1. A "BIT" of extra protection for your investment

Cross-border investment has never been without risk. In various otherwise attractive investment destinations, foreign investors in the communications and media space face one or more of a cumbersome regulatory environment, complex local and state legislation, corruption in public administration, and a legal system marked by unpredictability and delays. It is, therefore, vital that businesses entering such markets engage in prior strategic planning to ensure the protection of their investments and (should something go wrong) access to effective dispute resolution mechanisms.

International investment agreements ("IIAs") are one of the most powerful investment protection tools in a foreign investor's arsenal. The most common form of IIA is the bilateral investment treaty ("BIT") – an international agreement between sovereign states for the reciprocal promotion and protection of foreign investment in each other's territories. While a BIT is an agreement made between states, the protections contained in the BIT are extended to individual investors investing between those states.

The importance of BITs in this context is two-fold.

First, BITs provide investors with substantive protections such as guarantees of fair and equitable treatment, full protection and security, non-discrimination, free transfer of funds, and protection from unlawful expropriation. These protections, the meanings of which have been developed over various cases interpreting BITs, afford the investment a stable and predictable legal environment and reduce the risk of politically-motivated legislative changes or other acts where a host state will cause or allow a foreign investment to be damaged or destroyed.

Second, BITs generally contain dispute resolution clauses that enable foreign investors to initiate arbitration claims directly against the host state of the investment in the event that any of these protections promised to investors under the BIT are infringed so as to cause harm to an investment. This provides investors with an impartial and independent forum for the resolution of disputes, based usually in a neutral third country, and avoids possible delay or corruption in the local courts. Any resulting arbitral award will be binding, subject to limited review, and enforceable under treaty.

Since the first BIT was signed between Germany and Pakistan 1959, more than 3,000 BITs have been signed worldwide. In addition, various multi-lateral or regional investment agreements contain investment protections equivalent to those in a BIT.

Claims brought under BITs cover many different investment sectors. Recent uses of such instruments have included the arbitration commenced by Vodafone in 2012 under the India-Netherlands BIT over retrospective tax legislation proposed by the Indian government. Several more BIT claims are also pending or threatened against India in relation to the Indian Supreme Court's 2012 decision to cancel 122 2G licences awarded to various mobile phone operators in some of which foreign companies had invested.

The use of BITs to protect cross-border investment requires analysis at the planning stage. Alongside tax considerations, the availability of a BIT between the intended "host" state, and potential "investor" states, should be one of the key structuring factors. The existence of protections under a BIT may often make it easier for an investor to seek equivalent protections directly from a state or regulator as part of any investment framework.

When problems do arise, a decision to sue the state in which one's investment is based will never be a simple or first solution. However, the ability to do so can influence a negotiated outcome, and will in any event provide a last resort should all else fail.

Specialist advice is required to make use of BIT protections, including ensuring that investments meet formal requirements which are present in various BITs, and that disputes are handled to preserve the right to claim under a BIT.

2. European Parliament "rapports" on proposed Data Protection Reforms

European Parliament Rapporteur Jan Philipp Albrecht has published his report on the proposed Data Protection Regulations, suggesting some onerous amendments to the draft Regulations.

The Rapporteur for the European Parliament, Jan Philipp Albrecht, was elected to review the European Commission's Data Protection reform proposals which were published in January 2012. The Rapporteur has now published his report and broadly supports the reforms proposed by the European Commission.

The Data Protection Regulation (the "Regulation"), if implemented, will be the first major overhaul of Data Protection law in Europe since implementation of the existing Directive in 1995. It will impact upon almost every organisation doing business in Europe. However, European businesses may be disappointed to note that, in a number of instances, the Rapporteur suggests even more onerous obligations than those originally proposed by the European Commission.

In relation to consent, the Rapporteur has proposed making it clear that the use of default options that a data subject is required to modify in order to object to processing, such as pre-ticked boxes, do not express free consent. In relation to other legal grounds for processing, the Rapporteur proposes listing the circumstances in which there would be a presumption that the interests or fundamental rights and freedoms of the data subject outweigh those of the data controller. This would effectively limit the scope of the "legitimate interests" justification and could have a significant effect on data controllers in the UK where this justification is one of the most often relied upon conditions to legitimise processing.

Perhaps more welcome to data controllers is the Rapporteur's proposal to extend the period within which data controllers must notify a personal data breach to the supervisory authority, from 24 to 72 hours. Further, the Rapporteur proposes that the data subject need only be notified where he/she is likely to be adversely affected by the data breach, e.g. in cases of identity theft or fraud, physical harm or significant humiliation.

The current timetable is to adopt the new Regulation by the end of June 2013 (the end of the Irish Presidency of the EU), although it is accepted that this may slip. All parties have announced that they would like to see the Regulation adopted before the European Parliament elections and the next rotation of the European Commission in 2014. If they manage to keep to the later 2014 date, it is likely that the Regulation would become directly applicable in the Member States some time in 2016.

A copy of the Rapporteur's report and proposed amendments is available here.

3. Going once, going twice….. UK 4G auction update and a round-up of Spectrum news

4G auction update

Ofcom's 4G auction, which commenced on January 23, has now come to a close. The one off sale has raised £2.3 billion (a £1.2 billion shortfall on the £3.5 billion factored by the Treasury into this year's Budget), with Vodafone contributing the largest sum (£791 million) for five lots of spectrum, and Everything Everywhere paying £589 million for four lots. Other successful bidders include Telefónica UK, Three, HKT (a subsidiary of PCCW), and Niche Spectrum Ventures Limited (a BT subsidiary).

The auction offered the available spectrum in two bands, 800 MHz and 2.6 GHz. The capacity of these bands is equivalent to two-thirds of the radio frequencies currently used by wireless devices, and was principally freed up due to the switch-over of the UK's television sets from analogue to digital.

Niche Spectrum Ventures Limited paid an additional price of £15 million to be allocated spectrum bands 2,520 to 2,535MHz and 2,640 to 2,655MHz (its further frequency allocation of 2,595 to 2620MHz was at no additional price). Similarly, Vodafone Limited paid a further £8 million to be allocated spectrum bands 801 to 811MHz and 842 to 852MHz and £4 million to be allocated spectrum bands 2,500 to 2,520MHz and 2,620 to 2,640MHz (Vodafone's frequency allocation of 2,570 – 2595MHz was at no additional cost). Hutchinson 3G UK Limited was not required to pay an additional price for its frequency assignment of 791MHz – 796MHz and 832MHz – 837MHz. Everything Everywhere was also allocated spectrum bands 796 – 801MHz and 837 – 842MHz at no additional cost.

The lot of 800MHz spectrum to which Ofcom attached coverage obligations was won by Telefónica UK. Consequentially, Telefónica UK is obliged to provide mobile broadband service for indoor reception to at least 98% of the UK population (increasing to 99% when outdoors) and at least 95% of the population of each of England, Northern Ireland, Scotland and Wales by the end of 2017 at the latest. Telefónica UK was automatically allocated the frequency allocation 811 to 821MHz and 852 to 861MHz in accordance with the auction regulations.

Ofcom expects that operators will be able to start rolling out their networks soon with 4G consumer services being launched by these operators in spring or early summer 2013.

The news release is available here.

Liberalising additional Licences

Ofcom has published a consultation proposing to liberalise all mobile licences in the 900 MHz, 1800 MHz and 2.1 GHz bands to permit the deployment of additional 4G services following requests from Vodafone, Three and O2 to remove the regulatory constraint on the use of 4G technology in their spectrum licences. This follows Ofcom's approval in August 2012 of Everything Everywhere's application to use its existing 1800MHz spectrum to deliver 4G services. Everything Everywhere launched the UK's first 4G mobile services at the end of October 2012.

If Ofcom moves forward with its proposal, it will align the permitted technologies across all mobile spectrum licences, including those recently awarded in the 4G auction. The move will also mean that Ofcom meets its long-standing objective to liberalise all mobile licences, removing regulatory barriers to the deployment of the latest available mobile technology.

Ofcom's consultation closes on 29 March 2013 and Ofcom expects to publish its decision in Q2 of this year.

The consultation paper can be found here.

Release of licence-exempt spectrum and MOD spectrum sale

Recent work by the Conference of European Posts and Telecommunications Administrations ("CEPT") and the European Telecommunications Standards Institute ("ETSI") has found that Short Range Device ("SRDs"), Radio Frequency Identification ("RFID") and Global System Mobile Communication - Railway ("GSM-R") applications are able to share the 872 to 876MHz and 917 to 921MHz bands provided appropriate methods are deployed to control application interference.

In its recent consultation, Ofcom proposes to release this spectrum on a licence exempt basis with technical conditions that enable SRD and RFID use. Furthermore, following confirmation that the MoD will release bands 870 to 872MHz and 915 to 917MHz to Ofcom or another Government department, Ofcom has said that if released to Ofcom, it would expect to release this spectrum on the same licence-exempt basis.

Such release would create a number of opportunities for industries which utilise SRD and RFID technologies and bolster opportunities for innovation of machine-to-machine applications (such as smart metering and house alarms) through the use of the additional low frequencies.

Ofcom's consultation closes on 28 March 2012 and Ofcom expects to public a statement of its decision in Q2 2013. If Ofcom decides on licence exempt release, it will publish a consultation on the technical details of exemption with a statement and notice with draft regulations being published in Winter 2013/14. Implementation of the regulations would then be likely to happen in Spring 2014.

The consultation paper can be found here.

4. Fighting for Freedom: EU to headline media freedom and pluralism?

The European Commission's High Level Group on Media Freedom and Pluralism recommended that the EU should play a larger role in supporting pluralism and media freedom in Europe.

In October 2011, European Commission Vice-President Neelie Kroes established a High Level Group on Media Freedom and Pluralism (the "HLG") to advise and provide recommendations for the respect, protection, support and promotion of media freedom and pluralism in Europe. In January 2013, the HLG published its recommendations in a report entitled "Free and pluralistic media to sustain European democracy".

The overarching theme of the report is that, whilst the main responsibility for maintaining media freedom and pluralism rests with the individual Member States, the EU should be considered competent to uphold media freedom and pluralism and to protect the fundamental rights of EU citizens, in particular, the "rights of free movement and to representative democracy". Key recommendations made by the HLG include:

  • Further harmonisation of EU legislation (for example, libel laws and data protection) to improve the functioning of the Single Market.
  • Competition authorities (both at national and European level) should consider the value of media pluralism when enforcing competition rules. These authorities should consider new developments around online access to information, in particular the "dominant position" held by some network access or internet information providers and the restrictions over media freedom and pluralism imposed by such bodies.
  • National authorities must regularly assess, or commission others to assess, individual countries' media environment and markets.
  • Citizens should be better educated to critically engage with media, for example, by both teaching media literacy in schools at high-school level.
  • A free and pluralist media environment must be a pre-condition for EU membership.
  • Compulsory remedies following court cases should "include an apology and retraction of accusations printed with equal positioning and size of the original defamation".

The report also makes reference to the UK Leveson inquiry, stating "[t]he recently released Leveson report… has offered overwhelming evidence as to the multiple ways in which… “self-regulation” has not just been interpreted as “no regulation”, but has led to gross abuses of journalistic privileges". The report therefore recommends that all media organisations follow clear and publically available codes of conduct and editorial guidelines.

A copy of the report can be found here.  

5. EU contraction on broadband expansion?

The European Union's budget cuts have resulted in an €8.2 billion cut to the CEF budget for broadband services leaving little room for investment in broadband markets.

The European Union's decision on 8 February to cut the overall budget for 2014-2020 by 3.3% has resulted in the proposed €9.2 billion budget allocated to digital services (from the €50 billion pan-European Connecting Europe Facility ("CEF")) being reduced to just €1 billion.

The Digital Agenda commissioner, Neelie Kroes, has expressed her disappointment, stating that the substantially reduced budget "does not leave room for investing in broadband networks". Kroes believes that the reduced budget will help create a single market for digital services but will not be able to support the renovation of the networks that they run on. In the long term, this will inhibit the digital services market because the infrastructure upon which they depend will not be advanced or expansive enough to support them.

In the UK, the Department for Culture, Media and Sport ("DCMS") has issued a statement highlighting the importance of the EU agreeing an affordable budget and making the point that the cuts will have little impact on broadband roll-out in the UK. The DCMS highlighted that the details of CEF had not been finalised - consequentially, the government had not based its broadband plans on speculative proposals. BT has also indicated that the cuts will not have an effect on the existing Broadband Development UK roll-out, targeting superfast connections for 90% of UK homes by 2015.

It remains to be seen exactly how much the budget cut will affect the EU's plans to support an expansive high speed network by 2020, but the decision would appear to be a very real and present disincentive to investors; investors that are the key to a European recovery and the future of a more competitive Europe.