UK Upper Tribunal provides renewal guidance for licence agreements

The Upper Tribunal, in a recent decision under the Electronic Communications Code, AP Wireless (II) (UK) Limited v On Tower UK Limited, substantially upheld a previous decision of the First Tier Tribunal that an operator that takes an assignment of a licence is capable of being treated as a party to that licence and so is the correct party to renew it under the .

The Upper Tribunal reached this decision despite overruling the basis on which the First Tier Tribunal reached its original decision and allowing the respondent's appeal in relation to one of the subject sites.

Dispute background

This case related to a number of sites where a licence to install electronic communications apparatus had been assigned by the original operator and was now held by On Tower. Importantly, the contractual term of each of the licences remained in force when the Code came into force on 28 December 2017 (these licences are known as subsisting agreements).

On Tower had sought to renew the licence for each site with AP Wireless (APW), which had argued that On Tower was unable to do so. Under the Code, only an operator that is a party to the licence can renew it. APW argued that On Tower was not a party, notwithstanding that the licence had been assigned to it. The First Tier Tribunal had initially rejected that argument and APW's appeal of that decision lead to this judgment.

Lease and licence distinction

A similar but different issue had previously been determined by the Court of Appeal in a previous judgment relating to renewals under the Code. However, in that case – Vodafone Ltd v Potting Shed Bar and Gardens Ltd (formerly known as Gencomp (No 7) Ltd) – the agreement at issue was a lease and there had been no assignment by the operator, rather there had been a change in landlord to APW through the grant of an intermediate lease.  

Under the general law and the provisions of the Code, APW would not have been a party to the lease in the Gencomp case. However the Court of Appeal determined that APW should be treated as if it were, as it had the benefit and the burden of the lease and, therefore, "stood in the shoes" of the original landlord.

The Court of Appeal in Gencomp did not deal with the position where the agreement at issue is a licence and there has been a change in landowner in circumstances where this would not make the new landowner a party to the licence under the general law and the provisions of the Code.

In the present case, On Tower would similarly not be a party to the licence under the general law and the provisions of the Code. The Upper Tribunal, therefore, had to grapple with whether On Tower, having been assigned the licence, similarly had the benefit and burden of the licence, such that it "stood in the shoes" of the original operator and should be treated as if it were a party to it. The same question does not arise with leases, where section 3 of the Landlord and Tenant Act 1995 transfers the burden of a lease to an assignee.

Upper Tribunal decision

The Upper Tribunal described the situation as "finely balanced", but sided with On Tower and upheld the First Tier Tribunal's decision, albeit adopting different reasoning. In doing so, it confirmed that an assignee operator will be treated as a party to a licence and, therefore, be able to renew it under the Code, where there has been a valid assignment of the benefit of the licence and the assignee operator has assumed the primary responsibility for performing the licence obligations (that is, the burden of the licence).

The Upper Tribunal confirmed that an assignee operator could assume the burden of the licence in a number of ways, including unilaterally, in a contract with the other party to the licence or in a contract with only the other operator who is assigning the licence to it. However, merely assuming performance of the licence obligations (for example, paying the licence fee) would not be sufficient.

Osborne Clarke comment

This decision will be welcomed by operators. Had the appeal succeeded, operators who had taken over a previously existing site by way of assignment of a licence (which is very common in the industry and may have affected thousands of sites) would not be able to use the Code renewal provisions to reduce costs, as the Code intends.

The Upper Tribunal's acceptance of a variety of mechanisms (including possibly retrospective mechanisms) to assume the burden of a licence will cover most historic scenarios and provides guidance to operators going forward. Operators that have previously taken an assignment should undertake careful reviews before initiating the renewal process under the Code, to ensure they are able to validly do so.