Telefonica O2 Europe Plc & Ors, R (on the application of) v Secretary of State for Business, Enterprise and Regulatory Reform

A national court should refer a challenge to the validity of a Community measure where the challenge is reasonably arguable and the European Court alone has jurisdiction to determine validity. A challenge is not unarguable merely because the opposing arguments are formidable.

In reviewing proportionality, the question is whether the measure is manifestly inappropriate to the legitimate objective. A Europe-wide wholesale price cap was not reasonably arguable as manifestly inappropriate. A retail price cap was capable of challenge where regulatory evidence suggested that wholesale regulation and market forces should first be assessed. The subsidiarity ground added nothing distinct to that retail challenge.

The mobile network operators sought permission to challenge the validity of the Mobile Roaming European Communities Regulations 2007, which implemented penalties for breach of the Community Roaming Regulation. They also sought a reference to the European Court of Justice concerning the Roaming Regulation’s legal basis, proportionality and subsidiarity.

The court permitted Hutchison 3G UK Ltd to intervene because it was directly affected by the price caps, and allowed the GSM Association to make representations. The central issues were whether the validity challenge was reasonably arguable and, in particular, whether the Community-wide wholesale and retail price caps were lawfully adopted.

1. Procedural applications. Hutchison 3G UK Ltd was joined as an interested party because it was directly affected by the imposition of wholesale and retail price caps. The GSM Association was permitted to make representations. The judicial review claims were a legitimate procedural device for obtaining a reference on the validity of the Roaming Regulation.
2. Reference threshold. If the challenge to the validity of the Roaming Regulation was unfounded, permission could be refused. If it was reasonably arguable, the national court could not determine validity itself and should refer the issue to the European Court of Justice: [2006] ECR 1-403 and [2002] ECR 1-6677.
3. Legal basis. The challenge under article 95 of the Treaty was reasonably arguable. There was a striking difference between the regulatory regime under the Framework Directive and the centralised price controls imposed by the Roaming Regulation. The European Court might conclude that the latter was a radical departure rather than a complementary measure. The issue had economic importance and had not previously arisen in precisely that form.
4. Proportionality and subsidiarity. The applicable proportionality test required the court to ask whether the measure was manifestly inappropriate, bearing in mind the Community legislature’s wide discretion: C-310/04 and [2001] ECR 1-7992. The challenge to the wholesale cap and the alleged market-size error was unarguable. By contrast, the challenge to the retail cap was viable. Regulatory evidence supported delaying retail price control so that wholesale measures and market forces could operate first, while recognising national market differences. The subsidiarity ground added nothing to that challenge.
5. Orders. Permission for judicial review was granted in both claims. The identified questions were to be referred to the European Court of Justice, with the precise wording and supporting materials to be settled subsequently. Permission to appeal was granted on the issues referred, but not on the grounds the court considered unarguable. The reference was not to be delayed pending any appeal, and costs were reserved.

First-instance judicial review proceedings. No earlier decision is stated in the judgment.