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Guernsey: E-Commerce


In July, 2005, the UK's Forum of Private Business (FPB) revealed that it has lodged complaints against the music superstore HMV and the Guernsey government with the UK's Treasury, National Audit Office, and HM Revenue and Customs, after it emerged that the retail giant is setting up a website on the Island to sell CDs and DVDs VAT-free.

The FPB announced that HMV's move to Guernsey had "set alarm bells ringing" coming just weeks after the Jersey government announced that no more major retailers would be granted licenses to sell goods VAT-free from their island.

The loophole allows retailers to sell goods such as CDs, DVDs, computer games and contact lenses that are valued at under GBP18 VAT-free from Jersey and Guernsey back to the UK through websites. The Channel Islands are not part of the EU for VAT purposes and, therefore, goods under this value sent by mail order from the Islands are exempted from VAT.

Reports in the UK media in early 2006 suggested that this was no longer the case, as the Guernsey authorities had announced that they will not grant permission for distributors acting for online retailers located in the United Kingdom to establish warehouses in Guernsey. According to the Financial Times, the Guernsey government also revealed that it would not grant housing licences for the employees of such operations.

Speaking the BBC with regard to the move, Guernsey's Deputy Minister for Commerce and Employment, Carla McNulty-Bauer explained that:

"Our priority is to ensure that our local, home-grown businesses that are Guernsey-friendly are looked after and given the best advantage possible. We do not want those companies to be prejudiced against in any way."

The island of Alderney has developed a specific regime for Internet betting. In 1999 Alderney said it would issue four licences, but later increased the number to six, as well as introducing a regulatory structure for gaming.

In July 2001 legislation fixed the maximum number of betting licences at six and each licence holder is entitled to employ a maximum of ten staff based on the Island. Licences are issued for a three year period and are subject to an annual fee of GBP75,000.

The licences are specifically for betting and sports book business and the appropriate legislation is "The Gambling (Betting) (Alderney) Ordinance 1997" and "The Gambling (Betting) (Amendment) (Alderney) Ordinance, 1999", copies of which are available from the Alderney Gambling Control Commission.

In May 2000 the States of Alderney established an independent, non-political, commission, the Alderney Gambling Control Commission, to take over the regulation of the licensed businesses from the Island's Policy and Finance Committee. The Commission has built upon and developed the policy of ensuring its regulatory and supervisory approach meet the very highest international standards.

The Commission is also engaged in regular dialogue with other regulatory bodies at an international level. It participates in the Gaming Regulators European Forum (GREF) and the International Association of Gaming Regulators (IAGR). The Commission works closely with other agencies, particularly in the prevention of financial crime.

The Alderney Gambling Control Commission chairman, John Godfrey, says: 'We have tried to position Alderney so that it is attractive to the highest quality companies, and those seem to be the kind that we are getting. When you are dealing with the ones that we want in Alderney, regulation is not a substantial burden to them because it reflects the way they wish to run their business in any event. It is a matter of good corporate governance.'

Mr Godfrey also said that there is 'continuing, widespread interest' in the Island from internet betting providers, announcing: 'It is encouraging. We are quietly and cautiously confident. It is going as well as we could reasonably expect.'

In January, 2004, the Gambling Control Commission confirmed that Harrah's Online Limited, the world's biggest casino company, had been awarded an interactive gaming licence. Founded 66 years ago, Harrahs' Entertainment Inc. operates 25 casinos in the United States, primarily under the Harrah's brand name. The licence has been issued for Harrah's new online-gambling site 'Lucky Me', which went live in the UK at the end of January. A spokesman for Harrah's Entertainment claims "the new site will offer innovative forms of gaming, is modelled on popular games-for-prizes Internet sites and will also appeal to women."

In July, 2006, the Commission announced that it had conducted a major review and revision of the legislative framework under which it regulates the eGambling industry.

Robin Le Prevost explained: "We have over the years, like many other jurisdictions, modified our laws to cater for the very fast changing eGambling industry. But we realised that as those changes began to add layer upon layer there was a danger that the fundamentals could become submerged. The States of Alderney, advised by the Alderney Gambling Control Commission, decided to take a radical review of the structure of its entire legislative framework and concluded that a root and branch rewrite was the best way to go forward."

He continued: "Whilst we have retained most of the previous provisions in the revised structure and provided for a grandfathering element to cater for our existing licensees and certificate holders, we have made many changes which we expect will find great favour with the industry. Firstly and importantly, we have created a single eGambling licence which caters for all activities and is transparent from a technological perspective. Whether you are a casino, poker room, lottery or a Sportsbook, and increasingly operators provide their customers with one or more of the above and no matter how you operate whether solely on the Internet, mobile or any other medium it can now all be done under a single licence for one single licence fee for an all inclusive fee of GBP70,000 per annum.

'Secondly, all provisions related to ongoing operations of licensees, which were previously contained in the Ordinances and which required government approval to be amended, have been dropped down into Regulations, which is administered by the Commission. This implies that, any changes required because of market and technical forces can be affected quickly and pragmatically. In doing so, we also took a good hard look at all the checks, balances and processes we have currently and many have been simplified and modified to make them less burdensome.

'Thirdly we have introduced a new type of licence, termed a Restricted Use eGambling Licence. Rather than go down the prescriptive and narrow route of Disaster Recovery legislation we have brought in the ability to grant Restricted Use licences for those operators who want to operate a mirrored site from within the jurisdiction, while primarily operating elsewhere in the world. The terms for this licence are identical to that required for the Full eGambling licence so as to ensure that we do not compromise our standards and quality of licensees but there are major concessions on the fee and the need to incorporate an Alderney Company. The effect of this licence is that the operator can utilise his equipment hosted in the jurisdiction whenever required and for whatever purpose in exchange for a daily fee. Should the operator decide to operate from the jurisdiction for an extended period of time, they can simply and swiftly turn the Restricted Use eGambling Licence into a Full eGambling Licence and of course switch to the annual licences fee basis.

'We are absolutely confident that without compromising the global respect the jurisdiction has justifiably earned over the last 5 years, these steps create a business friendly environment second to none and when seen in conjunction with the absence of all gambling and gaming taxes and duties and extremely low corporate taxes and no sales taxes we shall extend our advantage even further."

In September, 2006, the Alderney Gambling Control Commission announced that Gala Coral had been successful in its application for the first of Alderney's new eGambling Licences.

The new eGambling Licence allows operators a great deal of flexibility as it doesn't restrict the type and number of gambling activities an operator can run under a single licence, for instance poker, casino games and sports betting and bingo could all be conducted under the single licence. This reflects the growing trend for operators to offer multiple games to their customers.

Following the decision to license Gala Coral, the Commission has a total of 20 Full eGambling licences and 5 Associate Certificates in issue.

Robin Le Prevost, Head of E-Commerce Development for the States of Alderney said that they were delighted with the news and commented "Gala Coral are one of the most respected names in the eGambling industry and we take it as a compliment that they have chosen to acquire a licence from Alderney."

Robin added "We are currently seeing an unprecedented interest in Alderney with a great many companies at various stages of applying for licences. The recent legislative changes have been well received by the industry and combined with the fiscal benefits and technical infrastructure on offer in the Bailiwick of Guernsey, have cemented Alderney's position as a leading jurisdiction."

At its October 2006 meeting, the Alderney Gambling Control Commission resolved to grant a further four full eGambling Licenses. These licenses were granted to WagerWorks (Alderney) 6 Ltd, Asia Pacific Gaming Ltd, World Poker Tour Alderney Ltd and ElectraWorks (Alderney) Ltd. The granting of these licences followed the decision of the Commission in the previous month to issue full eGambling Licenses to the Alderney subsidiaries of William Hill plc and Sportingbet plc.

A new licensing framework which will enable Alderney to offer a wider range of options to prospective e-gambling businesses that are looking to become licensed in Alderney, came into force on January 1, 2010, increasing the territory’s reputation as a leading e-gambling jurisdiction.

In a statement on January 18, the Alderney Gambling Control Commission said: “The … introduction of Alderney’s revolutionary new licensing framework … is already proving to be a great success and marks the start of a new era in the world of online gambling regulation.”

“Building on its reputation as the leading e-gambling jurisdiction, Alderney has stolen a march on its rivals by revamping its licensing framework to reflect not only the changing dynamics of the eGambling industry but also the new regulatory environment unfolding in Europe and further afield. Based on a modular system, where operators need only choose the parts they require to fit their business model, the new scheme has reduced costs for many and cemented Alderney’s reputation as the lowest cost jurisdiction in Europe.”

According to the Commission, the new Category 1 license was introduced to cater for the increasing number of operators outsourcing gaming and gambling activities. The license authorizes the organization of gambling operations, namely the registration and verification of players, the contractual relationship with them, and the management of player funds. Under the new system, a Category 1 license can be granted in as little as four to six weeks. The Category 2 license was created to satisfy growth in business-to-business services, and authorizes the operational management of a gambling platform located within an approved hosting center.

A third major change has been the introduction of a system which can recognize and license equipment located outside of the jurisdiction – a move which meets technical requirements such as resilience and performance issues, in game betting products, live feeds, the rise in globally based gaming platforms, and the advent of cloud computing.

Le Prevost said: “However well thought through, a significant revision of the licensing legislation fills you with some trepidation as to how it will be received. But I think we can say, even though it is early days, the new scheme seems to have hit exactly the right note and enquiries and applications have shown a significant increase.”

“2009 continued a pattern of growth for Alderney as a jurisdiction but was a difficult year for some, especially the new start-ups, but one can sense a new energy and we are very much looking forward to 2010.”

The Gambling Control Commission, in its annual report for 2010, revealed a surplus of GBP2,107,740 over expenditure generated from interactive gaming and gambling licensing fees. The previous year's results produced a surplus more than twice that at GBP4,342,308. As at December 31, 2010, the number of new licenses issued in the year was seven, plus a further four resulting from migrations from associate certificates. The total for 2009 was 44 licenses with 14 new licenses issued.



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