Recall Support Services Ltd and Others v Secretary of State for Culture, Media and Sport
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Rose |
| Judgment Date | 17 October 2013 |
| Neutral Citation | [2013] EWHC 3091 (Ch) |
| Docket Number | Cases No: HC 11 CO4028, 4029, 4030, 4031, |
| Court | Chancery Division |
| Date | 17 October 2013 |
[2013] EWHC 3091 (Ch)
Mrs Justice Rose
Cases No: HC 11 CO4028, 4029, 4030, 4031,
HC 09 CO0405, HC 12 AO 1785
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Ms. Monica Carss-Frisk Q.C. and Mr. James Segan (instructed by Matthew, Arnold & Baldwin LLP) for the Claimants
Mr. Philip Moser Q.C., Mr. Brendan McGurk and Mr. Nicholas Gibson (instructed by the Treasury Solicitor) for the Defendant
Mr. Daniel Beard Q.C. and Ms. Sarah Ford (instructed by the Treasury Solicitor) appeared for the Home Secretary
Hearing dates: 1, 2, 3, 4, 5, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 22 and 23 July 2013
| Para | |
| I. BACKGROUND | 4 |
| (i) GSM Gateways | 4 |
| (ii) The regulatory framework in broad outline | 10 |
| (iii) The restriction on the use of GSM Gateways in the United Kingdom | 19 |
| (iv) The Claimants and their GSM Gateway businesses | 31 |
| II. INFRINGEMENT OF EUROPEAN LAW | 37 |
| II-(A) What are the applicable EU provisions? | 38 |
| II-(B) On what grounds can the Commercial Use Restriction be justified? | 54 |
| II-(B)(a) The legislative provisions | 54 |
| II-(B)(i) Can DCMS rely on public security grounds to justify the restriction? | 64 |
| II-(B)(i)(a) Public security justification under EU law | 64 |
| II-(B)(i)(b) Public security justification under UK domestic law | 75 |
| II-(B)(i)(c) Summary of conclusions on public security ground | 92 |
| II-(B)(ii) Can DCMS rely on efficient use of spectrum grounds to justify the restriction? | 93 |
| II-(B)(ii)(a) Efficient use of spectrum justification under EU law | 93 |
| II-(B)(ii)(b) Efficient use of spectrum justification under domestic law | 99 |
| II-(B)(ii)(c) Summary of conclusions on efficient use of spectrum as a justification as a matter of law | 106 |
| II-(C) Are the justifications put forward by DCMS on the basis of public security, efficient use of spectrum and avoidance of harmful interference made out on the facts? | 107 |
| II-(C)(i) Concerns about public security | 109 |
| II-(C)(ii) Concerns about harmful interference | 115 |
| II-(C)(iii) Concerns about inefficient use of the spectrum | 150 |
| II-(C)(iv) Conclusion on whether the grounds asserted have been made out on the facts | 160 |
| III. THE FRANCOVICH CRITERIA | 161 |
| III-(A) The first Francovich criterion: was the rule of law infringed intended to confer rights on individuals? | 168 |
| III-(B) The second Francovich criterion: did the breach by DCMS amount to a manifest and grave disregard of its obligations under the Authorisation Directive? | 172 |
| III-(B)(i) The importance of the rule and the clarity and precision of the rule infringed | 176 |
| III-(B)(ii) Intentional or involuntary infringement | 180 |
| III-(B)(iii) The European Commission's infraction proceedings | 205 |
| III-(C) The third Francovich criterion: did the breach cause loss to the Claimants? | 212 |
| III-(C)(i) Does the Claimants' failure to apply to OFCOM for an individual licence break the chain of causation? | 215 |
| III-(C)(ii) Does the likely behaviour of the MNOs break the chain of causation? | 222 |
| III-(D) Conclusions on the Francovich criteria | 228 |
| IV. THE QUANTUM OF LOSS | 229 |
| IV-(A) The expert evidence | 232 |
| IV-(B) The counterfactual | 242 |
| IV-(B)(i) Would the MNOs have refused to supply SIM cards or SIM card services to the GGOs? | 243 |
| IV-(B)(ii) Would the MNOs have changed their tariff structures to remove the arbitrage opportunity on which the GGOs' business depended? | 257 |
| IV-(B)(iii) Would competition from the MNOs have reduced the GGOs' profitability? | 259 |
| V. OVERALL CONCLUSIONS | 263 |
The Claimants bring this action to recover damages for the loss they say they have suffered as a result of a restriction imposed by the Defendant ('DCMS') on the use of a piece of telecommunications equipment known as a GSM Gateway. The Claimants allege that that restriction constitutes a serious breach of European Union law — so serious that the conditions for Member State liability laid down in Cases C-6&9/90 Francovich v Italian Republic [1991] ECR I-5357 are met. They assert that in the absence of the prohibition they would have operated flourishing businesses providing services through GSM Gateways to their customers. The total quantum of damages claimed by all the Claimants together is about £415 million.
The unusual aspect of this case is that there is no judgment of the Court of Justice of the European Union or any other court or body making a finding that the United Kingdom has infringed EU law by imposing the restriction. The Claimants must first establish that the domestic legal provisions did indeed fail properly to implement the European Directives on which they rely.
The Defendants ('DCMS') dispute every aspect of the Claimants' case. They deny that there was any breach of EU law; they deny in the alternative that any breach was so serious as to trigger Francovich liability. They deny further that any such breach caused any loss to the Claimants because they say there are other reasons why the Claimants would not have been able to develop their businesses in any event. Finally, DCMS say that there are too many uncertainties as to what would have happened in the absence of the restriction for the court to be able to arrive at a sensible quantification of damages.
I. BACKGROUND
(i) GSM Gateways
Telephone calls can broadly be divided into four kinds: those from a fixed line phone to another fixed line phone (F2F); those from a fixed line phone to a mobile phone (F2M), those from one mobile phone to another mobile phone (M2M) and those from a mobile phone to a fixed line phone (M2F). This case concerns primarily F2M calls. A GSM Gateway is a device that incorporates one or more SIM 1 cards created and issued by a mobile network operator ('MNO') and allowing the device in which the SIM card is installed to originate calls on that MNO's network. The main MNOs operating in the United Kingdom currently are Vodafone, Everything Everywhere, T-Mobile and 3. The SIM cards that go into a GSM Gateway are exactly the same as the cards more usually inserted into a mobile phone. The SIM card incorporates a particular tariff for a bundle of different kinds of calls at different prices, for example so many minutes and text messages per month for the fixed amount paid when the SIM card is bought and then further minutes or texts at a certain price paid as and when they are used.
The GSM Gateway is not itself a phone. Rather it is installed as part of the user's telecoms switching equipment with the effect that when the user makes a call from a fixed line phone to a mobile phone number, that call is diverted from the fixed line through the GSM Gateway. As the fixed line call passes through the GSM Gateway, it is converted into a call from one of the SIM cards in the device before being passed over to the network of the mobile phone used by the recipient of the call and on to that recipient's phone. The recipient's network treats the call as if it were made by a mobile phone using that SIM card in the gateway rather than as being made from the fixed line phone. So a GSM Gateway converts F2M calls into M2M calls.
Why would anyone want to do that? The answer to that question is at the heart of this case and lies in the charges that MNOs set for terminating calls on their mobile
networks. Every call that is made to a mobile phone incurs a charge imposed by the network to which the called person subscribes. This is called the mobile call termination charge or MCT charge. Over many years the charges that MNOs have set for terminating calls for their subscribers have been substantially higher for F2M calls than for M2M calls. Further, the charges have been higher for M2M calls from a different network (off-net calls) than for a call from a mobile phone on the same network as the recipient (on-net calls). The MCT is paid in the first instance by the network to which the caller subscribes and is then incorporated into the charge set by the caller's network for making that call. So part — sometimes a very large part — of the charge for each phone call a caller makes comprises the MCT charge that his network has had to pay the network of the recipient of the call. This means that it has, generally speaking, been much cheaper to call a mobile phone from another mobile phone than from a fixed line phone, and cheaper still to call from a mobile phone on the same MNO's network than from another MNO's networkA GSM Gateway can therefore save a user who makes many F2M calls a substantial amount of money because the user pays for every F2M call as if it were an on-net M2M call.
GSM Gateways come in various shapes and sizes. They range from small devices incorporating only one or two SIM cards to large pieces of equipment capable of making 72 simultaneous calls. A GSM Gateway which is capable of making 72 calls simultaneously is described as having 72 'channels'. Such a gateway may have slots for more than 72 SIM cards. For example, some GSM Gateway devices allow more SIM cards to be slotted into the device than there are channels so that the calls are automatically diverted through a fresh SIM once all the free minutes in the bundle on one SIM card have been used up. Each channel may also need to accommodate more than one SIM card to make sure that that channel is able to make an on-net call to any of the different MNO networks.
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