Sex shops win landmark licensing case against Westminster City Council

In the long-running case of Hemming (Simply Pleasure Ltd) and Others v Westminster City Council, the Court of Justice of the European Union (CJEU) has ruled a requirement to pay a licensing fee exceeding the cost of processing an application is unlawful.

Gosschalks was instructed in 2011 by the operators of 11 licensed sex shops in Soho, and two more in Covent Garden and the West End.

The case challenged the annual licence fee of £29,102 on sex shops levied by Westminster City Council.

This fee had been charged by Westminster since 2005 despite the European Services Directive, which came into force in 2009.

Under this Directive, licence fees must not exceed the cost of the authorisation procedures which, the retailers argued, could not possibly include the cost of enforcement against and prosecution of unlicensed operators.

It was accepted during the course of the proceedings that over £26k of the fee charged by Westminster reflected the costs of enforcement and prosecution.

After the retailers’ comprehensive success in the High Court in 2013, the Council brought a succession of appeals, during which most of their arguments were either abandoned or rejected by the Courts.

In 2015, the Supreme Court referred the case to the Court of Justice of the EU (CJEU) to consider the lawfulness of licence fees paid on application comprised of two parts, namely the costs of processing the application and the costs of enforcement against third parties.

It also asked whether the second part of the fee was a ‘charge’ if it was refundable to unsuccessful applicants.

In its ruling on 16th November 2016, which can be viewed here, the CJEU backed the group of sex shop owners.

It said that ‘the fact that a fee must be paid constitutes a financial obligation, and therefore a charge’ regardless of whether anything over and above this may be refunded to unsuccessful applicants. 

Steve Dillon, Partner, Head of Insolvency and lead commercial litigation Partner in this case, said:

“We are within sight of the end of this long legal battle. As a direct result of which, the annual licence application fees in Westminster have been reduced by almost £26,000.  I’m delighted that my clients – and retailers in general – got the right decision.

“Along with Philip Kolvin QC and our team of specialist counsel from Cornerstone and Brick Court Chambers, we are proud to have provided support to these retailers in the High Court, Court of Appeal, Supreme Court and the CJEU, and will continue to do so for other retailers who may have been affected by unlawful licensing fee regimes.”

Wider problems with unlawfulness of the licensing scheme noted by the CJEU's Advocate General in July (download here) may be the subject of future legal proceedings.

Need advice? Get in touch today

If you think you’ve overpaid licensing fees to your local authority, please call Steve Dillon today on 01482 325252.

Or email Steve here.

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