Cornerstone v University of the Arts London decision has potential to help unlock stalled Code negotiations

Written on 1 Sep 2020

Tribunal provides clarity on terms typically contained in agreements under the Electronic Communications Code that could help boost the rollout of digital infrastructure across the UK.

In its latest decision under the Electronic Communications Code, the Upper Tribunal (Lands Chamber) in Cornerstone Telecommunications Infrastructure Limited v University of the Arts London [2020] UKUT 0248 (LC) has determined that it has jurisdiction under paragraph 26 of the Code to grant longer-term agreements. It has also reinforced the factors that are relevant and will be considered by the tribunal under the paragraph 21 public benefit test and those that are not.

The tribunal has also provided much needed clarity and commentary on a number of terms that typically come into dispute between operators and site providers during the negotiation of Code agreements. Operators will take particular comfort from this decision as the clarity secured from the tribunal in this case should assist in "unlocking" negotiations with site providers and could prove to be a tipping point that propels the market closer to achieving the objective of the Code: to facilitate the cost-effective rollout of digital communications infrastructure.

Objective of the Code

The Code, which came into force in December 2017, was enacted to provide modern regulation to fully support the cost-effective rollout of digital communications infrastructure. Following the introduction of the Code, however, far fewer consensual Code agreements have been entered into between operators and site providers than under the old Code. This is due to a number of factors, including a reduction in the levels of consideration and compensation payable to site providers under the Code and tension between the operator and landowner communities on the terms to be included within a Code agreement. Contrary to the objectives of the Code, this has left operators unable to fully utilise it to install new digital communications infrastructure (and upgrade their existing infrastructure) and improve service to the public as the Code intends.

The decision in this case provides welcome clarity on the tribunal's view on many of the terms typically contained in Code agreements, hopefully providing much needed clarity that will unlock negotiations that have stalled across the market, allowing the objectives and benefits of the Code to be fully realised.

As alluded to by the tribunal in this case, unlocking the benefits of the Code and fully realising its objectives is arguably more vital now than it was when it first came into force in December 2017, given the increased importance of connectivity following the coronavirus pandemic.

The dispute

Cornerstone had, until recently, electronic communications apparatus (ECA) installed on two rooftop sites at the shopping centre and Hannibal House in Elephant and Castle (the exit sites) in London. As part of the major redevelopment of Elephant and Castle, the exit sites are due to be demolished later this year. These sites form part of the redevelopment of the east area of Elephant and Castle, which is due to be demolished and redeveloped first.

Cornerstone agreed to remove its ECA from the exit sites and sought rights under the Code to install and operate ECA on the rooftop of the London College of Communications in Elephant and Castle. The college is owned and occupied by the University of the Arts London (UAL) and is located in the west area of Elephant and Castle. The college also forms part of the major redevelopment of Elephant and Castle and is due to be demolished in around five years' time. UAL will then move to a newly developed building and campus in the east site. Due to the proposed redevelopment, it was intended that the installation of ECA on the college would be temporary only, with Cornerstone moving back to the east site once the redevelopment had been completed in around five years' time.

It was UAL's position that, due to the redevelopment and the contractual commitments it was subject to in respect of the same, it could only agree to grant Cornerstone a Code agreement under paragraph 26 and for five years. The effect of this, if granted, would be to circumvent part five of the Code, effectively allowing the "contracting out" of the Code, more specifically, the security of tenure provided to operators under part five.

When developing the Code, it was central to government policy and that of the Law Commission that it should not be possible to contract out of the security of tenure given to operators by the Code. Given this clear position and the fact that the redevelopment had already been delayed – together with the lack of certainty over whether the redevelopment timetable would be met – Cornerstone sought a five-year Code agreement under paragraph 20. Not only did this avoid a circumvention of part five, it also ensured that, if the redevelopment was further delayed, Cornerstone would not be required to remove its ECA from the college and relocate back to the east site prematurely.

During the case management hearing in April 2020, the tribunal granted Cornerstone interim Code rights enabling the installation and operation of ECA on the rooftop of the college, pending the substantive hearing in the case. The tribunal also made directions requiring the parties to seek to agree the terms of a Code Agreement, with a view to narrowing the issues between them on the terms of the proposed Code Agreement, prior to the substantive hearing in August.

In the substantive hearing, the tribunal was asked to address the following points:

  • Whether the substantive agreement permitting Cornerstone to install ECA on the rooftop of the college should be granted pursuant to paragraph 20 or paragraph 26 of the Code; and
  • in either case, what the terms of the Code agreement should be.

The decision

Due to the fact-specific nature of the contractual documentation underpinning the redevelopment, the tribunal determined that the test under paragraph 21 of the Code – or the public benefit test – had not been satisfied and an agreement under paragraph 20 of the Code would not be imposed by the tribunal. In taking this approach, the tribunal helpfully:

  • Made it clear that the level of prejudice the site provider must show to outweigh the public benefit of the availability of electronic communications, in the light of the increasing public demand for, and dependence upon, the availability of electronic communications must be "very high indeed". The tribunal also commented that the public benefit is perhaps even higher today, than when the Code was first enacted.
  • Confirmed, contrary to the position argued by UAL, that it was not necessary to consider the "net public benefit" when applying the public benefit test, which would be the benefit derived from the operator's installation and operation from a communications site minus any disbenefit caused by the installation.
  • Affirmed the well-establish position set out in Cornerstone Telecommunications Infrastructure Limited v University of London [2018] UKUT 356 (LC) that the tribunal will not consider the availability of any alternative sites available to the operator when considering the public benefit test, and extended this principle to make it clear that the availability of a sharing arrangement with another operator is equally irrelevant to an assessment of public benefit.
  • Made it clear that, while the tribunal was not restricted in the length of any Code agreement it could grant under paragraph 26, the tribunal will be alert to any attempt to use paragraph 26 to circumvent the security of tenure offered to an operator under part five, which would frustrate the clear policy under the Code.

Usefully, the tribunal also confirmed that, contrary to the arguments raised by UAL, paragraph 10 of the Code did not operate against normal contractual principles. If a site provider (Party A) does sell its interest in the relevant land to a third party (Party B) during the term of the Code agreement, paragraph 10 of the Code operates to ensure that Party B becomes a party to the Code agreement. Paragraph 10 does not operate, however, to release Party A from the Code agreement. Party A will remain a site provider under the Code agreement.

Clarified terms

The tribunal also confirmed its view on the following key terms, often in dispute in Code agreements:

  • Equipment: Operators are not required to specify (by list or otherwise) the ECA to be installed under the proposed Code agreement. To do so could invite disputes over the delineation between installation and upgrade rights and, given the present position under recent case law, such a requirement is likely to hamper operators' ability to provide electronic communication services to its customers and the public in the future.
  • Sharing and upgrading: Contrary to the position commonly argued by site providers in the marketplace, the Code does not require any right to upgrade or to share ECA contained in a Code agreement to be limited by the conditions set out in paragraph 17 of the Code. Instead, if an operator requires upgrade and/or sharing rights, which are not subject to the conditions in paragraph 17, it should set out its reasons for this and, unless there is good reason to impose the conditions under paragraph 17, the conditions can be excluded.
  • Indemnity: The purpose of an indemnity in a Code agreement is to regulate and manage third-party claims against a site provider arising from the unlawful acts and omissions of an operator. It is not a catch-all protective provision for the benefit of a site provider, covering every conceivable loss or damage whatever the cause. It protects both parties, including giving operators control of third-party claims against site providers.
  • ICNIRP: The law does not require operators to provide public ICNIRP (International Commission on Non-Ionizing Radiation Protection) exclusion zone plans to site providers and a contractual requirement to provide the same "is also a step too far".
  • Compensation: As already decided in the Islington case, the tribunal will, whenever possible, determine compensation payable to the site provider under a Code agreement at the outset (that is, as part of the decision imposing the agreement).

Osborne Clarke comment

This decision is welcomed by operators, as it brings a wealth of clarity on many terms often in dispute in negotiations between them and site providers under the Code. Accordingly, it is hoped that this decision will be the key to unlocking many negotiations and it will propel the market closer to the objective of the Code: to facilitate the cost effective rollout of digital communications infrastructure.

Equally, given the unique circumstances of this case, in particular the nature of the redevelopment and the specific contractual mechanisms underpinning it, this decision will not open the door for site providers to demand the use of long term paragraph 26 Code agreements to circumvent the security of tenure provided to operators under part five of the Code. Operators will be comforted by the tribunal’s word of warning concerning this and operators will be keen to see the tribunal carefully supervise and scrutinise the grant of any longer-term Code agreements sought under paragraph 26.

This article was written by Emily Van Schalkwyk, Partner, with the assistance of George Oakes, trainee solicitor, at Osborne Clarke LLP.