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JURIST's Switzerland Correspondent is Cyrill P. Rigamonti, Esq., Dr.iur., University of Zurich Faculty of Law.
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New Swiss Law Governing Casino Operators

[Zurich; Special to JURIST] In 1993, the Swiss voters approved an amendment to the Swiss Federal Constitution to allow the operation of casinos in Switzerland, which was to a large extent previously prohibited as a matter of constitutional law. Based on the new constitutional framework, the Swiss federal legislature enacted the Federal Act on Casinos, which entered into force on April 1, 2000, and which regulates gambling for monetary profit along with the licensing, operation, and taxation of casinos. The law is based on an extensive comparative analysis of foreign law, including, for obvious reasons, the law of the State of Nevada. This report will outline the basic features of the new law governing future casino operators.

The objective of the Federal Act on Casinos ("FAC") is threefold: (i) ensuring safe and transparent gambling, (ii) preventing criminal acts and money laundering within or through casinos, and (iii) minimizing negative societal effects of gambling. As part of these three objectives, the FAC should help to promote tourism and to provide income for the Swiss Federation and its Cantons (States). In terms of federalism, the FAC draws a line between games where winning involves some skill on the player's behalf ("games of skill") and games where winning predominantly depends on coincidence and requires a certain bet ("games of luck"). While the regulation of the former is left to the Swiss Cantons, the regulation of the latter constitutes a federal power and is subject to the FAC. Games of luck may only be offered by licensed casino operators. The Federal Council issued regulations detailing which games casino operators may offer. The operation of games of luck over the Internet is not allowed. The law governing the Swiss lottery remains untouched by the FAC.

As far as the license to operate a casino is concerned, the FAC distinguishes between large casinos requiring a type A license ("Grand Casinos") and small casinos requiring a type B license ("Kurs舁e"). The distinction is not based on the physical size of the casino, but rather on the type of games which are offered. Because the FAC requires geographical diversity as to the location of the casinos, a casino operator must obtain two separate licenses - one to locate a casino in a specific region and another to operate the casino.

The FAC outlines prerequisites for the application. Interested parties had to apply to the newly-established Swiss Federal Gaming Board (SFGB), a supervising authority based on the model of the Swiss Federal Banking Commission. The ultimate decision will be made by a federal executive, i.e. the Swiss Federal Council, whose decision is final and cannot be appealed. Over 50 applications have been filed with the SFGB within the six-month time period relevant for most applicants. The Federal Council only plans to grant a maximum of 4 to 8 type A licenses and 15 to 20 type B licenses.

Compliance with the provisions of the FAC will be enforced by imposing criminal sanctions and fines of up to one million Swiss Francs. In addition, the FAC makes use of a new means of administrative law called an "administrative sanction". If a licensed casino operator does not comply with the terms of the license or with the terms of a legally binding administrative order, the SFGB may sanction the operator with a fine as high as triple the amount the operator earned due to the non-compliance. If the operator did not earn anything due to its non-compliance, the SFGB may sanction the operator with an fine of up to 20% of the operator's gross income within the past business year.

In terms of taxation, the Swiss Federation will levy a special tax on the operator's gross income, calculated from the difference between the sum of bets and the sum of gains which were paid out to players. It is up to the Federal Council to determine the tax rate. However, according to the FAC, said rate should not be lower than 40% and not higher than 80%. An exception is provided in the law to allow the Federal Council to lower the tax rate to a minimum of 20% during the first four years of the operation of a casino. Special provisions may apply to a casino operating under a type B license. The tax income from both types of casinos will be used by the Swiss Federation to fund mandatory social security insurance.

Whether the new casino law will be successful in attracting and controlling casino operators remains to be seen. The SFGB is currently evaluating the applications and plans to complete the evaluation period by September 2001.

Dr. Cyrill P. Rigamonti, Esq.
JURIST Switzerland Correspondent
February 15, 2001

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