Risk based licensing framework: new age of licensing law

Following the completion of the 2017 Alcohol Policies and Legislation Review Final Report (Riley Report), the Northern Territory Government has been busy converting the recommendations into law and the mandated practices of licensees and the regulatory body, Licensing NT. The changes places the Northern Territory as the most tightly regulated liquor industries in the Southern Hemisphere all in an effort to reduce alcohol related harm and crime.

Of the proposed changes, there is one in particular that affects all licences. If passed in the coming months by Parliament, the implementation of the risk based licensing (RBL) framework will set annual fees and attribute an ‘authority’ (or category) to each Liquor licence under the amended Liquor Act (NT). This article provides a high level overview of the critical changes that licensees should be conscious of and the critical dates they must adhere to, to meet the changes (proposed for enactment in October 2019).

Framework

The following are the key features of the RBL framework:

1. Authorities: the draft RBL framework provides for twenty-five (25) ‘authorities’ that governs the conditions under which each licensee must trade that will have the effect of more effectively standardising licence types. It will also (via the Liquor Regulations (NT)) prescribe a ‘risk category’ to the various authorities. The Alcohol Review Implementation Team have indicated that certain venues that require particular special conditions to continue trading in their currently approved manner will have their conditions grandfathered with special conditions issued and attached to the new licences.
2. Risk Classification: as noted above, each authority will be assigned a risk classification which has been determined in conjunction with some industry groups to ascribe what risk is posed by the general operations of the relevant business. This will operate through a tiered scheme. A base licence fee will be assigned also and it will over time be adjusted according to the multipliers that are considered to either heighten or mitigate risk of harm caused by the relevant operator.

2.1 Base Fee: The following table outlines the current base fee payable under each risk classification:

2.2 Discounts: discounts will be available to licensees where certain risk mitigation strategies are implemented within the licensed premises. In essence, licensees that can display proven risk management strategies and compliance history will be rewarded with discounted renewal fees. The current proposal provides that for each of following strategies implemented by a licensee a 5% reduction will be applied to the annual RBL fee paid that licensee:

• Live original local music/entertainment (provided in accordance with Music NT’s policy);
• CCTV (additional to the requirements imposed under the conditions of the licence authority and made available to liquor inspectors and NT Police);
• Security (additional security by way of crowd controllers, in addition to anything imposed or required as a condition of their liquor licence);
• Installation and use of an ID scanning system at the point entry to a licensed premises;
• Membership to a suitable liquor industry group that has a code of conduct for its members;
• Membership to any liquor accords in the licensees area; and
• Implementation of the Good Sports program or similar program;
  Good compliance record.

2.3 Multipliers: there are two multipliers that will be utilised by Licensing NT:

• Tier volume multiplier which focus on the amount of pure alcohol purchased by the licensee in the previous twelve (12) months (as recorded in the wholesale data); and
• Hours multiplier which will calculate the venues hours versus the average hours of other venues under the same authority (e.g. if you trade less than the authority average you will receive a discount).

2.4 Breach Loading: loadings will be applied to the licence fee for a breach under the Liquor Act (NT) by the licensee, a finding of breach of a licence condition by the Liquor Commission and any infringement notice issued against the licensee pursuant to the Liquor Act (NT). Importantly, for the purposes of the RBL framework a breach will be counted for a period of two (2) years and will remain with the licence and will not be reset by a transfer or sale of the licence (i.e. they remain with the premises irrespective of a change in ownership).

The following loadings are currently proposed for breaches:

2.5 Licence Fee: the annual fee paid by each licensee will take account of the base fee, the multiplier and loadings for breaches. The formula proposed to determine the licence fee is as follows:

[(base fee x tier volume multiplier x hours multiplier) – discounts] x breach loading

3. Application: each licensee will be required to make application to Licensing NT by 1 April 2020 outlining which authority best applies to that licensee’s current licence and circumstances with any special conditions required articulated clearly within that application. Arguably, the intention of the RBL framework to standardised licences and avoid the need for liquor inspectors and NT Police to be aware of unique licence conditions that applies to each venue reduce the cost of compliance efforts and to some extent level the playing field.

It is important that licensees review the terms of their current licence against the new authorities to ensure they are in position to apply for the right authority by the due date and receive the most favourable conditions and the most effective cost base for the annual licence fee. Importantly, where a dispute arises between the licensee and Licensing NT, matters will be referred to the Commission for a decision, which could be a costly and time consuming exercise. For this reason, it is important that care is taken when applying to Licensing NT.

The critical dates and categories are listed on the Alcohol Policies and Legislation Reform website.

4. Failure to Apply: where a licensee fails to make application to Licensing NT by 1 April 2020, the Director-General of Licensing NT will make a determination as to which authority the licence best fits within. For this reason, it is important that all licensees diarise the date and ensure that they complete their application in advance of the cut-off date.

New applications

Those looking to make application for the grant a liquor licence between now and October 2019, will need to consider the new authorities and their application to the terms of their proposed liquor licence. Further, the financial modelling used to determine the viability of a new licensed premises should take account for the proposed annual licence fees and the cost of installing features in return for discounts.

Key messages

These are the key messages for any party to a transaction where a rebate is being considered:

1. The implementation of the RBL framework is proposed to be enacted during the October 2019 sittings of Parliament;
2. It is not certain as to how the penalty formula might operate as it is entirely dependent on the numbers ascribed by the Northern Territory Government and what will be considered to be a good compliance history. It could be very modest or very harsh – it’s a wait and see game that will be played out over the next few years;
3. Licensees are urged to review their licences against the proposed authorities and commence preparation of their application’s to Licensing NT prior 1 April 2020;
4. A failure to apply to Licensing NT prior to 1 April 2020 will result in the Director-General determining the appropriate licence without comment from the licensee; and
5. New applications for the grant of a liquor licence should consider the authorities when determining what authority to apply for and any special conditions they might seek.

For further information or advice regarding the proposed RBL framework, please contact Tony Morgan or Andrew Giles from the Darwin Commercial Team.

This article was written by Tony Morgan, Partner, and Andrew Giles, Senior Associate.

Tony Morgan

P: +61 8 8943 0478

E: tmorgan@hwle.com.au