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Hong Kong courts

Appeal court backs telecoms operators in licence fee dispute with Hong Kong government

HKT, the largest telecommunications network operator in Hong Kong, is considering possible civil action in a bid to recover excessive payments made to the government

PUBLISHED : Wednesday, 27 December, 2017, 9:02pm
UPDATED : Thursday, 28 December, 2017, 12:34pm

The Court of Final Appeal (CFA) has ruled against the Hong Kong government for wrongfully overcharging telecommunications network operators on the licence fees that they pay every year.

The judgment could pave the way for the affected telecommunications services providers to take further legal action to recover the excess payments they have made.

For the government, it may entail a major review of its annual financial statements stretching back more than a decade.

In the ruling handed down on Wednesday, the CFA’s six justices unanimously said the Secretary for Commerce and Economic Development and industry regulator the Communications Authority “fell into specified errors of law” in prescribing telecommunications licence fees.

That marked a significant victory for appellant HKT, the telecommunications arm of Richard Li Tzar-kai’s PCCW, which had mounted the legal challenge against the government’s license fees in an application for judicial review before the city’s High Court in 2013.

HKT had argued that there was no legal justification for the government to prescribe licence fees that would significantly exceed the costs of the affected telecommunications network operators, and to do so would be “a form of tax” and go beyond the scope of the applicable laws.

The fees collected are used to recover the authority’s costs in administering the licences and go into a trading fund.

Hong Kong regulator overcharged telecoms licensees

The CFA found the respondents “made errors of law concerning both the ambit of the power to prescribe these licence fees under the Telecommunications Ordinance and also in the construction of several provisions of the Trading Funds Ordinance”.

The respondents had budgeted “for notional tax and dividends to create a surplus that was designed to be transferred to the general revenue” of the Hong Kong government, it said.

The respondents, according to the court, were wrong in prescribing fees which included an element of “what in substance was a tax upon the licensee”, and that the Trading Funds Ordinance did not provide for profits generated to be paid into the general revenue of the government.

“Clearly, the telecoms sector has been subject to excessive fees for a long time,” HKT said in a statement. The company said it was considering “possible civil actions” to recover the excess payments made in past years.

The Office of the Communications Authority, the executive arm of the industry regulator, said it “will follow up with the court’s judgment in consultation with the Department of Justice, and in accordance with the policy directions of the Financial Services and the Treasury Bureau”.

Other interested parties to HKT’s case included SmarTone Telecommunications, Hong Kong Broadband Network, China Mobile Hong Kong and Hutchison Global Communications, the former fixed-line network business of Li Ka-shing’s Hutchison Telecommunications Hong Kong.