Law Review: A few thoughts on the OFCOM ‘Fit and proper person’ test re BSkyB

1. There is little in the way of hard law on the ‘fit and proper person’ test in relation to OfCom’s duties under  the Broadcasting Acts of 1990 and 1996

section 3(3) Ofcom:
(a) “shall not grant a licence to any person unless satisfied that the person is “a fit and proper person to hold it”; and
(b) “shall do all that they can to secure that, if they cease to be so satisfied in the case of any person holding a licence, that person does not remain the holder of the licence”.

2.  Eleanor Steyn, a media lawyer with London solicitors Michael Simkins LLP (who formerly worked for the media regulator Ofcom) makes an important legal point: “In my view, if Ofcom did try and revoke licences for the Sky channels then BSkyB would have relatively strong grounds for challenging it. It’s difficult to impute the behaviour of a small number of individuals to a whole company, and, to repeat, there are two separate companies here. The licences are not held by News International but BSkyB.  (My emphasis)

3. Eleanor Steyn notes (ibid): The way it has been interpreted so far has been in relation to compliance with other licence conditions.”  In other words in relation to the conduct of the licence holder while operating the licence.

4. Simon Hughes MP wrote to Ofcom – reported on 8th July 2011:

BSkyB

James Murdoch is the chairman of BSkyB and News International. Rebekah Brooks is currently the chief executive of News International which owns 40% of BSkyB. James Murdoch was, on Wednesday 6 July, accused on the floor of the House of Commons of seeking to pervert the course of justice. Tom Watson MP, speaking in the debate on phone hacking said ‘It is clear now that he personally [James Murdoch], without board approval, authorised money to be paid by his company to silence people who had been hacked, and to cover up criminal behaviour within his organisation. That is nothing short of an attempt to pervert the course of justice’. On Thursday 7 July James Murdoch confirmed in a statement that he had approved out of court settlements with hacking victims which prevented the public disclosure of documents which have now led to the arrest of senior journalists at the News of the World on criminal charges.

News International

As James Murdoch is the chairman of News International, and Rebekah Brooks is the Chief Executive of News International, the activities of News International are also relevant to the ‘fit and proper’ test in relation to BSkyB.

It is now clear that in order to cover up the allegations of criminal behaviour News International has been untruthful in its dealings with the Press Complaints Commission (PCC). It was reported in the Financial Times on July 7 2011 that Baroness Buscombe, the chair of the Press Complaints Commission, had said that the PCC had been lied to by News International. She also said that ‘The corporate culture was clearly there to mislead us’.

5. At present the licence holder is BSkyB only 39% owned by NI / Newscorp.  News International / News Corp  are seeking to acquire the remaining 61% interest which is held diversely with no major large holders at the scale of the News International holding. Would the conduct of an individual – James Murdoch is Chairman of BSkyB – be sufficient to trigger a finding by Ofcom that BSkyB in its present ownership structure, where News International is a minority, albeit a significant shareholder, to find that  a ‘person’ (which may include a corporate entity) is unfit to hold the licence? It will be intersting to see what company lawyers make of this.  I rather suspect that BSkyB could not be stripped of the licence in this situation.  It would be for BSkyB to question whether Mr James Murdoch is a ‘fit and proper’ person to be Chairman – an entirely different issue.

Eleanor Styen:  “Secondly, the licence holder is BSkyB, not News International. Basic principles of corporate liability mean that it is difficult to pin what is done by executives of a company on the company itself, let alone pinning it on another group company. You would need to look at, among other things, the extent of crossover in terms of board membership between BSkyB and News International.”

6. The position would be different if and when BSkyB is wholly owned by News International?  What if nothing can be pinned on Rupert Murdoch or other News International director – on the hypothetical construct  that past admissions by James Murdoch and Rebekah Brooks render them ‘unfit’  (See Simon Hughes MP extract above)?  A rather different matter, for then BSkyB – the holder of the licence – would be owned by a company untainted by the activities of anyone employed (a) by the company and (b) On the board of directors of the company.

I put these points forward for discussion – and not as an opinion.  I am interested in what those in academe, specialist in this era, and in practice think.  I may well be off beam. Are we likely to see, as others have suggested,  a cleansing of the internal Augean stables at News International to allow this takeover of BSkyB to proceed; a rather more lucrative prize for Rupert Murdoch than the News of The World, which he has ‘thrown under the bus’?

Finally – the Americans are more interested in succession issues for News Corp than they are in the ethics and morality of the News of The World.

* John Whittingdale stated on The Politics Show that it is News Corp seeking to take over BSkyB – a bit of confusion in the media generally on this issue

***

This is interesting… from TWO YEARS ago…. (Via appleblossombea )

Ex-Murdoch editor Andrew Neil: News of the World revelations one of most significant media stories of our time

Former Sunday Times editor says tabloid did not have a public interest defence and Andy Coulson has questions to answer

Well worth a read…. about what Andrew Neil thought about who knew what!

9 thoughts on “Law Review: A few thoughts on the OFCOM ‘Fit and proper person’ test re BSkyB

  1. Also, I thought this was a very interesting post from ‘Enders Analysis’. Claire Enders has been appearing on the TV quite often, as she has a lot of experience as a media analyst apparently, and has a keen interest in the business activities of the key media stakeholders.

    http://www.endersanalysis.com/content/publication/what-does-‘fit-and-proper’-mean

    “Ofcom is entitled to consider whether News Corp is ‘fit and proper’ to own BSkyB’s channels, not the company itself

    Precedent suggests that Ofcom will only be able to conclude that News Corp is unfit if the acquiring company’s directors are found guilty of a serious criminal offence. Suspicions, allegations and mistrust are absolutely not enough.

    We believe that Ofcom will only be able to assess whether News Corp is ‘fit and proper’ to own Sky channels after the transaction is concluded”

    (accessed 10 July 2011)

    It’s possible to download a full report apparently on the subject from the link above.

  2. With the greatest of respect, that reading of the fit and proper person test cannot be squared with section 3. Ofcom must be satisfied that an applicant is a fit and proper person in order to give them a licence in the first place.

  3. Obiter J – Indeed. One can only assume that the criteria were met at the time of the grant.

    Jeremy Hunt MP is taking advice on the issue now, as you know. The debate on Wednesday will be interesting – as, indeed, will be the legal mechanism used to deal with the issue.

    Sentiment, as opposed to law, seems to indicate that if the deal goes through now or in three months – ‘it will stink’.

  4. Something rather bizarre seemed to happen when I posted above. My pseudonym came up as obiterjObiterJ and links to some “bible” studies site. Certainly not me!! Hopefully, this one will be right.

    I read in the media this morning that the government is planning a strategy to prevent the merger but it has to be a strategy which is proofed from judicial review! Also, Clegg is reported in The Guardian as urging Murdoch to drop the bid. Would be highly convenient for many people if he did but, given the vague “fit and proper person” test, I don’t quite see why he should.

    The plurality question is also a tricky one since Hunt – (unwisely in my view) – said he was minded to allow the bid but then went to consultation with the undertakings

  5. A minor legal point. In ordinary circumstances News International’s 39% stake in BSkyB would not be regarded as a controlling interest. However, for the purposes of the Broadcasting Act 1990 (as amended), which contains the “fit and proper person” test, a different definition of control applies. Part 1 of Schedule 2, paragraph 1(4)(b) to the Broadcasting Act 1996 introduced a new test that states, “although he does not have [a majority interest], it is reasonable, having regard to all the circumstances, to expect that he will be able, by whatever means and whether directly or indirectly, to achieve the result that the affairs of the body are conducted in accordance with his wishes. OFCOM could therefore conclude that News International has a controlling interest ahead of considering whether it is a fit and proper person.

  6. Pingback: News-of-the-World-gate: the empire strikes back | Scholars and Rogues

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