The following letter from solicitors Phillips Fox is self-explanatory. The letter questions why Airservices Australia is not following Government policy in relation to the National Airspace system.

Following the letter there are some background notes and points in relation to the proposed action.

  27 April 2006

Dear Mr Russell

Claim against Airservices - NAS decisions

We act for Mr Dick Smith.

Our client has expressed considerable concern over the conduct of the Board and executive of Airservices in relation to the National Airspace System (NAS).  We are instructed on the issues set out below.

Under the Air Services Act 1995 Airservices is responsible for regulating certain airspace.

Australia has adopted a policy on airspace which involves the implementation of the American airspace model which is called NAS.

The implementation of NAS has Cabinet approval and broad government and industry endorsement including from the Civil Aviation Safety Authority.  The Civil Aviation Safety Authority and the responsible Minister for Airservices, The Hon Warren Truss MP, have made a number of statements supportive of the NAS policy.

The internal tension between regulator and commercial player has been recognised for a long time by the government and the proposal to transfer the current regulatory functions of Airservices into a new organisation is long overdue.  However, in the meantime, Airservices is engaged in a spate of pre-emptive decision making prior to that separation of regulatory functions. 

Airservices has been engaged in conduct and / or decision making which has not taken into account the NAS policy.  That conduct and / or decision making has taken into account a report on safety issues which is known to contain significant errors.

Airservices, and the officers and members of Airservices, have been engaged in conduct and / or decision making which, to a fair minded observer, would give rise to a reasonable apprehension of bias.

Conduct leading up to a determination by Airservices under Air Services Regulation 2.04 in relation to airspace and the determination itself are amenable to review under the Administrative Decisions (Judicial Review) Act 1977 (AD(JR) Act) or section 39B of the Judiciary Act 1903 (Judiciary Act).

The failure of the Board of Airservices to keep the responsible Minister informed of the operations of Airservices in relation to the implementation of the NAS policy may be in breach of their obligations under the Commonwealth Authorities and Companies Act.

The errors of law that may be alleged against Airservices can be extracted from the AD(JR) Act.  They are:

1                   that procedures that are required by law to be observed in respect of the conduct have not been, are not being, or are likely not to be, observed;

2                   that the person who has engaged, is engaging, or proposes to engage, in the conduct does not have jurisdiction to make the proposed decision;

3                   that the making of the proposed decision would be an improper exercise of the power conferred by the enactment in pursuance of which the decision is proposed to be made; in

3.1      taking an irrelevant consideration into account in the exercise of a power;

3.2      failing to take a relevant consideration into account in the exercise of a power

3.3      an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;

3.4      an exercise of a power in a way that constitutes abuse of the power.

4                   that an error of law has been, is being, or is likely to be, committed in the course of the conduct or is likely to be committed in the making of the proposed decision;

5                   that there is no evidence or other material to justify the making of the proposed decision; and

6                   that the making of the proposed decision would be otherwise contrary to law.

The errors of law under section 39B of the Judiciary Act are similar in nature.  The issues involve a 'matter' arising under a law of the Commonwealth.

There are three principal areas of operation which give rise to the above grounds of review.  They relate to the application of the NAS policy and the reasonable apprehension of bias in that Airservices may not bring a clear and impartial mind to the determination process.

Failure to consider and apply the government's NAS policy

The conduct which gives rise to the above errors of law relates to the implementation of the NAS government policy.

It is evident to our client that Airservices is acting in a manner which is inconsistent with the government policy to implement the NAS airspace system. 

We have set out below part of the factual background which our client considers substantiates the allegations of errors of law.

On 29 March 2006, the CEO of Airservices had made a decision, recorded on 31 March 2006 in the outcomes of a closed meeting between the CEO and 11 airline pilots, which concluded that 'those present agree that further implementation of the remaining NAS reforms be halted'. 

At the same time that the Minister's office is advising the public of the government's strong support for the US NAS system, Airservices is actively winding back the implementation of the NAS system.  As an example, the category of airspace north of Melbourne is being inexplicably reversed by Airservices without proper analysis and contrary to the government's policy on NAS.

The determination, or proposed determination, by Airservices in respect of the airspace north of Melbourne involves a clear departure from the NAS policy.  Airservices is obliged to take the NAS policy into account when making a determination in relation to airspace, unless there are strong coherent reasons to the contrary in the particular circumstances.  There is no objective and probative evidence that the application of the NAS policy in relation to the Melbourne airspace would lead to an inappropriate outcome. 

The so called 'safety case' study (Airspace Risk Assessment Class E over Class D Towers) does not have scientific legitimacy and does not constitute objective and probative evidence which would be sufficient to displace the application of the NAS policy.  Airservices is already on notice of the significant errors contained in that report.  Further, we note that Airservices is currently performing a contract in the United States which involves operating Class D towers with Class E airspace above.  It appears that neither the United States, nor Airservices in operating in that country, have taken the same view on safety as that set out in the 'safety case' report.

We are instructed that, under NAS, the airspace north of Melbourne should have been upgraded from Class G to Class E.  However the application of NAS and the Class E classification was not even considered by Airservices.

We are instructed that officials in Airservices may have a view that, as the NAS policy has not been formally notified to Airservices by the Minister under either the Commonwealth Authorities and Companies Act or the Air Services Act, then it is not a relevant consideration or guiding policy in decision making.  Such a view would be mistaken.  A decision maker making a decision under a law of the Commonwealth must have regard to a government policy, endorsed by Cabinet and fully and continually supported by the responsible Minister.  It is well established law that the government policy must be applied unless there are real and cogent reasons in the circumstances to vary from that policy. 

Inconsistency in decision making

We are instructed that there is material inconsistency in the determinations on airspace made, or proposed to be made, by Airservices.  While Airservices is considering or has made a determination after a request from Qantas in relation to the airspace above 7,500 feet north of Melbourne, which will change that category from Class G to Class C, there was an agreement between Qantas and Airservices that Qantas could operate its subsidiary Jetstar at Hamilton Island with their 180 passenger Airbus operating after the air traffic control tower was closed.  This means that the Qantas subsidiary Jetstar is operating in the Class G uncontrolled airspace where the collision risk is far higher at the low altitudes compared with the airspace north of Melbourne. 

We understand that the computer modelling available to Airservices indicates that the collision risk of operating large jets in that type of situation is more than 100 times greater than above 7,500 ft such as in the airspace north of Melbourne.

There appears to be no safety or regulatory reason for the inconsistent approach by Airservices.  Our client notes the economic benefits to Jetstar and Qantas.

Reasonable apprehension of bias

On the basis of our instructions we consider that there is a basis for a fair minded observer, cognisant of all the relevant facts, to form a reasonable apprehension of bias in that they may form the view that you, as CEO of Airservices, may not bring a clear and impartial mind to the decision making processes involving airspace.  Examples of the factual background to this allegation follow.

We are instructed that you, as CEO of Airservice and apparently the only senior Airservices officer present, met with a select group of airline pilots on 29 March 2006.  At that meeting you agreed 'that further implementation of the remaining NAS reforms be halted.'  The group of airline pilots at that meeting were not representative of the aviation industry and certainly only a small component of the previous broad consultative process that led to the adoption of NAS as the government's policy. 

A substantial portion of the CEO's remuneration and the remuneration of other executives is linked to the profitability of Airservices.  We note that in a letter to a constituent dated 4 May 2004 from the Federal Member for Cook, Bruce Baird MP, stated:

'I can confirm that as a commercial authority, the Board of Airservices Australia had determined a link between financial performance and at risk remuneration for senior managers.'

In the past Airservices has claimed that NAS will cost more for it to administer.  This gives rise to a reasonable apprehension that the senior executives will seek to limit the costs of Airservices.  This may influence decisions regarding airspace. 

The examples given above also support this contention.

In light of the position of Airservices as a regulator of airspace and the conflict of interest inherent in being a senior manager of Airservices, sound governance practice would be to conduct the regulatory operations with the utmost transparency.  This has not happened. 

Request to Airservices

We request that Airservices:

1                   not change the category of the airspace north of Melbourne from category G to category C (a further departure from the NAS policy position) if it has not already been changed;

2                   set aside the determination which changed the category of the airspace north of Melbourne from category G to category C if that determination has already been made;

3                   engage in conduct which is consistent with lawful obligations and consider and apply the NAS policy in determining the category of airspace north of Melbourne;

4                   undertake that it will act in a manner consistent with NAS policy in future;

5                   not take into account the 'Airspace Risk Assessment Class E over Class D Towers' Study in making any determination in relation to airspace;

6                   implement an open and transparent decision making process in relation to airspace; and

7                   confirm that it will keep the responsible Minister informed in accordance with the Board's obligations under the Commonwealth Authorities and Companies Act and the Air Services Act.

We seek a written acknowledgement from Airservices that it will comply with the above list of points. 

If Airservices does not provide the written acknowledgement before close of business 5 May 2006 our client may proceed to make an application to the Federal Court without further notice to Airservices. 

Yours sincerely

Background

Airservices is a government business.

Airservices is established under the Air Services Act and has regulatory and commercial responsibilities.

The US National Airspace System (NAS) has been adopted by the Australian government as the model for Australian airspace.  That policy direction has endorsement from Cabinet and other government entities such as the Civil Aviation Safety Authority.

Airservices should comply with government policy.  It is not complying with the NAS policy.

There is no objective sensible reason for Airservices not to comply with the government policy on NAS.

Under the Airservices Act and Commonwealth Authorities and Companies Act Airservices must keep the Minister informed of its operations.

The Minister, the Hon Warren Truss MP, is responsible for ensuring that Airservices conducts its operations in an appropriate and transparent manner.

The Minister should act and ensure that Airservices conducts its regulatory activities consistent with the government's policies on air safety and air travel.

In light of the recognised conflicting roles of regulator and commercial business, Airservices should operate with the utmost probity and transparency.

Points in relation to the particular issues

The government endorsed Uhrig report places a strong emphasis on the role of the responsible Minister in managing agencies in their portfolio.  The Hon Warren Truss MP is accountable to Parliament and the public for the operations of Airservices.

The Administrative Decisions (Judicial review) Act 1974 and the Judiciary Act 1903 provide the legal basis for a Federal Court challenge to the conduct of Airservices.