First Scottish Telecoms Appeal Judgment opens the door for renewals

Published 11 mayo 2021

The recent Inner House decision in EE Limited and Ors v Duncan – the first Scottish appeal decided under the new Electronic Communications Code (the ECC) – will be welcomed as a turning point in estate management for operators across the UK.

In September 2020, the Lands Tribunal for Scotland issued its Opinion in EE Limited and Hutchison 3G UK Limited v Duncan and Others (LTS/ECC/2019/12 to 16 and 2020/01, 02, 03 & 13). This decision was the first UK-wide judicial determination concerning the interpretation and application of Part 5 of the ECC to renewals (see our previous article summarising the legal context and the key points of the decision here).

The decision was regarded by many as a hollow victory for operators. One the one hand, it confirmed that leases continuing by tacit relocation still enjoy the protection of transitional Code rights under the ECC (and are not therefore locked into a potentially redundant position as was the case in Arqiva Services Limited –v- AP Wireless II (UK) Limited ([2020] UKUT 195 (LC)).

On the other hand, however, the Tribunal inserted the so-called “high bar” into the application of Part 5 of the ECC as to the operators’ business and technical needs pursuant to paragraph 34(13)(a) - limiting this to circumstances where operators have to show there is a specific need to replace or modify an agreement in the first place.

The decision resulted in a perverse position whereby operators could not renew the contractual position across their estate in line with the new Code, without first examining the characteristics of each particular site and identifying a particular technical need for the renewal that couldn’t otherwise be achieved under the existing agreement.

In good news for operators, that position has changed following the Inner House appeal judgment in (1) EE Limited and (2) Hutchison 3G UK Limited v Duncan ([2021] CSIH 27), delivered on Friday.

The Court of Session has now removed the “high bar” from the requirement to have regard to an operator’s business and technical needs in terms of Paragraph 34(13)(a) of the ECC. In particular, it has confirmed that:

• There is no sound basis for operators having to demonstrate that existing leases are thwarting a specific project in some way, or are unduly onerous, before Part 5 can be utilised; and
• The term “needs” should be interpreted less restrictively. It should also include, for example, the general business and technical opportunities afforded by new Code agreements such as sharing/upgrading rights and “no scheme” valuations.

The judgment also dealt with a cross-appeal made by the landowner on two fronts, namely that the Tribunal was wrong to reject his submissions on:

• the paragraph 33 notice being invalid because the termination date in the notice was not an ish date; and
• a lease continuing on tacit is unwritten and is not therefore a subsisting agreement.

Both of these points were rejected by the Court of Session and the Tribunal’s decision on these points was upheld.

This judgment is a welcome step forward for operators who have found that many decisions under the ECC have not gone their way (particularly in the English Court of Appeal). It makes the first successful appeal judgment for operators under the ECC and importantly no longer confines the use of Part 5 of the ECC to situations where existing agreements are unduly onerous or restrictive. Operators can now focus on renewal strategies that will help them to re-align outdated old Code agreements with the enhanced rights and protections afforded by the new Code alongside the opportunity for cost savings.

What is also of note is the emphasis placed on Parliament’s underlying objectives under the ECC – namely to speed up the rollout of modern electronic communications infrastructure. This message has recently been reinforced by the Government, with its consultation on changes to the ECC released earlier this year. As part of this, the Government has recognised that many of the new Code reforms are not having their intended effect and that change may be needed to support the development of UK digital connectivity.

It is true the ECC, as currently drafted, suffers from a lack of clarity that has thwarted its underlying aim. With more than 30 judgments issued on its application since the end of 2018 (and with more appeals on the way), it has become one of the most hotly contested pieces of legislation in recent years.

There is clearly much more work to be done for both operators and landowners before the right balance is achieved. This latest guidance from the Court of Session is however a key piece in unlocking the door for operators, and with more Government attention on the subject at the moment, it will be taken as a welcome but early sign of the promise of the ECC finally being realised.