Betting shop chain Paddy Power threatened to launch judicial review proceedings against Southwark Council when it announced it was tightening planning rules to make it more difficult to open new bookmakers and payday loan shops.
Borough High Street is one of six areas in Southwark identified as having clusters of three or more betting shops.
Southwark Council leader Peter John announced last summer that he would ask the borough's planning committee to make an 'article 4 direction' to restrict change of use and the order came into effect in the autumn.
Unless special policies are invoked by a council, payday loan shops and bookmakers do not require planning permission to open in premises formerly occupied by a restaurant, pub or takeaway.
Last October the council removed this permitted development right and require anyone proposing to open a financial services business in a former food and drink establishment on a high street to seek planning permission.
The change only applies to Southwark's 'protected shopping frontages' which in SE1 include parts of Borough High Street, Tower Bridge Road, Great Suffolk Street, Waterloo Road, Old Kent Road and The Cut.
Next week Southwark's planning committee is expected to rubber-stamp the introduction of the tighter policy.
Papers published for the planning committee meeting reveal the lengths to which betting shop chains have gone to to block the council's move.
The notice of a proposed claim for judicial review set out Paddy Power's argument that the planning committee had not been properly advised when it made its immediate article 4 direction last October.
In separate correspondence Ladbrokes – which has branches in Blackfriars Road and Tower Bridge Road – accused the council of adopting a "wholly disproportionate measure for which there is no reasonable justification for both its purpose and extent".
The Association of British Bookmakers criticised the council for taking "draconian action" and said that "there is nothing about the number or concentration of betting offices in the borough which marks it out as exceptional or so exceptional that a blanket abrogation of permitted development rights is necessary".
Southwark's use of the article 4 direction was highlighted in the House of Commons by planning minister Nicholas Boles earlier this year.