is, with the specific contribution of each Chamber, the work of the entire Parliament, so that the legislature must respect the constitutional principles according to which a law cannot be adopted by only one Chamber (Decision No 1.029 of October 8, 2008, published in the Official Gazette of Romania, Part I, No 720 of October 23, 2008, Decision No 3 of January 15, 2014, published in the Official Gazette of Romania, Part I, No. 71 of January 29, 2014, Decision No 355 of June 25, 2014, published in the Official Gazette of Romania, Part I, No 509 of July 8, 2014, paragraph 38, Decision No 624 of October 26, 2016, cited above, paragraph 39, Decision No 765 of December 14, 2016, cited above, paragraph 29, Decision No 62 of February 7, 2017, paragraph 32, Decision No 377 of May 31, 2017, paragraph 48, Decision No 404 of June 6, 2019, paragraph 79, and Decision No 154 of May 6, 2020, paragraph 67).

• The provisions of Art. 1 and para. 6 of the Law violate the provisions of Articles 45 and 53 of the Constitution

1. Article I point 2, paragraph 5) of article 1 is amended and will have the following content:

(5) By way of exception to the provisions of para. (2), according to which the games of chance are operated directly by a single company holding a class I license, the operation of games of chance can be carried out, jointly, by two or more companies holding a class I license or/ and class II license, between which there are one or more contracts concluded under the terms of the law, the responsibility falling on the contracting parties. Conventions which, explicitly or covertly, would allow an entity not licensed under gambling legislation to carry out gambling activities are prohibited. Considering the provisions of art. 10 para. (3) and those of art. 21 para. (1) and (3), the interaction with the client/beneficiary of gambling services can be carried out exclusively through the qualified staff employed by the gambling organizer or a company affiliated to the gambling organizer.”

6. In Article I, after point 17, a new point is inserted, point 171, with the following content:

“17¹. In Article 15 paragraph (2), after letter b) a new letter is inserted, lit. b1), with the following content:

b¹) the proposed space, if it has slot-machine gaming devices as defined in art. 10 para. (1) lit. e), must be located in an administrative-territorial unit with a population greater than 15,000 inhabitants. The proof of the number of inhabitants is made by a certificate issued by the town hall in whose territorial radius the proposed space is located.»”

According to art. 45 and art. 53 of the Constitution:

Art. 45- The person’s free access to an economic activity, free initiative and their exercise under the conditions of the law are guaranteed.

Art. 53 – Restricting the exercise of rights or freedoms

(1) The exercise of certain rights or freedoms may be restricted only by law and only if necessary, as the case may be, for the protection of national security, public order, public health or morals, the rights and freedoms of citizens; the conduct of criminal investigations; the prevention of the consequences of a natural calamity, disaster or particularly serious loss.

(2) Restraint can only be ordered if it is necessary in a democratic society. The measure must be proportional to the situation that determined it, to be applied in a non-discriminatory manner and without prejudice to the existence of the right or freedom.

As appreciated in the specialized doctrine, economic freedom is a corollary of the right to private property, provided for by art. 44 of the Constitution (I. Muraru, S. Tănăsescu – Constitutional law and political institutions, edition 14, vol. I, C.H. Beck publishing house, 2011, p. 178) to which it contributes.

Indeed, the right of private property cannot be conceived and fully exploited without the existence of economic freedom, that is, the freedom to use and dispose of the right of private property in order to obtain economic benefits for the holder.

According to art. 44 para. (1) of the Constitution, the right to property, as well as claims on the state, are guaranteed. The content and limits of these rights are established by law.

The adoption of measures that have the effect of restricting the exercise of these rights and freedoms can only be carried out under the conditions provided by art. 53 respectively under a law and for a limited time, in order to respect the principle of proportionality with the situation that determined this restriction. In the context of the Constitutional Court Decision no. 872/2010, it was held that “in order for the mentioned restriction to be justified, the requirements expressly provided by art. 53 of the Constitution, namely:

– to be provided by law;

– to impose its restriction;

– the restriction must be circumscribed to the grounds expressly provided for by the constitutional text, namely: the protection of national security, public order, public health or morals, the rights and freedoms of citizens; the conduct of criminal investigations; the prevention of the consequences of a natural calamity, disaster or particularly serious disaster;

– to be necessary in a democratic society;

– it is proportionate to the situation that gave rise to it;

– to be applied in a non-discriminatory manner;

– shall not prejudice the existence of the right or freedom.”

The application of the restriction on carrying on the activity in localities with less than 15,000 inhabitants, in the absence of any objective justification circumscribing the need to protect a general interest, represents a violation of economic freedom, in clear disagreement with the constitutional rules.

Even if the activity of gambling constitutes a State monopoly, that circumstance does not result in the establishment of an absolute right to determine the conditions for the exercise of those activities, and any restriction of those rights, even in that case, can be regulated only within the limits laid down by the constitutional rules.

In other words, given that the measure restricting activity in certain localities was adopted without having been based on a prior analysis showing the need to protect a public interest, the provisions of Article 1(1)(b) of the Regulation are contrary to the limits of the public interest. 6 of the Law is contrary to Article 53 of the Constitution.

In the same vein, the provisions of Art. 1 of Law 107/2024, are susceptible of unconstitutionality, in relation to the provisions of Articles 44 and 53 of the Constitution.

The prohibition of gambling activity was expressly provided for by the regulation prior to the adoption of Law 107/2024, being unequivocally retained in the Government Emergency Ordinance no. 77/2009 (the version prior to the amendments adopted by law):

• 1 ³ para. 1: (…) the licensed gambling operator is the gambling organizer, i.e. the legal entity that has obtained the license to organize gambling and the authorization to operate gambling from the Supervisory Committee of the National Gambling Office.
• 6 para. 1: Gambling organizer means the legal entity licensed to organize and operate gambling games under the conditions of this emergency ordinance and specific regulations. This status may be acquired by a legal entity under Romanian law established under the law or by a legal entity legally established in a Member State of the European Union or in signatory states of the Agreement on the European Economic Area or in the Swiss Confederation.

In accordance with the provisions of Art. 1 of O.U.G. 77/2009, gambling means that activity which cumulatively fulfills the following conditions: material winnings are awarded, usually monetary, as a result of the public offer by the organizer of a potential win and the acceptance of the offer by the participant, with the collection of a direct or hidden participation fee, the winnings being awarded on the basis of the game rules approved by the National Gambling Office, hereinafter referred to as the N.N.G.O., by random selection of the results of the events that are the object of the game, regardless of how they are produced.

From the analysis of the aforementioned texts, it is clear that the gambling activity can only be carried out (organized and operated) by the gambling organizer, namely by the entity licensed and authorized under O.U.G. 77/2009, therefore, the provision in Art. 5 is superfluous.

Moreover, Article 1 para. 5 of GEO 77/2009, as amended by Law 107/2024, contains an inaccurate reference to the provisions of Art. 1 para. 2, from which it only apparently establishes an exception, although the article in question regulates the category of entities that can become gambling organizers and not the conditions for carrying out the activity, the normative text under analysis (Art. 1 para. 5) includes a series of provisions at odds with the provisions of Art. 44 and 53 of the Constitution:

Although the normative act as a whole expressly provides for the prohibition of unlicensed entities to carry out gambling activities, this being the essence of the regulation of GEO 77/2009, art. 1 para. 5 establishes, at least in appearance, a prohibition on gambling organizers to acquire the resources necessary for the organization and conduct of the activity on the basis of legal acts concluded under the conditions of the law, with unlicensed companies.

Thus, to the extent that the text of the law would be interpreted in the sense that the prohibition also applies to the legal acts necessary for the acquisition by the licensed company of the resources necessary for the conduct of its business, the text would be unconstitutional, being violated the right to private property and free economic initiative (from the perspective of the gambling organizer, but also from the perspective of the holder of the resources, the unlicensed company).

Therefore, the normative act cannot be interpreted in the sense that, by agreement, the right to organize and operate the gambling activity could be transferred to an unlicensed company, but it cannot be interpreted in the sense that any agreement concluded by the gambling organizer with an unlicensed company will lead to ”joint operation” or operation of gambling by a company that does not hold this right.

Therefore, in order to be in line with constitutional principles, the text can only be interpreted in the sense that an agreement under which the contracting parties pool resources (the gambling organizer, those essential for the conduct of the activity – the means of gambling, and the unlicensed company, any other resources not subject to licensing), in order for the activity to be carried out by the licensed company and the results to be distributed to the parties in accordance with the agreement, is permissible.

In the same vein, it is unconstitutional to generally restrict the activities that licensed companies may carry out through partnerships with unlicensed companies, as regards the use of human resources (the interaction with the client/beneficiary of gambling services may be carried out exclusively through the use of qualified personnel employed by the gambling organizer or by a company affiliated to the gambling organizer).

On the one hand, the regulation is unclear, absolutely prohibiting any interaction with the gambling organizer’s customers, carried out on the basis of agreements concluded under the law by its partners, on the other hand, it violates art. 53 of the Constitution, by limiting the right of companies to determine the manner in which they will carry out their activities, although they are not subject to special regulation, there being no legal justification for making the carrying on of the activity conditional solely on the persons at the disposal of the company by virtue of employment contracts, prohibiting any other agreements with similar purposes, although they are recognized by law.

Given that the legal text does not seek to limit rights in order to protect social order or a public interest, the restriction of rights is not in line with constitutional provisions.

• The provisions of Art. 1 para. 6 of the Law violate the provisions of Art. 2 of the Constitution

Given that the text of the law (apparently) concerns the amendment of a condition to be verified when authorizing means of gambling, to the extent that the rule would be interpreted as applying from the date of entry into force of the law, namely with regard to means of gambling authorized under the old law, it is unconstitutional.

Although the space in which the means of gambling is operated is not an indication of the operating permit, it is an essential condition for the issue of the permit, so that a change to it during the period of the permit issued would indirectly lead to the invalidation of the permit, and such a solution would contravene the principle of non-retroactivity of the law.

The principle of non-retroactivity of new law is provided by the provisions of Art. 15 para. 2 of the Constitution of Romania, according to which: ”The law shall apply only for the future with the exception of more favorable criminal or contravention law” and the provisions of Article 6 of the Civil Code, according to which:

1) Civil law is applicable as long as it is in force. It shall not have retroactive effect.

2) Legal acts and facts concluded or, as the case may be, committed or produced before the entry into force of the new law may not give rise to legal effects other than those provided for by the law in force at the time of their conclusion or, as the case may be, of their commission or production”, meaning that the new law cannot attribute its own effects to past legal situations or to the legal acts or facts from which they derive, i.e. it cannot attribute to them effects which they could not have produced under the law under which they were formed.

3) Legal acts null and void, voidable or affected by other causes of ineffectiveness at the date of entry into force of the new law shall be subject to the provisions of the old law, and cannot be considered valid or, where appropriate, effective according to the provisions of the new law.

Taking into account the provisions of Article 6 of the Civil Code, it is unquestionable that the modification of the conditions for carrying out the activity (according to the new law) will not affect the operating authorizations issued under the old law, the new conditions being applicable only to the legal acts (operating authorizations) issued under the new law.

The interpretation of the National Gambling Office in the sense that the new licensing conditions apply immediately has led to the revocation of the license to organize gambling, according to art. 17 para. 2 letter i) of GEO 77/2009 for gambling organizers, being invalidated (for the time being, provisionally) by the courts that have suspended the decisions to revoke the licenses, essentially holding that this interpretation is apparently unlawful since the condition provided for by the new law does not apply to previously issued authorizations, the organizers having the right to continue to carry on business under the law in force at the date of issuance of the authorization.

• Failure to inform the European Commission about the draft technical regulation

In accordance with Art. 5 of EU Directive 2015/1535:

”Subject to Article 7, Member States shall communicate any draft technical regulation to the Commission without delay, except where it merely transposes the full text of an international or European standard, in which case the information regarding the standard concerned shall suffice; they shall also forward to the Commission a statement of the grounds which make the enactment of such a regulation necessary, where these have not been sufficiently clarified in the draft technical regulation.

Member States shall also communicate to the Commission the texts of the main laws, regulations or administrative provisions directly related thereto, where they have not already been communicated to the Commission in an earlier communication, where knowledge of such texts is necessary for assessing the implications of the draft technical regulation.

Member States shall communicate the draft technical regulation to the Commission again under the conditions referred to in the first and second subparagraphs of this paragraph if they make significant changes to the draft technical regulation which have the effect of changing its subject matter, shortening the implementation timetable originally envisaged, adding specifications or requirements, or making the latter more restrictive.”

In accordance with Article 1(f) of Directive 2015/1535

(f) “technical regulation” means a technical specification or other requirement or rule on services, including the relevant administrative provisions, the observance of which is compulsory, de jure or de facto, in the case of marketing, provision of a service, establishment of a service operator or use in a Member State or a major part thereof, as well as laws, regulations or administrative provisions of Member States, except those provided for in Article 7, prohibiting the manufacture, importation, marketing or use of a product or prohibiting the provision or use of a service, or establishment as a service provider.

The de facto technical regulations include:

(i) legislative acts or administrative acts of a Member State which refer either to technical specifications or other requirements or rules regarding services, or to professional codes or codes of good practice, which in turn refer to technical specifications or other requirements or rules regarding services, the observance of which confers the presumption of compliance with the obligations imposed by the respective legal acts or administrative acts;

(ii) voluntary agreements to which a public authority is a contracting party and which provide, in the general interest, for compliance with technical specifications or other requirements or norms regarding services, with the exception of the specifications for public procurement;

(iii) technical specifications or other requirements or rules regarding services in relation to fiscal or financial measures that affect the consumption of products or services by encouraging compliance with these technical specifications or other requirements or rules regarding services; technical specifications or other requirements or rules regarding services in relation to national social security systems are not included.

In view of the fact that restricting gambling activity in localities with fewer than 15 000 inhabitants is likely to have a significant effect on the marketing of means of gambling, it constitutes a technical regulation within the meaning of Article 1(f) of Directive 2015/1535 read in conjunction with Article 1(d) of the Directive (“other requirements” means a requirement, other than a technical specification, imposed on a product for the purpose of protecting in particular consumers or the environment and which affects the life cycle of the product after it has been placed on the market, such as conditions of use, recycling, reuse or disposal, where such conditions can significantly influence the composition or nature of the product or its marketing;)

In support of this interpretation is the conclusion in Joined Cases C-213/11 and C-217/11 Fortuna sp. z o.o. and others v Dyrektor Izby Celnej w Gdyni, EU:C:2012:495, Joined Cases C-213/11 and C-217/11, EU:C:2012:495, paragraphs 25 and 40, that:

National provisions, such as those in the Gambling Act, which could have the effect of limiting and even making progressively impossible the operation of low-paying automatic games outside of casinos and gaming halls, constitute “technical regulations”, as long as it has been established that said provisions constitute conditions that can significantly influence the nature or marketing of the product in question.

A measure that reserves the organization of automatic games only to casinos must be qualified as “technical regulation” within the meaning of Article 1(11) of Directive 98/34. (Directive 98/34 was repealed by Directive 2015/1535, the regulation being taken over in a similar manner by the normative act in force).

On the basis of the same reasoning, the legal provisions according to which the operation of means of gambling is allowed only to organizers that carry out their activity in specialized locations established in localities with a population of more than 15,000 inhabitants will be decisive in reducing the activity of marketing of means of gambling and, consequently, it represents technical regulation within the meaning of Directive 2015/1535, in which case the Romanian State was obliged to notify the Commission, according to Article 5 of the Directive, previously cited.

The failure to notify the Commission in accordance with Directive 2015/1535 constitutes a procedural irregularity in the adoption of the technical regulations concerned and has as a consequence the inapplicability of these technical regulations, leading to the unenforceability of the technical regulations in question, so that they cannot be invoked against individuals, and individuals can invoke Article 8 of Directive 98/34 before the national court. The national court is obliged to refuse to apply a national technical regulation, which has not been notified in accordance with the directive. (Article 8 of Directive 98/34, repealed by Directive 2015/1535 was replaced by Article 5 of Directive 2015/1535).

• The remedy available to the organizers of gambling involves the referral to the Constitutional Court, but such an approach is long-lasting, the term in which the Court will rule on the exceptions of unconstitutionality can vary from a few months to more than a year.

Although it may not be a feasible solution to avoid the revocation of licenses based on seemingly unconstitutional provisions, to the extent that the Court finds the law unconstitutional, such a hypothesis could give rise to a right to compensation for the affected organizers How difficult the process of recovering damages caused by decisions of state authorities proves to be, all the more so in the case of decisions based on legal provisions, will be analyzed in a future issue.