QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| Gibraltar Betting & Gaming Association Ltd
|- and -
|The Secretary of State for Culture, Media & Sport
The Gambling Commission
- and -
The Government of Gibraltar
The Gibraltar Gambling Commissioner
Kieron Beal QC and Oliver Jones (instructed by The Treasury Solicitor) for the 1st Defendant
Adam Lewis QC and Tom Cleaver (instructed by The Gambling Commission Legal Department) for the 2nd Defendant
Lord Pannick QC and Ravi S Mehta (instructed by Mishcon De Reya) for the 1st Interested Party
Charles Brasted (instructed by Hogan Lovells International LLP) for the 2nd Interested Party
Hearing dates: 23rd & 24th September 2014
Crown Copyright ©
|A. Introduction: Issues and conclusion||1-19|
|(i) The Parties||1-3|
|(ii) The Claimant's challenge||4-9|
|(iii) The expedited nature of the claim||10-12|
|(iv) Summary of issues||13|
|B. The regulatory regime under challenge||20-71|
|(ii) The Gambling Act 2005 ("GA 2005") and relevant changes brought about by the Gambling (Licensing and Advertising) Act 2014 ("GLAA 2014")||22-50|
|(iii) Statement of principles for licensing and regulation: September 2009||51-55|
|(iv) Licensing compliance and enforcement policy statement: September 2009||56-60|
|(v) Licence conditions and codes of practice (consolidated version): May 2014||61-62|
|(vi) The scope for the exercise of discretion in implementation and enforcement||63-67|
|(vii) The fees payable under the regulatory regime||68-71|
|C. The Claimant's passporting proposal||72-81|
|(ii) The initial proposal||73|
|(iii) The submission that point of consumption regulation would generate an illicit market||74|
|(iv) The recognition of foreign licensing as sufficient||75-77|
|(v) The evolution in the proposal to dual licensing||78-79|
|(vi) The rejection of the passporting proposal by the Minister: 26th February 2014||80|
|(vii) The Claimant's submission that the Defendants misunderstood the passporting proposal||81|
|ISSUE I: WHETHER THE MEASURES ARE DISPROPORTIONATE, DISCRIMINATORY OR IRRATIONAL|
|D. The prima facie application of Article 56 TFEU to the new licensing regime||82-86|
|(i) Article 56 TFEU||82-83|
|(ii) The Claimant's case in outline as to the restrictive effects of the new regime||84|
|(iii) The concession by the UK Government that the new regime is prima facie prohibited under Article 56 TFEU||85-86|
|E. The proportionality test: The relevant law||87-131|
|(i) The scope for justification: legislative basis||87-88|
| (ii) Acceptable grounds of justification:
Consumer protection, prevention of fraud curtailment of the inducement to squander funds, other overriding public interest grounds
|(iii) The inadmissibility of economic grounds of justification||90-91|
|(iv) The proportionality test: Constituent parts||92-95|
|(v) The evidential task of the national Court: Full assessment||96-98|
|(vi) The margin of appreciation to be accorded to the decision maker: The meaning of "manifest" as in "manifestly inappropriate"||99-101|
|(vii) Guidance from European jurisprudence||102-105|
|(viii) Guidance from domestic jurisprudence||106-110|
|(ix) Factors in the present case relevant to margin of discretion||111-131|
|1. The GA 2005 as amended is an Act of Parliament||112|
|2. The risk associated with the service being regulated –remote internet gambling||113-114|
|3. Guidance from jurisprudence at the EU level||115|
|4. The inability to achieve 100% efficiency||116|
|5. Willingness to review the situation||117|
|7. The type of reasoning required of the State to justify a measure||119-120|
|8. The extent to which facts underlying the policy choice are justiciable||121|
|9. Avoiding second guessing predictions as to the future success of a measure||122|
|10. Views of the European Commission||123|
|11. The relevance of the position of foreign regulators||124-131|
|F. Proportionality: Does the new place of consumption based regime serve a legitimate objective?||132-159|
|(i) The issue: The legitimacy of the objective pursued||132|
|(ii) Conclusion on the issue of legitimate objective||133-134|
|(iii) The source of relevant evidence: Parliamentary privilege||135-140|
|(iv) The legislative objectives of the GA 2005||141|
|(v) Consultation papers||142-146|
|(vi) Impact Assessment: June 2011||147-150|
|(vii) The position of the UK Government in communications with the European Commission||151|
|(viii) Impermissible economic objectives||152-153|
|(ix) Other source material which is to the same effect||154|
|(x) The validity of the precautionary approach||155-157|
|G. Proportionality: Will the new regime be ineffective because it will lead to the growth of illicit trade||160-172|
|(i) The issue||160|
|(ii) Claimant's submissions||161-162|
|(iii) The fallacy in the Claimant's economic assumptions||163-168|
|(iv) The comparables||169|
|(v) Did the Secretary of State have to disprove the Claimant's theses about the risk of diversion to illicit trades?||170-172|
|H. Proportionality: Whether the new regime will prove to be unenforceable||173-181|
|(i) The issue||173|
|(iii) The unproven assumption as to the scale of the enforcement problem||175|
|(iv) The GC's powers should be reasonably effective||176|
|(v) The relevance of the obligation to review and repair||177-179|
|(vi) The Claimant's specific criticisms||180-181|
|I. Proportionality: Is the new regime the least restrictive means for securing the legitimate objectives?||182-190|
|(i) The issue||182-183|
|(iii) Ancillary points||187-190|
|J. Discrimination/Equality: Is the new licensing regime discriminatory as being contrary to the principle of equal treatment?||191-196|
|(i) The issue||191|
|K. Rationality under domestic law: Is the refusal of the Minister and/or GC to adopt the passporting approach irrational?||197-200|
|ISSUE II: WHETHER THE CLAIMANT HAS LOCUS TO SEEK A JUDICIAL REVIEW|
|L. Introduction: The Secretary of State's objection||201-202|
|M. Conclusion on locus||203-215|
|(i) In this case locus should not be revisited following the grant of permission||205-206|
|(ii) At least one member of the Claimant association has an acknowledged direct right of action under Article 56 TFEU||207|
|(iii) Other members of the Claimant association have a clear economic and commercial interest in the outcome||208|
|(iv) The Claimant has an interest by reason of prior involvement in the consultation and scrutiny processes||209|
|(v) The fact that the Claimant is a representative body is not determinative||210-215|
|N. The distinction between locus and relief||215-220|
|ISSUE III: THE CONSTITUTIONAL RELATIONSHIP BETWEEN THE UNITED KINGDOM AND GIBRALTAR|
|O. The issue||221-228|
|P. Legislative framework||229-233|
|Q. Relevant Case law||234-260|
|(i) EU jurisprudence||234-258|
|(ii) Domestic jurisprudence||259-260|
|R. The evidential dimension: What sorts of facts will be sufficient to engage Article 56 TFEU in relation to the provision of services between Gibraltar and the UK?||261-267|
Mr Justice Green :
A. Introduction, issues and conclusion
(i) The Parties
(ii) Claimant's challenge
"The New Licensing regime is unlawful, in that it is a disproportionate restriction on the freedom to provide services guaranteed by Article 56TFEU"
The Claimant also seeks a supplementary declaration that the decision of the Minister and the GC to adopt the new regime and reject the passporting proposal is irrational in domestic law:
"The decision of the Minister and/or the GC to adopt the New Licensing regime, and to refuse to adopt the passporting proposal was irrational".
(iii) The expedited nature of the claim
(iv) Summary of issues
i) Issue I: Whether the measures are disproportionate, discriminatory or irrational: Is the new regime in violation of Article 56 TFEU upon the basis that it is disproportionate and/or discriminatory? Further, was it irrational and unlawful under domestic law for the First and Second Defendant to reject the Claimant's "passporting proposal"?
ii) Issue II: Whether the Claimant has locus to seek a judicial review: Does the Claimant have the right to invoke before the High Court the directly effective right contained within Article 56 given that it is a trade association which, itself, does not provide services in the United Kingdom but, rather, provides representational services to its members which are predominantly Gibraltar based gambling operators? The Defendants say Article 56 TFEU can be invoked in judicial review proceedings only by a person who actually provides cross-border services.
iii) Issue III: The constitutional relationship between the UK and Gibraltar: What is the proper analysis of the relationship between the UK and Gibraltar? Is a restriction imposed by the UK on the provision of services from Gibraltar to the UK a purely internal matter, or a restriction on trade between one Member State (the UK) and a third territory or is it even a restriction on trade between two different Member States? The answer to this first question informs the related question: To what extent does Article 56 TFEU apply to restrictions on trade which do not occur between Member States?
B. The regulatory regime under challenge
(i) The Gambling Act 2005 (GA 2005) and relevant changes brought about by the Gambling (Licensing and Advertising) Act 2014 ("GLAA 2014")
"(a) To pursue, and wherever appropriate to have regard to, the licensing objectives, and
(b) To permit gambling, in so far as the Commission thinks it reasonably consistent with pursuit of the licensing objectives".
"In this Act a reference to the licensing objectives is a reference to the objectives of —
(a) preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime,
(b) ensuring that gambling is conducted in a fair and open way, and
(c) protecting children and other vulnerable persons from being harmed or exploited by gambling".
"(1) For the purposes of this Act a person provides facilities for gambling if he —
(a) invites others to gamble in accordance with arrangements made by him,
(b) provides, operates or administers arrangements for gambling by others, or
(c) participates in the operation or administration of gambling by others".
It is apparent, therefore, that an off-shore provider of gambling services will provide "facilities for gambling" in the UK simply by virtue of the fact that he creates facilities which may be accessed in the United Kingdom; and this arises even if the operator has no physical presence in the United Kingdom.
"33. Provision of facilities for gambling
(1) A person commits an offence if he provides facilities for gambling unless —
(a) an exception provided for in subsection (2) or (3) applies, or
(b) an exception provided for by any of the following provisions applies —
(2) Subsection (1) does not apply to any activity by a person if —
(a) he holds an operating licence authorising the activity, and
(b) the activity is carried on in accordance with the terms and conditions of the licence.
(3) Subsection (1) does not apply to any activity by a person if —
(a) he acts in the course of a business carried on by a person who holds an operating licence authorising the activity, and
(b) the activity is carried on in accordance with the terms and conditions of the licence.
(3A) Section 36(3A) limits the application of this section in cases involving the use in Great Britain of certain facilities for remote gambling".
The italicised text set out above constitutes an amendment brought about by the GLAA 2014.
"36. Territorial application
(1) For the purposes of section 33 it is immaterial whether facilities are provided —
(a) wholly or partly by means of remote communication;
(b) subject to subsections (2) and (3), inside the United Kingdom, outside the United Kingdom, or partly inside and partly outside.
(2) Section 33 applies to the provision of facilities for non-remote gambling only if anything done in the course of the provision of the facilities is done in Great Britain.
(3) Section 33 applies to the provision of facilities for remote gambling only if at least one piece of remote gambling equipment used in the provision of the facilities is situated in Great Britain (but whether or not the facilities are provided for use wholly or partly in the United Kingdom).
(3) Section 33 applies to the provision of facilities for remote gambling only if –
(a) at least one piece of remote gambling equipment used in the provision of the facilities is situated in Great Britain, or
(b) No such equipment is situated in Great Britain but the facilities are used there.
(3A) In a case within subsection (3)(b), the person providing the facilities commits an offence under section 33 only if the person knows or should know that the facilities are being used, or are likely to be used, in Great Britain.
(4) In this Act "remote gambling equipment" means, subject to subsection (5), electronic or other equipment used by or on behalf of a person providing facilities for remote gambling —
(a) to store information relating to a person's participation in the gambling,
(b) to present, to persons who are participating or may participate in the gambling, a virtual game, virtual race or other virtual event or process by reference to which the gambling is conducted,
(c) to determine all or part of a result or of the effect of a result, or
(d) to store information relating to a result.
(5) In this Act "remote gambling equipment" does not include equipment which —
(a) is used by a person to take advantage of remote gambling facilities provided by another person, and
(b) is not provided by that other person".
(1) An operating licence is a "remote operating licence" if it authorises activity to be carried on —
(a) in respect of remote gambling, or
(b) by means of remote communication.
(2) A remote operating licence may not also authorise activity which is neither —
(a) in respect of remote gambling, nor
(b) carried on by means of remote communication.
(3) An operating licence must state whether it is a remote operating licence or not".
"(a) the integrity of the applicant or of a person relevant to the application;
(b) the competence of the applicant or of a person relevant to the application to carry on the licensed activities in a manner consistent with pursuit of the licensing objectives;
(c) the financial and other circumstances of the applicant or of a person relevant to the application (and, in particular, the resources likely to be available for the purpose of carrying on the licensed activities)".
"75. General conditions imposed by Commission
(1) The Commission may specify conditions to be attached to —
(a) each operating licence, or
(b) each operating licence falling within a specified class.
(2) For the purposes of subsection (1)(b) a class may be defined wholly or partly by reference to —
(a) the nature of the licensed activities;
(b) the circumstances in which the licensed activities are carried on;
(c) the nature or circumstances of the licensee or of another person involved or likely to be involved in the conduct of the licensed activities.
(3) Where the Commission issues an operating licence it shall attach to the licence any condition specified under subsection (1) as a condition to be attached to operating licences of a class within which each licence falls".
"(1) The Commission may amend or revoke a condition specified under section 75; and a reference in this section to the specification of a condition includes a reference to the amendment or revocation of a condition".
"(6) A condition of a remote operating licence may restrict the methods of communication that may be used in the course of the licensed activities".
"(1) For the purposes of this Act a person advertises gambling if —
(a) he does anything to encourage one or more persons to take advantage (whether directly or through an agent) of facilities for gambling,
(b) with a view to increasing the use of facilities for gambling, he brings them or information about them to the attention of one or more persons, or
(c) he participates in or facilitates an activity knowing or believing that it is designed to —
(i) encourage one or more persons to take advantage (whether directly or through an agent) of facilities for gambling, or
(ii) increase the use of facilities for gambling by bringing them or information about them to the attention of one or more persons".
"Territorial application: remote advertising
(2) The prohibition in section 330(1) applies to advertising by way of remote communication only if —
(a) the advertising satisfies the test in subsection (4),
(b) the advertising satisfies the additional test in subsection (5) or (6), if relevant, and
(c) the gambling to which the advertising relates satisfies the test in subsection (9).
(4) The test referred to in subsections (1)(a), (2)(a) and (3) is that the advertising involves —
(a) providing information, by whatever means (and whether or not using remote communication), intended to come to the attention of one or more persons in Great Britain,
(b) sending a communication intended to come to the attention of one or more persons in Great Britain,
(c) making data available with a view to its being accessed by one or more persons in Great Britain, or
(d) making data available in circumstances such that it is likely to be accessed by one or more persons in Great Britain.
(9) The test referred to in subsections (1)(c) and (2)(c)…is —
(a) in the case of non-remote gambling, that it is to take place in Great Britain, or
(b) in the case of remote gambling, that at least one piece of remote gambling equipment to be used in providing facilities for the gambling is or will be situated in Great Britain.
(b) in the case of remote gambling, that –
(i) at least one piece of remote gambling equipment to be used in providing facilities for gambling is or will be situated in Great Britain, or
(ii) no such equipment is or will be situated in Great Britain, but the facilities are or will be capable of being used there".
(iii) Statement of principles for licensing and regulation: September 2009
"2.3 The Commission expects applicants for licences to:
• be able to demonstrate that they can meet the Commission's suitability assessment
• ensure that the activities they plan to carry out will be conducted in a manner which minimises the risks to the licensing objectives
• work with the Commission in an open and co-operative way
• disclose to the Commission anything which the Commission would reasonably expect to know".
"2.5 The Commission also expects those holding licences, including, as appropriate, personal licences, to:
• conduct their business with integrity
• act with due care, skill and diligence
• take care to organise and control their affairs responsibly and effectively and have adequate systems and controls to minimise the risks to the licensing objectives
• maintain adequate financial resources
• have due regard to the interests of customers and treat them fairly
• have due regard to the information needs of customers and communicate with them in a way that is clear, not misleading, and allows them to make a properly informed judgment about whether to gamble
• manage conflicts of interest fairly
• work with the Commission in an open and co-operative way
• disclose to the Commission anything which the Commission would reasonably expect to know".
"3.13 The Commission will request only that information which it requires and will avoid duplicating requests by seeking to obtain information from government bodies (for example, the Serious Fraud Office) and other regulators (for example, the National Lottery Commission, the Office of Fair Trading, the Office of Communications and the Financial Services Authority) where it is possible, and appropriate, to do so".
The Claimant relies upon paragraph 3.13 as enunciating the important principle of the avoidance of duplication. The Claimant submits that the new regime is however rife with duplicative obligations and burdens which supports its contention that the overall regime is disproportionate.
"3.24 The Commission will take coordinated regulatory action with government bodies and/or other regulators where it is appropriate to do so".
Support for the principle of mutual co-operation between regulators is found further in paragraph 4.11 where the GC states that it will seek to build and maintain good liaison and close working relationships with local authorities, other regulators and law enforcement bodies including in relation to the sharing of information and the investigation of offences.
(iv) Licensing, compliance and enforcement policy statement: September 2009
"3.5 All applicants are required to supply the Commission with sufficient and complete information to support their application and in particular information that will enable an assessment on their suitability to be made. However, the Commission takes a risk based and proportionate approach to the amount and detail of information an applicant is required to provide. Guidance on the type of information required is included in the guidance notes that accompany the application form".
"Assessments and visits will be used proportionately, as the Commission will seek to target those areas of greatest risk to the licensing objectives".
"4.9 The Commission will:
• act reasonably in discharging its powers under the Act and conducting assessments and visits
• exercise its powers under the Act fairly, responsibly and with due respect for other parties involved
• explain what information is required, and why, to ensure requests are appropriate, proportionate, minimise disruption to the business, and enable the relevant person to comply fully with the request
• seek the co-operation of others wherever possible and only use its statutory powers when necessary".
"4.10 A request for the production of any records or to provide an explanation of records will be made either orally or in writing, dependent upon the individual circumstances of each case. Wherever possible, licensees will be given a reasonable period of time to comply with the request. The Commission will seek to take into account the burden placed on the individual or business when removing records so that it causes minimal disruption".
"4.16 The decision about how best to deal with any issues will be informed by an assessment of risk. This will ensure that the Commission's resources are focussed primarily on those operators, individuals and activities which present the greatest risks to the licensing objectives".
(v) Licence conditions and codes of practice (consolidated version): May 2014
(vi) The scope for the exercise of discretion in implementation and enforcement
"1. On request, licensees must provide the Commission with such information as the Commission may require about the use made of facilities provided in accordance with this licence, and the manner in which gambling authorised by this licence and the licensee's business in relation to that gambling are carried on, including in particular information about:
a the numbers of people making use of the facilities and the frequency of such use
b the range of gambling activities provided by the licensee and the numbers of staff employed in connection with them
c the licensee's policies in relation to, and experiences of, problem gambling.
2. In particular within 28 days of the end of each quarterly period or, for those only submitting annual returns, within 42 days of the end of each annual period, licensees must submit a Regulatory Return to the Commission containing such information as the Commission may from time to time require".
"47. As the Commission has made clear, at conferences and in discussion with operators and the Remote Gambling Association, under the new licensing regime the Commission will have a broad discretion about how best to protect consumers and pursue the licensing objectives in the Act. For example, the Commission may require an operator to have a "mirror" server located in the UK or a British representative, or to provide a bond, or some other bespoke condition depending on the circumstances. We will use our powers in section 77 of the Act to impose specific licence conditions, on a case by case basis, to applicants in particular to those applying from outside the European Union or "white listed" jurisdictions. However, in such cases, the Commission's starting point will not be to limit itself by reference to a prior detailed study of the requirements imposed by the local regulatory regime, the likelihood that those requirements will be adequately enforced, and the effect of that regime on the Commission's pursuit of its licensing conditions in the particular case, instead it will assess whether the operator can meet the requirements for selling to consumers in Great Britain.
48. The Commission will continue to exercise discretion about how much reliance it should place on information or evidence from other regulators, just as it does at the moment given that many of our non-remote licence applicants hold licences in other jurisdictions. In the Commission's view it is more effective to retain such flexibility and decide, on the basis of the evidence, applications on a case by case basis, as that allows the Commission to take account to changes in the nature of the jurisdiction and the individuals in post (in both the regulator and the operator) and the actual material provided by the applicant or by the home regulator".
(vii) The fees payable under the regulatory regime
C. The Claimant's passporting proposal
(ii) The initial proposal
"We believe our proposals would minimise the legal and practical risks whilst delivering on the UK Government's overall objectives of maximising taxation receipts and minimising harm to consumer protection. We should underline that our proposed solutions for DCMS may not require specific changes to the Gambling Bill itself, but instead depend on the use of statutory instruments and changes to the Gambling Commission's licensing conditions and Codes of Practice (LCCP)"
(iii) The submission that point of consumption regulation would generate an illicit market
"2. Summary of concerns with the overall point of consumption regime (POCR)
• It is very likely that many customers will simply migrate to unlicensed, unregulated and non-compliant operators.
• These unlicensed, unregulated operators will have a significant market advantage over the licensed, regulated and compliant operators.
• There will be no effective deterrent and significant incentive to unscrupulous unlicensed, unregulated operators in targeting UK consumers.
• The unregulated market operators will have the opportunity to gain customers as they haven't previously been able to in the competitive UK market because they will be in a position to compete on unfairly advantageous terms with the reputable operators.
• There is ample evidence of such migration in various continental markets that have implemented national licensing and regulatory regimes e.g. France, Italy and Spain.
• It is estimated by the Italian regulator that up to 50% of the market is unregulated. In France, it has been estimated that approximately 70% of sports betting takes place via unlicensed operators, with gross gaming revenue from licensed sports betting operators declining 24% in the third quarter of 2011 by comparison to the year before.
• Following the US on-line gambling shut down in 2007 (post-implementation of the Unlawful Internet Gambling Enforcement Act in October 2006), legislation and enforcement measures in themselves were not sufficient to ensure the prevention of unlicensed activities. Even with the recent regulation of remote gambling in the States of Nevada and New Jersey, a significant amount of unlicensed activity is expected.
• Additional taxation and the increased compliance and licensing costs flowing from the POCR will act as a "double-whammy" for foreign operators without any corresponding benefit to UK consumers in respect of jurisdictions that are deemed sufficiently regulated.
There is overwhelming evidence that there will be a very real risk of consumer harm should the POCR measures be implemented in their entirety in their current form which will undermine consumer protection and has the potential to reduce taxation receipts, the precise opposite of what the UK Government stated aim".
(emphasis in original)
(iv) The recognition of foreign licensing as sufficient
"Operators should continue to be able to advertise and transact with the UK provided the regulator in their home jurisdiction is approved. A licence issued by such a recognised regulator would allow an operator to provide services to customers in the UK without unnecessary impediment. This would either be on the basis of that licence itself being sufficient (a form of "passporting" as is used in the financial services sector) or on the basis of the issue of a separate licence from the UK Gambling Commission predicated on the licence issued to the operator by the recognised local regulator. Such a regime would be similar to that successfully adopted in the EU in relation to financial services and is in line with the movement of the EU towards mutual recognition and would avoid unnecessary restrictions, compliance costs and substantive licensing fees that will be incurred by operators in suitable jurisdictions under the proposed POCL".
Our position is that, to the extent that our proposed passporting regime constitutes a restriction under Article 56, it is a proportionate and lawful one.
As stated above, it is in practice impossible and dangerous for the UK Gambling Commission to effectively regulate operators overseas and the GBGA can provide very substantial evidence to support this. The nearest comparison with the position regarding authorisation of financial services firms shows why the proposed approach is unworkable and endangers UK consumers and the UK's jurisdictional and licensing reputation.
In the absence of a legal framework that covers the EU, the proposal to require recognition of suitable jurisdictions and regulate and effective regulation through the means we have outlined is a perfectly sensible, proportionate and lawful way forward, entirely consistent with EU law.
This provides a much better model than that currently being pursued by many EU Member States and that has led to a balkanisation of the remote gambling market within the EU, much to the detriment of the companies listed in the UK that are world leaders in this area of e-commerce".
(v) The evolution in the passporting proposal to dual licensing
"Our proposal would require all operators wishing to offer remote gambling services into the UK to obtain a licence from the Gambling Commission. It is therefore very different to the current unrestricted EEA and White List regime. The Commission will retain the power to issue or to refuse to issue a licence, but the requirements placed on operators and the fees payable by them could be limited – unlike the proposed place of consumption regime – to those that are justifiable and proportionate based on the quality of the local licensing and regulation".
(vi) The rejection of the passporting proposal by the Minister: 26th February 2014
"As you are aware, the purpose of the Remote Gambling Bill is to enhance consumer protection by ensuring consistency regulation by the Gambling Commission. All remote gambling operators that wish to engage with British consumers will be required to obtain a remote operating licence from the Commission, regardless of where they are based.
Unfortunately, I do not think that passporting as outlined in your letter will assist us to achieve this. Whether it is Gibraltar or any other jurisdiction, a passporting approach would undermine the achievement of consistency of regulation. Consistent with the purpose of the Bill, I hope the Gambling Commission and overseas regulators, including the Gibraltar regulator, will [to] continue to work together within the existing regulatory framework. I am content this framework provides wide scope for co-operation and sharing of best practice between regulators.
Your letter also raises your concern that the Gambling Commission lacks sufficient information-sharing powers. I am content that the Gambling Commission has all the powers it needs under the Gambling Act 2005 to share information with overseas operators where it is appropriate to do so.
I hope that the Gambling Commission and overseas regulators, including the Gibraltar regulator, will continue to work together as much as possible to ensure a smooth transition to the new regime".
(vii) The Claimant's submission that the Defendants misunderstood the passporting proposal
D. The prima facie application of Article 56 TFEU to the new licensing regime
(i) Article 56 TFEU
"Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended".
(ii) The Claimant's case on the restrictive effects of the new regime
i) The requirement to comply with a range of regulatory obligations imposed by the GC which may be duplicative or inconsistent with those of the local regulator but which are not necessarily better calculated to protect consumers.
ii) The requirement for operators to provide detailed information to the GC over and above the information required to be provided to local regulators.
iii) The requirement for operators to identify the location of a customer upon each occasion that the customer uses a remote gambling service.
iv) The requirement for operators to engage with their foreign regulator (i.e. the GC) for matters normally reserved and more properly dealt with by the local regulator which will necessitate the taking of expensive UK legal advice on a duplicative and potentially conflicting basis.
v) The requirement for operators to have an address in the United Kingdom for the purpose of the GC issuing documents to the operator.
vi) The substantial licence and application fees which will have to be paid.
vii) The requirement to procure all gambling software from other operators licensed by the GC irrespective of the efficacy of established testing methods designed to ensure that gambling software meets the required standards and the proportion of the operator's overall business undertaken with customers in Great Britain. It is said that in practice many operators may be unable to isolate software that it uses in respect of customers using its facilities in Great Britain from software it uses for customers using facilities elsewhere which will mean that all software might have to comply with the GC requirement even if a negligible number of customers are located in Great Britain.
viii) The requirement set out in the proposed LCCP and GC guidance on regulatory returns to overseas operators which propose a separation of data that relates to the activity of British customers and data that relates to customers elsewhere.
(iii) The concession by the UK Government that the new regime is prima facie prohibited by Article 56 TFEU
"The UK Government accepts that the proposed reforms constitute a restriction of freedom of services under Article [56 TFEU]. However, as set out below, the UK Government considers that the proposed reforms are a lawful restriction on the freedom of gaming and betting services and satisfy the conditions of necessity and proportionality as laid down by the CJEU".
E. The proportionality test: The relevant law
(i) The scope for justification: Legislative basis
"The provisions of this chapter and measures taken in pursuance thereof shall not prejudice the applicability of provisions laid down by law, regulation or administrative action providing for special treatment for foreign nationals on grounds of public policy, public security or public health".
(ii) Acceptable grounds of justification: Consumer protection, prevention of fraud, curtailment of the inducement to squander funds, other overriding "public interest" grounds
"According to the Court's established case-law, restrictions on games of chance may be justified by overriding requirements in the public interest, such as consumer protection and the prevention of both fraud and incitement to squander money on gambling…".
Similar views were expressed by the Court in Case C – 46/08 Carmen Media Group Limited  ECR I-8149 where, at paragraph  the Court stated that restrictions on gaming activities could be justified by imperative requirements in the public interest such as consumer protection, the prevention of fraud, the prevention of incitements to squander money on gambling, all of which fell within the more general ground of justification of preserving public order. These objectives were said to "…limit betting activities in a consistent and systematic manner".
(iii) The inadmissibility of economic grounds of justification
"43. Concerning, third, to the Kingdom of Spain's argument that the income received by the bodies and entities whose games of chance benefit from the exemption in question is used to finance socially-useful infrastructure and projects, it should be noted that the Court has already held that, although it is not irrelevant that lotteries and other types of gambling may contribute significantly to the financing of benevolent or public interest activities, that motive cannot in itself be regarded as an objective justification for restrictions on the freedom to provide services… It is moreover apparent from the Court's case-law that economic grounds are also not included among the grounds in Article 46 EC which could justify a restriction of the freedom to provide services guaranteed by the Treaty…".
(iv) The proportionality test: Constituent parts
"To demonstrate what it is required to demonstrate in order to enable a state to avail itself of the derogation from article 30 for which article 36 provides, it is necessary to adduce factual evidence (1) to identify the various mischiefs which the challenged restrictive measures were intended to prevent, (2) to show that those mischiefs could not have equally effectively been cured by other measures less restrictive of trade, and (3) to show that the measures were not disproportionately severe having regard to the gravity of the mischiefs against which they were directed. This last mentioned consideration involves the concept in Community law (derived principally from German law) called "proportionality". In plain English it means "You must not use a steam hammer to crack a nut, if a nutcracker would do".
"The alleged infringement of the principle of proportionality
12 It was argued that the directive at issue infringes the principle of proportionality in three respects. In the first place, the outright prohibition on the administration of the five hormones in question is inappropriate in order to attain the declared objectives, since it is impossible to apply in practice and leads to the creation of a dangerous black market. In the second place, outright prohibition is not necessary because consumer anxieties can be allayed simply by the dissemination of information and advice. Finally, the prohibition in question entails excessive disadvantages, in particular considerable financial losses on the part of the traders concerned, in relation to the alleged benefits accruing to the general interest.
13 The Court has consistently held that the principle of proportionality is one of the general principles of Community law. By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued.
14 However, with regard to judicial review of compliance with those conditions it must be stated that in matters concerning the common agricultural policy the Community legislature has a discretionary power which corresponds to the political responsibilities given to it by Articles 40 and 43 of the Treaty. Consequently, the legality of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue (see in particular the judgment in Case 265/87 Schräder  ECR 2237, paragraphs 21 and 22)".
(v) The evidential task of the national Court: Full assessment
"43. In addition, it should be recalled that the restrictions imposed by the Member States must satisfy the relevant conditions of proportionality and non-discrimination, as laid down in the Court's case-law. Thus, national legislation is appropriate for guaranteeing attainment of the objective pursued only if it genuinely reflects a concern to attain it in a consistent and systematic manner (see, to that effect, Case C-42/07 Liga Portuguesa de Futebol Profissional and Bwin International EU:C:2009:519, paragraphs 59 to 61 and the case-law cited).
44. The mere fact that a Member State has opted for a system of protection which differs from that adopted by another Member State cannot affect the assessment of proportionality of the provisions enacted to that end. Those provisions must be assessed solely by reference to the objectives pursued by the competent authorities of the Member State concerned and the level of protection which they seek to ensure (Case C-176/11 HIT and HIT LARIX EU:C:2012:454, paragraph 25 and the case-law cited).
45. In the specific area of the organisation of games of chance, national authorities enjoy a sufficient measure of discretion to enable them to determine what is required in order to ensure consumer protection and the preservation of order in society and — provided that the conditions laid down in the Court's case-law are in fact met — it is for each Member State to assess whether, in the context of the legitimate aims which it pursues, it is necessary to prohibit betting and gaming wholly or in part or only to restrict them and, to that end, to lay down more or less strict supervisory rules (see, to that effect, Joined Cases C-316/07, C-358/07 to C-360/07, C-409/07 and C-410/07 Stoß and Others EU:C:2010:504, paragraph 76, and Carmen Media Group EU:C:2010:505, paragraph 46).
46. Furthermore, it is not disputed that, unlike the introduction of free, undistorted competition in a traditional market, the presence of that kind of competition in the very specific market of games of chance, that is to say, between several operators authorised to run the same games of chance, is liable to have detrimental effects, owing to the fact that those operators would be led to compete with each other in inventiveness to make what they offer more attractive than what their competitors offer, and thereby to increase consumers' expenditure on gaming and the risks of their addiction (Joined Cases C-186/11 and C-209/11 Stanleybet International and Others EU:C:2013:33, paragraph 45).
47. However, the identification of the objectives in fact pursued by the national legislation is, in the context of a case referred to the Court under Article 267 TFEU, within the jurisdiction of the referring court (see, to that effect, Dickinger and Ömer EU:C:2011:582, paragraph 51).
48. It is also for the referring court, while taking account of the information provided by the Court, to determine whether the restrictions imposed by the Member State concerned satisfy the conditions laid down in the Court's case-law as regards their proportionality (see Dickinger and Ömer EU:C:2011:582, paragraph 50).
49. In particular, it is for that court to satisfy itself, having regard inter alia to the actual rules for applying the restrictive legislation concerned, that the legislation genuinely meets the concern to reduce opportunities for gambling, to limit activities in that area and to fight gambling-related crime in a consistent and systematic manner (see Dickinger and Ömer EU:C:2011:582, paragraphs 50 and 56).
50. In that regard, the Court has previously held that it is the Member State wishing to rely on an objective capable of justifying the restriction of the freedom to provide services which must supply the court called on to rule on that question with all the evidence of such a kind as to enable the court to be satisfied that the measure does indeed comply with the requirements deriving from the principle of proportionality (see Dickinger and Ömer EU:C:2011:582, paragraph 54 and the case-law cited).
51. It cannot, however, be inferred from that case-law that a Member State is deprived of the possibility of establishing that an internal restrictive measure satisfies those requirements, solely on the ground that that Member State is not able to produce studies serving as the basis for the adoption of the legislation at issue (see, to that effect, Stoß and Others EU:C:2010:504, paragraph 72).
52. Accordingly, the national court must carry out a global assessment of the circumstances in which restrictive legislation, such as that at issue in the main proceedings, was adopted and implemented."
(vi) The margin of appreciation to be accorded to the decision maker: The meaning of "manifest" as in "manifestly inappropriate"
(vii) Guidance from European jurisprudence
"248. Games of chance and gambling, for their part, can only function and continue for the great majority of players who lose more than they win. Opening the market in that field, which would increase the share of household budget spent on gaming, would only have the inevitable consequence, for most of them, of reducing their resources".
(viii) Guidance from domestic jurisprudence
i) The test was applicable in cases relating to public health;
ii) Where what was in issue was an Act of Parliament the level of intensity of review for the purposes of the proportionality test was that of "manifest error".
iii) The test of "least intrusive means" either did not apply at all or applied with the same lower level of intensity.
iv) In relation to the least intrusive means the Claimants bore the burden of adducing evidence to show that there were other equally suitable means of achieving the gain in public welfare sought by the legitimate aim of the state in pursuing the measure.
i) In areas of policy where a wide margin of appreciation is attributed to the legislature that same margin is attributed to the executive  – ;
ii) The breadth of the margin of appreciation depends upon the circumstances of the case and is not a concept or a test that can be expressed with precision:
"200. The breadth of the margin of appreciation in relation to any decision thus depends on the circumstances of the case and, in particular, on the identity of the decision-maker, the nature of the decision, the reasons for the decision, and the effect of the decision. Further, because the extent of the breadth cannot be expressed in arithmetical terms, it is not easy to describe in words which have the same meaning to everybody, the precise test to be applied to determine whether, in a particular case, a decision is outside the margin. It is therefore unsurprising that in different judgments, the same expression is sometimes used to describe different things, and that sometimes different expressions are used to mean the same thing."
iii) So far as the obligation to choose the least restrictive measures was concerned:
"203. Further, "when there is a choice between several appropriate measures recourse must be had to the least onerous". In para 6.3 of the European Commission's Guidance referred to in paras 42 and 142 above, "the existence of alternative measures hindering trade less" is described as "an important element in the analysis of the justification [for a particular measure] by a Member State", and it is also said that a Member State has "an obligation to opt for the 'less restrictive alternative', and failure to do so will constitute a breach of the proportionality principle".
204. However, that factor should not be applied by a court in such a way as to usurp the role of the primary decision-maker. So, where there is an alternative possible measure, there may be a difference of view as to which measure would be less onerous, and, unless the view of the Member State's government that its measure is the more appropriate is manifestly wrong, the court should not substitute its own view for that of the government. This is, I think, what the Court of Justice had in mind, when it said in National Federation of Fishermen  ECR I-3115, para 59, that a measure could not be challenged as disproportionate "merely because other kinds of measures could have been adopted, since the selection of measures to be taken is a political decision falling within the purview of the Member State concerned, within the limits set by Decision 92/593".
(ix) Factors in the present case relevant to the margin of discretion
"69. In that regard, it should be noted that the sector involving games of chance offered via the internet has not been the subject of Community harmonisation. A Member State is therefore entitled to take the view that the mere fact that an operator such as Bwin lawfully offers services in that sector via the internet in another Member State, in which it is established and where it is in principle already subject to statutory conditions and controls on the part of the competent authorities in that State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime, in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators".
"44. The mere fact that a Member State has opted for a system of protection which differs from that adopted by another Member State cannot affect the assessment of proportionality of the provisions enacted to that end. Those provisions must be assessed solely by reference to the objectives pursued by the competent authorities of the Member State concerned and the level of protection which they seek to ensure (Case C-176/11 HIT and HIT LARIX EU:C:2012:454, paragraph 25 and the case-law cited)."
"112. Having regard to that margin of discretion and the absence of any Community harmonisation in the matter, a duty mutually to recognise authorisations issued by the various Member States cannot exist having regard to the current state of EU law
113. It follows in particular that each Member State retains the right to require any operator wishing to offer games of chance to consumers in its territory to hold an authorisation issued by its competent authorities, without the fact that a particular operator already holds an authorisation issued in another Member State being capable of constituting an obstacle".
"The fifth question
82. By its fifth question, the national court asks whether Article 36 EEA precludes a national statutory rule prohibiting the provision and marketing of gaming for which no licence has been granted in Norway, but which is approved under national law in another EEA State."
"85. In that respect, the Court recalls that when determining the objectives of their policy on gambling and betting, the Contracting Parties enjoy a margin of discretion to define the level sought with respect to the protection of consumers, the maintenance of public order and other legitimate aims (see paragraph 42 above). Consequently, different levels of protection may exist throughout the EEA. A licence permitting the offering of gaming services may be less strict in the home State of the gaming operator than in the host State. Levels of protection may differ, in particular, with respect to the kind of games permitted, the frequency of gambling opportunities being made available, and the forms of marketing deemed acceptable. Moreover, protecting consumers in highly specific areas such as gambling and betting, as well as maintaining public order, may require different approaches depending on the respective characteristics of each society. Even if the legislation and practice in the home State of the operator ensures a high level of protection in relation to the sociological features characterizing that state, this may not necessarily amount to the same level of protection with respect to the features characterizing the state where the services are to be provided.
86. At the outset, the EEA State where the services are to be provided thus has a right to require possession of a licence issued on the same conditions as its own nationals, even if the service provider already holds a licence issued by the home State. However, national measures must not be excessive in relation to the aims pursued. This would be the case if the requirements to which the issue of a licence is subject coincided with the requirements in the home State. That means, firstly, that in considering applications for licences and in granting them, the Contracting Party in which the service is to be provided may not make any distinction based on the nationality of the provider of the services or the place of establishment and secondly, that it must take into account the requirements already fulfilled by the provider of the services for the pursuit of activities in the home State (see, for comparison, Case 279/80 Webb  ECR 3305, at paragraphs 19–21)".
F. Proportionality: Does the new place of consumption based regime serve a legitimate objective?
(i) The issue: The legitimacy of the objectives pursued
(ii) Conclusion on the issue of legitimate objective
a) To better satisfy the statutory licensing objectives in section 1 GA 2005.
b) To improve the consistency of the application of the Act to all operators providing services in the UK.
c) To enable the GC to obtain more comprehensive information about the market and the operators providing services to the UK market so as to achieve better supervision and protection of consumers.
d) To protect consumers by increasing transparency about regulation and thereby avoiding the risk that consumers are misled or confused.
e) To ensure that social problems arising out of gambling are addressed more fully and effectively.
f) To ensure that all operators bear social and financial responsibility for the adverse social consequences of remote gambling.
g) To ensure that all operators bear similar regulatory costs.
(iii) The source of relevant evidence: Parliamentary privilege
"Freedom of speech – that the freedome of speech and debates or proceedings in Parlyament ought not to be impeached or questioned in any court or place out of Parlyament".
"I agree with Mr Speaker that to allow the evidence of a witness to a Select Committee to be relied on in court would inhibit the freedom of speech in Parliament and thus contravene article 9 of the Bill of Rights. It would have been open to the Ombudsman, who was served with this claim as an interested party, to have put the substance of the observations she made to the Select Committee into a witness statement, a letter or a public statement which could be adduced in evidence by either side. But she has not done so, and has (entirely properly) decided not to take an active part in these proceedings. I should not, therefore, allow her oral evidence to the Select Committee to be relied upon in court".
"If the Tribunal either rejects or approves the opinion of the Select Committee it thereby passes judgment on it. To put the point differently in raising the possibility of its reliance on the opinion of the Select Committee, the Tribunal potentially made it subject to submission as to its correctness and of inference which would be a breach of Parliamentary privilege".
"50. In my judgment, there is no constitutional impediment to the court receiving the material that the parties and the intervenor seeks to place before it for the purpose of informing itself as to the statutory history, the relevant considerations that led to the formation of policy, the aim of the policy in promoting the Regulations, and the existence of factors that might be relevant to the assessment of whether the Regulations were proportionate in their derogation from the principle of equal treatment of the grounds of age. The purpose of receiving this material is for the court to inform itself of any consideration that may be relevant or carry weight when it reaches its own conclusions that it has a constitutional duty to reach. In receiving and informing itself from Parliamentary materials, the court is not adjudicating upon whether anyone else who has expressed a view, (whether a Parliamentary Committee, a Minister or a witness to a Committee) is right or wrong as a matter of law or fact. Nor, in my judgment, will receipt of such material have a chilling effect on the willingness of witnesses to give evidence to such Committees. What is said to Parliament is said in public, recorded and reported on in public for all interested to read.
51. In my judgment, what the constitutional principles identified in Prebble, Al Fayed, Bentley and the OGC case indicate are as follows:
i) The court must be astute to ensure that it does not directly or indirectly impugn or question any proceedings in Parliament in the course of judicial proceedings.
ii) 'Impugn or question' extends beyond civil or criminal sanction for any statement in Parliament but includes a judicial determination as to whether a statement in Parliament is right or wrong. The judge cannot receive evidence of what is said in Parliament for the purpose of agreeing or disagreeing with it.
iii) The court must reach its own conclusions on questions of law and the legality of administrative action, subordinate legislation, and whether primary legislation is compatible with the European Convention on Human Rights or provisions on European Community Law. It cannot reach those conclusions by agreeing or disagreeing with the expressions of opinion that may have occurred inside Parliament, however eminent or well qualified may be the people expressing those opinions".
(iv) The legislative objectives of the GA 2005
(v) Consultation papers
"These differences inevitably lead to confusion amongst consumers who may not be aware that their different gambling activities are subject to varying levels of protection".
Further, the Department identified the fact that overseas licensed operators had different levels of testing and security requirements and the GC was not able to assess their robustness which could ultimately mean that consumers were gambling on websites that had not been independently tested or audited to the standard expected of licensees subject to the GA 2005. This concern was in the context of the fact that the robustness of software used by games providers was linked to the ultimate fairness of games to consumers. At paragraph [3.16] the Department stated:
"3.16 The Commission receives many enquiries from British consumers about gambling activity licensed offshore. There have been enquiries in relation to social responsibility (for example, where consumers have been unable to self exclude from websites) and unfairness (for example, where winnings are not paid out or where complaints have not been satisfactorily dealt with). However, as the Commission does not regulate these operators, they can only refer enquirers to the regulator in the originating jurisdiction and cannot investigate the complaints or follow up to determine whether the issues go on to be resolved.
3.17 These enquiries give us a general indicator of the common problems that exist for British consumers and indicate that some people are unaware that they are gambling on an overseas licensed website and are not protected by British law".
(vi) Impact Assessment: June 2011
"The policy objectives are to ensure that the licensing objectives and related protections in the 2005 Act continue to be afforded to GB consumers and to ensure that the costs of demands placed on the GB Gambling Commission resulting from the activities of offshore operators are not subsidised by licence fees paid by GB-based operators. The Gambling Act 2005 will be simplified so that remote gambling is regulated on a point of consumption basis, so all operators selling into the British market, whether from here or abroad, will be required to hold a GB Gambling Commission licence, increasing protection for GB consumers, supporting action against illegal activity (including sports betting integrity) and removing market distortions".
"109. No solution, short of one imposed at disproportionate cost and unacceptable limits on consumer choice and freedom will ever be 100% effective. This proposal, however, is no worse than the present position with non-white list/EEA operators who have to operate via third parties, and who may have some additional powers as licence fee and fines are a recoverable debt.
110. By putting in place a fair and open system of regulation which provides operators with the ability to apply for a licence to access British consumers, the vast majority of remote gambling in Britain will be effectively regulated. It is already the case that a large proportion of gambling operators demonstrate corporate and social responsibility and we envisage that these operators will want to show their commitment to this by complying with the regime we are proposing.
111. Whilst there will always be operators who refuse to comply, we anticipate that these will be limited in number and will have such a miniscule impact on the protection of British consumers and licensed operators that to implement excessive enforcement measures would be disproportionate when compared to the risk they present".
(vii) The position of the UK Government in communications with the European Commission
"The UK Government refers to and relies on the command paper published with the draft Bill and regulatory Impact Assessment dated June 2011 which details the evidence justifying the proposed reforms.
The UK Government considers that strengthening consumer protection is a necessary prudential step to limit the risks of harm to British consumers in the future particularly as more countries permit on-line gambling. As set out in the Impact Assessment, the Gambling Commission now has oversight of less than 20% of the British remote gambling market and does not have the direct access to operators, their systems and data to identify current and developing risks or to address them. Without the reforms and ability to impose consistent requirements on operators, the Gambling Commission will continue to have a very limited view of the risks to consumers in the remote market and would have to persuade an increasing number of jurisdictions to make changes it thought necessary. The Gambling (Licensing and Advertising) Bill will close this regulatory gap by ensuring all remote gambling operators who engage with British consumers are subject to consistent regulation by the Gambling Commission in accordance with the Gambling Act 2005.
As set out in the regulatory Impact Assessment, the lack of consistent regulation creates significant consumer confusion. The evidence indicates that in many cases, consumers make a reasonable assumption that an operator that is active in Great Britain must be licensed by the Gambling Commission which can lead to confusion. This is evidenced by the enquiries received by the Gambling Commission about gambling activity that is licensed off-shore (see Figure 1 below). In particular, the Gambling Commission has received enquiries about social responsibility (for example, where consumers have been unable to self-exclude from websites) and unfairness (for example, where winnings are not paid out or where complaints have been unsatisfactorily dealt with). However, under the existing arrangements the Gambling Commission cannot directly investigate these complaints or enquiries or follow up to determine whether the issues go on to be resolved, and has to refer the complainant on to overseas regulators.
Figure 1 – Summary of enquiries received by the Gambling Commission between 3 June 2011 and 22 January 2013 which relate to remote gambling operators licensed in other jurisdictions.
|Jurisdiction||Complaints & Disputes Overseas||Gambling Transaction||Government Department||Other||(blank)||Grand Total|
|01 – Alderney||198||10||3||211|
|02 – Antigua & Barbuda||29||29|
|03 – Costa Rica||13||3||16|
|04 – Cyprus||22||1||23|
|05 – Gibraltar||702||4||22||11||739|
|06 – Isle of Man||94||1||8||103|
|07 – Kahnawake||17||1||18|
|08 – Malta||136||6||1||143|
|09 – Netherlands Antilles||55||1||56|
|10 – USA||21||1||7||1||30|
Even where operators are subject to appropriate levels of regulation overseas there are different regulatory standards and approaches. There is limited consensus in areas such as standards and software testing which inevitably means that British consumers may experience varying levels of protection depending on which operator they deal with. The Gambling Commission has encountered practical difficulties in trying to obtain information or raise queries via other regulators who may well take a different view of priorities or operators. Although some operators do share some information with the Gambling Commission in addition to their own regulator on a voluntary basis, this is often of insufficient detail to be used in an investigation and limits the Gambling Commission's ability to conduct thorough investigation. There have been instances where the Gambling Commission has been unable to obtain the information from the overseas licensed operator or regulator. In some cases the Gambling Commission is told the refusal to provide information is because of overseas data protection requirements.
The UK Government considers that the inability for the Gambling Commission to demand such information, as well as the lack of obligation on operators regulated in other jurisdictions to report suspicious activity to the Gambling Commission or sports bodies constitutes a risk to consumers and to sports betting integrity in the UK".
(viii) Impermissible economic objectives
(ix) Other source material which is to the same effect
"5. We support the principle that gambling should be regulated on a point of consumption basis — even the most vociferous opponents of legislation did not argue that the principle was wrong, or that they would refuse to apply for a UK licence — and there are several reasons why it should be so regulated, including equity, consistency, clarity and responsiveness to the needs of UK consumers. The industry argues that most remote gambling by UK customers currently takes place with companies that already meet, or approach, the required standard because they are regulated by 'White-Listed' regimes; and none of our witnesses has raised any specific objection to the costs of or regulatory requirements for obtaining Gambling Commission licences".
(x) The validity of the precautionary approach
G. Proportionality: Will the new regime be ineffective because it will lead to the growth of illicit trade
(i) The issue
(ii) Claimant's submission
"As far as the GBGA is aware, the unlicensed market currently has little traction in the UK, and so the New Licensing Regime creates a substantial new threat to consumer protection where none existed".
(iii) The fallacy in the Claimant's economic assumptions
(iv) The comparables
(v) Did the Secretary of State have to disprove the Claimant's theses about the risk of diversion to illicit trades?
H. Proportionality: Whether the new regime will prove to be unenforceable
(i) The issue
(iii) The unproven assumption as to the scale of the enforcement problem
(iv) The GC's powers should prove reasonably effective
(v) The relevance of the obligation to review and repair
"As time passed the consistently adverse impact on women became apparent. But, as with the broad measure of discretion afforded to governments when monitoring measures of this type, so with the duty of governments to monitor the implementation of such measures: the practicalities of government must be borne in mind. The benefits of the Order could not be expected to materialise over-night or even in a matter of months. The government was entitled to allow a reasonable period to elapse before deciding whether an order had achieved its objective and, if not, whether the Order should be replaced with some other measure or simply repealed. Time would then be needed to implement any decision. I do not think the Government could reasonably be expected to complete all these steps in six years, failing which it was in breach of Community law. the contrary view would impose an unrealistic burden on the Government in the present case".
"…in a challenge brought promptly to the legality and efficiency of a transposition on the basis that the national measures were ultra vires the enabling power under the European Communities Act 1972, the question is principally determined by reference to social policy aims identified by the Government at the time of transposition. I accept that subsequent developments may show that Government is required to review those aims and their impact upon the class who suffer unequal treatment, but just as there is a broad measure of discretion as to the adoption of social policy aims, and the best means of giving effect to them, so there is abroad measure of discretion afforded to Governments as to when those aims and the methods of giving effect to them need to be reviewed".
(vi) The Claimant's specific criticisms
i) The Claimant contends that the GC is "a small organisation, currently equipped to regulate only 15% of the UK market" and will be under-resourced. The GC rejects this submission and I agree. The GC employs approximately 250 staff which figure is due to increase in 2015. It presently regulates in excess of 3000 licensees of which 137 are remote gambling operators. To put the scale of the problem into context Mr Adam Lewis QC, for the GC, submitted as follows:
"While it is true that the remote gambling operators it regulates are responsible for only 15% of the British consumer market, it is important to note that 55% of that market is regulated by the Gibraltar Gambling Commission, who confirms in his evidence…that he carries out that task with "six experienced staff: three of whom work on licence administration, three of whom work on regulation". With its much greater resources, and the resulting economies of scale, the GC is more than capable of assuming that burden, and the burden of regulating the remaining 30% of the market. The non-remote market it currently regulates is much larger and it involves many of the same issues, so the GC will be able to make use of its existing expertise. [Further] even if the GC's resources prove insufficient, they can be increased. Even if to begin with it had too much work for its current employees to process efficiently, and there were therefore some backlogs and delays – none of which is accepted – that would not render the whole NLR unlawful in the meantime, still less in principle".
ii) In relation to the submission that extra-territorial enforcement is impossible or very difficult the GC submits that: the scale of any problem has been exaggerated by the Claimant; in any event if problems arise these will, in the main, be resolved through liaison between the GC and the foreign regulator; and further (and in any event) sanctions available to it (which include persuading payment service providers to block payments and prosecuting or deterring advertisers in the United Kingdom from advertising such services) will generally prove effective. With regard to the issue of payment blocking the GC explained in evidence before the Court that major payment service providers had already agreed to block payments to and from unlicensed operators and to consult the GC register of licensed operators. In particular the GC had entered into arrangements with PayPal, Mastercard and Visa who account for the vast majority of on-line payments. Other possible payment methods, including top-up cards and crypto-currencies, were heavily reliant upon Mastercard and Visa. Ultimately the position of the GC is that the scale of the problem identified by the Claimant is exaggerated and artificial. The GC also explained, through witness statement evidence, that the ability to advertise to potential customers was critical to the commercial success of remote gambling operators and the GC has powers to curb illegal advertising in co-operation with major websites such as Google, eBay and Facebook. Further, the GC had achieved success in co-operating with advertising bodies, trade associations and advertising carriers to ensure that unlawful services were not advertised in future.
I. Proportionality: Is the new regime the least restrictive means for securing the legitimate objectives?
(i) The issue
(iii) Ancillary points
"To the extent that the [Secretary of State] has misunderstood the suggestion, his rejection of it was unlawful".
J. Discrimination/Equality: Is the new licensing regime discriminatory as being contrary to the principle of equal treatment?
(i) The issue
K. Rationality under domestic law: Is the refusal of the Minister and/or the GC to adopt the "passporting" approach irrational?
L. Introduction: The Secretary of State's objection
M. Conclusion on locus
(i) In this case locus should not be revisited following the grant of permission
"… where permission to bring judicial review proceedings has been given, then, unless it is appropriate to deal with standing as a preliminary issue, there is likely to be little point in spending valuable court time and costs on the issue of standing. In that situation, we would not encourage the court to embark on a complex argument about standing".
"121. It will rarely be appropriate to treat standing as a preliminary issue in the context of the substantive claim for judicial review, since both the sufficiency of the claimant's interest in the outcome and the appropriateness of any discretionary remedy on matters that stand to be assessed in the context of the claim as a whole and the evidence adduced by the parties (see IRC v National Federation of Self-Employed and Small Businesses Ltd  AC 617 per Lord Roskill at [656D – E]). Once the substantive stage has been reached, rather than serving as a "threshold issue", it is appropriate for the sufficiency of the Claimant's interest simply to be weighed in the balance when considering the question of relief (R (Dixon) v Somerset County Council  Env LR 111 at )".
I do not express a view on how rare, rare would be.
(ii) At least one member of the Claimant association has an acknowledged direct right of action under Article 56 TFEU.
"This particular obstacle could, of course, have been overcome by an individual gambling services provider with EU law rights being joined as a Claimant. However despite the Secretary of State giving the Claimant due notice of this point in his pre-action protocol response to the letter of claim, that has not been done. The Claimant has no doubt made a conscious decision to bring the claim simply in the name of the association – a limited company established in Gibraltar – without joining any of its members. But it cannot therefore then purport to rely parasitically on rights which are available (if at all) only to some of those individual members. GBGA had said that the Secretary of State has "no answer" to its argument based on the rights of Yggdrasil…But the answer is a short one. Yggdrasil is not a Claimant. If it were, the Court could have conducted an examination of the impact of such rights under EU law as Yggdrasil may have established. But no evidence of that has been adduced. Given the extremely tight timetable, it is too late for Yggdrasil to be added as a Claimant now, even if the GBGA had made an application for such joinder".
The Secretary of State's position has changed to the extent that he now accepts that Yggdrasil would have had locus had it been joined as a separate Claimant. There are, with respect, two answers to Mr Beal's objections in the skeleton. First, as Mr Beal QC pointed out this case came before the Court with extreme speed. Hickinbottom J did not require this matter to be resolved as a preliminary issue, notwithstanding that the point had been raised by the Secretary of State in a response to the letter of claim. As a matter of case management, had this case proceeded at a more normal pace then a judge might have ordered a preliminary issue or the joinder of Yggdrasil or some other company who had clear locus. I am of the view that had there been more time this issue would probably have been resolved by the joinder of a person with a direct interest. It thus seems to me technical to refuse to deal with the Claimant's case in such circumstances.
(iii) Other members of the Claimant association have a clear economic and commercial interest in the outcome
(iv) The Claimant has an interest by reason of prior involvement in the consultation and scrutiny processes.
(v) The fact that the Claimant is a representative body is not determinative
"1. A declaration that the United Kingdom is in breach of its obligations under Article 119 of the [EEC Treaty] and the [The Equal Pay Directive] by providing less favourable treatment of part-time workers (most of whom are women) than are full-time workers (most of whom are men) in relation to the conditions for receipt of statutory redundancy pay and compensation for unfair dismissal.
2. A declaration that the United Kingdom is in breach of its obligations under [The Equal Treatment Directive] by providing less favourable treatment of part-time workers (most of whom are women) than of full-time workers (most of whom are men) in relation to the conditions for receipt of statutory redundancy pay and compensation for unfair dismissal".
The Secretary of State contended that the EOC had no locus to proceed. Lord Keith delivered a judgment with whom the remainder of the Committee (save Lord Jauncey) agreed. He held that the EOC had locus:
"The matter to which the EOC's application relates is essentially whether the relevant provisions of the Act of 1978 are compatible with European Community law regarding equal pay and equal treatment. Has the EOC a sufficient interest in that matter? Under section 53(1) of the Act of 1975 the duties of the EOC include: "(a) to work towards the elimination of discrimination, (b) to promote equality of opportunity between men and women generally…". If the admittedly discriminatory provisions of the Act of 1978 as regards redundancy pay and compensation for unfair dismissal are not objectively justified, then steps taken by the EOC towards securing that these provisions are changed may very reasonably be regarded as taken in the course of working towards the elimination of discrimination. The present proceedings are clearly such a step".
Lord Keith referred to other cases in which the EOC had been the "initiating party" and in which it had successfully challenged the provisions of social policy said to lack equality. It had been common ground in those proceedings that the EOC had locus standi:
"In my opinion it would be a very retrograde step now to hold that the EOC has no locus standi to agitate in judicial review proceedings questions related to sex discrimination which are of public importance and affect a large section of the population. The determination of this issue turns essentially upon a consideration of the statutory duties and public law role of the EOC as regards which no helpful guidance is to be gathered from decided cases. I would hold that the EOC has sufficient interest to bring these proceedings and hence the necessary locus standi".
(ibid pages [25G] – [26E])
"101. The claimant contends that it has sufficient interest. Sufficient interest is the remedy afforded by judicial review; in this case the quashing of the reconfiguration decision on the grounds that the consultation process was unfair and flawed. The claimant plainly has an interest in that remedy. The majority, if not all of the individuals who have contributed to the fighting fund, together with the Directors of the claimant, would have a direct sufficient interest in their own right had they brought the claim as individuals. Some of those individuals are clinicians, others are members of the public. The adverse costs in litigation are such that no citizen of ordinary means would prudently contemplate bringing this litigation as an individual. Incorporation was and is the proper means of allowing the interests of a substantial number of persons who consider the defendant's position to be unfair and unlawful to be jointly represented. There is no better placed challenger, in fact there is no other challenger.
102. I am satisfied that the claimant has sufficient interest in these proceedings. The claimant represents many individuals who have contributed financially in order to bring these proceedings. It includes individuals who have been or could be directly affected by the closure of the Leeds Unit and clinicians who work within the unit. Incorporation, following the intervention of the Charity Commission, was a proper means of allowing the interests of a substantial number of such persons to pursue this litigation".
N. The distinction between locus and relief
"At no stage in the course of the litigation, which included two visits to this House, was it suggested that judicial review was not available for the purpose of obtaining an adjudication upon the validity of the legislation insofar as it affected the applicants".
"It is legitimate for the national court, in relation to a particular enactment of the national law, to give it a meaning in cases covered by the Community law which is inconsistent with the meaning it has in cases not covered by the Community law. Whilst it is at first sight odd that the same words should have a different meaning in different cases, we are dealing with a situation which is odd in juristic terms".
O. The issue
"8. As the Court has consistently held, the provisions of the Treaty on freedom of movement and the regulations implementing those provisions cannot be applied to activities which are confined in all respects within a single Member State…and the question whether that is the case depends on findings of fact which it is for the national court to make.
9. All the facts established in the national court's judgment are confined within a single Member State, the Kingdom of Belgium, the applicant in the main proceedings is a Belgian national, has always resided in Belgium and has worked only in the territory of that Member State.
10. Accordingly, the reply to be given to the national court is that Articles 48(1) and 51 of the EEC Treaty and Regulation No. 1408/71 in particular Articles 3 and 84(4) thereof, do not apply to situations which are confined in all respects within a single Member State".
P. Legislative framework
"In addition to the provisions of Article 52 of the Treaty on European Union relating to the territorial scope of the Treaties, the following provisions shall apply:
1. The provisions of the Treaties shall apply to Guadeloupe, French Guiana, Martinique, Réunion, Saint-Barthélemy, Saint-Martin, the Azores, Madeira and the Canary Islands in accordance with Article 349.
2. The special arrangements for association set out in Part Four shall apply to the overseas countries and territories listed in Annex II.
The Treaties shall not apply to those overseas countries and territories having special relations with the United Kingdom of Great Britain and Northern Ireland which are not included in the aforementioned list.
3. The provisions of the Treaties shall apply to the European territories for whose external relations a Member State is responsible.
4. The provisions of the Treaties shall apply to the Åland Islands in accordance with the provisions set out in Protocol 2 to the Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden.
5. Notwithstanding Article 52 of the Treaty on European Union and paragraphs 1 to 4 of this Article:
(a) the Treaties shall not apply to the Faeroe Islands;
(b) the Treaties shall not apply to the United Kingdom Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus except to the extent necessary to ensure the implementation of the arrangements set out in the Protocol on the Sovereign Base Areas of the United Kingdom of Great Britain and Northern Ireland in Cyprus annexed to the Act concerning the conditions of accession of [certain new Member States];
(c) the Treaties shall apply to the Channel Islands and the Isle of Man only to the extent necessary to ensure the implementation of the arrangements for those islands set out in the Treaty concerning the accession of new Member States to the European Economic Community and to the European Atomic Energy Community signed on 22 January 1972.
6. The European Council may, on the initiative of the Member State concerned, adopt a decision amending the status, with regard to the Union, of a Danish, French or Netherlands country or territory referred to in paragraphs 1 and 2. The European Council shall act unanimously after consulting the Commission".
"The Treaties apply to Gibraltar as a European territory for whose external relations a Member State is responsible. This shall not imply changes in the respective positions of the Member States concerned".
Q. Relevant case law
(i) EU jurisprudence
"21. Before examining this argument, I must consider whether the situation with which the referring court is confronted falls within the scope of Community law. In Case 175/78 Saunders  ECR 1129, paragraph 11, the Court stated that the provisions of the Treaty on the free movement of workers did not apply "to situations which are wholly internal to a Member State, in other words, where there is no factor connecting them to any of the situations envisaged by Community law"…the instant case does not concern the rules laid down in Treaty on the free movement of persons for, as I have explained, those rules do not apply to the island. However, since it involves the right of a British national to take up employment in the Isle of Man, it might be thought that the provisions of Protocol No. 3 are also excluded here by reason of the situation being wholly internal to a Member State. Indeed the joint observations of the DHSS and the United Kingdom suggest that that may be so since the essential point at issue is the claim of a national of the United Kingdom to take employment in a territory for whose external relations the United Kingdom is responsible and in which the communities rules relating to the free movement of workers do not apply.
22. I do not think that suggestion can be accepted. Circumstances such as those at issue in these proceedings are not "wholly internal to a Member State", for, as I have explained, the Isle of Man is not part of the United Kingdom. Moreover, Article 4 of the Protocol in requiring the Isle of Man authorities to apply the same treatment to all natural and legal persons of the Community, manifestly applies in relation to the nationals of all the Member States including the United Kingdom. It cannot therefore be said, as the Court said in Saunders, that there is no factor connecting this case to any of the situations envisaged by Community law. The effect of Saunders is that a national of the United Kingdom may enjoy fewer rights vis-à-vis the United Kingdom than nationals of other Member States. However, there is no suggestion in Protocol No. 3 that nationals of the United Kingdom enjoy fewer rights under Community law vis-à-vis the Isle of Man than the nationals of other Member States. I conclude that the circumstances of this are not to be regarded as "wholly internal to a Member State" and that they therefore fall within the scope of Community law".
"40. Turning next to Mr Pereira Roque's argument that the requirement of equal treatment should nevertheless be applied between citizens of the United Kingdom who are not Channel Islanders and nationals of other Member States it is true that Protocol No. 3 distinguishes citizens of the United Kingdom having certain links with the Channel Islands from other citizens of the United Kingdom.
41. However, since Channel Islanders are British nationals, the distinction between them and other citizens of the United Kingdom cannot be likened to the difference in nationality between the nationals of two Member States.
42. Nor can relations between the Channel Islands and the United Kingdom be regarded as similar to those between two Member States because of other aspects of the status of those islands".
"… neither, because of other aspects of the status of those Islands, can relations between the Channel Islands and the United Kingdom be regarded as similar to those between two Member States…"
"Such wording suggests that, for the purposes of the application of those Community rules, the United Kingdom and the Islands are, as a rule, to be regarded as a single Member State."
"Gibraltar is currently a British Crown Colony. It does not form part of the United Kingdom"
"28. It is necessary to determine, first, whether, for the purposes of the application of the Treaty provisions on free movement of capital, OCTs are to be treated as Member States or non-Member States.
29. The Court has already held that the OCTs are subject to the special association arrangements set out in Part Four of the Treaty, with the result that, failing express reference, the general provisions of the Treaty, whose territorial scope is in principle confined to the Member States, do not apply to them (see Case C-260/90 Leplat  ECR I-643, paragraph 10; Case C-181/97 van der Kooy  ECR I-483, paragraph 37; Case C-110/97 Netherlands v Council  ECR I-8763, paragraph 49; and Case C-300/04 Eman and Sevinger  ECR I-8055, paragraph 46). OCTs therefore benefit from the provisions of European Union law in a similar manner to the Member States only when European Union law expressly provides that OCTs and Member States are to be treated in such a manner.
30. It should be noted that the EU and FEU Treaties do not contain any express reference to movements of capital between Member States and OCTs.
31. It follows that OCTs benefit from the liberalisation of the movement of capital provided for in Article 63 TFEU in their capacity as non-Member States".
"42. Moreover, as was pointed out by the Commission at the hearing, if an exceptional rule were created for dealings between a Member State and its own OCT, a distortion would result in the EU internal market. This is so because Member States would not have to respect the same rules with regard to their own OCTs as the other Member States.
43. This argument, I would add, is supported by the judgment of the Court in Prunus, in which the Court approached the dispute by noting that it was 'necessary to determine, first, whether, for the purposes of the application of the Treaty provisions on free movement of capital, OCTs are to be treated as Member States or non-Member States.' In other words, nothing turned on the fact that problem in issue in Prunus concerned capital movements between France and a United Kingdom OCT, namely the British Virgin Islands.
44. Furthermore, in my opinion, the territorial scope of application of EU law in general is a separate legal question from the scope of individual rules of EU law, particularly when the latter contain specific clauses bringing third country activities within their rubric.
45. As I have already mentioned, the territories in which EU law is 'valid' law are specified in Article 299(1) and (2) EC. This does not mean, however, that any individual rule of EU law which, by its nature, may have certain extra-territorial effects, is inapplicable to the OCTs. The classic example of this arose in the consideration of anti-competitive conduct taking place outside of the European Union in Joined Cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85 Ahlström Osakeyhtiö and Others v Commission, but it can happen whenever the subject matter regulated by EU law necessarily encapsulates conduct or legal relations occurring outside the borders of the European Union.
46. Thus, with respect to the fundamental freedoms, purely internal situations arise when there is no relevant geographical division between two parts of a Member State under EU law governing the matter. This is the case, for example, with respect to capital movements between England and Scotland. On the other hand, and to take another example, the movements of goods between a Member State and its territory outside EU customs and/or fiscal territory in terms of free movement of goods are not purely internal situations because there is a geographical division defined by EU law.
47. Finally, I would like to point out that the situation considered by the Court in Eman and Sevinger, is distinguishable from the cases to hand. Eman and Sevinger concerned the scope of the rights of EU citizens, part of the acquis communautaire, but the territorial application of which is not delimited, either in the EU Treaties or elsewhere. For example, there is no express rule obliging the Member States to preclude their nationals who are resident in OCTs from EU citizenship law, and the rights and obligations that it entails. The Court held that 'persons who possess the nationality of a Member State and who reside or live in a territory which is one of the OCTs referred to in Article 299(3) EC may rely on the rights conferred on citizens of the Union in Part Two of the Treaty.
48. Thus, movements of capital between the Netherlands and the Netherlands Antilles, in other words two territories having a different status with regard to the applicability of EU law, do not represent a purely internal situation. Therefore Article 56(1) EC is applicable and the Netherlands Antilles has to be considered as being in the same position in relation to the Netherlands as third countries".
"It cannot be inferred from this fact that Gibraltar, is as a matter of Community law, part of the United Kingdom".
"To accept that the United Kingdom is responsible for the implementation of Community law in Gibraltar does not in any way imply acceptance of the false proposition that Community law considers Gibraltar to be part of the United Kingdom of Great Britain and Northern Ireland".
(ii) Domestic jurisprudence
"11. As for the European law issues it was not necessary to construe the UK tax charge differently or disapply it because the EU freedoms did not apply as between the UK and Gibraltar, given the particular treatment of that territory under the relevant European legislation, and the situation was therefore one which was to be regarded as wholly internal to the Member State (the UK). In relation to the Gibraltar issue we declined to make a reference to the CJEU. The fact that the Gibraltar company provided services to other Member States, that it had employees from other Member States, or that Peter Fisher had lived in Spain for a period while setting up the operation in Gibraltar did not provide a sufficient foreign connection for the purposes of EU law to engage the relevant EU freedoms."
R. The evidential dimension: What sorts of facts will be sufficient to engage Article 56 TFEU in relation to the provision of services between Gibraltar and the UK?
"65 In this case, it must be observed, first, that, in view particularly of the conclusion reached in paragraph 54 of this judgment, a contribution such as that in issue in this case which is calculated by the PEMB by reference to the quantities of potatoes produced by the party concerned and exported from Jersey to the United Kingdom certainly constitutes a charge imposed on goods despatched from one region to another in the same Member State. Second, it must be added that even though the 2001 Act covers, according to its wording, only potatoes despatched to the United Kingdom for consumption there, that does not rule out the possibility that such potatoes, once within the United Kingdom, might then be re-exported to other Member States, with the result that the contribution in question may be levied on goods which, after having passed through the United Kingdom in transit, are in fact exported to other Member States.
66 In this case, the possible development of such a pattern of re-exports from the United Kingdom to the other Member States is certainly conceivable given that, as appears from the information provided to the Court, almost all the Jersey Royal potatoes grown on Jersey are traditionally exported to the United Kingdom."