Gambling Licensing

Law and Procedure Update

In the last journal we mentioned, in brief, that the Upper Tier Tribunal had delivered its decision regarding the Greene King v Gambling Commission case, and that we would report in more detail.

The decision was handed down on 29th January by Judge Levenson.

A brief reminder of the background.  Greene King operates over 1,000 licensed premises, and applied to the Gambling Commission for an Operating Licence to permit them to provide bingo in their pubs.  The application was originally made to the Gambling Commission on 24th May 2012, and it was refused by the Commissioners at a Regulatory Panel on 22nd February 2014.  Greene King appealed to the First Tier Tribunal, and Judge Warren handed down his decision, allowing the appeal on 8th December 2014.  This decision quashed the earlier decision of the Gambling Commission to refuse the application.

In Judge Warren’s decision of 8th December 2014, he was of the opinion that the Gambling Commission was trespassing on territory which the Gambling Act 2005 assigns to Licensing Authorities, and he found that the Commission’s purpose in refusing the applications made by Greene King was to prevent them from applying for a Bingo Premises Licence for one of their pubs.

It is the Gambling Commission’s subsequent appeal against the decision of Judge Warren sitting in the First Tier Tribunal, which was handed down on 29th January 2016 by Judge Levenson sitting in the Upper Tier Tribunal.  Judge Levenson found in favour of the Gambling Commission.  This decision did not consider the detail of the Greene King application, or the merits of that application, rather the Upper Tier Tribunal was asked to consider whether the First Tier Tribunal decision was legally flawed in two ways:

1. The First Tier Tribunal erred in law in finding that the Commission had taken into account matters which were exclusively for the Licensing Authorities on a Premises Licence application.  This finding was contrary to the statutory scheme of the Act, and the function of the Commission as the national regulator;

2. The First Tier Tribunal erred in law in requiring the Commission to issue an Operating Licence it had found to be inconsistent with the licensing objectives, in circumstances in which no factual finding had been made by the First Tier Tribunal, which overturns that conclusion. Judge Levenson allowed the appeal on the basis of (1) above and, therefore, it was not necessary for him to consider the arguments regarding (2) above, and the factual findings that had been made by the First Tier Tribunal.

It helps, in analysing the Upper Tier Tribunal decision, to consider the Gambling Commission’s original decision to refuse the Operating Licences to Greene King back on early 2014.  In its decision the Gambling Commission expressed concern about the development of commercial bingo in pub premises, and the potential impact on the licensing objectives.  The Commission therefore decided to take a precautionary approach.

The Gambling Act 2005 requires the Commission to pursue, and wherever appropriate, have regard to the licensing objectives, and must permit gambling insofar as it thinks such permission is reasonably consistent with those objectives.  In its decision, the Gambling Commission’s regulatory panel did not consider that granting the applications to permit bingo in the Greene King pubs would be reasonably consistent with the pursuit of the licensing objectives, as high stake bingo and £500 jackpot machines in a pub owned by them, could potentially jeopardise the fair and open objective and the protection of children and vulnerable persons from gambling objective.  The Commission expressed a view that the intention of the Act was to create a graduated regulatory regime, and that there are different expectations of those frequenting pub or bingo premises after their primary purpose.

They therefore refused the application to Greene King, and this approach has been upheld by the Upper Tier Tribunal.  Judge Levenson, in his decision, made a number of other noteworthy comments.  In his view, the Commission has an integral role as the national body, with oversight over gambling policy and regulation; it issues Statements of Principles and Codes of Practice; it acts as a gamekeeper by issuing Operating Licences and Personal Licences; it provides guidance to Licensing Authorities and advice to Government, and its first duty is to have regard to the licensing objectives.  He went on to say that although Licensing Authorities are empowered to consider matters relating to individual premises, this does not mean that the Commission has no power to consider matters relating to the operating environment. 

Although the Act creates a dual regulatory structure, albeit one heavily balanced in the favour of the Commission, and the functions overlap to some extent in cases of overlap and statutory controls, the Courts have consistently held that it is inappropriate to place a legal fetter on the discretion of either regulator by attempting to draw a clear line between their jurisdictions.

He commented that the Commission has the function of setting policy at a national level, and where innovative applications are made which give rise to issues of gambling, as a matter of principle, regardless of the particular local areas to which they relate, it cannot be unlawful for a national regulator to express a view as to the wider issue of principle.

Judge Levenson confirmed that the Commission has a broad power to attach conditions to an Operating Licence, including the manner in which facilities are provided, and that this inevitably includes consideration of the operating environment; in the case of the Greene King application, within pubs.
Greene King had a right of appeal to the Court of Appeal from the Upper Tier Tribunal, which they have exercised.  They first sought permission from the Upper Tier Tribunal, and they are now taking the matter to the Court of Appeal.

So this is not the end of the litigation and we will of course keep you updated.

Court of Appeal provides clarity on requirements of a ‘game’

This case involved operators of Spot the Ball (STB) Competitions and whether their activities could be classed as a game of chance under the Gaming Act 1968 in order to claim VAT exempt status under the Finance Act 1972, the Value Added tax Act 1983 and the Value added Tax Act 1994.

The operators originally sought to recover VAT paid between 1979 and 2006 in the region of £70 million.
The STB competitions in question invited players to place a cross where he or she thought the ball was located on a player coupon, which was then returned to the operator.  The winners of the competition would be decided not by reference to the actual position of the ball in the original photograph, but by reference to the opinion of a panel of experts.

The competition was presented to the public as involving skill and judgment and also involving elements of chance.

The First Tier Tribunal found that however a skilful a competitor might be and even if superlative skill was applied that in the circumstances a player could only approximate the ball’s location and that accordingly the Spot the Ball was indeed a game of chance and therefore exempt from VAT.

HMRC appealed that decision and the Upper Tribunal found that the First Tier Tribunal had erred in its findings.  A game of chance required some sort of engagement with other players and therefore the STB competition, where no such interaction occurred, could not be classed as a game and therefore the VAT exemption would not apply.
The matter has finally reached the Court of Appeal which has held that the First Tier Tribunal did not err in its decision and that ‘Spot the Ball’ in these circumstances was indeed a ‘game of chance’.

For the purposes of the Gaming Act 1968, whether a competition is a ‘game’ or not is a question of fact and ‘game’ is to be given wide meaning, although there must be a degree of active participation.
There is no requirement for competitors to be assembled together.There is no requirement for inter-player interaction.

Courts will look at the realities of the offer and the competition and will not be deceived, whether innocently or otherwise, by delusive appearances or descriptions.

So where does this leave us? 
The definition of gaming in the Gaming Act 1968 and the current Gambling Act 2005 are similar, gaming means playing a game of chance for a prize. Spot the ball can be run as a game of chance where the result is determined by a panel of judges.  If players’ crosses were compared with a footballs’ actual location there could be a strong argument that this may be less a game of chance and more a game of skill.
Depending how a particular promotion/game is run there are potential costs implications from both licensing and taxation perspectives.

For further information on this issue contact Partner and Head of Betting & Gaming, Nick Arron, 0115 953 8500.