Recall Support Services Ltd & Ors v Secretary of State for Culture, Media and Sport

The Authorisation Directive permits Member States to require individual spectrum licences where justified by public security, harmful interference or efficient spectrum use. A restriction must nevertheless be rational and proportionate. Public security justified restricting commercial multi-user GSM gateways, but not commercial single-user gateways where the restriction was arbitrary and discriminatory. The restriction was not justified by harmful interference or spectrum efficiency. The resulting breach of EU law was insufficiently serious to engage Member State damages liability under the Francovich criteria. The claimants established rights and loss, but not a manifest and grave disregard of EU obligations.

The claimants operated, or supplied SIM cards to operators of, GSM gateways. They claimed approximately £415 million in damages from the Secretary of State for maintaining a restriction under the Wireless Telegraphy (Exemption) Regulations 2003 on commercial use of gateways.

The claim concerned the compatibility of that restriction with the Authorisation Directive and the RTTE Directive, its justification by public security, harmful interference and efficient spectrum use, and the application of the three Francovich criteria. The court also considered causation and quantum in the alternative.

1. Applicable EU legislation. The restriction had to be assessed under the Authorisation Directive. The RTTE Directive concerned technical requirements and did not confer a general right to obtain spectrum access merely because equipment was CE compliant.
2. Available justifications. Under both versions of Article 5 of the Authorisation Directive, public security, avoidance of harmful interference and efficient spectrum use could justify an individual licensing regime. Failure to notify the restriction under Article 114 TFEU did not prevent reliance on public security. Under domestic law, section 5 of the Communications Act 2003 implemented the public security aspect. The court did not decide whether efficient spectrum use justified restrictions under the pre-2011 domestic provisions.
3. Application of the justifications. Public security concerns justified restricting commercial multi-user gateways, but not commercial single-user gateways while self-use gateways remained exempt. The latter distinction was arbitrary and discriminatory. The use of genuine SIM cards in gateways did not constitute harmful interference. Nor was restricting gateways rationally justified by spectrum efficiency, given OFCOM’s economic and market-based approach to spectrum management.
4. EU-law infringement. The restriction therefore infringed Article 5 of the Authorisation Directive only insofar as it applied to commercial single-user gateways.
5. Francovich liability. Article 5 was intended to confer on would-be service providers a right to operate under a general authorisation unless individual licensing was lawfully justified. The breach did not amount to a manifest and grave disregard of the United Kingdom’s obligations: Article 5 was deliberately flexible, the decision-making process was careful, and the Commission had closed its investigation. The claimants established loss and were not required first to apply unsuccessfully for individual licences. The likely conduct of the mobile network operators went to quantum, not causation.
6. Disposition. The claims were dismissed. The court made alternative observations on the counterfactual and identified matters that would have constrained any loss.