The UK's 3G network operators have suffered a serious defeat in their ongoing attempt to claim back billions of pounds from the UK Government.
The European Court of Justice ruled on Thursday morning that the third-generation mobile auctions, which took place in the UK and Austria in 2000, were not liable for VAT.
Some 3G operators, principally Hutchison — which owns 3 — had argued that the auctioning of the licences was a transaction liable to VAT. As such, the operators could claim back 17.5 percent of their licence fees.
Advocate General Kokott, a senior European judge, has rejected this claim. In an opinion published online on Thursday morning, he said that the UK and Austrian Governments had been acting as regulators when they held the auctions, not economic agents.
Kokott's ruling does not constitute a binding ruling by the European Court of Justice, but according to reports these provisional opinions are upheld in around four out of five cases.
The UK mobile operators stood to win almost £4bn back, having spend £22.5bn acquiring UK 3G licences.
3, which took the case to the European Court, could not be contacted immediately for comment.