In potentially the final chapter of this long running saga, on 16 September BAA filed an appeal with the Competition Appeal Tribunal (CAT) against the Competition Commission's (CC) decision of 19 July ordering BAA to proceed with the sale of Stansted and one of its Scottish airports (Edinburgh or Glasgow).
The CC had ordered that the divestment process should start on 19 October 2011 at the latest, but while BAA's appeal is likely to delay this timetable further, the CAT will be under pressure to hear the review promptly given the long delay already since the original CC divestment order following its March 2009 report. Potential bidders will eagerly await the outcome of the appeal, and in particular whether, as BAA has requested, the CAT will order a suspension of the sale timetable while the appeal is heard.
The substance of the appeal relates to BAA's attempt to convince the CC, prior to its 19 July decision, that there had been material changes of circumstances since the CC's original March 2009 report meaning that the divestment of Stansted was no longer proportionate and appropriate.
Although the CC rejected all of BAA's arguments, BAA is now asking the CAT to find that the CC's assessment was flawed and/or irrational in not recognising a "material change in circumstances" and maintaining the divestment order despite three factors:
- the government's decision not to expand runway capacity at London airports;
- the significant fall in the level of Stansted's profitability; and
- the impact of these on the possibility of common ownership of Heathrow and Stansted giving rise to an adverse effect on competition.
In the alternative, BAA is challenging the proportionality of the divestiture remedy and its timing and sequencing given the current economic climate and the potential damage to BAA and its shareholders in ordering the divestment of Stansted within a short specified period.
This latest chapter follows on from the Supreme Court refusing BAA leave to appeal the Court of Appeal's judgment of last year which restored in full the CC's 2009 Report. That in turn followed BAA's initial success before the CAT in having the CC Report overturned on grounds of bias. Please see our previous updates for more details of these previous developments.
Now the CAT will again have to make a decision on whether to endorse the CC's controversial decision. BAA may have concerns about being forced to sell an asset in the current climate, although given the economic instability it remains to be seen whether further delay will lead to the market improving or in fact deteriorating further.
Considering the delays that appeals have already caused to the implementation of the original CC order, the CAT may have limited appetite for a further appeal, but it will have to consider BAA's arguments. The CAT has previously recognised that CC decisions involve a significant element of judgement and said that it will allow the CC an appropriate margin of appreciation such that it will not intervene without good reason.
However, unless the BAA appeal is dismissed as vexatious, or the CAT decides not to suspend the sale timetable while the appeal is heard - both of which seem highly unlikely - there will be some further delay to the sale process with pressure for a hearing before the CAT perhaps early next year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
