Sex shop judgment bans excessive regulation costs

The EU’s top court has backed a group of sex shop owners by ruling that a requirement to pay a licensing fee exceeding the cost of processing an application is unlawful. The case, Timothy Martin Hemming, trading as ‘Simply Pleasure Ltd’ and Others v Westminster City Council, was referred to the Court of Justice of the EU from the UK Supreme Court.

In a judgment handed down today, the CJEU said placing a charge on an application would not meet the services directive aim of facilitating access to services – even if the charge is refundable should an application be refused.

Hemming and other shop owners were challenging Westminster council's licensing regime for sex shops. The Local Government Act 1982 requires sex shop proprietors to pay two fees when submitting their application, one related to the administration of the application (non-refundable), and another for the management of the licensing regime (refundable if the application is refused).

In 2011-12, when the case started, the total fee was £29,102 (€37,700). Of that, £2,667 (€3,455) related to administration of the application and £26,435 (€34,245) related to the management of the regime.

Hemming claimed that Westminster council infringed the EU’s services directive by requiring the payment of the second part of the fee.

Under that directive, any charges that applicants incur when submitting a licence application must be reasonable and proportionate to the costs of the authorisation procedure and not exceed them. The Supreme Court asked whether the second part of the fee constitutes a ‘charge’ contrary to the directive, because the fee exceeds processing costs.

In its judgment, the CJEU said the requirement to pay a fee, part of which corresponds to the costs of managing the authorisation scheme, is unlawful even if that part is refundable. It added that the fact that a fee must be paid constitutes a financial obligation, and therefore a ‘charge’. 

Previously, the Gazette reported that local councils were prepared for a ‘significant financial fallout’ from the case.

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Sex shop judgment bans excessive regulation costs