The European Commission has initiated infringement proceedings against Malta over its legal protections for Malta-registered companies against court judgments issued in other EU member states.

On Wednesday, the Commission formally notified Malta of the proceedings.

The infringement proceedings r Bill 55: the Gaming (Amendment) Act approved in June 2023 which had the stated aim of codifying Malta’s longstanding policy to encourage the establishment of gambling operators in Malta.

What the act actually does, however, is add an article to the Gaming Act – Article 56A – which states that as a “principle of public policy;” no court action can be taken against licence holders which are deemed to:

• conflict with or undermine the legality of the provision of gambling services in and from Malta by licensed operators
• relate to an authorised activity which is lawful under the terms of Malta’s gambling laws and regulations

More crucially, however, Article 56A also states that the court shall refuse recognition or enforcement in Malta of any foreign judgment or decision deemed to meet the above criteria

The bill has accordingly come for considerable criticism overseas, with reports that thousands of claims against betting companies in Malta were going unclaimed as a result.

An investigation led by Investigate Europe described the law as “letting global gambling giants off the hook” in the face of a flood of complaints.

The bill led to considerable pressure on the European Commission to act, and it has finally done so by sending a letter of formal notice to Malta: the first step of its infringement proceedings.

The Commission’s conclusions

As it announced the launch of infringement proceedings, the European Commission insisted that Malta was failing to comply with its obligations under Regulation (EU) 1215/2012, which concerns jurisdiction and the recognition and enforcement of judgments.

Malta, it said, “failed to comply with the regulation by imposing on its courts an obligation to systematically refuse —on grounds of national public policy— the recognition and enforcement of judgments issued by courts of other EU Member States against Maltese-licensed gaming companies.”

It highlighted that the bill also discouraged foreign litigants from pursuing legal action against gambling operators in Maltese courts.

“Maltese legislation, by effectively shielding the online gaming sector from cross-border litigation, undermines the principle of mutual trust in the administration of justice within the union,” the Commission argued. “It also violates the prohibition on reviewing judgments from other member states on their substance, exceeds the limits of the public policy exception, and distorts the EU’s rules on jurisdictio.”

Malta now has two months to respond and address the shortcomings raised by the commission. In the absence of a satisfactory response, the commission may decide to escalate the matter to the next stage by issuing a reasoned opinion: a formal request to comply with EU law.

The final stage would see the issue referred to the European Court of Justice, and the Commission may recommend the imposition of fines on the offending member states.

Government defends Malta’s legal regime

As may be expected, the government defended the controversial bill and insisted that there was nothing wrong with its provisions.

In a statement, the economy ministry insisted that Article 56A “does not establish new or separate grounds for refusing recognition or enforcement of judgments beyond those set out in Regulation (EU) 1215/2012.”

“Rather, it codifies into law Malta’s long-standing public policy on online gaming matters,” it said, reiterating the stated aim of Bill 55.

The ministry added that Malta remained fully committed to “constructive dialogue” with the commission, and pledged to respond to the letter of formal notice within the 2-month deadline.

Peter Agius insists Commission should address third-party litigation funding

On the other hand, Nationalist Party MEP Peter Agius insisted that Malta needed to align with EU law to extinguish the infringement proceedings.

However, he also called on the European Commission to address what he described as “the other side of the problem:” a “jungle” of third party litigation funding (TPLF) bids which he said was spurring “doubtful” court actions on gambling losses to Malta-based gambling firms.

TPLFs are arrangements where third parties extraneous to the case agree to finance lawsuits in return for a share of any ensuing settlement or judgment, effectively using court cases as an investment.

“As I highlighted in a previous parliamentary question to the European Commission, this is a state of collapse of the internal market. The Commission should not address the issues on the online gambling sector piecemeal. Freedom of movement needs to prevail,” Agius maintained.