As long as the regulator’s foot

The Court of Appeal’s remarks in BT v Ofcom (Partial Private Circuits) make Ofcom’s dispute-resolution power a still more distinctive alternative to court litigation, and in the right circumstances a more attractive one.  

The appeal arose out of a dispute, brought to Ofcom under s.185 Communications Act 2003, about whether BT had overcharged for partial private circuits (“PPCs”), components necessary for other communications providers to extend their networks. Ofcom decided in 2009 that it had, and ordered repayment. That decision was upheld by the CAT on appeal.

Much of BT’s further appeal to the Court revolved around whether Ofcom had failed to take various aspects of the domestic and European regulatory framework into account. The Court ruled that it had not.

But there were two issues of greater long-term interest.

First, jurisdiction to hear disputes under s.185. Was Ofcom prohibited by the regulatory framework from hearing disputes which were likely to take more than four months to resolve, or should it in any event have declined jurisdiction on that basis? The Court held that this was not…seriously arguable, clearing up a potential objection to the use of the s.185 route rather than proceedings in court.

Second, and more interestingly, the Court expressed a view on the principles of compensation which should be applied.

BT challenged the decision on the basis that it did not reflect “well established English law principles of compensation and restitution”.  It argued that the order for repayment was unlawful in that (1) it was baselessly punitive, (2) it did not acknowledge the passing on of the overcharge by the providers to their customers, and (3) it did not reflect (by way of ‘counter-restitution’) the benefits that the providers had received by virtue of BT charging less for other products than it would have done if its PPC charges had been lower.

The Court, however, said that it was not “necessary or appropriate to align section 190(2)(d) of the Act to English common law causes of action and remedies.”

In other words, Ofcom has a discretion to order a payment of an amount it considers appropriate, regardless of whether (for instance) an unjust enrichment claim would be limited or defeated by a defence. As the Court put it, the discretion is to “make such order for repayment as will best achieve the objectives of the Act and the [European regulatory framework] on the particular facts of the case.” The starting point should be to order full repayment of the overcharge, but that order should be reduced in Ofcom’s discretion if “the payee can show some good reason” why a lesser repayment would better achieve the regulatory objectives.

Note that it is the payee – i.e. the party which has wrongfully benefited from the overcharge – which must establish the “good reason”. BT submitted that the providers could show no loss (because of their passing-on of the overcharge to customers), but that submission was rejected. Instead, the Court said it was not possible on the evidence to make a finding that costs had been passed on. That approach, too, is likely to make life easier for an aggrieved payor seeking repayment.

The Court’s remarks on Ofcom’s discretion may technically be obiter dicta; Etherton LJ held that in any event there was no proper basis on the facts for reaching a different conclusion from that of Ofcom or the CAT (the latter of which had said that Ofcom had a “hard discretion” in respect of ordering repayments, implying an ‘all-or-nothing’ approach). They also do not quite go so far as to say that Ofcom could, in its discretion, order more than a full repayment of the overcharge – and, given the absence of clear statutory wording to that effect, that would be a much harder case to make.

But this judgment nevertheless marks out a referral under s.185 as a weapon with its own distinctive strengths.

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Filed under Damages, Telecoms

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