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Civil Aviation Act 2012

Background and Summary

3.This Act contains measures which modernise the regulatory framework for civil aviation in the United Kingdom through reforms to the legislative framework for the economic regulation of airports and the legislative framework of the Civil Aviation Authority (CAA), and by conferring certain aviation security functions on the CAA. It also contains measures to reform the Secretary of State's powers to regulate the provision of flight accommodation.

Reforms to the framework for the economic regulation of airports

4.The House of Commons Transport Committee’s 2006 report The Work of the Civil Aviation Authority recommended that the DfT should carry out a review of the CAA, including the central elements of the framework for the economic regulation of airports as set out in the Airports Act 1986 (the “AA 1986”) (report available at: www.publications.parliament.uk/pa/cm200506/cmselect/cmtran/809/80902.htm).

5.In 2008, the Government announced that such a review would take place and would be informed by advice from an independent panel of experts. The panel’s recommendations were published in December 2009, following a public consultation in March 2009 (http://www.dft.gov.uk/pgr/aviation/airports/reviewregulatioukairports/expertpanelopinion) and (http://webarchive.nationalarchives.gov.uk/20110720190543/http:/www.dft.gov.uk/consultations/archive/2009/ukairports/index.html) and (http://webarchive.nationalarchives.gov.uk/+/http:/www.dft.gov.uk/pgr/aviation/airports/reviewregulatioukairports/decisiondocument/pdf/decisiondocument.pdf).

6.Advice from the expert panel, and the response to the public consultation, supported the case for reform of the framework for the economic regulation of airports, and in December 2009 the previous Government published its decision document which set out the case for reform in this area.(1)

7.In the Queen’s Speech of May 2010, the Government announced its intention to reform the framework for the economic regulation of airports. In Written Ministerial Statements in July 2010 and March 2011, the Government provided Parliament with further detail on the direction of the reforms, and the intention to bring forward legislation. A draft Bill was published on 23 November 2011 to give the House of Commons Transport Committee the opportunity to consider the Government’s legislative proposals before they were brought before Parliament. The Committee’s Report was published in its Thirteenth Report of Session 2010-2012 on the 19 January 2012.(2)

8.In most sectors of the economy, the degree of competitive rivalry between firms and the threat of competition law is sufficient to protect consumers from the risk of firms exploiting their market power, for example by charging unreasonably high prices or by providing unreasonably low levels of service quality.

9.However in some sectors of the economy – typically those which used to be state-owned monopolies and where circumstances limit the prospect for effective competition – economic regulation is needed to protect consumers. Such regulation has typically capped the prices that dominant firms can charge in order to promote efficiency, while providing them with a fair return on their investments. In the UK economic regulation is carried out by independent expert regulators in the following sectors: gas and electricity (Ofgem), water (Ofwat), telecoms and post (Ofcom), rail (Office of Rail Regulation) and airports and air traffic services (CAA).(3)

10.The previous legislative framework for airport economic regulation was established for Great Britain under Part 4 of the AA 1986 and for Northern Ireland under the Airports (Northern Ireland) Order 1994 (No. 426 (N.I.1)). Under that regulatory framework the Secretary of State was responsible for deciding which airports should be “designated” for price cap regulation.(4) The CAA was then responsible for regulating these airports by setting the maximum amount the airport operator could charge airlines over a five year period.

11.Consultations on reforming this regulatory framework illustrated that the aviation industry, the regulator and other stakeholders believed the previous regime was burdensome, disproportionate and in need of reform. The Competition Commission concluded in its 2009 report BAA airports market investigation: A report on the supply of airport services by BAA in the UK (5) that the previous legislative framework distorted competition between airlines by adversely affecting the level, specification and timing of investment and the appropriate level and quality of service to passengers and airlines.

12.It was widely considered that the previous framework for airport economic regulation did not meet the standards expected from a modern regulatory regime. The previous regime would not permit the CAA to introduce alternative forms of regulation - for example by monitoring prices and regulating certain aspects of service quality - even if this would benefit passengers and reduce costs for industry.

13.Reform to the framework of the economic regulation of airports was also prompted by the significant changes that have taken place in the aviation sector since the enactment of the AA 1986, including large increases in passenger volumes, the expansion of regional airports and entry by low-cost airlines.

14.The economic regulation measures contained in this Act are intended to provide the CAA with a clear primary duty to further the interests of passengers and owners of cargo in the provision of airport operation services and, where appropriate, promote competition in those services; to provide a more flexible and targeted set of regulatory tools (including a licensing regime); to make the CAA’s decisions more accountable through a system of appeals; and to reduce unnecessary regulatory and central government involvement.

15.The Act also grants the CAA powers to enforce competition law by enabling the CAA to exercise powers concurrently held with the Office of Fair Trading (OFT). These powers include the enforcement of competition law in relation to the provision of airport operation services sector and the ability to make market investigation references to the Competition Commission in relation to the provision of airport operation services. A number of economic regulators (including the CAA for air traffic services only) have concurrent powers with the OFT in respect of sectors which fall within their responsibility. These sectors include telecommunications, gas, electricity, water and sewerage, and railway services.

Aviation security

16.The Act confers certain aviation security functions on the CAA, including the review of aviation security directions, advice and assistance to industry and compliance. The Secretary of State remains responsible for aviation security policy and giving aviation security directions under the Aviation Security Act 1982 (the “ASA 1982”).

17.The Act also enables transfer schemes to be made in connection with the aviation security functions to be conferred on the CAA.

Reform to the legislative framework of the CAA

18.The House of Commons Transport Committee report The Work of the Civil Aviation Authority also recommended that the DfT should carry out a fundamental review of the CAA itself. In 2007 the Government commissioned Sir Joseph Pilling to conduct an independent strategic review. The report was published in June 2008(6). His recommendations have informed some of the CAA reform measures contained in the Act. Some of his governance recommendations have been implemented without the need for legislation, for example the creation of a separate Chair and Chief Executive for the CAA. Others required legislation and the Act makes a number of changes to the CAA’s legislative framework as follows:

CAA membership

19.Previously, the Secretary of State appointed all the members of the CAA’s board and, with Treasury consent, determined their remuneration. Sir Joseph Pilling, in his 2008 Report recommended that modernising the CAA’s governance structure would help the CAA to maintain its general standing and record of success. Another recommendation was that the CAA board should be allowed to appoint its own executive directors and determine their remuneration packages. The Act contains provisions that make this change.

Civil sanctions

20.The Act enables the CAA to make use of alternative civil sanctions alongside existing criminal penalties.

CAA’s charging schemes

21.The CAA’s charging schemes are the mechanism by which it recovers its regulatory costs from industry. These normally come into force on 1 April each year following consultation with the Secretary of State. Under the Civil Aviation Act 1982, (the “CAA 1982”) the CAA is required to allow a minimum of 60 days between publication of its proposed charges and those charges coming into force. The Act introduces a statutory obligation on the CAA to consult charge-payers and reduces the 60-day notice period to 14 days.

Criminal proceedings

22.The CAA previously investigated and prosecuted aviation-related offences on behalf of the Crown, pursuant to arrangements to provide assistance to the Secretary of State under section 16 of the CAA 1982. The Act makes express provision for the CAA to institute criminal proceedings as part of its enforcement function under section 20 of the CAA 1982 to ensure that costs associated with carrying out enforcement work, including prosecutions, will be recoverable from the industry under the new charging scheme arrangements rather than from the taxpayer, as was the case under previous arrangements.

Information, guidance and advice

23.The Act contains provision creating a new duty for the CAA to publish or arrange for the aviation sector to publish such information and advice as the CAA considers appropriate: (i) to assist users (passengers or owners of cargo), including potential users of air transport services, to compare services and make more informed choices; and (ii) to inform the public about the environmental effects (including emissions and noise) of civil aviation in the UK and measures taken to limit the adverse environmental effects. The CAA may also publish best practice guidance and advice for the aviation sector aimed at either improving service standards for users or limiting the adverse environmental effects of civil aviation in the UK. The CAA must consult on its policy for carrying out these new functions and have regard to the principle that the benefits of carrying out the functions should outweigh any adverse effects.

Disclosure of medical information

24.The CAA receives medical information relating to flight crew and air traffic controllers in the course of licensing those persons to perform their air navigation roles. It is currently prohibited from disclosing that information unless at least one of a number of conditions is met, for example the consent of the person to whom the information relates has been obtained. Following a recommendation of the House of Lords Committee on Science and Technology in 2007 (H L Paper 7, December 20077) and Government response (H L Paper 105, May 20088), the Act will permit the CAA to disclose medical information, in anonymised form, for medical research purposes.

Regulation of the provision of flight accommodation

25.The Act amends the Secretary of State’s existing powers to regulate the provision of flight accommodation, which is the basis of the Air Travel Organiser’ Licensing (ATOL) scheme run by the CAA. The scheme protects passengers purchasing seats on flights, mainly where these form part of a package holiday or a ‘Flight-Plus’ holiday, in the event of the insolvency of a package tour operator or travel agent. The DfT consulted on the proposals to reform the ATOL scheme in summer 2011(9), including broadening the scope of the Secretary of State’s regulation-making powers to allow the scheme to better reflect the way in which holidays including a flight are now sold and arranged. Following from this, section 71 of the CAA 1982, as amended by section 94 of the Act, allows the Secretary of State to make regulations to require ATOL licences to be held by (i) airlines for the sale of holidays including a flight (ii) businesses procuring holidays including a flight on an “agent for the consumer” basis and (iii) businesses that facilitate making available flight accommodation. It also provides the Secretary of State with powers to make regulations imposing obligations on ATOL licence holders and giving consumers a right of action in the courts in relation to contraventions of those obligations.

Structure of the Act

26.The Act is divided into three Parts. It has 113 sections and 14 Schedules.

27.The Act makes changes to a number of existing Acts, most notably the ASA 1982, the CAA 1982, the AA 1986, the Transport Act 2000 (the “TA 2000”) and the Regulatory Enforcement and Sanctions Act 2008 (the “RESA 2008”). The arrangement of the Act is as follows:

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