LAWYERS ARE WAGING A DEBATE ABOUT THE PROS AND CONS OF LEGISLATION THAT IS SET TO TRANSFORM THE GAMING INDUSTRY.

JEREMY FLEMING HEARS HOW POLITICAL AND TAX ISSUES COULD BE CRUCIAL

Gamblers are the types that build castles in the air, people say, and they may be doing that in greater numbers before long.

The government has now published its long-awaited Gambling Bill, and among other things it establishes a framework for 'remote gambling' - including gambling on the Internet - and lawyers predict that the measures could establish the UK as the world capital of virtual gambling.

Lawyers are among the key stakeholders who will be commenting as part of a consultation exercise on the Bill, which closes at the end of February.

Julian Harris, the head of licensing at national firm Pinsents, says his firm argues that, in the long term at least, it makes good commercial sense for operators to base remote gambling businesses in the UK, 'which will be the first major First World jurisdiction to license in this important area'.

But he adds: 'The interest that will be created is going to be subject to one very important caveat: the tax regime is as yet unknown, and in order to be successful, the UK will have to compete with some very well operated and extremely tax advantageous jurisdictions, such as Alderney.'

David Clifton, a partner in the licensing department of London firm Joelson Wilson & Co, says: 'The government's proposals for remote gambling are clearly designed to achieve the position of world leader in this field for the UK.

They are certainly provoking intense interest around the world - as has been evident at conferences at which I spoke last year in Greece, Portugal, and Spain.'

But Mr Clifton says the most interest was apparent at the Las Vegas Global Gaming Expo, where Joelson Wilson took a stand with its new US associate firm Cooper Levenson (see [2003] Gazette, 27 November, 6).

'Delegates wanted to find out exactly what opportunities await them under the new legislation in Britain,' he says.

He agrees that the key to whether the government's ambitions will be achieved lie in the tax structure proposed - 'about which governmental lips are fairly tightly sealed'.

Another key provision in the Bill is the creation of a Gambling Commission to replace the Gaming Board and act as a national regulator with wider functions, greater flexibility to act, and stronger enforcement powers.

The commission's decisions would be appealable to a new Gambling Appeals Tribunal.

Mr Harris says the commission and tribunal will make legal challenges to the regulator much simpler.

'In the past, it has been almost impossible to challenge decisions of the regulator, not just because there was no procedure in law for doing so, but also because in many cases the Gaming Board was not obliged to give reasons for its decisions.

'The only route was to challenge by means of judicial review.

We do not foresee an enormous number of challenges, and the board has always acted sufficiently responsibly that there would never have been an avalanche of challenges to its decisions, but it is good both for the regulators and for those being regulated that there should be a proper mechanism for appeal.'

Mr Clifton says that whether appeals will be simpler in the future 'will depend on the procedures that will be put in place and the quality of the members of the tribunal itself'.

He adds: 'What I do think is worthy of note is that the Gambling Commission will have the power to initiate prosecutions - something that the Gaming Board cannot do currently.'

One bugbear of the proposals is a provision that would see the transfer of the power to grant licences for gaming from magistrates' courts to local authorities.

Peter Glazebrook, a partner in the licensing department of London firm Davenport Lyons, says: 'It's the same problem encountered with the transfer of power in liquor licensing to local authorities under the Licensing Act 2003.

Local authorities are not so objective.

There is always a danger that they will - as politicians - be partisan, or that they might be seen to be.'

Mr Harris says concerns arise for several reasons.

'Magistrates are less likely than local authorities to be influenced by local party politics, and it is also very difficult for local authorities to look at such decisions other than in planning terms.'

He says the purpose behind the change is that government wants local people to be responsible for these decisions.

But he adds: 'It seems to us that the general perception of local residents is likely to be that the decisions of magistrates are more likely to be impartial than those of politically motivated local authorities.

Moreover, local authorities are now having to determine liquor licences, and this is an additional burden on their already stretched facilities.'

Mr Clifton says: 'It's not the role of local politicians to be impartial.

Political decisions will definitely creep in very quickly.

However, I do not see any possibility of the government changing its mind.

'Another area of concern is the very considerable training that local authority councillors and staff will require to properly equip them to deal with a realm of licensing in respect of which they will have had no previous experience.

Grave concerns are now being expressed that local authorities will not have the personnel or financial resources to manage the transitional procedures under the Gambling Bill.'

But the Bill also proposes to abolish crucial limitations in the current regime, which could herald a massive increase in gaming houses in the UK.

These conditions limit casinos to 'permitted areas' and only allow them where they fulfil 'demand criteria'; those using them are required to have membership, and a condition is that membership applications take 24 hours to process.

Mr Harris says: 'There have already been some minor measures enacted, for example limits on the sale of alcohol on the gaming floor and the provision of live entertainment have been relaxed.

Although these are minor in nature, they have far-reaching effects.

'Many companies either have not made great use yet of these changes, but in larger casinos the ability to provide live entertainment can be a major attraction - and in our view will be an important factor in substantially increasing the gaming market in the UK from the current 3% of the adult population who visit casinos.'

Mr Harris says the new law will be important for lawyers in several areas, not least planning law - as companies avidly seek out new premises.

But he warns that here there is a trap for the unwary.

He says: 'Gaming is highly specialised and most clients already know the few firms with the necessary expertise to advise them.

The real opportunities will be in planning, property and development work over the next few years.'

For Mr Clifton, the potential gambling legislation is already providing a boom in work for specialist lawyers, notwithstanding the proposed removal of the 'demand' test.

He says: 'We have been preparing for this for a number of years and increasing our international profile in the process.'

The industry is clearly preparing too.

For example, last November Pinsents acted for casino giant MGM Mirage on its joint venture with Earls Court and Olympia Group, advised by Joelson Wilson, to develop a casino, restaurant and retail entertainment complex at London's Olympia once the Gambling Bill is enacted.

City firm Travers Smith Braithwaite acted for Candover Partners, the majority owner of Earls Court and Olympia Group.

But Mr Clifton warns: 'There are a number of firms seeking to jump on the bandwagon who claim to have broad experience in this field of law.

That is not the case.

There are very few firms who have so far had the opportunity to become fully involved in all aspects of betting and gaming law.

That will change but it is the firms with the existing experience and expertise who are in demand now and who will have a head start over their rivals.'

Mr Glazebrook says the opportunities for companies will be double-edged.

'On the one hand, it will introduce competition into the market, but on the other hand the liberalisation will enable the existing operators to expand.'

There is also only a limited number of companies that will be in a position to exploit the new law, he says.

'There will be scope for the big entertainment companies to introduce gaming and vice-versa.'

He says big nightclubs and possibly strip clubs could be in the market, although he adds: 'Strip clubs will have to careful about how they combine their operations.

There might have to be some separation.'

Perhaps that will see a return in a new form of the ever-controversial Chinese Walls.