By Miranda Cole and Katharina Grosse-Ophoff

In its UPC judgment this week the European Court of Justice (“ECJ”) has clarified the application of consumer protection laws to, and the jurisdiction of national regulatory authorities over, providers of electronic communications services (“ECS”) that are established in one member state who provide services in another.  The court also confirmed that ECS providers need not establish a branch in member states in which they provide service, as long as they are established in at least one member state.

Facts.  The case was referred to the ECJ by a Hungarian Municipal Court dealing with legal proceedings relating to a fine issued by the Hungarian telecoms regulator against UPC (a Luxembourg-established supplier of packages of radio and audio-visual broadcast services which are uplinked to satellites from Luxembourg ).  The fine was issued after UPC refused to provide information regarding its contractual relationship with a customer to the Hungarian regulator, on the basis that the regulator did not have jurisdiction over UPC’s activities.

Scope of the ECS Concept.  In its assessment, the ECJ analysed Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services (the Framework Directive) and the three accompanying Directives.  UPC argued that it does not supply an ECS within the meaning of the Framework Directive,* since it does not transmit any signal and does not operate an electronic communications network, e.g., the satellite infrastructure.  The ECJ found that the fact that the signals were transmitted by infrastructure that does not belong to UPS is irrelevant, and that the defining criterion of an ECS is whether the provider is responsible vis-à-vis end-users for transmission of the signal which ensures that they are supplied with the relevant service.

Powers of national authorities.  Having established that the Framework and related directives (including the Authorisation Directive) apply, the ECJ went on to hold that the Authorisation Directive does not oblige the national authority of the jurisdiction in which ECSs are provided to recognise authorisation decisions taken in the state from which ECSs are supplied.  As a result, member states in whose territory the recipients of ECSs reside, may impose conditions on the provision of those services, such that the supply of ECSs is monitored by the authorities of the member state in which the ECS recipients reside.

The ECJ went on to hold that national authorities may request companies to provide information required to verify their compliance with consumer protection conditions.  In particular,  Article 11(1)(b) of the Authorisation Directive, read in conjunction with point 8 of Part A of the Annex, enables national authorities to request information from companies that is proportionate and objectively justified to verify such compliance.  Accordingly, the member state in whose territory the recipients of ECS reside may make the provision of those services subject to consumer protection conditions.

However, while service providers can be required to register in the country in which ECSs will be provided (subject to the caveat that the information required for registration is limited to that necessary for the identification of the provider), they cannot be required to establish a permanent branch because such an obligation would infringe on the freedom to provide services under Article 56 of the TFEU.  The possibility of more extensive monitoring afforded by the establishment of a branch or a separate legal entity does not justify such an infringement.

* An ECS is a service normally provided for remuneration which consists wholly or mainly in the conveyance of signals on electronic communications networks, including telecommunications services and transmission services in networks used for broadcasting, but exclude services providing, or exercising editorial control over, content transmitted using electronic communications networks and services. It does not include information society services which do not consist wholly or mainly in the conveyance of signals on electronic communications networks.

Co-Author, Katharina Grosse-Ophoff, Trainee, attended Maastricht University (LL.B. 2011) and the London School of Economics (LL.M. 2012).