Imposition of Electronic Communications Code Rights via Lease: Comprehensive Analysis of EE Ltd & Anor v. London Borough Of Islington

Introduction

The case of EE Ltd & Anor v. London Borough Of Islington ([2019] UKUT 53 (LC)) represents a pivotal decision by the Upper Tribunal (Lands Chamber) in interpreting and applying the Electronic Communications Code (the "Code"). This judgment addresses critical issues surrounding the imposition of Code rights by tribunals, specifically focusing on the nature of consideration and compensation, and whether such rights can be imposed in the form of a lease. The parties involved include EE Limited and Hutchison 3G UK Limited as claimants/code operators, and the Mayor and Burgesses of the London Borough of Islington as the respondent/site provider.

Summary of the Judgment

The Upper Tribunal was tasked with determining whether it possessed the authority to impose Code rights in the form of a lease and how consideration and compensation should be assessed under the new Code framework introduced by the Digital Economy Act 2017. EE Ltd and Hutchison 3G UK Ltd sought the right to install electronic communications apparatus on the roof of Threadgold House, a residential building owned by the London Borough of Islington. The Tribunal ultimately concluded that it does have the power to impose Code rights via a lease agreement and determined the appropriate level of consideration and compensation payable to the landowner.

Analysis

Precedents Cited

The judgment references several pivotal cases that have shaped the understanding of property rights and compensation in the context of electronic communications installations:

Cardtronics Europe Ltd v Sykes (VO) [2018] EWCA Civ 2472
Cornerstone Telecommunications Infrastructure Ltd v University of London [2018] UKUT 356 (LC)
Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111
F. R. Evans (Leeds) Ltd v English Electric Co Ltd (1978) 36 P&CR 185
Hoare v National Trust (1999) 77 P&CR 366
Raja Vyricherla Narayana Gajapatiraju v The Revenue Divisional Officer, Vizagapatam [1939] AC 302
Telereal Trillium v Hewitt [2018] EWCA Civ 26
Port of London Authority v Transport for London [2008] RVR 93

These cases collectively inform the Tribunal's approach to compensation, valuation of land rights, and the distinction between consideration and loss or damage. Notably, Hoare v National Trust and Telereal Trillium v Hewitt provide valuable insights into nominal valuations in cases with limited or no market demand, influencing the Tribunal's assessment of consideration under the Code.

Legal Reasoning

The Tribunal's legal reasoning is anchored in the interpretation of the Electronic Communications Code as amended by the Digital Economy Act 2017. The primary questions revolved around:

Whether the Tribunal can impose Code rights in the form of a lease.
How to determine the appropriate consideration payable under the Code.
The scope and application of compensation under the Code.

Imposition of Code Rights via Lease: The Tribunal scrutinized the Code's provisions, particularly paragraphs 20 and 23, and the absence of explicit restrictions on the form of agreements imposed. By referencing historical practices under the old Code and legislative amendments that disapplied certain tenant protections when Code rights are the primary purpose of a lease, the Tribunal concluded that it has the authority to impose leases as necessary to confer Code rights.

Consideration: The determination of consideration is governed by paragraph 24 of the Code, which mandates assessing the market value of the land based on hypothetical arm's length transactions under specific assumptions, notably the "no-network" condition. The Tribunal evaluated expert testimonies and valuation methodologies to establish an appropriate sum that reflects the granting of Code rights without factoring in the economic benefits derived from network operations.

Compensation: Compensation, distinct from consideration, is intended to address loss or damage suffered by the landowner due to the imposition of Code rights. The Tribunal analyzed the applicability of various compensation heads, dismissing speculative claims and emphasizing that compensation should only be awarded for concrete and demonstrable losses.

Impact

This judgment has significant implications for the application of the Electronic Communications Code:

Tribunal Authority: Affirming the Tribunal's power to impose leases widens the scope of how Code rights can be exercised, ensuring that operators can secure necessary sites even against the objections of landowners.
Valuation Standards: The decision clarifies that consideration must be assessed independently of the network's economic value, promoting a fair and standardized approach to determining financial terms under the Code.
Compensation Framework: By delineating the boundaries of compensable loss, the judgment helps prevent inflated or unfounded compensation claims, protecting site providers from excessive financial obligations.
Legal Precedent: The case sets a precedent for future disputes under the Code, providing a clear framework for tribunals when balancing the interests of operators and landowners.

Overall, the decision fosters a more predictable and equitable environment for the deployment of electronic communications infrastructure, balancing operational needs with the rights and compensations of landowners.

Complex Concepts Simplified

Electronic Communications Code (the Code)

The Electronic Communications Code is legislation that governs the acquisition and use of land for installing electronic communications equipment, such as mobile phone masts and antennas. It provides a legal framework for operators to secure sites, even if the landowner is unwilling, by allowing tribunals to impose agreements that outline the terms of use, including payments (consideration) to the landowner and compensation for any loss or damage suffered.

Consideration vs. Compensation

Consideration refers to the payment made by the operator to the landowner for the right to use the land for installing communications equipment. It is akin to rent and is determined based on the market value of the right being granted, assuming the land is not used for providing network services ("no-network" assumption). Compensation, on the other hand, addresses any loss or damage the landowner might suffer due to the imposition of these rights. This can include reduced land value or increased maintenance costs but does not overlap with the consideration paid.

No-Network Assumption

The "no-network" assumption is a valuation principle used to determine consideration. It assumes that the landowner is not allowed to utilize the land for its primary business purpose (providing network services) when assessing the market value of the right being granted to the operator. This ensures that the consideration reflects the use of land solely for Communications Code purposes, without factoring in additional economic benefits the operator might derive from its network.

Conclusion

The Upper Tribunal's decision in EE Ltd & Anor v. London Borough Of Islington marks a significant development in the application of the Electronic Communications Code. By affirming its authority to impose leases for Code rights and elucidating the mechanisms for determining consideration and compensation, the Tribunal has provided clear guidance for future cases. The judgment ensures that telecommunications operators can efficiently secure essential infrastructure while safeguarding the rights and interests of landowners through fair compensation practices. This balanced approach facilitates the ongoing expansion and modernization of the UK's electronic communications network infrastructure.