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PARIS - A row between France and the European Union is coming to a head, and the future of Europe's most vibrant horse-racing industry could be at stake.
The battle is about a time-honoured state monopoly on sports gambling which France has been defending tooth and nail in
defiance of the EU's single market laws and the growing threat from internet betting.
Under laws dating back to 1891, the Paris Mutuel Urbain (PMU) agency has sole rights over on and off course bets on horse races in France. Last year, the PMU ploughed €653 million ($1.3 billion) back into the industry, putting up prizes at race meetings and subsidising infrastructure.
The French state also has a monopoly on betting on football matches and lotteries, run by Francaise des Jeux (FdJ).
France has been blatantly ignoring two instructions from the European Commission, one filed last year and the other four months ago, to end the monopoly on sports betting, while attacking bookmakers who are edging in on its turf.
France, along with Sweden and Greece, have until October 31 to fall into line or face the threat of action at the European Court of Justice. If the court rules in favour of the commission, the defendants may face a hefty fine for every day their national market remains closed to outside competition.
Negotiations on the dispute begin in Brussels on November 6 between European Commissioner Charlie McCreevy and France's European Affairs Minister, Pierre Jouyet, and Eric Woerth, a budget minister in charge of the gaming monopolies.
Ahead of this deadline - and at the risk of infuriating the powerful guardian of EU laws - France has gone on the offensive.
It has targeted Unibet, a firm which is spearheading the foreign online challenge. Unibet is listed on the Stockholm Stock Exchange and operates out of Britain but is registered in Malta, an EU member whose betting tax is just 5 per cent, compared with 13 per cent in France.
In June, Paris police raided the France Poker Tour, an event sponsored by Unibet. Unibet's attempts to sponsor a team in the Tour de France cycle race also ran into problems because of bans on internet gambling advertising.
Last week, police at Amsterdam's airport arrested Unibet's president, Petter Nylander, in response to a European arrest warrant issued by France in April after he refused to answer court accusations by the FdJ accusing him of breaching French gambling laws.
His arrest sparked an unprecedented outburst from the commission.
"We believe that the French legislation which is invoked here is, as such, not compatible with community law, should therefore have been changed and could therefore be no basis for any arrest warrant of any sort, anywhere," said a spokesman for McCreevy.
France has few friends when it comes to its respect for Europe's single market directive - the EU-wide law to which it agreed nearly 20 years ago. France is one of the biggest offenders in this regard, dragging its feet in opening up its electricity, gas, aviation, railways and other markets.
This time, though, it could have some support for claiming an exemption, arguing that, in the case of the PMU, a large part of gambling income (about 8 per cent of the agency's revenue of €8.1 billion in 2006) returns to the horse-racing industry, which employs 62,000 people, many of them in poorer rural areas.
Those in the business agree, saying that in Belgium and Germany racing has been devastated by the advent of the free market there. Less popular race meetings have been scrapped, especially in trotting, and racehorse owning and training have been concentrated in fewer and fewer hands.
In France, there are thousands of small and medium-sized owners and trainers who survive by getting a share of the winnings from the many races staged with PMU funds.
Bookmakers, though, pay nothing from their winnings beyond taxation and use fiscal havens such as Malta as the legal base for their fast-growing online business.
"An entire ecosystem depends on the money from the PMU," said PMU boss Bertrand Belinguier.
"In France, people bet nearly half as much on the horses as in Britain, but the money that is returned to horse racing is four times as much. As a result, half of Europe's 500 racecourses today are in France, and last year we were the biggest race organiser in the EU with 17,492 races.
"We are the biggest horse-racing country in the Europe by far," says Belinguier. "Is this what they want to destroy?"
