The new valuation methodology introduced in the 2017 Electronic Communications Code significantly reduced the amounts which telecoms operators have to pay under agreements with landowners.
The debate still rages about whether this change has helped the roll-out of faster electronic communications services by making it cheaper for operators to install their equipment, or hindered the roll-out by increasing the animosity between operators and landowners.
It is clear that the amount of litigation has skyrocketed since the introduction of the Code. Operators routinely make applications to the Tribunal for the imposition of new agreements on landowners, under paragraphs 20, 26 or 34 of the Code.
Where an operator and a landowner are incurring litigation fees which exceed the rent payable under a new agreement, the question has to be asked: who pays?
Tribunal’s powers
The Tribunals are empowered by paragraph 96 of the Code to make such order as it thinks fit in relation to litigation costs, having regard in particular to:
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the extent to which any party is successful in the proceedings, and
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any unreasonable refusal by a party to engage in alternative dispute resolution.
This brings Code proceedings broadly into line with the costs position in civil litigation generally.
Survey agreements (paragraph 26 of the Code)
The Upper Tribunal has determined that where an operator seeks to have a survey agreement imposed on a landowner, the starting point is that the operator should pay the landowner’s litigation fees. Martin Rodger QC set out the Tribunal’s reasoning for this in EE Ltd and another v HSBC Bank Plc [2022] UKUT 174 (LC):
10. The Tribunal’s usual order reflects the principle that the costs of a reference are necessary because [rights under paragraph 26] cannot be conferred by agreement but may only be imposed by order of the Tribunal… The costs incurred by a site provider in a reference made necessary because an operator wishes to have a Code right to undertake a survey ought not in principle to fall on the site provider.
11. The Tribunal’s usual order also reflects its practice in other circumstances where, in the public interest, powers of compulsory acquisition are exercisable on terms to be determined by the Tribunal. The costs incurred by claimants in establishing the amount of compensation to which they are entitled following the compulsory acquisition of their land are part of the expense that has been imposed on them by the acquisition. For that reason, the Tribunal will normally make an order that the costs incurred by a claimant who is awarded compensation should be paid by the acquiring authority.
The first of the reasons given by the Tribunal is specific to paragraph 26 of the Code. However, the second reason is potentially of much broader application.
Permanent agreements and renewal agreements (paragraphs 20 and 34 of the Code)
There is currently little guidance on litigation costs from the Tribunals where a telecoms operator makes an application to the Tribunal for a new permanent agreement to be imposed (under paragraph 20 of the Code) or to renew an existing agreement (under paragraph 34 of the Code).
In On Tower Limited v IX Limited, in which the First-Tier Tribunal dealt with a renewal claim under paragraph 34, Judge Jackson stated the following in regard to litigation costs;
“I find that there is nothing in the Respondent’s conduct which entitles the Claimant to its costs nor to displace the convention that a site owner which does not unreasonably oppose renewal in principle should be entitled to its reasonable and proportionate costs.”
However, while most operators accept they will need to pay a landowner’s transactional costs of negotiating a new agreement, most operators continue to routinely refuse to pay a landowner’s litigation costs – leaving landowners out of pocket.
The correct approach?
The Upper Tribunal’s reasoning in EE v HSBC is persuasive. The Code empowers telecoms operators to force landowners to grant them rights over their land, in most cases against their will. Where the terms on which those rights can be exercised are in dispute, then provided that the landowner acts reasonably (by, for example, protecting its ability to develop in the future or the value of its land), it is difficult to see why landowners should have to bear their own litigation costs, particularly given the operator is no longer required to pay rent reflecting the market value of the land.
The current lack of clear authority from the Tribunals on paragraph 20 and paragraph 34 applications allows operators to take a hard line in refusing to pay a landowner’s litigation costs where terms are agreed consensually after a Tribunal application has been made. This has the effect of forcing landowners without the financial means for substantial litigation to accept onerous terms or be left out of pocket.