Gibraltar Betting & Gaming Association Ltd v (1) The Secretary of State for Culture, Media & Sport and (2) The Gambling Commission [2014] EWHC 3236 (Admin)

The High Court held that the provisions of the Gambling (Licensing and Advertising) Act 2014 were neither a disproportionate restriction on the freedom under Article 56 TFEU nor contrary to domestic law.

Key findings

  • Courts should not interfere with Acts of Parliament unless they are manifestly inappropriate.
  • Relevant factors in determining the margin of appreciation to be granted to a public body include the decision maker's status and the risks associated with the regulated activity.
  • The more political and value-laden an issue is, the less likely the Courts will be to intervene.

Background

The Claimant was the Gibraltar Betting and Gaming Association Limited (“GBGA”), which is a trade association based in Gibraltar representing international online gambling operators licensed in Gibraltar. GBGA challenged the legislative framework introduced by the Gambling (Licensing and Advertising) Act 2014 (“the impugned Act”), which amends the Gambling Act 2005. The impugned Act introduces ‘fundamental’ changes to the existing regulatory system. The key change is a shift from a system of regulation based on the place of supply to one based on the place of consumption. Consequently, operators who know (or should know) that their facilities for gambling are being used or are likely to be used by people situated in Great Britain will need to be licensed in Great Britain in order to avoid committing an offence.

This change has far-reaching implications. A large number of major operators providing online gambling had relocated to offshore jurisdictions, with an estimated 55% of all operators being now based in Gibraltar. The new provisions bring these companies within the ambit of the UK Gambling Commission (“GC”) and will subject them to a point of consumption tax.

Issues

GBGA submitted that the new regime is unlawful on two primary grounds:

  1. It is a disproportionate restriction on the freedom to provide services as guaranteed under Article 56 of the Treaty on the Functioning of the European Union (“TFEU”); and
  2. The decision to adopt the new regime and to refuse its alternative ‘passporting proposal’ was irrational.

The Secretary of State and the GC rejected these submissions, arguing that the new regime is perfectly legitimate, reasonable and proportionate. As a matter of principle, it was submitted that the Parliament and Executive enjoys a wide margin of discretion to choose the appropriate method of regulation under both EU and domestic law.

The High Court’s decision

On Article 56 TFEU

At the outset, both defendants conceded that the new regime introduced a restriction for the purposes of Article 56 but submitted that there was a justification for the restriction and that this justification was proportionate. After a detailed examination of the circumstances in which the new measures had been introduced, Mr Justice Green held that the measures were proportionate. On the standard of review applicable to proportionality challenges to national measures on the basis of EU law, he noted that the Court must undertake these four steps:

  1. Identify the objective of the measure in question and determine whether it is a lawful objective
  2. Determine whether the measure is effective to achieve the said legitimate aim;
  3. Determine whether the measure is no more onerous than is required to achieve that aim; and
  4. Ensure that the measures do not produce adverse effects that are disproportionate to the aim pursued.

In the instant case, it was concluded that the impugned Act satisfied the above test. The government had addressed all the relevant considerations and had a sufficient evidential basis for its position. He rejected GBGA’s submissions that the move would incentivise illicit trade and that the new regime would be unenforceable.

The Court undertook a detailed analysis of the margin of appreciation to be accorded to decision-makers, and the connected question of the scope of ‘manifestly inappropriate’ test. The exercise of determining the margin was context-specific, with factors including the decision maker's status and the risks associated with the regulated activity being particularly relevant. It noted that the more ‘political and value-laden an issue’, the less the courts should interfere. Further, while dealing with Acts of Parliament, it held the Court should only step in if ‘there are fundamental errors or where the policy choices adopted are wholly unsupported by evidence or unconnected with any lawful policy objective and cannot on any logical or sensible basis be said to be consistent with the various limbs of the proportionality test’. In accordance with this approach, while considering GBGA’s argument that the alternative ‘passporting proposals’ would have been a more suitable measure, the Court observed that the only question was whether it fell within the scope of Parliament to reject the proposals, as it was not within the Court’s purview to debate their merits and demerits.

On irrationality under domestic law

The State challenged the admissibility of this argument on the basis that an Act of Parliament cannot be challenged purely on domestic public law principles. Mr Justice Green did not address this question, but noted that even if such an argument on irrationality were admissible, the new regime introduced by the impugned Act was such that it would pass ‘any standard of judicial review’.

Comment

This case sees the Court grapple with the question of the scope of the term ‘manifestly inappropriate’. In that respect, the Court lays down a clear marker for the extent of judicial interference with Acts of Parliament. Courts should only step in where there were fundamental errors, or a lack of evidence, or where the Act is completely disproportionate to the objective sought to be achieved. The decision also lays out the approach to be followed when assessing whether a proposal is justified and proportionate for the purposes of EU law. It is interesting to note that despite the technical differences in the standards to be applied in EU law and domestic irrationality challenges, the Court's approach of reluctance to intervene in issues of policy and discretion was equally applicable in both spheres.