Justice – Photo © Yanchenko – Fotolia
(LUXEMBOURG) – Providing services by operators established in Gibraltar to persons established in the UK constitutes, in EU law, a situation confined in all respects within a single Member State, the EU’s top court has ruled.
The case concerned the Gibraltar Betting and Gaming Association (the ‘GBGA’), a trade association whose members are primarily Gibraltar-based gambling operators who provide remote gaming services to customers in the UK and elsewhere.
In 2014, the UK adopted a new tax regime for certain gambling duties, based on the ‘place of consumption’ principle, requirings gambling services providers to pay a gaming duty in respect of all remote games of chance placed with them by UK consumers.
Under the previous taxation regime, based on ‘place of supply’, only service providers established in the UK were charged gambling duties on gross profits from their supply of gaming services to customers worldwide
The GBGA challenged the new tax regime at the UK High Court on the basis that the regime was contrary to the principle of the freedom to provide services enshrined under Article 56 of the Treaty on the Functioning of the EU.
The defendant, Her Majesty’s Revenue and Customs, argued that the GBGA had no enforceable EU rights as the provision of services by operators established in Gibraltar to persons established in the UK is not caught by EU law. And that, in any event, as an indistinctly applicable tax measure, the new regime cannot be said to be a restriction of the freedom to provide services.
The High Court asked the Court of Justice whether, as regards the freedom to provide services, Gibraltar and the UK should be treated as a single Member State or whether, Gibraltar had the constitutional status of a separate territory to the UK, so that the provision of services would be treated as intra-EU trade.
The Court observed, first of all, that the provisions of the Treaties apply to the European territories for whose external relations a Member State is responsible. Gibraltar is a European territory for whose external relations a Member State, namely the UK, is responsible, so that EU law is applicable to that territory. It also noted that, under the 1972 Act of Accession, EU acts do not apply to Gibraltar in certain areas of EU law.
However, freedom to provide services is not one of those exceptions. Article 56 TFEU is therefore applicable to Gibraltar. Next, the Court observes that, according to its case-law, the provisions of the Treaty on freedom to provide services do not apply to a situation which is confined in all respects within a single Member State.
The Court concluded that, as a matter of EU law, the provision of services by operators established in Gibraltar to persons established in the UK constitutes a situation confined in all respects within a single Member State.
The Court confirmed that Gibraltar does not form part of the UK. However, that fact was not decisive in determining whether two territories must, for the purposes of the applicability of the provisions on the four freedoms, be treated as a single Member State.
According to the Court, there is no factor that could justify the conclusion that relations between Gibraltar and the UK may be regarded, for the purposes of Article 56 TFEU, as akin to those existing between two Member States.
The contrary approach would be tantamount to denying the connection, recognised in EU law, between that territory and that Member State. Indeed, the UK has 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 is concerned.
Finally, the Court confirmed that the conclusion that it has reached undermines neither the objective of ensuring the functioning of the internal market nor the status of Gibraltar under national constitutional law or international law. It emphasises that its conclusion cannot be understood as undermining the separate and distinct status of Gibraltar.
