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Treaties tabled on 12 May 2010

CHAIR —Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a legal proceeding of the parliament and warrants the same respect as proceedings of the House and the Senate. The giving of false or misleading evidence is a serious matter and maybe regarded as a contempt of parliament. At the conclusion of your evidence will you please ensure that Hansard has had the opportunity to clarify any matters with you. If you nominate to take any questions on notice, could you please ensure that your written response to questions reaches the committee secretariat within seven working days of your receipt of the transcript of today’s proceedings. I invite you to make any introductory remarks before we proceed to questions.

Mr Lucas —The four treaty actions under consideration today are amendments to our air services agreement with Brunei and new air services agreements with Spain, Switzerland and the United Kingdom. The agreement with Spain is an inaugural agreement. The agreements with Switzerland and the UK will replace older air services agreements.

Air services agreements are negotiated to permit and facilitate the operation and development of international air services under the framework of the Chicago convention of 1944, which provides an overarching civil aviation framework. International airlines cannot service a market between two countries without the framework of an air services agreement. The agreements will be implemented through an existing framework of legislation, including the Air Navigation Act, the Civil Aviation Act and the International Air Services Commission Act.

Australia maintains a standard model air services agreement which has been developed in consultation with aviation stakeholders. All efforts are made to negotiate the agreements that we are looking at today as closely as possible to the standard draft at the time the relevant agreement was negotiated. The department engages in comprehensive stakeholder consultation processes ahead of all bilateral air services negotiations. The negotiations with these countries were no exception. Prior to negotiations we invite airlines, airports, Australian government departments, state and territory government departments and a variety of industry groups to provide us with comments and input on issues of importance to them. This direct consultation specific to the negotiation supplements the department’s ongoing dialogue with key stakeholders.

As with all air services agreements, these agreements oblige the Australian government and the relevant foreign government to allow the designated airlines of each country to operate services between the two countries in accordance with the limitations settled between aeronautical authorities and subject to compliance with applicable laws, including safety, aviation security, border security including customs and quarantine, and trade practices.

The treaty level air services agreements are supplemented by arrangements of less than treaty status between aeronautical authorities, settling more detailed commercial entitlements that determine the scope of airlines’ operations under the air services agreements. These memorandums of understanding are by custom confidential between aeronautical authorities and are not distributed publicly. We have provided copies of these MOUs to the committee to aid your consideration of these agreements.

Turning to the specific treaty actions tabled for the committee’s consideration, the amendments to the air services agreement with Brunei were negotiated in 2007 and will be effected by an exchange of diplomatic notes amending the air services agreement which entered into force in 1992. The amendments proposed will modernise the nationality test in the agreement, in accordance with government policy, and introduce, also in line with government policy, an open route schedule. At present, only Royal Brunei Airlines provides air services between Australia and Brunei, operating 12 services per week.

The air services agreement with Spain was signed by the Minister for Infrastructure, Transport, Regional Development and Local Government in June 2009. The agreement will establish for the first time a treaty level air services arrangement between Australia and Spain. Spain is the last major European country with whom Australia has established an air services agreement. At present, no airlines operate between Australia and Spain, using their own aircraft; however, Qantas and Spanish airline Iberia provide joint codesharing services on routes between Australia and Spain over London and Frankfurt.

The air services agreement with Switzerland was signed in 2008, having been negotiated in 2003, and it replaces the previous air services agreement which entered into force in 1993. At present, no airlines operate services with their own aircraft between Australia and Switzerland; however, Qantas utilises the agreement to codeshare on British Airways services into Geneva and Zurich.

The agreement with the United Kingdom was signed in 2008, having been negotiated in 2006, and replaces an agreement originally negotiated in 1958, and it has been amended numerous times over the years. At present, under the agreement, three airlines operate direct passenger services with their own aircraft between Australia and the United Kingdom: Qantas, British Airways and Virgin Atlantic. Qantas operates 28 services per week via a mixture of Singapore, Hong Kong and Bangkok. British Airways operates 14 weekly services via a mixture of Singapore and Bangkok, and Virgin Atlantic operates seven weekly services via Hong Kong.

In summary, these agreements open new markets for Australian airlines to Spain, the UK, Switzerland and Brunei. The agreements increase the opportunities for the Australian community, in particular the tourism and export industries, to access markets across a range of countries. Greater opportunities for airlines to serve new markets also increases the choices and services available to Australian consumers. We would be pleased to answer any questions the committee may have on these agreements.

CHAIR —Thank you.

Senator CASH —In relation to the consultation process, there is a note here, which I understand may well be from the secretariat, which says:

The reality in the case of these treaties is that the public consultation process, the regulation impact assessment and the JSCOT examination are taking place after the changes contained in the treaty are in place.

Would you clarify when the consultation process took place, because, from what I am hearing from you, these agreements are already up and running.

Mr Lucas —Certainly. We go through a process of consultation with stakeholders prior to the negotiation of the agreements. When we negotiate the agreements, they are given interim administrative effect between aeronautical authorities so that airlines can access the rights available under the agreements immediately. Once the agreements have been negotiated, we commence the domestic processes to have them signed and subsequently brought into legal force. During that process, we are engaged in consultation with Australian government departments in the process of securing their agreement to the text for signature.

Senator CASH —In relation to the Brunei agreement, point 21 of the national interest analysis states:

While not all stakeholders specifically addressed the amendments to the Agreement, there was general support for liberalisation ...

When you say there was ‘general support’, what issues were raised that were not supportive of this agreement?

Mr Lucas —As I recall, there were no specific objections to the treaty amendments which were settled and which are now before the committee. In the course of air services negotiations, there tends to be a range of views on the ‘hot button’ issues of capacity, entitlements and traffic rights. In the lead-up to negotiations there was a range of views from stakeholders about how much capacity it was appropriate to settle. We would be very happy to confirm on notice whether there were any negative views of the treaty amendments proposed here. My recollection is that there were not, but we will confirm that.

Senator CASH —That would be greatly appreciated. Also in relation to the Brunei agreement, point 7 of the national interest analysis refers to an amendment of the definition of ‘agreed services’, and I can see why that needs to be almost clarified. It also refers to the adoption of the proposed open route schedule. Could you clarify what the open route schedule is, and how that is actually going to be extended under the agreement?

Mr Lucas —The structure of the treaty level air services agreement includes an outline, and it is usually in a route schedule in an annex to the agreement, which is the technical structure, that sets out the routes that airlines can operate. It has been Australian government practice for quite a number of years to negotiate that route schedule to be as open as possible, and in the case of this amendment that allows airlines to operate from any points in Australia via any intermediate points to any points in Brunei and beyond to any points. It is vice versa for Brunei carriers. Those route rights are then restricted by provisions in the memorandum of understanding between aeronautical authorities that restrict the ports at which airlines may exercise traffic rights—that is, to pick up and discharge passengers, cargo, mail et cetera.

Senator CASH —In relation to the amendment of the definition of grade services, is that literally to clarify so that you can have commercial services, or should I say transport of passengers and cargo separately?

Mr Lucas —Correct.

Senator CASH —That was obviously an issue, and it just needs clarification—so you are able to do that?

Mr Lucas —Correct.

Senator PRATT —I want to ask about the manner in which these agreements are replacing MOUs, and the difference between a treaty status and an MOU, and why we are pursuing MOUs before making treaties and if this is common practice.

Mr Lucas —The practice that we follow in relation to memorandums of understanding and treaties is the standard international practice in the negotiation of air services agreements. The process involves a memorandum of understanding which is signed at officials level between aeronautical authorities that sets out and makes available immediately the rights under the agreement. The MOU also goes into more detail than the treaty level air services agreement. The agreement provides a higher level framework, and the memorandum of understanding fills in some of the detail underneath that high level treaty framework. The MOU also gives the treaty interim administrative effect, which essentially means that the aeronautical authorities treat the agreement as if it were binding—we observe it even though it is not technically in a legal sense in force and binding. The binding treaty action is only taken following the consideration of the treaty by this committee, and the reason for bringing the treaty into administrative effect and for bringing the rights in the MOU into effect immediately is to ensure that airlines can access the rights under those arrangements as quickly as possible and so that we do not hamper airlines’ commercial activities. The nature of the aviation industry is that airlines will often want to access the rights negotiated at a set of talks as soon a possible.

Senator CASH —What, then, would be the impact if this committee decided, no, it would not ratify the treaty? I personally cannot see that happening, but that is beside the point. I am interested to know what the impact would be.

Mr Lucas —That probably is a broader question than just air services agreements, so perhaps my colleague from the Department of Foreign Affairs and Trade might be better placed to comment.

Mr Mason —Yes, the answer is that with this treaty, as with all other treaties that the committee considers, the committee, as you know, writes a report and the critical parts of that report are the final paragraphs where the committee recommends taking binding treaty action or not. If the committee recommends against binding treaty action, then the government is obliged to consider that and take it into account.

Senator CASH —But ultimately it is for the government to decide whether or not—

Mr Mason —Ultimately it is for the government to decide, because in a legal sense it is the executive that ultimately decides on treaty action or not. The government could, if it wished to, whilst taking into account what the JSCOT has said, decide that it would go ahead with the treaty and take the binding treaty action. The government very rarely does that because, as the former foreign minister, Mr Downer, once put it, it would be a very brave government that would be prepared to override the recommendations of a bipartisan committee that is chaired by a government member and which has set out the reasons why it is recommending against taking the treaty action. That said, governments, after weighing all that up, ultimately can go ahead and take the binding treaty action. So it would be a decision for the government as to what degree of weight it wanted to put on the recommendations by the Joint Standing Committee on Treaties.

Senator CASH —Thank you.

Mr FORREST —I am just a little bit curious as to why a large number of these proposals come to the committee together. Is that unusual, or why is that the case with so many at once?

Mr Lucas —Just to confirm the question: why are a number of air services agreements signed at different times coming forward at once?


Mr Lucas —The reason is simply timing and coincidence. As we worked to prepare the documentation for the tabling of the treaties, the tabling dates resulted in them coming together all at once.

Mr FORREST —Do you have others that are likely to come quickly and in a bunch together?

Mr Lucas —We are currently working through the process of preparing the documentation for air services agreements with Brazil, Mexico and Turkey to be tabled. The timing of that will depend on the timing of clearance of those amongst agencies and availability of tabling dates in the next few months.

Mr FORREST —The issue of capacity of existing airports is bothering me a little bit. What I am envisaging is that this is just business as usual being formally documented and agreed, but if there is a likelihood of increased traffic in either direction has that been considered for the impacts on domestic Australian airports, plus all the others?

Mr Lucas —The question of capacity at airports is not something that comes within the scope of air services agreements. The practice in relation to capacity and access to airports is that where an airport is nearing capacity and airlines need to obtain scarce slots for operations at that airport, the slots are allocated in Australia, as in other countries, by a separate independent slot allocation agency—Airport Coordination Australia, in the case of Australia—and airlines go through that stand-alone national process to obtain slots to actually access the airports.

Mr FORREST —My assumption is correct, though, that these arrangements are already operating anyway, isn’t it? There will not be a dramatic change because it has been developed through a memorandum of understanding and developed up to a formal agreement.

Mr Lucas —That is correct. The effect of binding treaty action being taken on these air services agreements is to deliver final binding legal force to the treaty level arrangements.

Mr MURPHY —Mr Lucas, how is an assessment conducted to determine that that memorandum of understanding is in Australia’s interests?

Mr Lucas —The memorandum of understanding is negotiated by the department and signed by the department with our overseas counterparts, in accordance with a mandate set by the Minister for Infrastructure, Transport, Regional Development and Local Government. The mandate that the minister approves is prepared based on our assessment and our consultation processes with a range of industry and government stakeholders to take into account the needs and pressures that industry sees and the broader bilateral relationship issues that get highlighted by our colleagues at the Department of Foreign Affairs and Trade.

Mr MURPHY —Does everyone who has a significant interest get consulted in that process?

Mr Lucas —We believe that our consultation process captures everyone who has an interest in that. Our consultation list is set out in the consultation annexes to the national interest analyses and it demonstrates the breadth of organisations and individuals who are consulted, but if there are other entities or individuals who would like to be consulted we are always happy to add them to our stakeholder consultation process. It is our hope that our process to judge the interest of industry and interested stakeholders is as broad as possible.

Mr MURPHY —Thank you.

CHAIR —As there are no further questions, thank you for attending to give evidence today. If the committee has any further questions the committee secretariat may seek further comment from you at a later date.

[9.28 am]