France was embarrassed yesterday by the arrest of a prominent internet gambling executive just as Paris was trying to defuse pressure from Brussels to end its 300-year-old state control of betting.

Petter Nylander, chief executive of Unibet, a Swedish firm, was detained under a French arrest warrant on Tuesday at Amsterdam airport after failing to appear before a French judge who is investigating the company’s alleged breach of a state monopoly on online gambling.

He was released and ordered to remain in the Netherlands while a judge decides whether to extradite him to France. Mr Nylander’s arrest was the boldest action in a rearguard campaign to save two monopolies created in the 19th century, the Française des Jeux (FDJ), which runs lotteries, and the PMU horse-racing board.

The European Commission ruled in the summer that France was breaching the law on free movement of services in the Union with its tight control on gambling. The two organisations account for half the annual ¤20 billion turnover from betting in France, with state-licensed casinos taking the rest. These pay 60 per cent of their earnings to the treasury. Charlie McCreevy, the Internal Market Commissioner, denounced the action against Mr Nylander as unjustified. “In our view, somebody might have been arrested who is innocent under EU law,” said his spokesman.

Under threat of European Court action, Paris has agreed to consider opening up online gaming and is due to start negotiations with the Commission next month. The Budget Ministry said yesterday that it regretted the timing of Mr Nylander’s arrest and hoped that the FDJ and the PMU would drop the complaints that started the case against his firm.

Unibet is registered in Malta, operated from Britain and listed on the Stockholm stock exchange. It claims to have 1.8 million customers in 150 countries. It said that it was outraged by France’s disregard for EU law. Mr Nylander, who lives in London, said yesterday that he would not stop offering his company’s services in France. “We are doing nothing illegal because we have a licence for Britain,” he told Dutch newspapers. “According to the European rules, if you have a licence for one member state, you are authorised to use it in the others.”

Dominique Santacru, Mr Nylander’s French lawyer, said that the arrest was indefensible. “Mr Nylander is the head of a registered business . . . and he is arrested like a common thief,” he said.

The fight to keep the State’s lucrative control on gambling is the latest in a series of battles by France to preserve practices that breach the rules of the single market. As well as forcing France to allow competition in power and public transport, Europe is gradually prising open monopolies in areas such as art sales, hairdressing, property conveyancing and ski instructing.

France’s attempts to save the monopoly on lotteries in the past year has led to comic episodes such as the rushed passing of a ban on play by minors after the State argued to Brussels that gambling was a health risk that needed state control. In June police raided the Paris session of the France Poker Tour and confiscated the chips on the ground that they caried the logo of Unibet, which sponsored the tournament.

Thousands of French residents are defying the law to place bets online with companies outside France. The French casino industry also wants an end to the bar on its entry to online gaming.

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