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Court of Justice finds in favour of sex shops

In the latest twist in the sex shop licensing litigation, R(Hemming & ors) v Westminster City Council, on 16 November 2016 the Court of Justice of the European Union delivered judgment in favour of the licensees.

The Supreme Court had referred the case to the Court of Justice to consider the legality of charging up-front licence fees including third party enforcement costs at the point of application for a licence.

The Court of Justice resoundingly rejected Westminster's case that it was entitled to charge such up-front fees to applicants, even if these fees were refundable to unsuccessful applicants. The full judgment can be read here.

Westminster had charged sex shops applying for an annual renewal of their licence a total fee of about £29,000. Of this only £2,000 represented the costs of administering the application process, while more than £26,000 represented the costs of managing and enforcing the licensing regime, in particular investigating and prosecuting unlicensed traders.

The Court of Justice held that the second part of the fee was unlawful as contrary to the Services Directive 2006. Article 13(2) of the Directive only permitted applicants to be charged for the costs of administering the application process. This was regardless of whether the second part of the fee was refundable to unsuccessful applicants.

At the time the case was originally brought in the High Court, Westminster City Council charged an annual fee for the renewal of sex shop licences of £29,102. It has since reduced the fee to £3,288, including enforcement costs.

The Court did not comment on the wider issues raised by the case. However, in his opinion dated 28 July 2016, Advocate General Wathelet questioned the compatibility of the domestic licensing regime with the Services Directive. He cast doubt on whether it was permissible under the Directive to limit the duration of sex shop licences to one year or to charge successful applicants for the cost of investigating and prosecuting unlicensed traders. The Advocate General's opinion can be found here.

It appears most unlikely that we have heard the final word on these wider issues.

The sex shop owners were represented by Head of Cornerstone Barristers Philip Kolvin QC leading Matt Hutchings of Cornerstone Barristers and Tim Johnston of Brick Court Chambers, instructed by Stephen Dillon of Gosschalks.