General counsel Carol Hui and her small team are guiding Heathrow through turbulent times
Building a third runway at Heathrow; curbing growth at Stansted; using RAF Northolt for short-haul civilian flights; and even constructing a ‘Boris Island’-style transport hub on Kent’s Isle of Grain – all these were ideas pitched to former FSA chairman Sir Howard Davies and his Airport Commission before 19 July by those seeking to influence Government policy on improving the UK’s air travel provision.
Throughout 2013 the commission will scrutinise every submission and piece together a strategy to be published in the summer of 2015 – in theory, ready for implementation after the next general election.
At the forefront of Heathrow’s submission is the airport’s general counsel Carol Hui (pictured). Having started in the role in March 2009, Hui is not only Heathrow Airport Holding’s legal head, she also sits on its executive committee alongside CEO Colin Matthews.
Just last year, Hui was appointed the director of Heathrow Airport Limited – the company overseeing Heathrow Airport itself.
“For the past nine months I’ve been executive sponsor for the hub capacity programme, arguing the case for Heathrow expansion,” she tells The Lawyer. “It involves master planning, communications and public affairs, sustainability, economics, strategy and legal.”
No small job then. Fortunately, the case for Heathrow is something Hui clearly feels passionate about.
“The case is strong,” she says. “We need connectivity and Heathrow is located near the demand. There are about 114,000 jobs around Heathrow – the Thames Valley area is full of business clusters. Moving the airport would disrupt that and we need to make sure we preserve it.”
Heathrow has provided a robust 40-page submission alongside a handy interactive online chart outlining the benefits of expansion at national, regional and local level. Not only would a third Heathrow runway save up to £66bn on Boris Johnson’s proposed Thames Estuary airport, it says, but 10 to 20 per cent fewer people would live inside the airport’s noise footprint than they do today.
The new runway could be in place by 2029, allowing 260,000 more flights to jet off from Heathrow each year.
“It’s ongoing,” Hui says. “If we’re selected it will be a lot of work.”
Of course, Heathrow’s proposals have their fair share of critics. In fact, everyone from Friends of the Earth to grass-roots campaign groups such as Airport Watch have wellied in on the debate.
“There are objections, but we try to be transparent,” Hui insists. “We’re involved in community engagement with local councils. We take into account noise impact and recognise that expansion plans will impact the property side. We’ve learnt from the past and we try not to be like the old BAA.”
Trying not to be like the old BAA has become a mantra at the heart of Hui’s strategy for Heathrow. It is hardly surprising when you consider she has spent three of her three and a half years in the role engaged in litigation over the break-up of the company.
“Two days after I joined Heathrow, the Competition Commission (CC) ordered a 1,000-page report about wanting BAA to break up and sell three airports in two years,” she says.
With BAA’s seven national airports carrying 60 per cent of UK air passengers, the commission had ruled there was a lack of competition, particularly between its three airports serving London.
For Hui there was little question about the next step: “I had to challenge their decision.”
BAA swiftly put Gatwick on the market but the commission still required it to dispose of Stansted and either Edinburgh or Glasgow within two years. Throughout the course of a bitter legal battle with the Competition Appeals Tribunal (CAT) (see timeline, page 16), BAA sold off Edinburgh, but refused to budge over Stansted.
Ultimately, on 2 February 2012 it lost an appeal in the Supreme Court over Stansted’s future. On 20 August of that year it reluctantly announced it would sell the airport, and on 18 January finally sold it to Manchester Airports Group for £1.5bn.
“Over three years, we had successive litigation with the CC,” Hui recalls. “The decision was meant to be made in March 2009, but we delayed it. Being spread over three years means we had more breathing space in selling off the airports.”
Having sold the three required assets, BAA was left with only Heathrow, Southampton, Aberdeen and Glasgow on its books, with Heathrow accounting for more than 95 per cent of the business. Suddenly, ‘British Airports Authority’ didn’t seem like such an appropriate title for the organisation.
In October 2012 BAA rebranded as Heathrow (shorthand for Heathrow Airport Holdings), with each of its other three airports operating under their own standalone brands. For Hui, the facelift was about altering public perceptions about the company.
“There has been a change in attitude compared with the old BAA,” she notes. “We live in a competitive world, not the old monopolistic arena.”
Heathrow’s new image has been promoted through a ramped-up ad campaign in recent years, hitting the country’s billboards and TV screens. The airport is also positioning itself as a luxury goods one-stop-shop, aiming to “compete with the best West End shopping experience”.
“People are now more aware of Heathrow,” Hui notes. “We’re making our case for being more commercial with the public.”
The long haul from ‘BAA’ to ‘Heathrow’
The legal crew
For a company that has been tangled up in so many legal binds it is remarkable that before 2009 it had no external panel.
“When I joined there was nothing,” laments Hui. “I spent my first six months building up the legal department – assessing the team, making sure I understood the company’s needs and recruiting talent.”
Her first step was to look at the in-house team.
“I recruited senior partners rather than juniors, and mainly ones from good private practice firms or with industry experience,” says Hui. “I wanted to congregate all our expertise in one place. When you’re a small department you have a critical mass which makes sharing work easier.”
The legal team at Heathrow consists of 12 “very experienced” lawyers, including two who focus on corporate and finance, two on property and planning, two on commercial, IP and IT work, one on litigation including health and safety, employment and aviation law, one on regulation and competition as well as aviation, and one on non-Heathrow airports. Hui overseas the whole team.
“It’s as efficient as possible,” notes Hui. “At British Gas there were over 100 lawyers. Here, some of the team are very senior and they keep busy all the time.”
Heathrow’s legal team is in close contact with the rest of the business. In fact, every member of the team spends one or two days a week sitting within a different department, functioning as a direct point of contact.
As well as distributing a regular legal bulletin and holding legal surgeries for the broader Heathrow team, the department also runs training sessions on points of law ranging from contracts and data protection to competition and the Bribery Act. To avoid pitfalls, Hui’s team has even developed an online competition training tool alongside panel firm Eversheds.
“The top few hundred managers are involved and even the CEO takes part,” she reveals. “They all say how useful it has been.”
Faced with a blank canvas Hui did not waste any time constructing a legal panel for BAA. The company’s first panel review was completed in March 2010.
“I spearheaded the project myself,” she says. “It can take up to one year to put a panel together, but I conducted the whole review in less than a month.”
The panel consists of nine firms, each of which is allocated its own areas of specialism. Pinsent Masons and Eversheds are among the firms picking up most work from Heathrow, while Blake Lapthorn, Herbert Smith Freehills and Freshfields Bruckhaus Deringer are hot on their heels.
Berwin Leighton Paisner (BLP) is a recent addition to the roster and advises on regulation, competition and procurement, as well as property and planning. Allen & Overy assists with corporate, finance and taxation, while Morton Fraser and Brodies are instructed to advise on Heathrow’s two Scottish airports.
Why these firms in particular? Well, in addition to quantitative considerations such as turnover and industry experience, Hui took qualitative aspects like diversity into account.
“I want the firms I use to evince the values I like to see,” Hui adds. “It’s a company’s duty to ensure it gives people equality of opportunity.”
She also values more tangible assets such as the provision of trainees – Hui’s 12-strong team is bolstered by five trainees from its panel firms at any one time – and fee
arrangements include a volume rebate. In essence, she says, “if our legal spend hits a certain threshold we get a cheque back”.
Ultimately, though, there’s an aspect of chemistry involved.
“You have to get on with them,” says Hui, and they must have “interesting new ideas.”
Rather than allowing teams to become stagnant Hui ordered a shake-up of the panel in March 2013. As well as adding BLP to the mix, the roles of Pinsent Masons and Eversheds were expanded, to “inject new blood” into Heathrow’s legal efforts.
Between run-ins with various commissions and authorities, Heathrow’s legal team has barely had time to unfasten its seatbelt in recent years. Despite having submitted their bid to the Airport Commission the airport’s legal team’s feet are unlikely to touch the ground any time soon.
Among its latest challenges is navigating Heathrow’s deliberation with the Civil Aviation Authority over its proposed economic regulatory settlement for the next five years, as the current price controls expire in 2014. Hui says it is important that the settlement “sets a return at a level that incentivises our shareholders to further invest in airport facilities” for the benefit of passengers.
“The best case for fair settlement incentivises our shareholder base to invest in the UK,” Hui insists.
Investors notably include sovereign wealth fund China Investment Corporation, which owns a 10 per cent stake, and Spanish infrastructure company Ferrovial, which has an indirect interest in Heathrow of more than 30 per cent.
In other news, the team is working on the trifling matter of “the largest privately funded project in Europe” in the form of Heathrow’s brand new Terminal 2. Once the Queen cuts the red ribbon in June 2014, the £2.5bn so-called Queen’s Terminal will serve around 20 million passengers each year.
Whether Heathrow wins its prized third runway or not, one thing is for sure – Hui’s pint-sized legal team will continue to help define the future of UK air travel.
Carol Hui: CV
1982: Qualified as a corporate finance lawyer, Slaughter and May
1989: Head of corporate legal, British Gas
1995: Deputy general counsel, BG Group
1997: Group legal director and company secretary, TDG
2000: General Counsel at Amey
2009: General counsel, BAA
2012: Director of Heathrow Airport Limited
Gatwick: trying to be a good neighbour
“Airports aren’t necessarily the neighbours you want,’ says Robert Herga (pictured), general counsel at Gatwick, in an admirable bid to take honours in the understatement of the week competition.
Even though the airport lies nearly 30 miles south of the capital and effectively sits among rolling West Sussex fields, it still boasts the name London Gatwick. However, that relative remoteness – at least in comparison to its main competitor in west London – does not mean development comes without fear of opposition.
“Planning is an important issue for us,” says Herga, “particularly in the context of our plans for a second runway. You’ve got to keep your local stakeholders on board. There’s a lot you have to take into account with noise and ways of making this better for local residents.”
Herga should know. He spent two decades with BAA – the body that used be known as the British Airports Authority prior to its 1986 privatisation – before doing a brief stint at retailer Carpetright. In 2010 he returned to the airport sector when Gatwick’s owners headhunted him for the GC role.
The in-house team was five-strong when he arrived, having been launched from a standing start in the run-up to the airport’s sale in 2009.
“In preparation it built up some of its departments and I think it slightly over-built the legal department,’ comments Herga. “So I slimmed it down by two, to what I think is the right size now.”
The current team of three qualified lawyers and one paralegal divides its work into three broad categories. First is capital projects, covering construction law.
“We’ve got pretty huge capital expenditure,” says the GC, explaining that the airport has engaged in projects valued at more than £1bn in the past five years and has plans for a similar expenditure over the next five.
Next comes the airport’s property portfolio and its commercial arrangements with a vast array of retail tenants, having over the years blended the line between airport and shopping mall.
“We’ve had various expansions and redevelopments,” says Herga, “bringing in a lot of fresh concessionaires, so there’s a huge amount of work in that field.”
The third prong to the legal department covers day-to-day procurement contracts, IP and data protection issues. In addition to ensuring the airport does not trample over the sensibilities and rights of its neighbours, Gatwick’s in-housers face persistent industry challenges over whether it is abusing a dominant position.
“We’re having an interesting debate with the Civil Aviation Authority as to whether we’re in a dominant position,” admits Herga. “Our story is that BAA was broken up for good reason – to create competition – and we say that competition exists. We have quite a debate with the CAA as to whether we have market power, so competition law is a concern.”
London City: on the rise
London’s City Airport is the capital’s newest – with the ribbon cut in 1987 – so it is fitting that its top lawyer is herself relatively new to the legal profession.
Jo Bushill qualified as a solicitor in 2008 – doing her training entirely in-house in the UK offices of Los Angeles-based Fortune 500 company Jacobs Engineering Group. In 2011, the City Airport position arose and Bushill jumped.
“I wanted to be in a role where I could get involved in all levels of detail of the business – staffing, commercial, operational – as well as dealing at financial and board levels,” she recalls.
Reflecting the smaller size of the airport squeezed into London’s humming Docklands financial district, the legal team is hardly large. In fact, Bushill has just one junior colleague, a barrister currently transferring to the solicitor side of the profession. “We try to keep the department lean,” Bushill explains. “We are very general, dealing with a lot of different areas; the volume of work is very high but focused in certain areas – commercial, corporate and employment. But we also get lots of random areas to deal with.”
Bushill is considering growing the department but takes a considered approach to adding staff. “If we became dependent on external advisers in a specific area, we’d look to in-source,” she says.
But for the most part, Bushill is happy to continue with the status quo in balancing in-house work with external instructions. Indeed, within the past few weeks, she has just completed a tender process for external advisers, awarding deals to two suppliers and two other firms to handle ad hoc litigation. Birmingham-based Wragge & Co and international firm Eversheds are the two main winners, with the former taking all commercial work, while the latter will deal with employment. The two litigation beneficiaries are London firms Holman Fenwick Willan and Plexus Law.
“Given that we are such a small team it is really important that we use external lawyers who understand our business.”
Just as City itself has grown from being a slight idiosyncrasy at launch to an airport where, according to Civil Aviation Authority figures, last year eclipsed the 3 million passenger mark (an 8 per cent rise on 2011), Bushill’s job has also expanded. She first dealt with the legal affairs brief but rapidly took over compliance and company secretary roles, as well as the insurance programmes and risk management.
“The aviation industry is an exciting sector to work in. It uses cutting-edge technology, while having to deal with potentially very significant risks – all within a highly regulated industry. I can’t imagine a better place for an in-house lawyer to be working.”