Commentary Part 1 – Airports Modifying licences Section 23: Restriction on power to modify
107.Section 23 provides a restriction on the CAA’s powers to modify licence conditions. It applies where a licence condition contains an exception (“derogation”) relating to or operating by reference to financial arrangements entered into before section 3 of the Act comes into force. This may occur, for example, where a ring-fencing licence condition is subject to a derogation to prevent it cutting across financial arrangements entered into by the licence holder or a person connected to the licence holder before section 3 comes into force.
108.In these circumstances, the CAA cannot modify the licence by removing or restricting the derogation unless it has determined that: (i) there has been a material change in circumstances since the derogation was granted; and (ii) the benefits of modifying the derogation are likely to outweigh its adverse effects to users of air transport services. The CAA must publish its determination on or before giving notice of its proposal to make a licence modification.
109.For example, a typical ring-fencing licence condition found in other regulated sectors is a prohibition on the granting of security over assets of the regulated business. Where an operator of an airport area (or a person connected to the operator) has existing lending in place at the time that section 3 comes into force, which is secured on the assets of the regulated company, the regulator may choose to include such a condition in the licence but with a derogation in respect of the existing lending. In these circumstances the CAA would not be able to remove or restrict this derogation until the dual test had been satisfied.