This article first appeared in The Edge Malaysia Weekly on May 27, 2019 - June 2, 2019

MALAYSIA Airports Holdings Bhd (MAHB) will oppose a judicial review application by AirAsia group against the Malaysian Aviation Commission’s (Mavcom) refusal to mediate their differences in the latest dimension in the legal tangle involving Asia’s biggest budget airline group and Malaysia’s dominant airport operator.

MAHB’s intention was communicated to the Kuala Lumpur High Court in a letter dated May 23, 2019. Its subsidiary, Malaysia Airports (Sepang) Sdn Bhd (MASSB), was named the second respondent in AirAsia’s judicial review application on May 14.

In its application, AirAsia is seeking a certiorari order to quash Mavcom’s decision not to rule on its dispute with MAHB, and a mandamus order to compel Mavcom to decide on the dispute.

The dispute between the airline and airport operator began with MAHB’s suit in December 2018 to claim uncollected airport taxes from AirAsia Bhd and AirAsia X Bhd amounting to RM36.12 million, but it has since snowballed to include other issues.

If the court grants leave for AirAsia to commence the judicial review, the process will likely shed greater clarity on the interpretation of Sections 74 to 78 of the Mavcom Act 2015, which deals with dispute resolution.

When contacted, Mavcom executive chairman Dr Nungsari Ahmad Radhi says the commission will let the process take its course and will respond accordingly to the court’s decision on the application.

Among others, Section 74 provides that any dispute between two or more aviation service providers regarding any matter under the Mavcom Act will first be resolved through mediation. Should such a dispute remain resolved within a specified timeframe, Section 75 provides that Mavcom will commence to decide on the dispute.

In the present dispute, AirAsia and AirAsia X had filed a judicial review application on May 14 to challenge Mavcom’s pronouncement that it would not decide on an ongoing dispute between the two airline companies and MAHB over the collection of passenger service charges (PSC).

According to letters dated Feb 28 and March 18, Mavcom maintains it is not in a position to decide on the dispute as the matter is pending disposal by the court. (On Dec 11, MAHB had filed a suit against AirAsia over the uncollected PSC amounts.)

But in an affidavit filed on May 14, AirAsia maintains that Mavcom has a statutory duty to mediate the dispute and has erred in law by its refusal to do so.

“The first respondent (Mavcom) failed to appreciate that by the wording of the Mavcom Act, it does not have a discretion to decline to decide on the disputes between the applicants (AirAsia and AirAsia X) and the second respondent (MASSB),” according to AirAsia’s affidavit.

The judicial review application will be heard on June 17. MASSB is represented by Skrine while AirAsia and AirAsia X are represented by Messrs Bodipalar Ponnudurai De Silva.

Impact on MAHB’s suit

The outcome of AirAsia’s judicial review application will have significant bearing on MAHB’s suit against the airline companies for PSC.

AirAsia group had refused to collect the full RM73 PSC for international departures, which kicked in on July 1, 2018. Instead, it collects RM50 as it feels the RM73 rate is unfair to international passengers flying out of the klia2 terminal, which it deems to have inferior services and facilities compared with the Kuala Lumpur International Airport main terminal.

MAHB had filed the suit in December after AirAsia rebuffed its letter of demand for the outstanding sum in October last year. AirAsia maintains the MAHB suit is frivolous and an abuse of process as the airport operator could have first turned to the dispute resolution process under the Mavcom Act.

Therefore, a successful judicial review against Mavcom’s non-intervention could strengthen AirAsia’s argument against MAHB’s December 2018 suit. The next hearing for MAHB’s suit against AirAsia group is scheduled for July 4, more than two weeks after the judicial review application is to be heard.

A judicial review process will also shine the spotlight on the Conditions of Use (COU) agreement between AirAsia group and MAHB, which is also a contentious point in MAHB’s suit.

For perspective, it is worth noting that in response to the MAHB suit, AirAsia had sent a notice for mediation against MAHB on Jan 31. The carrier had sought RM479.78 million in losses and damages suffered over a four-year period and nominated Messrs Sreenevasan Young as mediator.

However, MAHB declined the mediation notice. In a Feb 4 letter sighted by The Edge, MAHB argued that under Clause 13 of the COU agreement, Malaysian courts have exclusive jurisdiction to determine disputes related to the contract.

The COU agreement governs the use of airport facilities. In a nutshell, the contract stipulates that all charges due to MAHB, including the PSC, must be paid within 30 days of the date of its invoice.

The COU contract was entered into by MAHB and AirAsia group in 2010, according to MAHB, which also asserted that AirAsia did not object to amendments to the contract in 2017.

However, in a Feb 11 response to MAHB, AirAsia group asserted that it “did not agree to the terms” of the COU as they were “unilaterally imposed by MASSB” and that negotiations to regulate the relationship between the airport operator and the airline are still pending.

AirAsia also asserted in the same letter that in any event, Clause 13 is “void and unenforceable as it directly contravenes Sections 74 to 78 of the Mavcom Act”.

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