Identifying the correct operator for terminating Electronic Communication Code agreements

Summary

Landowners need to carefully consider which is the relevant operator for the purposes of terminating agreements relating to electronic communications apparatus under the Electronic Communications Code (Code). In a decision applicable to Code wayleaves and licences entered into before 28 December 2017, the Upper Tribunal has held that, even if such an agreement has been assigned by the original operator party to another party, the original party may remain the relevant operator for the purposes of termination under part 5 of the Code, where it retains primary responsibility for performing the obligations in the agreement.  

Context

The Upper Tribunal decision in AP Wireless II (UK) Ltd v ON Tower UK Ltd [2024] UKUT 429 (LC), published on 18 December 2024, concerns the key issue of whether an assignee operator of a licence agreement relating to electronic communications apparatus under the Code is to be treated as "a party to a Code agreement" for the purposes of Part 5 of the Code, where the assignee is not obliged to the licensor (site provider) to perform the obligations in the agreement.

Part 5 of the Code relates to termination of Code agreements and provides an important process for example where a property owner wishes to redevelop its property and needs to terminate the Code agreement.

This decision is only relevant to licences or wayleaves entered into before 28 December 2017. However, there are many such agreements under the old Telecommunications Code that remain in effect and the Digital Economy Act 2017, which brought the new Code into force on 28 December 2017, has transitional provisions, applying aspects of the new Code (with modifications) to such pre-28 December 2017 agreements (known as “subsisting agreements”), including Part 5 of the Code. The matters before the Upper Tribunal related to pre-28 December 2017 licences.

The issue highlighted in this decision cannot arise in relation to licences or wayleaves entered into on or after 28 December 2017, because paragraph 16(4) of the Code (which applies only to agreements made on or after that date and not retrospectively) makes the burden of all Code agreements, whether leases, licences or wayleaves, pass on an assignment, and paragraph 16(5) (which applies similarly) provides for release of the original party to the agreement.

The decision also does not apply to leases – if the agreement was a lease and not a licence, by virtue of section 3 of the Landlord and Tenant (Covenants) Act 1995 (replacing the doctrine of privity of estate), the assignee of a lease is bound by the burden of tenant covenants in the lease with effect from the date of the assignment. However, the same does not apply to the assignee of the benefit of a licence - under the general law, the benefit but not the burden may be assigned.

Decision

The Upper Tribunal decided that a lawful assignee who has assumed the primary responsibility for performing the obligations in the licence agreement will be the operator who is a party to the Code agreement (for Part 5 purposes), even if the assignee has not executed a deed of covenant directly with the licensor.

The Upper Tribunal ruled that assumption of responsibility can be evidenced by:

• a multi-party deed by which the licensor permitted the assignment,
• a unilateral deed of covenant with the licensor made by the assignee, or
• a covenant or agreement made by the assignee with the assignor to perform the obligations in the licence agreement. This could be the typical indemnity covenant from the assignee to the assignor, or even a full covenant from the assignee to the assignor, in the assignment deed relating to performance of future obligations under the licence, which according to the Upper Tribunal makes the assignee, as between the assignor and assignee, primarily liable to perform the obligations of the licensee.

By assuming the principal responsibility for the burden of the agreement, the assignee is sufficiently standing in the shoes of the licensee, at least for the purposes of Part 5 of the Code. Whether it can be sued by the licensor under the general law, directly or indirectly, is a different issue, which is not material to the operation of Part 5.

The mere assignment of the benefit of the licence agreement, or assignment coupled with payment of licence fee (but without an obligation to pay), will not suffice to make the assignee a party to the Code agreement. As mentioned, assumption of responsibility for the obligations of the licence agreement is required, whether direct with the licensor, or as an indemnity to or covenant with the assignor.

Until the assignee assumes a primary liability to perform the obligations of the licence agreement, notices under the Code (including in relation to Part 5) would have to be served by or on the assignor.

These judicial comments are very important in relation, for example, to ensuring that notices under Part 5 are served on the correct operator.

Approach to dealing with Part 5 applications before the First Tier Tribunal

The Upper Tribunal made some important general points on how Part 5 applications should be dealt with before the First Tier Tribunal (FTT).

• As a matter of good practice, the applicant's formal case should state the basis on which it and the respondent are said to be a party to the relevant Code agreement, whether it is a “subsisting agreement” or a new agreement under the Code. If it is a subsisting agreement, whether it is claimed to be a lease to which Part 5 applies, or a licence or wayleave. This will assist with issues that arise as to whether the applicant or the respondent is the proper party to the reference, or whether the FTT or the County Court is the appropriate jurisdiction. There may be a situation that the respondent remains the operator that is the party to the Code agreement, even though an assignment is known to have taken place, and, if so, this requires to be stated in the applicant's formal case.
• The current practice of the FTT appears to be to direct that questions of standing or jurisdiction are to be heard as preliminary issues and proceed directly to written submissions on such issues, once they are identified. While it is understood that the FTT is an informal tribunal and not a court, it would nevertheless be safer, and ultimately more convenient, for the respondent to be directed to plead and serve points of response to the application, even if limited to the intended preliminary issues, before any evidence (if necessary) and submissions are prepared.
• In some cases, where it is thought that the respondent may raise further facts in response, it may also be necessary for the applicant to plead its responsive case. This will ensure that the parties' factual cases on such issues are clearly defined at the outset. Questions of lease or licence, and whether an applicant has standing, or the correct respondent has been identified, may continue to arise in applications to the FTT for some years.

Implications

This Upper Tribunal decision highlights an important issue for landowners/licensors in relation to the termination of licences or wayleaves under the Code that were entered into before 28 December 2017. There is a considerable amount of electronic communications apparatus installed under such agreements. It is common for those agreements to have been assigned over the years due to corporate changes or the involvement of infrastructure companies.

Landowners need to carefully consider which is the relevant operator for the purposes of the termination of such agreements under Part 5 of the Code. It may be the original operator party to, or an assignee of, the agreement, and it is not clear cut that the assignee will always “step into the shoes” of the original party. It depends on whether the assignee has assumed primary responsibility for performing the obligations in the agreement. Early legal advice should be taken where the timing of removal of electronic communications apparatus is critical to redevelopment of the property.