What does the Supreme Court’s ruling mean for telecoms?

Posted: 19/07/2022

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Laura West and Jonathan Wills address the implications of a landmark Supreme Court ruling on the Electronic Communications Code.

Last month, the Supreme Court issued its first decision on the new Electronic Communications Code. Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd and conjoined appeals [2022] UKSC 18; [2022] PLSCS 99 concerned three appeals: Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] EWCA Civ 1755; [2019] PLSCS 201, Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd and another [2021] EWCA Civ 90; [2021] EGLR 14, and Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020] UKUT 195 (LC); [2020] PLSCS 127 (known as On Tower).

The appeals were brought by CTIL and On Tower UK Ltd, both providers of infrastructure to mobile network operators which wanted to establish that they had the right to apply under Part 4 of the Code where they had equipment installed. The issue on appeal centred on the interpretation of paragraph 9 of the Code: “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.”

Compton Beauchamp

In Compton Beauchamp, Vodafone placed equipment on farmland under a fixed-term, contracted-out tenancy. In due course, the tenancy at will which arose was terminated. CTIL served notice on Compton Beauchamp under paragraphs 20 and 27 of the new Code (seeking respectively, permanent and temporary rights) envisaging that a “sweetheart” deal could be done with Vodafone). The Upper Tribunal (Lands Tribunal) held that it had no jurisdiction because (with paragraph 9 in mind) the person in occupation of the site was not Compton Beauchamp, but Vodafone. The Court of Appeal upheld that decision.

Ashloch

In Ashloch, a 10-year tenancy held by Vodafone concerning a rooftop site attracting the protection of Part II of the Landlord and Tenant Act 1954 expired, but was continued under section 24(1) of the 1954 Act. There was an intervening lease of the site (subject to the tenancy) in favour of AP Wireless. In 2019 – following the decision in Compton Beauchamp – CTIL arranged to take an assignment of Vodafone’s tenancy, and then served notice under paragraph 20 of the Code for permanent rights. The Court of Appeal identified the following points:

l That, on the current understanding, the only means by which an operator might add or modify rights during the term of an agreement was consensually;

l That it was clear that an operator in situ under a “subsisting agreement” had the right to renew either via Part 5 of the new Code, or Part II of the 1954 Act, but not both;

l And that, where operators were considered the occupier for the purposes of paragraph 9, the effect of the transitional provisions was to leave some operators in situ without any means to renew at all.

On Tower

In On Tower, contracted-out leases expired. On Tower sought rights under paragraphs 20 and 27 of the new Code. At first instance in the tribunal, Judge Cooke indicated any periodic agreement arising by conduct or inference, such as here, would not constitute an “agreement in writing of the occupier” – the requirement for such an agreement to be subject to the transitional provisions which apply to the Code. Where the agreement is not “an agreement in writing of the occupier”, the agreement will be outside the ambit of the Code altogether. As such, On Tower was one of the operators left “out in the cold” without any means to renew.

The decisions of the Supreme Court

The principal issue before the Supreme Court in all three appeals was whether, for the purposes of paragraph 9 of the Code, an operator with equipment already installed on land constituted an “occupier”. This is important because, if an occupying operator is an occupier, then it cannot ask the tribunal to confer additional code rights on it, using paragraph 20.

The court decided this issue in favour of the operators, departing from the decisions below. It noted that, with regard to the task of interpretation, the correct approach was not to work out what the word “occupier” means, but to work out how the scheme was meant to work and then consider what meaning to give to occupier in order to achieve the statutory. It was mindful of government policy supporting the roll-out of new infrastructure, and considered that this would be impeded if operators were prevented from applying for new rights where they already had apparatus installed. Operators can, then, seek new code rights despite being in occupation through their apparatus. However, operators cannot seek to modify the terms of an agreement during its term; they must respect the bargain that exists between the parties. If they wish to modify an extant agreement otherwise than consensually, they must wait to use the provisions of Part 5 of the Code for this purpose at the end of the contractual term.

However, although the operators won on the main issue, this did not mean that all the appeals succeeded.

In Compton Beauchamp, the operator’s appeal was dismissed. The court held that it is only any occupation of the operator which is seeking code rights that must be disregarded. Where a third-party operator happens to be in occupation, it is not open to a claimant operator to argue that the third party’s occupation must be disregarded so as to allow the landowner to grant rights to the claimant.

In On Tower, the operator’s appeal succeeded. The code agreement had come to an end prior to the new Code taking effect. Consequently, its rights to be in occupation thereafter were unwritten. An unwritten agreement is not capable of being a code agreement (by paragraph 11 of the Code). As a result, it no longer had code rights. It was permitted to seek new code rights under the paragraph 20 procedure.

In Ashloch, the court accepted what had consistently been held below: where an operator had a lease protected by the 1954 Act, it had to pursue the renewal process under that Act rather than seeking modification under the Code. It was not, however, prevented from seeking entirely new code rights under the Code. The outcome of the appeal remains be determined following further submissions as to whether in substance what was being sought was a modification or new code rights.

Impact of the decision

On a conceptual level, the judgment solves the difficulties in the different approaches apparently taken by the Court of Appeal in Compton Beauchamp to paragraph 20 rights versus rights under interim and temporary code agreements (under paragraphs 26 and 27 of the Code). As a matter of practice, it removes a somewhat absurd state of affairs in which an operator could not ask for new code rights over land it already occupies, but could do so in respect of land a few centimetres away, or even by removing its apparatus, seeking new rights, and then putting the apparatus back.

While these three cases all involved an attempt to have code rights imposed, the decision will also have an impact on what is possible consensually. In On Tower, if the parties had come to a deal, they could have entered into a code agreement without bothering the tribunal. Prior to this judgment, that would not have been thought possible: a contractual agreement could be entered into, but if On Tower’s occupation was not disregarded, code rights would not be thereby conferred.

Operators may have been content to do deals in certain cases, but of course if they did not have the possibility of recourse to the tribunal to have rights imposed, they would not be able to avail themselves of the favourable “no network assumption” for the valuation of consideration payments. Now that it is known that an occupying operator without code rights can go to the tribunal under paragraphs 20 or 26, one might expect consensual deals in such circumstances to be done at lower rents, and with other terms that are more favourable to operators.

There are numerous cases in the UT which are stayed pending this decision. A good number of those will now proceed with operators but in many (including those not yet referred to the tribunal), it is possible that new notices may be needed, as occupying operators are only permitted to seek additional code rights, and not seek to amend existing terms.

It is likely that there will be dispute around the margins of this decision, in an area of practice which has been hotly contested so far. One such area may be whether what is sought by an occupying operator is truly a new code right, or rather an impermissible modification masquerading as such. Another might be whether an operator is prevented from serving a paragraph 20 or 26 notice where it has already been ordered by the tribunal to remove its apparatus.

It is true that the government’s policy of seeking to roll out digital infrastructure more easily is assisted by this decision. However, in the face of the seemingly authoritative decision of the Court of Appeal in Compton Beauchamp, the government was already taking steps to achieve much the same outcome in any event. This is through Part 2 of the Product Security and Telecommunications Infrastructure Bill, which has now passed through committee stage in the House of Lords. That Bill would allow an occupying operator to seek new code rights by statutorily disregarding its occupation (see “Eyes on the latest mobile Bill”). It also acknowledges that the 1954 Act is the relevant route for the renewal of 1954 Act tenancies granting Code rights. However, the government expressly decided not to legislate to allow “in-term” modification of code agreements.

So, although this decision was hotly anticipated, it could be said that its long-term importance had largely been neutered by the government, even before opening submissions.

This article was published in Estates Gazette in July 2022 and was co-written with Jonathan Wills, barrister at Landmark Chambers .

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