and has been automatically translated.
An Austrian player must reimburse a Maltese online casino for winnings already received because the casino does not have a license in Austria. This was the final decision of the Austrian Supreme Court (OGH) (Ref. 8 Ob 21/24g). Without a license, gambling contracts are absolutely null and void, which is why they must be reversed in both directions.
Previously, it was only made clear in Austria that players could reclaim losses suffered by unauthorized gambling providers. If players could reclaim their illegal losses but keep their illegal winnings, participation in illegal games would be risk-free. According to the Supreme Court, this would make participation in illegal gambling all the more attractive and would pose a risk of addiction. It refers to the reversal provision in Section 877 ABGB: “Anyone who demands the rescission of a contract for lack of consent must, on the other hand, also return everything he has received from such a contract for his benefit.”
“The possibility for the organizers to refuse to pay out the promised winnings or to reclaim what has already been paid deprives the players of the prospect of being able to keep the hoped-for winnings,” writes the Senate of Judges, “As soon as this becomes generally known among the players, the undesirable business model as a whole is thus deprived of its basis.” Whether the casino knows that the games are considered illegal in Austria is irrelevant: “In view of the regulatory purpose of the Austrian Gaming Act, their knowledge or negligent ignorance of the illegality of their offer is irrelevant.”
This is because the purpose of the Austrian Gaming Act is not only to protect players, but also to generate as much revenue as possible for the state and “to prevent the criminality associated with illegal gambling. (…) an essential regulatory purpose of the Gaming Act (is) to be seen in the fight against money laundering and terrorist financing.”
The enclosed monopoly
Austria has a monopoly on gambling; the Republic has only granted a single license for online gambling (to Österreichische Lotterien GmbH, a subsidiary of Casinos Austria AG). Nevertheless, several foreign providers advertise their online games of chance in Austrian media, pay taxes on their Austrian gambling revenues to the Republic of Austria and refer to licenses from their country of domicile, often Malta.
Nevertheless, according to the established case law of the Austrian Supreme Court, these online games of chance are illegal in Austria and the underlying contracts are absolutely void pursuant to Section 879 of the Austrian Civil Code (ABGB) (this does not apply to sports betting). Players can therefore reclaim their losses (winnings less stakes). Thousands of Austrians have filed such claims, an average of five per day. The limitation period in Austria is 30 years, not just three years as in Germany, meaning that almost the entire era of online gambling can be brought before the courts.
In the case now decided by the Supreme Court, the player initially sued the Maltese provider for repayment of alleged losses. The defendant gambling provider responded with a counterclaim: the player had actually deposited EUR 21,928 between May 22, 2020 and July 27, 2020 and received EUR 29,090.71, i.e. made a profit of EUR 7,152.71. As the player claimed that the underlying gambling contract was void, she had to return her winnings. The Austrian withdrew her complaint, but the ball was already rolling.
Player must return winnings
In the first instance, she was able to defend the claim, but the second instance ruled in favor of the casino. The woman appealed to the Supreme Court, which confirmed that the player must return her winnings. Plus interest and legal costs. The casino’s action is therefore not an abuse of law. As the Supreme Court is a supreme court, this means: rien ne va plus.
It will be of little consolation to the Austrian player who lost before the Supreme Court that she saved herself a small part of the sum due to an accounting error by the casino lawyer. The lawyer submitted the invoice for his services to the court with 20 percent Austrian VAT. However, as he was working for a Maltese company, he should have charged the (lower) Maltese VAT, explained it and backed up the tax rate with documents. Because he did not do this, the Supreme Court did not award the casino any compensation for the VAT on the legal fees.
The consequences
The effects of the decision are only partially clear. It certainly strengthens the market position of the only indisputably legal provider, Austrian Lotteries, which also offers roulette, blackjack, poker and other games of chance online. This is because Austrian gamblers can keep any winnings there.
It is rather unlikely that foreign online casinos will now sue non-lucrative customers throughout Austria. After all, the providers want to keep the players happy so that they come back and possibly lose more money. It is not likely, but also not inconceivable, that the Maltese casinos will organize themselves in order to have to give back less: If a provider is sued by an Austrian for repayment of their losses, the other providers could check whether the plaintiff has made any winnings with them and reclaim them if necessary. This could deter some players from taking legal action themselves.
The interaction with insolvency law is more significant. Not all online casinos are successful in the long term; if a company becomes insolvent, the management (or the bankruptcy trustee) is even obliged to collect as many claims as possible. In such cases, Austrian gamblers are more likely to be required to repay the money back to 1994, plus interest. Even providers that have already been liquidated could be revived in order to get money out of Austria and to pay back bankruptcy creditors who have been short-changed.
Conflict with EU law
It is disputed whether Austria’s (and Germany’s) refusal to recognize Maltese gambling licenses is permissible. The EU treaties guarantee the freedom to provide services in Article 56 TFEU; companies should be able to offer their services across borders without having to overcome different licensing hurdles in each country. Despite complaints from those affected, the EU Commission has so far done nothing. So last year, a Maltese court appealed to the European Court of Justice (ECJ) to clarify whether the German ban on online gambling violates the freedom to provide services (case no. C-440/23). The proceedings are pending but have been suspended.
Some providers comply with the Austrian rulings, others do not. Since 2023, it has been particularly difficult to enforce them in Malta. Since then, the country’s gambling law has stipulated that such foreign judgments against legal providers in Malta are not to be recognized or enforced. It is disputed whether this provision violates EU law, which generally provides for the mutual recognition of court judgments. The EU Commission is investigating.
The new situation in Germany
The legal situation in Germany differs from that in Austria in several relevant respects. What both countries have in common is that they have never recognized or had to recognize a contradiction between their gambling regulations and the freedom to provide services under EU law. One of the legal differences is that the statute of limitations in Germany is significantly shorter at three years (possibly ten in certain cases) than the Austrian statute of limitations of 30 years.
In Austria, the Federal Gambling Act only provides for a single, nationwide license. In Germany, this is not regulated by law, but by a state treaty between the federal states, the State Treaty on Gambling. This was revised in mid-2021. While online gambling was previously banned throughout the country except in Schleswig-Holstein, all German states have since been able to issue licenses. There is currently one license for an online casino (Bavarian State Lottery and Casino Administration), five for online poker (all from Malta) and numerous for virtual slot machines (companies from Malta, Germany and one from Austria).
More than three years have passed since this fundamental change, so there are unlikely to be any new cases under the old legal situation. In the meantime, Germans have numerous legal opportunities to gamble away their euros – and they do not get back any legal losses. Instead, they are allowed to keep any winnings (or gamble them away again), tax-free.
The German legal situation regarding illegal gambling
Only those who are determined to enter an illegal online casino can still hope to successfully sue for reimbursement of their losses in the German courts. (Whether they then manage to collect the judgment is another matter). But watch out! This does not necessarily apply to all German courts.
The civil law provisions relating to the nullity of contracts and, where applicable, their rescission also differ between Austria and Germany, as does the case law. In Germany, this is also influenced by standards and decisions that do not exist in Austria (for example, the German Act to Combat Illegal Employment and the diesel scandal cases). German law punishes participation in illegal gambling under criminal law (Section 285 of the German Criminal Code) if it is intentional; in Austria, on the other hand, only commercial participation is relevant under criminal law (Section 168 (2) of the Austrian Criminal Code), and even then an administrative criminal law provision in the Gambling Act expressly takes precedence over criminal law.
In both civil law systems, void contracts open up the possibility of rescission. However, unlike in Austria, there is a fundamental exception in Germany: if the party making the payment knew (or should have known) that it had no legal basis, it cannot reclaim its payment. Nor can he reclaim his payment if it was illegal or immoral(Section 817 BGB sentence 2). This, one might think, would make the claims of German players impossible, as Section 285 of the German Criminal Code criminalizes participation in illegal gambling. And illegal payments are not allowed to be reclaimed under enrichment law.
Giessen Regional Court triggers series of lawsuits
Nevertheless, the Regional Court (LG) of Giessen awarded a claim against an online gambling provider to a plaintiff at the beginning of 2021 (Ref. 4 O 84/20). Although the court found that the contract between the player and the online casino was void, the judge expressly did not apply Section 817 sentence 2 of the German Civil Code. The purpose of the State Treaty on Gambling 2011 was to protect players; refusing to reclaim gambled deposits due to criminal activity on the part of the player undermined this protection. Therefore, the provision in the BGB should be removed.
The Munich Regional Court I, which two months later still used the traditional case law (case no. 8 O 16058/20), took a different view: It applied section 817 BGB sentence 2 and denied the player compensation. Because he had gambled illegally, he was not entitled to claim anything back. And should this standard not be applicable, the reclaiming of the loss would still be ruled out, namely as a breach of good faith (Section 242 BGB), especially as the player had acted on his own initiative.
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However, the Giessen decision set a precedent, and several German courts subsequently ordered online gambling providers to reimburse gambling losses. This line of jurisprudence followed the established case law of the Federal Court of Justice (BGH) in illegal employment cases prior to 2014. Under German law, such contracts for work and services that are intended to evade VAT are void in their entirety (whereas in Austria, only the part relating to tax evasion is void). Nevertheless, the BGH allowed enrichment law claims by undeclared work contract partners by declaring section 817 BGB sentence 2 inapplicable in order to avoid injustice.
However, the BGH changed its line of case law in 2014: Since then (case no. VII ZR 241/13), the BGH has recognized the provision in the BGB, meaning that neither the undeclared worker nor their client can assert claims. According to the BGH, this is the only way to achieve the purpose of the Act to Combat Illegal Employment. Applied to illegal online gambling, this would mean that the casino could, in principle, refuse to make repayments with reference to the illegal gambling. (This BGH ruling is virtually the opposite of the current OGH ruling, according to which both parties can insist on reversal). The Gießen Regional Court (and the courts following it) are unlikely to have taken this case law into account in 2021.
Giessen Regional Court reverses
In 2022, the BGH issued another decision that may be relevant here (case no. XI ZR 515/21): If a contract violates a prohibition law, this generally only leads to the nullity of the legal transaction if the prohibition is directed against both parties to the contract. However, the Interstate Treaty on Gambling is a unilateral prohibition. Only if a unilateral prohibition could not be given effect through administrative or criminal law measures would it exceptionally render the prohibited contract null and void.
The Regional Court of Giessen also agreed with this in April 2023: “It is precisely not the purpose of the State Treaty on Gambling 2011 to generally protect players from the risk of loss,” it said (case no. 5 O 189/51), “otherwise no form of gambling should be permitted.” After all, the player is at risk of financial loss with every game of chance, regardless of its legality. The online ban could have been made effective through penalties, so it was not necessary to declare the gambling contracts concluded in violation of the ban null and void. As the contract thus remained valid, the Hessian player was unable to request a reversal under the law of unjust enrichment and was left with his losses. Just like his colleague at Munich Regional Court I two years earlier, but with a completely different reasoning.
Braunschweig Higher Regional Court takes third approach
Since 2023, the Braunschweig Higher Regional Court (OLG) (case no. 9 U 3/22) and several other OLGs in its slipstream have argued differently. They are guided by the BGH’s 2014 ruling on illegal employment, but not by its 2022 ruling on nullity. In other words, although they classify the gambling contracts as void, they no longer categorically exclude the exception from rescission. The defendant gambling provider can therefore theoretically argue that the player has committed a criminal offense and thus forfeited their right to a refund (Section 817 BGB sentence 2).
Theoretically. In practice, this group of Higher Regional Courts refers to case law according to which the exclusion of rescission demanded with reference to the criminal offense of gambling only applies if the player knew that his illegal actions were prohibited or at least recklessly ignored this fact. (This does not apply to immoral actions, which are not the issue here).
According to the Higher Regional Court of Braunschweig, “the existence of the most diverse prohibition laws cannot be assumed to be generally known without further ado”. Therefore, a casino that invokes the exception provision must prove that the player was aware of the prohibition (or that he recklessly ignored the information). The fact that the player has accepted the obligation to inform himself about the legal situation in the General Terms and Conditions but has not complied with this is not such recklessness.
The casinos did not meet this burden of proof in the proceedings known to the editors. As a result, the exclusion of the player’s claim to enrichment did not apply after all, and the gambling providers were once again ordered by the OLGs to reimburse the losses to the respective plaintiffs.
Two lawyers, three opinions
The Higher Regional Court of Hamm agrees with this (Ref. 21 U 116/21) and also mentions an opinion expressed in the literature according to which pathological gambling addiction could exclude the player’s culpability; without the player’s culpability, the casino cannot invoke the exclusion of restitution due to criminal conduct. This would mean that the casinos would not even be able to prove that their customer was aware of the wrongdoing if he was not culpable. However, the OLG does not say whether this legal opinion is correct, and according to BGH case law, gambling addiction only reduces culpability in extreme cases.
More succinctly, the Higher Regional Court of Karlsruhe (Ref. 14 U 256/21) argued in the same way as the Higher Regional Court of Braunschweig and granted the player compensation. The internet casino had to pay back the gambling losses. The judges also pointed out that the gambling provider itself claimed that its offer was legal. This was not the case, but if the casino’s lawyers wrongly assumed that it was legal, the casino could not assume that the player should have known that his participation in the gambling behavior was unlawful. Consequently, the casino could not invoke the BGB provision, which only applies if the player has intentionally committed a criminal offense.
The Bamberg Higher Regional Court also ruled in favour of the plaintiff player (case no. 10 U 22/23 e), but recognized a further legal basis for the player’s repayment claim: anyone who culpably violates a protective law must compensate for the resulting damage (section 823 paragraph 2 BGB). The protective law in this case is Section 284 Paragraph 1 of the German Criminal Code, which makes the organization of gambling without a license a punishable offence.
However, some other Higher Regional Courts, such as Cologne at the end of 2023 (case no. 19 U 92/23), continue to follow the case law of Giessen Regional Court in 2021. This summary shows that many paths lead to the same result: German players can often reclaim their losses suffered at unlicensed online casinos, but only within the limitation period. As mentioned, the German rulings discussed here relate to the old gambling treaty, which was replaced in mid-2021; however, the basic legal principles can probably still be applied to online gambling dens that are still operating illegally. This should by no means be relied upon, as perhaps the Giessen Regional Court will once again convince other German judges with its more dogmatically comprehensible 2023 case law.
Low risk of repayment of illegal profits in Germany
The editorial team is not aware of any German ruling on the repayment of winnings paid out by the player to an illegal casino. No wonder: such a lawsuit by an illegal online gambling provider is likely to have little chance of success. It is too late for new lawsuits under the old gambling law situation because such claims are time-barred in Germany; in more recent cases, casino operators must know that they can have their “services” licensed in Germany, whereas without a German license they would be operating illegally in Germany. And this means that the players would now have the defense under Section 817 BGB sentence 2, because the reclaiming, illegal online casino would have acted intentionally in violation of criminal law.
The question remains: Doesn’t the prospect of being reimbursed for losses suffered without the risk of having to pay back winnings made illegal online gambling even more attractive? In this respect, the new Austrian decision certainly has its merits.