Ofcom Owes UK Mobile Operators £220m in Licence Fee Dispute

The UK High Court of Justice has ruled that Ofcom must pay back £220m to mobile operators as part of restitution for the regulator’s handling of a licence fee hike to the 900MHz and 1800MHz (3G and 4G) spectrum bands (i.e. £82.4m to EE, £54.4m for Vodafone, £54.4m for O2 and £26.9m for Three UK).

The situation arguably began in December 2010, after the then coalition Government directed Ofcom to revise fees for mobile spectrum in the 900MHz and 1800MHz bands in order to reflect the “full market value” of those frequencies, as well as other statutory duties. The regulator duly proposed a huge hike in licence fees (here) and so began a long running legal battle.

The core matter now appears to have been largely resolved after Ofcom failed to follow proper process when raising their fees and another revision was proposed at the end of last year (here). Meanwhile there has also been a dispute over the question of how much money should be paid back to the operators for fees taken (i.e. the difference between how much operators would have paid under the original 2011 model and how much they did pay under the unlawful 2015 revision).

The parties have all agreed that simple interest be awarded on whatever sum is due, calculated at 2% above the Bank of England base rate from time to time. The figures were actually agreed by Ofcom, though it disputed the entitlement to claim the net sum (i.e. the figures stated in the first paragraph above) and hence the latest case, which they’ve lost.

The Judgement

To summarise the above, my conclusions are as follows:

a. I accept the submissions of the MNOs that there is a principle of legality which precludes the exaction by a public authority of an unlawful fee or charge and, equally, facilitates the recovery of unlawfully exacted fees through a claim in unjust enrichment.

b. Where an unlawful fee has been exacted, the payer will in principle be able to make a claim in unjust enrichment for the return of the fee (subject of course to applicable defences). But where a lawful fee could and would have been charged, then the claim is likely to be for the net sum.

c. In determining whether a lawful fee could and would have been charged, and if so the amount of that fee, it may be necessary or helpful to hypothesise the taking of necessary administrative steps which were omitted, for the purpose of fixing the proper amount.

d. There is no warrant for hypothesising a new legal entitlement in order to render that which was unlawful notionally lawful, which would be to undermine the principle of legality; it would also tilt the balance unfairly towards public authority payees making unlawful demands.

e. Nor, and separately, is there any warrant for hypothesising a change in the law. On the contrary, where parties have proceeded on the basis of an existing legislative framework, the law of unjust enrichment should not be used to undermine those legal relations.

In such circumstances, I am satisfied that the MNOs are entitled to succeed in their claims for the net sum, as I consider that they are supported by general principle and, conversely, that Ofcom’s alternative principle is flawed.

Naturally the mobile operators will be pleased with this outcome (The Register confirms as much), while Ofcom noted that the case “has been decided on what is a technical and important point of law“; the judge recognised this by granting them permission to appeal. Suffice to say this battle may not be over just yet and much will depend upon whether or not the regulator pursues an appeal.