The ECJ held that the award by the public authorities in the UK and Austria of 3G mobile telecommunications licences by auction does not constitute an ‘economic activity’ within the meaning of the Sixth VAT Directive. The companies who had been allocated the rights had argued that the allocation was a transaction subject to VAT and that the payments made had included VAT.

The activities of the public authorities in the UK and Austria consisted of allocating, by auction, rights to use certain frequencies in the electro-magnetic spectrum to economic operators. Those rights allow the economic operators to offer their services to the public. Therefore the auction of the rights is necessary before the economic operators can provide their services. The key issue is that the public authority itself is not operating in the market.

On this basis it was held that the activities of the public authorities were not economic activities. Hence the auctions were not subject to VAT.

A copy of the judgement is available at http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=EN&Submit=rechercher&numaff=C-284/04.