The shop in North Yorkshire, which sells fairly traded items, lodged an appeal at the tribunal in October after the commission turned down its second application for charitable status, because "trading is not in itself a charitable purpose", a spokeswoman for the regulator said at the time.
In its written judgment this week, the tribunal said it was turning down the appeal because the appellant had not been able to prove how selling fairly traded goods relieved poverty, as set out in its draft objects sent to the commission.
One of the objects, which were written and amended by the appellant after discussion with a commission case officer, was: "The prevention and relief of poverty in developing countries around the world by selling fair-trade goods, that is goods for which the producers of those goods have received a fair price, thus enabling those producers to lift themselves out of poverty and raising awareness of the same in the UK for the public benefit."
During the hearing, the appellant likened the shop to a tap at the end of a supply chain providing fairly traded goods to the public and therefore benefitting the producers in developing countries.
But the commission argued that the shop’s benefit in relieving poverty was too remote from its primary purpose, which was to sell goods to the public. The tribunal agreed.
Judge Alison McKenna said in her judgment: "We have considerable sympathy with the appellant’s conceptual position and its argument that the Fairtrade movement must function as an organic whole, but we note that because the appellant regards it as a self-evident fact not requiring proof, it has not taken the necessary steps to demonstrate in this appeal whether, and if so how, the sale of fairly traded goods relieves the poverty of its potential beneficiaries."
The tribunal said it was up to the appellant to prove its case and suggested that this was possible with the assistance of experts.
"It seems to us that this is an argument eminently capable of proof, either with expert evidence from an economist or with the assistance of the Fairtrade Foundation itself, which will doubtless have better evidence than anyone else of the impact that the ultimate sale of the goods has on the overall Fairtrade project," the judgment said.
But the commission was criticised in the judgment for making a formal decision on what were only draft objects, which were themselves redrafted following a discussion with a commission case officer.
"It therefore seems to us that the most that the Charity Commission could do in August 2013 was to offer the company its informal opinion of the proposed draft objects," the judgment said. "We hope that the Charity Commission will review its practice in this area of its work to distinguish in its response between where draft objects are under consideration and where they have been formally adopted,"
The commission welcomed the tribunal’s ruling and said it would consider any fresh application that provided evidence of a link between sales of fair trade goods and the alleviation of poverty.
"We will take on board the judge’s suggestions regarding the commission’s registration processes," said Kenneth Dibble, chief legal adviser at the commission.
Harrogate Fairtrade Shop said it was disappointed by the decision and would endeavour to gather the required evidence if it decided to submit a fresh application for charitable status.
"It seems that the tribunal has set the bar extremely high in that it seeks certainty," said David Seaman, treasurer of Harrogate Fairtrade Shop. "I am no lawyer, but I understand that the normal standard of proof in civil cases is ‘on the balance of probabilities’."