Ofcom proposed to exempt equipment that routed calls through a mobile network while concealing who had made them. The Home Secretary directed Ofcom to keep the licensing requirement on national security and public safety grounds. The Supreme Court had to reconcile two duties Parliament had imposed on Ofcom. One required it to grant exemptions when technical conditions were met. The other required it to comply with ministerial directions on specified matters.
The equipment, known as a commercial multi-user GSM gateway or COMUG, took calls from different customers and routed them through a SIM card, often to save money. A network could see the number and location of that SIM card. It could not use those details to identify the original caller or, for a mobile call, the caller’s location. That mattered to authorities seeking communications data or executing an interception warrant.
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The licensing regime and the Direction
Under section 8(1) of the Wireless Telegraphy Act 2006 it is unlawful to establish or use a wireless telegraphy station, or to install or use wireless telegraphy apparatus, except under a licence granted by Ofcom. Section 8(3) allows Ofcom to make regulations exempting equipment of a specified description, either absolutely or subject to terms. Section 8(4) goes further: if Ofcom is satisfied that the conditions in section 8(5) are met, it must make an exemption. Those conditions concern matters such as undue interference, technical quality, efficient use of spectrum, safety of life, social, regional or territorial cohesion, and cultural and linguistic diversity. They do not include national security.
In July 2017 Ofcom announced that the statutory conditions were met and proposed to exempt COMUGs. The direction of 25 September 2017 required licensing to continue. An applicant would have to show that identifying information could pass through the network. The minister’s concerns about national security and public safety were accepted. The dispute was over who could act on them.
The two duties
Section 5 applies to Ofcom’s functions under Part 2 of the 2003 Act and its other functions relating to management of the radio spectrum, including licensing and exemption regulations. Section 5(2) requires Ofcom to carry out those functions in accordance with general or specific directions from the Secretary of State. Section 5(3) confines that power to national security, relations with governments outside the United Kingdom, compliance with international obligations, and the safety of the public or public health. Those are matters reserved to the Secretary of State. Ofcom has no power of its own to refuse an exemption because of them.
VIP, a company which had provided GSM gateway services before going into administration in 2005 and liquidation in 2010, sought judicial review. It argued that the Direction was outside the section 5 power because it told Ofcom not to perform the duty in section 8(4).
The courts below
The High Court quashed the direction. Morris J considered that a power to tell Ofcom how to carry out a function did not authorise the minister to prevent Ofcom from performing a statutory duty.
The Court of Appeal agreed. Its starting point was that Parliament would need clear words to authorise a direction preventing compliance with a duty. It found no such words in section 5. It also thought the minister could address security concerns by directing Ofcom to attach conditions to an exemption.
The Supreme Court’s construction
Lord Richards read the two Acts together. Until the reforms in 2003, the Government had controlled wireless telegraphy and could take security into account in licensing. Parliament then transferred technical regulation to Ofcom. It retained a ministerial power over a short list of matters, including national security, for which the Government remained accountable.
There was a practical reason for that division. Ofcom could assess interference and spectrum use. It was neither equipped nor instructed to judge whether a technical exemption would endanger national security. On the lower courts’ interpretation, the regulator would be obliged to grant an exemption even where the minister reasonably considered that doing so would prejudice that interest.
The Court rejected the reading that section 5(2) allows only a direction to take a positive step, or to take it in a particular way, and not a direction to refrain. The subsection is deliberately general: it covers all of Ofcom’s Part 2 functions and its other radio-spectrum functions. Ofcom is carrying out a function when, because of a direction, it does not make exemption regulations, just as it is when it does make them. Given the purpose of protecting vital national interests, it was improbable that the Secretary of State could direct Ofcom how to act but not direct it not to act.
The Court rejected a general rule requiring special wording whenever a direction would prevent performance of an apparent duty. That consequence matters in interpreting legislation, but the text, purpose and relationship of the provisions determine the answer. Here Parliament had qualified one duty by the other. A minister could act only on the statutory grounds and had to act reasonably and proportionately.
A licence can require proof of compliance before an operator starts. A breach of a condition attached to a general exemption may emerge only afterwards. The Court did not decide whether conditions would have given equal protection here. VIP had challenged the existence of the minister’s power and had put forward no evidence that the choice to require a licence was irrational.
Verdict: The Court unanimously allowed the Secretary of State’s appeal and dismissed VIP’s application for judicial review. The power in section 5 of the Communications Act 2003 authorised the direction to retain licensing.
