Legal Consequences of Privatisation

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Legal Consequences of Privatisation

32ND ANNUAL CONFERENCE, Christchurch, NZ, 19-23 April 1993

WP No. 126

Legal Consequences of Privatisation

Introduction

While the title of this working paper as decided at the 1992 Conference is “Legal Aspects of Privatisation” this working paper in fact deals with “The Legal Aspects of Commercialisation”. The reason for applying this wider interpretation is that if consideration were to be limited strictly to “privatisation”, discussion of the legal aspects of the establishment of State Agencies and State Companies would precluded from the working paper.

As the majority of Governments appear to be opting for the State Agency/Company it was felt that it was not the intention of Conference that SC7 should ignore this area when compiling this working paper. Research included reference to the situation in a number of countries including the United Kingdom, Switzerland, Australia, New Zealand and Ireland.

The need for a greater degree of commercialisation in the operation of government organisations, such as a country’s air navigation system, is widely recognised. The full path to divestiture may take an activity from within a government department to a company wholly within the private sector. Privatisation is the process of moving along the path. The main steps along the way are:

Commercialisation – The introduction of user charges, commercial accounting and commercial performance objectives.

Corporatisation – The creation of a state-owned corporation, often by statute.

Restructuring – An important intermediate step which is often needed where a state-owned corporation has not been subjected to or has not responded effectively to a competitive commercial environment.

Divestiture – The transfer of ownership of the corporation from the public to the private sector.

Commercialisation of the air traffic control system can be accomplished in many ways. The most common to date are the operation of the ATC system:

  • under a Crown Corporation;
  • a separate agency solely owned by the government;
  • contracting out of ATC services to private companies;
  • contracting out of ATC services to municipal governments or airport authorities.

Discussion

There are many issues to be addressed when the operation of the air traffic control system is commercialised. Issues to be considered are as follows:

  • The commercial entity must be a “good employer”;
  • Security of Tenure (the right to hold a job in the new enterprise under the same terms and conditions of employment previously enjoyed);
  • An independent, regulatory body to ensure levels of service and safety are maintained;
  • Licensing of air traffic controllers;
  • Representative of controllers at the Board of Directors level of the commercial entity;
  • Third party liability as a result of employee’s actions.

A “good employer” is an employer who operates a personnel policy containing provisions generally accepted as necessary for the fair and proper treatment of employees in all aspects of their employment, including provisions requiring:

a) Good and safe working conditions; and

b) an equal opportunities employment programme; and

c) the impartial selection of suitably qualified persons for appointment; and

d) opportunities for the enhancement of the abilities of individual employees.

When an ATC system is commercialised, this issue is to be addressed either through legislation or included in the charter issued to the commercial entity in order to ensure that employee’s rights are protected.

Security of tenure is a very important issue that has to be addressed when the operation of the ATC system is commercialised. In this regard, the key clause in any legislation appears to be the following:

The conditions in regard to tenure of office which are granted by the company in relation to a member of staff so transferred shall not, while he/she is in the service of the company, be less favourable than the prevailing conditions in the Civil Service at the time of such alteration, save in accordance with a collective agreement negotiated with any recognised Trade Union or Staff Association concerned.

When commercialisation occurs, if this issue is addressed satisfactorily, it will greatly enhance a smooth transition which will ensure a safe air traffic control system.

An autonomous ATC organisation must not imply abrogation of the government’s safety and oversight responsibility. The government must ensure, ideally through an independent regulatory body, that:

  • the government’s obligations regarding services and facilities are fulfilled and comply with relevant ICAO documents and user’s operational requirements;
  • ATC capacity is commensurate with traffic demand, meaning traffic should be handled without delays except under exceptional circumstances such as extreme peak periods, where contingency measures should be applied;
  • high levels of service are maintained and monitored; S no excessive or discriminatory user charges are applied. In particular, the government should ensure that charges are based on actual and reasonable costs and are apportioned fairly between different categories of users;
  • users are systematically consulted and costs should be transparent; S the commercial entity regularly prepare, adopt and publish, in consultation with the users, a short, medium and long-term ongoing development plan.

The implementation of such a regulatory body, with the above stated mandate, would ensure that the commercial entity provide adequate staff, training and modern ATC equipment. In order to insure a high standard all air traffic controllers employed by the commercial entity, providing ATC services, shall be licensed in accordance with ICAO requirements. The regulatory body shall ensure that the commercial entity meets this requirement. (IFATCA Policy – Page 4323, Paragraphs 2.4.5, 2.4.6 and 2.4.7)

It is essential that controllers be aware of the implications of commercialisation and having become aware be in a position to safeguard their common interests. This may be achieved if air traffic controller representatives have a consultative role in countries where commercialisation is either planned or already underway. Appointment to the Board of Directors would ensure controllers’ concerns are addressed at the highest level of the commercial entity.

Third party liability as a result of an employee’s actions must be addressed prior to vesting day (day of transition to the commercial entity). The legal liability of the air traffic controller should be addressed in accordance with IFATCA Policy (Page 4441 and 4412 of the IFATCA Manual).

Conclusions

Commercialisation of the ATC system is a viable option provided the following issues are addressed:

The commercial entity must be a “good employer” as defined above.

Statutory provisions to include administration machinery to insure that all the current terms and conditions of employment of employees are transferred to the commercial entity on vesting day.

Statutory provisions to include administrative machinery to ensure that all current employees in the ATC system are ensured employment in the commercial entity on vesting day.

Establishment of an independent regulatory body to ensure safety and the provision of an efficient service. (refer to paragraph 2.4 and 2.4.1)

Licensing of air traffic controllers employed by the commercial entity should be in accordance with IFATCA Policy.

Provisions should be in place to allow for a representative of the controllers to sit on the Board of Directors of the commercial entity.

Liability of the air traffic controller should be addressed in accordance with IFATCA Policy.

Recommendations

“ It is recommended that IFATCA Policy on the commercialisation of the ATC system be as follows:

IFATCA endorses the commercialisation of the ATC system provided the following conditions are in place on vesting day:

The commercial entity has to be a “good employer” as defined by legislation or included in the charter issued the commercial entity. A “good employer” is an employer who operates a personnel policy containing provisions generally accepted as necessary for the fair and proper treatment of employees in all aspects of their employment, including provisions requiring:

a) Good and safe working conditions; and

b) an equal opportunities employment programme; and

c) the impartial selection of suitably qualified persons for appointment; and

d) opportunities for the enhancement of the abilities of individual employees.

Statutory provisions shall include administrative machinery to ensure that all terms and conditions of employment currently enjoyed by employees are transferred to the commercial entity.

Statutory provisions shall include administrative machinery to ensure that all current employees in the ATC system are ensured employment in the commercial entity.

Statutory provisions to include the establishment of an independent regulatory body (independent of the commercial entity). The independent regulatory body would ensure that:

a) The government’s obligations regarding services and facilities are fulfilled and comply with relevant ICAO documents and user’s operational requirements;

b) ATC capacity is commensurate with traffic demand, meaning traffic should be handled without delays except under exceptional circumstances such as extreme peak periods, where contingency measures should be applied;

c) High levels of service are maintained and monitored;

d) No excessive or discriminatory user charges are applied. In particular, the regulatory body should ensure that charges are based on actual and reasonable costs and are apportioned fairly between different categories of users;

e) Users are systematically consulted and costs should be transparent;

f) The commercial entity regularly prepare, adopt and publish, in consultation with the users, a short, medium and long term ongoing development plan.

Statutory provisions to include the Licensing of Air Traffic Controllers employed by the commercial entity in accordance with IFATCA Policy (IFATCA Manual Page 4323).

Statutory provisions in place to allow for a representative of the controllers to sit on the Board of Directors of the commercial entity.

Statutory provisions to provide protection for air traffic controllers’ liability in accordance with IFATCA Policy (IFATCA Manual Pages 4411 and 4412).”

Last Update: September 20, 2020  

December 21, 2019   253   Jean-Francois Lepage    1993    

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