AUGUST 15 — In “Issues before the courts in the dispute over the issuance and renewal of business licences for pool betting operators in Kedah” I explained the first of three issues for consideration by the Court of Appeal in the dispute over the issuance and renewal of business licences for pool betting operators in Kedah.

The second issue concerns the constitutional demarcation between federal power over betting and lottery, and state power over local government and premises licensing.

The relevant constitutional provisions are Articles 4, 73, 74, 75, 80, 81 and the Legislative Lists in the Ninth Schedule – that is, List I (Federal List) and List II (State List).

Article 4(1) declares the Federal Constitution to be the supreme law of the Federation.

Articles 73 and 74 allocate legislative competence of the federal parliament and state assemblies by subject matter.

Article 75 addresses inconsistency between state law and federal law.

Article 80 distributes the federal and state executive powers respectively.

Article 81 stipulates states’ obligations towards the Federation.

The Legislative Lists enumerate the matters which the federal and state legislatures may make law on.

Item 4(l) of List I places ‘betting and lotteries’ within the Federal List. The Pool Betting Act 1967 (PBA) is therefore within the legislative competence of the federal government. Accordingly, the Minister of Finance’s licensing power under Section 5 of the PBA is a legit exercise of federal executive power.

By contrast, Item 4(a) of List II concerns local government, including local administration and local authorities. The Local Government Act 1976 (LGA) provides the “statutory machinery” for licensing trades, businesses, and premises by local authorities.

These powers are substantial and legitimate. They permit regulation of the use of premises, public order, sanitation, safety, nuisance, suitability of location, and other genuinely local considerations.

According to the Court of Appeal, the difficulty arises “when an ostensible exercise of local licensing power is used, not to regulate premises as premises, but to suppress the licensed activity throughout the state”.

In such a case, the constitutional analysis could not stop at form. The court must identify the true character, object and effect of the impugned decision.

In delivering the appellate court’s majority decision, Justice Faizah Jamaluddin said:

“On the facts here, the refusal [to grant business premises licences to the respondents] was blanket, state-wide, directed at the subject of betting and lotteries, and driven by opposition to the activity itself rather than by any defect in the premises.

“In pith and substance, this was not regulation of premises. It was prohibition of a federally licensed activity. That is the constitutional vice in this case.

“That conclusion does not diminish the reality of local licensing powers. It marks their constitutional limit.

“A state or local authority may regulate premises for proper local government purposes. It may not use that power as a device to enter a federal field or to render nugatory licences lawfully granted under a federal statute.”

Article 80 of the Federal Constitution reinforces the constitutional limit.

Executive authority must flow from legislative competence. When state executive authority is exercised, Article 80(1) requires that it be exercised only “to all matters with respect to which the Legislature  of  that State may make laws”.

In addition to that, Article 81 stipulates that state executive authority must be “so exercised — (a) as  to  ensure  compliance  with  any  federal  law  applying  to  that  State;  and (b) as not to impede or prejudice the exercise of the executive authority of the Federation”.

Where the Minister of Finance has renewed licences under the PBA, a state-wide decision that renders those licences inoperative in practice, not for premises-specific reasons but because the state seeks to stop pool betting altogether, impedes federal executive authority in a federal field.

So, while state and local authorities retain their premises licensing powers, these powers must be exercised for legitimate local government purposes and consistent with the Federal Constitution and federal law.

State executive powers cannot be used as a constitutional substitute for federal control over betting and lotteries.

In the words of the Federal Court in the case of Letitia Bosman v Public Prosecutor and other appeals (No 1) [2020], the Federal Constitution, by the Legislative Lists, demarcates constitutional fields of competence and are not to be read as invitations to encroachment.

In simple words, the Federal Constitution demarcates federal and state powers.

The constitutional demarcation was pointedly illustrated by Justice Faizah in the diagram below:

One must commend the learned appellate judge. How many judges illustrate the law by way of a diagram?

Accordingly, the impugned decision exceeded the constitutional limits of state power.

It was ultra vires the Federal Constitution.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.