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Gibraltar gambling industry threatens judicial review of "unlawful" new UK licensing regime

Proposed changes to the way in which gambling operators based outside Great Britain but wishing to provide or advertise remote gambling services to GB-based consumers would be licensed are "unlawful" and would "threaten the safety of consumers online", Gibraltar-based operators have said.

The Gibraltar Betting and Gaming Association (GBGA), which represents Gibraltar-based online gambling operators, has informed the UK government and Gambling Commission of its intention to apply for judicial review of the changes, which are set out in the recently-published Gambling (Licensing and Advertising) Act. The Act outlines a new 'point of consumption' (POC) regulatory framework for remote gambling, to take effect once secondary legislation is in place.

GBGA chief executive Peter Howitt said that this new licensing regime, combined with planned tax changes, would drive consumers to unregulated or poorly regulated operators. The regime would effectively require the Gambling Commission to police firms based all over the world without proper oversight or enforcement powers, he said.

"This is bad for UK consumers, bad for the regulated industry, bad for Gibraltar and is in breach of European law, but fantastic news for operators who choose to avoid proper regulation," he said. "We know of no precedent where any regulator in any industry will be granted the role of licensing and regulating operators all over the world in this way, threatening to criminalise companies and people who fail to submit to its regime."

"The likely impact of this legislation will be to drive UK consumers towards unregulated or poorly regulated operators, leaving them exposed to unnecessary risks. This Act allows operators from 165 new jurisdictions to gain licences to operate and advertise in the UK and the Gambling Commission is supposed to regulate this industry with no extra-territorial information gathering or enforcement powers. Clearly that spells a new danger for British consumers," he said.

The GBGA has claimed that the new regime would breach European law by being a neither reasonable nor proportionate means of achieving the government's stated aim of better consumer protection. In letters to the UK government and the Commission, the GBGA claimed that the new regime set out in the Act was a "disproportionate and unjustified interference with the right to free movement of services", was "not capable of improving consumer protection because it will be largely unenforceable", would have "adverse unintended consequences, which will outweigh any possible benefits", and would "deliver a competitive commercial advantage to unscrupulous operators".

The GBGA has also claimed that the new regime was "discriminatory in that it places the same burden on all operators irrespective of the local legal and regulatory regime", which "is contrary to the UK government's earlier assurances that ... operators in 'trusted jurisdictions' would be subject to a 'much lighter touch approach' (14 July 2011)".

According to the GBGA, a 'passporting' regime under which national regulators would continue to license their own operators but work with and share information with the Gambling Commission on a formal basis would be a more effective and proportionate means of meeting the same aims. However, the UK government rejected this proposal without proper consideration or explanation, the GBGA said.

Once the new regime is in force all gambling operators, wherever they are based, would be required to obtain a remote gambling licence from the Gambling Commission if they wished to provide or advertise remote gambling services to consumers in Great Britain. The new law would bring many foreign-based operators within the scope of direct regulation by the Commission by altering the licensing regime based on where bets and wagers are placed – the 'point of consumption' – rather than where the operator is based – the 'point of supply'. Licensed remote gambling operators would also have to adhere to the Commission's Licence Conditions and Codes of Practice (LCCP).

Separately, the UK government has decided to implement a new tax regime for remote gambling which would also follow a POC approach. Under the plans, which are contained in this year's Finance Bill, the obligation to pay tax would apply where there are arrangements between a gambling operator and a 'UK person' for that person to participate in remote gambling, subject to some limited exemptions. The provision of remote gambling services to GB consumers is not currently subject to the UK's tax regime.

Gambling law expert Susan Biddle of Pinsent Masons, the law firm behind Out-Law.com, said previously that any legal challenge could significantly delay the planned introduction of the reforms. However, responding to news of the GBGA's letters, she pointed out that the current timetable would not be affected if the application for judicial review was rejected, "depending on how long this process alone takes".

"Some of the changes to the LCCPs are unrelated to the change to POC regulation and the indications are that the Commission will push ahead with these, even if the POC changes are deferred," she said.

"The change to the tax regime is separate. On this basis, I would expect this change to go ahead, assuming of course that this does not itself become subject to any separate challenge," she said.

The UK government and the Commission have until 2 July 2014 to respond to the GBGA's requests.

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