British Telecommunications Plc v The Office of Communications

Where a public regulator acts reasonably, in good faith and in the public interest when bringing or resisting proceedings, a tribunal whose rules contain no presumption that costs follow the event should ordinarily begin without a predisposition to award costs against the regulator merely because it lost.

A specialist tribunal may fashion its own costs practice under its procedural rules. It must, however, apply governing legal principles and explain any features of its regulatory context that justify a different approach. The substantive nature of the proceedings matters more than fine distinctions between regulatory, dispute-resolution and merits appeals.

Ofcom appealed against the Competition Appeal Tribunal’s order requiring it to pay 50% of BT’s recoverable costs following BT’s successful appeal under section 192 of the Communications Act 2003. The substantive appeal concerned Ofcom’s definition of product and geographic markets in its business connectivity market review.

The Tribunal had treated costs following the event as the starting point, following its decision in British Sky Broadcasting Ltd v Office of Communications [2013] CAT 9. Ofcom argued that the Tribunal should ordinarily make no adverse costs order where Ofcom had acted reasonably and in good faith. The central issue was whether the Tribunal had adopted the correct legal starting point under rule 104 of the Competition Appeal Tribunal Rules 2015.

1. Appeal allowed and costs decision remitted. The Tribunal erred in adopting costs following the event as its starting point. Its decision could not stand because it followed British Sky Broadcasting Ltd v Office of Communications [2013] CAT 9 without applying the relevant principles derived from Bradford MDC v Booth, Baxendale-Walker v Law Society [2007] EWCA Civ 233 and Regina (Perinpanathan) v City of Westminster Magistrates’ Court [2010] EWCA Civ 40.

2. Those authorities establish a principle relevant to proceedings in which a regulator acts in its regulatory capacity, reasonably and in the public interest. Where the applicable procedural rules contain no contrary presumption, the tribunal should not begin with a predisposition to award costs against the regulator merely because it was unsuccessful. The regulator’s public function and the risk that adverse costs may inhibit proper regulatory action are material considerations.

3. The Tribunal is a specialist United Kingdom tribunal and should ordinarily be master of its own procedure. It may develop costs practices suited to its functions under rule 104 of the Competition Appeal Tribunal Rules 2015. That procedural autonomy remains subject to applicable legal principles and, in an English and Welsh case, binding authority of the Court of Appeal.

4. The correct analysis does not turn on fine distinctions between dispute-resolution appeals, regulatory appeals and merits appeals. The substantive nature of the proceedings is decisive. The important consideration is whether the regulator was acting in that capacity in bringing or resisting proceedings and whether its conduct was reasonable and directed to the public interest.

5. A different costs approach may still be justified by the particular regulatory context, industry circumstances, standard of review or procedural rules. The Tribunal must identify and explain those circumstances consistently. It remained best placed to assess the competing arguments about any chilling effect and to exercise its discretion afresh.

1. Court of Appeal (Civil Division): Allowed Ofcom’s appeal and remitted the costs decision to the Competition Appeal Tribunal for reconsideration under the correct legal principles: [2018] EWCA Civ 2542.

2. Competition Appeal Tribunal: On 25 January 2018, ordered Ofcom to pay 50% of most of BT’s recoverable costs and £500,000 on account. It treated costs following the event as the starting point under rule 104 of the Competition Appeal Tribunal Rules 2015. Permission to appeal was granted on 9 March 2018.

3. Competition Appeal Tribunal—substantive appeal: Quashed specified market-definition determinations made by Ofcom and later gave full reasons in [2017] CAT 25.