Almost a year on from the New Electronic Communications Code (the “New Code”) coming into force, how have the courts interpreted the New Code so far?
Most importantly, should the outcomes of the court decisions (and out-of-court settlements) provide confidence or caution to landowners intending on entering into telecommunications agreements?
Historical Backdrop – the purpose of the New Code
The New Code was brought into effect under the Digital Economy Act 2017 and was intended to demonstrate the government’s commitment towards the UK’s rapidly advancing digital industry. Champions of the New Code such as Matt Hancock MP stated that the new Act would “remove outdated restrictions” in the existing legislation, whilst Mark Talbot (Chair of the Royal Institute for Chartered Surveyors Telecoms Forum Board) commented that provisions within the Act enabled “investment in national digital infrastructure whilst balancing the needs of the public, and private property owners”.
Few would deny that effective and efficient digital infrastructure is now essential in the modern day. Indeed, the European Parliament has recently passed a draft ‘European Electronic Communications Code’ directive – a step towards bloc harmonisation of digital services including the installation of telecommunications equipment. Digital telecommunications infrastructure is a vital facilitator of social communication and a substantial component in the mechanics of worldwide business.
Notwithstanding the numerous benefits that digital infrastructure brings from both a corporate and social viewpoint, many legal commentators have opined that the New Code does not provide an adequate balance between the rights and interests of landowners against that of their operator tenants. With detailed scrutiny of the operation of the New Code over the past year, it could be convincingly argued that the said balance, tips firmly in favour of operators.
Deciphering the Code – Key Changes
There are numerous changes under the New Code, some of the key ones are summarised below:
- Valuation Changes – under the old Code, the amount of rent payable to landlords is calculated according to what is ‘fair and reasonable’ – arguably to the benefit of the landlord. The new regime brings in a ‘no scheme’ valuation, in which land is now assessed on its value to the landowner and not the operator. Ultimately, this will drive down rent costs for operators.
- Removing Operators from the land – removal is likely to be more drawn-out than under the old Code. The landlord must serve notice at least 18 months in advance of the required/proposed removal date – which may well be to the detriment of landowners with short-term development plans.
- Site Sharing – under the New Code, operators can upgrade, share and alter telecoms sites with other operators without the consent of the landowner, and assign leases without consent, regardless of the terms of any written agreement.
Deciphering the Code – Events in 2018
(1) A Bargain Settlement – Virgin Media and Durham County Council dispute [August 2018]
In mid-June, Virgin Media took Durham County Council to court for allegedly blocking their efforts to roll out broadband on the Council’s land. Virgin claimed that Durham CC were holding their plans to ransom due to the high costs the Council were demanding for allowing the operator access to certain areas of land (specifically in grass verges that ran alongside public pathways).
CEO of Virgin Media Tom Mockeridge cited that Durham’s attitude ran ‘counter to more forward-thinking councils’, whilst Durham Council was disappointed by the decision by Virgin Media to pursue them via the courts and countered by quoting the ‘poor performance’ of Virgin Media in their local authority.
However, in mid-August, both parties jointly announced that they had agreed a settlement figure of a meagre £1 for land access to the disputed areas. Although this dispute did not reach the doors of the Upper Tribunal (“UT”), the fact that Durham CC settled on such a low sum would assumedly indicate that:
(a) they estimated their chances of successfully arguing against the New Code provisions in court were slim, or
(b) they were convinced that the benefits of expedited rollout of the broadband cabling was better than stalling the same through the UT.
(2) Enforcement of Interim Rights – EE Ltd & H3G UK Ltd v London Borough of Islington [October 2018]
The case of EE concerned whether the UT could grant the operator interim Code rights (pursuant to paragraph 26 of the New Code) to install telecoms apparatus on the roof of a block of flats (Threadgold House) owned by the London Borough of Islington.
Prior to the said request, the operator had its telecoms apparatus on the roof of a nearby property (Leroy House). The landowner of Leroy House announced that it had sought planning permission for redevelopment works. The operator subsequently identified Threadgold House as an ‘appropriate’ alternative site for relocation and thus applied to the court to seek interim Code rights.
Chamber President Martin Rodger QC granted the operator the interim rights – citing that the ‘public benefit of communications coverage…outweighs the small amount of prejudice’ experienced by the landowner and confirmed that the test under paragraph 21 of the New Code had been satisfied. The UT also discarded the £12,500 annual rental suggestion from the local authority – instead favouring the figure suggested by the operator (EE suggested £2,551.77 and the UT directed that payments of £2,551.00 be made).
Rodger QC also alluded to the fact that the standard of proof for operators seeking to convince courts of their argument for interim Code rights departs from the norm. An operator can attain interim Code rights if they have a ‘good arguable case’ (as per the case of Canada Trust v Stolzenberg ), meaning one side only has to submit that they have a better argument on the material available.
Whilst the local authority was defeated on occupation and rent, the UT threw in a consolation condition into the order for the landowner. Rodger QC ordered that if the landowner of Leroy House failed to obtain planning permission and redevelopment was aborted, the operator would lose their right to install the apparatus at Threadgold House. Rodger QC also ordered that rights granted in any pending agreement between the parties at that stage should be kept to a minimum.
(3) “Human Right” – Cornerstone Telecommunications Infrastructure Limited (CTIL) v The University of London (UOL) [October 2018]
In this matter, the operator ( CTIL) desired access to a premises owned by the landowner (UOL) in order to undertake a survey to determine the suitability for placing their telecoms apparatus on the site. CTIL had lost a nearby telecoms site due to the demolition of the site for redevelopment, so sought an alternative. UOL refused and the matter went to the UT, presided again by Martin Rodger QC.
At first, Rodger QC criticised the initial notice letter sent by CTIL’s lawyers to UOL as ‘imperative and threatening’ in its character; in what he believed should have been a ‘consensual process’ between the parties. Despite that, one has to consider if the law itself provides for a consensus given the weight it affords to operators – especially when interim Code rights can be applied for without the need for bilateral consent.
Rodger QC also mentioned the novel submission by CTIL’s Counsel that mobile telephony was now a human right. Additionally, the UT affirmed that Parliament had made a policy decision to give ‘greater weight’ to the public interest of providing telecommunications infrastructure than the public interest of private property rights.
The UT ordered that interim Code rights be granted to the operator to carry out the survey. Interestingly, in making his summation, Rodger QC quoted evidence provided by a representative of UOL in that they were ‘disinclined to have operators’ on ‘any’ of their sites. From the perspective of a landowner, this could be interpreted as a reasoned averseness to permit telecommunications apparatus on their buildings (especially if they were legally advised on the pitfalls of the New Code).
(4) Warrant a response? – DCMS Consultation on Code Amendments [December 2018]
The curtain call of the New Code in 2018 must surely be the ongoing Department for Culture, Media and Sport (DCMS) consultation entitled ‘Ensuring tenants access to gigabit-capable connection’ which closes on 21 December 2018.
The main proposal of the consultation would modify the New Code to entitle operators to go direct to the Magistrates Courts and apply for a ‘warrant of entry’ to enter private land to install apparatus – albeit where a landowner is absent or unidentifiable and only on a temporary basis. The palpable risk to landowners here seems to be that if a warrant is granted, and installation of the apparatus has completed, an operator is likely to seek Code rights if then challenged by the landowner.
At paragraph 5.3 of the consultation, operator access to land is apparently justified where a landlord ‘fails in their obligation to facilitate the deployment of connectivity’. Was it the intention of Parliament for there to be a positive obligation on landowners to facilitate infrastructure apparatus?
Most surprisingly, the modification is justified on the grounds that the Magistrates Court route will facilitate the maintenance of ‘good relationships with landlords’ compared to the UT route. Whilst the speed of a warrant of entry may be a plus for operators looking to claim land for their apparatus, the DCMS will be hard-pushed to find a landowner that favours arbitrary entry-by-force over a prepared and measured hearing in court.
Conclusions from 2018
1) Operators have a financial advantage: in the Virgin case, Durham County Council had an initial idea of the costs required for land access but agreed to reduce it to £1 to settle. Moreover, one only has to look at the sympathetic approach of the UT towards the operator in EE to see that the court ordered a rental figure essentially akin to what the operator had asked for. Rodger QC’s judgment in the case of EE also alluded to the nature of the New Code in that it imposed: ‘agreements on unwilling parties in return for consideration which Parliament has deemed to be adequate notwithstanding that it may be significantly lower…’
2) There is a lower standard of proof for interim arrangements: interim Code rights can also be granted to operators on a lower standard of proof. The Canada Trust standard means that (under the Code) the two-limbed test of (1) showing that there was a public benefit and (2) demonstrating that the prejudice of access could be compensated adequately; are not entirely difficult legal hurdles to overcome. In EE and Cornerstone, Rodger QC made reference to the standard of proof on both occasions and confirmed that both had been satisfied. Where the standard of proof was higher, it is arguable as to whether the UT would have granted the interim rights.
3) The Public Interest argument is important: perhaps most pertinently to the argument of legislative inequity, Rodger QC mentions public interest and public benefit routinely throughout his judgments – addressing the point that if the conditions are satisfied under the New Code, public benefit (an arguable proxy for ‘operator benefit’) trumps the property rights of individual landowners. In Cornerstone, Rodger QC’s confirmation of the supremacy of public interest over private property rights in Code matters speaks for itself. Likewise, Cornerstone showed that the legislation enables the right of operators to force private property owners into compliance even when they have no desire to allow telecommunications apparatus on (any of) their properties.
4) The redevelopment ground may be the only failsafe for landowners: under the New Code, a Court cannot impose Code rights on a landowner if the landowner has the intention of redeveloping all/part of the land (or the neighbouring land) and could not reasonably do so under a Code order. As was the case in EE, the operator made the decision to explore alternate sites (i.e. Threadgold House), in light of the fact that their current landlord was due to redevelop. Redevelopment may, therefore, be a way of defeating Code rights but only if the desire to do is genuine and substantiated and of course landowners must be prepared to adhere to the lengthier removal procedures.
To coin a phrase from an eminent historic telecoms company, it appears that the future is bright for operators’ disputes concerning the New Code. The New Code has been drafted to favour the rights of operators over landlords and although only a handful of cases have been tested thus far, 2019 is likely to see more cases being heard in the UT.
Whereas parties under the old Code relied upon settlement and litigation was rare, the fact that parties such as Durham County Council and The University of London, who were not willing to initially be forced into terms with operators indicates that a degree of fightback from landowners is inevitable. Whilst case law in 2018 has centred around landowners in urban areas, it will be interesting to see if the decision of the court differs if and when remote/rural sites are concerned – even more so when those sites are owned by individuals and not public bodies or companies.
The potential for litigation is undoubtedly high and both landowners that have existing telecoms agreements and landowners intending on entering into agreements should exercise caution and seek legal advice on the same. Having said that, as the judgments in EE and Cornerstone have made clear, courts can impose interim agreements without an operator even needing to be on site – especially if land/premises is considered ‘appropriate’ by the operator.
So, what will 2019 bring for landowners? Will Parliament review and/or consult landowners with a view to watering down the pro-operator concentration of the legislation? Or, as is the case with the DCMS consultation, will Parliament continue to legislate to the advantage of operators? If British political affairs of recent times have taught us anything, it is to expect the unexpected.
How we can assist
Our Real Estate and Development team can guide you through negotiations with telecoms businesses, helping you to obtain an agreement that is commercially favourable to you. Our lawyers act solely on behalf of landowners and can advise you on key issues.
If you would like more information, please do not hesitate to contact our telecommunications experts:
James Nelson: email@example.com or on 01494478628
Shona Dunning: firstname.lastname@example.org or on 01494478627
Alex Wyatt: email@example.com or on 01494478676