Regulatory authorities have been given the green light to continue using fees to cover enforcement or regulation costs, following a Supreme Court ruling today.

Simply Pleasure Ltd, a chain of sex shops based in central London, objected to Westminster City Council spending most of its annual licensing fees on enforcing the regulatory regime as a whole.

In 2011/12, the company pointed out, just £2,667 of the £29,435 sum demanded went on processing its application – a system it argued was illegitimate under domestic and EU law.

The long-running case went to the Supreme Court after the Court of Appeal ruled in favour of the shops' owner.

In the Supreme Court, the case was subject to interventions by the Solicitors Regulation Authority, Law Society, Bar Council and Bar Standards Board. The bodies believed the case to have far-reaching implications not just for local authorities but for professional regulators that spend fees on regulating a wider profession.

Westminster Council told the court that the Local Government Act 1982, which states that applicants should pay a ‘reasonable fee’ for the ‘grant, renewal or transfer of a licence’ was wide enough to cover the licensing fees it charged.

The Supreme Court unanimously allowed the council’s appeal in part, but referred the question of whether it was lawful to require payment with licensing applications that may prove unsuccessful to the Court of Justice of the European Union in Luxembourg.

Iain Miller, partner at national firm Bevan Brittan, said the Supreme Court had established the principle that fees charged by local authorities and professional regulators can be used to fund the wider enforcement or regulatory regime.

Miller, who represented the Law Society and Bar Council added: 'The Supreme Court’s decision moves the debate on so that it is not about the principle of whether you can charge for enforcement – but how you charge for it. 

‘To that extent, today’s ruling will come as a big relief to local authorities.’