European Court of Justice gives judgment on licensing fees and the Services Directive

17/11/16

The European Court of Justice handed down its judgment today in an important case concerning Article 13(2) of the Services Directive.

Westminster City Council charged a two-part fee to applicants for sex shop licences, both elements of which had to be paid at the point of application. The first element related to the cost of administrating the application process, the second (much larger) element​ related to the costs of running an enforcement scheme, to crack down on unlicensed sex shop operators. If an application was rejected, the Council refunded the enforcement element of the fee to the unsuccessful applicant. The Supreme Court referred two questions to the European Court of Justice and asked, in essence, whether the requirement to pay the enforcement fee at the point of application breached Article 13(2) of the Services Directive, which provides that “... any charges which the applicants may incur from their application shall be reasonable and proportionate to the cost of the authorisation procedures in question and shall not exceed the cost of the procedures.”

The Court agreed with the Advocate General and held that (1) the refundable element was a charge incurred from the application (and it was irrelevant that it was refundable if the application was unsuccessful); and (2) it was unlawful to charge for enforcement costs at that point, since they were not included in the "cost of the procedures". 

The matter will now be relisted before the Supreme Court for final resolution.

The judgment is here.