Legal shield for gaming pits Malta against the EU

Malta’s parliament was a House divided in 2003: the ruling Nationalists toasted a referendum victory to take Malta into the EU, while the Opposition Labour was deeply eurosceptic.

Back then just a simple majority of MPs was needed to make the EU Accession Treaty the law that made Brussels’ regulations supreme. But it would have been impossible to secure a two-thirds majority to tend to one jigsaw piece: a constitutional article that makes the island’s supreme law impervious to EU law.

20 years later, Malta’s creaky Constitution is pitting the island against the supremacy of EU law.

And it comes in the form of a decree by a judge in the Superior Courts, to uphold recent and controversial amendments to Malta’s hallowed gaming laws.

The case concerns a request to enforce an Austrian court judgment obtained by Michael Christian Felsberger, for a garnishee order on a Maltese gaming company, TSG Interactive.

Jennifer Orlando-Salling, a PhD Fellow at the University of Copenhagen

Delivered on 21 July 2023, Mr Justice Toni Abela blocked its enforcement. His decree was based on the amendments to the Gaming Act – controversial in themselves, because they allow the courts to refuse such foreign judgments and give immunity to gaming companies from such legal actions.

That alone flies in the face of Malta’s EU obligation to recognise and enforce the judgments of other EU courts in civil and commercial matters – the EU Regulation 1215 of 2012.

Malta’s amended gaming rules now introduce an ‘ouster clause’, that prohibits the courts from hearing a particular type of litigation. Their declared objective, as presented in the House, are the codification of Malta’s “long-standing public policy” to encourage the establishment of gaming businesses here – a protectionist law.

Prof. Kevin Aquilina, constitutional lawyer

So, when the Felsberger case was filed in Malta to enforce the Austrian court decision, the judge decreed as having no authority to hear the case.

“It’s a landmark decision of enormous constitutional significance that should draw far more attention than it is doing currently,” says Jennifer Orlando-Salling, a PhD Fellow at the University of Copenhagen, who says Malta already suffers from lengthy proceedings on commercial litigation.

The reason is that, apart from the new rules protecting Malta’s multi-million gaming industry, Mr Justice Abela used Article 6 of the Maltese Constitution to uphold his decree – asserting that the Court’s ultimate “loyalty” is towards the Constitution against all other laws “inconsistent” with it, even European laws it would seem.

Article 6 states that “if any other law is inconsistent with this Constitution, this Constitution shall prevail and the other law shall, to the extent of the inconsistency, be void.”

But so does Malta’s European Union Act of 2003 assert the primacy of EU law, binding Malta, part of its international obligations, to comply with EU law.

But Orlando-Salling says the Constitution’s Article 6 is an “arguably redundant relic inhabited of its colonial past”, a symbolic and outdated assertion of sovereignty that is ignored by the Courts.

This time however, it was not ignored. Mr Justice Abela has reasoned that without a correct wording that declares Article 6 to be subordinate to the European Union Act, then the latter remains subordinate to the island’s supreme law.

The constitutional lawyer and former Dean of the University of Malta’s Faculty of Laws, Prof. Kevin Aquilina, has argued that it is likely that the parties in the Felsberger case did not even raise the issue of another Constitutional article, the one that allows the Maltese parliament to enact laws only if they are in accordance with the EU Accession Treaty and in full respect of human rights (Art. 65).

“Once it was not raised, it would have been unfair were the court to raise it itself and decide thereupon without allowing the parties to at least make submissions thereupon,” Prof. Aquilina has said.

This has created a Catch-22 situation: while MPs are obliged to only enact laws that are in conformity with EU law, this obligation ceases if the provisions of the EU law – such as the cross-border enforcement of court decisions in matters of gaming – contravenes the power of MPs to enact laws on the way the Superior Courts are regulated.

“The solution clearly lies in the guidance given by the Civil Court, that is, an amendment needs to be made to Article 6 of the Constitution to the effect that until such period as Malta continues to be a member of the European Union, it is EU Law that should prevail over the provisions of the Constitution,” Prof. Aquilina said of Mr Justice Abela’s decree.

This amendment would have been impossible back in 2003, requiring a two-thirds majority vote in the House of Representatives when Labour at the time was ideologically opposed to EU accession. Prof. Aquilina says that with Labour now a pro-EU party, there is no obstacle to amend the Constitution.

“However, if the Constitution is so amended, the protectionist measure of Article 56A of the Gaming Act would need revisiting as well. But this will take quite some time to materialise until the Court of Justice of the European Union pronounces itself on the matter and Malta comes along to change the Constitution,” he adds.

Orlando-Salling says the Abela decree should sound alarm bells, because similar decrees could essentially weaponise the Constitution against Malta’s EU obligations to enforce cross-border court decisions.

“In continuing to lack the fundamental constitutional reform needed, these remnants of colonial inheritance will continue to overwhelmingly empower the executive and will only lead to a recycling of the same problems already faced,” she says.

In this case, the Court decree is being used to enforce the government’s protections of the gaming industry while ensuring their competitiveness.

“It has more to say about the power, and hold, of the gaming industry domestically than a change in the relationship between Malta and the EU,” Orlando-Salling surmises.

“It seems that short-sighted pragmatism and realism will be seen to have seemingly won the day here rather than an activist anti-EU sentiment. And, though precedents are not part of Maltese law though they are not without weight. What if this happens again? It’s bound to, given the lack of constitutional reform.”

The Abela decree explained

The decision was handed down by Mr Justice Toni Abela in the First Hall of the Civil Court, in the case Michael Christian Felsberger et vs TSG Interactive Gaming Europe Ltd.

The plaintiffs had obtained a favourable judgment in the Austrian courts against the gaming company and sought to enforce it in Malta. A feat now blocked by the Maltese courts.

Earlier this year, the Maltese parliament approved the inclusion of Article 56A to the Gaming Act, which granted a form of “immunity” from legal action that would “conflict with or undermine the legality of” Malta’s gaming services or obligations that arise from it.

This “immunity” is afforded to all holders of a gaming licence (i.e. gaming companies), the current or former officers of such a company and “key persons of a licence holder for matters relating to the provision of a gaming service,” as well as players receiving that service.

The judge used the provisions of this article to reject the garnishee order, but he also commented on the fact that Article 56A also attempted to regulate the jurisdiction of the courts, a power that is constitutional in nature.

“The Court shall refuse recognition and, or enforcement in Malta of any foreign judgment and, or decision given” in the cases described above, reads subsection (b) of that article.

The judge, however, ruled that the Constitution remained Malta’s supreme law.

“The court is aware of both the regulation and those parts of the Code of Organisation and Civil Procedure, particularly Article 825A [which states that EU regulations will apply in cases where local law is in conflict with them.]

“It is true that these legal provisions affirm the supremacy of Union laws. But there is another supremacy which we often forget: that of the Constitution of Malta, which is the highest law in the country, and which surely must not be considered as an ordinary law,” Mr Justice Abela wrote.

The decision is likely to have a ripple effect reaching far beyond Malta’s gambling laws, because of a dichotomy introduced into the Constitution in 2003. Since 1974, Article 6 of the Constitution established the supremacy of the Constitution, stating that any other law which is inconsistent with it is void.

But Article 65 of the same Constitution, introduced in 2003, after Malta’s accession to the EU, states that “Parliament may make laws for the peace, order and good government of Malta in conformity with full respect for human rights, generally accepted principles of international law and Malta’s international and regional obligations in particular those assumed by the treaty of accession to the European Union signed in Athens on the 16 April 2003.”