Workshop: Late night licensing

The case of Hemming (t/a Simply Pleasure Ltd) and others v Westminster City Council [2012] EWHC 1260 (Admin) concerned a challenge to the reasonableness of an annual fee of over £29,000 for a sex establishment licences in Soho, London.

The court was also asked to consider whether the implementation of the EU Services Directive (EUSD) no longer permitted the costs of enforcing a licensing system to be reflected in the licensing fee. As Keith J noted, this latter issue, 'has wider ramifications than the narrow interests of the parties' (para.32). If anything, this is an understatement: it will apply to many areas of public law where administrative permits are required. However it is of particular relevance to licensing.

In his detailed judgment, Keith J held that: 'Whatever domestic law had permitted in the past, there had in the future to be, not only a proportionate relationship between the fee which was charged and the cost of the 'authorisation procedures', but the fee could not exceed the cost of those procedures... There is simply no room for the costs of the 'authorisation procedures' to include costs which are significantly in excess of those costs.'
This decision is contrary to and overrules, the pre-directive position that entitled local authorities to account and charge for the 'vigilant policing'¦ within the city'.

The emphatic decision raises significant questions about the setting and accounting of local authority fees '“ where the EUSD applies, general enforcement costs are no longer recoverable. However, it casts serious doubt over new proposed late night licensing powers.

Late night levy

The late night levy is a new power enabling local authorities to charge a levy to persons who are licensed to sell alcohol between midnight and six am in a local authority's area, as a means of raising contribution towards the costs of policing the late-night economy (Home Office, Guidance on the Late Night Levy, October 2012, para 1.1). It has been introduced by sections 125-139 of the Police Reform and Social Responsibility Act 2011 (PRSRA 2011); further guidance and secondary legislation is imminent.

EU Services Directive

Regulation 18(4) of the EUSD provides that: 'Any charges provided for by a competent authority which applicants may incur under an authorisation scheme must be reasonable and proportionate to the cost of the procedures and formalities under the schemes and must not exceed the cost of those procedures and formalities.'

In Hemming the court recognised that the extent and scope of authorisation scheme is very wide. An authorisation may be granted not only by a formal decision but also by an implicit decision (para 39).

Article 4(6) of the EUSD states that authorisation scheme means any ?procedure under which a provider or recipient is in effect required to take steps in order to obtain from a competent authority a formal decision, or an implied decision, concerning access to a service activity or exercise thereof.

In the context of the EUSD the key question from Hemming is whether the late night levy is an authorisation scheme '“ a number of factors suggest that it might be:

1. Government consultation papers and the late night levy guidance expressly label the levy as a charge and section 126(2) of the PRSRA 2011 refers to 'relevant late night authorisation'.

2. The levy is a charge, which must be paid in order to permit the sale of alcohol within the late night period.

3. A failure to pay the levy will result in ?the suspension of the entire ?premises licence.

Overall, the requirement to pay the levy is a procedure or step that an operator is required to take in order to access the late night period and exercise an authorisation to operate within that period. It is therefore likely that the directive is engaged.

Excessive

Given this, it is clear from Hemming that the fee for late night authorisation cannot include the costs of policing (see para 33) or the 'the cost of policing and other arrangements for the reduction or prevention of crime and disorder, in connection with the supply of alcohol between midnight and six am' (s 125(3)(a) PRSRA 2011). Not only are these costs excessive and disproportionate, they would fall foul of the EUSD.

If this analysis is correct the entire raison d'etre of the late night levy is undermined and the provisions of the levy effectively redundant. It clearly also has wider ramifications for other authorisations to which the EUSD applies.

Hemming is due to be considered by the Court of Appeal, a hearing scheduled for January 2013.

Until such time local authorities should proceed with the implementation of the levy with extreme caution.