EE Ltd & H3G UK Ltd v Stephenson & AP Wireless (II) UK Ltd [2021] UKUT 167 (LC)

The Upper Tribunal (Lands Chamber) (the Tribunal) has issued an important decision concerning the renewal procedures under the (new) Electronic Communications Code (the Code).

Background

EE and Hutchison 3G UK Limited (the Operators) occupy a greenfield site for the purposes of their respective telecommunications networks, pursuant to a lease that was contracted out of the Landlord and Tenant Act 1954 (the 1954 Act) and expired in 2019 (the Existing Agreement). It is treated as a “subsisting agreement” under the transitional provisions of the Code. The current site provider is AP Wireless II (UK) Limited (APW), which owns a leasehold interest in the site.

The Operators served notices pursuant to para 33(1) of the Code requesting the site provider's agreement to terminate the Existing Agreement and to enter into a new agreement, being the Operators' standard form agreement appended to the notices.

A consensual agreement was not reached, so the Operators applied to the Tribunal for an order under para 34(6) to terminate the Existing Agreement and to impose a new agreement, or in the alternative "such other order under para 34 as the Tribunal may consider appropriate in all the circumstances". Para 34(13) requires the Tribunal, in determining which order to make, to have regard to all the circumstances of the case. One of the particular circumstances listed is "the operator’s business and technical needs".

APW's position

APW accepted that the Operators were entitled in principle to have the terms of the Existing Agreement varied in order to incorporate rights conferred by the Code which may not have been present in the Existing Agreement (for example - minimum sharing/upgrading rights and the right to determine consideration under the valuation principles of the Code). However, APW argued that the Operators were not entitled to a variation insofar as that remedy had not been the subject of a Code notice.

APW also argued that the Operators' application under para 34(6) for termination of the Existing Agreement and the grant of a new agreement was not valid unless they provided a site-specific need and justification for a new agreement, rather than the continuation or variation of the Existing Agreement. This argument relied heavily on the first instance decision of the Lands Tribunal (Scotland) in EE Limited & Hutchison 3G Limited v Duncan [2020] (which has since been overturned on appeal).

It was further contended by APW that the onus lies heavily on an applicant to justify any disputed change to the existing terms, so appending a standard form agreement was not sufficient, adopting the 1954 Act decision O'May v City of London Real Property Co Ltd [1983] which established the principle that "the burden of persuading the court to impose a change… against the will of either party must rest on the party proposing the change".

The preliminary issues

The hearing focused on the following preliminary issues: 

1. whether the claim for the termination and replacement of the Existing Agreement with a new agreement would be bound to fail in circumstances where the Operators do not provide a site-specific justification.

2. whether the Operators' alternative claim for a different order under para 34 will fail in the absence of full particulars of the alternative form of order sought, and the site-specific need for such order.

The Tribunal's decision 

The Tribunal held that:

• An operator does not have to prove a site-specific justification for the replacement of an expired agreement with a new Code agreement. The Tribunal applied the decision of the Scottish Court of Session (Inner House) in the Duncan appeal
• Whilst the provisions of the Code are similar to those in the 1954 Act, the O'May principle does not directly apply to Code renewals. Rather, the Tribunal should decide what order to make, taking into account all the circumstances. The Tribunal emphasised that site providers "are required to put up with a degree of change in the public interest of facilitating the provision of a choice of high quality networks"
• There is no reason why an operator cannot apply for the termination of its existing agreement and the imposition of a new agreement on its standard terms, so long as they are annexed to the notice
• An operator is not entitled to plead for a change to the existing agreement which is not specified in its notice (i.e. a variation/modification). However, it is possible for a site provider to expressly waive the requirement for an operator to serve a new notice.

Comment

This decision comes after the recent announcement of the Product Security and Telecommunications Infrastructure Bill. The objective of the Bill will be to accelerate the deployment and use of digital infrastructure. It is anticipated that the Bill will propose reforms to the Code to support faster and more efficient deployment of telecommunications networks, to keep pace with the growing demand for fast, reliable, resilient connectivity.

In the meantime, this decision provides welcome guidance and clarity on the renewal of subsisting agreements under the Code. The Tribunal's decision highlights the policy objectives that underpin the Code, namely to confer broader rights and flexibility on operators enabling them to provide high quality network services at a lower cost, and confirms that operators will not have to establish a site-specific "need" for the replacement of an existing agreement with a new Code agreement. The confirmation that the O'May principle is not directly applicable is also helpful, although it will take time to establish case law under the new Code in relation to the Tribunal's position on the key terms that parties will seek.

It is anticipated that this case will now continue to trial, to determine whether the Existing Agreement should be terminated and renewed, or otherwise varied and extended, and on which terms.