On Tower UK Limited v AP Wireless II (UK) Limited: Court of Appeal clarifies meaning of 'party to a code agreement'

Court clarifies when operators become parties to telecommunications code agreements for modification and termination rights

The Court of Appeal has resolved a significant question about the electronic communications code in schedule 3A to the Communications Act 2003: when does an operator become a 'party to a code agreement' for the purposes of Part 5 of the Code?

The dispute concerned telecommunications sites at Fields Farm, Sandbach, and Blackwell Grange Golf Club, Darlington. On Tower UK Limited had acquired the benefit of licence agreements for both sites through a series of assignments from the original operators. When On Tower served notices under paragraph 33 of the Code seeking new leases at reduced rents, AP Wireless II (UK) Limited, the site owner, contended that On Tower lacked standing because it was not a 'party to a code agreement'.

The First-tier Tribunal (Property Chamber) held that On Tower was entitled to proceed, concluding that holding the benefit of the agreements sufficed. On appeal, Fancourt J in the Upper Tribunal (Lands Chamber) rejected that reasoning but reached the same result, holding that an assignee becomes a party to a code agreement if it has 'assumed the primary responsibility for performing the obligations in the licence agreement' through a covenant with the assignor or site provider.

APW appealed, arguing that an operator only becomes a party to a code agreement when it assumes both benefit and burden through a direct obligation to the landowner. On Tower defended the Upper Tribunal's decision whilst also advancing alternative grounds, including that benefit alone suffices.

The statutory framework

The Code replaced its predecessor in 2017 with the aim of making it easier for communications providers to deploy and maintain infrastructure. Part 5 of the Code deals with termination and modification of agreements. Paragraph 30 provides for code rights to continue beyond their contractual expiry date. Paragraph 31 allows a site provider 'who is a party to a code agreement' to serve notice seeking to terminate it. Paragraph 33 permits an operator or site provider 'who is a party to a code agreement' to require changes to its terms.

Under conventional contract law, a person acquiring only the benefit of a contract would not be considered a 'party' to it. However, as the Court of Appeal recognised in Vodafone Ltd v Potting Shed Bar and Gardens Ltd [2023] EWCA Civ 825, the Code uses the phrase 'party to a code agreement' in an extended sense.

The Court of Appeal's analysis

Lord Justice Newey, with whom Lords Justices Holgate and Foxton agreed, acknowledged that the arguments were 'finely balanced' but concluded that an operator holding merely the benefit of a code agreement is a 'party' to it for Part 5 purposes.

Several features of Part 5 pointed towards this conclusion. Paragraph 31 provides for notices to be served on 'the operator who is a party to the agreement', and paragraph 32 allows that operator to serve a counter-notice and apply to the tribunal. An assignee currently exercising code rights has a much more obvious interest in these matters than an original operator who may not have been involved with the site for years.

Similarly, paragraph 33 enables an operator 'who is a party to a code agreement' to seek changes to its terms. The operator exercising code rights at the relevant time has the most obvious stake in such applications. If notice need only be served on the original operator, the current operator might not learn of a site provider's application at all.

Paragraphs 34 and 35 also indicated that Parliament had in mind the operator currently exercising code rights. Paragraph 34(13) requires the tribunal to consider 'the operator's business and technical needs' – plainly those of the present operator rather than a predecessor who had ceased involvement with the site.

The Upper Tribunal's approach – requiring assumption of 'primary responsibility' for obligations – was rejected as creating the greatest uncertainty. It could depend on arrangements between operators of which site providers were ignorant. APW's proposal – requiring a covenant directly with the site provider – fared little better. The Code contains no mention of such a requirement, and it would allow operators to choose when to become parties simply by giving a covenant.

The Court found support in the Code's purpose. Parliament aimed to enable operators exercising code rights under expired agreements to continue doing so. Treating the operator currently exercising code rights as a 'party to the agreement' serves those aims. The approach adopted achieves certainty and is not unfair to site providers.

The appeal was dismissed, albeit for reasons differing from those of the Upper Tribunal. Operators who have acquired code rights through assignment may invoke Part 5 procedures without needing to have assumed the burden of the original agreement through a covenant or other mechanism.

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