TLT licensing news (Scotland) September 2015 Out and about: The last few weeks have been the busiest of the year for the licensing team, appearing at Angus Licensing Board, Dundee Licensing Board, Glasgow Licensing Board, Renfrewshire Licensing Board, Aberdeen Licensing Board, and East Lothian Licensing Board for various clients. Stephen attended the Scottish Pub & Bar Awards (previously the DRAM awards) and helped with the judging of the Customer Service of the Year award on site visits with awards host Sue Young. He also conducted a gambling seminar in Glasgow and made a fleeting TV appearance on BBC Reporting Scotland in connection with one of our cases, the "burger van" appeal McLuskey & Others v North Lanarkshire Council but more on that next month! This month in summary Alcohol licensing news EU Advocate General delivers opinion on minimum pricing Linear pricing of alcohol "Stop and swab" in Aberdeen The Social Responsibility Levy reappears on the political agenda Gambling news Gambling Commission consults on licensing fees Gambling Commission issues statement on Rank case and anti-money laundering FOBTs and the Scotland Bill Consultation Responses now online Alcohol licensing news EU Advocate General delivers opinion on minimum pricing One of the major licensing stories this month has been the EU Advocate General's opinion on minimum pricing in Scotland. The decision has created significant commentary and was hailed by both the "for" and "against" camps as a victory. Much of the press coverage seemed to suggest that minimum pricing has been found to be illegal but that is not correct. The opinion itself is, in terms of appeal procedure, now a matter for the European court itself to consider before giving its final judgement. So the opinion itself is not the last word. In addition to that, the European court decision is to be referred back to the Court of Session in Edinburgh, and it is then they who will have the say on whether the European decision will influence their decision over whether the law is incompatible with EU trade laws. The opinion is extensive but in one passage the Advocate General indicates that a minimum pricing law could be legal as long as other alternatives would have a less restrictive effect. Health campaigners and supporters of minimum pricing point to the Court of Session who, in their original judgement, do make some assessment of what these alternatives may be, and therefore believe the opinion is in their favour. But it is more complicated than that. It is not clear whether these alternatives need to be tried as opposed to merely explored, but more fundamentally is the context of the capability of pursuing alternatives given the law and opinion discusses the powers of a "member state". Scotland is not, of course, a member state. One of the alternatives to minimum pricing is increased taxation. Leaving aside the fact that the UK has one of the
largest tax burdens on the alcohol industry in the EU, the point here is that Scotland cannot control alcohol duties as that is reserved to Westminster. The Scotch Whisky Association and others who are opposed to minimum pricing point to other passages of the opinion where the Advocate General says it is difficult to justify and could be discriminatory; as well as to the fundamental restatement of what we all knew the law was anyway: that minimum pricing can only be lawful if there was proof alternative means were unsuitable and that the opinion suggests that minimum pricing would be illegal in any member state, not just in the Scottish context. It is therefore far from clear how this will pan out. The EU court will make its own judgement known in due course, and then we shall have to wait to hear from Edinburgh. Watch this space. Linear pricing of alcohol We have seen recent press coverage of alleged illegal "promotions" and in particular questions over single and double measures. There is much confusion and inaccuracy in these reports. The interpretation of Schedule 3 to the Licensing (Scotland) Act 2005, which contains the mandatory conditions which apply to all licences including a list of banned irresponsible promotions, has and will continue to be a talking point for legal practitioners. Some licensing areas state that certain promotions are unlawful, whilst others do not. The recent coverage discusses Go large measures. This is sometimes referred to as upselling or doubling up. It is said that offering a double for any less than twice the price of a single is said to be in clear breach of the law. Contrary to this view, it is in fact perfectly legal in our view to have a double measure at a price which is less than twice the value of a single. What is illegal is where a premises tries to upsell the larger measure. So, if a customer asks for a rum and coke and the barman asks Do you want to make that a double for an extra 1, then that action would be in breach of the Act. But simply having a price list and allowing the customer to make his or her own choice about whether they wish a single or a double is not, in our view, illegal. The 2005 Act has not imposed linear pricing in this sense. That was clearly mentioned in parliamentary debates at the time. On 20 September 2005 George Lyon MSP said that the then Scottish Executive had taken legal advice on whether Schedule 3 imposed linear pricing, and that advice was it did not. The purpose was not to introduce linear pricing, but deal with certain promotional activity instead. The Scottish Beer and Pub Association (SBPA) argued that it did introduce linear pricing, which the Executive rejected. An OFT complaint was pursued by the SBPA at this time, but it was also rejected on the basis that the OFT did not believe challenging the then Licensing (Scotland) Bill was within their remit. Licensing boards across Scotland have local policies which confirm that linear pricing in this context is a misnomer. The Perth & Kinross Licensing Board, for example, states in its current policy: For the avoidance of doubt, the Board does not consider that there must be linear pricing of alcohol according to the size of measure. The relevant paragraph 8(2)(c) of Schedule 3 to the Act states that an irresponsible promotion includes one which: "involves the supply free of charge or at a reduced price of one or more extra measures of an alcoholic drink on the purchase of one or more measures of the drink". Having a double measure for less than the cost of two singles does not offend this provision: the larger measure is merely available at a certain price; it is not conditional on the purchase of one or more measures of the drink. It therefore only becomes irresponsible, in our view, if the barman tries to upsell the larger measure, which offends a separate provision under paragraph 8(2)(e) which states a promotion is irresponsible if it encourages, or seeks to encourage, a person to buy or consume a larger measure of alcohol than the person had otherwise intended to buy or consume. The Alcohol etc (Scotland) Act 2010 introduced partial linear pricing for multipack deals, but this does not apply if the single of product is not stocked (ie a four pack of beer is not caught unless individual cans of the same volume are sold), nor does it apply to multiples of multipacks. This gaping hole in the legislation has been remarked upon for some time now. A new Bill, laid before Parliament by Dr Richard Simpson, contains a clause which would seem to close this particular gap: the Alcohol (Licensing, Public Health and Criminal Justice) (Scotland) Bill; on which the Government is currently seeking views and will reported on in futures issues of our newsletter. "Stop and swab" in Aberdeen Police Scotland have faced trade and ministerial criticism over the apparent use of a "stop and swab" exercise at nightclubs in Aberdeen. The technique is being compared to the controversial issue of "stop and
search" and according to human rights experts is illegal. The exercise involves police swabbing persons queuing to get into a nightclub, and if the test is "positive" in detecting traces of illegal substances, the management are encouraged to deny that individual entry. If the individual refuses to participate, it is reported that the police are advising management to refuse entry on the basis they have "something to hide". Press reports indicate at least one nightclub operator was not opposed to the practice and praised the police for their assistance but the matter will now be raised in Parliament by leader of the Liberal Democrats in Scotland, William Rennie MSP. The Social Responsibility Levy reappears on the political agenda The Social Responsibility Levy, a part of the Alcohol etc (Scotland) Act 2010 which was never brought into force, has been raised again in parliament by John Swinney MSP. The levy has been controversial from the off, as a form of so-called "polluter pays" additional tax burden on licensed trade operators. The intention of the levy is to raise funds to pay for services required as a result of alcohol harm such as police, local authority or NHS costs. The levy would apply to holders of premises licences under the Licensing (Scotland) Act 2005, but also, bizarrely, to holders of non-alcohol licences such as street traders and public entertainment venues. The levy was never introduced because Parliament brought in the "public health" levy instead which was applied to the major supermarket operators. That levy was stopped earlier this year. Kenny MacAskill MSP, who was the Justice Minister when the original levy was originally proposed said: "Given the significant shifts in drinking patterns from the on to the off trade, with 72% now provided by the off licence trade as opposed to 49% in 1994, will the Scottish Government ensure that actions target where the major source of the problem of abuse of alcohol lies?". John Swinney's response was: "The Scottish Government position has always been that we will not introduce the social responsibility levy during the lifetime of the public health supplement, and until the economic circumstances are correct. The public health subsidy has now concluded, and the Government will consider in due course if there is a case to apply a social responsibility levy for which legislative provision currently exists. I can assure him that evidence that he has cited today and the points that are raised as a consequence will be part of the Government's consideration of how to take forward this issue." This will be a matter for considerable concern for the trade. The levy would apply to all alcohol licences and is often discussed in the context of the night-time economy. It may seem invidious to that sector that the tax would be introduced and paid by clubs and pubs as a result of concerns that the off trade sector is selling the vast majority of alcohol. Gambling news Gambling Commission consults on licensing fees The Gambling Commission has released a consultation seeking views on the level of licensing fees. This is an expected step following a Select Committee report on gambling back in 2012 entitled "The Gambling Act 2005: A bet worth taking?" which explored the question of fees generally (amongst other areas of interest). The Commission is proposing that a review of its fee commences at the end of 2015 and the discussion paper looks at current cost-recovery protocols as well as suggestions about fees should change. Some of their suggestions include: Graded fee scales on gross gambling yield, not number of premises for most operators Graded fee scales on gross gambling yield, not size of premises, for casinos Changes to fees for change of corporate control for small family businesses Changes to fees moving from within sub-categories of fee bands This discussion paper relates only to fees payable to the Gambling Commission, that is, fees in relation to operating licences. Fees payable to local licensing boards for licence applications are unaffected and remain at the existing levels. There is no proposal to review licensing board fees that we are aware of at this time. Responses to the discussion paper should be lodged with the Gambling Commission no later than 27 October 2015. Gambling Commission statement on Rank case and anti-money laundering The Gambling Commission has released a statement following its investigation into anti-money laundering (AML) procedures at Rank which it says have serious shortcomings and are acknowledged by the operator.
It says; "The Commission has agreed the operator s remedial actions including a third party audit of its revised AML arrangements and the surrender of an estimated 950,000 profits that resulted from these shortcomings, to be spent for agreed socially responsible purposes." The Commission has issued a detailed public statement looking at the specific failures and the remedial work undertaken by Rank; and has highlighted a series of key issues for all gambling operators to take note of and be aware of: monitoring whether appropriate and risk-sensitive policies and procedures relating to the prevention of money laundering and ensuring that people are not exploited or harmed by gambling are being followed effectively ensuring that operators manage the risk of money laundering by taking a range of measures, including a consideration of where the money a customer is gambling with comes from making sure that money laundering risks relating to established customers are monitored effectively on an ongoing basis ensuring that, where there is a suspicion that a customer may be committing money laundering offences, operators take an appropriate range of actions, including both making an appropriate disclosure to law enforcement agencies and reviewing whether to continue with the business relationship with the customer in question having a clear understanding on how to manage the risk of tipping off customers effective record keeping misplaced confidence in the effective implementation of policies and procedures. FOBTs and the Scotland Bill Latest Update The Scottish Parliament has recently been consulting on a Call to Evidence concerning FOBTs and betting premises, as has been reported in previous issues of this newsletter. The Call to Evidence was closed on 28 August 2015 and a number of responses have been published on the Parliament website. Respondents include a number of licensing boards, local authorities, pressure groups, trade operators and one or two individuals. The number and extent of responses underlines that this area of licensing law remains very controversial with a number of calls for more or less powers. Some of the licensing board and local authority responses make overt calls for greater powers over betting premises including suggestions that an "overprovision" test should be introduced to the Gambling Act 2005. Many operators are concerned that the powers proposed in amendments to the Scotland Bill seem to go much further than dealing with FOBTs in betting premises but may create wider powers over any type of machine on any gambling premises. The Scotland Bill is due to be debated again at Westminster and these amendments may pass or fall. Expect further updates on this in the next issue! If you would like any more information on the information in this bulletin, or would like to seek legal advice on any form of licensing law, please feel free to get in touch. TLT contact Stephen McGowan, Partner and Head of Licensing (Scotland) T +44 (0)333 006 1203 stephen.mcgowan@tltsolicitors.com TLT's Licensing team provides leisure sector operators in Scotland with local expertise and presence. Additionally, TLT is unique in being the first firm able to provide a licensing service which offers genuine and significant expertise across England, Scotland and Wales. TLT's Leisure team is made up of over 50 lawyers. We provide clients with a full service including licensing, real estate, corporate M&A and finance, equity investment, competition, commercial services, franchising, IP, planning, dispute resolution, employment and pensions. Our clients appreciate the seamless service we can
give them and our innovative approach. Our specialists help some of the sector's leading pub companies, hotels, clubs, restaurants, visitor attractions and tour operators to stay ahead in this highly competitive industry. This publication is intended for general guidance and represents our understanding of the relevant law and practice as at 21 September 2015. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication. TLT LLP, and TLT NI LLP (a separate practice in Northern Ireland) operate under the TLT brand and are together known as TLT. Any reference in this communication or its attachments to TLT is to be construed as a reference to the TLT entity based in the jurisdiction where the advice is being given. TLT LLP is a limited liability partnership registered in England & Wales number OC308658 whose registered office is at One Redcliff Street, Bristol, BS1 6TP. TLT LLP is authorised and regulated by the Solicitors Regulation Authority under ID 406297. In Scotland TLT LLP is a multi national practice regulated by the Law Society of Scotland. TLT (NI) LLP is a limited liability partnership registered in Northern Ireland under ref NC000856 whose registered office is at Montgomery House, 29-33 Montgomery Street, Belfast, BT1 4NX. TLT (NI) LLP is regulated by the Law Society of Northern Ireland under ref 9330.