On Friday last week (7 May), the Inner House of the Court of Session handed down its judgement in EE Limited & Hutchison 3G UK Limited v Duncan, the first appeal court decision in Scotland on the new Electronic Communications Code, with the operators successfully challenging the Lands Tribunal's earlier ruling in favour of the landowners.
As covered in our previous blog, the case concerned applications brought by the operators to terminate existing leases, which had passed their contractual expiry dates, and to replace them with new agreements under the new Code. Part 5 of the Code provides a mechanism for the parties to modify a 'code agreement' at, or after, the expiry of the contractual term. In dismissing their applications, the Lands Tribunal concluded that the operators had not sufficiently made out a case for the orders sought.
The Tribunal had set the bar too high
In considering the applications for termination of existing leases and their replacement with more advantageous agreements under the new Code, the Tribunal ruled that the operators must be able to show particular 'needs' in relation to the individual sites which justified the "judicial cancellation of existing contracts", for example, an existing agreement being unduly onerous or restrictive. It was not enough to point to the current arrangements as being out of step with the minimum rights available under the new Code.
In delivering the judgement of the court allowing the operators' appeal, Lord Malcolm concluded that "The Tribunal erred in its approach to the requirement to have regard to the operators' 'business and technical needs'" and went on to explain that "The Tribunal was wrong in inserting a 'high bar' into its assessment. Too much was imported into the term 'needs'. It does not exclude the general business and technical opportunities afforded by, for example, agreements which reflect the new code's approach to matters such as sharing and upgrading facilities, and 'no scheme' valuations."
Scottish leases continuing by tacit relocation are subsisting agreements
The court also affirmed the Land Tribunal's ruling that a written lease running on tacit relocation (extended on a yearly basis after the contractual term) when the new code came into effect in December 2017 was a subsisting agreement for the purposes of the Code and therefore the modification procedure under Part 5 of the Code was available to the operators.
Implications for operators and landowners
Having clarified that the imposition of new agreements can be justified by reference to the enhanced rights available to operators under the new Code, including upgrading, sharing and reduced rent, we can expect to see a renewed push from operators for renewals with an increase in the number of old code agreements being brought into line with the new Code.
Whilst the Tribunal's decision was seen at the time as a triumph for landowners, in that lease renewals on new Code terms were not simply there for the asking, the operators' successful appeal means that the tables have again been turned in their favour.
Contributor
Partner
