2.12 From an early stage in negotiations the Department defined the position it would adopt as a responsible shareholder. This meant:
■ In principle, matching additional private sector investment, by amount and in detailed terms; and
■ Supporting the work of the government's non-executive Partnership Directors within the Company, who themselves played an active role in the Company's negotiations with banks and potential investors.
2.13 We found evidence during our examination that NATS' four investing banks had on occasions complained to the Department about the stance of the Civil Aviation Authority during negotiations. The banks wanted to see more concessions from the economic regulator that would relieve the financial pressures on the Company, and so reduce the need for concessions by the other participants. The banks told us that they had been looking for indications that the Authority would consider a review of the price cap favourably. They considered the initial response from the CAA was extremely negative and that it was wholly appropriate for them to make their views known to the Company and to its shareholders. They became more confident that the CAA appreciated the issues surrounding the company's finances when in mid-summer 2002 the CAA appointed the Royal Bank of Scotland as its financial adviser.
2.14 The Department themselves had to manage a potential conflict of interest since as well as being a shareholder in NATS, they are also a sponsor of the Authority which determines NATS' prices and as a consequence in this case, the level of new shareholder capital that was required. Even though it has no locus to intervene in the economic regulation of NATS by the CAA, the Department had to be careful not to apply pressure, or to be perceived as applying pressure on an independent regulator, since the credibility of independent economic regulation is an important element of the Government's economic policy. Through interview with regulatory officials, and review of documentation, we have found no evidence to suggest that the Department had applied pressure on the Authority.