Café games: revenue share agreement between cafés and operators under pressure!
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18 Nov 2024 •
Reading time: 3 minutes As stipulated by law, gambling providers are always obliged to obtain their services from a manufacturer and E-license. This is usually done with a cooperation agreement. A recent ruling was made by the Court of Appeal that would put this form of cooperation under great pressure.
Cumulative prohibition
In a procedure before the Court of Appeal in Antwerp, according to Gambling Club’s information (not yet) published, a party (holder of a C license for the operation of café games) appealed against a decision in first instance rendered by the commercial court in Tongeren. In this procedure, the opposing party (holder of a class E supplier license) demanded payment of several sums under a rev share contract concluded between the parties, and now terminated, entitled “cooperation agreement”.
In first instance, the C license holder was ordered to pay a relatively high fee to the E license holder. The first-mentioned café owner appealed against the decision of the first judge, arguing in essence that the cooperation agreement was void, due to a violation of Article 4 and 27, first paragraph 1 of the Belgian Gaming Act. Article 4 stipulates that games of chance can only be offered by (operational) license holders. Article 27, paragraph 1 contains the so-called cumulative prohibition, and states that the operational license (A, B, C, F1, …) may not be combined with a supplier license (class E).
In its judgment of 6 November 2024, the Court of Appeal follows the reasoning of the café owner (license C) and states that the E license holder (through the mediation of the C license holder) nevertheless “helped” operate the gaming machines in the café. The Court first establishes that the income from the operation of the gaming machines was divided equally between the parties (there was therefore no question of compensation per machine), which means that, according to the Court, the E-license holder participated in the risk of the operation in the same way as the café owner. However, the Court states that this is not prohibited, but that in this case the agreement went even further.
Possible consequences
Firstly, the wording of the contract indicated a “joint” operation. Secondly, the contract also showed that the café owner acted as an intermediary for the E-license holder, an argument for which the Court expressly refers to the commission structure as agreed between the parties. A commission agent (in this case the C-license holder) acts in his own name, but on behalf of a principal (in this case the E-license holder). It is also interesting that the Court refers in this regard, for the sake of completeness, to the invoices from the E-license holder to the café operator and in which the VAT regime applicable to commission agents was applied (Article 20 §1 of the VAT Code).
According to the Court, the argument that the supplier did not participate in the operation of the café, as he was not a manager or director, and had no decision-making authority, is not relevant for the assessment of the cooperation agreement regarding the gaming machines.
Null and void
As a result of all this, the Court ruled that the E-license holder in fact carried out an activity that required a permit without having a permit (violation of Article 4 of the Gaming Act). Moreover, it could not obtain that permit because it would then be in breach of the prohibition on cumulation (violation of Article 27, paragraph 1 of the Gaming Act). As a result, the Court ruled that the subject of the agreement was unlawful, prohibited and punishable when it was concluded. The agreement is therefore considered absolutely null and void, with the result that the E-license holder had no grounds to bring a claim against the C-license holder. In addition, the E-license holder was ordered to pay the legal costs (the legal fees) to the café owner, both in the first instance and on appeal.