Hutchison 3G & Ors v HMRC [2007] EUECJ C-369/04

European Court of Justice preliminary ruling (about 8 pages) in the dispute between UK mobile phone operators and HMRC on whether the amounts paid for UMTS (3G) spectrum licences were deemed to include VAT.

The Court ruled that a State body issuing spectrum licences, even by auction and with substantial fees being charged, was not engaged in an "economic activity" for the purpose of the Sixth VAT directive.

The judgment is based on the view that the purpose of the spectrum licensing regime was to prevent interference and ensure the efficient management of radio frequencies, and that the initial issuing of licences through the 3G auction was a transaction of a different nature from any subsequent trading in spectrum rights. Because the function of allocating the initial spectrum licences “cannot, by its very nature, be carried out by economic operators”, it does not constitute an economic activity:

38. Therefore, in granting such an authorisation, the competent national authority is not participating in the exploitation of property, consisting in rights to use the radio-frequency spectrum for the purpose of obtaining income therefrom on a continuing basis. By means of that allocation procedure, that authority exclusively carries out the activity of controlling and regulating the use of the electromagnetic spectrum which has been expressly delegated to it.

The judgment does not endorse the Advocate General's contention (paragraphs 58-59 of his opinion) that the competition law concept of economic activity is narrower than the VAT concept.

A similar judgment was issued in case C-284/04 involving mobile phone operators in Austria.

For further information or advice please contact Franck Latrémolière.

Filed under ECJ/CFI, Economic activity, VAT.

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