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Major payout looms after Advocate General opinion on licensing fees

Local authorities could face a multi-million pound payout if an opinion of an Advocate General on the calculation of fees for licensing is confirmed by the Court of Justice of the European Union.

The Supreme Court had asked the CJEU to provide a preliminary ruling on the interpretation of Article 13(2) of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (known as ‘the Services Directive’).

The case concerned the payment of a fee for the grant or renewal of a ‘sex establishment’ licence in Westminster. The fee was made up of two parts, one related to the administration of the application which was non-returnable if the application was refused, and the other (much higher) related to the management of the licensing regime which was refundable if the application was refused.

In the opinion, which can be viewed here, Advocate General Wathelet said the crux of the case was “essentially whether the requirement to pay the second part of the fee is consistent with Article 13(2) of the Services Directive. To that effect, the case goes beyond the strict confines of the grant and renewal of sex shop licences, as illustrated by the fact that several professional associations, such as those representing lawyers and architects, intervened in the proceedings before the national court”.

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The Advocate General concluded: “Article 13(2)….. must be interpreted as precluding the competent authority of a Member State from taking into account, when calculating the fee due for the grant or renewal of an authorisation, the cost of managing and enforcing the authorisation scheme, even if the part corresponding to that cost is refundable where the application for the grant or renewal of the authorisation in question is refused.”

The full court will now consider the issue.

Commenting on the ruling, law firm Bevan Brittan said there were significant implications for local authorities as a whole, not just for Westminster, with councils issuing as many as 600,000 licenses across England and Wales governing a range of venues including pubs, clubs and other places of entertainment on payment of license fees, "which could now be, in part, unlawful".

Partner Virginia Cooper said: “If it follows the opinion of the Advocate General, the final decision reached by the ECJ will have wide reaching implications for the local authority sector.

“The Advocate General has concluded that it is unlawful for authorities to include in the charge the costs of managing and enforcing premises licenses - such as investigating and prosecuting third parties operating without authorisation – if the license fee is payable at the same time as the application for authorisation.

“If confirmed, authorities will only be permitted to include in the license fee a contribution towards regulatory and enforcement costs where successful are not required to pay the fee until their authorisation is accepted.

“Councils and other authorities that have levied these potentially unlawful fees within the last 12 years could now be subject to restitution claims from a range of claimants and at a substantial cost.”

Cooper added: “If they have not already done so, authorities should consider reviewing their existing licensing schemes to identify whether or not any of their schemes fall within the remit of the Directive and whether or not any fees levied may fall into the category disapproved of by the Advocate General.”

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