Vodafone loses challenge on financing legal interceptions

Telecoms firm Vodafone have lost a case they had filed against the Malta Communications Authority over tariffs they are charged to finance Malta Security Services intercepts.

In 2005, the MCA had imposed an obligation on telecommunications companies to pay a percentage of their gross profits to subsidise legal communication intercepts by the MSS.

The plaintiffs Vodafone Malta and later Go Plc and Mobisle communications had argued that it was effectively a new tax on mobile telephony which went against the spirit of applicable European directives and associated local laws.

They contended that the EU Authorisation Directive imposed limitations on administrative costs on rights to use radio frequencies. The tariffs should be limited to the actual cost of the regulator to run the authorisation system as member states are prohibited from imposing further financial burdens on the operators, they argued, saying that the tax was imposed in breach of the EU directives.

The plaintiffs asked the court to declare the MCA directive null and beyond the scope of the MCA’s powers.

But in his reply, the Attorney General argued that the Framework Directive regulating electronic communications networks allowed member states to take the necessary measures for security, public politics, and criminal investigations.

Additionally, the fee was necessary for telephony operators to be able to operate without harming public order and was therefore connected to administration. It was argued that the directive is always subject to the necessity of safeguarding public order.

The directive did not specify who should pay for the service and therefore didn’t exclude that operators could be made to foot the bill. This was up to the member states, it said.

The MCA, in its reply, said that the role of the authority in the matter is to assist the MSS in collecting the payments due from companies authorised to provide communications services. The purpose of the directive was to define a cost sharing mechanism for legal interception obligations and establish the manner in which contributions were paid.

The authority was authorised by a memorandum of understanding to collect payments from service providers and pass them on to the security services, who own and operate the interception system.

In 2004, the government had consulted with all parties involved, including the applicant, before implementing the system, it said. The MCA denied that the tariff was too high.

The court observed that the system was a tool used by Malta to achieve the objectives of the Framework Directive and therefore did not fall under the limits imposed by the EU Directive

The court noted that the Maltese directive was not imposing a general tariff to operate in the islands and the fact that it was implementing a directive did not preclude the Authority from requesting further payments in the sector. The contributions in question are not to cover costs incurred by the authority in its function as a regulator but costs for the financing of a system which has nothing to do with its regulatory work, it said.

The court turned down all the telecoms operators’ claims in their entirety.