UK Gambling Act Gibraltar Challenge Rejected by High Court

October 11th, 2014 | by Kaycee James
The Royal Courts of Justice London

Two days after Phil Ivey lost his case against Crockfords here, the High Court in London shot down the GBGA’s challenge to the UK Gambling Act. (Image: Alamy)

The UK Gambling Act will go into effect on November 1, despite a challenge to its legality from the Gibraltar Betting and Gaming Association (GBGA).A High Court judge in London has rejected the GBGA legal challenge to the new UK Gambling (Licensing and Advertising) Act, ruling it “neither disproportionate, nor discriminatory, nor … irrational.”

The legislation, which will establish a point-of-consumption tax for operators, was delayed for a month while the Department of Culture, Media and Sport considered the GBGA challenge, but it will now come into force on November 1.

At the heart of the GBGA’s objection to the new licensing regime was the fact that all online gambling operators wishing to engage with the UK market will now be required to hold a UK license, and therefore pay a 15 percent tax on gross gaming revenue. Previously, businesses were able to be licensed in a number of jurisdictions around the world that had been whitelisted by the UK (such as Gibraltar) that charged a  lower tax rate.

Clear-Cut Case

The GBGA contested that the point of consumption tax would drive customers to the unregulated markets, because licensed UK poker sites would be forced to raise rakes and cut bonuses in order to offset the cost of operating within the new regime. This, argued GBGA, would defeat the point of regulation in the first place, and contradict the Act’s stated aim of protecting the consumer.

Furthermore, stated GBGA, the Act was tantamount to “wholly unjustified, disproportionate and discriminatory interference with the right to free movement of services,” and contravened Article 56 of the Treaty on the Functioning of the European Union (TFEU), which deals with the right to trade freely across borders.

The judge ruled, however, that the UK government had addressed all considerations in drawing up the legislation and had been able to provide satisfactory evidence to justify its policy.

“There are no errors or flaws in that logic or in the procedures which led to the adoption of the final policy conclusion,” the judge said. “This, in my judgment, is a clear-cut case.”

UK Not in Breach of Article 56

He also ruled that Gibraltar, as a British Crown dependency, was not a distinct EU member state, and therefore trade restriction between Gibraltar and the UK could not constitute a breach of EU law. The UK could only be in breach of Article 56, he said, if it could be said in this case to be “exerting a spin-off, indirect effect on inter-Member State trade. The end result is that the claim does not succeed,” he concluded.

The GBGA expressed its disappointment with the court’s decision in an official statement: “Cross-border regulatory regimes require significant co-ordination and co-operation on key legal and regulatory issues and the UK already had this with the Gibraltar industry, regulator and jurisdiction,” it said. “We maintain this law is not in the best interests of consumers, the industry and the regulator itself and that there are more effective ways of dealing with the challenges of regulation and competition in this sector.”

The GBGA’s only recourse now is to take the case to the European Court of Justice (ECJ), but as Julian Harris at law firm Harris Hagan said recently, its chance of success is slight.

“The ECJ could strike it down,” says Harris, “but it would have to be fairly flagrantly in breach of European law. And it’s not.”

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