Westminster City Council has launched an appeal against a High Court ruling that prohibits it from using licence money collected from legitimate sex shops to enable it to enforce the rules against unlicenced ones, reports The Independent.
The case against the council was brought by Simply Pleasure Limited and six other licencees operating a total of 11 sex shops in the Soho and Covent Garden areas of the London.
It is serving as something of a landmark case, as a further 15 councils have backed the action stating that the outcome of the case will have ramifications in their areas.
In the original High Court case the claimants argued that an EU directive introduced into UK law in the Provision of Services Regulations 2009 prohibits licence fees from being charged for anything more than an amount that covers the cost of administering an application.
Lawyers for the claimants cited the fact that a licence for a sex shop costs the proprietor £29,102 per annum, per shop, compared to just £286 for a licence to run a pet shop and £1,905 for a nightclub in the same area.
Westminster City Council argued that policing the sex-shop trade was an essential part of the licence fee and that local residents were entirely in favour of a higher charge to include the cost of additional policing.
Ruling in favour of the licencees, the High Court judge accepted that whatever arrangements had been allowed in the past, EU law in this area is clear and prohibits additional charges included in the licence fee to cover the cost of policing.
Benefits do not always have to be directly paid for
The judge accepted that the licenced sex-shops ultimately benefit from the additional enforcement work of the police, as they do not have to compete against unlicenced competitors. However, he went on to add that there was no law that says that those who benefit from council action should be the ones who pay for it.
He added that although the arrangement had worked perfectly well for many years, that did not preclude the correct interpretation of the EU Directive in question.
"I have concluded that since the year beginning February 1st 2010 the council has not been permitted, when determining the reasonable licence fee for sex establishments, to reflect the fee which it determines the costs of enforcing the system," said Mr Justice Keith in the High Court in May 2012.
The purpose of the EU Directive 2006/123/EC is the promotion of free trade within individual member states by prohibiting councils from charging extortionate licence fees that might serve to deter businesses from seeking to operate in a given area.
However, Westminster City Council believes that the policing work carried out by the council against unlicenced sex-shops is of great value, citing the fact that it has helped shut down 14 illegal outlets in 2011 alone, with police seizing some £330,000 in fake and poor quality goods.
"It should be deeply concerning to everyone that a common sense domestic law is being overridden by EU legislation," said Councillor Audrey Lewis, the licencing chairman of Westminster City Council.
The three Court of Appeal judges hearing the appeal are expected to give their judgment later this year.
Westminster City Council in sex shops court battle (The Independent)