‘Illegal state aid’ challenge to tax levied on BT’s UK fibre network fails in European Court


In a decision dated 21 January, but only released this week, the EU’s General Court in Luxembourg has dismissed Vtesse’s appeal against a decision of the European Commission that rates (a UK land use tax) levied on BT’s UK fibre network did not constitute state aid.

Vtesse originally complained to the Commission in 2004, but the Commission closed its case in December 2006 on the following basis:

In conclusion, it should be recalled that business rates are a tax on the value of the property concerned. They are not a tax on profits or revenues. They are normally applied on all non-domestic properties, and consequently are applied to all telecommunications networks. According to British case-law all telecommunications networks are valued as a whole. There are several methods for valuing such property. When all methods can be applied, they should result in the same valuation. The use of a specific valuation method depends on the circumstances of the case.

It now appears that the VOA has applied to BT and Kingston the general rules concerning business rates as laid down in the legislation and case-law. It is clear that the valuation of BT’s and Kingston’s hereditaments as well as the revisions of these rateable values, are carried out on the basis of a different method than in the case of their competitors. However, the Commission can conclude that there is no evidence that the use of this different method is not justified by the objective differences between those firms and their competitors and by the extent of the evidence available to the VOA.

There is no evidence that the application of a different valuation method to BT and to Kingston has resulted in an advantage to these firms in comparison with their competitors. Since there is no evidence of an advantage, the Commission can conclude that the non-domestic rates system has not provided State aid to BT and/or Kingston within the meaning of Article 87(1) EC during the period considered by the Commission i.e. 1995-2005.

Vitesse appealed on the basis that the Commission didn’t carry out a full and proper investigation before closing the case. It appears from reports of the General Court’s judgement that the court did not engage with this substantive ground of appeal, instead dismissing the appeal on the basis that Vtesse was unable to demonstrate that it was individually concerned by the action. The court apparently observed that Vtesse would have needed to establish causality between the contested state aid and any change in Vtesse’s market position.

Against the backdrop of a government policy objective to encourage competitive roll-out of fibre networks this decision will clearly disappoint BT’s competitors.

About Rob Bratby

Telecommunications, media and technology lawyer advising companies across Europe and Asia
This entry was posted in Broadband, Court decision, EU, Telecoms, UK and tagged , , , , . Bookmark the permalink.

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