Defeated in court, UK operators lose out

The European Court of Justice has ruled that the now infamous 3G mobile auctions of 2000 which cost UK and Austrian operators billions, were not liable for VAT.

The decision on Thursday comes as a major defeat for 3G operators in the UK who have been trying to recoup some of the money that was spent on the licences.

The operators argue that the auctioning of licences was subject to VAT (Value Added Tax) which would allow them to claim 17.5 per cent of the cost. However senior European judge Advocate General Kokott (pictured) rejected the argument. In a statement online (PDF document), the court says: “Despite classification as an economic activity, the Advocate General is of the opinion that there was no duty to charge VAT in this case. That is because, in issuing licences, the State and its institutions were carrying out an activity required of them as public authorities. Only the State regulatory authorities are authorised under Community legislation to issue individual licences for operating a telecommunications network. The decisive factor is that they were operating under a special legal regime applicable only to the State. The form of the transaction was irrelevant.”

Estimates on how much the operators could have clawed back from a VAT claim range between £3.5 and £4bn. More than 22bn was spent on 3G licences in the UK in 2000 which promised high speed communications, video and next-generation services.

An industry statement read: “Following the hearing before the court on Feb 7 2006 the Advocate General delivered her opinion on September 7 2006. We are reviewing the opinion with our legal council. It is however the judges of the European Court who ultimately decide the law on the questions referred. It is expected that the judgement of the European court will be delivered in the first half of 2007 pending the court’s judgement, we do not intend to make any further comment.”