CRAN 1-1 Telecom … Giants share spoils in drawn-out battle

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Roland Routh

Windhoek – The Supreme Court has declared a section of the Communications Act, which gives the Communications Regulatory Authority of Namibia (CRAN) unlimited powers to impose levies on communications service providers, as unconstitutional in a judgement delivered last Friday.

It however also declared that service providers are obliged to pay the levies imposed from the date of the publication of the regulation in the Government Gazette, which was September 13, 2012, up to the date of the judgement invalidating the regulation, which is June 11, 2018.

Supreme Court Judge of Appeal and Judge President of the Namibia High Court Petrus Damaseb, in agreement with appeal judges Dave Smuts and Fred Chomba, upheld an appeal CRAN lodged against a ruling of the High Court that upheld a constitutionality challenge by Telecom Namibia against a section of the Communications Act that allowed CRAN to garner levies from them.

The Supreme Court also ruled that Item 6 of the Regulations Regarding Administrative and Licence Fees for Service Licences, which states a telecommunications service provider is levied a minimum percentage on its turnover – 1.5%, is declared invalid, but only since the date of the judgement, which was last week Friday.

The Supreme Court furthermore declared Section 23(2)(a) of the Communications Act 8 of 2009 unconstitutional and struck it down. This section made provision for CRAN to impose a levy to defray its expenses as contemplated under Section 23(1) of the Act for the purpose of regulating the telecommunications, postal and radio spectrum industries.

CRAN imposed the levy on September 13, 2012, but Telecom Namibia refused to honour the levy and challenged Section 23(2)(a) and the regulation made under it (the levy), in the High Court, saying that the regulation impermissibly had a retro-active effect and that it either constituted an unconstitutional tax without representation, or constituted an unconstitutional delegation by parliament of unlimited legislative power.

The High Court upheld the challenge, finding that Section 23(2)(a) was a tax as it went beyond what Section 23(1) authorised and that there was no connection between the regulatory scheme and charges levied based as it was on a percentage and without actual or properly estimated costs of regulation. This section granted CRAN powers to impose a percentage levy on the income of service providers concerned – whether such income is derived from the whole business or a prescribed part of such business. It was against this section that Telecom objected as they said it gave CRAN unlimited powers and the High Court agreed with the objection.

The Supreme Court on the other hand found that the High Court misdirected itself when it found that there was no connection between the regulatory scheme and the levy and that the levy was indeed a tax.

The Supreme Court judges said that even if a charge has all the attributes of a tax, but is connected to a regulatory scheme, it will not be a tax. According to Judge Damaseb who wrote the judgement, the Act represents a complex and complete regulatory framework for the affected industries with substantial benefits and privileges to those granted licences to operate under it and therefore, there is a relationship between the scheme and those being regulated.

He further said that the essence and substance of the Act (or its dominant purpose) is to regulate behavior, and the raising of revenue is only incidental. “The levies imposed are intended for the carrying out of the policies of the legislation and need not be directly linked to the costs of regulation.”

According to its Act, CRAN was initially funded by government, but has to derive its operating costs from fees from the grant, renewal and transfer of licences; any revenue received for services it provides; fines and monetary sanctions imposed by it; and any levies prescribed under the Act. This, the Supreme Court said, makes it very clear that, barring the initial appropriation by the Treasury, CRAN is on its own regarding revenue generation.

The Supreme Court appeal was lodged by CRAN, which Telecom Namibia opposed. CRAN was represented by Advocate Vincent Maleka SC assisted by advocates Gary Coleman and Ramon Maasdorp instructed by Angula Co. Inc., and Telecom by Advocate Raymond Heathcote assisted by Advocate CE van der Westhuizen, instructed by Shikongo Law Chambers. MTC Namibia was involved in the matter as an intervening party and was represented by Advocate Jeremy Gauntlett SC QC, assisted by Advocate FB Pelser, instructed by Tjombe-Elago Inc.

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