Eu Lotto Ltd v Secretary of State for Digital, Culture, Media and Sport

JurisdictionEngland & Wales
JudgeLord Justice Green
Judgment Date15 November 2018
Neutral Citation[2018] EWHC 3111 (Admin)
CourtQueen's Bench Division (Administrative Court)
Docket NumberCase No: CO/1118/2018
Date15 November 2018

[2018] EWHC 3111 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Gross

Lord Justice Green

Case No: CO/1118/2018

The Queen on the application of

Between:
(1) Eu Lotto Limited
(2) Lottoland Europe Limited
(3) Multi Lotto UK Limited
Claimants
and
Secretary of State for Digital, Culture, Media and Sport
Defendant

and

(1) The Gambling Commission
(2) Camelot UK Lotteries Limited
Interested Parties

Martin Chamberlain QC and Malcolm Birdling (instructed by Joelsons) for the Claimant

Andrew Sharland QC, Rupert Paines and Daniel Isenberg (instructed by the Government Legal Department) for the Defendant

Jonathan Moffett QC and Christopher Knight (instructed by the Gambling Commission) for the First Interested Party

Dinah Rose QC and Daniel Cashman (instructed by Linklaters LLP) for the Second Interested Party

Hearing dates: 24th, 25th and 26th July 2018

Judgment Approved

Lord Justice Green

A. The Issue

1

This is the judgment of the Court to which we have both contributed. There is before the Court a rolled-up application for permission to claim judicial review and, if granted, the hearing of the claim. We grant permission and deal with the case upon its substantive merits. This case concerns national lotteries. These have been commonplace since they were first introduced in the 17 th century. Until 1993 large scale lotteries were prohibited. The National Lottery etc. Act 1993 (“the 1993 Act”) altered this. It established the National Lottery as a means of supporting various sporting, cultural, community and other organisations' interests. In this jurisdiction the National Lottery was launched in 1994. Betting on the outcome of (as opposed to participating in) lotteries evolved as a secondary form of gambling almost from the outset. This case concerns a prohibition on such secondary gambling.

2

The Claimants challenge the decision of the Secretary of State to lay the Gambling Act 2005 (Operating Licence Conditions) (Amendment) Regulations 2018 (“the 2018 Regulations”) before Parliament in the exercise of powers conferred pursuant to sections 78 and 355(1) of the Gambling Act 2005 (“GA 2005). This extends the prohibition on gambling on the outcome of the National Lottery.

3

In the UK gambling on the outcome of the National Lottery is prohibited by section 95 GA 2005. One of the games offered by the National Lottery is “EuroMillions”. This is a multi-national lottery spread across a number of different states in Europe. With the advent of the internet and the growth of on-line gambling, betting companies have found a way around the prohibition in section 95. The 2018 Regulations came into force on 6 th April 2018 and seek to close what is said to be a “loophole” which permits the circumvention of section 95 by betting companies offering to UK consumers betting on the outcome of EuroMillions run from outside of the UK. The new measures insert a new Regulation 4 into the Gambling Act 2005 (Operating Licence Conditions) Regulations 2007 (“Regulation 4”). This has the effect of preventing the holder of a betting operating licence from offering bets on the outcome of a non-UK EuroMillions draw or “… on the outcome of a EuroMillions lottery, regardless of the name given to that lottery or how that lottery is described in any jurisdiction”, to consumers in Great Britain.

4

The Claimants include companies engaged in the provision of gambling services who have been prevented by Regulation 4 from continuing to offer what had, in the past, been a lawful product to their customers in this jurisdiction by providing them with the opportunity to bet on the outcome of non-UK EuroMillions draws. They argue that: The effect of the 2018 Regulations is to prevent the Claimants from offering that service on pain of breach of the criminal law. Similarly, the Claimants' British customers have been deprived of the choice to access these products.”

5

Three main arguments have been advanced by the parties to this case which can be summarised as follows:

(i) Issue I – Is Regulation 4 prohibited by Article 56 TFEU? Do the 2018 Regulations impose an unlawful restriction on the Claimant's freedom to provide services contrary to Article 56 TFEU which prohibits restrictions on the freedom to provide services within the European Union unless justified on established policy grounds. It is common ground that, prima facie, Regulation 4 engages the prohibition on measures restricting the provision of services within the EU; the real issue is whether that restriction is justified on public policy grounds.

(ii) Issue II – Was the consultation unfair and therefore unlawful? The Claimants argue that the Secretary of State failed to conduct a fair and lawful consultation concerning the introduction of Regulation 4 because he omitted from the consultation any reference to the need to ensure, so far as possible, that gambling on the outcome of the National Lottery did not lead individuals towards harder and more harmful forms of gambling such as betting. It is said that this objective, upon which weight is now placed by the Secretary of State, was not identified in the course of the consultation and the inevitable consequence is that that consultees directed their representations to the stated objectives but not this unidentified objective. In the event the consultation was unfair and therefore unlawful.

(iii) Issue III – Do the Claimants have locus to bring this claim for judicial review? A third issue arose concerning the locus of two out of the three Claimants to seek judicial review. The Defendant contends that the Second and Third claimants do not have locus because: (i) in relation to the Second Claimant based in Gibraltar Article 56 TFEU does not apply to situations confined in all respects within a single Member State and since Gibraltar has been declared (in a recent ruling of the CJEU) to be part of the United Kingdom services between Gibraltar and the UK are not services as between Member States and hence those companies have no right to seek to apply Article 56 to their activities; and (ii) in relation to the Third Claimant it has not yet applied for any betting licences in the UK and its position is too remote from any activity that would be caught, even potentially, by Article 56 TFEU.

6

Underlying the present dispute is a tension between two contrasting values: on the one hand the freedom to engage in legitimate business activity across the EU market; and on the other hand, social policy concerns as to gambling even in the UK where gambling has not been outlawed on religious or moral grounds.

7

Article 56 TFEU is an important economic freedom to provide services. The Claimants contend that the 2018 Regulations result in an unlawful and disproportionate restriction on their freedom to provide services in the EU market. The Secretary of State accepts that prima facie Regulation 4 amounts to a restriction on such trade but says that the restriction is justified on legitimate and recognised public policy grounds. In considering the issue of justification it is necessary to keep in mind that the margin of appreciation or discretion that the State undoubtedly has is, in this case, narrowed given that the UK (unlike some other states) has not set its face against all gambling on religious or moral grounds. That said, this narrowed margin does not preclude insulating the National Lottery and giving it a special status. Gambling is not a harmonised area of EU activity and the UK is, within reason, entitled to make a choice as to the extent and nature of regulation based upon social policy grounds. But an important caveat is that the real justification for a restriction on legitimate business activity – even in the area of gambling – cannot consist of purely economic or disguised anti-competitive grounds and it must be proportionate.

8

In our judgment the justifications advanced by the Secretary of State in evidence and in submissions to this Court establish a legitimate policy basis for Regulation 4. It meets the proportionality test laid down by the law for the evaluation of such restrictions on free trade. Moreover, the outright prohibition in Regulation 4 is the least restrictive measure which could effectively satisfy and achieve the lawful objectives which underpin it. For these reasons we are of the clear view that Regulation 4 is compatible with Article 56 TFEU.

9

The reasoning behind this conclusion is sufficient to dispose of the Claimants' second ground concerning consultation. However, we would not in any event have accepted the Claimants' objections to the consultation process performed by the Secretary of State which led to the draft Regulation 4 being laid before Parliament.

10

Finally, in relation to the objection raised by the Secretary of State as to the locus or standing of two of the Claimants to the bringing of this claim, we do not need to resolve this dispute because it is common ground that at least one of the Claimants does have a proper legal standing to bring this claim. The point is thus academic. Nonetheless, our provisional view was that the Claimants had the better of this argument. We did not hear full argument on this issue but, for reasons we summarise in this judgment (at section E below), we would have been loath to conclude that any of the Claimants lacked standing to bring the challenge.

B. The Facts

(i) The distinction between games and betting

11

Gambling can take three basic forms: lotteries, betting, and gaming. Lotteries entail entering into a draw for the chance to win a prize which is funded from ticket sales. They are normally considered to be one of the “softer” forms of gambling since they involve less risk of harm to players than other forms of gambling and are used to fund good causes.

(ii) The National...

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