Openreach v Ofcom dark fibre legal bill bounced back to Competition Appeal Tribunal

Court of Appeal rules it's wrong to assume regulator should pony up for cases it loses

The Court of Appeal has ruled that legal costs from BT Openreach's dark fibre bunfight against UK telcos will be reconsidered by the Competition Appeal Tribunal.

Yesterday's judgment was solely about who ought to pay whose legal bills for the case, which revolves around market design cockups made by Ofcom when the regulator tried to create a new dark fibre market based around spare capacity in Openreach's cable network.

Those gaffes were all in Ofcom's Business Connectivity Market Review from 2016, which dealt with the leased line market, of which dark fibre forms a part.

"Dark fibre" is fibre-optic cable in an operator's network that is not being used; the antonym of the term being "lit up". Other telcos wanted to be able to light up BT Openreach's cables for their own purposes, reasoning that in law the one-time state monopoly owed them access.

In designing the market for dark fibre, Ofcom divided BT Openreach's unused cable into four market segments: London; the London Periphery; Hull; and the Rest of the UK.

BT Openreach appealed against Ofcom in the Competition Appeal Tribunal (CAT), broadly arguing that the body had managed to get both the reach of the regulatable network and its geographic segments wrong, adding that its dark fibre network shouldn't be opened up to other operators because Ofcom's analysis of it was flawed. Cityfibre weighed in on BT Openreach's side, while Talktalk, Hutchison 3G, Vodafone, Colt Technology and Gamma Telecom all sided with Ofcom.

In a surprisingly clear 200-page judgment (PDF) handed down in November 2017, the tribunal ruled that BT Openreach had won. So far, so good. Then came the wrangling over legal costs.

If regulators get it wrong, should they pay the winner's legal bills?

The question kicked up to the Court of Appeal was straightforward: when Ofcom makes a regulatory decision against a telco and the tribunal overturns that decision, should Ofcom pay up?

The tribunal took the well-known legal principle of "costs follow the event", or in everyday English: "It's your fault we ended up here, you lost your case against me, now pay off my lawyers." Determined not to absorb a legal bill that would undoubtedly have run into the hundreds of thousands of pounds, if not more, Ofcom took it to the Court of Appeal.

The Court of Appeal has now ruled that when it decided who should pay the costs, the tribunal was wrong to start with "costs follow the event" and that it will need to rule again. Sir Geoffrey Vos, the Chancellor of the High Court (who was, very unusually, wearing an eyepatch in court today as he formally handed down the judgment), said:

"Ofcom's main submission was that the CAT ought to have proceeded on the basis that costs would not ordinarily be awarded against Ofcom in the context of a successful appeal under section 192 [of the Communications Act 2003] in the absence of unreasonableness or bad faith.

"In our judgment, the appropriate course is for this court to remit the costs decision to the CAT to decide the matter afresh on the correct legal principles adumbrated* in this judgment." ®

* "Represented in outline", according to the Oxford Dictionary. Yes, we had to look it up too.

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