OPINION OF ADVOCATE GENERAL

SZPUNAR

delivered on 19 January 2017 ( 1 )

Case C‑591/15

The Queen, on the application of:

The Gibraltar Betting and Gaming Association Limited

v

Commissioners for Her Majesty’s Revenue and Customs

Her Majesty’s Treasury

(Request for a preliminary ruling from the High Court of Justice (England & Wales), Queen’s Bench Division (Administrative Court) (United Kingdom))

‛Article 355(3) TFEU — Territorial scope of application of the Treaties — Status of Gibraltar — Article 56 TFEU — Freedom to provide services — Purely internal situation — Games of chance — Concept of restriction — Fiscal measure applicable without distinction’

Introduction

1. In 2014, the United Kingdom of Great Britain and Northern Ireland (UK) adopted a new tax regime (‘the New Tax Regime’) for certain gambling duties, requiring gambling service providers to pay a gambling duty in respect of gambling services provided to ‘UK persons’, regardless of whether the gambling service provider is located in the UK or in another country. This New Tax Regime replaced the previous taxation regime under which only service providers established in the UK were charged gambling duties on their gross gambling profits from their supply of gambling services to customers worldwide.

2. The Gibraltar Betting and Gaming Association (‘the GBGA’), a company incorporated in Gibraltar, takes issue with this New Tax Regime, given that gambling services offered from Gibraltar to the UK are henceforth subject to an additional duty in the UK. The GBGA alleges that the tax is contrary to the freedom to provide services, enshrined in Article 56 TFEU.

3. Whether or not Article 56 TFEU can be invoked in a situation where the facts are confined to the UK and Gibraltar hinges on the question whether for the purposes of that provision those two entities are part of the same Member State or not. In other words, it will need to be determined whether we are in the presence of what is generally referred to as a ‘purely internal situation’.

4. Although this case is about the relationship between an island ( 2 ) and a rock, I will not resort to the plot device of a cliff hanger in this Opinion. I propose that the Court should hold that, for the purposes of Article 56 TFEU, Gibraltar and the UK are to be treated as one entity. There is a purely internal situation which does not trigger the applicability of Article 56 TFEU. In the alternative, should the Court find otherwise, I propose that the provisions of the New Tax Regime which are contested in the present case should not be regarded as a restriction on the freedom to provide services, given that they apply without distinction and on a non-discriminatory basis to gambling service providers located in the UK and elsewhere.

Legal framework

EU law

5. Article 355 TFEU reads as follows: ‘In addition to the provisions of Article 52 of the Treaty on European Union relating to the territorial scope of the Treaties, the following provisions shall apply: … 3. The provisions of the Treaties shall apply to the European territories for whose external relations a Member State is responsible.’

6. Article 28 of the Act concerning the Conditions of Accession and the Adjustments to the Treaties ( 3 ) reads as follows: ‘Acts of the institutions of the Community relating to the products in Annex II to the EEC Treaty and the products subject, on importation into the Community, to specific rules as a result of the implementation of the common agricultural policy, as well as the acts on the harmonization of legislation of Member States concerning turnover taxes, shall not apply to Gibraltar unless the Council, acting unanimously on a proposal from the Commission, provides otherwise.’

7. As is clear from a combined reading of Article 29 of the same Act of Accession and Annex I, point 1.4, to that Act of Accession, Gibraltar is not part of the Union’s customs territory. ( 4 )

The law of the UK

8. There are seven UK gambling duties: general betting duty, pool betting duty, remote gaming duty, gaming duty, bingo duty, lottery duty and machine games duty.

9. The present case concerns remote gaming duty.

10. In 2014, in the UK, the Finance Act 2014 (‘the FA 2014’) introduced the New Tax Regime for the imposition of excise duties on gambling services. Section 154 of Chapter 3 of Part 3 of the FA 2014 defines ‘remote gaming’ as gaming in which persons participate by the use of the internet, telephone, television, radio, or any other kind of electronic or other technology for facilitating communication. ‘Gaming’ is defined in section 188(l)(a) of the FA 2014 as ‘playing a game of chance for a prize’.

11. Section 155(1) of that act provides that an excise duty, known as remote gaming duty, is to be charged on a ‘chargeable person’s participation in remote gaming under arrangements between that person and another person’.

12. ‘Chargeable person’ as defined in section 155(2) of the FA 2014 includes ‘any UK person’. By section 186(1) of the FA 2014, ‘UK person’ is defined as ‘an individual who usually lives in the United Kingdom’ or ‘a body corporate which is legally constituted in the United Kingdom’. Operators (including gaming service providers) must keep appropriate records to enable them to verify whether customers usually live in the UK (‘UK persons’) or whether they usually live outside the UK (see Her Majesty’s Revenue and Customs Guidance, published in accordance with requirements of section 187 of the FA 2014). Operators must, inter alia, check the customer’s address (on a bank statement, associated with a credit card or on a driving licence) or a customer’s contact telephone number. If there are two or more indicators of a UK location, operators must treat that customer as a UK person, and submit a return to Her Majesty’s Revenue and Customs.

13. Remote gaming duty is chargeable at the rate of 15% of ‘the gaming provider’s profits’ on remote gaming for an accounting period. In essence, profits may be calculated as stakes received, less winnings paid out (see section 157 of the FA 2014).

14. Under section 162 of the FA 2014: ‘A gaming provider is liable for any remote gaming duty charged on the provider’s profits on remote gaming for an accounting period.’

Facts, procedure and questions referred

15. The GBGA is a trade association whose members are primarily Gibraltar-based gambling providers who provide remote gambling services to customers in the UK and elsewhere. At least 55% of the remote gambling services provided to UK based customers are provided by companies based in Gibraltar and approaching 90% of the economic activity by UK based customers in the UK remote gambling market did not pay any excise duty to the UK exchequer.

16. Under the tax regime which preceded the New Tax Regime, the relevant UK tax law provided that providers of remote gambling services established in the UK paid tax in the UK on their gross profits derived from remote gambling services to customers wherever they lived at a rate of 15%. According to the referring court, it was common ground that this could be correctly described as a ‘place of supply’ tax. Providers of remote gambling services established outside the UK (including in Gibraltar) paid no tax in the UK on the remote gambling services they provided to and which were consumed by persons in the UK. Providers of remote gambling established in Gibraltar paid tax in Gibraltar on their remote gambling services worldwide (a) at a rate of 1% of turnover in respect of online fixed-odds betting and betting exchanges and (b) at a rate of 1% of gross profit or gaming yield in respect of online casinos. According to the referring court, it was also common ground that this could be correctly described as a ‘place of supply’ tax.

17. The GBGA challenges before the referring court the United Kingdom’s New Tax Regime for certain gambling duties introduced by the FA 2014. It takes issue with the fact that providers of remote gambling services based in Gibraltar are no longer able to provide such services to UK persons free of UK tax. Such providers will incur additional expense in complying with the New Tax Regime and the new regulatory framework and will, until a double taxation arrangement is put in place or Gibraltar changes its tax regime, pay tax in both the UK and Gibraltar on the same business activity with UK persons.

18. It is in the context of these proceedings that, by order of 21 September 2015, received at the Court on 13 November 2015, the High Court of Justice (England & Wales), Queen’s Bench Division (Administrative Court) (United Kingdom) referred the following questions for a preliminary ruling: ‘(1) For the purposes of Article 56 TFEU and in the light of the constitutional relationship between Gibraltar and the United Kingdom: (1) Are Gibraltar and the UK to be treated as if they were part of a single Member State for the purposes of EU law and so that Article 56 TFEU does not apply, save to the extent that it can apply to an internal measure? Alternatively, (2) Having regard to Article 355(3) TFEU, does Gibraltar have the constitutional status of a separate territory to the UK within the EU such that the provision of services between Gibraltar and the UK is to be treated as intra-EU trade for the purposes of Article 56 TFEU? Alternatively, (3) Is Gibraltar to be treated as a third country or territory with the effect that EU law is only engaged in respect of trade between the two in circumstances where EU law has effect between a Member State and a non-Member State? Alternatively, (4) Is the constitutional relationship between Gibraltar and the UK to be treated in some other way for the purposes of Article 56 TFEU? (2) Do national measures of taxation that have features such as those found in the New Tax Regime constitute a restriction on the right to the free movement of services for the purposes of Article 56 TFEU? (3) If so, are the aims, which the referring Court has found domestic measures (such as the New Tax Regime) to pursue, legitimate aims, which are capable of justifying the restriction on the right to free movement of services under Article 56 TFEU?’

19. The GBGA and the Governments of the UK, Belgium, the Czech Republic, Ireland, Spain, Portugal and Gibraltar submitted written observations, as did the European Commission. All of these, with the exception of the Czech Republic, presented oral argument at the hearing on 4 October 2016.

Analysis

First question: applicability of Article 56 TFEU in a situation confined to Gibraltar and the UK?

20. By its first question, the referring Court in essence seeks to ascertain whether Article 56 TFEU can be invoked by an individual in a situation the facts of which are confined to the UK and Gibraltar.

The issue: can Article 56 TFEU be invoked between the UK and Gibraltar?

21. The referring court is uncertain, given that the Government of Gibraltar takes the view that, by reason of its distinct constitutional status, the provision of services from operators residing in Gibraltar to persons residing in the UK is ‘protected’ by EU law, and any restriction must be justified. This principle does not, in the Gibraltar Government’s view, depend on analysis of whether there are, in fact, any actual or potential effects on intra-EU trade between Member States.

22. Surprising though this may appear, the Court has not, as yet, been called upon to determine whether the freedom to provide services applies between the UK and Gibraltar. Also, as far as I can ascertain, neither has legal literature specifically focused on the question of the relationship between Gibraltar and the UK as far as the freedom to provide services is concerned. I can only guess at this stage why this is so: because it is generally believed that the answer can only be that situations between the UK and Gibraltar are purely internal ones when it comes to the freedom to provide services under Article 56 TFEU. In any event, in my view the case at issue is one of a purely internal situation, which means that Article 56 TFEU cannot be invoked.

23. Here’s why.

Treaty provisions: Article 52 TEU and Article 355 TFEU

24. By virtue of Article 52(1) TEU, the Treaties apply to the 28 Member States. This provision confirms a general principle of public international law, according to which international organisations do not have a territory of their own but are composed of the territories of their member states. ( 5 ) Moreover, Article 29 of the Vienna Convention on the Law of Treaties of 23 May 1969 ( 6 ) stipulates that unless a different intention appears from the Treaty or is otherwise established, a Treaty is binding upon each party in respect of its entire territory. The territory of a Member State is defined by domestic law and public international law. ( 7 )

25. Article 52(2) TEU adds that the territorial scope of the Treaties is specified in Article 355 TFEU.

26. Article 355(3) TFEU in turn states that in addition to the provisions of Article 52 TEU, the provisions of the Treaties are to apply to the European territories for whose external relations a Member State is responsible. The origin of this provision is to be found in Article 79 the Treaty of Paris of 1951 establishing the European Coal and Steel Community. ( 8 ) The initial ECSC Treaty provision was conceived for the region of the Saarland. ( 9 ) Subsequently, both the EEC Treaty ( 10 ) and Euratom ( 11 ) contained a comparably worded clause. Nowadays, Article 355(3) TFEU is taken to cater for the situation of Gibraltar. This has been confirmed by the Court, as will be seen in more detail below. ( 12 ) Moreover, in the legally non-binding but nevertheless illustrative Declaration No. 55, annexed to the final act of the intergovernmental conference which adopted the Treaty of Lisbon, the Kingdom of Spain and the UK state that ‘the Treaties apply to Gibraltar as a European territory for whose external relations a Member State is responsible’ and that ‘this shall not imply changes in the respective positions of the Member States concerned’.

27. It is therefore safe to state, as the Gibraltar Government also correctly points out, that the application of EU law to Gibraltar derives from a Treaty basis (Article 355(3) TFEU) other than that applicable to the UK (Article 52(1) TEU).

28. What Article 355(3) TFEU is silent on is the relationship between the UK and Gibraltar when it comes to the application of the fundamental freedoms. All that directly transpires from that provision is that EU law applies to Gibraltar.

Case-law on Gibraltar

29. The Court has in a number of instances been confronted with situations which in some way or another involved Gibraltar.

– Case C-145/04, Spain v UK

30. This case constitutes one of the rare instances in which a Member State instituted infringement proceedings against another Member State on the basis of Article 259 TFEU. The Kingdom of Spain was of the opinion that the UK had infringed EU law by virtue of the arrangements made by it for the inhabitants of Gibraltar to vote in European Parliament elections and in particular because it arranged for voting by the people who reside in that territory but do not possess the nationality of a Member State or, therefore, citizenship of the Union. In that case, the Court was mainly requested to determine whether the UK was entitled to grant the right to vote in elections to the European Parliament to persons residing in Gibraltar but not possessing the nationality of a Member State or, therefore, citizenship of the Union. The Court dismissed the Kingdom of Spain’s action. ( 13 )

31. The reason why I mention this case here is that it provides a neat historical and political overview which is of general use for the case at issue.

32. In the words of the Court, ‘Gibraltar was ceded by the King of Spain to the British Crown by the Treaty of Utrecht concluded between the former and the Queen of Great Britain on 13 July 1713, which was one of the treaties which put an end to the War of the Spanish Succession. The final sentence of Article X of that treaty stated that if it ever seemed meet to the British Crown to grant, sell or by any means to alienate the property of the town of Gibraltar, a right of pre-emption would be given to the Crown of Spain. Gibraltar is currently a British Crown Colony. It does not form part of the United Kingdom. Executive authority is vested in a Governor, who is appointed by the Queen, and, for certain domestic matters, in a Chief Minister and Ministers who are elected locally. They are responsible to the House of Assembly, elections for which are held every five years. The House of Assembly has the right to make laws in defined domestic matters. The Governor, however, has power to refuse to assent to legislation. The United Kingdom Parliament and the Queen in Council also retain power to legislate for Gibraltar. Gibraltar has its own courts. It is, however, possible to appeal against judgments of Gibraltar’s highest court to the Judicial Committee of the Privy Council. In Community law, Gibraltar is a European territory for whose external relations a Member State is responsible within the meaning of [Article 355(3) TFEU] and to which the provisions of the EC Treaty apply. The Act concerning the conditions of accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland and the adjustments to the Treaties (OJ 1972 L 73, p. 14) provides, however, that certain parts of the Treaty are not to apply to Gibraltar’. ( 14 )

33. Ergo, the Court is already aware of the fact that Gibraltar is not actually part of the UK.

– Case C-30/01, Commission v UK

34. In Case C-30/01, Commission v UK, the Commission sought a declaration from the Court that the UK had failed, in respect of Gibraltar, to adopt a number of laws, regulations or administrative provisions to comply with a series of internal market EU secondary law instruments pertaining to the free movement of goods.

35. In dismissing the Commission’s application, the Court held that the exclusion of Gibraltar from the EU customs territory implied that neither the Treaty rules on free movement of goods nor the rules of secondary EU legislation intended, as regards free movement of goods, to ensure approximation of the laws, regulations and administrative provisions of the Member States pursuant to Articles 114 and 115 TFEU, were applicable to it. ( 15 ) This is, in my view, a logical conclusion against the background that Gibraltar is, as seen above, excluded from the Union’s customs territory. In this respect, therefore, as expressed by Advocate General Tizzano in that case ‘Gibraltar must be considered as a third country for the purposes of the Community provisions on movement of goods’. ( 16 )

36. Other than that, it transpires from Case C-30/01 that infringement proceedings pursuant to Article 258 et seq. TFEU are brought against the UK when it comes to the situation of Gibraltar.

37. This is, in my view, a first indication that we are here in the presence of a purely internal situation in the case at issue. It is the UK and not Gibraltar that has assumed obligations towards the other Member States in ratifying the Treaties. Logically, therefore, infringement proceedings with respect to Gibraltar are brought against the UK. If the freedom to provide services were to apply between the UK and Gibraltar, this would imply, as the Commission correctly points out, that by virtue of the Treaties the UK assumes an obligation vis-à-vis itself. This would be rather odd.

38. Moreover, if infringement proceedings cannot be brought against Gibraltar, neither can they, logically, be instituted by Gibraltar, for lack of the status of a Member State of the EU. ( 17 ) If Gibraltar enacted legislation which the Commission or indeed the UK or another Member State were to oppose under Article 56 TFEU, it could not be pursued under Articles 258 or 259 TFEU. The UK would even have to pursue itself for legislation enacted by Gibraltar. This would be even more odd. ( 18 )

– Cases on freedom to provide services in the case of internet betting

39. In the specific context of the freedom to provide services under the Treaty, the Court consistently finds that a firm having its registered office in Gibraltar is a private operator established in a Member State, ( 19 ) without even mentioning Article 355(3) TFEU. ( 20 ) This also means that such a firm can benefit from the rights enshrined in Article 56 TFEU and offer via the internet its services ‘in a Member State other than the one in which it is established’. ( 21 ) Obviously, those cases before the Court only concerned a situation between Gibraltar and a Member State other than the UK.

40. Again, no additional insights are gained from these cases. If, as is uncontested and clear, Gibraltar is not a third country, logically, for the purposes of Article 56 TFEU, it has to form part of a Member State.

41. Yet, the referring court wonders whether, instead of treating the UK and Gibraltar as one entity for the purposes of Article 56 TFEU, there is the possibility of holding that Gibraltar has the constitutional status of a territory separate from the UK within the EU such that the provision of services between Gibraltar and the UK is to be treated as intra-EU trade for the purposes of Article 56 TFEU.

42. I do not see how this could, on any understanding of Article 355(3) TFEU, be possible.

Case-law on other territories

– Case C-355/89, Barr and Montrose

43. The Gibraltar Government refers to Advocate General Jacob’s Opinion in Barr and Montrose Holdings, where the Advocate General states that the movement of workers between the UK and the Isle of Man was ‘not “wholly internal to a Member State”, for … the Isle of Man is not part of the United Kingdom’. ( 22 )

44. I frankly fail to see a legal link with the case at issue, since the Isle of Man is subject to a legal regime that differs from that of Gibraltar. What the Isle of Man and Gibraltar have in common is that they are not part of the UK.

45. Article 355(5)(c) TFEU stipulates that notwithstanding Article 52 TEU and Article 355(1) to (4) TFEU, the Treaties are to apply to the Channel Islands and the Isle of Man only to the extent necessary to ensure the implementation of the arrangements for those islands set out in the Treaty concerning the accession of new Member States to the EEC and Euratom signed on 22 January 1972. Article 2 of Protocol No 3 to the UK Act of Accession in turn states that the free movement of workers, as enshrined in Article 45 TFEU, does not apply to the Isle of Man. It is therefore logical that, as regards Article 45 TFEU, the situation between the UK and the Isle of Man is not a purely internal one. The Court, moreover, held, or rather confirmed that, according to Article 2 of Protocol No 3, the rights enjoyed by Manxmen in the UK are not affected by the Act of Accession, but that that article specified that such persons do not benefit from the Community provisions relating to the free movement of persons and services ( 23 ) and that neither that provision nor other provisions of that protocol could be interpreted as requiring the Isle of Man authorities to treat natural or legal persons from the Community in the same manner as Manxmen are treated in the UK. ( 24 ) Ergo, as the Commission also underlines, from the perspective of EU law a UK national moving to the Isle of Man has the same rights as any other EU national. Advocate General Jacobs’ statement is therefore to be seen in this context and is, as such, not of direct relevance in the case at issue.

– Case C-293/02, Jersey Produce Marketing Organisation

46. Far more conducive to resolving the first question in the present case is the Jersey Produce Marketing Organisation case.

47. Jersey producers were prohibited from exporting their potatoes to the UK unless they had registered with the Jersey Potato Export Marketing Board and entered into a marketing agreement with them. These producers sought to invoke Article 35 TFEU. The Court thus had to determine whether, for the purposes of the FEU Treaty, trade in such goods between Jersey and the UK must be treated as if it were trade in goods between Member States or whether, for the purposes of that case, Jersey and the UK must be treated as if they formed part of a single Member State.

48. Just like Gibraltar, Jersey does not form part of the UK. Indeed, the Court has itself affirmed that it is, for the purposes of Article 355(3) TFEU, a territory for whose external relations that Member State is responsible. ( 25 ) The only difference in the legal treatment between Gibraltar and Jersey is that, as far as the latter is concerned, there is the provision of Article 355(5)(c) TFEU, which constitutes a lex specialis in relation to Article 355(3) TFEU. As a result of that specialised provision, the Treaty rules do not apply fully but apply only in part to Jersey, within the limits laid down by the specific regime created for it. In this respect, the general legal situation regarding Jersey is identical to that of the Isle of Man.

49. Now, and this is the crux of the matter: Jersey Produce Marketing Organisation was about the Treaty provisions on the free movement of goods. Contrary to the situation in Barr and Montrose Holdings, no rules of the specific regime applied to the Channel Islands. Consequently the Court held that ‘for the purpose of the application of [Articles 28, 30, 34 and 35 TFEU,] the Channel Islands, the Isle of Man and the United Kingdom must be treated as one Member State’. ( 26 )

50. Nothing else can or should, in my view, be said of the situation of the UK and Gibraltar when it comes to the freedom of provision of services under Article 56 TFEU.

Further considerations

51. The Gibraltar Government stresses that since Article 355(3) TFEU must be interpreted by reference to its object and purpose, which is to ensure the effective application of EU law in relation to the European territories concerned by that provision and since this purpose includes the creation of an internal market ‘without internal frontiers’ (see Article 26(2) TFEU), the proper construction of Article 355(3) TFEU therefore requires that there be free movement of services between Gibraltar and the UK. Relying on an analogy between Gibraltar and the Channel Islands and the Isle of Man – to which Article 355(5)(c) TFEU applies – would be misplaced.

52. I do not agree with such reasoning.

53. Using that logic, one could bring any internal situation within the ambit of the internal market freedoms. The Court has resorted to the terms ‘without internal frontiers’ of Article 26(2) TFEU in support of argument. For instance, in Carbonati Apuani, a case about a marble tax payable on marble excavated in one specific commune, ( 27 ) the Court pointed to Article 26(2) TFEU ( 28 ) in support of its more fundamental argument that the very principle of a customs union requires the free movement of goods to be ensured within the Union generally, not in trade between Member States alone, but more broadly within the territory of the customs union. ( 29 )

54. Such considerations are very specific to the creation of a customs union. ( 30 ) Any territorial demarcation, even within a Member State, is bound to have consequences for the free movement of goods throughout the Union. Such considerations cannot therefore be transposed to the freedom to provide services as such.

55. Moreover, as the Commission also points out in its observations, Carbonati Apuani was not a case of a purely internal situation. Indeed, the tax in question, by its nature and terms, impinged on trade between Member States. ( 31 ) The same goes for earlier cases, to which the Court specifically referred in that case. ( 32 )

56. Whichever way one looks at it, Article 56 TFEU speaks about ‘nationals of Member States’ ( 33 ) in the context of the freedom to provide services. Article 355(3) TFEU does not add a new Member State. Ergo, Gibraltar and the UK cannot be other than a single Member State for the purposes of applying Article 56 TFEU.

57. In short, I read Article 355(3) TFEU as not creating new or supplementary rights (or obligations) between the UK and Gibraltar that are in addition to those flowing from UK and Gibraltar constitutional law.

Conclusion

58. I therefore propose that the Court should answer the first question to the effect that the UK and Gibraltar are to be considered as a single Member State for the purposes of the application of Article 56 TFEU.

Second question: restriction pursuant to Article 56 TFEU?

Hypothetical nature of second question

59. By its question the referring court seeks to ascertain whether the introduction of remote gaming duty constitutes a restriction on the freedom to provide services under Article 56 TFEU.

60. Given that the provisions of the FEU Treaty on the freedom to provide services do not apply to a situation which is confined in all respects within a single Member State, ( 34 ) the second question is hypothetical.

61. Should the Court, however, reach a different conclusion as regards the first question and be of the opinion that Article 56 TFEU applies to the case at issue, then that provision needs to be examined.

62. The same goes, incidentally, for the eventuality of the Court finding that although the dispute in the main proceedings is confined within a single Member State (for the purposes of Article 56 TFEU), there is an interest in the Court answering a question on substance for one of the reasons recently summarised in Ullens de Schooten. ( 35 ) That said, I would add a word of caution at this stage: on the assumption that the situation in the case at issue is a purely internal one, I do not see how the referring court has indicated, in accordance with the requirements of Article 94 of the Rules of Procedure of the Court, in what way the dispute before it, despite its purely domestic character, has a connecting factor with the provisions of EU law on the freedom to provide services that makes a preliminary ruling on interpretation necessary for it to give judgment in that dispute. ( 36 ) This is so because the referring court appears to concentrate solely on whether the situation in the case at issue in the main proceedings is internal or not and not on whether, in case it was internal, there are connecting factors with EU law.

63. What follows is, therefore, offered on this hypothetical basis only.

Essential features of the New Tax Regime

64. The referring court has found that after the introduction of the New Tax Regime: (1) a UK duty (or ‘remote gaming duty’) is charged on a ‘chargeable person’s’ participation in remote gaming with gambling providers whether the gambling providers are established in the UK, Gibraltar or elsewhere in the world, (2) a ‘chargeable person’ is any UK person (a UK person in turn being ‘an individual who usually lives in the UK’ or ‘a body corporate which is legally constituted in the UK’), (3) the rate of the remote gaming duty in the UK is 15% of the gambling provider’s profits (as defined) for the relevant period, (4) the tax is paid by the gambling providers, and such payment is a condition of maintenance of their licence to provide the services, (5) to calculate the amount of a gaming provider’s profits for an accounting period in respect of ordinary gaming, one must take the aggregate of the gaming payments made to the provider in the accounting period in respect of ordinary gaming and subtract the amount of the provider’s expenditure for the period on prizes in respect of such gaming, (6) the part of the provider’s income and outgoings to be taken into account for determining the profit have to be identified in its books and records and so isolated from other receipts and outgoings of the provider, (7) the result of that identification can, as such, be taken forward into a calculation of the provider’s profit from all of its activities, (8) that result is identified and quantified without reference to any administrative or other expenses (e.g. rent and wages) or the 15% tax payable on that sum (that is on the difference between the defined receipts and the defined outgoings).

65. Crucially, as the referring court points out, the essential change and the essential effect of the remote gaming duty is that it identifies and charges tax on a defined net return from an identified market and that market and that return are defined in the same way for all the providers of remote gaming services to that market.

‘Extraterritoriality ’

66. The GBGA and the Gibraltar Government submit that the taxes payable under the New Tax Regime are to be characterised as extraterritorial taxes as they are not taxes on consumption or on consumers, but are taxes on the profits of suppliers who are located outside the UK. Given that the tax is assessed at 15% of a supplier’s gross gambling profits, or ‘net stakes’, that is the supplier’s aggregate receipts from UK persons minus the amount paid out in winnings to UK persons, it is assessed as a fixed proportion of the supplier’s aggregate gain from gambling transactions with UK persons. Since the supplier will not gain from every transaction (because the gambler will sometimes win), it cannot be construed as a tax on participation in gambling activities. Consumers may gamble extensively, but to the extent that they win, no tax will be payable by the operator in respect of their consumption. Since the net stakes are calculated in aggregate over a three month period, it is not possible to attribute any portion of tax payable by the operator to any particular consumption of gaming services by any consumer.

67. The opposing view, advanced by the UK Government, is that the New Tax Regime imposes domestic gambling duties which are non-discriminatory in their nature. It taxes the economic activity in the form of the consumption of gambling services in the UK by persons who usually live in the UK or by UK corporations. Remote gaming duty is levied on a chargeable person’s participation in remote gaming. The chargeable person is the gaming service recipient, albeit that the duty is made payable by the gaming service provider. The duty payable in relation to that participation is not calculated by reference to service providers’ profits, but rather, by reference to the amounts due from gaming less the amounts that they pay out as winnings. That is, it is a duty on aggregate net stakes. Whatever the method of calculation, it remains a duty on participation in remote gaming. It is not, therefore, an extraterritorial tax.

68. In my view, the terminology of extraterritoriality is unfortunate in the context of the present case. As a rule, in the absence of harmonisation, by virtue of its fiscal sovereignty, a (Member) State is free to define unilaterally whom it taxes where and under what conditions, both as regards direct and indirect taxation. Only in extreme cases where no link to its jurisdiction can be established, can one speak of a tax which is prohibited because of its extraterritoriality.

69. In the case at issue, however, there are clear links with the UK. The starting point is consumption by a UK person, which is overwhelmingly consumption physically taking place in the UK. Moreover, as the referring court points out, the payment of the tax is a condition of maintenance of the gambling provider’s licence to provide the services to customers in the UK. It is therefore difficult to speak of a tax which is illegal because of an alleged extraterritoriality.

Direct or indirect tax?

70. As for the question whether the tax at issue constitutes a direct or an indirect tax, I believe that this question is not relevant in the present context. Both are measured against the freedom to provide services in the same manner. In addition, I am not in a position to give a definitive answer to this question, which should, in my view, be left to the referring court.

71. There are both elements which point to the remote gaming duty being a direct tax on the supply of the services offered from Gibraltar and elements which point to it being a tax on consumption effected in the UK.

72. The elements indicative of a direct tax are the following: it appears to me that the economic burden of the tax is, in the end, borne by the supplier of the service and that in this respect the tax in question comes close to a tax on profits. Moreover, I am not of the view that the tax is already included in the price of the service offered to the consumer. The referring court itself points out in this connection that the effect of the New Tax Regime is to charge tax on a defined part of the receipts of a provider less a defined part of the outgoings of the provider. The definition and so the assessment of that part of the profits relates to the source of business, namely, in broad terms, the UK market.

73. That said, what triggers the whole taxing exercise is the consumption of gambling services effected by the consumer (a UK person), even if not all consumption is taxed, namely that consumption which leads to a win for the consumer.

Place of consumption

74. We still need to take a closer look at the precise point of consumption.

75. The GBGA and the Gibraltar Government take issue with the fact that the taxes in question are not restricted to actual consumption taking place in the UK because the customer, that is the chargeable person under the New Tax Regime, may not be in the UK at the time of the transaction.

76. I am not convinced by this argument, and it even appears to me that it attempts to turn the principle that an internet transaction can and must always be linked to a specific (Member) State on its head. It is certainly true that a person who is resident in the UK and registered as a UK person with his/her credit card details may participate in online gambling, that is enter into a transaction, while on holiday elsewhere abroad. That is not the point, however. What is crucial is which legal jurisdiction that person is the subject of. If a person is registered in the UK because this is where he has his centre of interest, then I fully understand that, for the purposes of the consumption tax, he is regarded as consuming in the UK.

77. In other words: just because the internet is as universal as it is and just because one can enter into transactions when not physically present in one’s Member State of origin does not mean that one does not consume in that Member State. A Member State can therefore define the place of consumption, even if, in some instances, there is a discrepancy between the physical location of the consumer and the defined place of consumption.

78. This may even lead to situations where different States tax the same consumption, in a situation where a UK consumer consumes when travelling. But such double taxation does not lead, as such, to an infringement of Article 56 TFEU, as we shall now see.

Restriction?

79. Pursuant to Article 56 TFEU, restrictions on freedom to provide services within the Union are prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended.

80. As is well known, Article 56 TFEU requires not only the elimination of all discrimination against providers of services on grounds of nationality or the fact that they are established in a Member State other than that where the services are to be provided, but also the abolition of any restriction, even if it applies without distinction to national providers of services and to those of other Member States, which is liable to prohibit, impede or render less advantageous the activities of a provider of services established in another Member State where he lawfully provides a similar service. ( 37 )

81. Under such a broad reading of Article 56 TFEU, the measures in question are liable to render the exercise of the freedom to provide services between Gibraltar and the UK less attractive. As they constitute an additional charge for the Gibraltar economic operators, one may be inclined to think that they constitute a restriction in the sense of Article 56 TFEU.

82. The problem with such an approach is that when it comes to national taxes, the mere imposition of a tax leads to a restriction. Indeed, the levying of any tax hinders economic activity or makes it less attractive. ( 38 ) Frequently, this is the very point of taxes. This is the reason why the Court, as I think one can safely assume by now, takes a more flexible approach when it comes to taxes under the internal market freedoms, in particular the freedom to provide services, the freedom of establishment and the free movement of capital.

83. It is Advocate General Kokott who has been the most explicit in this respect and who has extensively argued in several of her Opinions ( 39 ) for a more nuanced approach in the domain of taxes. I will resort to some of her argumentation at this stage, as I think that it underlies the Court’s reasoning in the relevant cases.

84. If a tax were to be capable of ‘review in the light of the fundamental freedoms of EU law even in cases where it is neither overtly nor covertly discriminatory and is as such levied on all EU citizens in the same way, then even the decision by a Member State to levy a tax in a particular situation and any increases in that tax would fall within the scope of EU law. This would effectively disregard the fiscal sovereignty which the Member States continue to exercise under the existing division of powers within the European Union. A tax that is levied without any discrimination at all cannot therefore, in principle, give rise to a restriction of a fundamental freedom’. ( 40 )

85. That said, the Court has identified the possibility of a restriction for the purposes of Article 56 TFEU where a tax is charged at a prohibitive rate. ( 41 ) In the case at issue it is, however, not possible to argue that 15% constitutes a prohibitive rate.

86. As a consequence, the remote gaming duty does not constitute a restriction within the meaning of Article 56 TFEU – if it applies without distinction to both UK and non-UK economic operators and is non-discriminatory. I shall examine that last point below.

Double taxation

87. The question of a double taxation is inextricably linked to the question of restriction under Article 56 TFEU. As the Commission rightly stresses in its observations, the existence of double taxation does not constitute a restriction. In the absence of harmonisation, double taxation, as such, is not prohibited by the fundamental freedoms but is simply a consequence of the principle that (Member) States have the power of taxation, arising from their fiscal sovereignty. ( 42 )

88. With respect to direct taxation, the Court consistently holds that double taxation is not contrary to the fundamental freedoms. ( 43 )

Discrimination?

89. But does this case present one of discrimination between gambling operators based in the UK and those based in Gibraltar? If this were to be the case, then indeed, there would be an infringement of Article 56 TFEU, if such discrimination was not justified.

90. Article 56 TFEU also sets out to abolish discrimination between nationals of Member States when it comes to the freedom to provide services. This provision is, therefore, a particular expression of the general principle of non-discrimination underlying the Treaties. ( 44 )

91. The GBGA and the Gibraltar Government submit that the taxes imposed under the New Tax Regime are (indirectly) discriminatory. Although applicable without distinction, the New Tax Regime places gambling providers outside the UK, including those established in Gibraltar, at a particular disadvantage by comparison with providers in the UK. This is because providers in Gibraltar will be subject to double taxation in relation to their services provided to UK persons, whereas UK-based operators providing services to the same consumers will not.

92. I do not agree with such reasoning.

93. Rather, as the UK contends, the New Tax Regime imposes domestic gambling duties which are non-discriminatory in nature. Although the New Tax Regime creates an additional cost for service providers, it applies equally to all gambling service providers, wherever they are established, who are engaged in economic activity in the UK gambling market. It is not therefore, as such, liable to restrict the freedom to provide services under Article 56 TFEU.

94. It is clear to me that if the imposition of a tax had a greater effect on cross-border situations than on purely domestic situations, there would indeed be a breach of the principle of freedom to provide services. But this is not the case here.

95. The present case is not one of discrimination. The tax in question applies without distinction to service providers, regardless of whether they are established in the UK or not. Again, as the referring court itself stresses, the essential change and the essential effect of the remote gaming duty is that it identifies and imposes taxation on a defined net return from an identified market and that market and that return are defined in the same way for all the providers of gambling services to that market.

96. What the GBGA and the Gibraltar Government, in reality, call into question is the principle of the UK’s power of taxation and the issue of double taxation. But we have already dealt with that point above.

Conclusion

97. I therefore believe that Article 56 TFEU does not preclude the imposition of national measures of taxation that have features such as those found in the remote gaming duty scheme.

Third question

98. By its third question, the referring court seeks to ascertain whether a restriction to Article 56 TFEU is justified.

99. In light of the answers proposed to the first and second question, the question is hypothetical. The considerations that follow are therefore in the eventuality that the Court should hold both that there is no purely internal situation and that there is a restriction to the freedom to provide services in the present case.

100. The UK contends that the New Tax Regime pursues the following legitimate aims: (1) to level the playing field between UK operators and overseas operators; (2) to ensure that the UK can exercise proper fiscal supervision over the gambling market, including minimising the risk of operators avoiding tax on economic activity with UK consumers, based on the fiscal territoriality principle; ( 45 ) (3) to enable the UK to maintain the coherence of the UK tax system, ( 46 ) and (4) to increase tax revenue.

101. Regarding the last point, increasing tax revenue, the Court consistently holds that the objective of maximising public revenue alone cannot permit a restriction of the freedom to provide services. ( 47 ) However, the fact that a restriction on gambling activities incidentally benefits the budget of the Member State concerned does not prevent that restriction from being justified in so far as it actually pursues objectives relating to overriding reasons in the public interest. ( 48 ) Ergo, while increasing tax revenue does not constitute a ground of justification in itself, it does not stand in the way where there are valid grounds of justification which incidentally lead to an increase in tax revenue.

102. As for the other three grounds of justification advanced by the UK, I would have no objection as to the grounds themselves. However, as far as the proportionality test is concerned, since little information is furnished by the referring court, I am not in a position to provide proper guidance. It will therefore be for the referring court to determine whether the remote gaming duty is suitable and necessary to attaining the aims invoked by the UK.

Conclusion

103. On the basis of the above considerations, I propose that the Court answers the questions of the High Court of Justice (England & Wales), Queen’s Bench Division (Administrative Court) (United Kingdom) as follows: The United Kingdom of Great Britain and Northern Ireland and Gibraltar are to be considered as a single Member State for the purposes of the application of Article 56 TFEU.

( 1 ) Original language: English.

( 2 ) To be more precise: an island, a number of isles as well as part of an island.

( 3 ) Of the Kingdom of Denmark, Ireland, and the United Kingdom of Great Britain and Northern Ireland (OJ 1972 L 73, p. 14).

( 4 ) This is now also clear from Article 4 of Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (OJ 2013 L 269, p. 1).

( 5 ) See Kokott, J., in Streinz, R. (ed.), EUV/AEUV, Beck, 2nd edition, Munich 2012, Artikel 52 EUV, point 1.

( 6 ) United Nations Treaty Series, Vol. 788, p. 354.

( 7 ) See in this connection also judgment of 29 March 2007, Aktiebolaget NN (C‑111/05, EU:C:2007:195, paragraph 54), where the Court held with respect to Article 299 EC, the precursor to Article 355 TFEU, that ‘in the absence, in the Treaty, of a more precise definition of the territory falling within the sovereignty of each Member State, it is for each of the Member States to determine the extent and limits of that territory, in accordance with the rules of international public law’.

( 8 ) See the first paragraph of Article 79 of the ECSC Treaty: ‘This Treaty shall apply to the European territories of the High Contracting Parties. It shall also apply to European territories for whose external relations a signatory State is responsible; an exchange of letters between the Government of the Federal Republic of Germany and the Government of the French Republic concerning the Saar is annexed to this Treaty.’

( 9 ) Interestingly, the Saarland issue had been resolved by the entry into force of the Treaty of Rome on 1 January 1958. Yet, the relevant provision of the ECSC Treaty was mirrored in the EEC Treaty, although the Saarland’s situation had been dealt with the Saarvertrag of 1956, as a result of which the Saarland became the tenth Bundesland of the Federal Republic of Germany on 1 January 1957. Full economic integration into the Federal Republic, including the introduction of the D-Mark was effected in the middle of 1959.

( 10 ) See Article 227(4) of the EEC Treaty, and later, after the Amsterdam-renumbering, Article 299(4) of the EC Treaty. The text of that provision which is now found in Article 355(3) TFEU has not changed since 1957.

( 11 ) See Article 198(2) of the Euratom Treaty.

( 12 ) See judgment of 12 September 2006, Spain v United Kingdom (C‑145/04, EU:C:2006:543, paragraph 19).

( 13 ) See judgment of 12 September 2006, Spain v United Kingdom (C‑145/04, EU:C:2006:543, paragraph 80). This case, which provides a good example of cooperation between the Strasbourg and the Luxembourg courts, ultimately dealt with the execution, by the UK, of the Matthews judgment of the European Court of Human Rights. See judgment of the ECtHR of 18 February 1999, No 24833/94, Matthews v. the United Kingdom, ECLI:CE:ECHR:1999:0218JUD002483394.

( 14 ) See judgment of 12 September 2006, Spain v United Kingdom (C‑145/04, EU:C:2006:543, paragraphs 14 to 19). See also judgment of 30 April 2002, Government of Gibraltar v Commission (T‑195/01 and T‑207/01, EU:T:2002:111, paragraph 12).

( 15 ) See judgment of 23 September 2003, Commission v United Kingdom (C‑30/01, EU:C:2003:489, paragraph 59).

( 16 ) See Opinion of Advocate General Tizzano in Commission v United Kingdom (C‑30/01, EU:C:2003:25, point 62).

( 17 ) See Article 259 TFEU.

( 18 ) Neither can Gibraltar, incidentally, institute an action for annulment on the basis of Article 263(1) TFEU: see judgment of 29 June 1993, Gibraltar v Council (C‑298/89, EU:C:1993:267, paragraph 14). In the context of annulment actions against acts of the EU it is treated as a non-privileged applicant, under Article 263(4) TFEU, which can only bring an action under the narrow conditions of that provision.

( 19 ) See, for instance, judgment of 8 September 2009, Liga Portuguesa de Futebol Profissional and Baw International (C‑42/07, EU:C:2009:519, paragraph 20). This case concerned the marketing in Portugal of a number of games of chance offered, via the internet, by a firm having its registered office in Gibraltar. In paragraph 49 of the judgment, the Court found that that firm was ‘a private operator established in another Member State’.

( 20 ) By contrast, Advocate General Bot makes reference to Article 355(3) TFEU in his Opinion in Liga Portuguesa de Futebol Profissional and Baw International (C‑42/07, EU:C:2008:560, point 184 et seq.), even though in points 225 and 232 he goes on to assume that the firm in question is established in a Member State.

( 21 ) See judgment of 8 September 2010, Carmen Media Group (C‑46/08, EU:C:2010:505, paragraph 52).

( 22 ) See Opinion of Advocate General Jacobs in Barr and Montrose Holdings (C‑355/89, EU:C:1991:5, point 22).

( 23 ) See judgment of 3 July 1991, Barr and Montrose Holdings (C‑355/89, EU:C:1991:287, paragraph 22).

( 24 ) See judgment of 3 July 1991, Barr and Montrose Holdings (C‑355/89, EU:C:1991:287, paragraph 23).

( 25 ) See judgment of 8 November 2005, Jersey Produce Marketing Organisation (C‑293/02, EU:C:2005:664, paragraph 43).

( 26 ) See judgment of 8 November 2005, Jersey Produce Marketing Organisation (C‑293/02, EU:C:2005:664, paragraph 54).

( 27 ) The commune of Carrara in Tuscany (Italy).

( 28 ) See judgment of 9 September 2004, Carbonati Apuani (C‑72/03, EU:C:2004:506, paragraph 23).

( 29 ) See judgment of 9 September 2004, Carbonati Apuani (C‑72/03, EU:C:2004:506, paragraph 22).

( 30 ) In any event, as seen above, Gibraltar does not form part of the customs union.

( 31 ) See judgment of 9 September 2004, Carbonati Apuani (C‑72/03, EU:C:2004:506, paragraph 26).

( 32 ) See judgment of 9 August 1994, Lancry and Others (C‑363/93 and C‑407/93 to C‑411/93, EU:C:1994:315, paragraph 30); see, to the same effect, with regard to measures having effect equivalent to a quantitative restriction, judgments of 15 December 1982, Oosthoek's Uitgeversmaatschappij (286/81, EU:C:1982:438, paragraph 9); of 15 December 1993, Ligur Carni and Others (C‑277/91, C‑318/91 and C‑319/91, EU:C:1993:927, paragraphs 36 and 37); of 13 January 2000, TK-Heimdienst (C‑254/98, EU:C:2000:12, paragraphs 27 to 31); and of 5 December 2000, Guimont (C‑448/98, EU:C:2000:663, paragraphs 21 to 23).

( 33 ) My emphasis.

( 34 ) See, for a very recent affirmation of this consistent case-law, judgment of 15 November 2016, Ullens de Schooten (C‑268/15, EU:C:2016:874, paragraph 47 and the case-law cited).

( 35 ) See judgment of 15 November 2016, Ullens de Schooten (C‑268/15, EU:C:2016:874, paragraphs 50 to 53).

( 36 ) See judgment of 15 November 2016, Ullens de Schooten (C‑268/15, EU:C:2016:874, paragraph 55).

( 37 ) See judgment of 17 December 2015, X-Steuerberatungsgesellschaft (C‑342/14, EU:C:2015:827, paragraph 48 and the case-law cited).

( 38 ) See Opinion of Advocate General Kokott in X (C‑686/13, EU:C:2015:31, point 40).

( 39 ) See Opinion of Advocate General Kokott in Viacom Outdoor (C‑134/03, EU:C:2004:676, points 58 to 67) (on freedom to provide services, Article 56 TFEU); Opinion of Advocate General Kokott in X (C‑498/10, EU:C:2011:870, points 17 to 29) (on freedom of establishment, Article 49 TFEU), and Opinion of Advocate General Kokott in X (C‑686/13, EU:C:2015:31, points 38 to 45) (on freedom of establishment, Article 49 TFEU). See also Kokott, J., Ost, H., ‘Europäische Grundfreiheiten und nationales Steuerrecht’, Europäische Zeitschrift für Wirtschaftsrecht 2011, pp. 496-503.

( 40 ) See Opinion of Advocate General Kokott in X (C‑686/13, EU:C:2015:31, points 38 to 40).

( 41 ) See judgment of 11 June 2015, Berlington Hungary and Others (C‑98/14, EU:C:2015:386, paragraph 42).

( 42 ) An appropriate remedy for double taxation is therefore (mainly) bilateral conventions between (Member) States dealing with the issue. See also judgment of 14 November 2006, Kerckhaert and Morres (C‑513/04, EU:C:2006:713, paragraph 21).

( 43 ) See e.g. judgments of 14 November 2006, Kerckhaert and Morres (C‑513/04, EU:C:2006:713, paragraph 20 et seq.), and of 16 July 2009, Damseaux (C‑128/08, EU:C:2009:471, paragraph 30 et seq.) with respect to the free movement of capital.

( 44 ) See judgment of 11 December 2003, AMOK (C‑289/02, EU:C:2003:669, paragraphs 25 and 26 and the case-law cited).

( 45 ) The UK points in this connection to judgments of 14 November 2006, Kerckhaert and Morres (C‑513/04, EU:C:2006:713, paragraph 20), and of 20 May 2008, Orange European Smallcap Fund (C‑194/06, EU:C:2008:289, paragraphs 37 and 48). See also judgments of 13 December 2005, Marks & Spencer (C‑446/03, EU:C:2005:763, paragraphs 43 and 44); of 13 March 2007, Test Claimants in the Thin Cap Group Litigation (C‑524/04, EU:C:2007:161, paragraphs 68 and 72); and of 28 February 2008, Deutsche Shell (C‑293/06, EU:C:2008:129, paragraph 37).

( 46 ) The UK points in this connection to judgments of 13 December 2005, Marks & Spencer (C‑446/03, EU:C:2005:763, paragraphs 43 and 44); of 13 March 2007, Test Claimants in the Thin Cap Group Litigation (C‑524/04, EU:C:2007:161, paragraphs 68 and 72); and of 28 February 2008, Deutsche Shell (C‑293/06, EU:C:2008:129, paragraph 37).

( 47 ) See judgment of 11 June 2015, Berlington Hungary and Others (C‑98/14, EU:C:2015:386, paragraph 60 and the case-law cited).

( 48 ) See judgment of 11 June 2015, Berlington Hungary and Others (C‑98/14, EU:C:2015:386, paragraph 61 and the case-law cited).