GamingTechLAW

€ 70M (and € 2.5 bn?) save for VLTs licensees

noreply@blogger.com (Giulio Coraggio) — Wed, 19 Jun 2013 07:00:00 +0000

The Public Court of Lazio Region cancelled the € 70 million aggregate penalties issued by the Italian gambling regulator, AAMS, against ten Italian videolottery concessionaires, but such decision might have a much higher value.

Is this court decision a € 2.5 bn save?

Italian videolottery concessionaires have been facing a long battle with the Italian gambling regulator because of the lack of connection of their machines with the servers of the regulator at the time when the regulator's network had been set up between 2005 and 2008.

Indeed, in order to ensure the proper functioning of AWPs and videolotteries operated by Italian licensed entities and the accurate calculations of taxes due, the Italian regulator set up a very sophisticated network connecting the machines to the servers of the IT provider of the regulator, Sogei so that machines could be monitored in real time and abuses/frauds could be prevented. This system represented a major innovation and it is something of which Italy is very proud which is confirmed by its implementation also for online operators.

However, the setting-up of such a sophisticated network required a very complex activity both by licensees and the regulator which led to malfunctioning/lack of service of the network. The system is now properly working, but the regulator challenged to the licensees their misconduct during the setting up phase of the network. In particular, the regulator challenged to the licensees first the aggregate penalties for € 30 M because of the delays in the installation of the machines, but such penalties have already been cancelled by the Italian Supreme Court. And now aggregate penalties for € 70 M because of the malfunctioning of the gateway allowing the monitoring of the machines by the regulator that have been cancelled by the Court of Lazio Region.

The reasoning of the court in the lasj decision has been that since a reporting system of the volume of plays was in place, therefore the State did not suffer any economic damage that could justify the penalties which therefore had been cancelled.

But the final stage of the battle between the regulator and the Italian licensees has still to come. Indeed, the Italian Accounting Court issued aggregate penalties of € 2.5 bn against Italian licensees for the lack of connection of their machines with the servers of the regulator. The point raised by the court was that the lack of connection of the machines to the servers of the regulator frustrated the investments taken by the State to set up such network aimed at properly monitoring the functioning of the machines.

The proceeding on the Appeal relating to the above mentioned decision of the Accounting Court is expected for early next year, but in the meantime it is possible to argue that such huge penalties (even if arguable) already triggered considerable damages on the operations of licensees as given the potential insolvency risk the transactions that might damage/reduce the assets of the company could be challenged.

Licensees are confident that the decision of the Public Court of Lazio Region will considerably support them in the Appeal against the decision of the Accounting Court and most of the commentators argue that the entire market would benefit from the cancellation of such penalties. This might open up new M&A and private equity opportunities targeting Italian videolottery operators which had been considerably limited because of the threat given by these potential massive penalties. In particular, a number of Italian VLT operators are controlled by private equity funds that have performed the investment several years ago and might decide to exit soon.

What is your view on the above? Feel free to contact me, Giulio Coraggio, to discuss.

Image courtesy of Flikr by Tyler Ingram

Top 5 outsourcing issues - #4 forum selection and applicable law clauses

noreply@blogger.com (Giulio Coraggio) — Mon, 17 Jun 2013 07:00:00 +0000

Implications of forum selection and applicable law clauses are often underestimated, but they become a major issue when outsourcing agreements have to be enforced. After having discussed about liability, termination and SLAs and penalty clauses, we will review the most often issues connected with such clauses.

#4 issue for outsourcing agreements - applicable law and jurisdiction

The first issue is to decide between selecting the competent court or an arbitration panel. The decision might depend on the value of the agreement as an arbitration proceeding is usually more expensive than a court proceeding, but also on the topic of the potential dispute. Indeed, an arbitration panel might be a better choice for outsourcing agreements whose lack of performance will require the review of technical issues. Indeed, an arbitration panel might be better prepared to review the potential dispute even if there are some courts such as the court of Milan (Italy) that have considerable technical skills. Also, an arbitration proceeding allows to have a final decision in a quite short timeframe and to select the language of the proceeding.

In respect to the above, it is interesting the measure recently implemented by the Italian Government to foster foreign investments that provides the exclusive jurisdiction of the courts of Milan, Rome and Naples on disputes involving foreign investors without stable seats in Italy. Such courts indeed have more experience on international disputes and will make the potential outcome of the case more predictable so increasing their level of certainty without risking that foreign companies are forced to face disputes before small courts which more rarely deal with such international matters. This advantage will be hopefully coupled with faster trials since the introduction of the compulsory prior mediation proceeding as part of the same measure mentioned above is expected to reduce the workload for courts.

As to the applicable law, each party usually insists on its own applicable law and in some cases companies accept a foreign governing law with the exception of disputes connected to the breach of intellectual property clauses where they remain stick to their own law. However, the main issue is whether the laws of the court having jurisdiction on disputes shall be selected. It is quite common that foreign courts have to decide on agreements governed by English law and in such cases an expert having knowledge of the foreign law will be appointed. The issue is though whether such disalignment between competent court and applicable law can lead to a higher level of uncertainty on the outcome of the dispute, but the matter has to be reviewed based on the peculiarities of the contract.

Finally, there might be laws (such as those of smaller or developing countries) whose precedents do not cover the most common breaches arising from an outsourcing agreement and in such circumstances usually the parties rely on the laws of England and Wales.

What is your view on the above? Please contact me, Giulio Coraggio, if you want to discuss.

Image courtesy of Flickr by Caroline

Digital signature brings Italy a step ahead

noreply@blogger.com (Giulio Coraggio) — Sun, 16 Jun 2013 19:31:00 +0000

The approval of the new technical requirements applicable to digital signatures represent a major innovation that might ease the execution of international contracts and create opportunities for providers.

Digital signature devices will be the future?

Digital signatures represent a major change in Italy since according to so called code for the digital government, they will have the same evidential value as written signatures for agreements that require such formality. And indeed if electronic documents are not going to be signed with digital signatures they will be deemed null and void provided that they fall among those documents that if in paper version need to executed in writing.

Given the fact that digital signatures replace hand-written signatures for electronic-format contract documents, very stringent technical requirements have been set out i.e. the mere name at the bottom of an email will not suffice. Such technical requirements for instance ensure the unalterability of documents and their connection with the person to whom the digital signature belongs.

This change might be beneficial for international transactions e.g. for multinational companies whose directors are often outside the country and Italy might lead other countries to implement similar tools becoming an example to follow within Europe. Moreover, they represent also an opportunity for digital signature providers also because as part of the so called digital agenda from the first of January 2013 it was prescribed that citizens shall have a digital domicile and all the communications between governmental authorities and citizens shall occur electronically.

If you want to know more about the above, feel free to contact me, Giulio Coraggio.

Image courtesy of Flickr

The year of crowdfunding for start-ups?

noreply@blogger.com (Giulio Coraggio) — Fri, 14 Jun 2013 07:11:00 +0000

Crowdfunding seems to have become one of the best venues for start-ups to raise funds according to the Crowdfunding Industry Report and the recent regulatory developments in Italy on the matter may be an interesting opportunity for venture capital funds, incubators and start-ups.

Crowdfunding started from this...

The Crowdfunding Industry Report estimated 452 online crowdfunding existing platforms that raised in 2011 $ 1.5 billion and in 2012 $ 2.8 billion while the estimates for 2013 are that over $ 6 billion will be raised. Based on the report, Kickstarter is the most popular crowdfunding platform with more than 2 million users allocating over $ 500 million to 40,000 projects but with 18,000 projects collecting $ 320 million.

In Italy, crowdfunding is still in its early stage with the regulations recently approved raising considerable interest. At the same time the tax benefits for innovative start-ups that have been approved by the end of the year and the further benefits that according to rumours should be approved quite soon have led to the enrolment of over 853 innovative start-ups in the dedicated registry at the Italian Companies' House.

Also, according to the Venture Capital Monitor report, 55 new deals in seed and start-up capital have occurred in Italy in 2012 with an increase of 28% compared to 2011 and if it is taken into account that such investments occurred before the approval by the Italian Government of the above mentioned tax benefits for innovative start-ups, year 2013 expects to be a very promising year for incubators, venture capital funds and start-ups.

We have set up a team dedicated to start-up investments across different departments that is aimed at customising our offering to the life of a these entities which cannot be subject to the same rules as multinational companies. If you want to know more about the above, feel free to contact me, Giulio Coraggio.

Image courtesy of Flickr by Manymade

Online pharmacy sanctioned for illegal sale of products

noreply@blogger.com (Giulio Coraggio) — Wed, 12 Jun 2013 07:00:00 +0000

An online pharmacy has been sanctioned with a fine of € 200,000 for unfair commercial practices connected to the sale of pharmaceutical products online.

Online pharmacies are still illegal in Italy

Indeed, up until the full implementation of the EU Directive 2011/62/EU, the online sale of pharmaceutical products is prohibited under Italian law both for over-the-counter and prescription pharmaceuticals, while the defendant was advertising the fact that the sale was 100% compliant with applicable laws leading customers to underestimate the potential risks associated with such sale.

In this respect, it is interesting to see that the practice above has been sanctioned for breach of misleading advertising and unfair commercial practices regulations, since consumers had been misled on the legality of the online sale of pharmaceuticals and the conduct might potentially endanger the health conditions of consumers to which the advertising material was addressed.

This is a very interesting decision since the competition authority, which is also the authority in charge of misleading advertising and unfair commercial practices disputes, has challenged a conduct that is normally decided by authorities regulating pharmaceutical matters. And indeed, this shows a new scope of action of advertising regulations that shall not be underestimated in assessing the potential risks of unlawful practices.

It will be interesting to see the future developments in the sector. Also, we shall watch very closely the scenario when the Italian regulator will allow the online sale of over-the-counter products. In the meantime if you want to discuss the above, feel free to contact me, Giulio Coraggio.

Image courtesy of Flickr by Cedrick Ledesma

Top 5 outsourcing issues - #3 SLAs and penalty/liquidated damages clauses

noreply@blogger.com (Giulio Coraggio) — Mon, 10 Jun 2013 07:00:00 +0000

SLAs schedules and penalty/liquidated damages clauses are usually the core of outsourcing agreements, so after having discussed about liability and termination clauses we will try to cover these provisions.

#3 outsourcing agreements issue - SLAs and penalties/liquidated damages

One of the first issues that arise in drafting an outsourcing agreement is who has to draft the service level agreements (SLAs) and the battle is between lawyers and the IT team of the supplier and of the recipient of the service to take the lead. However, my experience is that a considerable team working activity is required and lawyers need to make an effort to speak the same language as engineers since otherwise it will be difficult to reach a result that adequately protects the parties and meets the needs of the recipient of the service. And indeed for SLAs it is quite rare that is possible to rely on previously drafted agreements since they have to be drafted taking into account the peculiarities of the business of the recipient of the service including for instance some statutory or market driven levels of service. The review and the understanding (or at least a high level review and understanding) by lawyers of technical documents and a very deep knowledge of the business of the recipient of the service considerably helps on the drafting of the SLAs but this rule is valid for the drafting of the entire outsourcing agreement.

Also, for this reason it is often mentioned that outsourcing agreements are very close to joint venture arrangements as both parties work together for a common result that in most of the cases means the success for both of them and such cooperative approach starts from the negotiation of the agreement and continues for its entire term.

The above is valid when the amount of liquidated damages/penalties triggered as a consequence of the breach of SLAs is determined as well. The drafting of such clauses needs to take into account that punitive damages are prohibited under the laws of several jurisdictions including Italy. Likewise, in countries like Italy if the amount of contractually agreed liquidated damages is excessive compared to the actual damages suffered as a consequence of a breach, the value of such liquidated damages might be reduced by courts despite of the wording of the clause so vanishing the efforts of long negotiations on the matter.

On the contrary, it shall be taken into account that depending on the wording of liquidated damages/penalty clauses, they might operate as a liability cap preventing to seek for additional damages in case of breach even if adequately proven in a dispute. Therefore they might represent a risk for the recipient of the service.

Finally, the above clauses might not be effective in absence of a detailed enforcement proceeding contractually agreed e.g. the setting up of an internal committee made of representatives of both parties in charge of reviewing a potential breach and identifying the party responsible for that, ensuring that any action aimed at limiting the potential damages suffered and, if necessary, enforcing the liquidated damages is often extremely important.

All in all, SLAs and penalty/liquidated damages clauses can have a number of hidden risks which can be overcome only through a strong cooperation between all the parties involved such as managers, commercial and IT persons as well as lawyers.

What is your view on the above? Feel free to contact me, Giulio Coraggio, to discuss.

Image courtesy of Flickr by Len Matthews

Betting exchange will kill or save sportsbetting?

noreply@blogger.com (Giulio Coraggio) — Thu, 06 Jun 2013 22:48:00 +0000

As anticipated Italian betting exchange regulations have finally come into force, but the main question on which operators in the sector are questioning each other is the effect of betting exchange games on the sportsbetting market.

Betting exchange vs. sportbetting, who will win?

The coming into force of the Italian betting exchange decree is an interesting change because betting exchange is the first betting product in Italy together with bets on virtual events subject to a tax regime based on gross profits rather than turnover. Indeed, the offering of betting exchange games will be subject to a tax regime of 20% of gross profits just like casino and cash poker games compared to sportsbetting games that face a tax regime between 2% and 5% of the turnover. Indeed, for bookmakers that usually have a margin around 8% of the amount collected from players, the current tax regime obliges them to pay into taxes over 50% of their profits!

The approval of betting exchange regulations whose offering might be deemed in competition with the sportsbetting offering has therefore led to a major reaction and complaints from Italian licensed sportsbetting operators which are concerned to be considerably damaged by a type of game similar to theirs but with a more favorable tax regime. This is even more true if the additional 0.5% turnover tax for the so called customized bets or bets not included in the official AAMS schedule whose regulations are expected to be approved soon will be confirmed.

The hope is that the director general of AAMS will take the position that the current tax regime for sportsbetting is considerably damaging the sector which saw a reduction in the spending of over 20% in 2012 compared to 2011 and is fueling the black market where better odds and a broader offering are available. And as a consequence of such situation, hopefully AAMS will decide to apply the 20% gross profit regime also to the offering of sportsbetting games at least for a trial period to check the effect of such regime on the tax entries as occurred in the past with the bingo offering whose tax regime has been considerably reduced for a trial period and then such lower tax regime has become stable.

However, if such approach is not followed by AAMS the risk is that the betting exchange of offering will considerably damage the sportsbetting sector to the benefit of very few operators.

The last developments in the Italian market should support an optimistic approach. The recent launch of online slots and its success with an 80% increase in the spending in the online casino sector compared to the first quarter of 2012 should be the evidence that AAMS wants to support the growth of the Italian online market.

It will be interesting to follow the developments in the next months, but in the meantime if you want to discuss the above, feel free to contact me, Giulio Coraggio.

Image courtesy of Flickr by Aldo Cavini Benedetti

€ 800,000 fines - Time for a privacy audit?

noreply@blogger.com (Giulio Coraggio) — Tue, 04 Jun 2013 07:00:00 +0000

The Italian Data Protection Authority sanctioned two major information services companies and a telecom operator with an aggregate fine of € 800,000 for breach of orders issued against them for breach of privacy regulations.

Time to speed up privacy compliance

As part of prior audit of the Italian data protection authority, it appeared that the two information services companies had created and sold databases with details (e.g. telephone number, email address and postal address) of million of people collecting information from public phone directories. Such data had been unlawfully used for marketing purposes without having priviously provided individuals with a privacy information notice and obtained their consent to the delivery of marketing communications. Also, as to the telecom operator, despite the fact he was aware of the unlawful source of the data, it had purchased the databases and processed such data for marketing purposes.

This action from the Italian data protection authority shows a new aggressive approach on ensuring compliance with privacy regulations which has been also confirmed by the adoption of the recent regulations on data breaches.

A number of clients of us are experiencing audits from the Italian data protection authority and this is one of the reasons why we are receiving more and more requests of review of privacy compliance of companies and groups. Indeed, privacy compliance issues are often underestimated, but given the potential sanctions that include also criminal sanctions as Google recently experienced, these shall be taken in higher consideration.

Also, the coming into force of the EU General Data Protection Regulation will provide massive sanctions also against non-European entities which shall comply with European data protection laws if they offer goods or services to individuals located in Europe or monitor their behaviour.

It is a crucial time for privacy compliance matters and as usual if you want to discuss about it, feel free to contact me, Giulio Coraggio.

Image courtesy of Flickr by Rob Pongsajapan

Top 5 outsourcing issues - #2 termination clauses

noreply@blogger.com (Giulio Coraggio) — Mon, 03 Jun 2013 07:30:00 +0000

As part of this series of posts, we already covered liability clauses, but termination and the consequential migration to a different provider are crucial in outsourcing agreements in my view.

This post is not meant to cover all the relevant termination scenarios, but those that trigger to major issues in a negotiation.

A major peculiarity of Italian law is that a clause entitling a party to terminate the agreement in case of breach of any provision of the agreement (which is typical in English law contracts), would not be valid. Likewise, it would not be sufficient to list all the clauses of the agreement setting out obligations on the other party in the termination clause as events leading to the termination since also such clause would risk to be challenged. Italian case law requires that the agreement expressly lists the events/breaches triggering the termination and therefore their selection might be challenging.

Another problematic termination clause is connected to the insolvency of the counterparty. Indeed, in some countries including Italy, clauses providing for the termination in case of bankruptcy of the counterparty would be null and void. So what's the solution? My personal view to be adjusted to the peculiarities of the contract is to entitle a party to terminate the agreement on the occurrence of events that show a financial difficulty of the other party. The threshold of "difficulty" however shall be sufficiently high to avoid that the termination can be exercised only during the so called "suspicious period". Indeed, actions taken during the suspicious period might be subject to clawback so vanishing any effort.

However, the advantage of civil law countries like Italy is that our civil code provides for general rules on termination. And for instance in case of a major breach a party might request the termination of the agreement or assign a cure period for the other party to remedy to his breach on whose expiry the contract is terminated even in absence of a specific contractual provision addressing that breach. The enforcement of such termination might be more complex (unless the other party recognises the breach) as a court shall decide whether the challenged conduct led to a major breach, but this type of provisions set a major distinction between civil law and common law contracts.
But apart from termination events (that may also include, among others, the termination at will, for the expiry of the contract, for change of control etc.) an outsourcing agreement requires a very detailed migration plan. Indeed, after a long contract the services provided by the supplier might have become an essential part of a business and, in absence of a migration plan, the entity receiving the service would risk to be obliged to remain linked to the same supplier for longer than it like to as the costs and efforts of switching to a different supplier would exceed the benefits.

Also, since the migration will occur at a point when the relationship between the parties might have been impaired, it is crucial that the supplier is contractually bound with a quite detailed exit plan to perform any activity necessary for the proper handing over to the new supplier. In this respect, it might be wise also to agree a migration period enough long to make sure that it can be performed without causing major operational issues.

The above is only a brief overview of more frequent issues connected to termination clauses, but as usual I would like to understand your view on the above. For this purpose, feel free to contact me, Giulio Coraggio, or comment on this post.

Image courtesy of Flickr by Leo Reynolds

Cannot block a website for an illegal movie

noreply@blogger.com (Giulio Coraggio) — Fri, 31 May 2013 07:25:00 +0000

We had previously reported of the siezure by Italian courts of 27 websites as through such websites it was possible to download illegal copies of the movie A Monster in Paris. Now the court of Rome (Italy) held that the seizure of the website Rapidgator was not justified.

The reasoning on which the court based its decision was that the seizure of the website (i.e. the blocking of the access to the website from Italian IP addresses through the filtering of domain names and DNS) was a disproportionate measure given that only one movie could be illegally downloaded. As a consequence, the order of seizure of the website was overturned and the access to the same has to be restored.

This is an interesting decision as we do not recall precedents in which courts decided the level of breach necessary to trigger such seizure measure. Indeed, someone might argue that even 1,000 movies illegally downloadable from a website might be a very limited number compared to the entire Internet and therefore it will be interesting to see how the principle set out in this decision will be applied in the future, bearing in mind that precedents are not binding in the Italian legal system.

What is your view on the above? Feel free to contact me, Giulio Coraggio, to discuss.

Image courtesy of Flickr

The hottest regulatory topic for social gaming?

noreply@blogger.com (Giulio Coraggio) — Thu, 30 May 2013 07:00:00 +0000

We have been advising several social gaming operators on their European expansion and therefore have got to know the position on social gaming under several jurisdictions. And through such reviews, it is interesting to see that the issue that always arises as to the qualification of social gaming pertains on what can be deemed to be "monetary value".

We already covered in the past the potential liabilities arising from the re-qualification of social games in Italy, but did not focus on what is meant as monetary value. Indeed, the issue arises with reference of social games where players are requested to purchase virtual currency to be wagered on the games available on the platform. Under such scenario, in most of the cases players can only win further virtual money and are restricted from withdrawing it, purchasing items through them and transferring them to other players.

As a consequence, players can only continue playing on the platform with their virtual money. It might be argued that they paid for the initial amount of virtual money (unless this was granted for free to them), but it may be also argued that if I put a coin in a videogame in an arcade and I am so good to win some additional lifes/credits during the game, I would face the same scenario of those how win virtual currency!

Indeed, I paid to play and I can only get the possibility to play some more. I remember a comment from a representative of the UK gambling commission at the last EiG where he stressed that their position at that time was to consider the parameter for the qualification of a game as "social" rather than gambling if players were not able to get the money out of the game.

This might be a quite strong position, but if the money cannot even be exchanged for anything or transferred to anyone, is it really possible to argue that they have any value in the real world?

What is your view on the above? Feel free to contact me, Giulio Coraggio, to discuss.

Image courtesy of Flickr by Ivan Walsh

Call for online copyright protection

noreply@blogger.com (Giulio Coraggio) — Wed, 29 May 2013 07:08:00 +0000

You may recall that over 2 years ago the Italian Communications Authority was meant to approve regulations on the protection of copyright over the Internet resembling the US DMCA. However, at that time no action had been taken, but the chairman of the Italian competition authority has now sent a call-to-action notification to the Parliament that might have an impact on the future of copyright on the Internet in Italy.

Interestingly the authority stressed the need to protect editors' works on the Internet also in the light of, among others, new tools such as social networks and news aggregators since the information generated by editors is exploited by third parties without that the former are able - according to the authority - to share the value gained through such information which might become an disincentive to the creation of such works.

On the basis of the above, the authority outlined that the possible options are

either to foster the cooperation between editors and operators exploiting such contents following the example of the agreement reached in France where Google contributed with EUR 60 million to the creation of a fund aimed at supporting the digital transition of the press and innovative investments in the sector;

or - on the basis of the recent German example - to adopt a law providing for a right connected to copyright for editors on the usage on their contents on the Internet for commercial purposes.

The authority is of the opinion that a new law addressing the matter and recognising a participation of editors to the benefits deriving from the exploitation of their contents is a better solution than the one-off contribution adopted in France. However, the authority itself recognises that such type of approach might lead to negative consequences for both users in terms of quality of services received and cost of access to them given that companies will try to transfer costs on them, but also for editors themselves as given the cost associated to the exploitation of their contents they might gain a lower level of visibility.

The letter of the authority does not contain any actual proposal for regulating the sector, but only fosters the Parliament to address the matter also escalating it at the international level. Indeed, a measure that would not be followed by similar actions in other jurisdictions might discriminate rather than support Italian editors.

Indeed, the matter is very complex and it is arguable what the real position of editors is. Indeed, the consequences of such type of measure in terms of lack of advertising/visibility of editors are uncertain. Additionally, if the contribution was recognised only to professional editors, it is possible to argue that such conduct might be deemed discriminatory towards any individual that creates contents and publishes them online.

It would be interesting to know your view on that, please comment this post or send an email to me, Giulio Coraggio.

Image courtesy of Flickr by gaelx

Top 5 outsourcing issues - #1 Liability clauses

noreply@blogger.com (Giulio Coraggio) — Mon, 27 May 2013 08:50:00 +0000

In the negotiation of outsourcing agreements, liability clauses are - together with SLAs - those that usually lead to most extensive discussions/fights with lawyers and managers struggling to find a solution able to make both parties "happy". Based on my experience, these are among the most common scenarios.

In common law countries, liability clauses usually start off with a provision excluding any liability for indirect and special damages, while in civil law countries like Italy, liability arises only for damages that are a direct foreseeable consequence of the contractual breach and therefore this kind of provisions have a more limited scope even if it is quite common to exclude any liability for loss of profits. Likewise, in common law countries liability for tort is usually excluded, but such exclusion would be at least arguable in civil law countries where a liability for tort cannot be contractually excluded.

But the most tricky part of liability clauses is to set a liability cap which usually is either a fixed amount or a percentage of the commissions paid during the last year(s)/six months in which the event leading to the contractual breach took place. However, it also happened to me that some operators requested to link the payment of contractual damages to the payment by the insurance company whose policy covers the damages arising out of the agreement which creates some issues since insurance companies are unlikely to link their policy to a contract and to identify a contractual counterparty as direct beneficiary of the policy.

Furthermore, it might lead to discussions the liability for governmental fines/penalties deriving from the service provider's conduct. Indeed, shall the provider bear the relative cost at the time when it is challenged or take control of the dispute and refund the price of the fine/penalty only after having received evidence of the prior payment by the counterparty?

Finally, liability clauses often clash against statutory restrictions that for instance in agreements governed by Italian law relate to limitations of liability for gross negligence and wilful misconduct that are null and void and formalities for the approval of liability clauses in case of standard agreements.

The above list is not meant to be exhaustive and there is no right approach but the solution shall be identified based on the peculiaties of the agreement. In this small series of blog posts, I will try to cover the most common issues in drafting outsourcing agreements, but in the meantime if you want to discuss the above, feel free to contact me, Giulio Coraggio.

Outsourcing and cloud projects easier with privacy binding corporate rules for processors

noreply@blogger.com (Giulio Coraggio) — Thu, 23 May 2013 07:54:00 +0000

Outsourcing agreements and cloud projects largely require the transfer of personal data from the outsourcee that processes them on behalf of the company receiving the outsourced service to the outsourcee's group companies.

Such practice creates major privacy issues if some of these group companies are located outside of the European Union, but these issues can now be sorted through the so called processors binding corporate rules (BCRs) that allow the free flow of personal data within the outsourcee's group. The processor BCRs have been approved in 2012 by the European privacy consultancy body, the so called Article 29 Working Party to waive any regulatory restictions in the flow of that within the outsourcee's group which is functional to the delivery of the service to their customer.

The approach to be followed according to the processor BCRs is that the group member contracting with the company receiving the service will be appointed as data processor and its group entities will act as sub-processors. However, in an explanatory document just issued by the above mentioned Article 29 Working Party, it clarified, among others, that:

the free flow of data within the service provider's group (i.e. the outsourcee's group) will require the prior consent from the data controller (the entity receiving the service) which can be however dealt through a blanket consent in the contract between the parties;
the processor BCRs cannot cover transfers to entities that are not part of the processor's group. Such transfer shall be covered by adequate contractual guarantees and fall under a different tool for data transfers provided by EU regulations;
the BCRs shall:

be complied with by all the members of the data processor's group to which the personal data are transferred;
entitle data subjects (i.e. the individuals whose data are processed as part of the outsourcing or cloud project) to bring a direct claim for their breach against the data controller (i.e. the entity receiving the outsourced/cloud service) and the data processor (i.e. the ourtsourcee/service provider);
entitle data controllers to bring claims against any member of the data processor's group for breach of the BCRs; and
be attached to the outsourcing/cloud services agreement between the data controller and the data processor.

The explanatory document referred above does not fully clarify whether the approval of the data protection authority of the country where the data controller is based operates as an additional condition for the implementation of the BCRs. Indeed, this would increase the complexity of this tool.

The BCRs for processors shall be seen as a very positive news for both entities outsourcing services or relying on cloud technologies and service providers as it might make their life easier with not too much efforts. As usual if you want more details on the above or want to discuss their implementation in your business, feel free to contact me, Giulio Coraggio.

Mobile payment in Italy, almost € 1 bn of volume!

noreply@blogger.com (Giulio Coraggio) — Tue, 21 May 2013 09:13:00 +0000

The University of Milan published a report on the status of mobile payment in Italy in 2012 which shows a potential growth that might lead to a volume of mobile payment transactions of over € 10 bn in 2016.

Indeed, the current scenario of the mobile payment market reports transactions for € 900 million in 2012 driven by the growth of mobile commerce which increased by 60% even if the largest volume of transactions derives from the purchase of digital contents with € 470 million. Also the usage of NFC phones has generated interested data with over 2.5 million users and almost 30,000 POS which are expected to become 6 million users and 170,000 POS by the end of 2013.

This growth will be fostered by the recent law provisions, the so called Decree Sviluppo-bis, which set forth the obligation:

for public entities and entities controlled by the State to receive payments through mobile technologies and
for any entity selling products and services to accept payments through credit card from 2014 with the possibility for the competent Ministries to extend such obligation to payments through mobile devices.

This growth was also due to the increase of number of smartphones that are now held by more than 50% of Italian users and indeed Italy is one of the European countries with the highest mobile penetration per citizens.

However,as already mentioned, there are some regulatory restrictions but these restrictions might be removed waiving any regulatory limit to the usage of the credit on the phone SIM card for payments but also implementing measures aimed at creating incentives for payments via mobile.

All these factors create very interesting expectations for the future of the Italian mobile payment sector and as usual feel free to contact me, Giulio Coraggio, if you want to discuss the potential opportunities and regulatory restrictions.

Internet and Advertising Consultation

noreply@blogger.com (Giulio Coraggio) — Mon, 20 May 2013 07:30:00 +0000

The Italian Communications Authority has just launched a consultation on Internet services and online advertising with the purpose of collecting opinions on the future of the Internet from users and operators.

The topics for which opinions can be submitted include:

fixed and movable means for the accessing to the webs (e.g. smartphones and tablets);
operation systems and browsers;
search engines and social networks;
information services on the web, online newspaper and radio and TV companies websites and blogs;
distribution and payment platforms;
online audience detection systems;
intermediary online advertising platforms and additional collectors of online advertising.

Opinions shall be submitted by the 1st of July 2013 via email, but can be also twitted using the hashtag #consultagcom.

This might be an interesting opportunity for companies that want to bring the attention of the Italian Communications Authority on issues relevant for their business. In this respect, if you want to discuss this matter, feel free to contact me, Giulio Coraggio.

Is tax reduction the best tool against the black market?

noreply@blogger.com (Giulio Coraggio) — Fri, 17 May 2013 12:09:00 +0000

The Italian gambling authority, AAMS, published the data on the Italian online gaming market for the first quarter of 2013 which show a minor reduction of spending of 0.2% compared to the same period of 2012, but what looks very interesting is that almost 50% of the spending in the market is generated by casino games and cash poker games. And casino games and cash poker games are the sole games currently subject to a gross profit tax regime.

In particular, casino games saw a huge boost because of the launch of online slots in December 2012 with an increase of the spending of 84.7% which according to the AAMS report was due to the reduction of the Italian casino black market whose spending in 2012 was assessed to be around € 280 million as opposed to € 147 million of the online licensed casino market. However, if a contraction of the black market has really occurred this is also due to the tax regime implemented for online slots which allowed operators to offer the same payout as the one available on .COM platforms.

On the contrary, in relation to the sportsbetting sector a spending increase of 29.1% has occurred compared to Q1 2013 but this was due to a payout of 94.9% occurred in January 2012. And this confirms the inefficiency of a turnover based tax regime. Indeed, it is likely that operators in January 2012 did not gain any profit since they had to pay turnover taxes between 2% and 5% regardless on whether or not they had achieved any margin. As a consequence, odds offered by unlicensed operators are often more attractive since the urcentainty of a turnover based tax regime to which licensed operators are subject leads them to offer lower odds to preserve their margins.

The recent approval of betting exchange regulations whose offering will be subject to a 20% gross profit tax might foster AAMS to expand the same regime to fixed odd sportsbetting games also given the number of complaints that such different tax regime between the two products is generating, but in the meantime operators shall ensure that an additional 0.5% gross profit tax is not requested for bets and events not included in the official AAMS schedule as prescribed by the relevant draft regulations.

Only a gross profit tax regime might considerably limit the black market and the hope is that the good example provided by Spaniards with a gross profit tax regime across all the products which - together with other measures - efficiently reduced the black market will be shortly followed by the Italian gambling regulator.

As usual if you want to discuss the above, feel free to contact me, Giulio Coraggio.

Facebook page manager convicted

noreply@blogger.com (Giulio Coraggio) — Wed, 15 May 2013 07:00:00 +0000

After the recent conviction of a blogger, the Court of Rome (Italy) has now convicted to 9 months of imprisonment a Facebook page manager for the comments posted by its users because of the crime of "instigation and encouragement to commit crimes".

The case related to a Facebook page against illegal billboards where users encouraged to take action against them. Because of such comments, a number of vandalism activities had taken place in Rome where over a hundred billboards had been spray blinded and such actions had given rise to a criminal claim against the manager of the Facebook page.

As occurred in the previous case, the defendant had tried to allege that he had no control over the messages published but the court held that given the contents of the message he could not have ignored their criminal relevance and therefore should have taken action against them.

It is interesting to see that both decisions do not mention the non-monitoring and liability exemption for hosting providers principles set forth in the EU E-Commerce Directive. Indeed, based on the principles of the E-Commerce Directive as implemented in Italy, hosting providers which might include both blogger and Facebook page managers hosting comments from users are not liable of the contents published by their users and are not obliged to remove them unless they receive a court order.

These recent decisions create a situation of uncertainty that hopefully higher courts will terminate, but in the meantime if you want to discuss the above feel free to contact me, Giulio Coraggio.

Tax permanent extablishment for e-commerce operators: a major risk!

noreply@blogger.com (Giulio Coraggio) — Tue, 14 May 2013 07:46:00 +0000

Here is the link to an interesting article from our DLA Piper tax partner on the potential risks of a tax permanent establishment for e-commerce operators, including online gaming operators.

Italian gambling data and black market

noreply@blogger.com (Giulio Coraggio) — Mon, 13 May 2013 19:31:00 +0000

Blogger convicted for user's defamatory comments

noreply@blogger.com (Giulio Coraggio) — Fri, 10 May 2013 05:39:00 +0000

The court of Varese (Italy) held that a blogger was liable of the defamation crime because of the comments published by some of her users on a forum available on her blog since as administrator of the blog she had the "availability" of the website which triggered a liability for both the contents published by her and by third parties.

This decision will lead to several discussions as you may remember that the Italian Court of Cassation (i.e. our Supreme Court) had taken a completely different view in the past. And it is interesting that the court held the defendant liable regardless of whether or not the contents published on the site had been filtered (i.e. had to be pre-apporoved by the administrator) or there was no prior filtering to their publication.

It is also interesting that the court did not qualify the blog/forum as press material which under Italian law triggers an editor's liability for all published contents, but as a "tool of communication among people" with the aggaviating circumstance of the occurance of the communication through advertising means.

Finally it is good to stress that according to the court decision, the presence of Ts&Cs or regulations of the site which prescribed the users' exclusive liability for their comments was not relevant since such type of agreements do not exclude criminal liabilities i.e. the authors of the comments could be deemed contributory liable for the crime, but their liability operated in addition to the administrator's liability.

We will see the reactions to this decision but in the meantime if you want to discuss the above, feel free to contact me, Giulio Coraggio.

Image courtesy of Flickr by Niecieden

Betting exchange regulations into force!

noreply@blogger.com (Giulio Coraggio) — Thu, 09 May 2013 22:52:00 +0000

The Italian betting exchange regulations have been just published on the Official Gazette and will soon come into force. But the question is what will be the effect of betting exchange games in the Italian market?

Betting exchange regulations provide a platform certification and approval process along the lines of what already prescribed for casino and card games. Also, the maximum winning will be € 10,000 and operators will be able to offer both events and types of odds included in AAMS official schedule and those customized events and types of odds submitted by them whose offering will soon be possible for fixed odd sportsbetting games.

However, as occurred with the coming into force of bets on virtual events, the favourable tax regime of betting exchange games which will be 20% of gross profits (i.e. of the operator's commission that cannot exceed 10% of the amount gambled) creates concerns on the potential negative effect that these games might have on the sportsbetting market. Indeed, the sportsbetting sector will soon see a process of liberalization which might partially reduce the loss suffered in 2012, but its tax regime based on turnover rather than on gross profits might render the betting exchange offering more attractive for players.

Additionally, according to the published version of the decree, it appears that operators will not be able to team up in networks in the betting exchange offering and therefore a type of game which was already likely to be offered by very few operators might end up having a single operator controlling the entire market even if the international liquidity sharing will not be allowed.

Given the above it will be interesting to see the reaction from sportsbetting operators to the coming into force of betting exchange regulations. And as usual, if you want to discuss about the above, feel free to contact me, Giulio Coraggio.

Gambling advertising of online casino operator challenged

noreply@blogger.com (Giulio Coraggio) — Fri, 03 May 2013 12:28:00 +0000

The Italian Advertising Self-Regulatory Court deemed the TV ad of a major remote gaming licensed casino operator in breach of the recently introduced provisions of the Advertising Self-Regulatory Code on gambling advertising.

The TV ad concerned the recently launched online slots showing a player gambling during the night with his PC and all of sudden gaining a major winning followed by a rain of golden coins.

The Monitoring Committee first and the Court of the Institute of Advertising Self-Regulation then held that the ad was in breach of the provisions against gambling advertising of the Advertising Code since it was creating expectations of easy winnings pushing players to underestimate the gambling addiction risks. Also, according to the court, the fact that the ad stressed the possibility to immediately withdraw the winning was encouraging players to gamble in order to sort financial issues. Finally, the presence of responsible gambling statements was not considered per se by the court as a sufficient tool to avoid the breach.

This is a very interesting decision as the new gambling advertising regulations had never been tested before. However, it may be argued that if a casino operator offers a major jackpot it should be able to advertise it. Indeed, it is not clear in the decision whether the fact itself of advertising a potential winning of a very large amount of money may be deemed in breach of advertising regulations. And if this approach is followed in subsequent decisions it might be argued that such decisions are in breach of the general principle of freedom to perform business since advertising is an essential part of a business.

What is your view on this decision? Feel free to contact me, Giulio Coraggio, to discuss.

Nickname theft is a crime

noreply@blogger.com (Giulio Coraggio) — Wed, 01 May 2013 07:54:00 +0000

The Italian Supreme Court convicted for the crime of identity theft a person that had created on an erotic chat a nickname with the initials of her former employer also providing her mobile number.

The defendant had argued that the crime did not arise because she had not pretended to be the claimant. Indeed, in the past the court had held that an identity theft occurs only when a person creates an email account with the personal details of another person misleading third parties on his identity.

However, in this last decision the court also held that the creation of the nickname referring to another person triggered the crime of identity theft since the crime arises "also when it is given to another person either a false name or a false status or a quality from which applicable laws trigger some legal consequences, being qualified as a "name" not only the first name but also any identity feature". And, according to the court, nicknames to be used for communications on the Internet fall among identity features as they grant a virtual identity which is able to lead to consequences in the real life.

This is a very interesting decision since if a nickname with the mere initials of a person can trigger the crime of identity theft its scope appears very broad. However, the decision of the court might have been affected by the fact that the nickname was provided together with the person's mobile number.

Finally, it is likely that this dispute will face also civil claims for privacy breach which on the basis of the reasoning of the Supreme Court would be triggered not only by the disclosure of the mobile number but also by the usage of the nickname which even if created by the defendant might be deemed as a personal data according to the reasoning of the court.

What is your view on the above? Feel free to contact me, Giulio Coraggio, if you want to discuss.

Ryanair sanctioned for charging credit card fees

noreply@blogger.com (Giulio Coraggio) — Tue, 30 Apr 2013 07:45:00 +0000

Ryanair has been sanctioned to the payment of an € 400K fine as their advertised flight fares were not inclusive of an additional cost for the usage of credit cards whose charging has been in any case deemed in breach of applicable regulations.

The Italian competition authority which has jurisdiction also on misleading advertising and unfair commercial practices had held in 2011 that, among others, the conduct undertaken by Ryanair in charging an "additional admin fee" for payments via credit card was in breach of Italian law provisions which prohibits advertising practices concerning flight fares referring to prices net of expenses, taxes and additional costs that are not clearly mentioned in the offer.

Subsequently, in 2012 the authority held that Ryanair had continued that challenged conduct but the company undertook to comply with the authority's decision by the 1st of December 2012. However, the authority has now reached the conclusion that Ryanair had not complied yet with its decision in the period between the 1st of December 2012 and the 2nd of February 2013 through the charging of a 2% "credit card tax" that was not included in the advertised price.

The authority in its decision referred to Italian provisions implementing the EU Payment Services Directive according to which "the beneficiary [of the payment] cannot charge expenses to the payer for the usage of a specific payment means". Therefore the position of the authority is that it is not possible to charge any fee for the usage of payment means. On the contrary it is possible to apply a discount in case of usage of a specific payment means.

On the basis of the above, as of the 2nd of February 2013 Ryanair started advertising a price inclusive of the fees for payments through credit card, but referring to a 2% discount in case of payments through debit card. The new approach followed by Ryanair has been deemed by the authority compliant with applicable laws but they decided to sanction the company for their prior lack of compliance with its order.

This decision creates a precedent which is applicable not only for any e-commerce operator (including for instance gambling operators) but also in relation to any advertised business as we mentioned in a recent post concerning franchising arrangements. The price inclusive of any potential cost shall be disclosed to consumers from the first contact with them through the advertising material and no fees can be charged for the usage of payment tools.

We will see whether this approach will be confirmed by subsequent decisions, but in the meantime if you want to discuss the above feel free to contact me, Giulio Coraggio.