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The new Electronic Communications Code: Welcome clarity

The Supreme Court has provided some clarity on whether operators, in particular those with pre-existing code agreements, have new code rights, as Samuel Lear finds out

The purpose of the new code was to facilitate the roll out of electronic communications networks for the benefit of the public at large while balancing those objectives with the rights of landowners.

When new legislation is introduced, litigation can often follow. The new Electronic Communications Code is no exception. Since its introduction, landowners and operators have been paying the price for legislation that was hastily introduced and has had the unintended consequence of driving landowners and operators towards litigation rather than collaboration. The Code intended to grant additional rights for operators as part of the government's drive for improving mobile and broadband coverage for the public at large. The volume of disputes has inevitably frustrated this objective.

In a recent landmark decision of Cornerstone Telecommunications Infrastructure Ltd (Appellant) v Compton Beauchamp Estates Ltd (Respondent) Cornerstone Telecommunications Infrastructure Ltd (Appellant) v Ashloch Ltd and AP Wireless II (UK) Ltd (Respondents) On Tower UK Ltd (formerly known as Arqiva Services Ltd) (Appellant) v AP Wireless II (UK) Ltd (Respondent) [2022], the Supreme Court has provided some welcome clarity as to how the new Electronic Communications Code, which came into force on 28 December 2017, should work.

One important theme of this decision concerned how operators under pre-existing code agreements (also known as ‘subsisting agreements’) governing the installation and maintenance of electronic communications equipment or apparatus could gain new or better code rights by virtue of the provisions of the new Electronic Communications Code.

The context

To appreciate the context behind these decisions, it is helpful to briefly set out the history of the law in this area.

The first code was introduced as part of the Telecommunications Act 1984 (under Schedule 2), as part of a wider privatisation programme of the telecommunications industry, which gave the courts powers to impose terms and conditions on landowners and operators which could allow operators to install and maintain electronic communications apparatus (the ‘old code’). As part of the drastically improving technology over the subsequent decades, the Communications Act 2003 was introduced which modernised the language used in the old code, extending it to include electronic communications. As the Supreme Court noted at para 3 of the judgment:

… it became clear that the drafting and operation of the old code was unsatisfactory and that it was generating problems that risked jeopardising the swift, economic roll out of new technologies as they arose in this fast moving sector.

The Law Commission was subsequently tasked with reviewing the old code. Of relevance to this decision, the report noted that a communications network was reliant on a complex array of hardware which had to be located on land which is not owned by the operator.

The recommendations of the report were partly actioned by virtue of the new Electronic Communications Code (which is Schedule 3A to the Communications Act 2003 and inserted as such pursuant to the Digital Economy Act 2017) (the ‘new code’). Crucially, the new code created transitional provisions which dealt with pre-existing arrangements under the old code and how they would operate under the new code. While recognising the need for a radical overhaul of the old code, the government recognised that there were thousands of subsisting agreements in place but that it would be inappropriate to impose all provisions of the new code retrospectively.

Historically, the landowner's consent was required before any operators could install any telecommunications apparatus. Recognising the increasing demand for an adequate telecommunications network, the government considered that the market was failing the public and that legislation was required to give operators greater rights to compel landowners to either sell or grant rights over their land for the purposes of installing necessary equipment to facilitate an improved network.

The interrelationships between the old and new codes, together with security of tenure provisions under the Landlord and Tenant Act 1954, has led to uncertainty as to their application. The government presumably hoped that the New Code would achieve a more collaborative approach between landowners and operators. The spate of cases going through the Tribunals suggests otherwise.

The key issues

As outlined in para 7 of the judgment, the Supreme Court identified the key issue as:

… whether and how an operator who has already installed ECA [Electronic Communications Apparatus] on a site can acquire new or better code rights from the site owner. At the heart of the three appeals is para 9 of the [new] Code. This provides 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 main issue that the Supreme Court had to consider was whether an operator with equipment already on a site should be regarded as an ‘occupier of the land’ for the purposes of the transitional provisions of the new code (as the Court of Appeal had determined). The practical implication of this definition is important; if operators are to be considered as the occupier of the land, this would mean that they could not grant new or additional rights pursuant to the new code on the basis that it is not legally possible to contract with oneself. This means that any pre-existing agreements could not benefit from new and additional rights under their subsisting agreement or after the term expires.

The Court of Appeal had decided that when the operator installs its equipment on land, it will (in many cases) thereafter become an ‘occupier’ as per para 9 above. This meant that operators would be unable to take the benefit of the provisions under the new code because new rights could only be conferred by an agreement between the occupier of the land (ie the operator) and the operator. Being unable to contract with oneself, this made the provision unworkable for operators under subsisting agreements or other existing arrangements. The Court of Appeal made sense of this on the basis that parties to an agreement should stick to the arrangement they have made. This was the argument that AP Wireless ran, as summarised at para 109 of the judgment:

… the initial agreement, whether voluntary or imposed by the tribunal, should then run its course for that contractual term without either party having the power to change it by adding new rights. The parties are held to the bargain they have agreed or which has been imposed on them by the tribunal for the duration of the initial fixed term. Once the contractual term has expired, the code rights run on in accordance with para 30(2) of the Code. Part 5 then applies for the benefit of both parties. Each of the site provider and the operator can apply under para 33 to modify the terms of the code agreement, to remove a code right or confer an additional code right and can, if need be, invoke the jurisdiction of the tribunal to achieve this.

However, this raised the question as to whether such an interpretation matched the intended purpose of the legislation, which was the case put forward by the operators.

The specific issues arising out of the three appeals were as follows:

Cornerstone Telecommunications Infrastructure Limited v Compton Beauchamp Estates Limited [2019] (the Compton Beauchamp appeal) 

Whether new code rights can be granted in relation to a specific site to an operator where a third party is in occupation

In March 2004, Vodafone entered into a contracted-out 10-year lease with Compton Beauchamp (the freeholder of the site) which entitled Vodafone to install a mast. Cornerstone was a joint venture between Vodafone and Telefonica, set up in 2012 to manage their vast portfolio of telecoms sites. Following the expiry of the term in 2014, Compton Beauchamp sought to terminate the operator’s occupation. Cornerstone served a paragraph 20 notice (under Part 4 of the new code (relating to the power of the court to impose agreements)) on Compton Beauchamp (and not Vodafone) seeking the conferral of new code rights under a new agreement.

This appeal, brought by Cornerstone, was dismissed because on the Supreme Court's assessment, it was Vodafone who should have been regarded as the ‘occupier of the land’ for the time being to whom the notice should have been served. Compton Beauchamp was not able to confer the additional code rights sought by Cornerstone. The Supreme Court pointed out, at para 140 of the judgment that the:

… proper implementation of the code does not require that all occupation of any operator with ECA installed on the site falls to be disregarded. The interpretation of para 9 […] means only that it is the occupation (if any) of the operator who seeks to have a new code right conferred on it which is ignored when considering how to identify the ‘occupier of the land.

Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020] UKUT 195 (LC) (the ‘On Tower appeal’)

Whether Code rights can be conferred on an operator with no subsisting agreement in place (in this case, the operator was deemed to have a tenancy-at-will)

This is of importance because operators could not rely on the provisions of Part 5 of the new code (relating to the termination or modification of existing agreements). Instead, they would need to look under Part 4 under which the ‘occupier’ issue under para 9 is engaged.

The (leapfrog) appeal brought by On Tower UK Ltd (formerly Arqiva), the operator, as against AP Wireless, was allowed following the same logic. In this case, AP Wireless is the freeholder of a farm which, when acquired, was subject to a telecoms lease granted to On Tower in 1997 for a term of 20 years (with additional supplemental leases entered into thereafter), excluded from the 1954 Act and which expired before the new code came into effect. As negotiations were ongoing, it was determined that On Tower had a tenancy-at-will. On Tower served notice under the new code on AP Wireless for a new code agreement.

The difference in this case is that On Tower's occupation by virtue of its apparatus falls to be disregarded (and therefore, On Tower was not to be considered as an ‘occupier of the land’) and the same barrier to a new code agreement being imposed did not apply as it did with Compton Beauchamp.

Cornerstone Telecommunications Infrastructure v Ashloch Limited and AP Wireless II (UK) Limited [2021] (the ‘Ashloch appeal’)

Whether Code rights can be conferred on an operator where the relationship governing the operator’s occupation is a continuing 1954 Act protected tenancy. This is particularly important for valuation purposes as landowners could generally expect to receive a higher rent from a 1954 Act renewal than a Code renewal

In June 2002, a 10-year 1954 Act protected lease was granted to Vodafone by the then freeholder (which is now Ashloch). The site was a roof of a building. The fixed term ended in 2012 but continued on a periodic basis. In 2018, AP Wireless acquired a 99-year lease of the rooftop, subject to Vodafone's lease, the benefit of which was assigned to Cornerstone in 2019. Cornerstone then served a notice on AP Wireless to enter into a new agreement.

This issue concerned the interrelationship between the new code and the 1954 Act.  Put simply, the 1954 Act provides security of tenure to business tenants despite the expiry of a fixed term unless the tenancy is ended using the statutory processes (although it is possible for parties to contract out of the 1954 Act). Over the years, many agreements granting rights to operators fell within the protection of the 1954 Act – often inadvertently, after allowing leases excluded from the 1954 Act to expire and a new periodic tenancy then being created through the operator’s continuing occupation. However, it has been uncertain since the introduction of the new code how the separate renewal and termination provisions of the 1954 Act should work with the new code, or whether the 1954 Act processes would even need to be followed given the clear intention from the government to remove the overlap of statutory protection.

Ultimately, this appeal was not decided as the Supreme Court invited further submissions in relation to whether Cornerstone sought new code rights or to renew rights that could only be renewed pursuant to the 1954 Act. However, the Supreme Court agreed with the lower courts that subsisting agreements under the 1954 Act do not allow operators to renew their rights under the new code and must instead follow the renewal process under the 1954 Act.

Considering the outcomes

Therefore, in relation to the key issue, the Supreme Court did adopt a purposive interpretation. Lady Rose (with whom the other Justices agreed) summarised the position as follows (at para 106):

… the starting point here is not to try to define the word "occupier" and then allow that definition to mandate how the regime established by the code works. The correct approach is to work out how the regime is intended to work and then consider what meaning should be given to the word "occupier" so as best to achieve that goal.

The Supreme Court therefore overturned the Court of Appeal's finding that an operator who already had equipment in place would be regarded as an occupier of the land and thus could not contract with itself to grant new code rights. They considered that it was likely to be the occupier who initially granted the operator the right to install equipment who would be regarded as the ‘occupier of the land’.

Having determined that there was no settled interpretation of the term ‘occupier’ across the range of legislation, the Supreme Court decided to look at the context in which the new code was introduced. The purpose of the new code was to facilitate the roll out of electronic communications networks for the benefit of the public at large while balancing those objectives with the rights of landowners.

The Supreme Court was satisfied that it could not have been the government's intention that operators operating under a subsisting agreement could not benefit from additional code rights, particularly having regard to the speed of change in technology. Therefore, it must be the case that the operator and the ‘occupier of the land’ should be separate entities in the context of where an operator with equipment already installed sought additional code rights pursuant to Part 4 of the new code.

The Supreme Court noted that there would be ‘arbitrary’ consequences if the alternative view was reached and that could inadvertently prejudice more rural areas. In particular, operators (particularly in urban areas) who do not become occupiers – for instance, because they have installed an antennae on top of a roof – would be in a better position to seek additional code rights as against operators in rural locations who are more likely to be construed as ‘occupiers’; for instance, because they have to install a concrete plinth, mast and power supply, and that would need to be segregated for security purposes. The judgment noted, at para 124 that this consequence would:

… appear[s] contrary to the Government's stated wish to "deliver the coverage that is needed, even in hard to reach areas […]".

This interpretation, in the Justices' view, would also help to avoid other issues, including:

  • the tribunal being asked to determine whether or not it should confer rights which the operator might not need at the outset of the agreement (but which it nevertheless seeks because it would not otherwise be able to seek such rights during the currency of the term);
  • the possibility of variations being in jeopardy if they are deemed to be conferring new rights and thus not capable of being conferred; and
  • other fact intensive issues as to what constitutes an ‘occupier’, which are only likely to continue in the face of uncertainty as to what arrangements give rise to an operator being regarded as an ‘occupier’. It might also help to avoid more absurd scenarios where operators may feel the need to move to a neighbouring site or remove apparatus, apply for new rights and then move the equipment back on to the original site.

However, it was also determined that the ability for operators to modify existing rights under a subsisting code agreement (via the tribunal, as opposed to by agreement with the landowner) would only arise at the end of the contractual term (via Part 5 of the new code). The rationale for this, as per AP Wireless' arguments as above, is that parties should be held to their bargains.

Therefore, in these specific appeals, the Supreme Court concluded (at para 171) that:

… the Court of Appeal erred in holding that the proper construction of the new Code results in the tribunal having no jurisdiction to consider an application under Part 4 of the new Code from an operator on the grounds that the operator is in occupation of the site because of the presence there of its ECA.

Accordingly, the Compton Beauchamp appeal brought by Cornerstone was dismissed, the On Tower appeal was allowed, and further submissions were invited in the Ashloch appeal.

While appreciating that parties should keep to the promises they had made (or had imposed upon them), the practical impact is that operators should be able to agree or apply for additional rights where they have equipment already in place, but that any modification of existing code rights could only be applied for once the contractual term of the subsisting agreement comes to an end.

Conclusion

Although there are many aspects to the new code that will keep practitioners busy for some time to come, the Supreme Court decisions have provided some welcome clarity on some key contested issues which will help to inform decision-making for all parties.  In the immediate term, the judgments should help relieve the Upper Tribunal in respect of similar cases that have been put on hold pending the outcome of this decision. However, the tension between the public demand for greater connectivity and the rights of landowners, and how these tensions should be balanced through legislation and government policy, will continue to rumble on.

Cases Referenced

  • Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020] UKUT 195 (LC)
  • Cornerstone Telecommunications Infrastructure Limited v Compton Beauchamp Estates Limited [2019] EWCA Civ 1755
  • Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd; and Ashloch Ltd; AP Wireless II (UK) Ltd On Tower UK Ltd v AP Wireless II (UK) Ltd [2022] UKSC 18
  • Cornerstone Telecommunications Infrastructure v Ashloch Limited and AP Wireless II (UK) Limited [2021] EWCA Civ 90