Appeal judges not convinced that sex shop ruling will damage SRA

An argument by Westminster Council's QC in a case involving Soho sex shops that a European directive could have"serious and adverse implications" for regulators, including the SRA and BSB, has been rejected by the Court of Appeal.

A group of West End sex shops relied on the Services Directive to challenge the £29,000 license fees they were charged by the council. The fee covered both the cost of compliance visits to licensed shops and operations to deal with and prosecute unlicensed operators.

The court heard that under the Services Directive, which came into force in the UK in December 2009, charges for schemes requiring a person to obtain the authorisation of a competent body to have access to or to exercise a service activity must not exceed the cost of authorisation procedures and formalities'.

The High Court held in May last year that enforcing the sex shop licensing system against unlicensed operators could no longer be reflected in the licence fee.

As a result Mr Justice Keith ordered Westminster Council to recalculate licence fees charged from 2006 and "make restitution" of the difference to the sex shops.

Giving the leading judgment in R(on the application of Hemming and others) v Westminster [2013] EWCA Civ 591, Lord Justice Beatson said he was "not satisfied" by the council's "consequentialist" arguments on the impact to other regulators if the High Court's interpretation of the directive stood.

Beatson LJ said the council's QC, Nathalie Lieven, had argued that Keith J's construction would have "serious and adverse implications for a number of regulatory regimes in this country which have hitherto relied on fees from persons authorised to provide services in a given area to administer and police the regulated activity against unlicensed operatives".

The lord justice went on: "Miss Lieven's examples of regulatory regimes covered by the Services Directive and the 2009 Regulations, where the regulator has no independent source of income, were the Bar Standards Board and the Solicitors' Regulatory Authority.

"She reiterated the council's argument that adopting the judge's construction would mean that the regulatory regime would be critically undermined.

"Her submission was that, if such bodies could not recover the costs of enforcement from fees charged to authorised practitioners, there would be no realistic and reliable means of recovering such costs."

However, Mr Justice Beatson said the QC's submissions were "insufficiently detailed to enable anything more than an impression to be gained" of how the services directive could apply to other regulators.

"There was, for example, no evidence about what the position would be if the fees payable by practising solicitors could not be used to monitor and prosecute people who hold themselves out as solicitors.

"The material about the position of the BSB does not support the council's case because the BSB does not prosecute those who impersonate barristers but relies on the CPS."

Beatson LJ concluded that the arguments about the impact on other areas did not, "on the material before this court, justify a departure from the clear wording of the Services Directive and the 2009 Regulations or show that the construction adopted by the judge is inimical to the purposes of the directive."

He dismissed Westminster Council's appeal. Lady Justice Black and Lord Dyson, the Master of the Rolls, agreed.