QB-2022-001364 - [2025] EWHC 2758 (KB)

GSM Gateways are items of telecommunications equipment which incorporate one or more SIM cards issued by a Mobile Network Operator (“MNO”). They allow the device on which the SIM card is installed to originate calls and texts on the MNO’s network. As a result, calls from fixed lines to mobile networks are treated by the recipient’s network as if they were made by a mobile phone, rather than from the fixed line phone. This means that the charges for the call are lower than they would have been had the call been treated as having been made from a fixed line. A GSM Gateway can therefore save money for a user who makes calls from a fixed line to mobile phones and for this reason they have been widely used by businesses and public bodies to reduce their phone bills.

GSM Gateways may be “self-use gateways”, which are used by the user itself, or “commercial use gateways”, which are provided by a business as part of a service to a customer. There are two types of commercial use gateway: commercial single user gateways, or “COSUGs”, have a single end user from which all the calls diverted through the gateway originate; commercial multi-user gateways, or “COMUGs”, have multiple end users so that the calls diverted through the gateway originate from more than one user. The business using the GSM Gateway to provide electronic telecommunications services seeks to make a profit by charging its customers rates for use of the Gateway which mean the customer pays less for their calls from fixed lines than they would otherwise have had to pay to a MNO.

At all material times the position in law has been that the establishing or use of any station, or the installation or use of apparatus, for wireless telegraphy requires a licence unless an exemption applies. This was the effect of section 1(1) of the Wireless Telegraphy Act 1949 (“WTA 1949”), which also enacted a general power of the Secretary of State to provide, by regulations, for exemptions of such classes or descriptions of stations or apparatus as may be specified in such regulations. It was common ground before me that a GSM Gateway falls and fell within the definition of “apparatus” for these purposes at all material times.

The use of telecommunications equipment was, however, regulated by Council of the European Union Directives which were transposed into United Kingdom law by primary and secondary legislation. The most relevant of these Directives for present purposes is the Authorisation Directive (2002/20/EC) which formed part of the Common Regulatory Framework and was required to be implemented by Member States by 24 July 2003. When the Authorisation Directive was first adopted in 2002, Article 5 provided, so far as material, as follows:

“Rights of use for radio frequencies and numbers

1.

Member States shall, where possible, in particular where the risk of harmful interference is negligible, not make the use of radio frequencies subject to the grant of individual rights of use but shall include the conditions for usage of such radio frequencies in the general authorisation.” (emphasis added)

Article 5(2) then dealt with the procedure for obtaining a licence where such was necessary. In very broad summary it required that such procedures be open, transparent and non-discriminatory.

The Common Regulatory Framework was implemented in the United Kingdom primarily through the Communications Act 2003 (“CA 2003”) which contained many of the required provisions and which also made amendments to the WTA 1949. The CA 2003 designated Ofcom as the national regulatory authority which had responsibility for many of the functions set out in the relevant Directives and transferred to Ofcom the powers of the Secretary of State to grant licences and make regulations under section 1 of the WTA 1949. However, section 5 of the CA 2003 provided that the Secretary of State had a power to give directions for specified purposes including in the interests of national security and, under section 5(2), that it was the duty of Ofcom to carry out its relevant functions in accordance which such general or specific directions as were given to them by the Secretary of State.

By way of implementation of Article 5 of the Authorisation Directive, section 166 of the CA 2003 also inserted a new section 1AA of the WTA 1949. This enacted a requirement that Ofcom make regulations exempting the installation and use of specified descriptions of stations or apparatus if it was satisfied that their use was not likely to involve undue interference with wireless telegraphy.

With effect from 7 February 2007, however, the WTA 1949 was repealed and replaced by the Wireless Telegraphy Act 2006 (“WTA 2006”). The position under sections 1 and 1AA of the WTA 1949 was reproduced under section 8 of the WTA 2006 which provided, so far as material, as follows:

“8 Licences and exemptions

In 2009, the Authorisation Directive was then amended, with a deadline for implementation of the amendments of 25 May 2011. Following these amendments, Article 5(1) now provided as follows:

“Rights of use for radio frequencies and numbers

1.

Member States shall facilitate the use of radio frequencies under general authorisations. Where necessary, Member States may grant individual rights of use in order to:

— avoid harmful interference;

— ensure technical quality of service,

— safeguard efficient use of spectrum, or

— fulfil other objectives of general interest as defined by Member States in conformity with Community law.

These amendments were transposed by the United Kingdom through the Electronic Communications and Wireless Telegraphy Regulations 2011. Section 8 of the WTA 2006 was amended by the 2011 Regulations so that the conditions of which Ofcom had to be satisfied under section 8(5) were now as follows:

“(5)

The conditions are that the use of stations or apparatus of that description is not likely to—

(a)

involve undue interference with wireless telegraphy;

(b)

have an adverse effect on technical quality of service;

(c)

lead to inefficient use of the part of the electromagnetic spectrum available for wireless telegraphy;

(d)

endanger safety of life;

(e)

prejudice the promotion of social, regional or territorial cohesion; or

(f)

prejudice the promotion of cultural and linguistic diversity and media pluralism.’”

(Subsection (5) has since been further amended by the Electronic Communications and Wireless Telegraphy (Amendment) (European Electronic Communications Code and EU Exit) Regulations 2020 but the amendment is not material for present purposes given that it post-dates the period in respect of which the claims are made.)

As far as regulations providing for exemptions are concerned, the relevant ones for present purposes are the Wireless Telegraphy (Exemption) Regulations 2003, regulation 4(1) and (2) of which provided, at all material times prior to 28 April 2016, that:

“(1)

…the establishment, installation and use of the relevant apparatus are hereby exempted from the provisions of section 1(1) of the 1949 Act.

(2)

...the exemption shall not apply to relevant apparatus which is established, installed or used to provide or to be capable of providing a wireless telegraphy link between electronic communications apparatus or an electronic communications network and other such apparatus or system, by means of which an electronic communications service is provided by way of business to another person.”

In July 2003, following a consultation exercise, the Secretary of State decided that no change would be made to the 2003 Exemption Regulations: GSM Gateways therefore continued to be exempted from the requirement to obtain a licence only to the extent set out in Regulation 4. This meant that if a company (for example) acquired a GSM Gateway for use in its own business there was an exemption from the requirement for a licence. But the exemption did not apply if the company provided the GSM Gateway to another person as part of a service provided under a commercial arrangement with that person. The effect of regulation 4(2) - that this type of commercial use of GSM Gateways was not exempted from the requirement for a licence - has been described in the caselaw as “the Commercial Use Restriction”.

In Recall Support Services v Secretary of State for Culture Media and Sport [2013] EWHC 3091 (Ch); [2014] 2 CMLR 2 Rose J (as she then was) considered a claim for damages for breach of Article 5 of the Authorisation Directive which had been brought pursuant to the principles in Francovich v Italian Republic (c-6/90) [1991] ECR I-5357 by claimants who included Edge. The claimants’ argument was that the Commercial Use Restriction was a failure by the United Kingdom to implement Article 5 because this Article required that providers of the services of GSM Gateways to others should not be required to obtain a licence to do so unless the conditions specified in the Article were satisfied, which they were not. The Secretary of State for Culture Media and Sport (“DCMS”) argued that the Commercial Use Restriction was justified in relation to GSM Gateways on the basis of: (a) the need to avoid harmful interference; (b) the need to ensure the efficient use of spectrum (which were grounds identified in Article 5); and (c) national security (which was said to be implicitly a potential ground under Article 5).

Rose J held that:

Rose J’s decision was upheld by the Court of Appeal on 28 October 2014: see [2014] EWCA Civ 1370, [2015] 1 CMLR 38. Permission to appeal was then refused by the Supreme Court on 25 February 2015.

Ofcom then began the process, under section 122 of the WTA 2006, of exempting COSUGs from the Commercial Use Restriction. From 6 November to 7 December 2015, it consulted on its proposal to make amending regulations and, on 6 April 2016, it made the Wireless Telegraphy (Exemption) (Amendment) Regulations 2016 (“the 2016 Amendment Regulations”). That decision was announced on 8 April 2016, and the 2016 Amendment Regulations came into force with effect from 28 April 2016. They amended Article 4 of the 2003 Exemption Regulations so that it now provided that the Article 4(1) exemption from the licensing requirement under section 8(1) applies to COSUGs whether or not they form part of a service provided to another as part of a business.

On 6 July 2017, again pursuant to section 122 of the WTA 2006, Ofcom announced its proposal to make amending regulations to exempt COMUGs under the 2003 Exemption Regulations, and it published a Notice of its proposed regulations (“the COMUG Notice”). The basis for that decision was that, in its view, whilst there was the potential for COMUGs to have an adverse effect on the technical quality of service in certain circumstances, this was not of a sufficient degree to warrant the maintenance of the Commercial Use Restriction. Ofcom also considered that the other conditions under section 8(5) were satisfied.

On 25 September 2017, however, on national security grounds the Secretary of State for Security directed Ofcom, pursuant to section 5 of the CA 2003, not to exempt COMUGs from the requirement to apply for a WTA licence for the commercial use of COMUGs (“the Direction”). The Direction also provided that Ofcom should not issue a WTA licence for such purposes unless certain conditions specified in the Direction were met. In light of the Direction, Ofcom did not make the exemption regulations contained in the COMUG Notice.

In December 2017, VIP Communications Ltd (in liquidation) brought a judicial review challenge to the Direction which was ultimately rejected by the Supreme Court in R (VIP Communications Ltd (In Liquidation)) v Secretary of State for the Home Department [2023] UKSC 10.