High Court Rejects LetterOne Appeal Over Forced Sale of UK Broadband Biz

The High Court in London has dismissed an appeal by investment firm LetterOne, which had been asking the court to rule that it was unlawfully ordered, under the new National Security and Investment Act (NSIA), to sell Upp’s full fibre broadband network by the UK Government. The company is now considering whether or not to challenge the outcome.

Just to recap. Upp was originally established as a £1bn project that aimed to deploy a new Fibre-to-the-Premises (FTTP) based broadband ISP network across 1 million premises in the East of England (here). But their efforts were dealt a significant blow in December 2022, after the UK Government ordered LetterOne – an investment firm that previously received significant backing from several prominent and now sanctioned Russians – to sell its entire stake in Upp in order to “prevent, remedy, or mitigate the risk to national security” (here).

The move came despite the fact that LetterOne itself was not under any sanctions after its oligarch founders resigned from the group’s board in 2022. The investment company then froze the shareholdings of those individuals (who jointly own less than 50% of the company) and said they had no operational involvement in the business.

At the time, LetterOne said they “believe that L1 ownership of Upp is not a threat to national security in any way” and pointed out that “L1 is not sanctioned and has taken fast, decisive action to put in place strong measures to distance L1 from its sanctioned shareholders. They have no role in L1, no access to premises, infrastructure, people and funds or benefits of any description.”

However, despite LetterOne launching a legal challenge against the government’s decision (here), the investor ended up selling Upp at a loss (i.e. “less than the £143.7m that (LetterOne) had by then invested“) to rival operator nexfibre in September 2023 (here). At that point Upp’s network had only covered 175,000 premises and is today still in the process of being integrated into nexfibre’s network, while their customers (c.4,000) were shifted to nexfibre’s retail ISP partner Virgin Media (O2).

The High Court in London has now dismissed LetterOne’s appeal against the decision. According to Reuters, LetterOne’s lawyer, Tom Hickman, had argued that its proposals to prevent Upp’s ultimate beneficial owners from exerting any improper influence over the operator were wrongly rejected and that the government wrongly took into account a potential risk that Britain’s allies might perceive its response as being too soft on Russia. But Mrs Justice Farbey DBE ruled the suggestion that the company’s proposal was rejected “for diplomatic rather than national security reasons” was not correct.

A spokesperson for LetterOne said:

“This is a disappointing decision, given the swift, robust and decisive action LetterOne undertook in the aftermath of Russia’s illegal invasion of Ukraine.”

The investment firm is now “considering whether to appeal” the ruling, although at the time of writing we’ve been unable to find a copy of the decision online and so can’t yet assess how likely such a move would be to succeed.