On Monday 14th April Paul Lasok QC will be taking part in a Competition Law debate at the new offices of Norton Rose. The panel will be made up of some of the most highly regarded experts in the area of competition law, including former CAT President Sir Christopher Bellamy, Michael Grenfell (Norton Rose), Stephen Kon (SJ Berwin), Tony Woodgate (Simmons & Simmons) and a representative from the OFT.

Norton Rose are administering this event in association with the Times.

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Paul Lasok QC

 

 

 

Her Majesty’s Revenue and Customs (Petitioners) v Loyalty Management (UK) Limited (Respondents)

Her Majesty’s Revenue and Customs (Petitioners) v Baxi Group Limited (Respondents)
Total (UK) Limited (Petitioners) v Her Majesty’s Revenue and Customs (Respondents)

An Appeal Committee of the House of Lords comprising Lord Hoffmann, Lord Walker and Lord Mance has granted the Commissioners leave to appeal in two separate cases involving loyalty schemes operated by Loyalty Management (UK) Limited (‘LMUK’) and Baxi Group Limited. It held that an immediate reference should be made to the ECJ. On the same day the Appeal Committee refused Total (UK) Limited leave to appeal in a case against the Commissioners for HM Revenue and Customs.

LMUK promotes the ‘Nectar’ high street customer loyalty scheme. Retailers who accept Nectar Points from customers as payment in whole or in part for goods or services are paid a “Service Charge” by LMUK. Baxi operates a loyalty scheme for purchasers of its boilers under which reward goods are provided by a separate company and paid for by Baxi. LMUK and Baxi contend that they are entitled to reclaim the VAT on their payments as consideration for a supply of services to them. The Court of Appeal agreed. The Commissioners argue that the payments are third party consideration for supplies of rewards (either goods or services) to the recipients; accordingly LMUK and Baxi have no right to deduct the VAT.

During argument Lord Hoffmann commented that the guidance of the ECJ was needed in reconciling the decision of the House of Lords in CEC v Redrow Group plc [1999] STC 161 with more recent decisions of the ECJ. The Appeal Committee rejected the submissions of LMUK and Baxi that the issues raised were acte clair in their favour.

A number of other appeals concerning customer loyalty schemes are currently stayed pending the resolution of LMUK and Baxi. As a result, both the Commissioners and taxpayers have a significant interest in the outcome of the two cases.

Total operated a sales promotion scheme through which customers could collect points every time they purchased fuel. Once the customer had collected a certain number of points these could be exchanged for a voucher issued by Total. The voucher was worth £5 when the customer used it to purchase goods or services in certain high-street retailers or donated its value to charity; it could not be exchanged for cash.

The main issue was whether the transfer of the voucher to the customer constituted a retrospective discount off the price of the fuel. Total contended that it was operating a price reduction scheme and that the voucher had the same VAT consequences as a cash rebate; i.e. that it reduced the amount on which the company was liable to pay output tax. The Court of Appeal had rejected this analysis [and held that the voucher did not act as a rebate because the customer received more at the same price rather than the same at a lesser price. In doing so the Court had placed significant reliance on the scheme documentation].

Before the Appeal Committee Total argued that there was a direct link between the supply of fuel and the provision of a voucher which enabled the voucher to act as a retrospective reduction in the price received for the fuel. It also suggested that a reference be made to the ECJ and alleged that the Court of Appeal’s judgment offended the principle of fiscal neutrality. The Commissioners contended that the principles of law to be applied were clear and that the scheme documentation was evidence that the voucher acted as a grant of an additional benefit to the customer and not as a price reduction. The Appeal Committee refused Total leave to appeal.

The result clarifies the position with regard to loyalty schemes which allow customers to collect points when goods or services are purchased and subsequently to redeem those points for non-monetary ‘rewards’. Following Total the transfer of a non-monetary reward [for example a voucher] to a customer redeeming his points does not operate to reduce the taxable consideration obtained by the supplier for the original goods or services.

Christopher Vajda QC represented the Commissioners against Loyalty Management (UK) Limited.

Nicholas Paines QC represented the Commissioners against Baxi Group Limited.

Christopher Vajda QC and Andrew Macnab represented the Commissioners for HM Revenue and Customers against Total (UK) Limited

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Andrew Macnab

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The London Central Employment Tribunal has dismissed all complaints of race and sex discrimination brought by Manchula Kuganesan against her employer, the Foreign and Commonwealth Office, where Ms Kuganesan is a senior accountant. The Tribunal heard evidence focusing on the selection of a white male candidate instead of Ms Kuganesan following a decision to upgrade her role. Ms Kuganesan alleged more generally that her career had failed to progress, relative to her comparators, due to race and sex discrimination in the Foreign Office. Foreign Office policy was also challenged as being indirectly discriminatory.

The Tribunal dismissed all complaints against the Foreign Office. It explained that it could understand how, from Ms Kuganesan’s point of view, it appeared that the question of upgrading her role only occurred because a white male colleague expressed an interest in it. However, the Tribunal stated that having heard two weeks of evidence, and understood the unique processes which exist within the Foreign Office, it was satisfied that Ms Kuganesan’s career progress had not been obstructed or impeded in any way on grounds of race or sex.

Ian Rodgers was instructed by the Treasury Solicitor on behalf of the Foreign Office.

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Ian Rogers

 

 

 

The Competition Appeal Tribunal considered the nature of Ofcom’s dispute resolution powers contained in the Communications Act 2003 in the recent decision in Rapture Television Plc v Office of Communications. Each of the six counsel appearing at the Tribunal were Monckton barristers.

Rapture Television, a broadcaster, complained to Ofcom about the terms and conditions on which British Sky Broadcasting Ltd offered Electronic Programme Guide (“EPG”) services to Rapture. Sky were obliged to provide such services on a fair, reasonable and non-discriminatory basis, as expanded upon in “The terms of supply of conditions access: Oftel guidelines”. The Tribunal considered the nature of Ofcom’s dispute resolution powers, together with the substance of the requirements incumbent upon Sky in the provision of EPG services in finding that Ofcom had correctly determined the dispute between the parties in this case.

Michael Bowsher QC, Elisa Holmes and Fiona Banks, instructed by Orrick, represented Rapture.

Peter Roth QC, instucted by Herbert Smith, appeared for Sky.

Christopher Vajda QC and Philip Woolfe represented Ofcom.

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Michael Bowsher QC
Philip Woolfe
Fiona Banks

On 25 March, the Royal Court of Jersey made a consent order discontinuing the first appeal made to the Royal Court against a decision by the Jersey Competition and Regulatory Authority (JCRA) under the Telecommunications (Jersey) Law 2002. The appeal had been brought by Jersey Telecom (JT), the largest mobile phone operator in Jersey, against a decision by the JCRA in August 2007 requiring the introduction of mobile number portability (MNP) in Jersey alone. Under MNP, customers can keep their mobile phone number when they switch operator.

After an agreed adjournment of the hearing of the appeal, in February 2008 it was announced that the three mobile telephone operators in Jersey and Guernsey have agreed with the two Channel Islands telecommunications regulators (the JCRA in Jersey and the Office of Utility Regulation in Guernsey) that MNP will be introduced across the Channel Islands by 1 December 2008, and the JCRA has issued an Initial Notice giving 1 December 2008 as the implementation date for MNP.

George Peretz, instructed by Bedell Cristin in Jersey, advised JT on the appeal.

Ben Rayment, and Ogier in Jersey, advised the JCRA.

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George Peretz
Ben Rayment

Four years after the EC Commission decided that the Walloon Region of Belgium had provided illegal State Aid to Ryanair in respect of Ryanair’s development of new routes and the basing of aircraft at Brussels South Charleroi Airport, the CFI heard Ryanair’s Appeal against the Decision on March 12th 2008. Ryanair’s case before the Court is that the EC Commission misapplied the State Aid rules to agreements entered into between Regional Airports such as Charleroi and Low Cost Airlines such as Ryanair, ignored the evidence available to them of similar lawful arrangements made between privately owned airports and Ryanair, wrongly refused to admit that publicly owned airports could invoke the Market Economy Investor Principle so as to compete on a level playing field and distorted the Business Plans of the Airport which showed that such an investment would be profitable.

John Swift QC and Josh Holmes were brought in to the case for the purpose of arguing at the Oral Hearing, instructed by A&L Goodbody of Dublin on behalf of Ryanair.

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John Swift QC
Josh Holmes

The VAT Tribunal has published its decision in the case of T Mobile (UK) Ltd, an appeal against a decision of HMRC concerning the VAT liability of “payment processing” charges levied on customers who do not pay their bills by Direct Debit. T Mobile charges its ‘pay monthly’ customers £3 for each bill which they pay by a method other than Direct Debit or BACS. T Mobile argued that these charges were consideration for supplies of “payment processing services”, and that those supplies were exempt from VAT pursuant to the financial services exemption (Group 5 of Schedule 9 to the Value Added Tax Act 1994).

In recent years, many telecoms and utility companies have introduced payment processing charges in an effort to encourage their customers to pay by Direct Debit. T Mobile’s appeal has been widely seen as a test case for traders seeking to establish that these charges are VAT exempt.

The Tribunal has dismissed the appeal, ruling as follows:

(1) The £3 charge was part of the consideration for T Mobile’s standard rated telecommunications services. There was no separate supply of payment processing services. In the alternative, any supply of payment processing services was ancillary to the supply of telecommunications services and should not be treated separately for VAT purposes.
(2) Even if there had been a separate supply of payment processing services, that supply would not have qualified as an exempt financial service.

Alan Bates represented the Commissioners for HMRC

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Alan Bates

A key telecommunications case featuring seven Monckton barristers has been picked out as one of The Lawyer’s ‘Top Ten Trials’ for 2008.

The case of Orange & Ors v OFCOM & BT, also referred to as ‘Calls to Mobiles’, is addressing the issue of call charges for mobile phones.

The article says, “Calls To Mobiles is the largest of several pieces of litigation relating to call charges this year, including the European case on roaming charges. This particular case will decide whether consumers have been paying too much for their telephone calls. OFCOM believes that this is the case and is looking for phone rates to be slashed.”

Proceedings begin in the Competition Appeal Tribunal at the end of January.

Monckton barristers are involved on all sides:

Peter Roth QC, Josh Holmes and Ben Lask represented OFCOM.
Anneli Howard represented BT

Jon Turner QC and Meredith Pickford appeared for T-Mobile whilst Ben Rayment appeared for the Competition Commission

The full article is available on The Lawyer’s web pages, please click here.

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Jon Turner QC
Ben Rayment
Josh Holmes
Meredith Pickford
Anneli Howard
Ben Lask