ECJ opinion: UK and Gibraltar are a single Member State for services

In the opinion of European Court of Justice Advocate General Maciej Szpunar, Gibraltar and the UK territory are a single Member State and European law regarding the freedom to provide services between Member States would therefore not be applicable to the Gibraltar Betting and Gaming Association's (GBGA) challenge to the introduction of Point of Consumption (PoC) tax in the UK in 2014.

PoC meant that operators based outside the UK mainland were to pay a gaming duty for all remote games of chance placed with them by UK consumers, regardless of the tax paid in their own jurisdiction. GBGA, whose members include most of the major UK-facing online betting and gaming operators, challenged PoC from the outset, saying the tax went against the freedom to provide services within the EU, one of the key principles with regard to trade in the EU.

However, for EU law to be applicable there must be trade between two Member States.

HMRC on behalf of the UK government argued that GBGA had no enforceable EU rights as the provision of services between Gibraltar and the UK was not covered by EU law.

AG Szpunar agreed, saying that in the event that the Court concluded that the freedom to provide services does apply to trade between Gibraltar and the UK, then he did not consider PoC to be a restriction to that freedom.

He also looked at whether a restriction to the freedom to provide services would be justified if the Court disagreed that the situation was purely internal. Szpunar explained that in this case it was for the referring court to determine whether the grounds of justification put forward by the UK.

These include to "level the playing field" between UK and overseas operators and ensuring the UK could "exercise proper fiscal supervision over its gaming market". The Advocate General’s Opinion is not binding on the ECJ, whose judges then deliberate the case and issue judgment at a later date.

The case will be referred back to the High Court in the UK on the basis that PoC is an extension of the gambling duty to overseas operators. The 2014 case was based around the argument that an extension of the licensing regime to overseas operators.

Peter Howitt, chief executive of the GBGA, commented: "We are naturally disappointed with the opinion of the Advocate General.

"We continue to believe that the gambling duty applied by the UK government to operators out of the jurisdiction, in circumstances where the customer may not be in the UK when they gamble or even a UK resident, is a disproportionate restriction on operators.  We look forward to receiving the CJEU's judgment on the issues."

A legal challenge to PoC by GBGA was rejected by the UK High Court in October 2014.

AG Szpunar's full opinion can be viewed here