Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

Project Number: 43429 February 2014

Regional: Institutional Strengthening for Aviation Regulation (Financed by the ADB’s Technical Assistance Special Fund)

Prepared by: Kim Murray, Team Leader and Michael Murray, Project Manager McGregor & Company P.O. Box 37703 Parnell Auckland 1151 New Zealand For: Asian Development bank (executing agency) Pacific Aviation Safety Office (implementing agency)

0

������ ��������� ����

Final Report

TA 7684-REG: Institutional

Strengthening for Aviation Regulation

VOLUME 1:

Commentary, Analysis,

Conclusions and Recommendations

January 2014

������������������

���������������������

�������� �!!"!��#�$�%���� �

&���'���(�)*+,-,".��!--/���&��0������(�)*+,-,".��!---�

������������1�����������2�$�'�3���4��4�5���������)*+,+,+---�/-�

������������������'����������

�����2�������4��4�5���������)*+,-,".��!--/�

1

PREFACE

This is the Final Report for the Technical Assistance which has been carried out over the consultancy contract period between 15 August 2011 and 31 January 2014. The Consultant’s Quarterly Reports were required to be in a format suitable for the final report. This Final Report therefore is a consolidation of the inception report and the eight quarterly reports that have been provided to the ADB and PASO member States during the contract period. The Third Quarterly Report in August 2012 marked the completion of the work carried out by the two regulatory specialists and the financial specialist in accordance with the terms of reference. That work is included in this Final Report. The Report consists of 12 volumes. Volume 1 contains commentary and analysis together with conclusions and recommendations. Volume 2 contains all the appendices referred to in Volume 1. The information concerning each of the ten States within the scope of the TA has been written up in separate volumes for each State, namely Volumes 3 to 12 inclusive. As well as satisfying the reporting requirements for the TA the individual State volumes: update the 2007 Legal and Technical Review of the then seven PASO member States; summarise the regulatory situation in each of the ten States party to PICASST and set out the basis for the analysis, conclusions and recommendations in Volume 1. All of the ten States have been visited by at least one member of the Consultant’s team.

The separate volumes on each State include detailed assessments of the regulatory situation and aviation law in all States together with summaries of issues identified for law reform. The law reform issues are presented as a recommended aviation law reform programme and can be used as drafting instructions for the State’s Government Law Officers or Legislative Counsel to progress as instructed by relevant Ministers. In some instances States have requested assistance with preparing new or amending draft legislation. The assistance provided together with the draft legislation is recorded and included in the individual State volumes. The Consultant’s team members record their grateful appreciation for all the hospitality and assistance provided to them in order to facilitate the work on the various components of the terms of reference.

2

CONTENTS

Page Preface .. .. .. .. .. .. .. .. 1 List of Additional Volumes, Figures and Tables .. .. 5 Glossary of Terms .. .. .. .. .. .. .. 6

1. INTRODUCTION Contract Inception and Progress .. .. .. .. .. 7 Background to TA .. .. . .. .. .. .. 9 The Terms of Reference .. .. .. .. .. .. 10 2. HARMONISATION OF AVIATION LAW The Global Dimension .. .. .. .. .. .. 12

Chicago Convention .. .. .. .. .. .. 12 ICAO Global Aviation Safety Plan .. .. .. .. .. 13 ICAO High Level Safety Conference 2010 .. .. .. .. 13 ICAO RSOO Symposium 2011 .. .. .. .. .. 14 The New Annex 19 .. .. .. .. .. .. .. 15 38th ICAO Assembly Resolutions .. .. .. .. .. 17 The Regional Dimension .. .. .. .. .. .. 18 Evolution of PASO .. .. .. .. .. .. .. 18 PASO’s Sustainability .. .. .. .. .. .. .. 21 World Bank Pacific Aviation Infrastructure Programme .. .. 22 The National Dimension .. .. .. .. .. .. 24 New Zealand Law as Model Law .. .. .. .. .. 24 New Zealand Treaty Status .. .. .. .. .. .. 26 New Zealand Primary Aviation Legislation .. .. .. .. 27 New Zealand Secondary Aviation Legislation .. .. .. 30 The Current Level of Harmonisation Achieved .. .. .. 33 3. PRINCIPLES OF SAFETY REGULATION Principles and New Zealand Model .. .. .. .. 35 Discharge of State Responsibilities .. .. .. .. .. 35 The Nature of Responsibility .. .. .. .. .. .. 36 Role of the Safety Regulator .. .. .. .. .. .. 36 The New Zealand Regulatory Model .. .. .. .. 38 Certification .. .. .. .. .. .. .. .. 40 Risk Assessment and Surveillance .. .. .. .. .. 40 Safety Information .. .. .. .. .. .. .. 41 Adopting the New Zealand Model .. .. .. .. .. 42 Institutional Considerations .. .. .. .. .. 43 Strategy and Organisational Structure .. .. .. .. 45 Purpose of a Civil Aviation Authority .. .. .. .. 46 Roles and Functions of a Civil Aviation Authority .. .. .. 46

3

4. SAFETY REGULATION AND INSTITUTIONAL ARRANGEMENTS Capacity of the States .. .. .. .. .. .. 49 Organisational Requirements – States .. .. .. .. 52 Institutional and Organisational Options .. .. .. .. 53 Office .. .. .. .. .. .. .. .. .. 53 Small Civil Aviation Administration .. .. .. .. .. 54 Regular Civil Aviation Authority .. .. .. .. .. 58 Recommended Civil Aviation Administration Structures .. 59 Recommended ICT System .. .. .. .. .. 60

5. SAFETY OVERSIGHT AND REGULATORY REQUIREMENTS

ToR Tasks – Regulatory Specialists .. .. .. .. 63 Task (i) Review existing ICAO audit results, provided by national civil aviation authorities (CAAs). Review PASO work programs and national strategies. .. .. .. .. 65 Task (ii) Recommend standardised compliance and enforcement documents to be adopted by national authorities, based on the harmonised regulatory environment .. .. .. .. .. .. .. .. 67 Task (iii) Recommend organisational structures, work planning, record-keeping procedures, and financial management systems for the national CAAs .. .. .. 69

Work Planning .. .. .. .. .. .. .. 69 Record-keeping procedures .. .. .. .. .. .. 69

Financial management systems .. .. .. .. .. 70 Task (iv) Review and recommend improvements to PASO internal procedures for planning and administration of the annual work plan for each technical discipline .. .. 71 Task (v) Document recommended improvements through updates to PASO internal manuals and external guidance material, and conduct on-the-job training with PASO staff in revised procedures .. .. .. .. .. .. 74

6. FINANCIAL MANAGEMENT OF PASO Task (i): Historical Financial Performance .. .. .. 76 Subscriptions .. .. .. .. .. .. .. .. 77 Operations Revenue .. .. .. .. .. .. .. 77 Fee Structures and PASO Sustainability .. .. .. .. 78 The Fee Structure .. .. .. .. .. .. .. 80 Task (ii): Financial Management Capacity .. .. .. .. 81 Budgeting Systems .. .. .. .. .. .. .. 82 Comments on PASO P&L Statement January-May 2012 .. .. 83 Timing of Budget .. .. .. .. .. .. .. 84 Planning .. .. .. .. .. .. .. .. 84 Sufficiency of Management Cost Accounting .. .. .. 85 Internal Controls, Audit Systems, and Data Processing .. .. 86 Tasks (iii) and (v): Finance Manuals .. .. .. .. 87 Tasks (iv): Institutional Strengthening and Financial Management 88 Financial Information .. .. .. .. .. .. .. 89 Corporate and Strategic Planning .. .. .. .. .. 92 Budget Policy and Procedure .. .. .. .. .. 93

Recovery of PASO Costs .. .. .. .. .. .. 95

4

7. PASO INSTITUTIONAL ARRANGEMENTS AND ORGANISATION Governance .. .. .. .. .. .. .. .. 99 Treaty and PASO Constitution .. .. .. .. .. 101 Assumptions .. .. .. .. .. .. .. .. 102 PASO Objectives .. .. .. .. .. .. .. 103 Safety Culture .. .. .. .. .. .. .. 104 Role and Functions of PASO .. .. .. .. .. 106 Key Issues .. .. .. .. .. .. .. .. 109 Oversight Strategies .. .. .. .. .. .. .. 110 Organisational Structure and Establishment .. .. .. 110 8. SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS International Background .. .. .. .. .. .. 114 Pacific Regional Developments .. .. .. .. .. 114 Harmonisation of Aviation Law .. .. .. .. .. 116 Principles of Safety Regulation .. .. .. .. .. 116 Safety Regulation and Institutional Arrangements .. .. 117 Safety Oversight and Regulatory Requirements .. .. 119 Financial Management of PASO .. .. .. .. .. 120 PASO Institutional Arrangements and Organisation .. .. 122 APPENDICES (see Volume 2)

Appendix 1: Terms of Reference Appendix 2: Work Programme and Methodology Appendix 3: Summary of TA Activities Appendix 4: Final Workshop PowerPoint Presentation Appendix 5: State Questionnaire Appendix 6: Pacific Upper Airspace Workshop Ade Memoire Appendix 7: Organisational Strategies Appendix 8: Compliance & Enforcement Appendix 9: Information Framework, ICT System Appendix 10: PASO Profit & Loss Analysis Appendix 11: Basic Corporate Planning Exercise Appendix 12: Status of New Zealand with Regard to International Air Law Instruments Appendix 13: Level of Harmonisation Among PASO Member States Based on NZ Law as Model Law as at December 2013 Appendix 14: State Legal Requirements and Capacity Summary Appendix 15: Consolidated List of TA Recommendations

5

ADDITIONAL VOLUMES: Volume 3: Cook Islands Volume 4: Republic of Kiribati Volume 5: Republic of Nauru Volume 6: Niue

Volume 7: Papua New Guinea Volume 8: Samoa Volume 9: Solomon Islands Volume 10: Kingdom of Tonga Volume 11: Tuvalu Volume 12: Vanuatu

LIST OF FIGURES

Figure 1 The Links to Institutional Strengthening Figure 2 Organisational Structure of an Office of Director of Civil Aviation Figure 3 Organisational Structure of a Small Civil Aviation Administration Figure 4 Anatomy of Regulatory Performance Figure 5 Future PASO Organisation

LIST OF TABLES

Table 1 Team Member Time Contribution Table 2 Categories of Civil Aviation Administration Table 3 Current & Effective State Institutional Categories Table 4 Indicative Internet Speeds PASO Member States Table 5 ICAO Universal Safety Oversight Program State Audits Table 6 Universal Security Audit Program State Audits Table 7 PASO Work Plan 2011: Planned-Budget-Actual Table 8 2005 and 2006 Deficit (AUD) Table 9 Administration Costs & Subscription Revenue 2005 – 2011 (AUD) Table 10 Operation Revenue & Costs 2007 – 2011 (AUD) Table 11 Total Financial Shortfall 2005 – 2011 (AUD) Table 12 PASO Budget v Actual - Total Income 2007-2011 (AUD) Table 13 PASO Operating Revenue - Actual v Budget 2007-2011 (AUD) Table 14 Financial Budget v Work Schedule (2012) Table 15 “Simplified” Version of 2011 Profit & Loss (AUD) Table 16 Global Average Levels of Compliance Table 17 Components of the Air Transport System for PASO Member States Table 18 Components of the Air Transport System for Individual PASO

Member States Table 19 PASO Establishment for Three Oversight Strategies

6

GLOSSARY OF TERMS ATPL = Airline Transport Pilot Licence

CAAF = Civil Aviation Authority of Fiji

CAANZ = Civil Aviation Authority of New Zealand

CASA = Civil Aviation Safety Authority of Australia

CASSOS = Caribbean Safety and Security Oversight System

CMA = Continuous Monitoring Approach

CPL = Commercial Pilot Licence

CROP = Committee for Regional Organisations in the Pacific

CSA = Comprehensive Systems Approach

DME = Distance Measuring Equipment (normally used with VOR)

EASA = European Aviation Safety Agency

FTE = Full Time Employee

GANP = Global Air Navigation Plan

GASP = Global Aviation Safety Plan

GASR = Global Aviation Safety Roadmap

GNSS = Global Navigation Satellite System

GSI = Global Safety Initiatives

HLSC = High Level Safety Conference

ICAO = International Civil Aviation Organisation

ICT = Information and Communications Technology

ILS = Instrument Landing System

LTR = Legal and Technical Review

MCTOW = Maximum Certificated Take Off Weight

MOC = Memorandum of Cooperation

NDB = Non-Directional Beacon (old technology navigation aid)

PASO = Pacific Aviation Safety Office

PAIP = Pacific Aviation Infrastructure Programme

PICASST = Pacific Islands Civil Aviation Safety and Security Treaty

PPL = Private Pilot Licence

RAIO = Regional Accident Investigation Organisations

RASG = Regional Aviation Safety Group

RSOO = Regional Safety Oversight Organisation

SARP = Standards and Recommended Practices

SMS = Safety Management Systems

SPC = Secretariat of the Pacific Community

SSP = State Safety Programme

TA = Technical Assistance

TOR = Terms of Reference

USAP = Universal Security Audit Programme

USOAP = Universal Safety Oversight Audit Programme

VOR = Very High Frequency Omnidirectional Range (navigation beacon)

VSAT = Very Small Aperture Terminal

7

1. INTRODUCTION Contract Inception and Progress Reporting 1.1 An Inception Report was provided in accordance with the contract dated 9 August

2011 entered into between the ADB and McGregor Murray & Company Ltd (the Consultant). That report: brought together some basic information relevant to the TA; introduced the Consultant to the PASO Council Members; outlined the Consultant’s intended work programme; reported on preliminary issues identified; and provided a basis for initial consultation with the member States on issues relevant to the TOR. The TORs are included as Appendix 1 to this report. Much of the content of the inception report is incorporated into this report, including the Consultant’s work plan and methodology (Appendix 2).

1.2 The Consultant has been providing aviation and other consulting services in the

Pacific region and further afield over many years. For this TA the Consultant has provided a consultancy team made up as follows:

Kim Murray (KIM) Legal specialist (team leader) Michael Murray (MEM) Regulatory specialist (project manager) Max Stevens (MBS) Regulatory specialist Ian Brown (IAB) Financial specialist

1.3 Full curricula vitae and summaries of work experience relevant to the TA were

submitted to the ADB as part of the competitive tendering process leading to the awarding of the TA contract to the Consultant. These are on file with the ADB and can also be made available to PASO Council Members if required.

1.4 In accordance with the contract, a notice to proceed dated 11 August 2011 was given

to the Consultant and the TA was deemed to have commenced on 15 August 2011. The ADB advised all Council members of the TA’s commencement by letters dated 28 September 2011.

1.5 The executing agency for the TA is the ADB. The PASO Council of Directors serves

as the project’s steering committee and the General Manager of PASO served as the TA coordinator.

1.6 The First Quarterly Report was provided to the ADB in December 2011. That report

included extensive commentary on the New Zealand regulatory model and the principles of aviation safety regulation. It also included an outline of the initial work done to improve the financial management of PASO.

1.7 The Second Quarterly Report was provided to the ADB in May 2012. It included a

preliminary assessment of the financial management issues concerning PASO. It also included a second volume covering the regulatory situation in eight of the ten member States after visits to most of the States by at least one of the regulatory specialists. The report also included a review of the aviation law in Tonga and Vanuatu.

1.8 The Third Quarterly Report in July 2012 incorporated all the work of the two

regulatory specialists and the financial specialist up to the end of their respective three months’ time allocations in the TORs. Accordingly that report included new chapters reporting on each of the regulatory tasks and financial management issues relating to PASO. The financial information relating to PASO is up until the end of May 2012.

8

1.9 The Third Quarterly Report also included a new Chapter concerning PASO

institutional arrangements and organisation. That Chapter proposed recommendations about how the organisation needs to develop to fulfil a broader mandate for safety and security oversight on behalf of its member States. The Third Quarterly Report included a summary of conclusions and recommendations as at July 2012.

1.10 On the completion of the regulatory and financial components of the TORs the

aviation legal specialist continued to update the quarterly reports as the legal work progressed. The Fourth Quarterly Report in October 2012 principally reported on the legal work in Solomon Islands (Volume 9).

1.11 The Fifth Quarterly Report included reporting on work done on Kiribati aviation law

(Volume 4) and Samoa (Volume 8) together with progress on law reform for Vanuatu (Volume 12). In addition Chapter 2 on harmonisation of aviation law was developed with the inclusion of further comment on aspects of utilising New Zealand aviation law as model law.

1.12 In March 2013 an abbreviated Sixth Quarterly Report was prepared but the full 12

volumes of the report were not reprinted. That report however incorporated most of the review and analysis of the aviation law of PNG.

1.13 The Seventh Quarterly Report consisted of a full reprint of all 12 volumes

incorporating all work up until the end of May 2013. In particular a significant ICAO development was the adoption of a new Annex 19 by the ICAO Council as explained in Chapter 2 below. The Seventh Quarterly Report included the review and analysis of aviation law in all ten of the PASO member States as set out in Part B of each separate State volume.

1.14 The Eighth Quarterly Report principally involved reporting on progress with aviation

law reform in Kiribati (Volume 4), Niue (Volume 6), Solomon Islands (Volume 9), Tuvalu (Volume 11) and Vanuatu (Volume 12).

1.15 This final report has added into the relevant volumes the draft legislation prepared for

Niue and Tuvalu subsequent to completion of the Eighth Quarterly Report. The contents of all quarterly reports has been brought forward and incorporated in this final report. A more detailed summary of TA activities conducted in each quarter is set out in Appendix 3.

1.16 The Report consists of 12 volumes: Volume 1 contains commentary and analysis

together with conclusions and recommendations. Volume 2 contains all the appendices referred to in Volume 1. The information concerning each State has been written up in separate volumes for each State, namely Volumes 3 to 12 inclusive.

1.17 In addition to quarterly reporting, the Team Leader made detailed presentations to

PASO Council members at Council meetings held during the TA contract period. These were: Noumea (September 2011); Rarotonga (May 2012); Port Vila (April and October 2013). A copy of the final PowerPoint presentation made jointly by the ADB TA manager and the aviation legal specialist at the October Port Vila meeting is included in Volume 2 as Appendix 4.

9

Background to TA 1.18 PASO came into existence as a new inter-governmental regional organisation on 11

June 2005, being 30 days after the fifth signature to PICASST in accordance with Article 12 of that treaty. Later in that year, the ADB initiated the establishment of the Pacific Aviation Safety Office project. The present TA has been a longstanding component of that project. At the time of PASO’s original establishment ICAO funded an initial legal and technical review to enable PASO to commence operations (the LTR project) and this TA follows on from the LTR project1.

1.19 The LTR project was carried out by K I Murray (team leader), R I C Bartsch and M M

Foon. The LTR project report was provided to ICAO and PASO in August 2007. The report set out an analysis of the global, regional and national dimensions of states’ obligations in relation to safety and security oversight. The report also included a summary of the level of aviation activity in the then seven PASO member States, together with a summary of the degree of harmonisation of the States’ aviation laws based upon the New Zealand Civil Aviation Act 1990 and the rules made under that Act.

1.20 At that stage, although all member States had committed to harmonising their

aviation law based upon the New Zealand regulatory model, the LTR report noted that some States still required extensive law reform. The LTR report therefore served as a “gap analysis” as at 2007 and indicated likely work areas for the current TA. Since 2007, the membership of PASO has developed to its current membership of 10 states, together with Australia, New Zealand and Fiji as non-voting members on the PASO Council but not parties to PICASST. The current TA has therefore represented a formidable challenge in that it encompasses both PASO as an international organisation and also each of the 10 member States to a greater or lesser degree.

1.21 The 2007 LTR report made it clear that the forces driving regional collaboration to

achieve improved levels of safety and security oversight by the Pacific States were occurring at the global level.

1.22 The LTR report outlined the relevant legal obligations of ICAO member States under

the Chicago Convention and the standards and recommended practices (SARPs) included in the Annexes to the Convention. The LTR report also explained ICAO’s universal system of auditing ICAO member States to ascertain their levels of compliance with safety and security oversight obligations. The outcome of that auditing procedure both globally and in the Pacific demonstrated the urgent need for action and assistance to many States if improved aviation safety and security standards were going to be achieved. The degree of international concern was such that ICAO and the major aviation stakeholders collaborated to establish a Global Aviation Safety Roadmap (GASR).

1.23 The GASR was published in 2007. Its relevance to the PASO member States and

PASO itself was outlined in the 2007 LTR report. Since 2007 however ICAO’s global strategy for achieving safety improvements has increasingly focused on the importance of successful regional arrangements. The ICAO Symposium on Regional Safety Oversight Organisations (RSOO) held in Montreal from 26 to 28 October 2011 indicated that the work to improve safety and security oversight must now take

1 See ADB Completion Report dated June 2011, Establishment of the Pacific Aviation Safety Office

(Pacific Region), section H, paragraph 20.

10

account of a more elaborate global framework being developed by ICAO. This will include an increasingly important role for RSOOs.

1.24 This still evolving global framework is the context in which the work referred to in the

TOR has been carried out. In other words, although the TA involved work relating to the law and procedures in both the member States and in PASO, the work has all been directed towards enhancing the levels of compliance by the member States and improving the effectiveness of PASO as part of ICAO’s global strategy for enhanced aviation safety and security.

1.25 As the TA work has included global (ICAO), regional (PASO) and national (the

member States) dimensions the structure of the 2007 LTR report has been taken account of and updated. However, the main chapter headings in Volume 1 of this report reflect the three main components of the TOR, namely legal harmonisation, safety regulation and financial management.

1.26 Fortunately, since 2007 it became apparent at the commencement of this TA that

significant further work had been done by several States towards implementation of the New Zealand regulatory model. In particular Solomon Islands had enacted new primary aviation legislation and adopted the New Zealand Rules. As the result of a World Bank transport sector project, Tonga had also been provided with a comprehensive draft Civil Aviation Bill based upon the New Zealand model. Further, Nauru had also recently enacted new primary aviation legislation. The developments in each State are reported upon in separate volumes for each State.

The Terms of Reference 1.27 The overall goal of the TA indicated by the terms of reference is increased safety and

security compliance rates, reduced compliance costs and increased financial sustainability of PASO. The TA is provided to national civil aviation administrations and PASO staff to enable legal and regulatory reform. An update to financial management systems and the PASO Financial Procedures Manual and a comprehensive audit of financial performance is also required2.

1.28 The TOR indicate that there are three main streams of work, namely aviation law

reform; institutional strengthening and assistance to the States with regulatory procedures and being able to effectively engage PASO’s services; and improving the financial sustainability of PASO as an international organisation.

1.29 The work is to consist of a total of 27 person months. The individual monthly team

member contributions required are set out in Table 1 as follows:

Table 1: Team Member Time Contributions

Time KIM MBS MEM IAB Total

In Field 5 1 1 1.5 8

Home Office 13 2 2 1.5 19

TOTALS 18 3 3 3 27

2 The audit of financial performance is not part of the current TA and has been carried out by another

consultant, Barrett and Partners Chartered Accountants, Contract No 572296 TA-7684 (Reg): Institutional Strengthening of Aviation Regulation.

11

1.30 It is evident therefore that the law reform component of the TA is the major focus of the work with more limited input from each of the two regulatory specialists and the financial specialist. This created some challenges for planning the work. In this regard the regulatory and financial components of the work were done more intensively over the first eight months period from contract commencement. This enabled the States and PASO to make decisions and take action in response to the TA work on regulatory and financial issues without necessarily awaiting the continuing work on legal harmonisation.

1.31 It is also noted that Section F of the TORs provided for the engagement of national

legal advisers to assist the consultancy team in each of the States. Limited funding was included as part of the TA for this purpose. However it was quickly apparent that there are very few lawyers in private legal practice in most of the States and even fewer with aviation or law drafting expertise. Instead it is the Government lawyers in the Attorney-Generals’ Offices that have the general public law expertise most relevant to the law reform work involved. Accordingly KIM identified and worked with Government national legal advisers in all the States visited.

1.32 In summary, the outputs of the TA have been:

• Analysis of safety oversight capacity for the ten PASO member States with extensive recommendations for improvement.

• Analysis of PASO financial situation demonstrating that PASO was not financially sustainable as at May 2011.

• Training and financial management assistance for PASO staff.

• Analysis of treaty status and aviation law in each of the ten PASO member States.

• Aviation law reform programmes recommended for all PASO member States.

• Draft civil aviation legislation provided for Niue, Tonga, Tuvalu, Vanuatu and Kiribati.

• Treaty acceptance drafting and advice for Solomon Islands to enable acceptance of an additional 20 international aviation instruments.

• Extensive recommendations for the development of PASO as a RSOO within the ICAO global framework.

• Eight interim quarterly reports to the member States, PASO and the ADB together with presentations to PASO Council members at their meetings in New Caledonia, Cook Islands and Vanuatu (2) during the TA contract period.

• A substantial report to serve as a comprehensive reference for State officials, PASO staff, ICAO and donor agencies.

12

2. HARMONISATION OF AVIATION LAW Global Dimension Chicago Convention 2.1 Chapter 2 of the LTR report included a summary of the provisions of the Chicago

Convention that were especially relevant to the responsibilities of States and collaborative safety oversight arrangements. Some of the Convention articles are particularly relevant to legal harmonisation3.

2.2 Article 12 relating to rules of the air states that each contracting State undertakes to

keep its own regulations uniform to the greatest extent possible with those established from time to time under the Convention, namely the SARPs.

2.3 Article 28 relates to air navigation facilities and standard systems. Under that article,

each contracting State undertakes, so far as it may find practicable, to provide in its territory, airports, radio services, meteorological services and other air navigation facilities to facilitate international air navigation in accordance with the SARPs.

2.4 Article 37 relates to the adoption of international standards and procedures. Under

that article each contracting state undertakes to collaborate in securing the highest practicable degree of uniformity in regulations, standards, procedures and organisation in relation to aircraft, personnel, airways and auxiliary services in all matters in which such uniformity will facilitate and improve air navigation.

2.5 As there are actually thousands of SARPs set out in the 19 Annexes to the Chicago

Convention the obligations upon States are formidable, even though mitigated to some extent in that States only have to achieve the “highest practicable degree of uniformity”. To the extent that States are not able to implement provisions in the Annexes designated as “standards” they are obliged by Articles 38 of the Convention to notify such differences to ICAO so that all other States can be notified.

2.6 As noted in the LTR report, the serious safety concerns arising globally due to the

inability of many States to achieve the minimum standards required under the Convention led ICAO to develop the universal safety oversight and universal security audit programmes. This produced even more disquieting information about the circumstances in many States.

2.7 This led to the development of the GASR in 2007 which identified some 12 focus

areas for attention by States, regions and industry as applicable. In particular, Focus area 1 for attention by States recognised inconsistent implementation of international standards. Focus area 2 also for attention by States identified inconsistent regulatory oversight and Focus area 5 relating to regions identified inconsistent coordination of regional programmes.

2.8 As noted in the LTR report, the evolution of PASO as at 2007 was more or less

consistent with the Roadmap structure and recommendations. Since 2007 however the international framework within which States and RSOOs need to operate has

3 For a major study of the role of law in achieving aviation safety see Jiefang Huang “Aviation Safety

through the Rule of Law – ICAO’s Mechanisms and Practices”, Kluwer Law International (2009). This work draws on the author’s extensive experience as a Legal Officer in the Legal and External Relations Bureau of ICAO.

13

been further developed. These developments are outlined in this Chapter of the report as background to the more specific aspects of implementation of the SARPs and harmonisation of law among PASO member States.

ICAO Global Aviation Safety Plan (GASP) 2.9 In March 2006 ICAO convened the Directors-General of Civil Aviation Conference on

a Global Strategy for Aviation Safety (DGCA/06), which considered the work being done to develop a safety “roadmap”. The Conference recommended that ICAO develop an integrated approach to safety initiatives based on the roadmap work to provide a global framework for the coordination of safety policies and initiatives. This resulted in the development of ICAO’s Global Aviation Safety Plan (GASP).

2.10 Essentially, the Safety Roadmap constitutes the basis on which the Safety Plan is

built and is an integral part of it. The Safety Plan can be seen as the ICAO strategy for states, regions and industry to address the focus areas identified in the Safety Roadmap.

2.11 As noted above, the technique used in the Safety Roadmap is to identify focus areas

for attention by States, regions and industry as appropriate. To direct the work in those focus areas the essential feature of the Safety Plan is the identification of 12 Global Safety Initiatives (GSI) related to each of the 12 focus areas set out in the Safety Roadmap. For instance, GSI-1 is Consistent Implementation of International Standards and Industry Best Practice; and GSI-2 is Consistent Regulatory Oversight. All the GSIs are relevant to all the PASO member States and to either the current or potential future role of PASO.

ICAO High Level Safety Conference 2010 2.12 A further significant development was the High Level Safety Conference (HLSC)

convened by ICAO in Montreal from 29 March to 1 April 2010. This Conference addressed numerous safety initiatives and sought to clarify the relationships between them. The Conference noted that the ICAO Secretariat itself was implementing its own internal business planning and risk management strategy. The conference endorsed the existing framework involving the GASR, the GASP, the role of the Regional Aviation Safety Groups (RASG) and RSOOs.

2.13 The Conference also endorsed the evolution of ICAO’s universal safety monitoring

audits into a Continues Monitoring Approach (CMA). In its original form USOAP essentially relied on compliance based audits. In its continuation beyond 2010 the USOAP broadens compliance assessment to incorporate a safety risk management based approach.

2.14 The Conference noted the widespread implementation of Safety Management

Systems (SMS) as a performance based regulatory requirement placed on aviation industry participants. The Conference supported the extension of that approach to states which would require them to develop a State Safety Programme (SSP). The Conference recognised some difficulties in managing a transition to an SSP environment but that an SSP would be an integrated component of the Continuous Monitoring Approach to safety oversight.

2.15 Whether or not a SSP is in place, the CMA now includes the development and

implementation of an on-line reporting and data management system that allows ICAO to monitor the safety oversight capabilities of contracting States on an on-going basis. Thus, CMA can be viewed as the means for further oversight of a SSP.

14

2.16 The HLSC also addressed as a major topic the requirement for the capture, reporting

and sharing of all safety-related data. This topic involves several complex aspects with many still to be resolved such as: the requirement for transparency; a “just culture” to encourage full reporting; appropriate data bases, standard metrics and taxonomy and the protection of safety-related information from inappropriate use. This latter topic is being addressed by a special working group convened by ICAO.

2.17 Because of the increasingly complex and onerous obligations for all States to

participate in the global strategy for improved safety outcomes, it is not surprising that the Conference agreed that the RSOO is a critical tool for many states to enable them to rectify deficiencies found in USOAP audits and to enable them to comply with the SARPs. In particular the Conference recognised that one of the major challenges facing RSOOs was the development of a funding mechanism that would ensure their long term sustainability. The case in point was PASO itself which the Conference received a status report about. In turn, this led the Conference to endorse both a policy and a strategy to support RSOOs4.

2.18 The HLSC was the prelude to the 37th ICAO Assembly held later in 2010 at which the

full ICAO membership adopted four resolutions of immediate relevance as follows:

Resolution A37-4: ICAO Global Planning for Safety; Resolution A37-5: The Universal Safety Oversight Audit Programme (USOAP)

Continuous Monitoring Approach; Resolution A37-8: Regional Cooperation and Assistance to Resolve Safety

Related Deficiencies; Resolution A37-21: Cooperation with Regional Organisations and Regional Civil

Aviation Bodies5 ICAO Symposium on RSOO 2011 2.19 The ICAO Symposium on RSOOs was held in Montreal from 26 to 28 October 2011

in accordance with Resolution A37-8 to promote the concept of RSOOs. Initially the Symposium reviewed the purpose and development of RSOOs and identified there was a continuum with some RSOOs only providing safety oversight in relation to specific ICAO annexes; whereas at the other end of the spectrum is the European Aviation Safety Agency (EASA) which has full regulatory powers in the member States, in defined areas of EASA authority.

2.20 In relation to the benefits of regional cooperation the Symposium noted in particular

harmonisation of aviation law and economies of scale. To enable RSOOs to be effective, the Symposium endorsed the continued development of ICAO guidance material which, among other things, should indicate that it is not desirable for a State to be a full member of more than one RSOOs. Although Regional Aviation Safety Groups (RASGs) and RSOOs play distinctly different roles it was recognised there was a need to ensure appropriate dialogue and synergies between them.

2.21 At the heart of the Symposium agenda was the critical issue of adopting appropriate

funding mechanisms to ensure sustainability of RSOOs. The various options

4 For a detailed discussion about the evolution of ICAO’s regional cooperation policies and

procedures see Ruwantissa Abeyratne “Ensuring Regional Safety in Air Transport”, Air and Space Law 35 no 3 (2010) pages 249-262. 5 The updated resolutions of the 38

th ICAO Assembly held in Montreal from 24 September to 4

October 2013 are referred to below.

15

identified were: State contributions, fees for services and user charges and implementation of a passenger safety levy. Although Government funding of RSOOs was preferable it was recognised this was not always available or sufficient in which case passenger levies would not be inconsistent with ICAO’s policies on charges for aviation services provided there was full transparency around their collection and use. It was recognised that ICAO’s existing policies and procedures only addressed user charges for airport and air navigation services and there was a need to develop the existing ICAO guidance material to cover all safety oversight requirements6.

2.22 The Symposium recognised that contributions from donor parties and stakeholders

and loans and grants from financial institutions such as the World Bank constituted an important source of funding for RSOOs, particularly during the early phase of their establishment. This funding however should have the clear purpose of establishing an RSOO as an autonomous and sustainable institution. Correspondingly the RSOO has to demonstrate good governance and the ability to effectively implement its mandate – which should be continuously evaluated.

2.23 In practical terms the Symposium concluded that RSOOs would need to play an

important part in assisting States with the development of their State Safety Programmes (SSPs) and be proactive in the provision of safety-related information and the human resources required to enable States to satisfy the requirements of the CMA. In particular, the Symposium recognised the role that RSOOs can play in establishing a mandatory incident reporting system and an accident and incident database. The RSOOs could facilitate the effective collection, storage, analysis and exchange of safety data and information.

2.24 Finally the Symposium reviewed the benefits of establishing Regional Accident and

Incident Investigation Organisations (RAIO) and the need to ensure close collaboration between RSOOs and RAIOs.

The New Annex 19 2.25 By State letter dated 8 April 2013 the Secretary General of ICAO notified all member

States of the adoption by the ICAO Council of Annex 19 – Safety Management. When adopting Annex 19 the Council prescribed 15 July 2013 as the date on which it will become effective (except to the extent a majority of contracting States register their disapproval). In addition the Council resolved that to the extent it becomes effective, it will be applicable on 14 November 2013.

2.26 The State letter summarises the Annex as follows:

“The new Annex consolidates existing overarching safety management provisions from Annex 1 – Personal Licensing, Annex – Operation of Aircraft, Annex 8 – Airworthiness of Aircraft, Annex 11 – Air Traffic Services, Annex 13 – Aircraft Accident and Incident Investigation and Annex 14 – Aerodromes, Volume I – Aerodrome Design and Operations. The consolidation of existing safety management provisions into a single Annex eliminates duplication of Standards and Recommended Practices (SARPs) that currently exist in other Annexes.”

2.27 An Attachment E to the State lists the benefits of Annex 19 are follows:

6 This has now been done in the latest edition of ICAO Doc 9734 – Safety Oversight Manual Part B:

The Establishment and Management of a Regional Safety Oversight System..

16

“3.1 Highlights the importance of safety management at the State level and enhances safety by consolidating safety management provisions applicable to multiple aviation domains into a single Annex. 3.2 Facilitates the future evolution of safety management provisions. 3.3 Promotes aligned implementation of SMS and SSP provisions. 3.4 Creates a process to collect and analyse feedback regarding the implementation of SMS and SSP.”

2.28 The key standards and recommended practices set out in Annex 19 include Chapter 3 on State safety management responsibilities and in particular standard 3.2 stating:

“Each State shall establish and implement a safety oversight system in accordance with Appendix 1.”

2.29 Chapter 4 sets out the safety management system standards and recommended practices for approved training organisations, aircraft operations, approved maintenance organisations, organisations responsible for the type design of aircraft, organisations responsible for the manufacture of aircraft and organisations that are providers of air traffic services.

2.30 Chapter 5 sets out the standards and recommended practices relating to safety data

collection, analysis and exchange. This chapter includes standards requiring States to establish mandatory and voluntary incident reporting systems. Standard 5.2.1 provides that each State shall establish and maintain a safety database to facilitate the effective analysis of information on actual or potential safety deficiencies obtained, including that from its incident reporting systems, and to determine any actions required for the enhancement of safety. Chapter 5 also includes standards and recommendation practices for safety data protection and safety information exchange.

2.31 Three responses required of States as a result of the adoption of Annex 19 are:

(a) notify ICAO of any disapproval of the Annex or any of its provisions by 15 July 2013;

(b) notify ICAO of any differences and compliance before 14 October 2013; (c) consider the use of the electronic filing of differences system (EFOD) for

notification of differences and compliance.

2.32 It will be evident therefore that the adoption of Annex 19 places certain obligations upon PASO member States (excluding Niue and Tuvalu which are not parties to the Chicago Convention). The initial obligation was the requirement in terms of Article 38 of the Convention to notify ICAO by 14 October 2013 of any differences between the standards in Annex 19 and the law and procedures in the relevant State. The foreword to Annex 19 recognises however that:

“Certain State safety management functions required in Annex 19 may be

delegated to a regional safety oversight organisation or a regional accident and incident investigation organisation on behalf of the State”.

17

2.33 As none of the PASO member States will be fully compliant with Annex 19 all the member States need to urgently cooperate to update PICASST to give PASO the necessary legal mandate to assist States with achieving full compliance. As noted in para 2.49 below Annex 19 provisions are central to the whole purpose and role of PASO.

38th ICAO Assembly Resolutions 2.34 The 38th session of the ICAO Assembly was convened in Montreal from 24

September to 4 October 2013. The Assembly updated and adopted several important resolutions relating to aviation safety and security. These resolutions encompass the obligations of States and the role of ICAO.

2.35 They are part of the global legal framework for aviation safety oversight. In general

Assembly resolutions are not legally binding. However in this regard it is necessary to draw a distinction between parts of resolutions that refer to the internal mechanisms of ICAO and those parts that are directed externally, to the member States for example. The former can be legally binding as part of the administrative level of the organisation and the latter can still have some legal effect7.

2.36 The resolutions of the 38th Assembly also frequently mention the contribution that

RSOOs can make when assisting States to fulfil their obligations. A brief summary of the resolutions of principal relevance to the scope of the TA is the following:

� Resolution A38-2: ICAO Global Planning for Safety and Air Navigation

2.37 This resolution notes the approval on 30 July 2013 by the Council of the first edition

of the Global Aviation Safety Plan (GASP) and on 29 May 2013 of the fourth edition of the Global Air Navigation Plan (GANP) and endorses both.

2.38 Importantly, the resolution:

“Urges member States to develop sustainable solutions to fully exercise their safety oversight and air navigation responsibilities which can be achieved by sharing resources, utilising internal and/or external resources, such as regional and sub-regional organisations and the expertise of other States;”

2.39 The resolution includes additional provisions and Appendices A and B relating

specifically to GASP and GANP respectively.

Resolution 38-5: Regional Cooperation and Assistance to Resolve Safety Deficiencies, Establishing Priorities and Setting Measurable Targets

2.40 The preamble to this resolution recognises that RSOOs have great potential to assist

States in complying with their obligations under the Chicago Convention through economies of scale and harmonisation on a larger scale resulting from the collaboration among member States in establishing and operating a common safety oversight system.

2.41 The resolution also recognises that member States may delegate certain functions to

RSOOs and that when applicable the word “States” in ICAO documentation should be read to include RSOOs. For instance, Annex 19 recognises the role of RSOOs in

7 The legal status of Assembly resolutions is explained by Jiefang Huang in the work noted at footnote

3 in Chapter 5, pages 194-184.

18

discharging delegated State safety management functions on behalf of States. The resolution goes on to emphasise both the role of the ICAO Council and the Secretary General in relation to RSOOs and that States should participate in, or provide tangible support for the strengthening and furtherance of RSOOs.

� Resolution A38-11: Formulation and Implementation of SARPs and PANS and Notification of Differences

2.42 This resolution recognises the difficulties that many States have in implementing all

standards and recommended practices and notifying differences as required in accordance with the procedures in Articles 37 and 38 of the Convention. Accordingly the resolution contains certain instructions to the ICAO Council concerning the procedures and requirements for adopting amendments to the Annexes, in particular that they not be amended more frequently than once per calendar year. States are reminded to publish significant differences in their Aeronautical Information Publications (AIP) and encouraged to use the electronic filing of differences (EFOD) system and generally to improve compliance with obligations relating to the filing and dissemination of differences.

� Resolution A38-12: Consolidated Statement of Continuing ICAO Policies and Associated Practices Related Specifically to Air Navigation

2.43 Given the likely significant expansion of PASO’s jurisdiction to encompass all

Annexes relating to air traffic services and the drive for economic efficiency and fairness in the management of Pacific airspace, this resolution, together with the GANP, is of considerable relevance for PASO. The resolution includes numerous specific subject matter appendices including the need for qualified and competent aviation personnel (Appendix D); formulation and implementation of regional plans (Appendix E), regional air navigation meetings (Appendix F) and delimitation of air traffic services airspace (Appendix G).8

The Regional Dimension Evolution of PASO 2.44 The background to the formation of PASO is set out in Chapter 3 of the LTR Report

including a brief summary of key provisions in PICASST. As noted above, since that report was completed, the organisation has grown to 10 member States. Australia, New Zealand and Fiji have not become parties to PICASST. Those three States do however regard themselves as members of PASO in reliance on certain provisions in Section 5 of the PASO Constitution and it is understood they pay membership subscriptions accordingly. It is however unusual for States that are not parties to the treaty establishing an international organisation to nevertheless be members of the international organisation.9

8 On 28 and 29 October 2013 the PICASST States; Australia, New Zealand, ICAO, the World Bank,

ADB, SPC, Pacific Forum, Airservices Australia, Airways New Zealand, ASPA and other stakeholders participated in a workshop on Pacific upper airspace management issues. The outcomes of the workshop are recorded in an Aide Memoire, a copy of which is included as Appendix 6. 9 In this report reference to “the PASO member States” means those States that are parties to

PICASST, namely Cook Islands, Kiribati, Nauru, Niue, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu. Those are the 10 States covered by the TA. Fiji expressly requested that it not be included in the TA.

19

2.45 There is also an issue as to whether the provisions in the Constitution relating to PASO membership are authorised by PICASST. This is due to an interpretation issue relating to Article 6(7) of PICASST. Article 6 relates to the PASO Council and subclause 7 states that: “The Council shall determine a type of representation other than Parties.”

2.46 These words in their context seem to refer to representation on the Council rather than membership of PASO. Article 6(8) is however clear that only parties to PICASST have the right to vote on Council decisions.

2.47 It is recommended that when the opportunity arises to review PICASST this

membership issue should be addressed. It is undesirable to allow membership to an international organisation of States unless all members are equally bound by the treaty that establishes the organisation, which includes the obligations of members. Further it would seem to be desirable for the treaty itself to establish the constitution of the organisation in the same way that the constitution of ICAO is set out in the Chicago Convention. Non-member States and other organisations can of course still be accorded observer status at PASO meetings in the same way that ICAO confers observer status at ICAO meetings.

2.48 A further development is the significant amendment to PICASST which was adopted

in Port Vila on 22 May 2009. At present, only three States have accepted the amendment and it will not come into force until 30 days after two thirds of the States accept10. Once that happens PASO’s jurisdiction will encompass 13 of the 19 current ICAO annexes as listed below:

Annex 1 Personnel Licensing Annex 2 Rules of the Air Annex 3 Meteorological Services for International Air Navigation Annex 4 Aeronautical Charts Annex 5 Units of Measurement to be Used in Air Ground Operations Annex 6 Operation of Aircraft Annex 7 Aircraft Nationality and Registration Marks Annex 8 Airworthiness of Aircraft Annex 10 Aeronautical Telecommunications Annex 11 Air Traffic Services Annex 14 Aerodromes Annex 15 Aeronautical Information Services Annex 17 Security11

2.49 Given that the new safety management Annex 19 is central to the safety oversight role and purpose of PASO it is evident that PICASST now requires further urgent amendment to bring Annex 19 within the jurisdiction of ICAO. This is necessary so that PASO will be authorised to carry out Annex 19 responsibilities on behalf of the member States if included within an appropriate Service Level Agreement between PASO and the relevant State.

2.50 An important output of the LTR was a draft service level agreement between PASO

and the individual member States. This document provided the legal basis upon

10

Cook Islands accepted the amendment on 14 December 2009 and Samoa accepted on 11 March 2010. Kiribati has also recently accepted the Amendment which will be confirmed upon deposit of the original signed instrument of acceptance by the Forum Secretariat. 11

Annexes shown in bold are the Annexes referred to in the existing PICASST text.

20

which the States could commence using PASO services. The States that have entered into Service Level Agreements are as follows:

Republic of Vanuatu signed 3 August 2007 Republic of Nauru signed 18 October 2007 Kingdom of Tonga signed 16 November 2007 Solomon Islands signed 20 November 2007 Independent State of Papua New Guinea signed 14 July 2008 Independent State of Samoa signed 23 October 2008 Republic of Kiribati signed 31 May 2013 Tuvalu signed 31 October 2013 2.51 Fiji also signed a Service Level Agreement on 28 October 2008. However it is

different in that it purports to be an agreement between PASO and the Civil Aviation Authority of the Fiji Islands rather than between PASO and the Government of the Fiji Islands. Recital B to the agreement records that Fiji is a party to PICASST and a member of PASO established by PICASST. However, it appears the whole agreement has been entered into on a misunderstanding by both PASO and the Civil Aviation Authority of Fiji because Fiji has not deposited an Instrument of Accession to PICASST. This could be easily remedied by the Government of Fiji depositing the necessary instrument with the Forum Secretariat and the appropriate Minister signing a new Service Level Agreement with PASO.

2.52 It is understood that Service Level Agreements have not yet been signed between

PASO and Cook Islands or Niue. The TA work has included the provision of a draft Service Level Agreement to both Tuvalu and Niue in a form that reflects those States not being parties to the Chicago Convention.

2.53 Further significant signposts of PASO’s evolution are evidenced by various

memoranda of understanding or cooperation entered into with other regulatory bodies, international organisations or agencies.

2.54 For instance, on 14 June 2011 PASO entered into a working arrangement with the

Civil Aviation Authority of New Zealand (CAANZ) to supplement the MOC between PASO and CAANZ signed in 2005. This working arrangement sets out the procedures for CAANZ to provide inspectors to PASO at an hourly rate of $175 “being less than the estimated costs for audit inspections and certifications within the New Zealand aviation regulatory system”.

2.55 A similar working arrangement was entered into between PASO and the Civil

Aviation Safety Authority of Australia (CASA) on 29 March 2011 whereby CASA charges for the provision of inspectors will be “at a rate no higher than the hourly rate charge by CASA charges for its regulatory functions in Australia ...”. A similar working arrangement is also in place between PASO and the Civil Aviation Authority of Fiji (CAAF).

2.56 PASO has also entered into MOUs with the Secretariat of the Pacific Community

(SPC) and the Caribbean Aviation Safety and Security Oversight System (CASSOS). PASO is now also a member of the Committee for Regional Organisations in the Pacific (CROP). In 2012 PASO also signed a MOU with the Melanesian Spearhead Group.

2.57 These developments indicate increasing recognition by other organisations and

agencies of PASO’s independent status as an international organisation with some of these arrangements increasing PASO’s capacity to provide safety and security

21

oversight services to its member States or access foreign aid loans and grants from donor agencies. However it is one thing to have these various arrangements in place but a challenge to have them working well in practice. It is therefore recommended that all these arrangements be reviewed and rationalised having regard to their utility and PASO’s capacity to participate in them.

2.58 It is however strongly recommended that PASO enter into an agreement or establish

a MOU with ICAO. The 38th ICAO Assembly Resolutions include numerous references to the need for ICAO to support regional and subregional organisations. This means there is a clear mandate for the ICAO Council and Secretariat to negotiate arrangements for ongoing assistance to PASO.

PASO’s Sustainability 2.59 A fundamental issue that may have caused difficulties since PASO’s establishment in

2005 is the distinction between PASO as an international organisation and the small office in Vanuatu staffed by eight people which acts as the Organisation’s secretariat.

2.60 The origins of PASO lie in an early proposal to incorporate a limited liability company

in Vanuatu that would open an office and employ inspectors to provide services on contract to the shareholding member States. Although the company was incorporated, this business and corporate model was abandoned in favour of establishing the new intergovernmental regional organisation that exists today.

2.61 Unfortunately the concept of an “office” was brought into the drafting of the PICASST

(and therefore the name of the organisation) so that there is serious risk of confusion between the Pacific Aviation Safety Office (i.e. the international organisation) and the small administrative and service provider office in Vanuatu12. Thus, as the PICASST States, Australia and New Zealand, and donor organisations all strive to make the organisation successful, so much of the attention has focused on trying to impose intensive managerial, financial and administrative efficiencies on a small number of people in a small office in Vanuatu. Instead the success or otherwise of the organisation depends upon the individual and collective performance of the member States.

2.62 It quickly became apparent to the Consultant’s team during its first visit to the PASO

office that no amount of managerial skill, financial discipline or administrative efficiency will guarantee the success of the organisation unless it is adequately funded to carry out its existing and foreshadowed functions in accordance with PICASST. In other words, the solution to PASO’s sustainability will not be achieved only by upgraded office policy and procedure manuals, financial regulations or information technology. That work is consequential upon the organisation’s funding problems being resolved.

2.63 The Consultant’s team has noted that the PASO Council, at its meeting in Honiara,

Solomon Island, in October 2009 and again at the AGM in May 2010 in Port Vila, Vanuatu, formally resolved that the member States would pay 50% of the actual cost of the work plans as agreed by the member States in advance by 31 January in each year and their second 50% to be paid by 30 June of the same year. Notwithstanding these resolutions, it is evident that many States have found it difficult to make timely payments of their subscriptions and the advance payments as agreed.

12

When the next opportunity to amend PICASST arises the name of the organisation should be changed to “Pacific Aviation Safety Organisation”.

22

2.64 Underlying this difficulty may be the fact that the representatives of the member States on the Council are not the same representatives who have the authority in their constitutional systems of government to ensure the State’s commitments to PASO are met. In this regard, the team’s visit to Vanuatu in August 2011 coincided with action by the Vanuatu CAA to include funding for its 2012 PASO work programme within the 2011 Ministry of Infrastructure Public and Utilities’ annual budgeting process for Parliamentary appropriation. The necessity for close alignment between PASO’s work planning and budgeting processes and the budgeting processes of the member States has therefore been more closely investigated.

2.65 There is also a discrete set of issues relating to the current host State agreement and

the location of the PASO’s secretariat office in Vanuatu. The host State’s financial support for PASO is noted in Chapter 6 of this report. It was surprising to the team that the host State agreement seemed to be the responsibility of the Vanuatu MIPU rather than the Government’s Ministry of Foreign Affairs. While that is entirely a matter for the Government of Vanuatu, the team understands that it would be more common for Government Ministries of Foreign Affairs to administer host State agreements with international organisations based in their countries.

2.66 Apart from the potential difficulties being encountered by States with meeting their

funding obligations to PASO through their constitutional public financing procedures, there is the risk that in hard pressed economies – whether in developed or developing countries – the risk of funding cuts due to competing Government priorities is a fact of life. The team therefore recognises that the concept of introducing a passenger safety levy requires further consideration and possibly legislative amendments. Chapter 6 of this report addresses these issues further.

World Bank Pacific Aviation Infrastructure Programme 2.67 The commencement of the current TA also coincided with the inauguration of the

World Bank’s Pacific Aviation Infrastructure Programme (PAIP) to focus on improving the aviation infrastructure, management and operations in the Pacific region13.

2.68 The programme is to be implemented in four phases over a 5-10 year period based

on projected country demand, readiness to meet eligibility criteria, and overall reform progress. It is to be supported by parallel investments of other donors. The first phase of the programme includes Kiribati, Tonga and Tuvalu Aviation Investment Projects. Subsequent phases may include Samoa, Solomon Islands and Vanuatu if those countries wish to participate and meet the project participation criteria.

2.69 The programme is to have a total cost of US$147.47 million and to focus on three

main areas:

(i) infrastructure investments; (ii) aviation sector reforms; (iii) strengthening the operations and management of regional airports.

13

This part of the report is a summary of the World Bank’s project appraisal document presented at the PASO Council Meeting in Noumea on 13 October 2011. See now WB Report No: 65353 EAP Project Appraisal Document dated 11 November 2011 on proposed IDA grants to Kiribati, Tonga, Tuvalu in the amount of $125 million.

23

2.70 The funding is divided into four components with the breakdown shown in the relevant World Bank documentation. In summary however the programme development objective is to improve operational safety and oversight of international transport structure in participating countries and its success is to be monitored in each participating country through four indicators, namely:

(i) certification of safety and security at project airports;

(ii) State requirements for safety and security reaches global ICAO average; (iii) modernisation of air traffic management; (iv) implementation of a regional safety and security levy for departing

international passengers.

2.71 As it happens there is a close correlation between the current TA and the PAIP in that the latter also involves developing and strengthening the role of PASO. In particular the PAIP in participating member states is contingent upon the participating States implementing a passenger safety levy and ensuring that PASO’s services as delivered through an annual work programme in order to fulfil all the State’s required safety oversight obligations. Essentially therefore funding issues will not be an obstacle to each participating State satisfying its full safety oversight obligations.

2.72 Within the PAIP the World Bank proposes that with the support of the Australian Aid

the sum of US$2.4 million will be available specifically to assist PASO. In effect, the World Bank is proposing to assist the States to engage PASO through the project to enable PASO to perform the following functions:

• implement its core business of certification, audit, surveillance and the resolution

of safety concerns in all participating countries for the first year and for the life of the Project in low traffic volume countries; and

• assist ICAO in monitoring progress against the eight areas of USOAP audits including the evolution to the continuous monitoring approach.

2.73 As the PAIP supports the upgrading of aviation infrastructure in the participating

States, those States will be expected to have an adequate oversight regime performed through PASO. Kiribati, Tonga and Tuvalu included in the first phase of PAIP account for approximately 30% of PASO’s work programme for 2012. With the addition of Samoa, Solomon Islands and Vanuatu in the second phase PAIP could potentially support nearly 75% of PASO’s work programme. In view of PASO’s integral involvement in the PAIP some funding was allocated to the development of a business plan for the organisation, the preparation of which was approved by the PASO Council at its meeting in Noumea on 13 October 2011.

2.74 Subsequently CAPA Consulting completed a business plan for PASO14. The CAPA

work took into account the work already done within the current TA relating to the regulatory and financial aspects of PASO. The business plan was considered by the PASO Council at its meeting in Vanuatu in April 2013. At that time it was approved in part, although the recommended substantial increase in PASO member subscriptions was not approved.

14

CAPA Consulting Review of Pacific Aviation Safety Office, SWOT & Options Analysis Business Plan for the Pacific Aviation Safety Office (TAL/CF/PBO1) dated 22 October 2012.

24

2.75 At a further Council meeting in Vanuatu in October 2013 however the Council approved full implementation of a revised business plan involving PASO’s revenue requirements being met by PAIP participating States being able to engage PASO’s services utilising their respective PAIP funding allocations. This is to be supplemented by a proposed grant of US$2.15 million to PASO for a PASO reform project15. The reform project involves three components, namely:

Component A: Transitional Management and Support Component B: Establishment of a Pool of Regional Aviation Inspectors Component C: Quality Management

2.76 Overall the current TA has proved to be compatible with the PAIP with elements of

that programme being consequential on TA work already done to assist PASO and the member States. In particular the harmonisation of law component of the TA included some legislative changes required to implement passenger levies; the work of the regulatory specialists to assist with institutional strengthening of States’ civil aviation administrations will be a valuable complement to infrastructure improvements; and the TA review of the financial management procedures in PASO’s Vanuatu office provided a useful base for development of the business plan for the organisation.

2.77 A fundamental requirement for all this work is that each of the PASO member States

needs effective and harmonised aviation law to enable them to ensure safe operations, either using the States’ own resources or resources provided by PASO, or a combination of both.

The National Dimension New Zealand Law as Model Law 2.78 As noted above the global approach to civil aviation safety is highly dependent upon

all Chicago Convention contracting States giving effect to the provisions of the Convention and the SARPs in their national law. This should mean that, regardless of regional arrangements, a high degree of uniformity or harmonisation of law should be achieved among all the contracting States. However as noted in the LTR the correct implementation in national law of the key provisions of the Chicago Convention and the many thousands of SARPs is an extremely challenging task. The significance of the collaborative regional arrangements agreed in PICASST therefore is that the parties to that treaty have agreed that New Zealdand aviation law can be used as model law.

2.79 On analysis it can be seen that the objective of achieving harmonisation of aviation

law among PASO member States involves two levels. At one level the object is to achieve harmonisation between the SARPs and national law; and at another more practical level the PASO member States propose to harmonise their national law among themselves based on New Zealand law. In other words, the practical harmonisation exercise should achieve compliance with SARPs as well. But this involves several assumptions, namely:

15

See World Bank Report No: PAD532 dated 3 September 2013 – IDA Project Appraisal Document on the Proposed Grant to PASO for a PASO reform project. The current TA is noted at paragraph 12 of the PAD including the TA conclusion that PASO’s financial performance is not sustainable and a far-reaching restructuring is urgently needed.

25

(i) that New Zealand aviation law achieves a high level of harmonisation with the ICAO SARPs;

(ii) that New Zealand aviation law is appropriate for New Zealand; (iii) that New Zealand aviation law is appropriate to use as a model for all PASO

member States; (iv) that the PASO States can correctly and effectively implement New Zealand

aviation law as model law with any modifications necessary; (v) that New Zealand aviation law will be kept up to date; (vi) that the PASO States will keep their law up to date.

2.80 One obvious point is that the most significant primary New Zealand aviation legislation, namely the Civil Aviation Act 1990, was enacted some 20 years ago. This raises the obvious question of whether it is an appropriate candidate to use as model law. This should not be of significant concern however as the Act has been amended some twelve times since 1990, the latest amendment being the Civil Aviation (Cape Town Convention and Other Matters) Amendment Act 2010. This amendment for instance, as well as enabling New Zealand to become a party to the Cape Town Convention, also made changes to the provisions empowering the making of Civil Aviation Rules.

2.81 The Civil Aviation Act 1990 is therefore kept up to date with frequent amendments

and the text of the Act appears in consolidated electronic format on the CAANZ website so that the tracking of the detailed amendments is unnecessary to ascertain the current law. However the Act frequently presents interpretation difficulties which have arisen in the New Zealand courts16. In addition the rule writing programme has encountered significant difficulties and delays in both the New Zealand Ministry of Transport and CAANZ. These issues all need to be kept under review as part of the harmonisation exercise17.

2.82 With regard to the safety and security provisions of the New Zealand Civil Aviation

Act 1990 it must be accepted that the equivalent legislation in the PASO member States is unlikely to be a mirror image of the New Zealand provisions. This is not essential but it is important that the main features of the civil aviation safety system created by the New Zealand Act are followed in the PASO member States’ equivalent Acts. This is the critical component of the harmonisation exercise because adopting the New Zealand model as the basis for harmonisation involves recognition that the New Zealand Act creates a civil aviation regulatory system and the Act authorises detailed technical operating rules which set the standards for aviation document holders to participate in the system.

2.83 Essentially therefore the regulatory provisions in New Zealand Act and the rules

made under that Act operate together to establish a system that takes a “life cycle” approach to aviation risk management. This model has the following features:

16

The New Zealand civil aviation legislation is comprehensively annotated with references to relevant case law in Brooker’s Aviation Law, published by Thomson Reuters. 17

In July 2013 the New Zealand Minister of Transport announced his Ministry was conducting a review of the Civil Aviation Act 1990 and the Airport Authorities Act 1966. Proposed changes are expected to be announced in early 2014 for public consultation.

26

• Safety standards are set out in detailed operating rules supported by Advisory Circulars;

• Entry control whereby applicants for aviation documents must be “fit and proper persons” and establish that they meet the safety standards for entry;

• Legal responsibility placed upon aviation document holders to comply with safety standards set out in the operating rules;

• Surveillance and monitoring of aviation document holders by the Director of Civil Aviation as safety and security regulator;

• Exit control involving recording voluntary cessation of aviation activity but also placing conditions on aviation documents or suspending or revoking them if necessary for safety reasons;

• Enforcement if necessary according to appropriate prosecution guidelines;

• The promulgation of safety education and aeronautical information and charts.

2.84 However the Civil Aviation Act 1990 is a comprehensive Act that deals with many

aviation topics other than safety regulation. It is also only one of several pieces of primary aviation legislation that, together with subsidiary legislation, implement New Zealand’s international treaty obligations18.

New Zealand Treaty Status 2.85 The status of New Zealand with regard to international multilateral aviation treaties as

recorded by ICAO is set out in Appendix 12. Appendix 12 shows that New Zealand was one of the original 52 signatory states that adopted the Chicago Convention in 1944. At the same time, New Zealand signed the International Air Services Transit Agreement but not the International Air Transport Agreement. The Transit Agreement provides for a multilateral exchange of the first two “freedoms of the air” (overflights and stops for non-traffic purposes). The Transit Agreement has been widely accepted19.

2.86 The Transport Agreement provides for a multilateral exchange of air traffic rights,

namely all five “freedoms of the air”. However that agreement failed to achieve any significant acceptance20. This has given rise to the worldwide phenomenon of the Bilateral Air Transport Agreement (and more recently multilateral agreements) as the legal basis for the conduct of most international commercial air services.

2.87 Appendix 12 also shows that New Zealand has a high level of acceptance of the

various formal amendments to the Chicago Convention (Items 4 to 22 inclusive). These mainly extend the number of the official languages of ICAO or increase the size of the ICAO Council and other ICAO organs commensurate with the growth in the membership of ICAO. Two more substantive amendments to the Chicago Convention however are Articles 83bis and 3bis (Items 17 and 18).

2.88 Article 83bis was adopted by the ICAO Assembly on 6 October 1980. This Article

provides for the transfer of certain functions and duties of the State of registration of an aircraft to another State by agreement where the other State may be in a better

18

A detailed explanation of how New Zealand implements international aviation treaty obligations is contained in a paper entitled “Rule Making and Implementation of International Law Standards” by K I Murray presented to the Lexis Nexis Conference on Legal Issues for Crown Entities held in Wellington in 2009. 19

Accepted by 129 States. 20

Accepted by 11 States.

27

position to exercise regulatory authority over the aircraft. This may occur when as a result of private lease, charter or interchange arrangements the aircraft is no longer operating in the State of registration21.

2.89 The other substantive amendment to the Chicago Convention is Article 3bis which

was adopted by the ICAO Assembly in May 1984 in response to the shooting down of a Korean Airlines 747 flight 007 on 1 September 1983 by a Soviet fighter aircraft with the loss of all crew and passengers on board. This tragedy occurred after KAL 007 inadvertently strayed into Soviet airspace. The essential obligation in Article 3bis is that the contracting States recognise that every State must refrain from the use of weapons against civil aircraft in flight and that, in the case of interception, the lives of persons on board and the safety of the aircraft must not be endangered. Under Article 3bis each contracting State agrees to publish its regulations in force regarding the interception of civil aircraft and also ensure that its civil aircraft comply when another State requires its aircraft to land at designated aerodromes in accordance with the provisions in Article 3bis22.

2.90 The treaties listed as items 26 to 34 inclusive in Appendix 12 all relate to the topic of

air carriers’ liability for passengers, baggage and cargo. These items catalogue some of the various multilateral efforts to modernise the original 1929 Warsaw Convention which culminated in the adoption of the 1999 Montreal Convention for the Unification of Certain Rules for International Carriage by Air. The Montreal Convention has now been accepted by some 103 States including New Zealand and now represents the modern international uniform law governing air carriers’ liability. A State that becomes a party to the Convention assumes the obligation to implement the exact words of the Convention in its domestic law23.

2.91 In relation to the topic of aviation crime items 35 to 39 inclusive in Appendix 12 show

that New Zealand has accepted the Tokyo, Hague and Montreal Conventions, the Supplementary Montreal Protocol for the Suppression of Unlawful Acts of Violence in International Airports as well as the Convention on the Marking of Plastic Explosives for the Purposes of Detection24. A diplomatic conference to modernise the Tokyo Convention is to be convened by ICAO from 26 March 2014 to 4 April 2014.

2.92 Two more recently adopted aviation crime treaties are listed as items 40 and 41 in

Appendix 12 namely the Convention on the Suppression of Unlawful Acts Relating to International Civil Aviation and the Protocol supplementary to the Convention for the Suppression of Unlawful Seizure of Aircraft. Both of these treaties were adopted in Beijing on 10 September 2010. The Conventions have not yet come into force25.

21

Article 83bis has been given effect to in New Zealand law by section 4 of the Civil Aviation Act 1990. 22

Article 3bis is implemented in New Zealand law by section 53A of the Civil Aviation Act 1990 relating to “flight over foreign country without authority or for improper purpose”. In addition the procedures for interception of civil aircraft are set out in the New Zealand Aeronautical Information Publication (ENR1.12-1). A detailed legal analysis of Article 3bis is set out in Chapter 3 of the work by Jiefang Huang cited at footnote 3 above. 23

New Zealand has implemented the Convention in Part 9A of the Civil Aviation Act. The text of the Convention itself is included as Schedule 6 to the Act. 24

These treaties have been implemented in the Civil Aviation Act 1990 and the Aviation Crimes Act

1972 although it is not easy to relate the various treaty provisions to the detail of the statutory

provisions. 25

New Zealand has not yet taken any action to prepare appropriate domestic legislation to enable ratification of the Conventions and Protocol. ICAO Assembly Resolution A38-19 urges all States to ratify the Convention and Protocol as soon as possible.

28

2.93 Two treaties that New Zealand has recently become a party to are the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests and Mobile Equipment on Matters Specific to Aircraft Equipment both adopted in Cape Town on 16 November 2001. New Zealand ratified these two treaties on 20 July 2010 after incorporating the provisions of these Conventions in Part 12 of the Civil Aviation Act 1990 at Schedules 7 and 8 to the Act. The significance of these treaties is that they create an international registry for recording security interests in aircraft and related mobile equipment such as aircraft engines and as such facilitate international asset-based finance and leasing arrangements.

2.94 In response to the terrorist action resulting in the destruction of the Twin Towers in

New York on 11 September 2001 two further important multilateral treaties have been adopted, namely the Convention on Compensation for Damage Caused by Aircraft to Third Parties and the Convention on Compensation for Damage to Third Parties Resulting From Acts of Unlawful Interference Involving Aircraft. As shown in Appendix 8 both of these Conventions were adopted in Montreal on 2 May 2009. New Zealand has not yet taken any action towards preparing the domestic legislation that would be necessary in order to accept the Conventions, neither of which have yet come into force.

New Zealand Primary Aviation Legislation 2.95 Apart from the Civil Aviation Act 1990 other significant primary legislation giving

effect to New Zealand’s treaty obligations is: Aviation Crimes Act 1972; Transport Accident Investigation Commission Act 1990; and the Airport Authorities Act 1966. This legislation taken together creates a much more elaborate civil aviation system than is warranted in most PASO member States with their much smaller levels of aviation activity. For example the New Zealand civil aviation system consists of:

• Ministry of Transport – responsible for policy advice to the Minister and legislative

reform;

• Civil Aviation Authority – established as a Crown Entity under the Civil Aviation Act 1990 and subject to the Crown Entities Act 2004;

• Aviation Security Service – established by the Civil Aviation Act 1990 as part of the Civil Aviation Authority;

• Transport Accident Investigation Commission – established by the Transport Accident Investigation Commission Act 1990 as an independent non-blame investigator of aviation, maritime and rail incidents and accidents;

• Airways Corporation of New Zealand Ltd – established under the State-owned Enterprises Act 1986 as a commercial provider of Air Traffic Services;

• International Airports – established and operated by limited liability companies subject to information disclosure and pricing regulation according to the Airport Authorities Act 1966 and the Commerce Act 1986.

2.96 By contrast in the PASO member States it is usually sufficient and appropriate to have a Director of Civil Aviation employed by a Ministry of Transport with aerodrome, air traffic control and aviation security services all provided by a separate airport authority established as a statutory corporation or a limited liability company under an

29

Airport Authority Act. No separate full-time independent body is required for incident and accident investigation as the necessary expertise can be contracted in from New Zealand or Australia as required. However the State should still have appropriate legislation according to which the contracted investigators would be required to comply with.

2.97 When carrying out a harmonisatio