Supreme Court hands down judgment in key case concerning the Electronic Communications Code

The Supreme Court has handed down judgment in the appeals from the Court of Appeal decisions in Cornerstone Telecommunications Infrastructure Limited v Compton Beauchamp Estates Limited [2019] EWCA Civ 1755 and Cornerstone Telecommunications Infrastructure v Ashloch Limited AP, Wireless II (UK) Limited [2021] EWCA Civ 90, in addition to the decision in the Upper Tribunal (Lands Chamber) (Tribunal) case Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020] UKUT 195 (LC)*. The decision is a key authority on how the Courts will approach certain aspects of the 2017 Electronic Communications Code (Code).

* Arqiva Services Ltd has since the Tribunal decision changed its name to On Tower UK Ltd, and is referred to by its new name throughout the remainder of this article.

On Tower UK Ltd

The key issue for the Court to determine in the On Tower appeal was whether an operator who had no 'subsisting agreement' when the Code came into force on 28 December 2017 and has not acquired Code rights by agreement since then can apply to the Tribunal to impose an agreement under paragraph 20 of the Code or for the Tribunal to impose temporary Code rights pursuant to paragraph 27 of the Code.

This issue is of importance to operators as it concerns how an operator in occupation of a site without existing Code rights can obtain new Code rights, given that the fact it does not have existing Code rights means it cannot look to Part 5 of the Code. 

The Court was required to consider the effect of paragraph 9 of the Code, which states that "a code right in respect of land may only be conferred on an operator by an agreement between the occupier of the land and the operator". The key question is how should the word 'occupier' be interpreted, in circumstances where the operator may be argued also to be the "occupier" of the site, bearing in mind that an operator clearly cannot grant Code rights to itself.

In On Tower:

• On Tower continued to occupy the site despite the expiry of its contracted out lease, which had expired before the Code came into effect. It continued to pay rent and other sums, and its customers (operators) continued to operate from the site pursuant to licence agreements
• The parties did enter into negotiations for a new lease, but no agreement was reached. As such, the Tribunal considered that On Tower were occupying the site under a tenancy at will
• On Tower subsequently gave APW (the site provider) notices seeking orders under paragraphs 20 and 27 of the Code, and a reference was made to the Tribunal.

After reviewing the Code as a whole, the Court held that the occupation by an operator of a site with no Code rights should be discounted, such that it can obtain new Code rights to regularise its occupation. Such an operator can therefore apply to the Tribunal for an agreement under paragraph 20 of the Code to be imposed.

In respect of operators in occupation with Code rights, the Court held that:

• An operator with Code rights should be able to obtain additional Code rights in respect of that site, as where additional Code rights are sought, the operator who is on the site is different to the 'occupier' of the site. In this situation, the operator is not to be regarded as the 'occupier' purely because it has ECA on the site
• An operator with Code rights can only apply to the Tribunal to modify the terms of its Code rights once Part 5 of the Code has become available to it (ie once the initial contractual term of its agreement comes to an end, provided the agreement is a 'Code Agreement' – not one whose primary purpose is other than granting Code rights and is a lease protected by the 1954 Act)
• As such, the position is now that an operator with Code rights can only serve notice on a relevant person under paragraph 20 of the Code to obtain additional Code rights, but cannot seek to modify Code rights already conferred to it in an existing Code agreement. 

In the Court's judgment, the effect of this analysis was the appeal in On Tower should be allowed

Compton Beauchamp

The key issue for the Court to determine was whether the Tribunal has jurisdiction to confer rights under the Code, in relation to a particular site, on an operator in circumstances where a third party is in occupation of the site.

In Compton Beauchamp:

• Vodafone was in occupation of the site after expiration of their lease, as under the old Code the freeholder was not entitled to enforce the removal of their apparatus without a Court order
• Vodafone shared use of the mast with Telefonica. They together formed a joint venture company to manage this and other shared sites, Cornerstone Telecommunications Infrastructure Limited (Cornerstone)
• Cornerstone served a notice under paragraph 20 of the Code on the freeholder of the land, Compton Beauchamp, seeking the conferral of Code rights on Cornerstone by Compton Beauchamp
• No notice was served on Vodafone and the notice did not ask the Compton Beauchamp to be bound by a Code right already granted.

The appeal in Compton Beauchamp was dismissed as the Court found that Vodafone was in occupation of the site and not Compton Beauchamp, such that the appeal should be dismissed as Compton Beauchamp could not grant Code rights to Cornerstone.

Ashloch

The key issue for the Court to determine was whether the Tribunal has jurisdiction to confer rights under the Code in favour of an operator where that operator has a tenancy protected by the Landlord and Tenant Act 1954 which is continuing by virtue of S.24 of the 1954 Act, and is in occupation of the land.

This issue is important as, for valuation purposes, the Code assumes that the right the transaction refers to does not apply to a telecommunications network. Thus, the rent payable by the operator under a renewal granted under the Code is likely to be lower than that determined through the 1954 Act renewal procedure. 

In Ashloch:

• Cornerstone took an assignment of a 1954 Act protected tenancy, the contractual term of which had elapsed
• Cornerstone gave notice to APW, the site provider, under paragraph 20 of the Code, seeking an agreement for APW to confer Code rights on it
• No agreement was reached, so Cornerstone applied to the Tribunal for the imposition of an agreement under part 4 of the Code
• APW argued that part 4 was not available to Cornerstone because only the occupier of a site can grant Code rights under it, and APW was not the occupier as Cornerstone was in occupation of the site
• APW therefore contended that the only way for Cornerstone to obtain new rights was by way of an application to the County Court for a new tenancy under the 1954 Act.

The Court held that the transitional provisions of the Code provide that an operator who had an agreement protected by the 1954 Act when the Code came into force on 28 December 2017 and wishes to renew its agreement, must use the 1954 Act lease renewal process as opposed to part 4 of the new Code. Once the new agreement is finalised under the 1954 Act process, the provisions of the Code then operate such that the new agreement will be a Code agreement and not a 1954 Act protected tenancy.

The Court did not however determine the appeal in Ashloch, as it could not conclusively determine from the facts available to it whether the application from Cornerstone sought additional Code rights (which would be permissible) or sought to renew existing rights, the latter only being possible under the 1954 Act. 

Comment

The decision in On Tower removes the previous significant problem concerning the status of an operator in occupation of a site without a 'subsisting agreement', confirming that such an operator is entitled to seek Code rights through the paragraph 20 procedure. This will be well-received by such operators who it had previously been thought could not apply for Code rights. 

The decision in Ashloch will however not be welcomed by operators who have 1954 Act protected tenancies, who may have wished to use the Code rather than then 1954 Act to renew their agreement terms, especially in relation to rent. That said, the proposed reforms to the Code proposed in the Product Security and Telecommunications Infrastructure bill, if passed, will likely nullify the wider valuation effect of this decision.

The decision does however give rise to two areas which appear likely to give rise to further uncertainty and possible dispute:

1. The distinction between seeking additional Code rights and seeking to modify existing Code rights, given that there are no criteria set out in the Code to assist in determining this; and
2. The status of an operator who is in occupation without a written agreement when the Code came into effect in December 2017. The Upper Tribunal had decided that such occupiers do not have a 'subsisting agreement', so that such operators would not have Code rights.
   
   The Supreme Court, whilst confirming that such operators can use the paragraph 20 procedure to renew their code rights even if they do not have a "subsisting agreement", appears to have encouraged the possibility of a future challenge as to whether operators without a written agreement in December 2017 really do not have a "subsisting agreement". This may lead to arguments that operators who do not have a written agreement, but are in occupation of a site, are in occupation under a 'subsisting agreement' after all and do have Code rights, such that they should/could make their application for a new agreement under paragraph 33 and not paragraph 20.