Agenda Item No 4
The Vale of Glamorgan Council
Public Protection Licencing Committee - 7th February, 2017
Report of the Director of Environment and Housing
Licence Fees: European Court of Justice Ruling - Hemming v Westminster
Purpose of the Report
The purpose of this report is to advise members of the recent European Court of Justice ruling in the Hemming v Westminster Case. The ruling has implications for the way in which local authorities can charge for the cost of administering and enforcing certain licensing regimes.
It is recommended that the report is noted and Committee receive a further report on this matter to ensure the Council licensing processes reflect those advocated by the European Court of Judgement.
Reason for the Recommendation
To advise Members of the potential changes in Licensing fee collection.
Summary of Hemming v Westminster City Council
The European Services Directive aims to make it easier for service providers to operate across Europe, and also makes it clear that licence fees can only be used to cover the costs associated with the licensing regimes covered by the Directive and not to make a profit or deter service providers. The Directive is enacted in the UK by the Provision of Services Regulations 2009, and Regulation 18(4) provides that charges under an authorisation scheme must be reasonable and proportionate to, and not exceed, the cost of the procedures and formalities under the scheme.
In 2012, sex shop owner Timothy Hemming led a case against Westminster City Council contesting that the level of licence fees charged by Westminster City council were not reasonable. Westminster's sex shop fees were in excess of £26,000 and included costs for the management of the regime including enforcement activities against unlicensed operators; it was this aspect of the fee that was not considered by Hemming to be 'reasonable and proportionate' under the legislation.
Administrative Court (May 2012) & Court of Appeal (2013)
The Administrative Court (and subsequently the Court of Appeal) ruled that licence fees must not exceed the cost of administering the licensing process and that this could not include the costs of enforcement against unlicensed operators. However the judgement did make it clear that the costs of compliance and enforcement against licensed operators could be included in the licence fee.
Supreme Court (April 2015)
Westminster Council appealed the decision of the Court of Appeal and, in April 2015, the Supreme Court overturned the Court of Appeal's decision and made it clear that local authorities could set their fees at a level that would enable them to recover the full costs of managing end enforcing the licensing regime, including the costs incurred in proceedings taken against unlicensed operators.
The Supreme Court also gave consideration to how such fees should be structured. Two methods were considered:
Scheme A - An application fee is charged to cover the authorisation procedures involved in the processing of the application, then successful applicants are charged an additional fee that covers the running costs and enforcement of the licensing regime.
Scheme B - The applicant is charged one fee upfront that covers all costs of the application process, and running/enforcement costs of the licensing regime. If the applicant is unsuccessful the portion of the fee that covers the running/enforcement costs is refunded to the applicant.
The Supreme Court had concerns about whether these fee structures were compatible with the EU Services Directive and felt that reference to the European Court of Justice was necessary for clarification.
The European Court of Justice (ECJ) (November 2016)
The ECJ ruled that the Scheme B approach of fee setting (outlined above) was not compatible with the EU Services Directive, arguing that the Directive
'precludes the requirement for the payment of a fee, at the time of submitting an application for the grant or renewal of a authorisation, part of which corresponds to the costs relating to the management and enforcement of the authorisation scheme concerned, even if that part is refundable if that application is refused.'
Relevant Issues and Options
The ECJ ruling means that Licensing Authorities should structure their fees under the Scheme A approach as mentioned above. This means that there should be two separate fees in place; one to cover the authorisation costs e.g. the cost involved in receiving and considering and application, and an additional fee only paid by successful applicants to cover the running and enforcement of the licensing regime.
The Services Directive does not currently apply to taxi related fees (drivers, operators and vehicles), or fees and charges under the Gambling Act 2005 and Licensing Act 2005. It will apply to licensing regimes such as sex establishments, street trading, animal related licences (pet shop, animal boarders etc.), and houses in multiple occupation.
As with many other local authorities, the current position in the Vale of Glamorgan is that fees are charged in a Scheme B approach with all costs included in the initial application. It is extremely rare for applications under these licensing regimes to be refused a licence; however a refund would be given in those circumstances.
All fees are in the process of being reviewed and will be structured as outlined in Scheme A to ensure compliance with the Service Directive. It is envisaged that the new fee structure will be in place by June 2017.
The Licensing Section is currently awaiting further guidance from the Local Government Association on when the additional charge can be made and what action can be taken for non-payment of the additional fee.
Resource Implications (Financial and Employment)
The Type A approach as outlined may increase the administrative burden on the Licensing Section especially if it involves pursuing non-payment of the second fee; however these costs will need to be considered and factored into the new fee structure.
Sustainability and Climate Change Implications
There are no sustainability and climate change implications arising from the content of this report.
Legal Implications (to Include Human Rights Implications)
The legal implications appear through the body of this report.
Crime and Disorder Implications
Under Section 17 of the Crime and Disorder Act 1998 the Council has a statutory duty to consider crime, disorder and antisocial behaviour implications whilst regulating licensing activities. There are no crime and disorder implications arising from this Report.
Equal Opportunities Implications (to include Welsh Language issues)
The Council is obliged to apply its licensing conditions on an equitable basis in the case of all applications.
Regulatory Services contribute to the Well Being Outcome 1: "An inclusive and Safer Vale and Objective 2 Providing decent homes and safe communities."
Policy Framework and Budget
This is a matter for decision for the Public Protection Licensing Committee.
Consultation (including Ward Member Consultation)
Relevant Scrutiny Committee
Homes and Safe Communities.
William Lane, Operational Manager, Shared Regulatory Services
Miles Punter - Director of Environment and Housing