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The government missed its deadline to respond to European allegations arising from the Phorm controversy that UK internet users are not protected against commercial wiretapping.

The European Commission last year set a deadline of 29 December for Whitehall to reply to its reasoned legal opinion that UK privacy laws are not up to agreed standards. Officials in Brussels wanted an undertaking that the online privacy regime will be tightened.

When that deadline passed the government had not responded, increasing the likelihood of a costly court case at the European Court of Justice, with the possibility of heavy fines to be paid by UK taxpayers if judges find in favour of the Commission.

The Home Office, which is handling the issue, declined to comment on having the missed deadline to respond to the Commission's final warning. "We are continuing to engage with the Commission on this issue," a spokeswoman said.

The Home Office has responsibility for the Regulation of Investigatory Powers Act (RIPA), the main UK law BT and Phorm's secret trials exposed deficiencies in, according to the Commission.

When it issued its final warning in October, Brussels said parts of RIPA - allowing those intercepting communications for commercial purposes to assume consent if they have "reasonable grounds for believing" it is given - infringe European law. Under the European ePrivacy Directive, the UK has agreed consent must be "freely given specific and informed indication of a person's wishes".

The Commission also said RIPA's requirement that for sanctions to be applied wiretapping must be "intentional" has no basis under the Directive.

The lack of a UK regulator to hear complaints about commercial interception, despite a requirement under the ePrivacy Directive, also concerned the Commission. The Information Commissioner's Office, which supervises implementation of many parts of the Directive, declined to investigate BT's secret Phorm trials.

A spokeswoman for the Commission said if and when the government does respond, an official analysis is likely to take several weeks. The matter will then be passed to Commissioners to decide whether to take the UK to court to force a change in the law.

Separately, it was announced on Monday that a director has quit Phorm. Stefan Allesch-Taylor, a private equity executive, joined only just over a year ago following a boardroom split.

In the wake of the furore over its secret trials, which were revealed by The Register, the firm has abandoned the UK market. It conducted a trial with Korea Telecom last and has been rumoured to be hiring in Brazil, but has not made any further announcements on commercial progress. ®

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