Brussels, 17 October 2007
The European Commission has decided to send an official request for information to Ireland on its rules that bar Irish residents from purchasing United Kingdom Premium Bonds, which are state-backed investment products where, instead of interest payments, investors have the chance to win tax-free prizes. They are comparable with a similar Irish product known as 'Prize Bonds'. Under Irish law, residents are not allowed to take part in lotteries run in other countries. The Commission disputes the classification of UK premium bonds as a lottery, and also wishes to verify whether the measure in question is compatible with the free movement of capital (Article 56 EC Treaty) and with the free movement of services (Article 49 EC Treaty). The letter of formal notice is the first step in an infringement procedure under Article 226 of the EC Treaty. The Irish Government has two months in which to respond. The Commission hopes that the answer it receives will lead to an early and satisfactory resolution of the matter.
The restriction in question stems from Section 34(1) of the Gaming and Lotteries Act 1956, which stipulates that Irish residents may not take part in lotteries outside of Ireland. The Commission disputes the classification of these bonds as lotteries, as both UK Premium Bonds and the Irish equivalent ('Prize Bonds') are marketed and sold as risk-free, state guaranteed investments.
Restrictions on the free movement of capital are prohibited under Article
56(1) of the EC Treaty, while Article 49 requires the elimination of
restrictions on freedom to provide services. The European Court of Justice has
consistently held that all measures which prohibit, impede or render less
attractive the exercise of such freedoms must be regarded as constituting such
restrictions (C-439/99 of 15 January 2002). The Court has also held that the
fundamental principles of freedom to provide services necessarily include the
rights of recipients of services (C-255/04 and C-262/02).