Clause 24 - Appeal to Competition Commission: conditions of new licences

Part of Civil Aviation Bill – in a Public Bill Committee at 10:45 am on 6th March 2012.

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Photo of John Woodcock John Woodcock Shadow Minister (Transport) 10:45 am, 6th March 2012

I beg to move amendment 21, in clause 24, page 17, line 10, leave out from ‘whose’ to ‘affected’ and insert

‘financial interests are substantially adversely’.

It is a pleasure to serve under your chairmanship today, Mrs Riordan, and to contribute to the proceedings. The amendment would raise the threshold under which appeals may be made to the Competition Commission against the licence conditions imposed by the CAA in a new licence. We support the principle of the new regime allowing appeals to be brought via the Competition Commission, rather than requiring judicial review, but we wish to ensure that effective safeguards are in place against the appeals process being used in a frivolous or vexatious manner.

Under the Bill as it stands, an appeal may be brought under any circumstances by the holder of the licence—the airport owner—and by providers of air transport services

“whose interests are materially affected by the decision”.

During pre-legislative scrutiny, a number of airport operators and their representatives argued that the appeals process should be balanced and that appeals against licence conditions by airlines should not be too numerous or effectively become a reflex reaction to every licence granted. In oral evidence to the Committee, Members will recall that Emma Gilthorpe, the director of regulation at BAA Airports Ltd, suggested that there was a risk of appeals being quite numerous under the Bill as it stands. She said that at Heathrow, with a revenue turnover of £1 billion each year through airlines, even small changes in the price control system would lead to an airline being considered as materially affected, thus potentially triggering an appeal.

A similar point was made by Gatwick Airport Ltd in its written evidence to the Committee. It pointed out that the Bill does not define “materially affected”. It wrote:

“virtually all airlines operating (or potentially operating) at a particular airport could argue that they have a material interest in the airport’s licence conditions, particularly those which related to price controls”.

Gatwick also points to the Competition Commission’s own recommendation. It expressed concern that a system in which numerous unmeritorious appeals are pursued increases the burden on the regulated company and increases the risk of the Competition Commission effectively becoming the regulator of the system. As I am sure the Minister agrees, it would be deeply counter-productive to the principles of the Bill, which we support, if, because of an imperfectly specified appeals process, an attempt to shift regulatory powers to the CAA shifted power to the Competition Commission instead.

The Airport Operators Association also raised concerns, saying that it was unclear under the proposed system what the motivation would be not to appeal, and adding:

“it is not difficult to foresee a situation where appeals become habitual, because they represent a risk-free opportunity to secure a better commercial outcome for appellants.”

Such a scenario raises the potential for a regulatory logjam of appeals, slowing the process of investment in improving airports, to the long-term detriment of passengers  and freight shippers. The Select Committee agreed with airports’ concerns on this issue, calling on Ministers to ensure that the Competition Commission has adequate powers to strike out vexatious and frivolous appeals. In particular, it recommended that the Government should specify more clearly what constitutes a “materially affected” air transport operator. We are concerned that Ministers have chosen not to accept that recommendation. Our amendment would establish a much stronger test of which air transport operators could lodge appeals, requiring that they be operators whose

“financial interests are substantially adversely” affected by the new licence conditions. The amendment would prevent vexatious or frivolous claims from operators that would be only marginally affected by licence conditions. It would prevent large numbers of airlines at a given airport from introducing co-ordinated appeals and would discourage appeals based on hypothetical air operations. The proposed wording leaves plenty of scope for genuine and warranted appeals, while limiting the potential for regulatory gridlock, so we hope the Minister will be able to accept it.