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Supreme Court to rule next week in landmark licensing fees dispute

The Supreme Court will next week (29 April) hand down its judgment in the Hemming case, a ruling that could have major ramifications for the ability of local authorities and other regulators to charge fees for licences.

The case of R (on the application of Hemming (t/a Simply Pleasure Ltd) and others) v Westminster City Council UKSC 2013/0146 centred on whether the local authority’s scheme of charging fees for licensing sex shops in Soho was permitted by Directive 2006/123/EC on Services in the Internal Market, as implemented by The Provision of Services Regulations 2009.

The respondent businesses run sex establishments, which are required to be licensed. Westminster was responsible for setting the fee when such licences were granted or renewed.

The fee was set as £28,531, in 2003, by the council’s Major Licensing Applications Committee and as £29,102, in 2004, by its Licensing Sub-Committee.

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Subsequently, neither committee considered the fee (albeit, that the fee was reviewed annually by one of Westminster’s officers) so that it remained the same until the year ending 31 January 2012.

The fee was calculated so as to cover the cost of:

  1. enforcing the licensing regime against unlicensed operators and monitoring compliance by licensed operators (accounting for around 90% of the fee); and
  2. administering the application.

The sex shop owners brought a judicial review in 2011 claiming that Westminster’s setting of the fee was unlawful. They argued, inter alia, that since the Provision of Services Regulations 2009 had come into effect in 2009, implementing Directive 2006/123/EC, the council was disentitled from including in the fee the cost of enforcing the licensing system against unlicensed operators.

In the High Court Mr Justice Keith upheld the respondents’ claim and ordered Westminster to make restitution of the difference between the payments it had received and the lawful fee.

In May 2013 the Court of Appeal dismissed the council’s appeal, except as to the amount that had to be repaid.

This reportedly still left Westminster with a bill for £2m. Its cabinet member for Public Protection and Premises at the time claimed that the Court of Appeal decision would mean a "free-for-all for the sex industry", and that the authority would not have the resources to deal with illegal sex shops.

Counsel for the respondents, Philip Kolvin QC of Cornerstone Barristers, subsequently argued in a book published in June 2013 that the fee regulations for 600,000+ licences could be unlawful.

Westminster took the case to the Supreme Court. It was heard by a panel of five justices – Lord Neuberger, Lord Mance, Lord Clarke, Lord Reed and Lord Toulson – on 13 January 2015.

The Local Government Association made a joint submission along with other intervenors including the Law Society and the Farriers Council.

The Supreme Court will issue its ruling next Wednesday, 29 April.

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