European Court of Justice
Published July 19, 2017
Regina (The Gibraltar Betting and Gaming Association Ltd) v Revenue and Customs Commissioners and Another (Government of Gibraltar intervening)
(Case C-591/15)
Before K Lenaerts, President, A Tizzano, Vice-President, M Ilešič (Rapporteur), L Bay Larsen and T von Danwitz, Presidents of Chambers and Judges J Malenovský, J-C Bonichot, A Arabadjiev, C Toader, C Vajda, S Rodin, F Biltgen, and K Jürimäe
Advocate General M. Szpunar
Judgment June 13, 2017
The provision of services by operators established in Gibraltar to persons established in the United Kingdom constituted, as a matter of European Union law, a situation confined in all respects to trade within a single member state.
The Grand Chamber of the Court of Justice of the European Union so held on a reference for a preliminary ruling by Mr Justice Charles sitting, in the Administrative Court of the Queen’s Bench Division, ([2016] STC 151) in proceedings between the Gibraltar Betting and Gaming Association Ltd and the Revenue and Customs Commissioners.
The Grand Chamber said that the Gibraltar Betting and Gaming Association was a trade association whose members were primarily Gibraltar-based gambling operators providing remote gambling services to customers in the UK and elsewhere. On July 17, 2014 a tax regime concerning certain gambling duties imposed by the Finance Act 2014 (the new tax regime) entered into force in the UK
Under the regime for the taxation of remote gaming applicable before the entry into force of the new tax regime, providers of remote gambling services established in the UK paid tax at the rate of 15 per cent on their gross profits, irrespective of where their customers lived, the tax being based on the “place of supply” principle. Providers of remote gambling services established in Gibraltar or elsewhere outside the UK paid no tax in the UK on gambling services provided to persons established in the UK.
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One of the main objectives of the new tax regime, which was based on the “place of consumption” principle, was to change the taxation of gambling so that, wherever they were based, providers offering such services to customers in the UK paid tax on such services to the UK exchequer, the rate of that tax being set at 15 per cent of the provider’s profits, as defined by the 2014 Act, during the relevant tax period.
As a result of those new taxes, in particular the remote gaming duty that was applicable without distinction to all economic operators providing remote gambling services to persons established in the UK, providers of such services established in Gibraltar, such as the members of the association, could no longer provide their services on the UK gambling market without paying any tax in that member state.
In the light of those considerations, the referring court considered that it was necessary to clarify the constitutional status of Gibraltar under EU law and, in particular, whether economic operators, such as the members of the association, established in Gibraltar could rely on EU law to challenge the legislation adopted by the UK establishing the new tax regime.
Gibraltar was a European territory for whose external relations a member state, namely the UK, was responsible and EU law was applicable to that territory pursuant to article 355(3) of the Treaty on the Functioning of the European Union. By way of derogation from article 355(3), under the Act concerning the conditions of accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland and the adjustments to the Treaties, EU acts did not apply to Gibraltar in certain areas of EU law.
Those exceptions were introduced on account of the special legal position of that territory, in particular its status as a free port. However, freedom to provide services, enshrined in article 56 of the Treaty on the Functioning of the European Union, was not one of those exceptions.
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It followed that article 56 was applicable, by virtue of article 355(3), to Gibraltar.
Against that background, it was necessary to examine whether the provision of services by operators established in Gibraltar to persons established in the UK constituted, for the purposes of EU law, a situation confined in all respects within a single member state.
The fact that Gibraltar did not form part of the UK was not decisive in determining whether they should be treated as a single member state. To treat trade between Gibraltar and the UK in the same way as trade between member states would be tantamount to denying the connection, recognised in article 355(3), between Gibraltar and the UK.
It was common ground that the UK had assumed obligations towards the other member states under the Treaties so far as the application and transposition of EU law in the territory of Gibraltar was concerned. It followed that the provision of services by operators established in Gibraltar to persons established in the UK constituted, under EU law, a situation confined in all respects within a single member state. EU law was applicable to Gibraltar, not on the basis that it formed part of the UK, but by virtue of article 355(3).
It followed that article 355(3), read in conjunction with article 56, meant that the provision of services by operators established in Gibraltar to persons established in the UK constituted, as a matter of EU law, a situation confined in all respects within a single member state.