Introduction

EE Limited ("EE") and Virgin Mobile Telecoms Limited ("VM") entered into a Telecommunications Supply Agreement (TSA) on August 28, 2013. EE, as one of the UK's major Mobile Network Operators (MNOs), provided VM access to its radio network, enabling VM to offer 2G, 3G, and 4G mobile services to its customers. A critical component of the TSA was the exclusivity provision, mandating VM to exclusively utilize EE's network during the defined "Exclusive Period." In May 2019, with the advent of 5G services, EE launched its 5G network, leading VM to seek alternative providers like Vodafone to supply 5G services. This migration sparked a legal dispute over whether EE's subsequent claim for lost revenue fell within an exclusion clause that barred claims related to "anticipated profits."

The central legal question was whether EE's claim for lost revenue constituted a claim "in respect of anticipated profits" as per clause 34.5(a) of the TSA, thereby excluding EE's damages under the contract. The England and Wales Court of Appeal (Civil Division) rendered a split decision, affirming the lower court's dismissal of EE's appeal, while a dissenting judge provided an alternative interpretation.

Summary of the Judgment

The Court of Appeal examined whether EE's claim for approximately £24.6 million in lost revenue from VM fell within the exclusion clause of "anticipated profits" outlined in clause 34.5(a) of the TSA. The majority, led by Lord Justice Zacaroli, upheld the lower court's decision that EE's claim was excluded by the clause. The majority reasoned that "anticipated profits" encompassed the expected revenue EE would have earned had VM not diverted its customers to Vodafone, aligning with the natural interpretation of "loss of profits."

However, Lord Justice Phillips and Lord Justice Coulson dissented. Phillips LJ argued that excluding EE's claim for contractual payments undermined the fundamental commercial bargain between the parties. Coulson LJ further contended that "anticipated profits" should be interpreted more narrowly, excluding only profits outside the TSA framework. Consequently, they believed EE should be entitled to recover the contractual losses resulting from VM's breach.

Ultimately, the majority decision stands, conflicting with the dissenting opinions. The judgment emphasizes the importance of precise contractual language and the commercial context in interpreting exclusion clauses.

Analysis

Precedents Cited

The judgment extensively referenced several key cases to interpret the exclusion clause:

• Easyair Ltd v Opal Telecom Ltd ([2009] EWHC 339 (Ch)) – Established approaches to strike out or summary judgment applications.
• Lamesa Investments Ltd v Cynergy Bank Ltd ([2020] EWCA Civ 821) – Emphasized the principles of contractual interpretation within commercial contexts.
• Arnold v Britton ([2015] UKSC 36) – Highlighted the importance of clear contractual language and the presumptions against defectively drafted clauses.
• Rainy Sky SA v Kookmin Bank ([2011] UKSC 50) – Affirmed that clear language in exclusion clauses must be adhered to unless causing commercial absurdity.
• Wood v Capita Insurance Services Ltd ([2017] UKSC 24) – Discussed the importance of drafting quality and the role of commercial common sense in interpretation.
• Sigeria Insurance v IBM United Kingdom ([2022] 2 All ER (Comm) 108) – Addressed the nature of expectation losses and the challenges in quantifying them.

Additionally, case-specific precedents like The Herdentor and Ease Faith Ltd v Leonis Marine Management Ltd ([2006] EWHC 232 (Comm)) were discussed to illustrate varying interpretations of "loss of profits" in different contractual contexts. However, the court noted the limited applicability of these cases to the current dispute due to differing contractual language and circumstances.

Legal Reasoning

The core of the legal reasoning centered on interpreting clause 34.5(a) of the TSA, which excludes liability for "anticipated profits." The majority held that:

• The natural and ordinary meaning of "anticipated profits" aligned with EE's claim for lost revenue due to VM's breach.
• The TSA was a meticulously drafted contract, intended to allocate risk clearly between EE and VM.
• Interchangeable use of "anticipated profits" and "loss of profits" within the TSA indicated a broad exclusion encompassing expectation losses.
• Drawing from precedents, clear contractual language governing key obligations should be respected unless it leads to commercial absurdity, which was not the case here.

The dissenting opinions, however, posited that:

• "Anticipated profits" should be narrowly interpreted to exclude only unforeseen or profits outside the TSA's scope.
• Excluding EE's claim would undermine the fundamental commercial arrangement between the parties.
• The term should not automatically encompass contractual payments, advocating for a more segmented interpretation.

The majority rebutted these points by emphasizing the consistent and clear language of the TSA and the absence of any indication that the parties intended a narrow exclusion of "anticipated profits."

Impact

This judgment has significant implications for the interpretation of exclusion clauses in commercial contracts. Key impacts include:

• Emphasis on Clear Contractual Language: Parties drafting contracts must articulate exclusions with precision to avoid broad or unintended interpretations.
• Broad Interpretation of Exclusions: Terms like "anticipated profits" may be construed broadly to include various forms of expectation losses unless explicitly limited.
• Commercial Context Matters: Courts will interpret exclusion clauses within the broader commercial framework and risk allocation intended by the parties.
• Limited Remedial Avenues: Parties may find that exclusion clauses can effectively limit potential damages claims, reinforcing the importance of negotiating fair terms.
• Future Contractual Negotiations: Businesses may need to revisit and possibly renegotiate terms to ensure clarity and mutual understanding regarding liability exclusions.

Moreover, dissenting opinions highlight the ongoing judicial debate on balancing contractual freedom with equitable remedies, suggesting that future cases might further refine the boundaries of such exclusions.

Complex Concepts Simplified

Exclusion Clauses

Exclusion clauses are provisions in contracts that limit or exclude a party's liability for certain types of losses or damages. In EE v Virgin Mobile, the clause in question aimed to exclude liability for "anticipated profits," meaning profits that were expected but not realized due to a breach.

Expectation Loss

Expectation loss refers to the damages awarded to put the injured party in the position they would have been in had the contract been fully performed. It represents the anticipated benefits the party expected from the contract.

Loss of Profits vs. Diminution in Price

Loss of Profits typically relates to the additional earnings a party expected to receive from a contract. Diminution in Price refers to the reduction in the contract price compared to the market price or what was initially agreed upon. The distinction was central to EE's argument that their claim should be characterized as the latter, potentially excluding it from the "anticipated profits" exclusion.

Strike Out/Summary Judgment

A strike out is when a claim is dismissed early in the litigation process, typically because it lacks legal merit. A summary judgment similarly dismisses a case without a full trial when there are no material facts in dispute. In this case, VM sought to strike out EE's claim on the grounds that it was excluded by the contract.

Conclusion

The Court of Appeal's decision in EE Ltd v Virgin Mobile Telecoms Ltd ([2025] EWCA Civ 70) underscores the paramount importance of precise contractual language and the courts' inclination to uphold clear exclusion clauses within commercial agreements. By affirming that EE's claim for lost revenue fell within the excluded "anticipated profits," the judgment reinforces the notion that parties are bound by the explicit terms they negotiate, provided those terms are clear and commercially sensible.

This case serves as a pivotal reference for businesses in structuring their contracts, highlighting the necessity of unambiguous language when allocating risks and liabilities. It also delineates the boundaries within which courts interpret exclusion clauses, balancing contractual freedom with fairness. Future litigations involving similar clauses will likely cite this judgment, cementing its role in shaping the landscape of contractual liability and risk management.

Ultimately, EE v Virgin Mobile affirms that well-drafted contracts with clear exclusion clauses can effectively limit liabilities, mitigating unforeseen risks in complex commercial relationships.