GBGA Loses High Court Case, UK to Implement Gambling Act November 1st

The Gibraltar Betting and Gaming Association (GBGA) has lost its legal challenge to modifications made to the United Kingdom’s Gambling (Licensing and Advertising) Act, in a British High Court decision handed down today by Justice Sir Nicholas Green.  In a 96-page decision, Justice Green rejected several arguments made by the GBGA, including the assertion that the 2012 Gambling Act changes violated EU treaty concerning the offering of GBGA members’ services.

GBGAThe sweeping decision by Justice Green leaves clear the United Kingdom’s plans to implement the Gambling Act modifications as of November 1st.  That implementation date has already been pushed back by one month while the GBGA challenge was being adjudicated.  The GBGA is not expected to appeal the decision.

Among the most important elements of the Gambling Act modifications that will go into effect in three weeks are formal licensing for UK-facing operators, requirements that licensed operators also offer legal and regulated services in other prominent international jurisdictions, and perhaps most importantly, a 15% “point of consumption” tax to be applied to all gambling transactions involving UK bettors, no matter where the online gambling firm is domiciled.

Primary among the UK’s intents in implementing the new series of regulatory changes is a desire to repatriate tax revenue lost when dozens of former UK gambling firms moved their corporate operations to Gibraltar in the last decade.  As much of 55% of all United Kingdom gambling business is now channeled through Gibraltar-based online sites, which due to a tax-friendly Gibraltar licensing regime had resulted in virtual tax-free operations for the firms.  By repatriating the revenue for the UK-initiated bets, the UK government hopes to recoup as much as £300 million in annual gambling tax revenue.

In his sweeping decision, Justice Green ruled against each of the GBGA’s assertions, writing as follows:

In relation to the issues arising I have concluded that the Claimant has not established that the new regime is unlawful under EU law or domestic law.  It is neither disproportionate, nor discriminatory, nor is it irrational. The new regime serves a series of legitimate objectives. There is no reason to doubt Parliament’s judgement that it will achieve a reasonable degree of effectiveness and there is no proper basis for concluding that it is or will be discriminatory in its effects. Further, I reject the submission that the new regime will create perverse incentives and lead to the creation of an illicit market of unscrupulous service providers.  I also reject the submission that the passporting proposal would meet the legitimate objectives of Parliament or prove effective or achievable without significant bureaucracy or extra cost.  My conclusions in relation to the decision of Parliament to adopt the new legislative regime apply equally to the position of the GC in relation to implementation.

The aforementioned “passporting proposal” was an alternative solution proposed by the GBGA and its 30 or so member firms, which would have, if accepted by the UK, left the redirected Gibraltar online gambling activity operating in a virtual tax-free mode.  Though financially advantageous for those operators, the GBGA’s passporting proposal would not, according to Justice Green, have aided the UK and Parliament in achieving its own goals under the Gambling Act changes.

Justice Green also ruled that Gibraltar was not a full European Union member despite being legally separate from the UK, and thus the GBGA and its member firms were not due full EU treaty protection, another part of the group’s claims.  Instead, according to the ruling, whatever EU rights Gibraltar obtains still come as a result of its being a British protectorate, and thus, the EU treaty-violation claims are invalid, since that would imply a trade circumstance involving the UK and another EU member, rather than between the UK and one of its territories.

The High Court justice also acknowledged that the UK-Gibraltar relationship could possibly affect Gibraltar’s trade relationships with -other- EU member states, but that such a claim had not been made and was not within the scope of his legal ruling.

Wrote Justice Green in his decision:

… In relation to the constitutional position as between the United Kingdom and Gibraltar I have concluded that Gibraltar is NOT to be treated as the SAME member state as the UK for the purpose of Article 56 TFEU.  Equally, Gibraltar is not a Member State in its own right so a restriction on trade between itself and the UK is not one on inter-Member State trade.  Gibraltar is a territory with a different legal and political status to that of the UK as is made clear in Article 355(3) TFEU.  However, the conclusion that Gibraltar and the UK are legally separate does NOT mean that a restriction on the provision of services between the two territories IS without more a restriction engaging Article 56 TFEU.  Whether there is such a consequence is a question of fact which focuses upon whether any of the restrictions are capable of exerting a spin-off, indirect, effect on inter-Member State trade.  In the event, whilst I have expressed scepticisms as to whether such an effect could in fact arise, it has not been necessary to form a decided conclusion on this.

At last report, the UK’s Gambling Commission had received 161 applications for licensure under the new regulations, while a handful of firms have decided to withdraw from the UK market.


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