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Funds for Liabilities

Introduction

Regulation 16 of the Electronic Communications Code (Conditions and Restrictions) 2003 (S.I. 2553/2003) requires persons benefiting from the electronic communications code ('code operators') to put in place sufficient funds in order to meet liabilities which arise on or before the date on which a relevant event occurs, or may arise at any time during the liability period, from the exercise of rights conferred upon them by paragraph 9 of the electronic communications code (the 'primary duty'). Regulation 16 sets a statutory liability period of three years commencing from the date on which a relevant event occurs. Ofcom is aware that there may have been some confusion amongst code operators about the statutory requirements relating to the liability period and wishes to draw code operators'attention to this aspect of regulation 16 below.

Securing provision of funds

On 15 October 2003, the Director General of Telecommunications (the "Director") published a statement entitled Funds for Liabilities. On 18 December 2003, the Director also published non-binding guidelines on how code operators might assess the cover they require in order to meet their primary duty under regulation 16. Code operators should consult these guidelines for all compliance issues relating to regulation 16. The guidelines are available via the following link http://www.ofcom.org.uk/telecoms/ioi/e_c_c/ffl/funds_liability.pdf. Since taking over and assuming the powers and responsibilities of the Director on 29 December 2003, the statement and guidelines have been adopted by Ofcom.

In Annex C to the statement, the Director set out a specimen bond by way of an example of the type of instrument that code operators could choose to put in place in order to secure provision of funds. The bond was included for illustrative purposes only and, as explained in the statement, all persons obtaining instruments for the purpose of fulfilling their primary duty under regulation 16 are required to seek their own independent advice on the drafting of any such instrument.

Revised specimen bond

Ofcom noted that certain improvements could be made to the above-mentioned specimen bond and, therefore, published a revised version. This is available via the following link http://www.ofcom.org.uk/telecoms/ioi/e_c_c/ffl/spec_bond.pdf. Ofcom emphasises that this specimen bond is also for illustrative purposes only. Again, it is a matter for each and every code operator to seek its own independent legal advice on the precise drafting of the bond (or any other instrument that it provides to comply with regulation 16) to ensure that the code operator fulfils its statutory obligations under regulation 16.

The liability period

Ofcom is aware that there may have been some confusion amongst code operators about the statutory liability period required under regulation 16. The "liability period" is defined to mean "the period commencing on the occurrence of a relevant event and ending on the third anniversary thereof" and is intended to provide any beneficiary with sufficient opporunity following the occurrence of a relevant event to assess whether it needs to make a claim against the relevant instrument. Code operators should be aware of the requirements of regulation 16 and ensure that any instrument they provide makes appropriate provision to discharge this duty.

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