March 6 (Bloomberg) -- State-run gambling companies in the European Union may find it harder to defend their monopolies after Europe's highest court lifted a barrier Italy used to keep out foreign competitors.

The European Court of Justice in Luxembourg today ruled Italy can't use criminal law to stop gaming companies licensed in other EU nations, including the U.K.'s Stanley Leisure Plc, from taking bets in the country. A law barring publicly traded companies from obtaining licenses restricts ``the freedom to provide services.''

State monopolies in France, Germany and other countries have been criticized by companies such as Ladbrokes Plc for blocking their cross-border online gaming business. Shares of providers such as Austrian Web bookmaker Bwin Interactive Entertainment AG rose after today's court decision, which may remove some restrictions on the EU's 50 billion-euro ($66 billion) industry.

``This is a step further toward a liberalization of the European gambling markets,'' said Lode Van Den Hende, a lawyer in the Brussels office of Herbert Smith. ``Overall this is very good now for the gaming operators. If this had gone against them they could have closed shop.''

Liverpool Bets

Massimiliano Placanica and two other people who operated shops in Italy where people could place online bets with Stanley's office in Liverpool, England, faced criminal charges under Italian law because Stanley didn't have a local gaming license.

The court prohibited the use of criminal law in particular in cases where foreign betting companies were refused the required license by the country, as was the case for Stanley.

``The Italian criminal penalties for the collecting of bets by intermediaries acting on behalf of foreign companies are contrary,'' to EU rules, an 11-judge panel of the court said.

The tribunal today left it to the national courts to decide whether by restricting the number of operators in the gaming and betting industry in the country, Italy was ``genuinely'' contributing to the goal of preventing crime.

Stanley, controlled by Genting Bhd of Malaysia, said today's ruling was a ``landmark'' that will put pressure on governments and the European Commission, the EU's executive arm in Brussels, to end national protectionism.

``We think it's time that the commission and national lawmakers act now to end this protectionism,'' said Adrian Morris, deputy director-general of Stanley.

`Milestone'

``This judgment is another step along the road to fairer competition in Europe,'' Christopher Bell, chief executive of Ladbrokes, said in an e-mailed statement. ``We have already seen Italy and Spain move to open up their betting markets and this judgment supports our view that the policies of many EU governments are inappropriate and disproportionate in restricting free and fair competition.''

Bwin said the decision was a ``milestone toward the opening of the European gambling market'', confirming that ``state monopolies were not in compliance with EU legislation before'' and in light of the judgment can no longer be upheld.

Government-owned lotteries also welcomed the decision, which they said established countries' right to limit gambling and betting activities.

The court confirmed that countries have the right to decide on the number of operators allowed on their market, Winfried Wortmann, president of European Lotteries, the association representing state lotteries, said in an e-mailed statement. ``This includes the option to give an exclusive right to one operator,'' he said.

`Obsolete'

Italy's state gambling monopoly said in an e-mailed statement that it agrees with the court, especially with the limits it placed on how much EU member states can control gambling in the name or public interest or to prevent crime. Still, it said the case was unnecessary because the law has been changed and licenses have been issued to foreign companies. Stanley declined to participate, the monopoly service said.

``As regards the Placanica case, it took place in a legal environment that is obsolete, given the new rules introduced this year and the assignment of licenses for 16,300 horse racing and sports betting points, to which all the main international players participated, except inexplicably, Stanley Ltd.,'' the state monopoly said.

Stanley argued its U.K. license should be recognized by all EU countries.

The commission last year started probing 10 EU countries including Italy, Germany, the Netherlands and France for discrimination by barring rivals from offering the same services as their state lotteries. They face being taken to the EU court depending on the outcome of the investigation.

Share Gains

Stock in Bwin, whose co-chief executive officers were detained for three days in September by French authorities, rose 2 euros, or 8 percent, to 27 euros in Vienna.

Unibet advanced as much as 9 kronor, or 5.4 percent, to 177 kronor in Stockholm. The company sponsors a professional cycling team whose members were barred last month by the organizers of a French race from wearing uniforms that displayed Unibet's Web site address.

Ladbrokes shares gained 2.3 percent to 405.75 pence in London. Sportingbet Plc, the online bookmaker that owns Paradise Poker, advanced 2.25 pence, or 4.6 percent, to 51.25 pence. Gaming VC Holdings SA, a Web casino company that gets most of its sales from Germany and Austria, rose 8 pence, or 7.8 percent, to 111 pence.

Questionable Effects

Still, lawyers including Quirino Mancini at Sinisi Ceschini Mancini and Partners in Rome said today's decision may be limited to the circumstances in this case. The court focused on Stanley's business, which ``isn't pure online betting,'' he said.

``Those who will now claim this is a big ruling for the whole online betting industry may be wrong,'' he said. Other bookmakers, including Bwin have a different model and may not directly benefit until another round of court proceedings.

The decision won't have any effect on Germany's state monopoly, said Friedhelm Repnik, spokesman for the association of the Lotto corporations, Germany's lottery.

``The situation in Italy is a completely different one,'' he said. ``They have a partially open market, here in Germany we have a clear state monopoly, whose central goal it is to prevent gambling addiction.''

The court has previously backed gaming monopolies if they're designed to prevent gambling addiction, he said.

Italy had already opened up its gaming market by introducing new rules in July 2006, said Mancini. Three months later it offered thousands of licenses, which ``caused a major change in the whole gaming distribution network in Italy,'' he said.

British operators Ladbrokes and William Hill Plc are just two non-Italian companies that got a license to set up betting shops in Italy, he said.

The case numbers are C-338/04, C-359/04, C-360/04 Procuratore della Repubblica v Massimiliano Placanica, Christian Palazzese and Angelo Sorrichio Placanica.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg via sbodoni@bloomberg.net

Last Updated: March 6, 2007 12:38 EST