Presentation by David Clifton (Director, Clifton Davies Consultancy - PDF document

Presentation by David Clifton (Director, Clifton Davies Consultancy Limited) at the Westminster eForum Keynote Seminar “The UK gambling sector: market developments, regulation and the impact of Brexit” held on 14 March 2017 at The Royal Society, 6-9 Carlton House Terrace, London SW1Y 5AG Examining key policy and regulatory priorities: Brexit, tax and forthcoming legislation I imagine that at the time this conference was being planned, it was anticipated that by the time it took place, we would have a very clear idea of the type of Brexit we would all be facing. Unfortunately, despite expectations that Article 50 will be triggered any day now following last night’s Parliamentary vote – unless any of you know a lot more than I do – apart from “Brexit means Brexit” and “a vote to leave is a vote to leave” we are still in the dark insofar as the detail is concerned. Never mind, to continue the vernacular: “it is what it is” and “we are where we are”. As a result, much of what I say about key gambling policy and regulatory priorities arising from the UK’s exit from the EU is going to be based on conjecture and surmise. To be fair, that may have been the case anyway. Triggering Article 50 will not of itself provide a basis for negotiating a new trading arrangement. Instead it will oblige the EU to try to negotiate a ‘withdrawal agreement’ with a leaving state, which is likely to be limited to practical issues arising out of the decision to leave. Obvious examples are those already hitting the headlines: • the settling up of balances in relation to budgetary contributions and • the relocation of nationals, including whether European citizens already here in the UK are going to be allowed to stay, with most recently: o the British Hospitality Association warning that many hotels and restaurants will go bust unless the Government allows EU migrants to continue to work in low-skilled jobs after the UK leaves the EU and o the heads of 35 Oxford colleges writing to The Times warning that the University and its research work will suffer enormous damage if its European lecturers, researchers and support staff lose their right to work in this country. There remains a spectrum of potential models with, at one end of the scale, Britain taking up membership of EFTA and becoming a part of the EEA and, at the other, simply relying upon the principles set out in WTA Agreements. So – that’s the starting point: all of this uncertainty means that any forward projections are necessarily left dangling in that same realm of conjecture and surmise, but I think some principles are clear, certainly insofar as the remote gambling industry is concerned. 1. European Court of Justice (“CJEU”) caselaw has restricted the EU’s influence in the gambling sphere – restrictions can be imposed if they are justifiable and necessary to protect legitimate public interest objectives and are applied consistently to local operators and to those in other EU Member States. As a result, gambling regulation is primarily dealt with across Europe on the basis 1

of national rather than EU legislation, including since 2014 – and despite the GBGA judicial review challenge – the remote gambling regime in Great Britain, as a result of which operators targeting British custom will still need to obtain an operating licence from the Gambling Commission post-Brexit. 2. We await the CJEU’s judgment in relation to the GBGA’s challenge to the UK’s point of consumption taxation of overseas gambling operators, but signs are not looking good for them based on the Advocate General’s Opinion, published in January, that the UK and Gibraltar are a single Member State. After that, it will be a matter for the High Court in the UK to dispose of the case in accordance with the CJEU’s interpretation, but I’m afraid my money is on a second failed JR. 3. Technically, following Brexit, the UK would no longer be required to apply its rules consistently with EU legal principles, meaning that it could, for example, impose additional licensing hurdles for EU operators or charge them higher fees or higher taxes, However, as other commentators have noted, it does not presently do so for other non-EU operators, so it’s probably unlikely that there will be any significant change post-Brexit. 4. Where change is likely to occur, however, is in relation to the ability of British operators to target players in EU Member States, for example: • in Italy where licences are presently available only to those who have operated in another EEA state throughout the previous two financial years, and • in Germany where British operators presently rely on the argument that penalties cannot be applied to operators from other EU Member States targeting German nationals, because of the uncertainty surrounding the legality of that country’s licensing regime. That argument would no longer be available to British operators post-Brexit who could find themselves on the receiving end of financial penalties from the German authorities without any recourse to the CJEU. 5. Some have suggested that British operators might not be permitted to pool liquidity with operators in other EU jurisdictions post-Brexit. That would be dependent on the stance of individual regulators, but a good relationship exists between the Gambling Commission and other European regulators, so speaking personally I doubt whether that is likely to happen. 6. Insofar as operators licensed offshore are concerned: • Gibraltar: if the CJEU confirms the Advocate-General’s Opinion that the UK and Gibraltar are a single Member State, the same considerations will apply to Gibraltar when the UK leaves the EU, but that will bring very considerable uncertainty for Gibraltar based gambling businesses and the 4,000 or so employees of those businesses who presently travel to and from across the Spanish border in reliance on the EU’s freedom of movement principle. • The Isle of Man and Alderney: both of these jurisdictions are already located outside the EU, so putting it simply, Brexit will have little effect on them. 7. What about the consequence on the Gambling Commission? In my view, Brexit is very unlikely to have any material effect on the very constructive manner in which the Commission presently works with regulators in other EU 2