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Civil Aviation Act 2012

Licence conditions

85.In January 2012, and in response to a request from the Secretary of State the CAA published an indicative licence. This can be found on the CAA’s website(12).

Section 18: Licence conditions

86.This section states that the CAA may include in the licence any conditions it considers necessary and expedient having regard to the risk that the licence holder may engage in conduct amounting to an abuse of substantial market power in a market for airport operation services (subsection (1)(a)). It is further empowered to impose any other licence conditions it considers necessary or expedient having regard to its duties under section 1 (subsection (1)(b)).

Section 19: Price control conditions

87.Section 19 requires the CAA to impose price control conditions where it considers this necessary or expedient having regard to the risk described in section 18(1)(a).

88.Subsection (1) provides that a licence condition is a price control condition to the extent that it regulates prices by (a) specifying the amount (or maximum amount) that may be charged, or providing that the amount (or maximum amount) that may be charged is to be determined in accordance with the condition; or (b) requiring that the amount (or maximum amount) charged should be approved by the CAA.

89.Subsections (4) and (5) enable the CAA to impose such price control conditions as it considers appropriate to deprive an operator of some or all of any unfairly high charges recovered by that operator and amounting to an abuse of substantial market power in specified circumstances and over a specified time period. These broadly comprise circumstances where the person is the operator on the day on which the relevant area becomes subject to regulation and is treated as having a licence for a period (under section 4) or would be treated as having a licence for a period but for the suspension of a market power determination or operator determination. The relevant time period begins when the operator becomes subject to regulation and will generally end when a licence is granted (see section 4(4)).

90.Subsection (6) provides that provisions for a price control condition may be made by reference to the amount charged for particular goods or services or to the overall amount charged for a range of goods or services.

91.Subsection (7) requires price control conditions to be time-limited.

Section 20: Conditions relating to CAA charges

92.Section 20 provides that a licence may include conditions requiring payment of the CAA’s charges determined by a scheme or regulations made under section 11 of the CAA 1982 in respect of its functions under Chapter 1 of Part 1 of the Act.

Section 21: Content and effect of licence conditions

93.Generic examples of provisions which may be included in licence conditions are set out in subsection (1). The examples are neither a prescriptive nor an exhaustive list of provisions that may be included.

94.Subsections (3) and (4) state that a condition of the licence may be modified without recourse to the standard licence modification process (set out in sections 22 to 30), provided the specific requirements of subsection (3) are met in that licence condition. However, the proposed inclusion of such a provision in the licence condition would itself be subject to the standard licence modification process (including possible appeal to the Competition Commission).

95.The requirements to be met under subsection (3) are that the licence condition specifies or describes the circumstances in which it may be modified, the period(s) within which the power may be exercised and the types of modification which may be made. For example, a licence condition may require information to be provided by a specified date each year but provide also that the CAA may replace that date with a different date at any time in the next 3 years if the number of passenger movements in a stated period exceeds a stated figure.

96.Such a provision may be modified through the standard licence modification process or through its own self-modifying provisions.

97.Subsection (5) concerns licence conditions containing exceptions relating to, or operating by reference to, financial arrangements entered into by the licence holder or a connected person before section 3 of the Act comes into force (“derogations”). Where a licence condition contains such derogations it may not specify that the exception will cease to have effect on a stated date or in specified circumstances, or provide for the CAA to determine which financial arrangements benefit from the exception. The effect of this provision is that a derogation can only be removed by use of the standard licence modification process under sections 22 to 30 including the special rules that apply to a licence modification in such a case (see the notes on section 23 below).

98.Subsection (6) states that a licence condition does not have effect when the licence holder is not the operator of any part of the airport area for which the licence is granted or when the CAA makes a determination that the airport area is no longer a dominant area located at a dominant airport (see also the notes on sections 7, 9 and 10 above).

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