May 31st, 2013 by James Goudie KC

The costs of enforcing a licensing system (of sex establishments) against unlicensed operators (who may not have applied for authorisation) cannot be reflected in licence fees charged by a local authority (under the Local Government (Miscellaneous Provisions) Act 1982).  So the Court of Appeal has held in Hemming v Westminster City Council [2013] EWCA Civ 591, upholding Keith J.  This is because such costs are not (proportionate) costs of “authorisation procedures and formalities” under an “authorisation scheme”.  They are therefore prohibited by the EU Services (in the Internal Market) Directive and the Provision of Services Regulations 2009, SI 2009/2999.  In order to justify a (licence) fee or charge it has to be shown that it is related to the cost of the actual authorisation process: Beatson LJ at para 84.  The Court rejected (para 98) the “consequentialist arguments” about the effect on other regulated areas advanced by the Council in support of its construction.  The Court, however, accepted (para 103) that not only can costs in investigating the suitability of an applicant be reflected in the fee, so too, in the case of an application to renew a licence, can be the costs of monitoring the applicant’s continued suitability and compliance with the licence terms.  Enforcement against licensed operators is to be distinguished from enforcement against unlicensed operators.

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