Telecoms: New Code creates confusion

The latest Electronic Communications Code decision from the Upper Tribunal in the case of Arqiva Services Ltd v AP Wireless II (UK) Ltd [2020] UKUT 195 (LC) has done little to clarify what is becoming an increasingly uncertain area of law. There is a strong argument that where case law cannot provide legal certainty, then the Code should be amended to deal with the various issues in play.

The Arquiva case

AP Wireless 2 UK Limited ("AP Wireless") own a site at Queen's Oak Farm near Towcester, over which Arqiva Services Limited ("Arqiva") wished to acquire Code rights.

Arqiva were in occupation of the site under the auspices of Schedule 2 of the Telecommunications Act 1984 ("Old Code") and the Upper Tribunal took, as a preliminary issue, the question of whether Arqiva now has Code rights and if not how it could acquire them.

Arqiva had a twenty year lease of the site which expired in October 2016. The lease was contracted out of the security of tenure provisions of Part 2 of the Landlord and Tenant Act 1954 ("1954 Act"). Arqiva remained in occupation of the site paying rent and various discussions took place about the terms of a new lease, with no agreement being concluded.

The Code

The Electronic Communications Code 2017 ("Code") came into force on 28 December 2017 and Arqiva gave notice on 2 July 2019 seeking orders under paragraphs 20 and 27 of the Code. Paragraph 20 enables the Tribunal to impose an agreement on an operator and landowner, whilst paragraph 27 provides for the imposition of temporary Code rights. These temporary rights apply where an operator has electronic communications apparatus on land and the landowner has the right to require its removal. The aim, of course, being the maintenance and continuity of the network.

The Code also sets out transitional provisions which apply to operators who had rights under the Old Code, at the point when the Code came into effect. Such agreements are called subsisting agreements and the Code will apply to them with some important modifications. We set out the detail of these modifications in our recent article on the Ashloch case

It is worth noting that the Ashloch case also confirmed that, where a subsisting lease is protected by Part 2 of the 1954 Act, the operator must seek a new tenancy under the 1954 Act procedure and cannot apply for Code rights using paragraph 20. Any new 1954 Act tenancy ordered by the court will, from that point, be deemed to be a Code agreement following the reasoning in the case of Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] ("Compton Beauchamp").

Preliminary Issues in Arqiva

  1. Did Arqiva occupy the site under a subsisting agreement?
  2. Could the Tribunal impose an agreement under paragraph 20 of the Code?

The answer to the first preliminary issue depends upon Arqiva's status following the termination of the original lease in 2016. Arqiva maintained that it was a tenant at will and there was no subsisting agreement in place as a result. By way of reminder, a tenancy at will is a precarious arrangement, which can be terminated by either party, at any time and which is not protected by Part 2 of the 1954 Act.

AP Wireless submitted that a tenancy at will existed during the negotiations for a new lease, but when those ended, a periodic tenancy was created. This was therefore a subsisting agreement and then subsequent correspondence created a 5-year licence, which conferred Code rights on Arqiva. As such the Tribunal did not have jurisdiction under paragraphs 20 or 27, but Part 5 of the Code would have applied.  

Tenancy at will or periodic tenancy?

It is often assumed that when a fixed-term lease expires and the tenant holds over, paying the same rent, a periodic tenancy is created on the same terms as the original agreement. However, there is no such presumption and the conduct of the parties has to be considered objectively, so their intentions can be established.

The Tribunal Judge concluded that work on the travelling draft lease ceased in September 2017, because the Code was about to come into force and a new approach was required. However, the intention remained to grant a new lease of the site and so the tenancy at will continued throughout.

A subsisting agreement?

The consequence of the decision that a tenancy at will existed is that, if it had been a subsisting agreement, the Tribunal could have made an order under Part 5 of the Code. If the finding had been that a periodic tenancy existed, then it would have been protected by Part 2 of the 1954 Act and as per Ashloch, the apparatus of the 1954 Act would have applied to the lease renewal.

In order to be a subsisting agreement, the tenancy at will would have needed to be an agreement in writing, permitting the keeping of apparatus on the site. That presented a problem to AP Wireless, because the tenancy at will was oral. AP Wireless argued that the oral tenancy at will was on the same terms as the original 1997 lease and therefore the permission to keep apparatus on the site remained in force, like all the other terms. The Tribunal Judge was not persuaded and ruled that the permission was time-limited to the 20-year fixed term of the lease.

Purposive approach

A further argument was that a purposive approach should be taken to the definition of subsisting leases, which includes these sorts of situations. This argument overlaps with the issue (explained below) of whether Arqiva could have made an application under paragraph 20 when it was already in occupation of the site and did not have Code rights. This loophole (identified in the Compton Beauchamp case) could have been avoided if a purposive approach had been taken, as operators would have been able to use Part 5 of the Code to secure the necessary rights.

Again, this argument did not find favour with the Tribunal, which made the point that the Code was not intended to be retrospective in effect and even Old Code rights did not become full-blown Code rights. Therefore it cannot have been intended to bestow Code rights on operators, who did not even have Old Code rights in the first place.

As such, the finding was that the tenancy at will did not confer rights under the Old Code and was not a subsisting agreement. The same result would have arisen if the arrangement had been an oral periodic tenancy and not a tenancy at will.

Did anything else change Arqiva's status?

Given the findings that the tenancy at will was not a subsisting agreement, Arqiva was then occupying the site without Code rights, unless something had happened to change its status.

AP Wireless maintained that correspondence between the parties created a 5-year contractual licence, which prevented the grant of temporary rights under paragraph 27 of the Code (because AP Wireless did not have the right to remove the apparatus) and also blocked the paragraph 20 application, as the licence conferred Code rights.

The Tribunal agreed with Arqiva that its status did not change as a result of the correspondence.

Could the Tribunal impose an agreement under paragraph 20?

According to the Tribunal's findings, Arqiva was on site without Code rights. The final question was a very important one, namely, how could an operator without Code rights, obtain those rights, when occupying a site with electronic communication apparatus in situ?

Arqiva's case was that the Tribunal had stand-alone jurisdiction under paragraph 20, or alternatively, Arquiva had made an application under paragraph 27. Lewison LJ in University of London v Cornerstone Telecommunications Infrastructure Limited [2019] EWCA Civ 20 described paragraphs 20 and 27 as "inextricably linked" and the Code confirms that a paragraph 27 application can only be made if a notice has been served under paragraph 20.

AP Wireless conceded that the Tribunal had jurisdiction under paragraph 27, but not in accordance with paragraph 20. This was because the Court of Appeal found in Compton Beauchamp that there was no jurisdiction to impose an agreement under paragraph 20 on an operator, already in occupation of the site.

A similar finding in Ashloch required the operator, in occupation of the site, to use the 1954 Act procedure to seek lease renewal, rather than paragraph 20 of the Code. In Ashloch, Part 5 of the Code was not available, because the lease was protected by Part 2 of the 1954 Act. If the Code rights were not so protected, then Part 5 of the Code would have been available.

The Tribunal decided that an occupier of a site without Code rights could not succeed in an application under paragraph 20, whether or not an application was also made under paragraph 27. This decision was reached with some reluctance as being contrary to the policy of the Code. How could it be right that an operator was prevented from obtaining Code rights for a particular site, when it was in occupation and had apparatus in situ providing a service?

Consequences of this decision

A further problem arises because if this decision is correct, an operator with a periodic tenancy, protected by the 1954 Act, can never obtain Code rights. This is because they cannot serve a section 26 notice (as that option is only available for leases granted with an initial fixed term). Therefore the 1954 Act route, with the likelihood of a better rent than the Code, is closed in terms of seeking a new lease. In addition, Parts 4 and 5 of the Code are unavailable as set out above.

Equally if Arqiva's case was successful, an operator with a protected 1954 Act lease could simply fail to respond to a section 25 notice and allow the lease to expire. It would then have no Code rights and could apply under paragraph 20. That would render the decision in Ashloch of no effect.

One answer to this series of problems is an amendment to the transitional provisions of the Code. The Tribunal was bound by the Court of Appeal's findings in Compton Beauchamp, but respectfully suggested that the interpretation of paragraph 20 in that case was too restrictive.

The result in Aquiva, was that both paragraph 20 and 27 applications were struck out. Leave to appeal to the Court of Appeal was granted on the second preliminary issue and the strikings out were postponed until the appeal is determined. It was noted that permission to appeal has also been granted in Ashloch and the suggestion was made that the cases might be heard together, as a number of Tribunal cases are backed up, pending the results of the Ashloch appeal. Taking into account the recent news that permission to appeal to the Supreme Court has just been granted in Compton Beauchamp, the telecommunications sector is clearly in desperate need of some judicial or legislative guidance.