The association, which represents offshore gambling operators, has been seeking exemption from the UK’s 15% point of consumption (POC) tax on gambling operators active in the UK, introduced in the UK Gambling Act. The GBGA argued that the POC tax is illegal under European law, because it violates Article 56 of the treaty on the functioning of the EU, which deals with the right to trade freely across borders.

For its part, HMRC said the GBGA has 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.

The association lost its case in the UK courts, but following a judicial review, the argument was referred to the CJEU. [Case C-591/15 The Queen, on the application of The Gibraltar Betting and Gaming Association v Commissioners for Her Majesty's Revenue and Customs].

The court was required to consider the specific point of whether Gibraltar and the UK are to be treated as if they were part of a single member state or whether, with respect to the freedom to provide services, Gibraltar has, as a matter of EU law, the constitutional status of a separate territory to the UK, so that the provision of services between the two is to be treated as intra-EU trade.

The CJEU said that Gibraltar is a European territory for whose external relations a member state, namely the UK, is responsible, and confirmed that EU law is applicable to that territory. Moreover, the Court 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 of the treaty on the functioning of the EU is therefore applicable to Gibraltar.

The court also observed that 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.

As a result, the CJEU concluded that ‘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’.

In its findings, the court also confirmed that Gibraltar does not form part of the UK. Nevertheless, it stated that ‘that fact is 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.

While the court said ‘it emphasises that its conclusion cannot be understood as undermining the separate and distinct status of Gibraltar’, the ruling has dealt a blow to the territory’s hopes of achieving a special status after Brexit. It is expected that the EU will offer Spain a right of veto over the relationship between Gibraltar and the EU.

The GBGA has not so far commented on the CJEU’s ruling. However, this mirrors an advocate general’s opinion on the issue which was published at the beginning of this year.

At the time Peter Howitt, CEO of the GBGA, said: ‘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.’

Case C-591/15 The Queen, on the application of The Gibraltar Betting and Gaming Association v Commissioners for Her Majesty's Revenue and Customs is here.