There needs to be regulation of litigation financing firms to curb a flood of player reimbursement claims in Austria and Germany against offshore licensed operators, lawyers said on a panel at SiGMA Europe.
Operators licensed in Malta and other jurisdictions have faced an avalanche of reimbursement claims since a court ruling in the middle of last year that said that if an operator does not have a license in Austria, the wagering contract with the player is voidable.
Furthermore, these claims have been extended to company directors and even former directors.
As a result many operators have chosen to exit the market. For example, bet-at-home pulled out last October after making a EUR 24.6 million to cover increasing claims.
The lawyers on the panel discussed whether the ruling had been a miscarriage of justice for the operators concerned.
Rise of litigation financing
Christoph Leitgeb, a partner with DSC, said the court decision had helped to create an industry of litigation financing companies that were funding the player claims and providing legal support.
“They established a very successful business model out of player claims and even in the past 12 months we have seen newly established funding companies which want to benefit from this business model,” he said.
Operators have established differing strategies to handle the claims, with some refusing to pay out following the final judgement, which has triggered enforcement action both in Austria and abroad.
However, Davinia Cutajar, a partner with WH Partners, said that to date there has been no final judgement as to whether the judgements are enforceable in Malta.
In theory, under Austrian procedural law, these findings can be appealed, though Nicholas Aquilina, a partner at BRANDL TALOS said the operators are getting short shrift from the Austrian courts.
Under procedural law, there should be oral hearings, with the first held just to discuss the following steps in the case. However, Aquilina said he had cases summarily decided by judges in “two, three or four minutes.”
European Commission case
“Obviously, that is not in line with Austrian civil procedural law and can be raised in an appeals court. However, the second instance courts are reluctant to consider procedural failures and confirm in most cases the first instance judgement.”
As a result, Aquilina said the situation has now been put before the European Commission, where the case is still pending.
He also said third-party litigators are at the heart of the problem and are advertising heavily in Austria on social media and even through leaflets sent to post boxes.
“There is talk about regulation that is primarily about having certain caps about what a third party litigation company can pay,” he said. “Also transparency. We often don’t know who is funding a claim. That is a major requirement being asked for.”
This regulation is also being pushed by some German MEPs and may gain some momentum.
No short-term fix
Christian Rapani, a partner with Rapani Law, said in the short-term the implementation of new regulation could fan the flames of the problem as the third-party litigators push to put in claims before new rules apply.
“Mid-to-long term, I expect a significant consolidation as not all will be able to meet the new standards.”
Either way, the panelists agreed there is no short-term solution to the problem, with player claims to remain an issue.
As a result, operators need to evaluate the best strategy to tackle these claims and incorporate this into their business model to ensure they are handled as efficiently as possible.