Recall Support Services Ltd and Others (Claimants/Appellants) v Secretary of State for Culture, Media and Sport
| Jurisdiction | England & Wales |
| Judge | Lord Justice Richards,Lady Justice Black,Lady Justice Rafferty |
| Judgment Date | 28 October 2014 |
| Neutral Citation | [2014] EWCA Civ 1370 |
| Docket Number | Case No: A3/2014/0070 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 October 2014 |
[2014] EWCA Civ 1370
Lord Justice Richards
Lady Justice Black
and
Lady Justice Rafferty
Case No: A3/2014/0070
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mrs Justice Rose
Royal Courts of Justice
Strand, London, WC2A 2LL
Monica Carss-Frisk QC and James Segan (instructed by Matthew, Arnold & Baldwin LLP) for the Appellants
Daniel Beard QC, Philip Moser QC, Brendan McGurk and Sarah Ford (instructed by The Treasury Solicitor) for the Respondent
Hearing dates: 7–8 October 2014
Introduction
The appellants claim damages for loss alleged to have been suffered as a result of the United Kingdom's maintenance in force of a restriction on the commercial use of a piece of telecommunications equipment known as a "GSM gateway". They contend that the restriction, referred to in these proceedings as "the commercial use restriction", was in breach of European Union law and that the breach was sufficiently serious to give rise to liability to damages under the principles in Cases C-6 & 9/90, Francovich v Italian Republic [1991] ECR I-5357 as developed in subsequent case-law. Their claim was dismissed by Rose J after a trial lasting almost four weeks. The judge herself granted permission to appeal.
Rose J's judgment extends to 75 pages plus a confidential annex and provides a masterly account of the background and analysis of the factual and legal issues with which she had to deal (including several that do not arise on this appeal). I will cross-refer heavily to it, repeating only those matters that are central to the issues in this court.
As explained more fully at paragraphs 4–9 of her judgment, a GSM gateway contains one or more mobile SIM cards which are used to route telephone calls originating from a fixed line network so as to terminate on a mobile network. Calls routed in that way appear to originate on the same mobile network as that of the party called and thereby benefit from the reduced rates available for "on-net" mobile-to-mobile calls on the same network. The use of GSM gateways can be divided into three kinds:
(1) a "self-use GSM gateway", where a single customer buys and installs the GSM gateway for use in its own business;
(2) a "commercial single-user GSM gateway" (or "COSUG"), where a commercial operator uses a GSM gateway to provide services to a single end-user, so that all the calls diverted through the gateway come from one user (though from multiple fixed lines used by that one user's workforce);
(3) a "commercial multi-user GSM gateway" (or "COMUG"), where a commercial operator uses a GSM gateway to provide services to multiple end users, so that the calls diverted through the gateway come from more than one user.
The appellants were GSM gateway operators (or were all so treated by the judge) who provided commercial services to business users, mainly in the form of COMUGs but also in the form of COSUGs. Their position is described at paragraphs 31–36 of Rose J's judgment. It appears that their businesses collapsed in 2003 as a result of action taken by mobile network operators. What matters for present purposes, however, is the impact on them of the regulatory regime in place from mid-2003.
The use of telecommunications equipment in the United Kingdom is regulated by a number of EU directives comprised within the Common Regulatory Framework adopted in 2002, replacing an earlier framework. The Common Regulatory Framework comprises the Framework Directive ( Directive 2002/21/EC of 7 March 2002) and four specific directives. Member States were required to implement the directives by 24 July 2003 and to apply the implementing measures from 25 July 2003.
The specific directive of particular relevance to this case is the Authorisation Directive ( Directive 2002/20/EC of 7 March 2002). That directive refers to two kinds of authorisation for the use of radio spectrum: a general authorisation (of which a user can take advantage without needing to make a specific application to the regulator) and an individual licence (which must be applied for, and the grant or refusal of which is subject to a decision by the regulator). Article 5 of the directive provides that "where possible, in particular where the risk of harmful interference is negligible", Member States shall make the use of radio frequencies subject to a general authorisation rather than to the grant of individual rights of use. The use of GSM gateways comes within the scope of the provision.
The commercial use of GSM gateways in the United Kingdom was not made subject to a general authorisation. The relevant provisions of domestic law are considered more fully later in this judgment but of particular importance are the Wireless Telegraphy (Exemption) Regulations 2003 ("the 2003 Exemption Regulations"). Those regulations provide an exemption from the provisions of the Wireless Telegraphy Acts that otherwise operate to prohibit the use of wireless telegraphy apparatus without a licence. The commercial use of GSM gateways, however, falls within a carve-out from the exemption and has continued to be restricted. The judge found that it was possible in principle to apply for a licence for the use of GSM gateways but that in practice at all material times there was no prospect of such a licence being granted to a GSM gateway operator. The appellants contend that this situation amounted to a prohibition on the commercial use of GSM gateways. Without prejudice to that argument, I shall follow the judge's approach of referring to it as a commercial use restriction.
The judge rejected the Secretary of State's contention that the commercial use restriction was justified on the ground of avoidance of "harmful interference", so as to fall within the express exception in Article 5 of the Authorisation Directive.
A major issue before her was whether the restriction could be justified on the ground of public security. Since the time when the existence of GSM gateways first came to light in 2002, the Home Office has maintained that the exemption of commercial operators of such gateways from the licensing regime would be seriously detrimental to public security. When a call is routed through a GSM gateway, the caller line identification of the party originating the call is replaced by that of the SIM card in the GSM gateway, so that the identity of the originating caller is masked. This is said to give rise to serious public security concerns for law enforcement agencies in relation to the investigation and prevention of terrorism and serious crime. The judge found that public security was available in principle under the Authorisation Directive as a justification for applying an individual licensing regime rather than granting a general authorisation. For reasons given in the confidential annex to her judgment, based on her assessment of evidence heard in private, she went on to find that the restriction on COMUGs was justified by the specific public security concerns raised by the Home Office but that those concerns did not justify the restriction on COSUGs.
Accordingly, she found that the commercial use restriction was in breach of the Authorisation Directive and constituted an infringement of EU law only to a limited extent, i.e. in so far as it applied to COSUGs but not in its application to COMUGs.
The judge went on to consider whether that limited infringement of EU law satisfied the Francovich criteria for state liability. She referred to the three conditions set out by the Court of Justice in Cases C-46/93 & 48/93, Brasserie du Pêcheur and Factortame [1996] ECR I-1131, namely that (1) the rule of law infringed must be intended to confer rights on individuals, (2) the breach must be sufficiently serious, and (3) there must be a direct causal link between the breach of the obligation resting on the state and the damage sustained by the injured parties. She found that conditions (1) and (3) were satisfied but that condition (2) was not satisfied because the infringement did not constitute a manifest and grave disregard of the United Kingdom's obligations under EU law.
The appellants advance the following grounds of appeal:
(1) By ground 1A they contend that the judge erred in her interpretation of Article 5 of the Authorisation Directive. They submit that public security was not available under Article 5 in its original form as a ground for withholding a general authorisation; and that even if it was available, a Member State could not avail itself of that ground without first notifying the matter to the European Commission under Article 114(4) TFEU and obtaining the Commission's approval, which the United Kingdom did not do.
(2) By ground 1B they contend that even if Article 5 of the Authorisation did permit reliance on public security as a ground for withholding a general authorisation, the United Kingdom chose to implement the directive in a way that provided no basis for reliance on the ground; on the contrary, the implementing legislation required the regulator to lift the commercial use restriction. It is submitted that in those circumstances the maintenance of the restriction was in breach of EU law in relation to COMUGs as well as to COSUGs.
(3) By ground 2 they contend...
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