EDINBURGH'S notorious sex industry is facing a double threat to its future after it emerged legal and political moves are under way which could spell the end of the capital's controversial saunas.

A legal appeal against the city council's decision to renew a sauna license will be heard next month – a test case campaigners hope can be used to mount a wider assault on what they regard as brothels.

Labour, the senior partner in Edinburgh council's coalition, has also set up an internal party working group to review its stance on saunas being granted licenses by the local authority.

Public entertainment licenses are required by law if establishments want to provide sauna, massage and gymnasium services. But many of Edinburgh's saunas are used as brothels.

While massage parlours are to be found in most major cities in the UK – as well as other Scottish cities such as Glasgow and Aberdeen – Edinburgh is notorious for both the number of massage parlours and their high visibility.

The capital's authorities have taken a laissez-faire attitude towards the sexual services offered in many of the city's saunas. Although brothel-keeping is illegal, selling and buying sex is not.

Defenders of the Edinburgh approach say the status quo keeps female sex workers safe and lets the sex industry be managed in a pragmatic way, while critics argue the services provided in the saunas amount to exploitation.

The issue came to a head in November when the council's licensing sub-committee considered 12 sauna applications.

In the past the sauna operators have had few problems with the committee, but a member of the public liaising with Edinburgh-based Zero Tolerance Charitable Trust, which works "to tackle the causes of men's violence against women", objected to the applications en masse, triggering an evidence session in the city chambers.

In written evidence, that objector – a website producer called Mike Anthony – stated: "It is well-established that Edinburgh saunas and similar establishments are brothels. Their main trade is sex for sale."

He continued: "Given the prices charged, times of opening, decor and amenities available, there are no indications that an alternative trade to sex for sale could apply."

A second objector claimed that another of the establishments was "known for being a brothel". However, the committee dismissed the objections.

Committee chairman Councillor Gavin Barrie said in a statement: "A number of applications for grant or renewal of licences for sauna premises were heard. Following consideration of representations, the committee granted or renewed 10 applications and continued two applications."

There are about 15 licensed saunas in Edinburgh. The public entertainment licence the operators need is reviewed annually.

After a procedural hearing last month, Anthony is now appealing the council's decision to renew the license for one of the saunas, Scorpio Leisure on Albion Road. Charles Stuart Haig was the applicant for the license renewal and the appeal will be heard on May 7 at the local sheriff court.

Jenny Kemp, the co-ordinator of Zero Tolerance, said: "We're glad the council's decision to license saunas is coming under proper scrutiny. Their policy of turning a blind eye to the harm and exploitation inherent in prostitution is dangerous and unsustainable."

She added: "This case could be an important milestone in the campaign to recognise prostitution as exploitation and that women need exit services, not bosses with council licenses".

In another development, Labour, which runs the council in coalition with the SNP, appears to be preparing the ground for taking a tougher line on the issue.

Although Labour councillors have rarely spoken out about saunas, a new internal working group in Edinburgh is reviewing the party's position on the license issue.

A Tory councillor in Edinburgh, Joanna Mowat, has in the past spoken of her unease at the council's approach.

She said last year: "If we are going to tolerate the licensing of brothels, which is essentially what we do, perhaps we should actually license brothels, and part of the regulation would be to ensure that the girls – or men – are not trafficked, that they are tested, that they have access to medical support and that workers can go in if they want a way out of this."

Anthony said yesterday: "I am not a moral crusader. What I am steadfastly against is any public authority colluding with organised criminals."

A spokesperson for the council said: "Premises which provide sauna facilities require a licence in Edinburgh. As with any licensed premises, police and members of the public have the right to object to any application. Any complaints are vigorously investigated and action taken where necessary if any breaches of a licence are found."

A spokesman for Scorpio Leisure said: "We are dealing with this through our solicitor."

If the moves against Edinburgh's massage parlours are successful, they will have no impact outwith the city, as licensing of such premises is an issue for each local authority.