Case C-369/04 Hutchison 3G UK Ltd & Others v CEC and Case C-284/04 T-Mobile & Others v Austria, Judgments of 26 June 2007

The ECJ has held that a Member State’s auction of 3G licences does not constitute an economic activity and so falls outside the scope of the Sixth Directive.  In finding that claims by successful bidders for recovery of allegedly-paid VAT have failed at the first hurdle, the ECJ declined to offer any observations on the other questions referred.  Issues such as when treatment of a public authority as a non-taxable person will lead to “significant distortions of competition” therefore remain shrouded in uncertainty.  There is, however, an interesting gleam of light in the short judgment. In departing from the Opinion of Advocate General Kokott, the ECJ has indicated that the door is open for the crossfertilisation of certain concepts in VAT and competition law.

We are delighted to announce that Monckton Chambers has been nominated as “Set of the Year” for Competition and EU for the third year running as part of the Chambers Bar Awards 2007 held in recognition of the high quality work done at the Bar.  These nominations are the result of research conducted for the next edition of Chambers UK.  We also offer our congratulations to Peter Roth QC who in the same category has been shortlisted as “Silk of the Year”.

We would like to take this opportunity to thank all our clients for their continuous support.

Judgment is expected in September in R(Federation of Tour Operators) v HM Treasury.

The Federation of Tour Operators challenged the recent increase in the rate of Air Passenger Duty, a tax upon the carriage of passengers by air, which is typically passed on by airlines to their passengers.

Tour Operators sell flights as part of package holidays but are prevented by the Package Travel Regulations from passing on the increase in the tax to customers who had already made bookings, but not yet travelled, at the time this increase took effect.  They argued that the Treasury overlooked this difficulty and that as a result a burden of £45 – £50m of the tax has unintentionally stuck with them, giving rise to a breach of their “right to property” protected by Article 1 of the First Protocol to the ECHR.  They further argued that the entire tax was contrary to the Chicago Convention on aviation, and Community law.

Tim Ward acted as junior counsel for the tour operators.

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Tim Ward QC

On 18 July 2007 the House of Lords gave judgment in Sempra Metals Ltd v. HMRC [2007] UKHL 34, the latest instalment in the long running Advance Corporation Tax (‘ACT’) group litigation.  The decision has already been described as having rewritten the law on debt repayment (The Times, 18 July 2007).

Sempra, formerly Metallgesellschaft Ltd., was one of the original claimants in the EC challenge to the UK’s ACT regime, part of which the ECJ held to be contrary to the right of establishment under Article 43 EC.  After the ECJ decision in 2001, five test cases proceeded, in order to resolve various issues arising out of the numerous claims for compensation by foreign companies and UK subsidiaries in respect of premature payments of ACT made between 1973 and 1999.  Four of the test cases have now progressed through the domestic courts and been decided by the House of Lords (Pirelli [2006] UKHL 4; Deutsche Morgan Grenfell [2006] UKHL 49; Boake Allen [2007] UKHL 25 and Sempra).  The fifth case, Test Claimants in Class IV, was referred by the High Court back to the ECJ, which delivered judgment in December 2006.

The appeal in Sempra raised two issues.  The first was the effect of the ECJ’s decision in Metallgesellschaft, on which the Court of Appeal had taken the view that the ECJ decision required the English courts to award compound interest to Sempra, regardless of the position in national law.  The House of Lords unanimously rejected that view, agreeing with the Revenue that the appropriate remedy was a question to be determined by national law, subject only to EC principles of ‘equivalence’ and ‘effectiveness’.

Secondly, the Revenue contended that Sempra had no cause of action in English law by which it could recover compound interest.  On this point, their Lordships sided with Sempra: Lords Hope and Nicholls concluded that there is a right at common law to recover compound interest representing the objective ‘time value of money’ as personal restitutionary relief in a claim for money paid under a mistake of law.  Lords Mance and Walker agreed that compound interest was available, but as an equitable discretionary remedy, rather than as of right at common law.  Lord Scott dissented, taking the view that compound interest could be claimed as damages but that Sempra had no restitutionary claim for interest based on a breach of EC law.  Lord Scott agreed with Lords Hope and Nicholls, however, that such a claim, if it existed, should be as of right at common law, and not available purely as a discretionary equitable remedy.

Their Lordships also disagreed on the appropriate measure of recovery: Lords Mance and Scott dissented from the majority view that recovery should reflect the objective ‘time value of money’, reasoning that Sempra could only recover the interest the Revenue actually earned in the relevant period.  All agreed, however, that a claimant may recover compound interest as damages, and the majority took the view that such a claim is available in all cases of late payment of debts.  On the particular facts of this case, their Lordships also agreed that recovery should be calculated by reference to the government borrowing rate, rather than the higher market borrowing rate contended for by Sempra.

Gerry Facenna is acting as junior counsel for HM Revenue & Customs in two of the five ACT group litigation test cases, Sempra and Pirelli.

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Gerry Facenna

 

 

On 12 July the Court of First Instance in Luxembourg awarded over 100 individuals, largely from Britain, substantial damages against the European Commission.  It ordered the Commission to pay almost £30m in relation to two linked sets of claims.

The individual claimants all worked at the EU’s nuclear fusion project (JET) based at Culham in Oxfordshire but they were not given the status of European employees.  Therefore they were denied the pay, pension rights and other benefits of the EU employees who worked alongside them carrying out the same functions on one of the largest scientific projects in Europe.  After a 7 year legal battle, involving three hearings in Luxembourg, the Court of First Instance first found that the Commission had committed “serious misconduct” by practising “long-term discrimination” against the claimants, and then fixed the amount of damages that each claimant can recover.

Two group actions were brought on behalf of over 100 contractors.  One group was represented by Peter Roth QC, Ian Hutton and Ben Lask, the other by Daniel Beard, all of Monckton Chambers.

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Daniel Beard QC
Ben Lask

The Court of First Instance (CFI) rejected a state aid challenge by Bouygues, one of the mobile phone operators in France, on 4th July 2007 against a decision of the European Commission which had found that the grant of 3G licences in France to France Telecom and SFR involved no aid.

France had retrospectively reduced the price of the 3G licences acquired by France Telecom and SFR to match the lower price subsequently paid by Bouygues when Bouygues was subsequently awarded the third 3G licence.  The CFI concluded that this price reduction afforded France Telecom and SFR no advantage and so involved no state aid.  In reaching its conclusion the CFI relied on the Community legislation setting out the manner in which 3G licences were to be awarded by the Member States.

Christopher Vajda QC who was instructed by the Paris office of Denton Wilde Sapte, acted on behalf of SFR, the number two mobile operator in France.

 

 

The House of Lords delivered its judgment in the test case on commercial agents’ compensation under Regulation 17 of the Commercial Agents (Council Directive) Regulations 1993 on 4th July 2007.

The House of Lords (Lord Hoffmann giving the lead Opinion, with the other members concurring) upheld the Court of Appeal’s approach that compensation is to be assessed by way of a business valuation of the value of the agency to the agent at the date of termination. He clarified that courts should presume a hypothetical buyer and a hypothetical open-market sale, but that otherwise the actual value should be assessed.

The House of Lords expressly disapproved of the approach in the Scottish Outer House of the Court of Sessions case King v Tunnock and also declined to make a reference to the European Court of Justice.

Philip Moser of Monckton Chambers acted for Lonsdale on behalf of Amicus.

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Philip Moser QC

 

 

At the end of June hearings took place in R(EISAI) and Alzheimer’s Society v NICE.

The case concerns a challenge to guidance issued by the National Institute for Health and Clinical Excellence (“NICE”) which restricts the availability of drugs which serve to inhibit the symptoms of Alzheimer’s Disease. This is the first time NICE is being challenged.

Previously, the drugs had been available to patients with mild or moderate Alzheimer’s Disease.  The effect of the new guidance issued by NICE was to restrict availability to patients suffering from mild Alzheimer’s Disease.  The companies which manufactured the drugs and the Alzheimer’s Society argued that the Guidance was unlawful for a range of reasons, including a breach of the requirements of the Race Relations Act 1976. Judgment is expected on 10 August.

Tim Ward and Gerry Facenna acted for the Alzheimer’s Society.

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Tim Ward QC
Gerry Facenna

C-369/04: Hutchison 3G & C-284/04: T-Mobile Austria

A ruling by the ECJ on 26th June means that Revenue and Customs will not have to pay a VAT claim for over £3 billion brought by the winners of the third generation mobile phone spectrum auction in 2000.

The mobile phone companies had claimed that the £27 billion paid by them for spectrum licences included £3 billion VAT, which they were entitled to reclaim.  However, the ECJ today ruled that the UK’s allocation of spectrum was not “economic activity” and hence was not subject to VAT.

The judgment will come as a relief not just to the UK but also to many other Member States, including Germany, the Netherlands, Ireland and Spain, where similar auctions were conducted and similar VAT claims made by the winners; a case from Austria on the same point was the subject of a parallel ECJ judgment today.

Barristers from Monckton Chambers acted on each side in this case: the mobile phone companies were represented by Paul Lasok QC, and Revenue and Customs by Christopher Vajda QC and George Peretz.

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Paul Lasok QC
George Peretz

The High Court gave judgment in the case of Chester City Council v. Arriva plc.  Arriva was accused of predatory pricing and flooding the market for local bus services in central Chester, in breach of Chapter II of the Competition Act.

Arriva defeated Chester City Council on every point, including by demonstrating that Arriva was not dominant on the relevant market.  The Court held that the relevant geographic market was to be measured using bus drive time isochrones and that the correct metric for assessing market share was bus capacity.  Permission to appeal was denied.

Paul Harris appeared on behalf of Arriva as Junior Counsel.

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Paul Harris QC