Aviation Law 2020 - ACC

Aviation Law 2020A practical cross-border insight into aviation law

Eighth Edition

Featuring contributions from:

ǼLEX

AEROHELP Law Office

Arias, Fábrega & Fábrega

ASBZ Advogados

Augusta Abogados

AZB & Partners

Azmi & Associates

Benn-Ibler Rechtsanwaelte GmbH

Canales, Dávila, De la Paz, Enríquez,Sáenz, Leal, S.C.

Christodoulou & Mavrikis Inc.

Clyde & Co

Dingli & Dingli Law Firm

ESENYEL & PARTNERSLAWYERS AND CONSULTANTS

Fox Rothschild LLP

Freidenberg, Freidenberg & Lifsic

Furtună și Asociații

Gongora Reina & Associates

Gross, Orad, Schlimoff & Co. (GOS)

IUNO

K&L Gates LLP

Kabraji & Talibuddin

Kaplan & Stratton Advocates

Kreindler & Kreindler LLP

Maples Group

Monard Law

Mori Hamada & Matsumoto

RadcliffesLeBrasseur

Raful Sicard Polanco & Fernández

Studio Pierallini

The Air Law Firm LLP

Urwantschky Dangel Borst PartmbB

VISCHER AG

Weerawong, Chinnavat & Partners Ltd.

Wiley Rein LLP

Aviation Law 2020Eighth Edition

Contributing editors:

Alan D. MeneghettiRadcliffesLeBrasseur

Philip PerrottaK&L Gates LLP

©2020 Global Legal Group Limited. All rights reserved. Unauthorised reproduction by any means, digital or analogue, in whole or in part, is strictly forbidden.

DisclaimerThis publication is for general information purposes only. It does not purport to provide comprehen-sive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

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Table of Contents

Aviation Law 2020

Expert Chapters

Q&A Chapters

1 The Use of Personal Data in the Commercial Aviation IndustryAlan D. Meneghetti & William Bainbridge, RadcliffesLeBrasseur

6 Investing in Mid-Life Aviation AssetsPhilip Perrotta, K&L Gates LLP

36

52

68

75

90

103

ArgentinaFreidenberg, Freidenberg & Lifsic: Elizabeth Mireya Freidenberg & Juan Manuel Llobera Bevilaqua

BelgiumMonard Law: Birgitta Van Itterbeek, Tine Bogaerts & Willem De Vos

British Virgin IslandsMaples Group: Michael Gagie & Rebecca Lee

Cayman IslandsMaples Group: Sherice Arman & Shari McField

ColombiaGongora Reina & Associates: Jorge Gongora

Dominican RepublicRaful Sicard Polanco & Fernández: María Esther Fernández A. De Pou & María Fernanda Pou Fernández

46

Hong KongClyde & Co: Alastair Long, Justin Yuen & Peter Coles130

62

83

AustriaBenn-Ibler Rechtsanwaelte GmbH: Mag. IrenaGogl-Hassanin, LL.M.

BrazilASBZ Advogados: Guilherme Amaral & Renan Melo

ChinaClyde & Co: Victor Yang, Samuel Yang & Peter Coles

97 DenmarkIUNO: Aage Krogh

11 Restoring Confidence in Aviation SafetyMarc S. Moller & Justin T. Green, Kreindler & Kreindler LLP

17 Onboard Offences and Unruly Passengers – Effective Management and the Changing Legal LandscapeChris Smith, The Air Law Firm LLP

22 United States Regulatory Regime for Commercial Use of Small Unmanned Aircraft SystemsAnna M. Gomez, Joshua S. Turner, Katy Milner Ross & Sara M. Baxenberg, Wiley Rein LLP

28 Regulations on Drone Flights in JapanHiromi Hayashi & Koji Toshima, Mori Hamada & Matsumoto

33 WALA: 12 Years of Growth in the Airport SectorAlan D. Meneghetti & Michael Siebold, Worldwide Airports Lawyers Association (WALA)

112 FranceClyde & Co: Maylis Casati-Ollier & Benjamin Potier

121 GermanyUrwantschky Dangel Borst PartmbB: Rainer Amann & Claudia Hess

IrelandMaples Group: Donna Ager & Mary Dunne148

137 IndiaAZB & Partners: Anand Shah & Rishiraj Baruah

160

198

214

IsraelGross, Orad, Schlimoff & Co. (GOS): Omer Shalev

179 JapanMori Hamada & Matsumoto: Hiromi Hayashi

MalaysiaAzmi & Associates: Norhisham Abd Bahrin & Nazran Arvind Bin Nahdan Rengganathan

MexicoCanales, Dávila, De la Paz, Enríquez, Sáenz, Leal, S.C.: Bernardo Canales Fausti & Aldo Álvarez Martínez

170

189

ItalyStudio Pierallini: Laura Pierallini & Francesco Grassetti

KenyaKaplan & Stratton Advocates: Peter Hime, Ruth Kirunga & Matthew Arrumm

206 MaltaDingli & Dingli Law Firm: Dr. Tonio Grech

221 NigeriaǼLEX: L. Fubara Anga & Oluwasemiloore Atewologun

228 PakistanKabraji & Talibuddin: Syed Ali Bin Maaz & Mubeena Sohail Ellahi

238 PanamaArias, Fábrega & Fábrega: Roy C. Durling & Sofía J. Cohen

244 RomaniaFurtună și Asociații: Mihai Furtună & Ioana Anghel

254 RussiaAEROHELP Law Office: Oleg Aksamentov & Ilona Tsimbal

263 South AfricaChristodoulou & Mavrikis Inc.: Chris Christodoulou

271 SpainAugusta Abogados: Sergi Giménez

279 SwedenIUNO: Aage Krogh

285 SwitzerlandVISCHER AG: Urs Haegi & Dr. Thomas Weibel

294 ThailandWeerawong, Chinnavat & Partners Ltd.: Nattaporn Pengkul

301 TurkeyESENYEL & PARTNERS LAWYERS AND CONSULTANTS: Selcuk Esenyel

307 United KingdomRadcliffesLeBrasseur: Alan D. MeneghettiK&L Gates LLP: Philip Perrotta

322 USAFox Rothschild LLP: Diane Westwood Wilson & Rebecca Tingey

Table of Contents

From the PublisherDear Reader,

Welcome to the eighth edition of The International Comparative Legal Guide to Aviation Law, published by Global Legal Group.

This publication provides corporate counsel and international practitioners with comprehensive jurisdiction-by-jurisdiction guidance to aviation laws and regulations around the world, and is also available at www.iclg.com.

This year, seven expert chapters cover a range of topical issues affecting the sector: from personal data, mid-life assets, safety and onboard offences, through to unmanned aircraft systems; as well as an organisational overview from key industry body, the Worldwide Airports Lawyers Association.

The question and answer chapters, which in this edition cover 35 jurisdictions, provide detailed answers to common questions raised by professionals dealing with aviation laws and regulations.

As always, this publication has been written by leading aviation lawyers and industry specialists, for whose invaluable contributions the editors and publishers are extremely grateful.

Global Legal Group would also like to extend special thanks to contributing editors Alan D. Meneghetti of RadcliffesLeBrasseur and Philip Perrotta of K&L Gates LLP for their leadership, support and expertise in bringing this project to fruition.

Rory SmithGroup PublisherGlobal Legal Group

Preface

Jeffrey N. ShaneGeneral Counsel

PrefaceDear Industry Colleagues,

On behalf of the International Air Transport Association, I would like to thank Global Legal Group for their hard work in publishing this eighth edition of The International Comparative Legal Guide to Aviation Law. Once again, they have brought together preemi-nent aviation lawyers from across the globe, providing a unique, worldwide legal update in a single volume. IATA hopes that you will find this edition enlightening and helpful.

The invitation to participate in this publication was well received by the world’s leading law firms, thereby validating the continued growth and interest in aviation law practice around the world. We thank the authors for so generously sharing their knowledge and expertise, and for making this publication so valuable a contribution to our profession.

IATA is the trade association for the world’s commercial airlines, celebrating our 75th

anniversary in 2020. Our vision from the very beginning has been to work together with our member airlines and industry stakeholders to shape the future growth of a safe, secure and profitable air transport industry that sustainably connects and enriches our world. This publication is wholly aligned with that vision.

We hope you can join us in New York City at our next IATA Legal Symposium, the world’s premier annual aviation law conference, 19–21 February 2020. For further information please visit our website at www.iata.org/legal-symposium. I hope to see you there!

Sincerely,

Aviation Law 2020

Chapter 1 1

The Use of Personal Data in the Commercial Aviation Industry

RadcliffesLeBrasseur William Bainbridge

Alan D. Meneghetti

© Published and reproduced with kind permission by Global Legal Group Ltd, London

IntroductionThe opportunities created by data, and in particular personal data, can be immensely valuable for all manner of businesses, for both market insight and financial reasons. The commercial aviation sector is of course no different in this respect, especially given the sheer amount and variety of data generated by the avia-tion industry – from engineering and scientific data, to flight data and weather data, through to consumer data, passenger data, security data, personal and in some cases (what we in the EU refer to as) special categories of personal data (that is, data regarding an individual’s race and ethnic origins, medical infor-mation, religious beliefs and so on).1

The generation of data gives rise to many questions, including:■ wherethatdataiscollected;■ howthatdataistreatedbytherecipientorholderofthat

data;■ wherethatdataisstored;■ whetherornotthatdataneedstobestoredsecurelyand,if

so,whetheritisindeedstoredsecurely;■ if thatdataneeds tobestoredsecurely, the standardsof

securitytowhichthatdatastorageneedstocomply;■ theuseofthatdata;and■ if that data relates to an individual (a “data subject”),

whetherthedatasubjectsuppliedtheirconsentknowingly,willingly and whilst being fully informed of: (i) the uses to whichtheirdatawillbeput; (ii)wheretheirdatawillbestoredandprocessed;and(iii) thesecurityarrangementsthat are in place with respect to their data (and – a corol-lary of sorts – whether they can withdraw their consent and“taketheirdataback”).

The answers to, and indeed the relevance of, these ques-tions will depend on the type of data which is involved – flight, weather, technical and engineering data (for example) will be treated differently and viewed by different recipients than, say, a passenger’s personal data which might be collected by duty-free shops, the airport (either directly or through its website), the ground handlers and security companies, or the airline oper-ators. It is also worth keeping in mind that not all types of data are protected by law – whilst certain types of data (most notably, personal data) will be legislatively protected in many jurisdictions,othertypesofdatamaybeprotectedsimplybytheparties dealing with that data on the basis that it is confidential or business-sensitive (e.g. the average spend at the various duty-free shops).

In this short chapter, some instances where, and the touch-points at which, personal data is collected in the commercial aviation industry are explored. It should be noted that this is a vast topic in and of itself, and one can write dedicated chapters and even books on the issues raised by, and the answers to, the

questions set out above. This chapter merely aims to provide a starting point for the key questions raised. This chapter does not explore the added ramifications presented by the use of artificial intelligence (or simply “AI”, as it ismost commonlyreferred to), and the ethics around this which are being worked out, it seems, almost on a weekly basis.

Collection PointsPersonaldatawillbecollectedthroughouttheentire“passengerexperience”fromthebeginning,startingwiththebookingofanairline ticket, to the potential purchasing of duty-free products on board, as demonstrated in the example set out below.

Case Study

ApassengerwishingtotravelfromLondonGatwickwilllogontotheGatwickAirportwebsitetofindoutthebestwaytotravelto the airport. While browsing, cookies will be collected which track the passenger’s movements through the website. In certain situations, the passenger may volunteer their email address and other personal information in order to be contacted by the airport in the event of delays (due to, for example, bad weather) or to receive regular updates and news from the airport.

Before leaving their house, or whilst on their mobile, the passenger may check in online, select their seat on the aircraft, advance-purchase any duty-free items for collection on board and input their meal choice and any other dietary requirements they may have (at which point, more cookies are collected, as well as personal data – this time by the airline on which the passenger is travelling). Potentially, special categories of personal data can alsobecollected;forexample,pointerstothepassenger’sphys-ical health and religion may (although, admittedly, not neces-sarily) be indicated by meal choices and special requirements (for example, the need for a wheelchair, extra oxygen on board or special assistance).

Once at the airport, the passenger will self-tag and drop their bag at the airline’s bag-drop counter (again, delivering personal data regarding their name, passport details, address, flight details and so on), pass through customs and immigration (at which point, more personal data is submitted to the customs and immi-gration authorities) and proceed to security, where they may be scanned using a full body scanner (which collects personal data regarding the passenger, at least to the extent the scanners are able to identify any physical health issues such as implants, not to mention generating images of the passenger’s body which raise a number of privacy concerns for adults, let alone minors).2

The passenger may then purchase further duty-free goods on their debit or credit card, showing their boarding card and

2 Personal Data in the Commercial Aviation Industry

Aviation Law 2020© Published and reproduced with kind permission by Global Legal Group Ltd, London

the express purposes for which it is collected. In the UK, for instance, these provisions may be located in Schedule 2 of the DataProtectionAct2018.On 14 April 2016, the European Parliament approved the

termsof theEUPassengerNameRecord (“PNR”)Directive,obliging airlines flying into the EU to hand the EU destina-tion country their passengers’ personal data in order to help the authorities fight terrorism and serious crime. Member Stateshaduntil25May2018 to implement theDirective intotheir national laws. The Directive requires Member States to setup“PassengerInformationUnits”(“PIUs”)tomanagethepersonal data collected by airlines. The information has to be retained for a period of five years, but after an initial six-month period, certain data is to be removed (such as the name, address and contact details of the passenger). While this Directive only applies to flights originating outside the EU, Member States may decide to extend this requirement to internal flights within the EU, as well as require tour operators and travel agencies to hand over the personal data they have collected to PIUs. In turn, the PIUs are ultimately responsible for transferring the personal data (if required) to the relevant national authorities as well as liaising with other PIUs to improve European co-operation in tackling terrorism and trafficking.4

Commercial Purposes

Contrast a security/crime prevention scenario with a situation in which the personal data of the passenger is collected for commercialreasons;forexample,whenthepassengerpurchasesan item at a duty-free shop and swipes their debit or credit card or loyalty card, when they submit their information (perhaps by dropping their business card into a box) for the chance to win a prize, or when they check in for a flight. In the EU there is a general prohibition of data transfers to non-EU countries that are not officially recognised as having an adequate level of data protection (only a relatively small number of coun-trieshavebeenofficiallydeemedassuchbytheEU;somethingwhich, by all accounts, is not a quick process).5 The sharing ofpersonaldatawithin theEU isnowalso subject to stricterlaws on data processing and sharing. The EU General Data ProtectionRegulation2016/679(“GDPR”)wastransposedintothenationallawsofMemberStateson25May2018.

Despite speculation on whether the UK Government would introduce new national laws to mirror the GDPR, following the resultofthereferendumtoleavetheEUon23June2016,HerMajesty’s Government further enhanced the data protectionregimeintheUKwiththeenactmentoftheDataProtectionAct2018 (“DPA 2018”), which expressly incorporated the provi-sions of the GDPR into domestic UK legislation.TheGDPRstrengthenstherightsofthedatasubjectinmany

different areas of data protection, including, but not limited to, the following: ■ whenever a company is required toobtain theconsentof

thedatasubject,thisconsentwillhavetobegivenbymeansof an unambiguous and clear affirmative action (such as ticking a box on the company’s website) in circumstances wherethatdatasubjectactsfreelyandisfullyinformedastothepurposesforwhichtheirpersonaldatawillbeprocessed;

■ thedata subjecthas, in certain circumstances, a right toobjecttotheprocessingoftheirpersonaldataunderArticle21 of the GDPR, such as when the company collecting that personaldataintendstouseitformarketingpurposes;

■ the data subject also has a ‘right to be forgotten’ underArticle17oftheGDPR,wherearequestcanbemadetothecompany collecting that personal data to stop processing

possibly also an airport rewards card (both of which are scanned – again, more personal data is collected, this time regarding the passenger’s whereabouts and purchasing preferences), and boards the aircraft where, if they are travelling internationally, they may have to complete an immigration form requesting further personal data. The passenger may also purchase more goods on board (on their debit or credit card) and submit their frequent-flyer details.Allscenariosandrelatedcollectionpointsarenotincludedin

the above case study, but the scenario does illustrate the point that, whilst not quite limitless, the opportunities for various organisations and companies to collect personal data, each and every time a passenger travels, are multifarious.

Treatment of the Data Collected by the Data ControllerGenerally, the manner in which personal data is collected and treated by the collecting entity is driven by the intended purpose for which that data is collected.

Security and Crime Prevention

The first question that should be asked is whether the personal data collected was for the purposes of security and/or crime prevention, or rather in order to bolster the collecting entity’s business intelligence and business requirements (for example, passenger habits, passenger dietary requirements and so on). By wayofexample, in2019SouthWalesPolicewerefoundtobejustifiedintheiruseofautomatedfacialrecognition(AFR)inacommercial setting to search for individuals found on a watch list. Despite arguments that the data being collected was of a highlypersonalnature, theHighCourt found that theuseofthe technology was permissible because South Wales Police had complied with all the relevant equality legislation, were processing personal data in manner consistent with all other relevant legislation, and had implemented sufficient safeguards topreventappropriateandnon-arbitraryuseofAFR.

In the case of the former, strict controls exist around exactly:■ whatpersonaldatamaybeharvested(usuallytheminimum

whichisnecessaryandwhichisusuallyspecified);■ howlongthatpersonaldatamaybekept(thisvariesfrom

jurisdiction to jurisdiction, but the usual rule of thumbis as long as may be required, unless otherwise legisla-tively specified). In the UK, the guidance issued by the Information Commissioner’s Office (ICO) on the use of CCTV3 stipulates that the personal data should be kept for the‘minimum amount of time necessary to fulfil its original purpose’;

■ theoriginalpurposeforwhichthatdatawascollected;and■ whetherthatpersonaldatamaybetransferredoutofthe

jurisdictionortoothercrimepreventionagencies(gener-ally this will be acceptable if the purpose of the transfer is to prevent the occurrence of crimes).

Furthermore,inthecaseofpersonaldatacollectedforsecu-ritypurposes,theissueofwhetherthedatasubjectsconcernedhave consented to the collection of their personal data and its subsequent use does not usually arise, as this data may be collectedwithout the consent of the data subject, provided itis required for the purposes of the prevention of crime and is collected and held in accordance with the relevant legislation.In virtually every jurisdiction, personal data collected for

the purposes of crime prevention may be collected without the consentofthedatasubject,providedthatallrelevantlegislativecontrols in relation to the collection and use of that personal data are adhered to and that the personal data is only used for

3RadcliffesLeBrasseur


companies to store, share and use the personal data of EU citizens, provided the company can meet a number of criteria. Referred to as the EU-US Privacy Shield, the aim of the legislation (which cameintoforceon1August2016)wastore-establishatransat-lanticdataframeworkafteritspredecessor(knownasthe“SafeHarbor”mechanism)wasstruckdownbytheEuropeanCourtofJusticein2015forfailingtoadequatelyprotectthepersonaldataofEUdatasubjects. TheEU-USPrivacyShieldwasreviewedandre-affirmedinOctober2019.

There is a long list of criteria that a US company must satisfy in order to obtainEU-USPrivacy Shield status; these notablyinclude:■ providingtheEUdatasubjectwitharighttolimithowthe

companycanusetheirpersonaldata;■ keeping thedata subject informedofhowtheirpersonal

dataisbeingused;and■ storing the personal data only for the time needed and,

afterthattime,destroyingthedatasubject’spersonaldatasafely and securely.10

Personal data may also be transferred from the EU to outside of the European Economic Area where the parties, betweenwhich the personal data is being transferred, have entered into an agreement incorporating the Standard Contractual Clauses adopted by the European Commission.11 Personal data may also be transferred between companies operating within the same corporate group structure, through approved Binding Corporate Rules (BCRs) applied across the relevant corporate group.

It is presently unclear what mechanism should be used in the event of onward transfers of data once that data has been trans-ferredoutsideoftheEEAforpartiesnotboundbyBCRsinthesame corporate group or not otherwise bound by contractual obligations that incorporate the Standard Contractual Clauses. Atbest,thereisalackofuncertaintyanduniformityinthewaythis question is being addressed by travel agents and airlines.

BreachesBreaches of the relevant legislation invariably lead to administra-tivefinesandpenaltiesinthejurisdictionconcerned.Thisisespe-cially the case under the GDPR, where a penalty for non-compli-ancecanseeacompanybeingfinedupto€20m,or4%ofannualglobal turnover – whichever is higher.12 The severity of getting it wrong in respect of personal data was made unequivocally clear inJuly2019,whentheICOannouncedarecordfineof£183minrespectofBritishAirways,followinganunprecedentedpassengerdata breach in which the personal data of around half a million customers was stolen.13 Inaddition,pursuanttotheGDPR,‘appropriatemeasures’may

be taken by the supervisory authority to deal with data breaches: for minor infringements (dependent on the nature, gravity and durationoftheincident),thismaybeintheformofareprimand;while more serious infringements could carry criminal penalties under the laws of each Member State.14Innon-EUjurisdictionswhere data protection legislation is still relatively new,15 it is often a challenge to know what approach the relevant regulator will take to breaches, and what types of fine they are prepared to mete out.

Other Concerns Otherconcernsariseinrelationtothe:(i)collection;(ii)reten-tion;(iii)use;and(iv)storageofpersonaldata,especiallyaroundthelocationofthatstorage.Furtherconcernsariseoutofthetransferofpersonaldata; inparticular,towhomthatpersonaldata may be transferred (whether as a result of the sale of a marketing list, an intra-group data-sharing arrangement or otherwise). The ability of a company to store and transfer a

thedatasubject’spersonaldataifitisunabletoprovidealegitimatereasonforretainingthatpersonaldata;and

■ whenadatabreachoccurs(forexample,personaldatahasbeen unlawfully accessed by a third party), the company collecting that personal data (which will usually be the data controller)isunderalegaldutytoinformthedatasubject‘withoutunduedelay’andimmediatelynotifytherelevantdata protection supervisory authority of that breach.6

The GDPR applies to any entity that controls or processes personal data of any individual in the EU (regardless of whether that processing takes place in or outside the EU or whether that individual is an EU resident or not). Taking the example scenario above, this would apply to a wide range of businesses, from loyalty card providers to airlines. The legislation does not, however, apply to authorities which process personal data for the purposes of public security, such as customs authorities (this type ofprocessingissubjecttootherlegislativerequirements).7

The example of the prize draw is a more challenging one – section 352 of theGamblingAct 2005 (the “GamblingAct”)(which is the main legal statute in the UK that governs prize draws) states that any disclosure of personal data must comply withtheDPA2018.Similarly,theGDPRappliesequallytoactiv-itiesthatfallundertheGamblingAct. Currentlyamajorchal-lenge for those operating prize draws, raffles and the like is that, if a form is completed to enter into a prize draw, it may have terms and conditions regulating the collection of personal data but, in the authors’ view, if the form only refers to terms which cannot be read at the time of completion of the form, it may be diffi-cult to enforce these terms against a consumer. Similarly, when a business card is dropped into a box for a prize draw, it is rare for terms and conditions describing the processing of the personal data collected to be shown, with the subsequent challenge for the data collector (usually the data controller, but in cases where the collector is only collecting the data on behalf of another and is not determining the use to which that personal data may be put, the collector may only be the data processor) of demonstrating that it has the requisite consents in place to use that data (for example, to contactthedatasubjectregardingfuturepromotionsandsoon).

It is, of course and at least in the EU, incumbent upon the data controller to establish, in the event of a challenge,8 that the datacontrollerhastherequiredconsentsinplace;evenmoresowith the new data protection laws applicable under the GDPR. In particular, the new requirement under the GDPR for the data subject to give their consent by a clear affirmative action (theso-called“tickbox”requirement)mayrequireoperatorsofprizedraws to clearly display the terms and conditions, and obtain the data subject’s express consent evidenced by a clear affirmativeaction,asaconditionforthedatasubjecttobeeligibletopartici-pate in the prize draw.

In the case of passengers travelling by air from the EU to the USA,personalpassengerdata(rangingfromthepassenger’snamethrough to their frequent-flyer information, billing information and all available contact information) may be transferred from the EUtotheUSAunderthetermsofaPNRagreementbetweentheUSAandtheEU.9 We note that similar arrangements have been put in place between the EU and Canada and between the EU and Australia;however,wefurthernotethatinJuly2017theCourtofJustice of the European Union found that the PNR agreement between the EU and Canada may not be concluded in the form it was in at that time, because several of the provisions set out in the PNR agreement were incompatible with the fundamental rights recognised by the EU. Negotiations to broker a deal on a new PNR agreement were commenced between the EU and Canada in June2018and,atthetimeofwriting,areongoing.

With respect to business-to-business transfers, an agreement wasreachedin2016betweentheEUandUSAwhichallowsUS

4 Personal Data in the Commercial Aviation Industry


Endnotes1. A list of what constitute special categories of personal

data in the European Union, and specifically the United Kingdom, and the requirements around the processing ofthatdata,canbefoundinArticle9oftheGDPRandsections10and11oftheUKDataProtectionAct2018.

2. This is a concern which many privacy advocates argue is disproportionate to any gains in security which body scan-ners may offer.

3. https://ico.org.uk/your-data-matters/cctv/ (as at the time of writing, the guidance had not been updated to take accountoftheGDPRortheUKDPA2018).

4. ThePassengerNameRecordDirective(EU)2016/681oftheEuropeanParliamentandof theCouncilof27April2016.

5. The jurisdictions which, at the time of writing, havebeen deemed adequate by the European Commission are Andorra, Argentina, Canada (only commercial organisa-tions),theFaroeIslands,Guernsey,theIsleofMan,Israel,Japan, Jersey, New Zealand, Switzerland, Uruguay and the UnitedStates ofAmerica (if the recipient belongs to thePrivacy Shield framework). Adequacy talks are ongoingwith South Korea.

6. TheGeneralData ProtectionRegulation (EU) 2016/679oftheEuropeanParliamentandoftheCouncilof27April2016.

7. Such as thePNRDirective (Directive (EU)2016/681oftheEuropeanParliamentandof theCouncilof27April2016).

8. Whether by a data subject challenging the legitimacy ofthe data controller’s right to contact them, or the relevant data protection supervisory authority (usually investigating complaints fromdata subjects, around those data subjectsbeing contacted by the data controller without their consent).

9. AgreementbetweentheUSAandtheEUontheuseandtransfer of Passenger Name Records to the United States DepartmentofHomelandSecurity(InterinstitutionalFile2011/0382(NLE)).

10. Commissionimplementingdecisionof12July2016pursuanttoDirective95/46ECoftheEuropeanParliamentandofthe Council on the adequacy of the protection provided by the EU-US Privacy Shield.

11. The validity of Standard Contractual Clauses is currently beingconsideredbytheCJEUinC-311/18concerningthedisputebetweenFacebookandMaxSchrems.

12. SeeArticle83GDPR.13. ICO: ‘Intention to fine BritishAirways £183.39m under

GDPRfordatabreach’,dated8July2019.14. SeeArticle83GDPR.15. For example, SouthAfrica obtained its first data protec-

tion-specific legislation, the Protection of Personal Information Act, in 2013 (the Act was passed into lawon 26November 2013), although at the time of writingthis chapter (November 2018) the Act had yet to fullycommence – certain sections of the Act became effec-tivefrom11April2014anditisbelievedthattheActwillcommence in the first quarter of 2019, with companiesbeing given a 12-month grace period for compliance.

16. SeeArticle5GDPRand,inparticular,Article5(1)(e).17. Forexample,withouttheconsentofthedatasubject,data

may be transferred out of the EU to organisations in coun-trieswhichhavebeenendorsedbytheEUasoffering‘anadequate level of protection’.

18. https://eur-lex.europa.eu/legal-content/EN/HIS/?uri=CELEX%3A52017PC0010.

datasubject’spersonalinformationhasbeenfurtherlimitedbyprovisions in the GDPR, most notably through the requirement for the company not to store personal data for a period which is longer than required for the purpose for which that personal data was originally collected.16 In addition, the data controller must establish, pursuant to Article 25 of the GDPR, appro-priate internal technical and organisational measures which are designed to implement the data protection principles and protecttherightsofthedatasubjects.

Unfortunately, length constraints do not permit this chapter to look into these issues in any depth; however, it is worthnoting that data controllers need to be constantly mindful of theconsentswhichtheyhaveobtainedfromtheirdatasubjects,as well as what the data controllers are permitted to do in the absence of those consents.17

Conclusion The next challenge for the aviation industry will be the imple-mentation of the draft EU ePrivacy Regulation (“ePrivacyRegulation”) which was published in January 2017 by theEuropean Commission.18Althoughitisstilluncertainwhenthislegislation will be agreed, yet alone enacted in the Member States, itisintendedthatitwillreplacethecurrentDirective2002/58/EC on Privacy and Electronic Communications.

The scope of the ePrivacy Regulation is that it will supplement the GDPR in addressing, in detail, electronic communications and the tracking of internet users more broadly. The aim is to enhance the security and confidentiality of all electronic commu-nications and technologies that process personal and non-per-sonaldata.LiketheGDPR,theePrivacyRegulationwillnotjustaffect airlines physically in the EU, but also any airline that deals with data originating in the EU.Astheaviationindustrytypicallycarriesoutlargeamountsof

online marketing and digital services, the effects of the ePrivacy Regulation are likely to be felt throughout the industry.Fromthedataprotectionlawsthathavebeenimplementedat

EU level, it seems that data protection is moving in many different directions.Firstly,theintroductionofthePNRDirectiveshowsthat counter-terrorism and serious crime prevention are at the top of EU and national governments’ priorities, to such an extent that the protection of personal data is willing to be sacrificed in the interests of national and global security.

The EU-US Privacy shield, as well as the Standard Contractual Clauses, show that the EU is determined to create a more globalised network of data-sharing in an attempt to promote busi-ness and growth between the EU and other areas of the world, while the GDPR at the same time introduces stricter measures on how businesses use personal data.

Several leading data protection experts, including the European Data Protection Board, have been quick to criticise the new EU-US Privacy Shield for failing to safeguard the rights of the individual (as well as for ignoring fundamental EU data regulation principles that are reflected in the GDPR). It is for this reason that many are expecting the EU-US Privacy Shield to face intense legal challenges in the European Courts in the near future.

In any event, it is fair to say that operators in the aviation sector have their work cut out for the future as they continue the process of implementing the new regulatory changes into the industry. Whilst the benefits of collecting and retaining personal data will continue to grow, the regime in which operators work is becoming stricter and is requiring more attention, not only to the manner in which personal data is collected and the consents which are required to be obtained, but also to the way in which that personal data is stored, processed, managed and safeguarded.

5

Aviation Law 2020

RadcliffesLeBrasseur

Alan D. Meneghetti is a partner in the Corporate department at RadcliffesLeBrasseur. He undertakes a full range of privacy, commercial and regulatory work in the general commercial, aviation and manufacturing sectors. His practice ranges from handling regulatory issues to the procurement of suppliers and responses to tenders, to data protection and privacy, information technology, intellectual property, and the drafting and negotiating of various commercial agreements, such as outsourcing, supply, service, and research and development. He has worked extensively on matters in Africa, the Americas, Europe and the United Kingdom.Alan is a regular contributor to publications and speaker at conferences in these sectors, and his articles and book reviews have been widely published.

RadcliffesLeBrasseur85 Fleet StreetLondon EC4Y 1AEUnited Kingdom

Tel: +44 20 7227 6704Email: [email protected] URL: www.rlb-law.com

William Bainbridge is a solicitor working in both the Corporate and Commercial Litigation departments at RadcliffesLeBrasseur. William acts for a range of corporate clients and private individuals and has a broad practice that involves advising on both contentious and non-con-tentious matters. Examples of the former include commercial and regulatory disputes, media-related disputes and Companies Act matters. William’s non-contentious practice includes the negotiation and preparation of commercial agreements, intellectual property matters and acquisitions.


Tel: +44 20 7227 7435Email: [email protected]: www.rlb-law.com

RadcliffesLeBrasseur is a leading UK-based law firm providing business, regulatory, not-for-profit and private legal advice.RadcliffesLeBrasseur is listed as a leading firm in the Legal 500 and Chambers and Partners directories, and named in The Times Best Law Firms 2020. The firm provides legal services nationally from offices in London, Leeds and Cardiff.The services offered by the firm in the aviation sector include:■ Financing of new and used aircraft, engines and equipment.■ Aviation business structuring.■ Acting before the Federal Aviation Administration and the Department of

Transportation.■ Commercial litigation and international disputes.■ Environmental regulatory and legislative matters.

■ An interdisciplinary approach, including commercial, corporate, employ-ment, immigration, property, dispute resolution and regulatory advice.

RadcliffesLeBrasseur’s clients in the aviation industry include lessors, manufacturers, financial institutions, repair facilities, parts distributors and insurers.

www.rlb-law.com


Aviation Law 2020

Chapter 26

Investing in Mid-Life Aviation Assets

K&L Gates LLP Philip Perrotta


Of course, the complexities involved in this exercise are considerable and involve a high degree of advance planning by either the airline’s fleet development section or the remarketing capability of the individual aircraft owners, especially as several tens of aircraft are often involved; nevertheless, the waterfall effect of new aircraft creating a cascade of available aviation assets is well-established and well-understood by the market.

This aspect of activity rarely attracts the type of press coverage, general interest and focus that is consistently enjoyed by an announcement that airline or lessor X has agreed with Airbus or Boeing (or sometimes both at the same time) to purchase Y number of Z-type aircraft. In many ways, however, it is of more fundamental importance to the functioning of the industry, the ability of operators to further embed air transport into communities and populations and thereby drive economic growth and social welfare, and to generate the type of forward momentum on a global industrial scale on which, perhaps coun-ter-intuitively, the original equipment manufacturers engaged in aircraft production so heavily rely in their future forecasts and appetite for assuming increasing risk in the various aircraft programmes with which they are involved.

2 Trend/Development of the PhenomenonAs regards the historic development of this phenomenon which is effectively the ongoing demand for “old” aircraft, it is helpful to put some definition around the nature of the product which is the subject of so much interest and appetite on an ongoing basis, as well as the context in many (but not all) cases. It is also relevant to consider the opportunities this demand creates for suppliers to the industry, which in turn helps make the process more efficient and supportable and therefore enduring in its broadest sense.

The demand for old aircraft – or at least “non-new”, because the age of an aircraft is also relevant in relation to certain regu-latory restrictions which apply in a number of jurisdictions as regards operation and safety – is driven by a number of factors not necessarily linked to the supply opportunities created by new aircraft orders. These factors themselves are partly inter-con-nected; however, to a greater extent they are a function of the individual requirements of an airline’s particular business plan and the financial circumstances which surround it.

As a general principle, first and foremost it is a truism as well as an industrial fact that many airlines (in fact, statisti-cally speaking, the majority of airlines globally) do not have the capital resources, or indeed the credit rating according to inter-national standards, to acquire new aircraft by way of purchase or lease, either on an ad hoc basis or consistently as part of a cohesive and co-ordinated fleet expansion strategy. As a result, the operators concerned which, as noted above, constitute the

1 Introduction/Historical ContextOne of the enduring features of aircraft procurement in the commercial aviation sector is the publicity surrounding, and therefore broad interest in, new aircraft technologies, large-volume new aircraft orders and the increasingly diverse customer base for new aircraft.

Significant attention is given to events as the two global aircraft manufacturing behemoths dominating the industry, Airbus and Boeing, compete directly and constantly scramble to announce news of their latest successes mostly in and around the series of ‘air shows’ during the calendar year. This is particularly true when the bi-annual events at Farnborough (near London, in the United Kingdom) and Paris (in France) become the focal points for everyone and anything connected to aviation and aerospace and the inevitable series of new aircraft orders makes the headlines.

In many respects, this also reflects the vast of amounts of capital investment and therefore risk involved in the relevant aircraft programmes, as well as the way in which air travel is now fundamentally integrated into the economies and daily lives of the world’s population. In other words, “Airbus”, “Boeing” and “new aircraft” have become concepts owned and appreci-ated by the general public at large, as well as for many informed observers, including certain professionals and a swathe of industry participants, who view new aircraft and their placement as the only genuine indicator of vibrancy and trends in the sector.

This myopic approach does, however, neglect another aircraft industry segment which has become increasingly relevant over a significant period of time, enduring through several of the inevitable industry cycles for which aviation and aerospace are famed, and actually set to become arguably even more apparent going forward, namely the appetite for used aircraft of certain specific types and particularly when the airframe concerned is matched with certain specific engines (or “power plants”), as we shall consider in this general article.

In many respects, this appetite is of course directly related to the series of new aircraft ordered and delivered to operators and leasing companies which are now so much a feature of the avia-tion landscape well into the 21st century.

Leaving aside the firm phenomenon, particularly in Asia, which is the growth from a position as a start-up of several low-cost carriers who are strongly backed by industrial conglom-erate shareholders or simply mega-wealthy entrepreneurs; as new aircraft are absorbed into the airline’s fleet and enter into service, they tend to replace, on a unit-by-unit basis, older aircraft types which are phased out and de-commissioned. This in turn creates a supply of often high-quality stock of used aircraft and/or engines which the relevant operator or aircraft owner is moti-vated to re-deploy by way of a sale or another lease.

7K&L Gates LLP


supply solutions when it concerns used aircraft as opposed to new equipment, which is generally a financed purchase or long lease (possibly combined with the option for the aircraft oper-ator lessee to purchase the aircraft at the end of such lease, by which time it has invested a considerable amount of capital by way of lease rental), the effectively greater supply of used aircraft at reduced lease rates has stiffened that segment of the market considerably, both as regards established operators and also new-entrant or start-up carriers, whose sensitivity to costs and the need to manage them is probably the greatest of all, leading to an ability and willingness to commit to longer lease periods for used aircraft and engine equipment.

3 The Nature of the DemandAll of these things together, plus some other more bespoke developments in the case of individual carriers which affect their immediate environment and own markets as regards their aircraft equipment choices, have given rise to the market’s consistent and sustained mainstream interest in used aircraft, more particularly in so-called “mid-life” aircraft types.

The implication that the phenomenon is generally applicable to all used aircraft is (if it indeed arises) misleading in any case. For example, aircraft of a certain vintage (generally, with an age since its respective year of manufacturing of between 15 and 20 years) are very limited in their scope of operations regardless of the aircraft type and the support still provided by an aircraft original manufacturer. Several jurisdictions, and not just the (in aviation terms at least) established “first world” of USA, Europe and Australasia, have passed very effective legislation and regu-lation which prohibits the operation of certain vintage aircraft for safety and environmental reasons, principally in relation to air and noise pollution and the need to protect their populations from the social and other effects arising.

Then, there is the perception of particular used aircraft types as regards characteristics such as their utility, passenger appeal and operating history which, as regards the latter point, unfor-tunately may include a somewhat chequered past as regards an accident record and pattern of technical unreliability, whether related to the airframe itself or its engines. Additionally, certain initially interesting used aircraft are no longer in production by their original aircraft manufacturer for a variety of reasons unconnected to the product itself (typically bankruptcy of the owning business), giving rise to the notion that they are part of an “orphan” fleet of aircraft which is therefore unsupported in terms of safety procedures, reliable spare parts and invested interest in their safe operation on behalf of the manufactur-er’s customer airlines and leasing companies, and in turn those companies’ own customers.

Finally, and possibly most critically of all given the significant sums of capital still required to be committed to a used aircraft, whether by way of upfront acquisition costs or through the term of an operating lease which requires supplemental payments, not all used aircraft are viewed positively by the financing commu-nity generally; in fact, the opposite is more often than not the case. It is a significant hurdle to overcome, therefore, that there is this absence of available capital and/or an associated appetite for deploying what in many cases are quite eye-watering sums as an upfront financial commitment to the financing of used aircraft.

Financing in its simplest terms, especially asset-backed financing where the aircraft itself forms the risk that any loans advanced will be capable of repayment by way of security to the relevant financier, usually requires a solid and predictable view of residual values without which most conventional banks will not proceed. This leads most prospective financiers to focus on predictable new aircraft trends and comfortable relationships

vast majority of the carriers worldwide, must simply get by with used, older aircraft to facilitate their fleet development plans in support of their business plans.

Secondly, there are certain macro-economic developments which tend to influence equipment acquisition decisions, and no greater example of that is the price of crude oil, or rather its tendency to fluctuate to sometimes surprising levels both upwards and downwards. Crude oil directly affects the cost to an operation of kerosene aviation fuel, which represents one of the most significant expenses, proportionally speaking, for an airline. The oil industry itself is characterised by economic booms and busts which then inevitably pass on to the cost of fuel and directly to the bottom line of an aircraft operation.

It is of course possible, and not infrequent, for an airline to manage the associated risks and negative financial impact on its fleet operations in this regard by utilising a series of finan-cial instruments generally referred to as “hedging”, albeit with some upfront cost and therefore not falling within the economic possibilities for many operations. However, a general trend in any case over the most recent industry cycles has seen crude oil drop in price in overall terms as a result of a number of factors, including: an extremely strong US Dollar driving, as always, a fall in commodity pricing generally; a genuine resolution by OPEC (Organization of the Petroleum Exporting Countries) to stabilise the oil markets by not cutting production, in a novel approach which has generally created an oversupply of crude oil; a widespread overall decline in demand for crude oil as a result of increased engine efficiency across a range of mobile assets including motor vehicles, ships and of course aircraft; along with China’s elected currency devaluation which left the world’s largest oil importer reducing its purchases on account of the increased cost to it of crude oil and a consequential whole-sale dumping of oil shares by the trader community. As a result of all this and the associated relative cheapness of kerosene aviation fuel, many airlines which had previously pursued the savings available with new-technology, fuel-efficient aircraft are electing to either defer or even cancel their new aircraft orders and continue with their existing fleet composition, or to target older equipment which can still sustain business plan profita-bility due to the price and wide availability of kerosene aviation fuel worldwide.

Thirdly, the aircraft original airframe manufacturers (inev-itably led once again by Airbus and Boeing), working closely in conjunction with their industrial partners and counter-par-ties at the engine manufacturers (principally General Electric and its range of joint-venture guises such as CFM International with Safran, Pratt & Whitney and Rolls-Royce), have made significant investment in technology insertion packages into their existing products. While most well-known among this type of technology innovation is the NEO (New Engine Option) aircraft offered by Airbus across its very popular A320 and A321 aircraft range, a number of other design modifica-tions from several manufacturers giving rise to features such as extended-range fuel tanks, carbon-fibre fuselage compo-nents and enhanced winglets have had the effect of allowing older aircraft to operate more efficiently and relatively longer. This has led to an increase in interest from aircraft operators and leasing companies in the possibility of extending aircraft possi-bilities longer into their economic lives and the associated fleet management decisions which see non-new aircraft feature more prominently than before.

As a final example of the factors stimulating demand in used aircraft, historically rock-bottom interest rates over the recent historical period have generally made the costs of renting or leasing aircraft incredibly cheap compared to previous eras in aviation. With the inevitable greater flexibility of aircraft

8 Investing in Mid-Life Aviation Assets


await the scheduled expiry of the lease and the planned return of the aircraft to its owner, and then engage in a termination process which sees the engines removed for sale, the airframe scrapped for spare parts (often in high demand among a secondary and tertiary airline customer base) and the opportu-nity to make a significant profit on the associated asset sales. All of this takes place in circumstances where the existing airline operator has agreed to contribute in some way to the overall financial outcome for the new owner in exchange for relief on its lease redelivery obligations, such as allowing the new owner to retain, in full and without any claims, the amount of maintenance reserves which have been paid in parallel to rent throughout the relevant lease, and allocated for scheduled and certain unscheduled maintenance events during the lease.

As can be seen, the types of profit which are attainable in this market, which does not enjoy anything like the publicity or general interest of the new aircraft world, can be more than significant and have reliably and consistently been obtained by those willing to invest time as well as money in the process.

4 Typical Transaction Structure and Legal Issues and Risks (a Flavour)As referenced above, the typical transaction structure in an acqui-sition of a mid-life aircraft generally works as follows (although clearly there will be variations depending on the circumstances of the opportunity and the particular motivations of all the parties involved in looking to transact the particular business).

A used aircraft will be currently on lease from its owner to an aircraft operator and entering its later years as regards its book value for accounting purposes, hence the aircraft will be depreci-ating at a faster rate than the lease rental rates it is able to generate. The aircraft itself will be something which an operator is viewing increasingly as a disproportionate cost, where it is obliged at the end of the relevant lease term to carry out a significant amount of engineering work on the owner’s property, pursuant to the relevant lease agreement, in order to comply with the so-called contractual “redelivery conditions”. The current aircraft owner is likely, on the other hand, to be concerned at the inherent risk it now has in an older aircraft asset, which it may view as difficult to re-market given its focus on new aircraft, primary airlines and other aircraft operators.

Once the relevant commercial negotiations are completed, typically through the vehicle of a partially-binding commitment agreement such as a “letter of intent” or “term sheet” signed by the existing owner and the prospective new owner, the transac-tion contracts typically prepared by the existing owner become the subject of much further focus and preparation, with the aid of professional advisers. The existing aircraft operator in posses-sion of the aircraft will be obliged to participate in the sale and acquisition process and broadly agree to it by virtue of the terms of the existing lease agreement (subject to one or two conditions, which usually revolve around there being no extra obligations arising to the new owner when compared with the existing owner as its lessor).

In parallel, the new owner’s technical team spends several long days and nights examining the aircraft records and inspecting the aircraft itself to ensure that there is nothing significant in terms of omissions, irregularities or outright damage which would affect the value of the investment it is about to make. It is a truism that the value of an aircraft is directly connected to the quality of the records which are associated with it, and any discrepancy, omission or inconsistency going “back to birth” when the aircraft was delivered from the factory by the orig-inal aircraft equipment manufacturer can have a material impact on the value of the aircraft and, therefore, the motivation of

with the relevant original aircraft manufacturers which they hope will act as a buffer in circumstances where their aircraft financing fails.

However, historical data is available to prove the fact, in rela-tion to certain used aircraft types, that a strong residual value is maintainable, due primarily to demand for the ability to re-market the aircraft in case of default. Even where that is not the case, the relevant lease rates for certain used aircraft types in the future will, in all probability, sustain their current levels while the aircraft residual value depreciates, meaning that a combination of aircraft and lease security can sometimes sustain a lender’s repayment risk. This analysis has led to a notably robust market for certain used aircraft as a financing instrument also, capable even of being pooled together with others being leased for a long period on good terms to operators of a certain quality and sold into the capital markets at a significant profit without disturbing the underlying leasing arrangements unduly in a so-called “securitisation” programme.

All of these things have collided in the marketplace to give rise to a strong and historical interest in so-called “mid-life” aircraft on the part of certain operators, certain leasing compa-nies and certain financiers, which shows no sign of abating. On the contrary, new aircraft continue to proliferate as deliveries to airlines ramp up in support of the huge-volume orders made in recent years. Furthermore, the top 10 companies continue to focus almost exclusively on new aircraft and long order streams, leading to significant offloading of their older aircraft assets to either secondary lessors or operators with either or both a lack of a long operating history or an uneven credit rating.

“Mid-life” has become something of a term of art for this market phenomenon and although, as referenced elsewhere in this article, it itself can relate to a number of different used aircraft types and ages, it generally (at least from the perspective of a leasing company, which tends to be a reliable gauge of market trends) refers to aircraft which are entering into their second lease since a leasing company took delivery from the original aircraft manufacturer. In other words, the aircraft will typically be around 12 years old and, with most accounting standards allocating long-life asset status to aircraft as regards deprecia-tion, the aircraft will therefore be close to economic maturity at the end of its second lease (all things running smoothly as regards lease defaults and aircraft accidents, which is the nature of the business risk aircraft leasing companies assume in return for their projected investment returns at the outset). This essen-tially means that a purchaser of the aircraft “mid-life” is likely to obtain an aircraft generating significant lease returns and which is soon fully written down as regards its book value, such that any subsequent sale generates a pure cash profit. Such market values (particularly for perennially attractive aircraft examples such as Airbus A320 CEO (Current Engine Option) and Boeing 737-700/800 aircraft) will very likely always be sustained, in view of the extensive demand factors described above.

This is particularly true in relation to the particular engines which may be fitted to the relevant aircraft, particularly in the latest years of an aircraft’s depreciation programme, such that engines can account in that period for as much as 80 per cent of the value of a mature aircraft type. Inevitably perhaps, this has given rise to a segmentation of the market for “mid-life” aircraft where speculators seek to obtain access to specific engine types (again, only specific engine types, and sometimes only specific derivatives of them, have the strong demand patterns which are of relevant interest) for on-sale or leasing as spare engines to operators looking to support their fleet operations with addi-tional assets at an economic rate.

These investor types are prepared to acquire (in some cases very) mature aircraft currently on lease to an aircraft operator,

9K&L Gates LLP


(c) No trailing obligations in relation to the aircraft/engines or lease to the existing owner.

It can be seen, therefore, that there are a number of elements to be drawn together in terms of the acquisition of a mid-life aircraft or engine asset and it is not an uncomplicated task to bring these together in a synchronised and co-ordinated fashion; particularly when, as is often the case, the parties involved and the aircraft and related engines themselves are located across jurisdictions and time zones a long away apart. As a result, it has become the case that a relatively small group of investor spec-ulators have become prominent and recognised for their ability to identify mid-life aircraft opportunities and deploy the neces-sary project management and professional skills to complete the transactions quickly and efficiently while minimising the risks involved as an aircraft and engine owner. And it is that group that stands to benefit most from this market segment going forward, as opportunities arise and the number of competitors drawn away from relatively modest returns on investment in the real estate sector is likely to increase.

5 Lessons Drawn and a Crystal BallFor the reasons analysed above, the interest in and around mid-life aircraft and other aviation assets is now very much a feature of the industry landscape. The relative lack of glamour and publicity connected with the acquisition and deployment of “older” aircraft should not detract at all from the fundamental role such aircraft play in the sustained growth of passenger numbers, worldwide economic development, and also in enhanced returns for investors prepared to risk extremely signif-icant sums of capital in a segment of the market which is some-times quite misunderstood.

It is true that a lot of learning has resulted from this type of transaction, some of which have caused new aircraft owners to lose significant sums of money on their original investment and projected rates of return. The reasons for those are multiple and probably the subject of a follow-up article; however, the ability to identify a particular aircraft or aircraft engine (or even a specific derivative of them) which will sustain its appeal in the long term to owners and operators is paramount, as is the talent for managing aviation assets in sometimes difficult jurisdictions with not always cooperative aircraft operators, and the initial ability to conduct deep but rapid due diligence on the condition of the aircraft, engines and aircraft records involved.

Clearly, an established contractual supply arrangement with aviation services providers to scrap, in an environmentally friendly fashion, the relevant aircraft and/or assets at the end of their economic lives or lease termination, plus a connected distribution network for used aircraft components, completes the picture of an efficient project management process designed to maximise the returns and minimise the risks, all the while maintaining good relationships with an aircraft operator and leasing company base which will likely give rise to further similar opportunities going forward for the same reasons.

In summary, the embedded interest in and demand for mid-life aircraft will continue to be a major part of the aviation land-scape worldwide and may increase going forward. The entre-preneurial eye of the new aircraft owner, the decision-making process of the existing aircraft owner, and the ability of the aircraft operator to deliver on its own business plan (all with the support and guidance of their expert professional advisors) are set to be tested and scrutinised even more in the future, which is surely a good thing.

the new owner to proceed with its investment and acquire the aircraft. At that stage, therefore, the pressure and focus is very much on the expertise and experience of the personnel who are conducting the relevant inspections and broader technical due diligence on behalf of the prospective new owner.

The product of all of this effort should then manifest itself in a binding sale contract between the existing owner and the new owner and a connected lease novation contract whereby the existing lease is transferred from an arrangement between the existing owner and the operator to one between the new owner and the operator. Both contracts will stipulate the conditions to be fulfilled and the procedures involved before the respective sale and lease novation is completed.

By way of further context and illustration, a flavour of the typical concerns of the three parties involved, which they will strive very hard to negotiate and include in the relevant binding agreement in order to risk-manage effectively, might therefore include the following as a non-exhaustive list:

4.1 Existing Owner

(a) Unconditional receipt of purchase price for the aircraft/engines.

(b) No trailing obligations whatsoever as regards the aircraft/engines and the lease to the aircraft operator.

4.2 Prospective New Owner

(a) (i) Fully effective and unconditional good title to the

aircraft/engines.(ii) Full set of uninterrupted bills of sale or other title

documents “back to birth”.(iii) No liens or third-party interests; for example, mort-

gage, unpaid landing charges or Eurocontrol fees.(b)

(i) No adverse tax consequences connected with the aircraft/engines purchase.

(ii) Location of airframe and engines (if different) at the point of sale to be tax-optimised.

(iii) Customs and import status of the aircraft and engines to be fully understood.

(c) (i) Technical integrity and the condition of the aircraft

and associated records are satisfactory.(ii) Statement by the existing owner that there has been

no major incident as regards the aircraft or the engines historically.

(iii) Aircraft records are complete, intact and showing no material omissions or deviations.

(iv) The relevant Certificate of Airworthiness is valid, current and not showing any exceptions or derivations.

(d) (i) Registration of its ownership interests on the relevant

aircraft register and (if relevant) the International Register established under the Cape Town Convention.

4.3 Aircraft Operator (Lessee)

(a) No increased costs or obligations arising from the new arrangements with a new lessor.

(b) No or minimal impact from the aircraft sale on its sched-uled operations or maintenance programme.

10

Aviation Law 2020

Investing in Mid-Life Aviation Assets

Philip Perrotta is a senior partner in the Firm’s London office, where he is responsible for the Aviation Finance team and is a member of its Banking & Asset Finance group. The nature of his practice is truly international and he frequently works globally with clients across Europe and South Asia, including out of Milan and Singapore as part of the service to clients in this practice area. He is an aviation and aviation finance specialist and recognised as a “leading expert”, regularly receiving both commendations for his ability, focus and commerciality as well as accolades in the legal directories, for example for being “very strong” and “dealing with all the big points without ever over-lawyering them”. He is noted as “experienced and skilled” and for providing “an excellent and accessible service” to clients (The Legal 500).Philip acts for a broad range of significant aviation businesses across the world and he has an impressive track record of successful transac-tions, some being landmark deals in the industry. He has successfully concluded literally hundreds of transactions involving commercial and business aircraft, aero-engines and other aviation assets in jurisdictions in every continent. Philip is a regular contributor at industry events, and is often sought after to comment on developments in a variety of segments of the aviation sector and the aviation finance market, where his insight as a commentator is highly valued.

K&L Gates LLPOne New ChangeLondon EC4M 9AFUnited Kingdom

Tel: +44 20 7648 9000Fax: +44 20 7648 9001Email: [email protected]: www.klgates.com

K&L Gates LLP is a fully integrated global law firm with lawyers located across five continents. Our broad global platform allows us to guide clients through the legal challenges inherent in the ever-changing international landscape. The deep latticework of relationships across our offices and practices enables our clients to respond to diverse legal issues and risks, through the services of one law firm with a single point of communica-tion. K&L Gates LLP represents leading global corporations in every major industry, capital market participants, and ambitious middle-market and emerging growth companies. Our lawyers also serve public sector entities, educational institutions, philanthropic organisations and individuals. We are leaders in legal issues related to industries critical to the economies of both the developed and developing worlds – technology, manufacturing, financial services, health care and energy, among many others.

www.klgates.com


Aviation Law 2020

Chapter 3 11

Restoring Confidence in Aviation Safety

Kreindler & Kreindler LLP Justin T. Green

Marc S. Moller


manufacturer responsible for the design, testing, assembly and marketing of an airplane will attempt to bring third parties into the liability mix. Those third parties may be component parts manufacturers, pilots, government agencies or main-tenance companies; anything to deflect blame. The Lion Air and Ethiopia Air tragedies are no different. Indeed, the Boeing 737 MAX litigation will prove to be a classic example of how contentious air crash litigation can be. Boeing, like virtually all defendants in these kinds of cases, will also assert a variety of legal arguments in an effort to reduce its exposure for the Boeing 737 MAX tragedies or to enlist reluctant partners while trying to promote settlements and overcome its public relations nightmare. In the Ethiopian Airlines Flight 302 litigation, now pending in Illinois (Chicago) federal court, Boeing advised the court that it invites all plaintiffs to engage in direct settlement negotiations to resolve these matters. While the invitation may appear to be enticing, it fails to commit to the standards that Boeing would apply to the damages calculus. It also avoids the all-important matter of accountability for the disasters.

Of course, one must not lose sight of the human cost of the two recent crashes that have left 346 families grieving and distraught. Their plight has already receded from the front pages of the world press, though Boeing’s commercial woes are often in the news. The truth is that the quantum of compen-satory damages the victims’ families may recover is an issue in every case. Whether a manufacturer’s conduct gives rise to the right to recover punitive damages always is contested, as will be the case in the Boeing 737 MAX litigation. Comparing lost lives to corporate balance sheets and profit and loss calculations makes the impact on corporate finances mere abstractions, in sharp contrast to the enduring suffering of the families of crash victims who must deal with their losses for the rest of their lives. Their suffering becomes especially pronounced if it becomes clear that the disasters were preventable or made more likely by the reckless indifference to the risk of harm.

Lion Air took delivery of its Boeing 737 MAX on August 18, 2018, just weeks before its Flight 610 crashed, and Ethiopian Airlines took delivery of its Boeing 737 MAX a few months before its Flight 302 crashed. The “black boxes” from both planes were quickly recovered and confirm that in each cockpit there was a titanic man/machine battle that the pilots lost. That two commercial airplane crashes should be so close in time, and seemingly with causation factors in common, shocked everyone.

Most certainly, the facts revealed in the immediate after-math of the disasters, and the similarity of essential facts drawn from the airplanes’ digital flight data recorders and cockpit voice recorders, pointed to flight control problems associated with the design of the airplanes. It did not take long for the working thesis to develop that Boeing, in its attempt to upgrade

IntroductionBy way of introduction, this article is not intended, nor should it be construed, as a legal brief in support of any party in any ongoing litigation or other proceedings that are pending or likely to be brought in the future relating to the Boeing 737 MAX issues or other air crash cases. And we must disclose that we represent plaintiffs in cases against Boeing arising from the Ethiopian Airlines Flight 302 disaster pending in the U.S. federal court in Illinois.

There have been many well-written articles in a variety of publications that express opinions about the cause or causes of the recent Boeing 737 MAX disasters, but there is still a lot to be learned in order to fully understand what caused the crashes of Lion Air Flight 610 on October 29, 2018 and Ethiopian Airlines Flight 302 on March 10, 2010. The authors of this article put pen to paper in September and by the time these thoughts are published we expect a lot of additional important information, government investigation reports and industry analysis will have become public. New information will not only add clarity to what is now known, but will add emphasis to the maxim “wait until you know enough to reach firm conclusions”. There is often a lot of distance between informed hypotheses and confirmed conclusions. Aviation crash investigation experts in government agencies in the United States and elsewhere, expe-rienced lawyers litigating passenger and crew wrongful death claims and analysis by Boeing hopefully will produce the neces-sary information from which reliable conclusions may be drawn.

Lessons from the 737 MAX CrashesIn anticipation of the release of the draft findings of the Indonesian accident investigation authority, the Indonesia Air Accident Investigation Board, The Wall Street Journal reported (September 22, 2019) that it will opine that “Indonesian inves-tigators have determined that design and oversight lapses played a central role in the fatal crash of a Boeing 737 MAX jet in October, according to people familiar with the matter, in what is expected to be the first formal government finding of fault”. The reporters added the caveat that the draft report is “subject to change and further analysis”. The U.K.’s Daily Mail (September 23, 2019) said the draft report will be formally released in November and will cite “100 failures that investiga-tors believe contributed to the crash”.

Identifying some of the factual and legal issues that lie at the core of the Boeing 737 MAX disasters may help frame the approach to solving the “causation” and “liability” puzzles the disasters present.

One can anticipate, when unchallenged evidence points to aircraft design defects as major contributing causes, the

12 Restoring Confidence in Aviation Safety


computer systems, so complex that the pilots are not “piloting” them for most of the time that they are in the air, from shortly after take-off to shortly before landing. They are mostly making computer inputs. Understandably, in this computer age pilots often do not second-guess the computers. That is fine when everything goes right, but can spell disaster when some unan-ticipated – even bizarre – anomaly occurs or triggers an unex-pected response to flight controls or an unintended increase or decrease in power during the flight regime. The time it takes for the average commercial pilot to diagnose and initiate corrective action may well be the difference between a safe flight and an unrecoverable loss of control. In short, computer automation has a potential downside. The Lion Air and Ethiopian Airlines crashes, therefore, demand careful re-examination of accept-able pilot performance levels and capabilities, from training to becoming pilot-in-command. The aviation community must raise its demands for elevated piloting skills, especially for the hugely sophisticated planes currently leaving manufacturers’ factories for the flight line.

Despite the unique nature of the MCAS system, airline pilots were not told about the addition of MCAS in the plane and how it functioned, nor did they receive any MCAS-specific training. They were in the dark. This was the state of knowledge when the Lion Air plane crashed.

To be sure, the Federal Aviation Administration (FAA) will face criticism for laxity in its airworthiness certification proce-dures and oversight. In demonstrable understatement the FAA published a piece on its website, last modified on May 23, 2019, which – under the heading “the Boeing 737 MAX Certification” – said “The Boeing 737 -8/9 MAX design had minor changes to the 737 Next Generation (NG) design. For this reason, the FAA issued an Amended Type Certificate to the Max airplane …”. It noted that issuance of Amended Type Certificates typically takes three to five years, while certification of new aircraft can take between five to nine years. If the changes were “minor”, why is it now proving so difficult to “fix” the airplane and why are the planes still grounded worldwide? And why the rush to get the 737 MAX certified and to market? Who was calling for a speeded-up certification process?

Importantly, there is little doubt that commercial competition between Boeing and Airbus to maintain their respective market shares and customers motivated Boeing management to fast-track the 737 MAX development and FAA approval process, and that rush to market contributed to the problems it now faces.

The 737 MAX 8/9 GroundingOnce the basic facts of the two disasters were understood by virtue of the readouts of the “black boxes” and made public within days of the Ethiopian Airlines crash in March of 2019, government airline regulators in Europe, China and elsewhere around the world issued orders grounding the Boeing 737 MAX until further notice. Days later the FAA followed. All the 737 MAX planes in service remain grounded as of the end of September, 2019.

Why the Boeing 737 MAX was not grounded immedi-ately after the Lion Air disaster is another mystery that has to be solved. Did Boeing or the FAA consider grounding the airplanes? Did Boeing resist grounding? If so, why? Whatever safety of flight or safety risk information Boeing gained from the Lion Air tragedy, and the action it took in the face of that knowledge, will be central to the analysis of claims arising from the Ethiopian Airlines crash. The grounding delay may turn out to be inexcusable. Did Boeing have its eyes on sales and the number of planes it calculated had to be sold to recover its design costs and achieve its revenue and profit objectives? Was

its 737 workhorse to satisfy the economic demands of the airline market, recognised the unusual aerodynamic handling charac-teristics of the Boeing 737 MAX attributable, at least in part, to the aircraft’s more powerful fuel-efficient engines that were placed further forward on the wings than the airplane’s predecessor. Those aerodynamic effects rendered the aircraft non-airworthy unless Boeing came up with something to counteract the plane’s tendency to pitch up and risk entering an aerodynamic stall under certain flight conditions. After exploring remediating options, it settled on the Maneuvering Characteristics Augmentation System (MCAS). There cannot be better evidence of a design problem that needed a cure. Why else would Boeing have added the MCAS. The MCAS name alone offers mystery as to what its purpose was.

As designed, MCAS, in essence, would cause the nose of the aircraft to automatically pitch down if it “believed” the airplane’s nose was too high. MCAS took its inputs from one of two Angle of Attack (AOA) sensors that would communicate the aircraft’s pitch to computer driven flight control systems. MCAS was programmed to accept the AOA data as valid without cross-checking the airplane’s other AOA sensor or other available flight data. MCAS was designed so that it accepted completely implausible AOA data as valid, as in the 74.5 degrees “nose up” data that triggered MCAS in the Ethiopian Airlines Flight 302 disaster. The fact that an MCAS system was needed to secure the U.S. government’s approval for marketing and sale of the 737 MAX standing alone is some evidence of the plane’s design complexity.

Although no commercial passenger airplane incorporated MCAS, it has been reported that there was an MCAS version Boeing installed in a military tanker jet in the early 2000s. Under a headline “Before 737 MAX, Boeing’s Flight-Control System Included Key Safeguards”, The Wall Street Journal (September 29, 2019) reported that in the military refuelling plane the MCAS took “inputs from multiple sensors and with limited power to move the tanker’s nose …”. Unlike the MCAS in the 737 MAX, according to that report, in the tanker the MCAS could acti-vate only once, not repeatedly. Another safeguard in the mili-tary refuelling jet was that “when the pilot grabs the stick, the pilot is in complete control”, said Will Roeper, an Assistant Air Force Secretary.

Pilot proficiency, the role of pilot training protocols for the Boeing 737 MAX and emergency procedures will get a lot of attention, as will the pilots’ actions or inactions in the final moments in the two 737 MAX disasters. Keep in mind, it is easy to claim pilot error, but not always fair or justified.

In the United States, the National Transportation Safety Board has been examining the U.S. design certification process used to approve the original design of the MCAS and published a “Safety Recommendation Report” on September 26, 2019, which addressed “assumptions about pilot recognition and response to failure conditions used during the design certifica-tion process as well as diagnostic tools to improve prioritiza-tion and clarity of failure indications presented to pilots”. The Agency concluded “that the assumptions that Boeing used in its functional hazard assessment of uncommanded MCAS function for the 737 MAX did not adequately consider and account for the impact that multiple flight deck alerts and indications could have on pilots’ responses to the hazard”.

Aviation safety today depends upon more than just getting sophisticated aircraft into the air. Other recent crashes like the 2013 Asiana Airlines Flight 214 crash at San Francisco International Airport in California and the 2009 Turkish Airlines Flight 1951 crash at Schiphol Airport in Amsterdam have also put into sharp focus “human factors” questions. Are the new generation of airplanes, loaded with the latest advanced

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of the MCAS. Those questions will be resolved in due course, but the point we make here is that these are questions that should have been fully addressed before the plane was marketed and put into service.

No one can argue or dispute that serious questions have been raised about the way the Boeing 737 MAX travelled from the drawing boards of Boeing engineers to pilots in the design and testing phase and then to the government agencies, particularly the U.S. FAA, to gain “certification” that the plane was, indeed, safe, airworthy and sale-worthy. In fact, the airworthiness certi-fication process is another subject under careful scrutiny. To what extent is an “airworthiness” certification by a government agency truly reliable is a question that needs a high-priority answer. Meanwhile, the U.S. National Transportation Safety Board (NTSB) will press for transparency, predictability and heightened scrutiny of safety of flight systems for new aircraft.

As the aviation industry, plane manufacturers, component parts manufacturers and government agencies wrestle with these issues, it is not an overstatement to say that 2019 repre-sents a watershed, a turning point in aviation history. The entire system demands serious review and improvement to restore confidence that, when government agencies lend their seal of approval to the airworthiness of airplanes and issue licences to pilots, they are all actually safe – restoration of faith that the aviation industry mantra “safety comes first” cannot be sacri-ficed to profit or expediency. As things stand now, passengers buckled in their seats for take-off wonder if their flight will be the odd one where risk manifests itself into disaster.

Certification IssuesThe U.S. FAA has been the worldwide gold standard for the issuance of airworthiness certificates for new and modified airplanes and airplane component parts, setting pilot and air traffic control standards and aviation safety in general. It adopts and periodically updates the Federal Aviation Regulations and issues alerts and airworthiness directives, all of which have the force of law and demand compliance. Some regulations and directives are more specific than others. But, like all govern-ment agencies, the FAA operates within budgetary constraints and that means its human resources are limited and the time the government’s safety engineers can commit to inspection and review of airplane design matters is limited.

Faced with the practical limitations of its oversight obliga-tions and inspections, the FAA long ago began to allow airplane manufacturers’ employees to perform some of the FAA’s “certi-fication” functions. They did this through a programme of “Designated Engineering Representatives” (DER) and other “designation” programmes. These DERs were manufacturers’ employees, identified by the manufacturers as having a high level of technical expertise and skill, and, most importantly, a commitment to independence. Independence was crucial so that, though they may have been wearing two hats, they would work to ensure that federal aviation regulatory standards were complied with by their formal employer.

Eventually the DER system evolved to a point that, by 2009, an aircraft manufacturing entity itself could be awarded an “Organization Designation Authorization” (ODA), which means a plane manufacturer could essentially certify that a plane met the airworthiness standards of the federal regulations. Officially, government oversight is still integral to the process and a sign-off by the FAA is still required. That fact still leaves the questions: what is the true real-world balance of responsi-bility between the manufacturer and the government; and can the government be held liable if its negligence contributes to a disaster?

it concerned about giving the Boeing 737 MAX a “black eye”? When and whether those existing grounding orders in place, as of September 2019, will be lifted is still unknown.

Whether Boeing’s market expectations for the Boeing 737 MAX programme can be realised is clouded with uncertainty, even if the design and aircraft flight control issues disclosed by the Lion Air and Ethiopian Airlines crashes are corrected and the grounding orders are vacated. Public confidence in the airplane has been badly damaged. One newspaper described the effect on Boeing as “‘A Punch in the Nose’; Second Crash Raises Questions About Plane’s Safety” (USA Today, March 10, 2018). The worldwide grounding has forced airlines to cancel many flights and complicated travel plans for passengers. No doubt some airline purchase orders have been put on hold and Boeing cut back production for a while. Simply put, the scale of the problems for Boeing and the aviation industry as a whole are unprecedented.

What is clear is that the stakes are high for the entire aviation industry and the affected families.

In addition to passenger wrongful death claims in the Boeing 737 MAX crash cases, airlines are lining up to claim damages from Boeing based upon their purchase of the airplanes and their losses resulting from their grounding and loss of revenue.

Airlines may assert breach of contract and fraud claims to win compensation. One can assume that they will argue that, but for representations that the planes were safe when the manufacturer had actual or constructive knowledge of fundamental design flaws and flight control risks, they would not have purchased the Boeing 737 MAX. Depending on contract warranty provi-sions and possible limitations, those claims may require proof that Boeing employees indeed had actual or constructive knowl-edge about the model’s alleged dangerous design features asso-ciated with the aerodynamic qualities of the airplane and its MCAS before purchase contracts were entered into, and even thereafter, or turned a blind eye. Moreover, even if the manu-facturer gained the knowledge after the planes were delivered, they may have breached a post-sale duty to warn about design deficiencies. What Boeing learned between the Lion Air and Ethiopian Airlines crashes distinguishes the liability analysis in the two cases. The Lion Air crash at the very least confirmed or disclosed grave problems and flight control issues associated with its MCAS that, if properly addressed, would have likely prevented the Ethiopian Airlines crash.

The level of concern the Boeing 737 MAX crashes have generated for the aviation industry is unprecedented. The New York Times reported on September 16, 2019 that “a small committee of Boeing’s board has been interviewing company employees, safety experts and executives at other industrial organizations in an attempt to understand how the aerospace giant could design and build safer airplanes”. Clearly Boeing understands that its “internal” practices need to be examined. That lesson should not be lost on other airplane manufacturers. There is an urgency for airplane manufacturers to review their “internal” design practices. Despite the well-documented excel-lent safety record of the commercial airlines industry, compla-cency can lead to fatal results. Projected increases in air travel lend further weight and heightened concern to designing truly safe airplanes and that they are only put in the hands of compe-tent pilots. Pilots and passengers do not like surprises, even if they turn out to be manageable. The virtual back-to-back Lion Air and Ethiopian Airlines crashes are clear warnings that cannot be disregarded.

At the time of writing, it is too early to know precisely what Boeing engineers knew or believed about how the changes incor-porated in the Boeing 737 MAX would affect the handling of the plane, or how pilots would respond to erroneous activation

14 Restoring Confidence in Aviation Safety


What is clear is that the ODA holder is, in reality, very much the primary entity in control of the certification process, with the FAA placing heavy reliance on the manufacturer’s conclusions regarding safety. If it can be established that the FAA failed to meet mandatory supervisory responsibilities as set forth in the ODA Manual, that conduct could potentially provide a basis for government liability outside the immunity of the “discretionary function” exception.

In United States v. Varig , 467 U.S. 797 (1984), the U.S. Supreme Court held on the facts presented that if a claim is founded upon alleged negligence by the FAA in the issuance of airworthiness certificates, those are safety judgments, and that even if negli-gently or recklessly made, do not give rise to a viable claim for money damages under the FTCA. In Varig , an on-board fire doomed the passengers to asphyxiation even though the plane landed safely. The families of victims claimed that the CAA, the agency later renamed the FAA, negligently issued an airwor-thiness Type Certificate for the Boeing 707 because it did not comply with regulation-specified fire protection standards. The lower appellate court held that the claims were proper on the ground that they did not involve “policymaking”. After an extended review of the entire FAA certification process, the Supreme Court reversed and dismissed the claims. It observed that the discretionary function “marks the boundary between Congress’ willingness to impose tort liability upon the United States and its desire to protect certain governmental activities from exposure to suit by private individuals”. (Id. at p. 808.)

In analysing the FAA’s certification practices, the High Court said, in Varig , the FAA undertook a “spot check system” and pointed to a manual developed by the CAA for use by its employees. That ODA Manual provided that “A manufactur-er’s policies, quality control procedures, experience, inspection personnel, equipment and facilities will dictate the extent of conformity inspection to be conducted or witnessed by [CAA employees]”. Therein lies judgment. The Court went on to say that “Congress could not have intended to impose liability for the regulatory enforcement activities of the FAA challenged in this case”. Varig is now 35 years old and it has been cited in a variety of FTCA cases resulting in dismissal of claims. However, since every case turns on its own facts, just how Varig will be applied in future cases is unclear. Judge Antonin Scalia concurring in United States v. Gaubert, 499 U.S. 315 (1991), wrote, “Unfortunately, lower courts have had difficulty applying the test”. He added: “In my view a choice is shielded from liability by the

discretionary function exception if the choice is, under the particular circumstances, one that ought to be informed by considerations of social, economic, or political policy and is made by an office whose official responsibilities include assessment of those considerations.” (Id. at p. 335.)

Berkowitz v. United States, 486 U.S. 531 (1988) is especially instructive because it upheld the plaintiffs’ right to seek damages from the U.S. government under the FTCA, in a case in which the U.S. Food and Drug Administration’s (FDA) Division of Biologic Standards (DBS) improperly issued a licence to Lederle that authorised it to manufacture and sell its trivalent oral polio vaccine, despite actual knowledge of FDA employees that the vaccine exceeded the regulation-specified test standard. Test data submitted to the DBS by Lederle, the poliovirus vaccine manufacturer, showed that the vaccine failed to conform with the applicable safety standards. Citing the Varig precedent, the Supreme Court reiterated its analytical approach reasoning that “it is the nature of the conduct rather than the status of the actor that governs whether the discretionary function exception applies in a given case”. (Id. at p. 534.) Even assuming that an agency’s

When the FAA published its proposed ODA rule in 2003, it stated that “FAA workload continues to increase because of requests for services and increased level of complexity in the product being introduced in the aerospace market … The net effect is a decrease in the capacity to perform certification of products or other certificate holders” (Fed. Register Vol. 69, No. 13/July 21, 2004).

The duties and responsibilities of the ODA holder and the FAA are spelled out in exquisite detail in the FAA’s ODA Manual. The parties memorialise their commitment by entering into a Memorandum of Understanding in which “an ODA holder agrees to use the same care, diligence, judgment, and respon-sibility when performing the authorized functions as the FAA would use in performing the function”. (ODA Manual 3-7.a.) An Organization Management Team (OMT) is set up within the FAA to “oversee” the ODA. (ODA Manual 5-2.) “Proper documentation provides the OMT with the information it needs to oversee the organization properly.” (ODA Manual 5-3.d.)

Is the Fox Guarding the Henhouse?The FAA relies on the ODA holder to perform compliance activities without supervision by the FAA, while reserving the right to participate in the process. The ODA Manual states that “Based on the FAA’s overall knowledge of the ODA holder’s technical expertise, we may review or participate in findings of compliance including tests in those design areas critical to safety” (ODA Manual 8-6.(5)).

The ODA system has been applauded by some and criticised by others, even though there was and is obvious logic to the system. Airplane manufacturers bear the ultimate responsibility for the safety of their products; their engineering experts created the designs of the various systems that are supposed to fly the planes and get them safely from point to point, and the govern-ment’s role is to approve or disapprove their conclusions. In the real world, however, the system operates with the presumption that the FAA should be able to rely heavily upon the representa-tions, opinions and conclusions of the manufacturers. It is also safe to say that when regulators are in doubt, they are likely to defer to the expertise of the manufacturers. Critics argue that the fox is guarding the henhouse.

A matter of law also plays into the analysis. The Federal Tort Claims Act (FTCA), 28 U.S.C. 1346(b), authorises suits against the United States for damages: “for injury or loss of property, or personal injury or death

caused by the negligent or wrongful act or omission [467 U.S. 797, 808] of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.”

Even though in the United States the federal government (FAA) can be sued for negligence to the same extent as a private individual under the FTCA, there is a very broad exception to that general rule. The government is immune from suit if the asserted claim involves a “discretionary function” (28 U.S.C. Sec 2680(a)). The government is not liable for: “[a]ny claim … based upon the exercise or performance or

the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused.” (28 U.S.C. 2680(a).) [486 U.S. 531, 536.]

The “discretionary function” exception basically insulates the federal government from liability when the claim is based upon a matter of policy judgment by government officials or decisions effecting a government policy.

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however, analysed three bases for liability: (1) the quality of the examiner’s performance; (2) the FBI’s decision to deny access to certain information; and (3) the FBI’s failure to maintain the integrity of its database, and reversed the District Court’s ruling. The Court concluded in sum that failure to comply with mandatory agency guidelines does not enjoy the protection of the discretionary function exception. How Sanders will fare if it reaches the Supreme Court is anyone’s guess.

Whether a claim that FAA negligence that affected the 737 MAX programme can withstand scrutiny is unknown. However, the door may be open to FAA liability if a regula-tion involves mandatory standards or duties, rather than policy standards, or if a government employee intentionally allowed an aviation product to be declared safe or “airworthy” knowing that it did not meet the regulatory standard. That kind of “conduct” borders on criminality. In any case, there is no question that ultimate responsibility for the design of safe aircraft remains with the manufacturer.

Another challenge is whether an FTCA claim can even be brought in cases arising from the Boeing 737 crashes, because both disasters occurred outside the U.S. and the FTCA does not permit claims arising in a foreign country. See 28 U.S.C. § 2680(k).

Realistically, there are limited to no negative consequences to the FAA for a mistake in the issuance of an airworthiness certif-icate; the pressure to get it right is in serious competition with the desire to get something done.

ConclusionEnsuring safety of aircraft and plane travel remains the bedrock principle of the aviation industry. The Boeing 737 MAX expe-rience is a reminder that the consequences of mistakes in judg-ments about what is or is not safe can prove fatal. Murphy created the maxim “if things can go wrong, they will go wrong”. The aviation industry has no choice but to make sure that things cannot go wrong.

action involves an element of judgment, “a court must determine whether that judgment is of the kind that the discretionary func-tion exception was designed to shield”. (Id. at p. 536.)

The Supreme Court then proceeded to compare and contrast Varig and Berkowitz, the controlling regulations and the agen-cy’s conduct. Analysing Varig , the Court “characterized the [plaintiffs’ claims] as challenging the FAA’s decision to certify the airplanes without first inspecting them and held that this decision was a discretionary act for which the government was immune from liability” (Berkowitz p. 537). The Court added “we intend specifically to reject the Government’s argument pressed in this court and in the Court of Appeals below, that the [discre-tionary function] exception prevents liability from any and all acts arising out of the regulatory programs of federal agen-cies”. The poliovirus vaccine regulations specified that it was the government’s duty to receive all relevant test data from the manufacturer and make a determination that it complies with the regulation-specified safety standard. Applying the “safety” standard did not involve discretion or judgment.

Fast forward to Sanders v. United States, 2019 WL4125233 (4th Cir. August 30, 2019), in which the plaintiffs were relatives of the murdered victims of a mass shooting in a church in South Carolina. They filed FTCA claims that alleged that, but for lapses in the FBI’s national criminal background check system, the deranged shooter would not have been able to purchase a semi-automatic firearm and kill people. Congress had directed the Attorney General to establish a National Instant Criminal Background Check System (NICS), which would provide access to every U.S. citizen’s criminal history. Federal law and the NICS requires a licensed gun dealer to check an individual’s criminal history before consummating sale of a firearm. Those background checks allow a gun dealer to determine whether his customer should be permitted to buy a weapon or not. By use of the NICS, the federal examiner and licensed gun dealers have access to a vast array of criminal justice information. The District Court opinion from which an appeal was taken upheld the government’s claim of immunity. The appellate court,

16

Aviation Law 2020

Restoring Confidence in Aviation Safety

Marc S. Moller, a trial and appellate lawyer, and a partner at Kreindler & Kreindler LLP for more than 35 years, has specialised in representing plaintiffs in commercial and general aviation accident, mass disaster and other wrongful death and personal injury cases. The results in some of those cases established important legal precedents and set records for recoveries in the jurisdictions in which the actions were filed.Mr. Moller’s trial record has earned him the distinction of being elected Fellow of the American College of Trial Lawyers and he has been the recipient of numerous awards and honours during his distinguished career. He has been appointed Lead Counsel or Chairman of Plaintiffs’ Steering Committees in mass disaster cases and served as trial counsel in matters involving virtually every type of commercial and general aviation aircraft, corporate jet and charter aircraft, helicopters and military aircraft in operation today. This breadth of experience and exten-sive publications have made him a valuable consultant in litigation outside the United States even when the U.S. jurisdiction requirements cannot be satisfied.

Kreindler & Kreindler LLP750 Third AvenueNew York, NY 10017USA

Tel: +1 212 973 3447Email: [email protected]: www.kreindler.com

Justin T. Green joined Kreindler & Kreindler LLP in 1997 and became a firm partner in January 2003. He focuses his practice on helping fami-lies of aviation disaster victims. He is currently the Co-chair of the Plaintiffs’ Executive Committee charged with prosecuting the Ethiopian Airlines Flight 302 cases pending in U.S. federal court in Chicago, Illinois. As an aviation lawyer, Justin has successfully represented families in major aviation cases. These include major airline disasters, corporate airplane and helicopter accidents, civil airplane and helicopter accidents and aviation accidents that have taken the lives of our servicemen and women. He has authored numerous articles on aviation, product liability and wrongful death law.Mr. Green is a Past President of the International Air & Transportation Safety Bar Association, and a member of the American Association for Justice, where he is a Past Chair of the aviation section.He graduated from Union College in Schenectady, New York, and earned his law degree from Fordham Law School in New York City.

Kreindler & Kreindler LLP750 Third AvenueNew York, NY 10017USA

Tel: +1 212 973 3403Email: [email protected]: www.kreindler.com

Since 1950, Kreindler & Kreindler LLP has earned its reputation as the premier aviation accident litigation law firm representing plaintiffs.Kreindler & Kreindler LLP partners have a long record of trial victories, settle-ments and favourable appellate rulings that have secured major rights and benefits for accident victims. Partners at the firm include numerous pilots, an aviation mechanic and engineers who use their technical expertise to benefit our clients. The firm has consistently demonstrated remarkable success in overcoming the arbitrary damage limits of treaties and statutes, winning difficult choice of law issues, promoting access to United States courts by defeating forum non conveniens dismissal motions, and setting

damage recovery records, which ensures that accident victims recover full and fair compensation for their losses. Kreindler & Kreindler LLP remains at the forefront of the continuing fight to promote victim rights.

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Aviation Law 2020

Chapter 4 17

Onboard Offences and Unruly Passengers – Effective Management and the Changing Legal Landscape

The Air Law Firm LLP Chris Smith


requirements of modern air travel. Nevertheless, it remains the most widely adopted framework and until the recent legisla-tive amendments are more widely adopted, it is likely to remain the point of reference for airlines managing incidents involving unruly passengers.

Scope

The provisions of the Tokyo Convention engage where the conduct complained of is either:a) an offence under any applicable penal law or criminal

code; orb) an act which, whilst falling short of criminal conduct, may

or does jeopardise the safety of the aircraft, passengers or property, or the good order and discipline on board an aircraft.2

Accordingly, the objectional conduct need not meet the threshold of criminal conduct for the Tokyo Convention to apply. Indeed, there only needs to be a mere ‘possibility’ of an act that jeopardises the good order and discipline on board the aircraft.

Jurisdiction

The rules as to which State has jurisdiction over offences and acts committed on board an aircraft can, perhaps, be described as one of the most problematic provisions of the Tokyo Convention. The difficulties that arise are often cited as the cause of an inability to prosecute unruly passengers. The rules on jurisdiction can be summarised as follows:■ TheStateofregistrationoftheaircraftwillhavejurisdic-

tion over offences and acts committed on board. Thus, for example, the UK has jurisdiction over matters occurring on ‘G’ registered aircraft.3

■ AContractingStatewhichisnottheStateofregistrationmay only assert jurisdiction if: ■ theoffencehaseffectontheterritoryofsuchState;■ the offence has been committed by or against a

national or permanent resident of such State;■ theoffenceisagainstthesecurityofsuchState;■ theoffenceconsistsofabreachofanyrulesorregula-

tions relating to the flight or manoeuvre of aircraft in force in such State; or

■ theexerciseof jurisdictionisnecessarytoensuretheobservance of any obligation of such State under a multilateral international agreement.4

It is not hard to contemplate, based on the above list, numerous scenarios whereby local law enforcement are unable

IntroductionDisruptive passengers are hardly a new phenomenon, yet the number of incidents entering the sphere of public knowledge via both mainstream and trade media appears to be increasing. If the frequency of reporting is indicative of the problems faced by airlines, incidents of disruptive passengers, particularly involving alcohol, are occurring with ever-increasing regularity.

Statistics gathered in 2017 by the International Air Transport Association (IATA) record unruly passenger incidents as occur-ring at a rate of one incident for every 1,053 flights.1 This compares to one incident in every 1,424 flights in the previous year. This increased frequency mirrors the position reported by many national civil aviation authorities. Whilst unruly passenger incidents are perpetrated by a small number of individuals, they have a disproportionate impact. The cost of dealing with a single incident can range from US$6,000 up to US$200,000. It also creates significant operational disruption and impacts on other passengers, as well as the crew.

Undeniably, alcohol is often a significant factor, but it is not the sole cause. Although, together with violent behaviour and smoking, it comprises the three most prevalent behaviours of unruly passenger incidents. Despite a number of public-facing campaigns and a voluntary code of conduct, the problem shows no sign of abating. The reluctance of governments to prioritise ending 24-hour drinking at airports has been seen as a signifi-cant impediment to addressing the issue, although this is unlikely to be the ‘silver bullet’ that solves the problem. The roles of both preventing incidents occurring and effective management need commitment from all stakeholders, not just airlines.

Although the legislative framework is imperfect, amendments came into force on 1 January 2020 which seek to remedy these imperfections and support airlines and enforcement authori-ties in taking a more robust approach to the problem of unruly passengers. The number of States ratifying the amending protocol (Montreal Protocol 2014) remains low, meaning it may be some time before the full benefits are enjoyed by all. Nevertheless, the problem with unruly passengers shows no indication of diminishing and requires effective management, whether under existing or new legislation.

Tokyo Convention 1963The Tokyo Convention was the first attempt at harmonising an international framework for dealing with offences and certain other acts committed on board aircraft, and has been ratified by 186 States. The Tokyo Convention was conceived in an age when commercial air travel was markedly different to carriage by air as we now know it. As such, it is unsurprising that a framework conceived over 50 years ago does not fully meet the

18 Onboard Offences and Unruly Passengers


or other offending acts (falling within the scope of the Tokyo Convention) have been or are about to be committed. When such a reasonable belief is held, the aircraft commander must also ensure that the measures imposed are reasonable.

In practice, courts ought to be slow to second-guess the deci-sion of the pilot with the benefit of hindsight. The court should not examine whether it was proved that the unruly passenger actually committed an act or offence. All that the airline (captain) need show was that they held a reasonable belief, even if post factum it was a false apprehension. Indeed, this was the approach taken by an Israeli Court applying the test on subjective grounds.6

Despite the powers vesting in the aircraft commander, assis-tance can be sought from the cabin crew and even other passen-gers, to deal with an unruly passenger. However, they act under the direction of the pilot and still based on the pilot’s reasonable belief. The cabin crew or indeed a fellow passenger may only act without authorisation from the pilot in circumstances when they have a reasonable belief that such action is immediately necessary to protect the safety of the aircraft, persons or property.7 The key distinguishing factor here is the immediacy to any threat to the aircraft or person, which is not a necessary ingredient to the powers granted to the aircraft commander.

Immunity from Prosecution

Although it may seem perverse to contemplate a scenario whereby an unruly passenger would pursue legal action against a carrier for off-loading them from a flight or for any actions taken in restraining them on board, it is not unheard of. Providing the aircraft commander, cabin crew or fellow passengers, as the case may be, have exercised their powers in accordance with the Tokyo Convention, they are immune from prosecution or a civil action in relation to the actions they have taken. This immunity also extends to the owner of the aircraft as well as the operator of the flight concerned.8

It is important to recognise that this statutory immunity only extends to suits from the unruly passenger him/herself. It does not extend to claims from other passengers who have been disrupted or even injured by an unruly passenger. That is not to say that a carrier could not still defend such an action; however, any defence would be predicated under a separate legal regime. Indeed, there appears to be a particular reluctance, certainly amongst US courts, to find carriers liable for violent or abusive behaviour by other passengers. This reluctance is illustrated by cases involving fist-fights on board the aircraft where airlines have not been liable for consequential injury.9 Similarly, claims for compensation arising from a delayed (diverted) or cancelled flight under European laws10 may also be defendable.

These legal lacunae have not gone unnoticed and the process of reviewing the Tokyo Convention has culminated in the adop-tion, by ICAO, of the Montreal Protocol 2014.

Montreal Protocol 2014The Montreal Protocol entered into force on 1 January 2020 having received its 22nd ratification by Nigeria on 26 November 2019. Given the low number of States which have ratified the Montreal Protocol it may be some time before the benefits are enjoyed by a large number of operators. Nevertheless, it repre-sents a positive step in the right direction.

The Montreal Protocol amends the Tokyo Convention 1963 (rather than repealing). They are to be read and interpreted as one single instrument and will be referred to as the Tokyo Convention as amended by the Montreal Protocol 2014.

to assert jurisdiction over the acts on board an aircraft. Where an inbound aircraft is foreign-registered, the Tokyo Convention does not automatically grant a jurisdiction upon the State of landing to prosecute a disruptive passenger. Instead, it must seek to establish grounds upon which to assert jurisdiction. In prac-tice, only one of the jurisdiction grounds will normally provide a viable gateway to establishing jurisdiction for a Contracting State that is not the State of registration of the aircraft. That is, the offence has been committed by or against a national or permanent resident of such State. If the aircraft lands at the airport of original destination, it is conceivable that a proportion of the passenger on board will be nationals or residents of that destination country. In which case, local law enforcement could prosecute if the offence was perpetrated by or against one of its nationals or residents. But this will not always be the case and more importantly, it requires the receiving State to take proac-tive steps to assert jurisdiction over the matter. Aside from requiring appetite amongst law enforcement to take such posi-tive steps, the removal of an unruly passenger is often rushed and chaotic and establishing nationality or residency is not foremost in the minds of officials. Indeed, this factor, coupled with pres-sures not to delay crews and turnaround aircraft, often means there is little appetite to prosecute and many States simply opt to deport the passenger back to their original point of departure.

Where the aircraft is forced to divert to a third country, it is highly unlikely that the receiving State will be able to utilise the same jurisdictional gateway, or indeed any others, as it is unlikely to have any nationals on board. Again, this usually results in the unruly passenger being deported with no further action being taken. Unless the competent authorities with whom jurisdic-tion rests are notified that the passenger is travelling inbound, together with details of the offensive conduct complained of, they will often be repatriated with no further action taken.

These jurisdictional impediments are further compounded for certain types of aircraft leases. Operators of a dry leased aircraft can find that they are operating an aircraft which is registered in a country other than their base of operation. Thus, the flight schedule for that particular aircraft will rarely, if ever, touch the country of registration (with jurisdiction over acts and offences on board). Thus, that dry lessee will always experience jurisdictional impediments when operating aircraft. In a market that favours leasing, the jurisdictional gaps will only increase.

The most successful and publicised prosecutions are those that arise from incidents on board aircraft returning to the State of registration of the aircraft.

Powers of the Aircraft Commander

The full ambit of powers to deal with unruly passengers vest in the aircraft commander.5 Although, cabin crew and indeed other passengers have limited powers in certain circumstances.

When the aircraft commander has reasonable grounds to believe that a person has committed, or is about to commit, on board the aircraft, a criminal offence or act that jeopardises the safety of the aircraft, passengers or property, or which jeopard-ises the good order and discipline on board, he may impose any reasonable measures (including restraint) which are necessary:(a) to protect the safety of the aircraft, or of persons or prop-

erty therein; or(b) to maintain good order and discipline on board; or(c) to enable him to deliver such person to competent author-

ities or to disembark him.Thus, the aircraft commander may only exercise the powers

vested in him if he has a reasonable belief that a criminal offence

19The Air Law Firm LLP


Mitigating the Effects of Unruly Passenger IncidentsThe application of the Montreal Protocol is still in its infancy and will take some time to receive the necessary ratifications to ensure that its benefits are felt worldwide. Even so, legisla-tion, of itself, will not eradicate the problem. Rather, it’s simply a gateway to better enforcement. Indeed, prevention is unlikely to be within the gift of any single group of stakeholders. One can point to numerous potential causes of unruly passengers: 24-hour licensing of alcohol sales at airport establishments; the sale of duty-free liquor; unfettered access to alcohol on board; operational delays; or the need for stronger enforcement. However no single cause is likely to eliminate the problem alto-gether. Even if all issues were addressed, industry stakeholders will never be in a position to influence the one factor over which they have no control, a passenger’s self-responsibility to conduct themselves in a manner appropriate for travelling in close proximity to others. It follows that airlines should always be prepared to act firmly and decisively.

General Conditions of Carriage

Airlines should ensure that their Conditions of Carriage contain an enforceable mechanism to recover any costs arising from dealing with an unruly passenger. Such a provision should cover as many conceivable risks as possible, from damage to onboard property, through to diversion costs. Even with the added protections under the Montreal Protocol, the airline will still need to avail itself of a cause of action recognised under a national law. An enforceable contractual provision is the easiest way to achieve this, although it may not be the only gateway to recovering costs.

Collating Evidence

Evidencing disruptive behaviour to the requisite standard may, on its face, be perceived as a given. Nevertheless, many cases have failed at the outset due to the lack of properly collated evidence. When viewed in context, it is often easy to see why: the need to turn around the aircraft and avoid further disrup-tion to the flying programme; crew being reluctant to complete detailed witness statements after a long duty period; omitting to take contact details for witnesses (including fellow passen-gers); or witnesses reluctant to appear in court or give state-ments. The list is endless, particularly when, by its very nature, such an incident can be chaotic, rapidly developing and, despite comprehensive training, is not a scenario that is dealt with by airline personnel on a day-to-day basis. Where the State of landing is unwilling to prosecute, as may be the case under the unamended Tokyo Convention, a comprehensive dossier is all the more important if authorities in the State of registration are to be persuaded to pursue a prosecution over a matter to which they have had no initial oversight.

Whether it is the airline or a State authority looking to pros-ecute an unruly passenger, airlines would be well advised to ensure that:a) a witness statement is taken, at the earliest opportunity,

from the pilot in command evidencing his decision-making process and, critically, the basis upon which any ‘reasonable belief’ was held (as to the threat posed), as well as why the actions taken were deemed reasonable in the circumstances;

One of the significant enhancements of the Montreal Protocol is greater particularity as to what types of behaviour will consti-tute an offence under the Tokyo Convention. In addition to the generalised definitions of behaviours that fall within the scope of the Tokyo Convention (see above), Contracting States to the Montreal Protocol are encouraged to: ‘take such measures as may be necessary to initiate appro-

priate criminal, administrative or any other forms of legal proceedings against any person who commits on board an aircraft an offence or act referred to in Article 1, paragraph 1, in particular: a) physical assault or a threat to commit such assault

against a crew member; or b) refusal to follow a lawful instruction given by or on

behalf of the aircraft commander for the purpose of protecting the safety of the aircraft or of persons or property therein.’11

Whilst the Montreal Protocol stops short of including a more comprehensive or non-exhaustive list of offences or other acts, work by ICAO is ongoing to update its guidance material to include a more detailed list.12

Jurisdiction – Changes

The Montreal Protocol makes a number of significant amend-ments to the jurisdiction provisions of the Tokyo Convention. In particular, it closes off many of the jurisdictional gaps that are often an impediment to prosecuting unruly passengers.

The State of registration of the aircraft retains jurisdiction over offences and acts committed on board. The Montreal Protocol extends jurisdiction to third-countries including:■ theStateoflanding,whentheaircraftonboardwhichthe

offence or act is committed lands in its territory with the alleged offender still on board;13 and

■ the State of the operator, when the offence or act iscommitted on board an aircraft leased without crew to a lessee whose principal place of business or, if the lessee has no such place of business, whose permanent residence is in that State.14

In exercising jurisdiction, the State of landing must now also consider whether the offence or act in question is also an offence under the laws in the State of the operator.15 This means an offender can no longer escape prosecution simply due to a disparity in the penal laws between two States.

Right of Recourse

The Tokyo Convention was silent as to the ability of airlines to recover the costs that arose from incidents involving unruly passengers. Whilst airlines in many jurisdictions were able to utilise domestic laws to recover such costs, this was not the case for all, particularly where the unruly passenger leaves the jurisdiction. The Montreal Protocol seeks to put this issue beyond doubt and expressly refers to a carrier’s rights to seek the recovery, under national law, of damages incurred, from a person offloaded in accordance with its provisions.16

The scope of the losses that will be recoverable will also remain a matter of national law. Even in the most favourable of jurisdictions, inevitably, there will be issues surrounding the remoteness of losses incurred by an airline. Thus, recovery will never be absolute, and airlines will still carry some cost, even if these are minimal.

20 Onboard Offences and Unruly Passengers


■ wagescanbegarnishedtoensureregularityofanypayments;and

■ pursuing an action against an unruly passenger, particu-larly those involving assaults on cabin crew, can help bolster workforce and/or union relations.

ConclusionIncidents of unruly behaviour show no sign of abating and without a coordinated and determined effort by all industry stakeholders, it will remain an ever-present feature of air travel. Airlines alone cannot solve the problem. However, they have a part to play in ensuring that when such incidents occur, they are prepared to both manage the incident effectively, but also follow through, taking a robust approach to enforcement. Whether this is of its own volition or by cooperating with national author-ities, the deterrent factor of well-publicised action should not be underestimated.

Endnotes1. https://www.iata.org/pressroom/facts_figures/fact_

sheets/Documents/fact-sheet-unruly-passengers.pdf.2. Article 1.1 Tokyo Convention 1963.3. Article 3 Tokyo Convention 1963.4. Article 4 Tokyo Convention 1963.5. Article 6 Tokyo Convention 1963.6. Zikry v Air Canada Civil file no. 1716/05 A (Magistrates

Court of Haifa 2006).7. Article 6.2 Tokyo Convention 1963.8. Article 10 Tokyo Convention 1963.9. Price v British Airways 23 Avi 18,465 (SD NY 1992); Stone v

Continental Airlines Inc 905 F Supp 823 (D Hawaii, 1995).10. Regulation (EC) No 261/2004 of the European Parliament

and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passen-gers in the event of denied board and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91.

11. Article 15 bis Tokyo Convention as amended by the Montreal Protocol 2014.

12. Circular 288 – Guidance Material on the Legal Aspects of Unruly/Disruptive Passengers.

13. Article 3.1(a) bis Tokyo Convention as amended by the Montreal Protocol 2014.

14. Article 3.1(b) bis Tokyo Convention as amended by the Montreal Protocol 2014.

15. Article 3.2 ter Tokyo Convention as amended by the Montreal Protocol 2014.

16. Article 18 bis Tokyo Convention as amended by the Montreal Protocol 2014.

b) witness statements are taken from any cabin crew involved. Any statements should comply with local rules or rules and generally ought not to cover hearsay evidence;

c) witness statements are taken from passengers. It is accepted that this may not always be possible, particu-larly as passengers will be disembarking, often in a rush to commence a vacation. In any event, contact details for the passenger should be obtained. Airlines should be discouraged from identifying witnesses by seat numbers, as passengers often move seats and trying to back-trace an individual via a passenger name record can be problematic, particularly for third-party bookings;

d) any picture or video media captured by passengers are noted and they are asked to preserve the evidence or steps are taken then to do so; and

e) where an airline foresees a prosecution being undertaken by anyone other than the authorities in the State of landing, the relevant authorities are notified as soon as possible. Early notification will allow the passenger to be detained upon their return to the country of departure.

It is also worth bearing in mind that the evidential standard required for a criminal prosecution of passengers is often higher than the corresponding civil standard, and the rules on evidence collection can be more stringent.

Enforcement

The reluctance of State authorities to prosecute unruly passen-gers is a matter that needs addressing at the very highest levels. Each State has an important part to play in deterring unruly behaviour and there needs to be an increased appetite not only to prosecute disruptive passengers, but also to cooperate on an inter-State basis in support of foreign prosecutions.

Even when State authorities are willing to prosecute an unruly passenger (which is not always the case), it should not be assumed that the costs incurred by the airline will be recoverable as part of any prosecution. Thus, an airline wishing to recover costs may still need to embark upon litigation before the civil courts; although in some jurisdictions, where a passenger has been successfully pros-ecuted to a criminal standard, it often follows that, under national law, the civil burden of proof is automatically met.

The ability of an unruly passenger to meet any judgment award can often be a decisive factor in whether to pursue a matter. Even if there are doubts as to a passenger’s immediate ability to pay, the following factors may also weigh in favour of further action:■ thepassengermayhavethebenefitofanindemnityundera

policy of insurance covering their travel;■ debtscanoftenbesecuredagainstpropertyorotherintan-

gible assets;

21

Aviation Law 2020

The Air Law Firm LLP

Chris Smith is a Partner at The Air Law Firm. Chris is recognised for his regulatory and dispute resolution work in the aviation and travel law sector, but also has a broad general commercial (non-contentious) practice. Coming from an industry background, Chris is familiar with the finer mechanics of an airline operation and works with a full spectrum of business units across an airline operation.Chris’ recent work includes:■ Brexit – corporate restructuring, contingency planning and future compliance readiness.■ Fatal Accidents – Air Accidents Investigation Branch (AAIB) investigations, hull and injury claims.■ Defending State-backed enforcement action across the EU.■ Passenger and Cargo liability.■ General commercial litigation.■ Airline and Tour Operator start-ups, Air Travel Organiser’s Licence (ATOL) applications and Package Travel Regulations compliance.■ EU and English consumer law compliance.■ Web-based sales and pricing compliance.■ General Conditions of Carriage.■ Aircraft leasing and block charter agreements.■ Dangerous goods.■ Contracts for the supply of goods and services.Chris has been independently nominated by his clients, contacts and peers for inclusion in a number of industry and legal guides for his work in aviation law, including:■ Chambers: recognised as an ‘Associate to watch’ for his regulatory work: “He has an excellent grasp of the law is attuned to the client’s

commercial sensitivities.”■ The Legal 500: recognised as a ‘Next generation lawyer’ for both his aviation and travel regulatory and commercial practice: “Knows

aviation law inside out, and is commercially minded.”■ Euromoney’s Expert Guides: a ‘Rising Star’ in Aviation.Chris is admitted as a Solicitor in England and Wales.

The Air Law Firm LLP48 Dover Street, MayfairLondon W1S 4FFUnited Kingdom

Tel: +44 20 7151 4179Email: [email protected]: www.theairlawfirm.com

The Air Law Firm LLP is a boutique aviation law practice providing interna-tional legal services to the aviation industry. The practice is a full-service offering to the aviation industry, covering both contentious and non-conten-tious matters. Our lawyers are passionate about aviation, recognised inter-nationally as being experts in their fields, focused and unique. Our practice model sets us apart: we offer a bespoke and focused service from an agile and responsive team who can react quickly to the changing demands of your business environment.

www.theairlawfirm.com


Aviation Law 2020

Chapter 522

United States Regulatory Regime for Commercial Use of Small Unmanned Aircraft Systems

Wiley Rein LLPKaty Milner Ross

Anna M. Gomez

Sara M. Baxenberg

Joshua S. Turner


Under the latter, a public operator must obtain a Certificate of Waiver or Authorization (COA) from the FAA.

■ Civil: Civil operators are those that are not public opera-tors. Civil operators that conduct operations for purposes other than recreation (i.e., commercial or educational purposes) may fly UAS only under Part 107, pursuant to a waiver or an exemption, or in accordance with otherwise existing aircraft regulations.

■ Hobbyist: Hobbyist operators are a subcategory of civil operators that fly UAS for hobby or recreational purposes. They are subject to less regulation than Part 107 opera-tors if they operate within certain strictures, including that the operations be conducted in accordance with the safety guidelines of a community-based organisation (such as the Academy of Model Aeronautics) and that the aircraft remain within visual line of sight (VLOS) and no higher than 400 feet above ground level. Under current law (which was revised most recently in October 2018 to give the FAA more authority over recreational operations), hobbyists must register any unmanned aircraft above 0.55 pounds, obtain prior approval to operate outside Class G airspace, and pass an aeronautical knowledge test (which the FAA is still in the process of developing). Hobbyists will be subject to future FAA regulations on Remote ID and may be subject to other rules aimed at airspace safety and security.

B. Small UAS Registration

All small UAS owners must register their aircraft via an online process. The operator must label his or her aircraft with its registration number. Registration costs $5 per aircraft and is valid for three years. Failure to register could result in civil penalties up to $27,500 and criminal penalties including fines up to $250,000 and/or imprisonment up to three years.

C. Part 107 Rules for Small UAS Flights

The Part 107 rules generally permit small UAS operations without specific prior approval from the FAA. Part 107 applies to operation and certification of small UAS for non-hobby and non-recreational purposes. Under the rules, entities may operate UAS pursuant to the following limitations:■ Aircraft size: The UAS must weigh less than 55 pounds,

including payload.■ Daylight and VLOS: The UAS must remain within VLOS

of the remote pilot in command and the person manipu-lating the flight controls of the small UAS. Alternatively,

I. A Brief Recent History of Commercial Small UAS RegulationIn the United States, the explosion of interest in the use of small unmanned aircraft systems (UAS) for commercial purposes is a relatively recent phenomenon. A small UAS is one that weighs less than 55 pounds.

Prior to 2012, the Federal Aviation Administration (FAA) issued only guidance regarding usage of UAS, and operations could only take place if operators obtained relief from numerous FAA restric-tions designed for manned aircraft. The FAA Modernization and Reform Act of 2012, however, mandated that the FAA integrate UAS into the national airspace (NAS) by, among other require-ments, issuing regulations to permit the operation of UAS. Since then, the FAA has taken a risk-based approach to author-ising commercial small UAS operations, issuing rules that would permit the safest operations possible, permitting more complex operations on a case-by-case basis, and considering additional rules to permit operations that present greater risks.

Initially, the FAA permitted limited commercial UAS oper-ations by following a process to exempt those operations from commercial aircraft regulations, subject to strict conditions. And in 2016, the FAA adopted the first rules allowing limited routine commercial small UAS operations (“Part 107”), and established a waiver process to permit expanded operations on an expe-dited basis. In 2019, the FAA proposed rules to permit certain expanded operations, and also permitted the first commercial UAS deliveries using pre-existing regulatory processes initially designed for manned aircraft that transport persons or property.

Security agencies, however, have urged the FAA not to adopt any more rules to permit additional UAS operations until the FAA can address their concerns about being able to identify and miti-gate rogue operations. One method to address security agency concerns is to adopt rules to permit the government to remotely identify operators. The FAA has therefore announced that it will not adopt rules to permit expanded operations until it first adopts such “Remote ID” rules.

II. UAS-Specific Regulations in the United States

A. Three Classes of Unmanned Aircraft Operations

There are three classes of unmanned aircraft operations under U.S. law – public, civil, and hobbyist – each of which is subject to differing regulatory regimes:■ Public: Public operators are federal, state, and local

government users. Public operators have the choice to fly operations under the Part 107 rules or as public aircraft.

23Wiley Rein LLP


waivable under Part 107, commercial operators can apply for an exemption under the Special Authority for Certain Unmanned Systems (Section 44807).

Pursuant to Section 44807, the FAA uses a risk-based approach to determine whether, due to the “size, weight, speed, opera-tional capability”, and other characteristics of the aircraft and operations, the operations can safely be conducted in the national airspace. If the FAA grants an exemption, it establishes a series of conditions for the operations and provides the applicant appropriate relief from relevant regulatory requirements. The FAA also may exempt applicants from statutory requirements that the pilot hold an airman certificate or that the aircraft hold a type certificate or airworthiness certification. Exemptions are granted on a case-by-case basis for specific operations.

Prior to the adoption of Part 107, the FAA used the same exemption process to enable commercial UAS operations on a case-by-case basis. These exemptions were called Section 333 exemptions because they were authorised by Section 333 of the FAA Modernization and Reform Act of 2012.

E. Post-Disaster or Emergency Operations

Public and commercial operators seeking authority from the FAA to operate in response to natural disasters or other emergency situ-ations may be eligible for expedited approval. Operations such as search and rescue, damage assessments, and media coverage providing crucial information to the public may be facilitated through the FAA’s Special Government Interest (SGI) amend-ment process. To apply, the operator must be an existing Part 107 Remote Pilot or have an existing COA. The FAA will ask that the operator identify a point of contact, the pilot and observer, the type of UAS, and the flight details. If approved, the FAA will add an amendment to the operator’s existing Remote Pilot Certificate or COA that authorises the applicant to fly under certain condi-tions for the specified emergency operation.

F. State and Local Regulations

The FAA’s progress to permit broader commercial UAS has been slow, which has opened the door to more state and local attempts to regulate UAS flights. Such attempts create ques-tions about the extent to which federal law preempts local law. Federal law states that the U.S. government “has exclusive sover-eignty of airspace of the United States” and U.S. citizens have “a public right of transit through the navigable airspace”. The FAA thus has authority to control traffic, and to adopt opera-tional and safety regulations on aircraft, in navigable airspace.

The FAA has issued guidance on state and local laws that would be preempted by federal law, including, for example, restrictions on UAS flight altitude and flight paths, bans on operations, and any regulation of the navigable airspace. State and local laws that the FAA’s guidance states are generally permissible include, for example, prohibitions on the use of UAS for voyeurism or for hunting and fishing, or requirements that police obtain a warrant prior to using UAS for surveillance.

The FAA has acknowledged, however, that there are areas that are not clearly the province of federal regulation. In 2017, the White House and Department of Transportation created the UAS Integration Pilot Program (IPP), which established private sector partnerships with state, tribal, and local governments, in part to identify the most effective models for balancing local and national interests in UAS integration. The IPP will be completed in 2020, after which the FAA may issue additional guidance on permissible state and local UAS regulatory activities.

the UAS must remain within VLOS of a visual observer (VO). The operations may only be during daylight, or at civil twilight (30 minutes before official sunrise to 30 minutes after official sunset) with appropriate anti-colli-sion lighting.

■ Flights over persons: The small UAS may not operate over any persons who are neither directly participating in the operation, under a covered structure, nor inside a covered stationary vehicle.

■ Maximum speed: The maximum groundspeed is 100 mph (or 87 knots).

■ Maximum altitude: The UAS may not fly higher than 400 feet above ground level (AGL) or above a structure.

■ Remote Pilot in Command (RPIC): The pilot must hold a Remote Pilot in Command certificate, which requires passing a knowledge test or holding a Part 61 pilot certif-icate. To be eligible for an RPIC certificate, the operator must be at least 16 years old, able to read, write, speak, and understand English, and in a physical and mental condi-tion to safely fly the UAS. The operator must also be vetted by the Transportation Safety Administration. The RPIC must conduct preflight inspections.

■ Airspace restrictions: Part 107 authorises operations without Air Traffic Control (ATC) permission only in Class G airspace; operators must apply for authority prior to operating in any other airspace (also known as “controlled airspace”).

■ Right of way: The operator must yield the right of way to other aircraft and may not operate so close to another aircraft as to create a collision hazard.

■ Operations from a moving aircraft or vehicle: Operations from a moving vehicle are prohibited unless they are over a sparsely populated area.

■ Careless or reckless operations: Careless or reckless oper-ations are prohibited, including the carriage of hazardous materials.

■ Drone deliveries: Transportation of property for compen-sation or hire is allowed under Part 107, provided: the flight is conducted within VLOS and not from a moving vehicle or aircraft; and the flight occurs wholly within the bounds of a State. (The intrastate requirement was included to avoid requiring UAS operators to be classified as air carriers – aircraft operators that carry persons or property for hire on an interstate basis. Air carriers are statutorily mandated to obtain safety and economic authority from the FAA, and, as discussed below, the procedures surrounding air carrier certification are complex.)

■ Airworthiness certification: The FAA does not require airworthiness certification for small UAS operating under Part 107.

The FAA will issue certificates of waiver from certain Part 107 rules if it finds the proposed operation can be safely conducted. For example, the FAA will entertain waivers to permit operations at night, over people, or beyond visual line of sight (BVLOS). To qualify for a waiver, the operator must demonstrate that the proposed operation can achieve a level of safety that is at least equivalent to that achieved by the rule for which it seeks the waiver. The FAA has issued approximately 3,400 waivers.

D. Section 44807 (Formerly Section 333) Exemptions

Part 107 applies only to small UAS that weigh less than 55 pounds at takeoff. If the aircraft weighs more than 55 pounds, or the operation requires deviation from Part 107 rules that are not

24 US Regime for Small Unmanned Aircraft Systems


B. Part 135 Air Carrier Certifications

Part 135 allows operators to apply for certification to conduct UAS deliveries. The FAA issues air carrier certificates to U.S. operators based on the type of services they plan to provide and where they want to conduct their operations. In addition to obtaining air carrier or operating certificates, operators must acquire airspace authorisations before they can begin operations.

The FAA has four types of certificates for Part 135 operations:■ Part 135 Single Pilot: A Single Pilot certificate enables

operations only by the operator named in the certificate, and only for one drone flight at a time.

■ Single Pilot in Command: A Single Pilot in Command certificate includes one pilot in command (certifi-cate-holder) and three second pilots in command. The FAA also imposes limits on the size of the aircraft and the scope of the operations it permits under this certificate.

■ Basic Operator: A Basic Operator certificate limits the size and scope of permitted operations. The certifi-cate-holder may have a maximum of five pilots, including a second-in-command, and may only use a maximum of five aircraft in the operation.

■ Standard Operator: A Part 135 Standard Air Carrier certificate permits the operator to fly UAS without a limit on the size or scope of operations, although the FAA must grant the operator authorisation for each type of operation it wants to conduct. The certification does not limit the company to carrying loads under 55 pounds, as operating under Part 107 would. And it allows the company to fly drones at night, after attaching the requisite safety lights and complying with other regulations.

The FAA has approved deliveries using two types of certif-icate – a Standard Air Carrier certificate and a Single Pilot Air Carrier certificate.

IV. Airspace Authorisations for Drone OperatorsPart 107 permits conforming small UAS flights in Class G airspace only. Operators therefore must obtain prior authori-sation from Air Traffic Control to operate in Class B, Class C, or Class D, and certain parts of Class E airspace. The FAA has set up a streamlined process to enable operators to obtain authority to fly in controlled airspace through the “Low Altitude Authorization and Notification Capability” (LAANC), web portal or app. LAANC also provides Air Traffic Control with knowledge of where and when UAS are operating.

The FAA partnered with several private organisations to provide the LAANC service. The organisations are known as UAS Service Suppliers (USS).

LAANC is available at approximately 400 air traffic facil-ities covering about 600 airports. Operators wishing to fly in controlled airspace near airports at which LAANC is not available must use the FAA’s manual process to apply for an authorisation.

V. UAS Traffic ManagementFull integration of small UAS into the NAS requires a traffic management system to ensure safe operations of both manned and unmanned aircraft. The National Aeronautics and Space Administration (NASA) is currently collaborating with the FAA and other federal agencies as well as industry to develop a UAS traffic management (UTM) system for low-altitude UAS opera-tions not under ATC control.

In the meantime, a number of state and local governments have enacted laws that purport to regulate various aspects of UAS operations, including restricting where and when UAS may be flown. For example, some states have barred UAS flights over facilities like prisons and stadiums; others have gone further, attempting to restrict all or most UAS operations over property without the consent of the owners below. Given federal primacy in air navigation, restrictions such as these are of dubious legality, and may not survive court challenge. To date, however, very few cases have been brought challenging state and local regulation of UAS flights; the primary case in this area is Singer v. Newton, where a federal district court found that a local law requiring permission to fly over private property conflicted with federal law and was therefore preempted. The lack of legal challenges in this area can partly be explained by the fact that UAS operations remain constrained by FAA regula-tions, and thus there are relatively few operators with the incen-tive to challenge onerous state and local restrictions.

Unmanned aircraft have also been the subject of study by the Uniform Law Commission (ULC) – a national organisation that develops proposed uniform state laws. The ULC established a committee to draft a statute on tort law related to UAS, focused primarily on whether state trespass laws need to be updated to take into account this new type of aircraft. After two years of work, the ULC in 2019 rejected a compromise proposal put forward by its drafting committee over last-minute concerns raised by rights groups. It is unclear whether the ULC will continue to push forward with this effort in 2020.

III. Regulating Drone Deliveries through Traditional Aircraft RulesThe FAA does not have rules in place that specifically address the use of UAS for deliveries. Indeed, the Part 107 rules explic-itly do not apply to “air carrier operations”, meaning generally the transport of property for hire over state or national borders. The operations conducted by air carriers are called “air transpor-tation”. Courts that have considered the question with respect to manned aircraft have found that an operator’s entire delivery network, and not just the flight path of the aircraft, dictates whether the operations are interstate and therefore constitute air transportation. This means that widespread UAS delivery networks likely will need to follow procedures established for air carriers if new legislation is not enacted.

The FAA Reauthorization Act of 2018 required the FAA to revise its regulations to specifically address carriage of property via UAS, but the agency has yet to meet this requirement. In the meantime, the FAA has used several methods to authorise deliveries by UAS.

A. Air Taxi Operator Exemptions

In order to engage in air transportation, an operator must hold economic authority from the Department of Transportation via either a certificate of public convenience and necessity or an exemption from the certificate requirement. In 2018, the Department of Transportation announced it would streamline economic authorisation of drone delivery operations by estab-lishing procedures where an applicant can obtain authorisa-tion to operate as an “air taxi”. This process enables relief from some of the more onerous statutory requirements applicable to air carriers. Under these procedures, UAS operators seeking air taxi authority must: (1) be U.S. citizens; (2) maintain liability insurance as required by FAA rules; and (3) register with the Department of Transportation.

25Wiley Rein LLP


A. Small UAS Flights Over People and at Night NPRM

On February 13, 2019, the FAA published a Notice of Proposed Rulemaking (NPRM) that would expand current regulations to enable commercial UAS operations over people, with increas-ingly strict requirements depending on the risk of harm posed by the aircraft. The NPRM also proposes to establish rules to permit nighttime operations, subject to pilot training and aircraft lighting requirements.

The NPRM proposed a three-tier framework of categories for permissible UAS operations based on the relative level of risk of different UAS categories:■ Category 1 is the most permissive, applying only existing

Section 107 requirements. Category 1 would simply allow operators to fly UAS over people if the UAS weighs 0.55 pounds or less.

■ Category 2 would allow the operation of UAS weighing more than 0.55 pounds over people if the aircraft meets three requirements designed to limit damage in the event of a collision with a person: (1) the aircraft, upon impact with a person, would “not cause injury to a human being that is equivalent to or greater than the severity of injury caused by a transfer of 11 foot-pounds of kinetic energy upon impact from a rigid object”; (2) the aircraft does not have exposed rotating parts that could lacerate human skin; and (3) the aircraft does not have an FAA-identified safety defect.

■ Category 3 would allow the operation of UAS weighing more than 0.55 pounds over people if operators comply with strict limitations which are designed to manage the increased risk of injury: (1) the aircraft, upon impact with a person, would not result in an injury as severe as the injury that would result from a transfer of 25 foot-pounds of kinetic energy from a rigid object; (2) the aircraft does not have exposed rotating parts that could lacerate human skin; and (3) the aircraft does not have an FAA-identified safety defect. In addition to these design requirements, which mirror that of Category 2 but with a less strict injury threshold, Category 3 UAS would be subject to opera-tional constraints. Specifically, Category 3 UAS would: (a) be prohibited from operating over open air assemblies of people; and (b) be required either to conduct operations “within or over a closed- or restricted-access site”, or to “not maintain sustained flight over any human being not directly participating in the operation[s]”.

Manufacturers will be required to demonstrate, to the FAA’s satisfaction, that their aircraft meets the proposed requirements for Category 2 or 3 operations. The FAA will issue a Public Notice once it accepts a manufacturer’s “Means of Compliance”. Among other requirements, manufacturers will also have to provide remote pilot operating instructions addressing the types of permissible payloads and other information regarding eligi-bility of operating under Category 2 or 3.

B. Safe and Secure Operations ANPRM

The FAA also released an Advanced Notice of Proposed Rulemaking, which is designed to gather information which may inform future rules. The ANPRM seeks comments for future UAS rulemakings on stand-off distances, payload restrictions, critical system design requirements, performance limitations, and unmanned traffic management operations.

The project is developing capabilities to show available airspace and airspace constraints, the locations where all aircraft are operating, relevant weather information, and continuous flight tracking. NASA’s vision is for multiple USS to be able to coordinate, deconflict and plan UAS and manned aircraft flights in the same airspace.

The FAA has established the UAS Traffic Management Pilot Program (UPP) and selected three test sites to test the UTM concept. According to the FAA, “UTM services to be demon-strated in the UPP include sharing of flight intent between oper-ators, the ability for a UAS Service Supplier (USS) to generate a UAS Volume Reservation (UVR)—a capability providing authorized USSs the ability to issue notifications to UAS Operators regarding air or ground activities relevant to their safe operation—and share it with stakeholders”.

VI. UAS Test SitesThe FAA has also established seven UAS Test Sites to support UAS integration. Several of the IPP projects are working with the FAA UAS Test Sites. At these sites, operators can conduct advanced drone research and operational concept validation. UAS Test Site data is collected and analysed by the FAA to inform critical safety decisions that will aid in UAS integration into the NAS.

VII. FAA Advisory and Rulemaking CommitteesIn addition to submitting public comments on FAA rulemaking proceedings, industry stakeholders are able to provide input that helps to shape FAA development of UAS policy through partic-ipation in rulemaking and advisory committees. The FAA has used rulemaking committees to gather stakeholder perspec-tive on a wide variety of issues related to UAS policy, including Remote ID, UAS operations in controlled airspace, and opera-tions of micro-UAS (UAS weighing no more than 4.4 pounds).

Another method by which the FAA gathers stakeholder feed-back in developing UAS policy is through the Drone Advisory Committee (DAC), an advisory body established in accordance with the Federal Advisory Committee Act, as amended. First established in 2016, the DAC is tasked with providing inde-pendent advice and recommendations to the FAA on UAS issues in response to specific requests. Membership is comprised of FAA and DOT staff, as well as high-level executives from a cross-section of stakeholders representing private industry, state and local government, and research and academia. The 2019 DAC has three task groups: 1) Remote ID; 2) UAS secu-rity issues; and 3) 107 waivers. These efforts are designed to result in recommendations to the FAA that may be adopted in future rulemakings or policies. The DAC’s charter is subject to renewal every two years.

VIII. Future RegulationsThe FAA has identified a path to full integration of UAS into the NAS, with the ultimate integration including full autono-mous passenger flights in all classes of airspace. The FAA will likely have a number of regulatory proceedings and activities to craft rules and standards that permit such operations. The agency’s current rulemakings that are either pending or on the immediate horizon include proceedings on small UAS flights over people, issues related to safe and secure operations, Remote ID, and operations over critical infrastructure.

26 US Regime for Small Unmanned Aircraft Systems


practice without waiting for a mandate. Widespread voluntary adoption will also make it easier to justify the final standards or rules the agency eventually adopts, and/or to pacify the long-held concerns of the security stakeholders.

D. Critical Infrastructure (Section 2209)

In Section 2209 of the FAA Extension, Safety, and Security Act of 2016, Congress required the FAA to develop a process to that would allow “applicants” to petition the FAA to “prohibit or restrict” UAS operations in “close proximity” to a “fixed site facility”. The shorthand for this is a procedure for restricting flights near or over “critical infrastructure”, but the actual stat-utory language is broader, applying to “critical infrastructure such as energy production, transmission, distribution facili-ties and equipment, and railroads [added in 2018]”, as well as “oil refineries and chemical facilities”, “amusement parks”, and “other locations that warrant such restrictions”. The FAA thus has a great deal of flexibility in deciding which sites should be covered, but to date the agency has not initiated a rulemaking to establish the requisite process. In fact, the FAA missed both the original 180-day deadline and another deadline of March 31, 2019, which was imposed in the 2018 FAA Reauthorization Act. As of autumn 2019, the FAA expected to issue an NPRM in this matter in late 2020.

In the absence of federal rules on fixed-site facilities, a number of states (and some localities) have moved forward with their own designations of what constitutes “critical infrastructure”, and have sought to restrict drone flights over these areas. While such state and local restrictions on navigation are legally ques-tionable, the pressure to adopt these limits will likely remain intense until the FAA implements Section 2209.

C. Remote ID

Remote ID is shorthand for a system that allows the identifica-tion of an unmanned aircraft system while it is in flight. There are two technological approaches for remote identification: (1) a network-based approach; and (2) a broadcast approach. Under the network-based approach, the UAS would transmit identi-fying data through an internet-based service. Under the broad-cast approach, the UAS would transmit identifying data using a variety of technologies, including Bluetooth, ADS-B, and ground-based radars.

The FAA made clear in its Flights Over People NPRM that it views adopting Remote ID rules as a necessary precursor to adopting regulations permitting expanded UAS use. Specifically, the FAA stated that it “plans to finalize its policy concerning remote identification of small UAS—by way of rule-making, standards development, or other activities that other federal agencies may propose—prior to finalizing the proposed changes in [Part 107] that would permit operations of small UAS over people and operations at night”. The FAA therefore plans to issue a notice of proposed rulemaking to adopt Remote ID rules, which is currently undergoing the Office of Management and Budget’s coordination process and is expected to be released by the end of 2019/beginning of 2020.

In the meantime, voluntary standards organisations such as ASTM International have been finalising standards for Remote ID. In addition, the FAA tasked the DAC with studying existing CTA, ASTM, and SAE standards relating to Remote ID and providing recommendations that will outline a process and framework for driving voluntary industry compliance with Remote ID. The FAA’s vision appears to be that, while the Remote ID regulatory process is pending, it can leverage industry expertise and cooperation to encourage develop-ment of Remote ID standards and have industry put them into

27

Aviation Law 2020

Wiley Rein LLP

Anna M. Gomez, former Deputy Assistant Secretary for Communications and Information for the National Telecommunications and Information Administration (NTIA) of the U.S. Department of Commerce (DOC), specialises in regulatory, policy, and transactional matters related to domestic and international telecommunications and unmanned aircraft systems. Anna has extensive experience in domestic and international communications law and policy. She represents clients before the Federal Communications Commission (FCC) and the Executive Branch on domestic and international telecommunications, public safety communications, and unmanned aircraft systems. She also counsels on regulation governing the operation unmanned aircraft systems, including regarding rules and authorisations, privacy, and spectrum licensing and allocation matters. Anna is co-chair of Wiley Rein’s Unmanned Aircraft Systems Practice Group.

Wiley Rein LLP1776 K St. NWWashington DC, 20006USA

Tel: +1 202 719 7261Email: [email protected]: www.wileyrein.com

Joshua S. Turner is currently serving as President of the Federal Communications Bar Association (FCBA). He represents clients in proceed-ings before the Federal Communications Commission (FCC), Federal Aviation Administration (FAA), and other federal agencies, as well as in federal and state court actions. In addition to regularly advocating in front of federal agencies, Josh argues in federal appellate court as well as in federal district court and state court. He also provides counselling on compliance with evolving regulation of unmanned aircraft systems (UAS); and tracks and analyses (a) FAA rulemakings and enforcement actions, and (b) state and local regulation of UAS, with a particular focus on potential conflicts between different regulatory authorities. Josh is co-chair of Wiley Rein’s Unmanned Aircraft Systems Practice Group.



Wiley Rein LLP is a dominant presence in Washington, DC, with more than 240 attorneys and public policy advisors. Our firm has earned interna-tional prominence by representing clients in complex, high-stakes regu-latory, litigation, and transactional matters. Many of the firm’s attorneys have held high-level positions in the White House, on Capitol Hill, and in federal agencies including the U.S. Department of Defense, the U.S. Patent and Trademark Office, the Federal Communications Commission, the U.S. Department of State, the U.S. Department of Commerce, the U.S. Environmental Protection Agency, the Federal Election Commission, and the U.S. Department of Justice. A large number of our attorneys also have active high-level security clearances that allow them to quickly “read in”

to matters when there is a need to access classified materials. The Legal Times has noted that the firm “represents as perfect a merging of public policy and corporate America as exists in Washington”.

www.wileyrein.com

Katy Milner Ross represents a broad cross-section of telecommunications industry clients on a variety of regulatory, transactional, and compliance matters. She has significant expertise in wireless issues, including matters involving unmanned aircraft systems (UAS or drones). Katy assists clients with Federal Communication Commission (FCC) and Federal Aviation Administration (FAA) issues in a rapidly changing regulatory environment, frequently preparing comments, reply comments, oppositions, and other legal pleadings as well as generating advo-cacy strategies. Katy also counsels clients on spectrum acquisition and utilisation, data privacy and security issues, and enforcement.



Sara M. Baxenberg offers counsel to companies engaged in telecommunications, mass media, unmanned aircraft systems (UAS), and emerging technology on a variety of regulatory, litigation, transactional, and compliance matters. She assists clients in obtaining authorisation from the Federal Aviation Administration (FAA) to operate UAS and provides counsel on federal, state, and local UAS policy issues. Sara also represents telecommunications providers and trade associations in litigation matters before state and federal courts involving wireless tele-communications infrastructure siting. She also represents clients in connection with regulatory compliance and federal agency proceedings in a wide variety of areas affecting the telecommunications and emerging technology industries, including wireless and satellite regulation, federal accessibility law, and consumer protection.




Aviation Law 2020

Chapter 628

Regulations on Drone Flights in Japan

Mori Hamada & Matsumoto Koji Toshima

Hiromi Hayashi


B. Overview of the Regulations Under the CAAThe CAA provides for the definition of UAVs, the prohib-ited airspaces for flight, the operating limitations and penalties for violations. If a person intends to fly UAVs in prohibited airspaces, beyond the limitations of allowed operations, then it must have permission or approval from the MLIT. However, according to the Q&A published by the MLIT, if an operator flies UAVs within a closed area where there is no possibility for them to leave the area, then permission or approval is not necessary.

The MLIT publishes the standards which MLIT will apply when examining applications for permission or approval (the “Standards”). The applications may be made at the following website, which is available only in Japanese: https://www.dips.mlit.go.jp/portal/.

According to the Standards, an operator must submit the application for permission or approval, in general, 10 business days before the flight of an UAV. A permission or approval is generally effective for three months. However, if a person will continuously fly UAVs under the same conditions, it can apply for permission or approval that is effective for up to one year. This type of application is usually made by mass media organi-sations which use drones in Japan.1. Definition of UAVsThe CAA defines UAVs as follows:(a) airplanes, helicopters, gliders, airships and other facilities

that are available for aviation uses designated by the rele-vant ordinance of the CAA;

(b) on which human beings cannot ride due to its structure; and

(c) which can fly by remote control or automatic operation based on programs,

(d) except when such facility weighs less than 200 grams.Therefore, only very light drones (e.g., toy drones) can be

exempted from the definition of UAVs. Further, the Standards classify the requirements for those which weigh less than 25 kg and those which are 25 kg or more. The requirements for UAVs weighing 25 kg or more are stricter than those for the lighter ones. The requirements discussed below are for UAVs weighing less than 25 kg.2. Prohibited airspacesIt is generally prohibited to operate a UAV in the following airspaces:(a) airspaces in which the UAV is likely to affect the safe oper-

ation of aircraft, which can be further classified into (i)

A. IntroductionThe following laws and regulations are the material legislation in Japan on the flights of unmanned aircraft vehicles (drones) (“UAVs”):(i) Civil Aeronautics Act;(ii) Act Prohibiting UAVs’ Flights Over the Houses of

Parliament, the Prime Minister’s Official Residence, Other Important Buildings and Nuclear Facilities;

(iii) Civil Code;(iv) Radio Wave Act; and(v) local regulations ( jyourei ) legislated by local governments.

The Civil Aeronautics Act (the “CAA”) is the key legis-lation for aviation safety in Japan, and the Ministry of Land, Infrastructure, Transport and Tourism (the “MLIT”) is the principal regulator of aviation matters, including the CAA. On December 10, 2015, an amendment to the CAA which intro-duced safety rules regarding unmanned aircraft vehicles (drones or “UAVs”) took effect. Before the amendment, there was no regulation on the flights of UAVs. But the Japanese public and the government turned their attention to UAVs after a drone was found on the roof of the Prime Minister’s office on April 22, 2015. On April 24, 2015, two days after the discovery, the Japanese government set up the Conference for Liaison between Governmental Bodies to discuss how UAVs should be regu-lated. It took less than eight months to enact the 2015 amend-ment, and that was extraordinarily rapid in terms of legislative amendments in Japan.

Further, governmental bodies and the private sector set up the Council to Improve the Environment regarding UAVs (the “Council”) in 2015. The Council holds ongoing discus-sions on regulations to develop the commercial use of UAVs. In June 2019, the Council published the “Roadmap towards the Industrial Revolution in the Air” (the “Roadmap”) which it revises annually. According to the Roadmap, there are four phases on the use of UAVs. In the first and second phases, UAVs may be flown within visual line of sight. In the third phase, UAVs may be flown beyond visual line of sight (“BVLOS”) over areas where it is unlikely for a third party to enter (e.g., moun-tains, sea, rivers, lakes and forests). Finally, in the fourth phase, UAVs may be flown BVLOS over areas where a third party may be located. As scheduled in the Roadmap published in 2018, the MLIT determined the requirements for the third phase in September 2018. The fourth phase is scheduled to start in or after the 2022 fiscal year.

29Mori Hamada & Matsumoto


such as cars, trains, vessels, airplanes, construction machines, buildings, houses, factories, storehouses, bridges, power plants, telephone poles, telephone cables, traffic signals, and street lights. “Properties” do not include land and nature (e.g., trees, grasses and weeds). In this regard, if an operator flies UAVs in a city area, it would not be easy to find an area where there are no persons other than Related Persons and no properties other than those controlled by Related Persons. Thus, operators will need approval to operate UAVs outside the parameters of condition (g).

■ For“eventsites”undercondition (h), theCAAcitesfestivals and exhibitions as examples. According to the Q&A published by the MLIT, if many people gather on specific dates or in specific locations, such as concerts and demonstration marches, these will be considered as event sites.

■ “Hazardous materials” under condition (i) meansexplosives, high-pressure gas, inflammable fluids and other harmful materials that are the same as any mate-rials that airplanes are prohibited from transporting.

■ To“dropanyobjectfromUAVs”undercondition(j)includes spraying water or other liquids (e.g., agricul-tural chemicals).

A person who intends to operate a UAV without complying with conditions (e) through (j) must obtain the prior approval of the MLIT. However, conditions (a) through (d), which were introduced in the amendment to the CAA in September 2019, are absolute without exception. The applicant must comply with the specified requirements under the Standards. For example, if an operator intends to operate UAVs BLVOS, then it must show that, among others, (i) the UAVs have a fail-safe function, (ii) it has experience in flights BVLOS, and (iii) it has an assistant to oversee the flight.

(2) Revised Standards requirements for BVLOS without assistants To achieve the third phase of the Roadmap (see Section A),

the Study Group has examined the requirements for oper-ating UAVs BVLOS without assistants, from September 2017 to March 2018. Based on the results, in September 2018, the Standards were revised to add conditions for flights BLVOS without assistants. The conditions are stricter than those for flights BLVOS with assistants, in terms of UAV functions, the operator’s experience and safety measures. For example, the additional require-ments include (a) the flight route being in areas where it is unlikely for a third party to enter (e.g., mountains, sea, rivers, lakes and forests), (b) manufacturers certifying that the functions of the UAVs will not harm third parties, (c) ability of operators to determine, through the use of the UAV’s cameras or ground cameras, whether third parties can enter areas directly below the UAV flight routes or surrounding areas, and (d) ability of operators to confirm, through the use of the UAV’s cameras or ground cameras, the status of airplanes which may fly into the UAV flight route. However, there are alternative options for require-ments (b) to (d). For example, requirement (b) does not have to be satisfied if the UAV operator controls, by prohibiting or restricting entry by third parties, the area over which an UAV in flight may fall as calculated by UAV manufacturers.

(3) Guidelines for cargo delivery On September 18, 2018, the sub-group of the Study Group

published the guidelines regarding the delivery of cargoes by UAVs (the “Guidelines”); these guidelines are not legally binding. The Guidelines stipulated (a) obligations

airspaces above airports and their vicinity (which differ for each airport), and (ii) airspaces which are 150 metres above ground or the water surface level; and

(b) airspaces which are above a “densely populated area”, which is defined as a densely inhabited district ( jinko shuchu chiku) (“DID”) designated based on the results of the national census. A DID is, in principle, an area with a population density of 5,000 people or more per square kilometre. An example of a DID is most of the Tokyo Metropolitan area.

The foregoing airspaces can be summarised in Figure 1 (please see end of chapter).

Any person who intends to fly a UAV in a prohibited airspace must obtain the prior permission of the MLIT. An application for permission must provide certain information required by, and meeting specific requirements of, the Standards, including (i) the applicant’s name and address, (ii) information identifying the UAVs to be flown (e.g., manufacturers, and the name and weight of the UAVs) except for UAVs that MLIT has identified on its website (e.g., the Phantom series manufactured by DJI), (iii) the purpose, date and time, route and altitude of the flights, (iv) the reason for flying in the prohibited airspace, (v) the func-tions and performance data of the UAVs, (vi) flight records and ability of the operator, and (vii) the manual for safe flights. Examples of specific requirements include, in the case of item (vi), the operator having at least 10 hours’ experience of flying the same kind of UAV covered by the application.3. Operational conditions(1) General Under the CAA, UAV operators must:

(a) not operate UAVs while under the influence of alcohol or medication, including illegal drugs;

(b) confirm that all necessary preparations have been completed, including confirming the externals (e.g., batteries, propellers and cameras being firmly installed onto the drones) and functions of UAVs, weather, and other flight conditions prior to operation;

(c) operate UAVs in a manner that prevents any collisions with aircraft or other UAVs;

(d) not operate UAVs in a manner that causes any issues with third parties, including by making unnecessary noise or causing UAVs to nosedive;

(e) operate UAVs only in the daytime;(f ) operate UAVs within visual line of sight of the

operator;(g) maintain a certain operating distance (30 metres)

between UAVs and persons or properties on the ground or water surface;

(h) not operate UAVs over event sites where many people gather;

(i) nottransporthazardousmaterialsspecifiedintherele-vant ordinance by UAVs; and

(j) not drop any object from UAVs except for the goods specified in the relevant ordinance.

For purposes of the foregoing conditions:■ “Daytime”undercondition(e)meansfromsunriseto

sunset, as announced by the National Astronomical Observatory of Japan, which differs depending on the area and time of year.

■ “Visual lineofsight”undercondition(f )meansthatthe operator is able to oversee by naked eye, but does not include overseeing through binoculars.

■ “Persons”undercondition(g)donotincludepersonswho are, directly or indirectly, related to the UAV oper-ator (the “Related Persons”), and “properties” do not include properties controlled by Related Persons,

30 Regulations on Drone Flights in Japan


operator (i) is an administrator of the facilities or has obtained the consent of the facility administrator, (ii) owns the land or has obtained the consent of the owner of the land, or (iii) flies the UAV to perform services for the State or local governments, and submits a notification to the Public Safety Commission through the Police Station with jurisdiction over the facilities, 48 hours prior to the flight. Any person who violates this law may be subject to imprisonment for up to one year or a fine of up to JPY 500,000.

D. Civil CodeThe handling of land ownership is material to the further devel-opment of flights of UAVs. Under the Civil Code, land owner-ship extends above and below the land and allows owners to exclude third parties to that extent. Any person who violates land ownership may be subject to tort action under the Civil Code, and the owner may seek damages against that person. In addition, the owner may seek an injunction to prevent that person from violating the owner’s rights of ownership.

While there are no provisions which set the limits as to how far ownership extends over or under the land surface, it is gener-ally interpreted that ownership extends to the extent that the owner’s interests exist. For instance, for flights of airplanes, it is generally considered that they would not constitute a viola-tion of land ownership because airplanes fly considerably higher up and thus, it is beyond the altitude where the owner’s interests exist. However, UAVs usually fly lower than airplanes. In fact, a permission is required if UAVs fly in airspaces within 150 metres of the ground or water surface level (see Section B.2). Further, to develop logistics services by UAVs in city areas during the fourth phase of the Roadmap (see Section A), it would almost always be necessary to fly closer to the ground surface. In this regard, governmental bodies have not been proactive in discussing possible rules or guidelines to deal with the relation-ship between land ownership and UAV flights, and there are no rules at the moment. While it would be difficult to set a clear line as to how UAVs should fly over private land without violating the rights of owners, it is necessary to provide certain comfort to business operators of UAVs.

E. Radio Wave ActUAVs are operated by telecommunications, using radio frequen-cies between a device on the UAV and the controller in the hands of an operator. Under the Radio Wave Act, an elec-tric facility which transmits and receives radio frequencies and its operator are collectively defined as a Radio Station (musen-kyoku). Establishing a Radio Station generally requires a licence, except for a Radio Station which transmits a very weak radio wave or is specifically excluded by the Radio Act and its ordi-nance. UAVs which are commercially available to consumers are generally equipped with a device that does not require a licence to operate. However, the device which uses a system for trans-mitting data from UAVs (musen-idotai-tsushin system), which was introduced on August 31, 2016, so that UAVs can transmit large-volume data, requires a licence for establishing a Radio Station. Further, the operator of a Radio Station must have the qualifi-cations designated under the Radio Wave Act and its ordinance.

When the said system was introduced, a trial licence to use the device on UAVs in the same manner as a mobile phone was put in place. Under this trial licence, a device on UAVs can transmit data directly to Radio Stations which are base stations for communications through mobile phones. This means that UAVs may transmit large volumes of data without passing through a controller, while flying over large areas covered by multiple base

which business operators are strongly expected to comply with at the minimum, and (b) obligations which busi-ness operators are encouraged to voluntarily comply with. Minimum obligations include not overloading UAVs with cargoes and taking insurance to cover damages caused by falling UAVs and cargoes. Voluntary obligations include properly packing the cargoes on the assumption that they will fall off the UAVs, and verifying the proper loading of the cargoes on the UAVs (for example, by using a sensor with a simple structure).

4. PenaltyA person who violates CAA regulations may be subject to a fine of up to JPY 500,000. A person who operates UAVs under the influence of alcohol or medication above public areas (e.g., roads, parks, public squares and stations) may be subject to imprison-ment for up to one year or a fine of up to JPY 300,000. Further, as of the CAA amendment in 2019, the MLIT may enforce the CAA by requesting any party who operates, designs, manufac-tures, maintains or alters UAVs to report such operation, design, manufacture, maintenance or alteration.5. Supplemental provisionWhen the CAA was amended to introduce the regulations on UAVs, it also stipulated a supplemental provision that the State will examine possible actions to make further contributions to the safe flights of UAVs and to serve the sound development of businesses using UAVs, based on the progress of technolo-gies relating to UAVs, the diversification of the use of UAVs and other circumstances, and the State will take necessary measures based on the results of that examination. The CAA and the Standards are amended or revised to be up to date, and there-fore the Standards are expected to be further amended around November 2019. According to the proposed amendment, if UAVs function sufficiently to be operated and the operator is creditworthy enough, and the manufacturer considers the oper-ator to have sufficient experience by taking into account such functionality and creditworthiness in terms of the associated flight risks, such operators may operate UAVs even if they do not have at least 10 hours of experience. This proposal is based on the Cabinet’s deregulation plan determined on June 21, 2019 which aims, among other things, to promote the operation of UAVs in agricultural business.

C. Act Prohibiting UAV Flights Over the Houses of Parliament, the Prime Minister’s Official Residence, Other Important Buildings and Nuclear FacilitiesThis law was enacted on March 17, 2016 and took effect on April 7, 2016, just before the G7 Foreign Ministers’ Meeting in Hiroshima, Japan. It prohibits flights of UAVs over impor-tant facilities, including the Houses of Parliament, the Prime Minister’s Official Residence, buildings of the government Ministries, the Supreme Court, the Imperial Palace, and nuclear plants, and areas within approximately 300 metres of these facil-ities. The purpose of the law is to prevent danger in the facil-ities and to secure the central affairs of the State, maintenance of good international relationships and public safety. Thus, it differs from the purpose of the CAA, which is to secure the safety of aviation. In 2019, this law was amended to prohibit the operation of UAVs over important facilities designated by the Ministry of Defense.

The definition of UAVs under this law is basically the same as under the CAA. However, this law prohibits the flights of UAVs weighing less than 200 grams. Under this law, UAV flights over important facilities and surrounding areas are allowed only if the



made by car. On October 26, 2018, the first approval for BVLOS without assistance under the revised Standards was obtained for the Fukushima trial runs. The five-location study has been completed and the MLIT published its interim report based on the results of the trials in June 2019. The report compiles the issues (e.g., cost-effectiveness of delivery by UAV) to realise and promote logistics services in rural areas and proposes possible tasks to address them. The realisation of a few commercial services to make deliveries by UAV is projected for the end of fiscal year 2019 (that is, March 31, 2020).

Further, according to the Roadmap, the government plans to examine and compile the issues in developing the third phase and reaching the fourth phase in or after the 2022 fiscal year, not only for logistics services but also for other services such as rescue work during emergencies (e.g., earthquakes), inspections of infra-structure, surveying, and agricultural business services. These issues include the UAV registration system, licensing require-ments for operators (e.g., an operator certification system), a universal traffic management system (UTMS), addressing inju-ries to persons or property (e.g., insurance), the relationship between land ownership and UAV operation, privacy protection, and cybersecurity. The progress of technology and regulatory amendments are anticipated to promote the commercial use of UAVs, which will to a certain extent resolve the labour shortage resulting from Japan’s declining population.

stations. The Ministry of Internal Affairs and Communications, which is the key regulator of the Radio Wave Act, is examining the technical requirements for providing full, non-trial licences for such device-equipped UAVs. A proposal for such require-ments is expected to be disclosed in December 2019.

F. Local Regulations ( jyourei)Local governments such as the Tokyo Metropolitan Government and other prefectures have the authority to establish regulations ( jyourei) covering areas governed by them to the extent that they do not conflict with national laws. For instance, many local governments have regulations for the use of public gardens. Most of them prohibit and penalise acts that impede the manage-ment of public gardens. For example, under the Regulations for Gardens of the Tokyo Metropolitan Government, a person cannot make an act that hampers the management of gardens without the permission of the Governor, under the threat of a penalty of up to JPY 50,000.

G. On the HorizonSince 2018, trials for achieving logistics services in rural areas were conducted at five locations. For example, Japan Post Co., Ltd. and Autonomous Control Systems Laboratory Ltd. imple-mented trial service runs to deliver mail by UAV between post offices in Fukushima Prefecture, where deliveries are usually

32

Aviation Law 2020

Regulations on Drone Flights in Japan

Hiromi Hayashi is a partner at Mori Hamada & Matsumoto, which she joined in 2001. Her areas of practice are international and domestic transactions, corporate restructuring and regulatory matters, including regulations on the telecommunications industry and radio frequen-cies. Hiromi has been a member of the firm’s Robotics Group since 2015, and is a member of the Logistics Subcommittee of the Study Group on the Flying of Unmanned Aircraft (Drones) Beyond Visual Line of Sight and Over Third Parties established jointly by the Ministry of Land, Infrastructure, Transport and Tourism and the Ministry of Economy, Trade and Industry (2017). Hiromi was admitted to the Bar in 2001 in Japan, and in 2007 in New York. She worked at Mizuho Corporate Bank from 1989 to 1994, and at Davis Polk & Wardwell in New York from 2006 to 2007.

Mori Hamada & MatsumotoMarunouchi Park Building2-6-1 MarunouchiChiyoda-kuTokyo 100-8222Japan

Tel: +81 3 5220 1811Email: [email protected]: www.mhmjapan.com

Koji Toshima is a partner at Mori Hamada & Matsumoto, which he joined in 2000.While he has focused on corporate and securities transactions, including M&A and venture investment, he has led the Robotics Practice Group in the firm since 2015, focusing on new technologies such as drones, autonomous cars, and data protection.Koji was admitted to the Bar in 2000 in Japan, and in 2006 in New York. He worked at Sullivan & Cromwell in New York from 2005 to 2006, and at the Tokyo Stock Exchange from 2006 to 2007.

Mori Hamada & Matsumoto Marunouchi Park Building2-6-1 MarunouchiChiyoda-kuTokyo 100-8222 Japan

Tel: +81 3 5223 7789 Email: [email protected]: www.mhmjapan.com

Mori Hamada & Matsumoto is a full-service international law firm based in Tokyo, with offices in Fukuoka, Nagoya, Osaka, Beijing, Shanghai, Singapore, Yangon, Bangkok and Ho Chi Minh, and a Jakarta desk. The firm has over 450 attorneys and a support staff of approximately 450, including legal assistants, translators and secretaries. It is one of the largest law firms in Japan and is particularly well-known in the areas of mergers and acquisitions, finance, litigation, insolvency, telecommunica-tions, broadcasting and intellectual property, as well as domestic litigation, bankruptcy, restructuring and multi-jurisdictional litigation and arbitra-tion. The firm regularly advises on some of the largest and most promi-nent cross-border transactions, representing both Japanese and foreign

clients. In particular, the firm has extensive practice in, exposure to and expertise on telecommunications, broadcasting, the Internet, information technology and related areas, and provides legal advice and other legal services regarding the corporate, regulatory, financing and transactional requirements of clients in these areas.

www.mhmjapan.com


Aviation Law 2020

Chapter 7 33

WALA: 12 Years of Growth in the Airport Sector

Worldwide Airports Lawyers Association (WALA) Michael Siebold

Alan D. Meneghetti


■ 2017Bologna,Italy,hostedbyAeroportodiBologna.■ 2018 London, United Kingdom, hosted by London

GatwickAirport.■ 2019Bogotá,Colombia,hostedbyElDorado–OPAIN

Airport.

WALA and the IndustryWALABoardMembersandindustrydelegatesgatherregularly–generallyonceayearattheAGMandannualconference,thisbeing themain event inWALA’s calendar. Some1,500dele-gates,representingmorethan425differentorganisationsfrommore than 75 countries across five continents, have alreadyattendedWALAconferences,andthisnumberissettogrowinthecomingyearsasWALAformalisesitsstructureandmember-ship.Nowincorporatedasanot-for-profitcorporation,basedinMontréal,WALAhascreatedacommunityoflike-mindedindi-viduals,regularlyreachingmorethan5,000industrydelegatesin90countriesthroughitsdatabase.Morethan150topicswithextremerelevancetotheindustry

havebeencoveredbymorethan125high-profilespeakers.Itisfairtosaythatthehighnumberofprofessionalattendees,

combinedwithamultitudeofbusinessandnetworkingoppor-tunities,havemade theWALAconferencecurrently themostimportantairportlaweventintheindustry’scalendar.

WALA 2019The2019WorldwideAirportsLawyersAssociationconferencewashostedbyElDorado–OPAINAirport,Bogotá,Colombia,from9–11October2019,andfollowed2018’ssuccessfulconfer-enceinLondon.Afullhouseofover120delegatesfromaroundtheworldattended,madeupofboth in-houseairport lawyersand consultants and lawyers in private practice, as well as leading academicsinthearea.Someofthetopicsincluded:

■ Celebrating100YearsofAirLaw.■ AirportEconomicRegulation&CompetitionLaw.■ AirportLawyersandtheChangingAirportBusinessand

LegalEnvironment.■ Airport and Air Navigation Service Provider (ANSP)

Liability.■ CivilAviationLawEducationandTraining.■ AirportConcessions.■ AirportBankruptcy.■ AirportTechnologyforLawyers.■ AirportandAirTransport4.0.■ TheAirportLawyer’sRoleinDevelopingAirportBusiness

Markets.

About WALAThe Worldwide Airports Lawyers Association (WALA) wasestablishedinPrague,CzechRepublic,inSeptember2007ataseminarheldatPragueAirport,asaresponsetothegrowingneedtodevelopairportlawasanindependentareaofaviation,trans-portationandlogisticslaw.LawyersofairportoperatorsfrommanycountriesinEurope(Belgium,Croatia,Cyprus,Lithuania,Malta, Poland andRussia) andLatinAmerica (Argentina andUruguay)attendingtheseminarwereall inagreementthatairand aeronautical law in each of their countries was outdatedand ill-equipped to face the new realities of airport services,which require specialised legal knowledge. Consequently, theattendees agreed to create andpromote aworldwideplatformandmeetingforumwhereairportlawyers(aswellasotherinter-estedparties)coulddevelop,shareanddebaterelevantissuesinthe fieldofair law (andparticularly in the law relating to thefunctioningandoperationofairports).2018sawWALA’s10th anniversaryconferenceheldinLondon,organisedbyAbiaxAirandhostedbyLondonGatwick.The XI edition of the WALA conference was held in

Colombia and attended by more than 120 delegates from 28differentcountries.Theagendagathered24high-levelspeakers,includingthehostcountry’scivilaviationdirector,theCEOofElDorado–OPAINAirportanddistinguishedspeakerssuchas Prof. Brian Havel, the head of Air and Space Law at theMcGillInstitute.Duringthecourseofthetwo-dayconference,10 sessions covered the agenda. The eventwas hostedbyElDorado–OPAINAirport,Bogotá,Colombia.

The ConferencesIn2008,sevenmonthsfollowing that initial seminar, theaimof the foundersbecamea reality. InSpain,at the ‘airport’ofCiudadReal,thefirstWorldwideAirportLawConferencetookplace.Thefollowingannualconferencestookplacein:■ 2009CiudadReal,Spain,hostedbyAeropuertodeCiudad

Real.■ 2010 Lisbon, Portugal, hosted by ANA Aeroportos de

PortugalS.A.■ 2011 Dallas, USA, hosted by Dallas Fort Worth

InternationalAirport.■ 2012Amsterdam,TheNetherlands,hostedbytheSchiphol

Group.■ 2013Montréal,Québec,Canada,hostedbyAéroportsde

Montréal.■ 2014BuenosAires,Argentina,hostedbyAA2000.■ 2015 Athens, Greece, hosted by Athens International

Airport.

34 WALA: 12 Years of Growth in the Airport Sector


3) Designate an entity tooperate asWALA’s executive armtoassistWALA’sBoard in thedevelopmentof theaboveinitiatives.

4) GrowthoftheWALABoard.TheBoardwelcomesElizabethAlbergoniasitslatestmember.

ElizabethhasbeenanactivememberthroughoutandhasbeendeeplyinvolvedinthegrowthofWALA;herjoiningtheBoardwasthenaturalnextstep.AtthesametimeBrianDay,aWALAveterananddearfriend,hassteppeddownfromBoardactivitybutremainsanactiveWALAmember.WesincerelythankBrianforhisgreatleadershipanddeeplyfeltfriendshipthroughout.

AcknowledgmentThe authors would like thank Diego Gonzalez, ElizabethAlbergoniandBrianDayfortheircontributiontothischapter.DiegoisPresidentoftheWorldwideAirportsLawyersAssociation;ElizabethisthenewlyappointedmemberofWALA’sExecutiveBoard,alongsideAlanandMichael;andBrianisaninstrumentalmemberoftheorganisation.SpecialthanksalsogotoGustavoDiCioofAbiaxandhisteamforagainorganisinganexcellentevent.

Since the 2017 conference, WALA’s Board has continuedto lookatways toexpand further the scopeofWALAand itsinvolvementintheindustry.TheBoardhasaclearmandatetocontinue togrowWALAand toexpand theconference in thefuture,andcontinueswith itsworkof formalisingWALAandproviding more facilities and services to members (such as aregularnewsletter,discountedacademiccoursesandsoon).

WALA 2020: Growing WALAInresponsetoincreasingdemand,WALA’sBoardhasinitiatedthefollowingactivitieswhichwillcontinuetobedevelopedin2020. WALA’saim is, inshort, tobecomemore involvedandmore embedded in the airport sector, and it believes that, by implementing themeasures below, itwill go a significantwaytowardsachievingthisaim:1) Introducemembership(withdifferentmembershipcatego-

ries)forindividualsandinstitutionswishingtohaveamoreinteractiveroleinWALA.

2) Provide training seminars based on the extensive andunique expertiseofWALA’smembers, particularly thoseofitsBoard,intwoformats:a. On-siteattherequestofanairportoperator,aviation

authority,orsimilarorganisation.b. Scheduledannualtrainingseminars.

35

Aviation Law 2020

Worldwide Airports Lawyers Association (WALA)

Alan D. Meneghetti is a partner in the Corporate team at Radcliffes LeBrasseur, where he undertakes a full range of privacy, commercial and regulatory work in the general commercial, aviation and manufacturing sectors. His practice ranges from handling regulatory issues to the procurement of suppliers and responses to tenders, to data protection and privacy, information technology, intellectual property, and the drafting and negotiating of various commercial agreements, such as outsourcing, supply, service, and research and development. He has worked extensively on matters in Africa, the Americas, Europe and the United Kingdom.Alan is a regular contributor to publications and speaker at conferences in these sectors, and his articles and book reviews have been widely published.

Radcliffes LeBrasseur85 Fleet StreetLondonEC4Y 1AEUnited Kingdom

Tel: +44 207 227 6704Email: [email protected]: www.rlb-law.com

Michael Siebold is Vice Chair and Executive Board Member of the Worldwide Airports Lawyers Association (WALA). His practice has always been set on an international footing. Michael earned his primary civil law degree in Germany and his secondary common law degree in Canada. He is the founding partner of Arnecke Sibeth Dabelstein (www.asd-law.com) – a leading German law firm with more than 150 fee earners in six offices across Germany – today its Senior Partner.Michael’s practice is mostly in the infrastructure area, in particular logistics, aviation/airports and the sports industry, and legal project management and financing.Michael is active in the German-Canadian community, presently acting as President of DKG Deutsch-Kanadische Gesellschaft, founder and director of the Event and Venue Management Institute (EVMI), a member of the Board and former Chair of INTERLAW, chairman of the standing arbitration Board of the LSBH, as well as being a member of the Board of several charitable trusts and organisations.

ARNECKE SIBETH DABELSTEINHamburger Allee 4 (WestendGate)60486 Frankfurt am MainGermany

Tel: +49 69 9798 85 – 0Email: [email protected]: www.arneckesibeth.com

The Worldwide Airports Lawyers Association is a non-profit partnership with the goal of promoting cooperation among airport legal affairs depart-ments and legal advisors for airports worldwide, as well as other public and private sectors related to the aeronautical industry.Worldwide Airports Lawyers Association2800 Park Place666 Burrard StreetVancouver, BCCanada

www.wala.aerowww.abiaxair.com/wala


Aviation Law 2020

Chapter 836

Argentina

Freidenberg, Freidenberg & Lifsic Juan Manuel Llobera Bevilaqua

Elizabeth Mireya Freidenberg

Argentina


■ ANACResolutionNo.180/2019,whichcreates the rulesforscheduleapprovalsforbothRegularandNon-RegularoperatorsinArgentina.

■ LawNo.26.102(AirportSecurityLaw),whichcreatedthePolicia de Seguridad Aeroportuaria(“PSA”–AirportSecurityPolice)andthebasisforArgentina’sairportsecurity.

■ ANACResolutionNo.180/19.InArgentina,laws,executivedecrees,regulationsandresolu-

tionsareconstantlyissued.Further, Argentina has ratified multilateral conventions

on aviation including, but not limited to, the 1929 WarsawConvention, the 1933 and 1952 Rome Convention, the 1944Chicago Convention, the 1948 Geneva Convention, the 1963Tokyo Convention, the 1970 Hague Convention, the 1999Montreal Convention, the Cape Town Convention and theProtocoltotheConventiononInternationalInterestsinMobileEquipmentonMattersSpecifictoAircraftEquipment.TheregulatorybodiesforaviationinArgentinaareasfollows:

■ ANACistheauthorityinchargeofregulatingandsuper-visingArgentinecivilaviation,instructingandintegratingtheaeronauticalcommunity.Furthermore,ANACguaran-teessecurityandexcellenceintheintegraldevelopmentofArgentineaviation.

■ TheMinistryofTransportationisresponsiblefordesigningand implementing policies for the development of trans-portation across the country, and for controlling regula-tions and transportation concessions. The Ministry ofTransportation has the following duties: elaborating andcarrying out the national policy on air transport; dealing with matters related to international air transport; and over-seeingairfleetregulations(LawNo.22,520asamendedbyExecutiveDecreeNo.13/2015).

■ The Accident Investigation Board (Annex 13 to theChicago Convention) is a financially self-sufficient bodyhaving its own legal status within the scope of the Ministry of Transportation, which determines the causes of acci-dents and incidents occurring in the field of civil aviation and recommends effective actions to prevent their recur-rence.Pleaseseeourresponsetoquestion1.9below.OncetheNationalSafetyBoard,createdbyLawNo.27,514, isimplemented, it will replace the Accident InvestigationBoard.

1.2 What are the steps which air carriers need to take in order to obtain an operating licence?

The requirements for obtaining a licence to operate domestic commercialairservicesare:anapplicationcontainingtheappli-cant’sname(whetheranindividualoracorporation);thetype

1 General

1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/or regulate aviation in your jurisdiction.

Argentina’s core aeronautical legislation is the ArgentineAeronautical Code (“AAC”) approved by Law No. 17,285, asamendedbyLawNo.22.390,andregulatedbyExecutiveDecreeNo.326/82. TheAACgoverns civil andcommercial aviationactivities, infrastructure, aircraft, personnel, liability and insur-ance,amongotherissues.Other relevant regulations which apply to aviation are as

follows:■ LawNo. 19,030, as amended by LawNo. 19,534 on the

NationalPolicyonCommercialAirTransportation.■ ExecutiveDecreeNo.2145/73ontheprovisionofground

servicestoaircraft,asamendedbyExecutiveDecreeNo.49/19andResolutionNo.24/19.

■ Executive Decree No. 1364/90 on Commercial AirTransportation, regulated by Air Force Resolution No.444/94.

■ The Argentine Civil Aviation Regulations (“RAAC”),which also regulate the technical aspects of air transport in Argentina(ANACResolutionNo.3/2005).Theseregula-tions are currently being amended to coordinate technical matterswithLatinAmericancountries.

■ LawNo.26,102onAirportSecurity.■ ExecutiveDecreeNo.239/07,whichcreatedtheNational

CivilAviationAgency(“ANAC”)(asamendedbyExecutiveDecreeNo.1770/07).

■ Executive Decree No. 52/94 (as amended by ExecutiveDecreeNo.1012/06)providingclarificationonarticle99.4oftheAAC.

■ ExecutiveDecreeNo.1492/92(asamendedbyExecutiveDecrees No. 2186/92 and 192/01), which regulates aircargotransportation.

■ Executive Decree No. 1770/07 (as amended by ANACResolutionNo.349/15),whichestablishedANAC’sfunc-tions,scopeofactionandorganisationalstructure.

■ Executive Decree No. 1470/97, which rules charteroperations.

■ ExecutiveDecreeNo.375/97,whichcreatedtheNationalAirport System (Organismo Regulador del Sistema Nacional de Aeropuertos–“ORSNA”)andExecutiveDecreeNo.197/00thatestablishesitsorganisation.

■ ResolutionNo. 1532/98 from theMinistry ofEconomy,Works and Public Services, which governs the generalconditionsforthecontractofcarriage.

37Freidenberg, Freidenberg & Lifsic


1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, restrictions and taxes which apply to international but not domestic carriers.

Asperarticle97oftheAAC,onlyArgentinecarrierswithanAirOperator’sCertificateissuedbytheAviationAuthorityareenti-tledtoperformdomesticoperations.Article 99 states that, for a company to be considered

Argentine,itslegaladdressaswellastheaddressesofitsmajorityshareholdersmustbeinArgentina.Themajorityshareholders–thosecontrollingatleast51%ofthevotingshares–mustalsobeArgentine.In accordance with Executive Decree No. 52/94 (as rein-

stated by Executive Decree No. 1012/06), Argentine compa-nieswithforeignshareholdersareconsideredtobe“Argentine”andmustcomplywiththenetmajorityoftheshareholdersbeingArgentine.

1.7 Are airports state or privately owned?

Article25Chapter1TitleIIIoftheAACstatesthataerodromesareeitherpublicorprivate.Publicairportsarethoseestablishedforthepublic’suse;therestareprivate.Theownerofthelandwhere the airport is built does not qualify the airport as public orprivate.Article26oftheACCsetsforththatpublicairportsareclassi-

fiedassuchbasedontrafficintensity.Internationalairportsarethosethatprovidecustoms,immigrationandsanitaryservices.Further,ExecutiveDecreeNo.92/1970classifiesaerodromes

and the need to get a certification by the Government to operate accordingtotherulesofAnnex14totheChicagoConvention.By Executive Decree No. 375/97, the Government of

Argentinacalledforbidstoprivatise33airportsoftheNationalAirport System that were then administered and operated bytheState (ArgentineAirForce). AeropuertosArgentina2000wonthebid.

Furthermore, the requirements and procedures for the licensing of an airfield are established in Regulations No.95/2005and1/2008,issuedbytheAviationAuthority.

1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction?

The airports require airlines to sign lease agreements for the spacetheyneedtouse.Inordertosignaleaseagreement,theairportdemandsamoneyguarantee.ORSNA,createdbyExecutiveDecreeNo.375/97,isaregu-

latorybodyappointedbytheStatetoapprovefaresandcontrolprivate airports as well as those licensed under concession by theState.

1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place which need to be adhered to?

InArgentina, air accidents are regulated byAnnex 13 to theChicagoConvention,articles185–190oftheAACandExecutiveDecreeNo.934/70,asamended.

of air service (scheduledornon-scheduled,domesticor inter-national, transportationofpassengers,cargoormail);andtheapplicantmustestablishalegaldomicileinBuenosAiresCity.Anyaircarrierinterestedinobtaininganinternationaloper-

atinglicencemustcomplywiththefollowingsteps:a) Theforeigncarriermustobtainadiplomaticdesignation

by the carrier’s flag country, based on the Bilateral AirServices Agreement or Memorandum of Understandingbetweenthecarrier’scountryoforiginandArgentina.

b) The foreign carrier must register with the ArgentineSuperintendenceofCorporationsasanArgentinebranchoftheforeigncorporation.

c) Upon due registration as a branch in Argentina, theforeign carrier must request an authorisation to operate international scheduled or non-scheduled air servicesfrom ANAC and submit: the corporation’s documents;commercial and operative permits obtained in its country of origin; a description of the aircraft it intends to operate in the routes; certificates of registration and airworthiness of the aircraft; and an insurance certificate that covers the carrier’s operations and its liability regarding its passen-gers, cargo and mail, third parties on the ground and crew members.

1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety?

The principal pieces of legislation governing air safety in Argentinaare:SectionsIII,VIII,IX,XIIandXIIIoftheAAC;LawNo.24,051onHazardousWaste;RegulationNo.28/2009establishing the National Safety Operational Programme forCivilAviation2008–2011andrevisedbyRegulationNo.74/10;andANACResolutionNo. 754/2016 creating theCommitteeforPreventionofCivilAviationAccidents.TheauthorityinchargeofadministratingairsafetyisANAC,

byestablishingrulesonsafetyandoncompliancewithchecks.

1.4 Is air safety regulated separately for commercial, cargo and private carriers?

No; air safety is jointly regulated for commercial, cargo andprivatecarriers.

1.5 Are air charters regulated separately for commercial, cargo and private carriers?

Air charters are regulated by National Decree No. 1470/97.Foreign carriers are authorised to perform charter services to Argentinabasedonreciprocity. An interesting fact regardingcharterregulationsinArgentinaisthat,contrarytothegeneralrule, a petition will be considered automatically granted if the AviationAuthoritydoesnotrejectitwithin10days.Thefollowingdocuments are required for requesting the permit: insurance,airworthiness and registration certificates; the contract signed between the tour operator/travel agent and the carrier; and acopyof the travel agent/touroperator authorisation issuedbytheTourismSecretary.Alldocumentsproceedingfromabroadmustcomplywiththe1960HagueApostilleConventionorbeconsularisedbythenearestArgentineconsulate.

38 Argentina


2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks?

ChapterIVof theAAClists thecontracts,mortgages,attach-ments, precautionary measures, privileges, temporary registra-tions, and in general any and all acts relating to the legal status ofaircraft,includingengines.ThisRegisterispublic.

Given that contracts evidencing ownership or a security interest in a single engine are included in the contracts that are registered in the Argentine Aircraft Registry, those contractsestablish the capacity of the lessee or acquirer of an aircraft to install a different engine than the one originally provided with theaircraft.Substitutionofanengineforanotheroneisregis-teredintheRegister;ownersandfinanciersthuskeepthelegalstatus of the engine originally registered until the original one isreplaced.ChapterIVmentionedaboveisregulatedbyExecutiveDecree

No. 4907/73, which establishes the procedures for obtainingaircraft registration certificates and sets forth the formalities to be fulfilled in order to register the various acts or contracts in theRegister.ResolutionNo. 2/2005of the aircraft registry clarifies that

engines may be registered individually, as long as the documents meettherequirementsstipulatedintheresolutioninquestion.In our view, this rule diminishes the risk of owners and finan-ciersregardingthepropertyofanindividualengine.

2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value-added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?

a) InArgentina,thelawonvalue-addedtax(“VAT”)(FederalLaw No. 23.349, as included in Decree No. 280/1997)establishes that the tax applies to aircraft trading onlywhenitinvolvesanaircraftthatisdestinedforprivateuse.

Otherwise,iftheaircraftisdestinedtocommercialtrans-port of passengers or cargo, aircraft trading is exemptfrompayingVAT.

Thisexemptionappliestoalmosteverytypeoftransactionregardingaircraft,asitalsoincludes:leasing;importation;andconstruction.

Likewise, thisexemptionapplies toalmosteverytypeofaircraft,asitgenerallyincludes“everyaircraftdestinedtothetransportofpassengersandcargo”.

Lastly, the exemption does not distinguish whether thepurchaserorsellerisinArgentinaornot.

The exemption is stated in Section 7 g) of Federal LawNo.23.349onVAT(textincludedinNationalDecreeNo.280/1997)andestablishesthat:“Sales,servicesmentionedinSection3c)anddefinitiveimportsthatinvolvemovableproperty included in this section, as well as works and services herein included, shall be exempt from the taxestablished by this law as hereinbelow indicated: (…) g)Aircraftbuiltforthetransportofpassengersand/orcargoanddestinedtosuchactivities(…).”

TheAccident InvestigationBoard is the agency responsiblefor determining the causes of accidents that have occurred in the field of civil aviation, recommending effective actions to preventitsrecurrenceandcarryingoutinvestigations.ByLawNo.27.514, theNationalSafetyBoardwas created,

which will be responsible for determining the causes of avia-tion,maritime,railroadandroadaccidents.TheNationalSafetyBoardwillreplacetheJunta de Investigación de Accidentes de Aviación Civil(“JIAAC”)onceitcommencesitsfunctions.

1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving air operators and/or airports?

Anumberofdomesticcarriershaveenteredthemarketoverthelast twoyears. FollowingpublichearingNo.218, thecurrentadministration ended a period of more than a decade without newdomesticandinternationalcarriersinArgentina.

The Government also obtained a repeal of a number of regu-lations that prohibited selling air tickets below an established amount (minimum fare). This has boosted the birth of newmarketmodels,suchaslow-costcarriers,which,althoughtheyare known in other parts of the world, were completely absent fromtheArgentinemarket.

2 Aircraft Trading, Finance and Leasing

2.1 Does registration of ownership in the aircraft register constitute proof of ownership?

Ownershipofaircraftbylessor–oranyothercompanythatistheowneroftheaircraft–isprovedupondueregistrationoftheleaseagreementintheArgentineAircraftRegister.As per Section 45 1), 2), 6) and 8), and Section 50 of the

AAC,registrationintheAircraftRegistryrendersthecontractenforceabletothirdparties.

2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the operation of this register?

ThereisnoseparateRegisterofAircraftMortgages.AllAircraftMortgagesareregisteredintheAircraftRegistry.The Argentine Aircraft Register is maintained by ANAC,

followingthetransferofallcivilaviationfunctionsfromtheAirForcetotheCivilAuthority.TheresponsibilitiesoftheAircraftRegisteraregovernedby

SectionIVChapterVIoftheAAC,aswellasNationalDecreeNo.4907/73.

2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation?

No.AslongasthecontractisregisteredintheAircraftRegistry– and the aircraft, ifunder the lessee’soperativecontrol– allregulatory requirements regarding aircraft operation should be fulfilledbythelessee.Nevertheless,thelessorshouldbeawareoftherequirements

fordomesticoperations,aspreviouslystatedinquestion1.6.



■ LawNo.14457(ratificationofthe1948GenevaConventionontheInternationalRecognitionofRightsinAircraft).

■ Law No. 27357 (ratification of the Convention onInternational Interests in Mobile Equipment and its ProtocolsignedatCapeTown,SouthAfrica,onNovember2001).

■ LawNo.19865(ratificationoftheViennaConventionontheLawofTreaties).

Argentinahasalsosignedbilateralagreementsonair trans-portserviceswithdifferentcountries:■ LawNo.23339(Germany);■ LawNo.17988(Bolivia);■ LawNo.13920(Brazil);■ LawNo.23453(Canada);■ LawNo.25834(Korea);■ LawNo.25836(theNetherlands);■ LawNo.23970(Denmark);■ LawNo.23426(theUnitedStates);■ Decree-LawNo.35544(Spain);■ Decree-LawNo.431/63(Switzerland);■ LawNo.23558(France);■ LawNo.25805(Russia);■ LawNo.13913(Italy);■ LawNo.25397(Malaysia);■ LawNo.22912(Mexico);■ LawNo.25621(Mexico);■ LawNo.23969(Norway);■ LawNo.23911(NewZealand);■ LawNo.17103(Paraguay);■ LawNo.25833(theUnitedKingdom);■ LawNo.26188(China);■ LawNo.25025(Singapore);■ LawNo.24237(Sweden);■ LawNo.16748(Switzerland);■ LawNo.26450(Panama);■ LawNo.26677(Ecuador);■ LawNo.26954(Qatar);■ LawNo.26956(Turkey);■ LawNo.26957(Indonesia);and■ LawNo.27178(theUnitedArabEmirates).

2.7 How are the Conventions applied in your jurisdiction?

A Convention enters into force after its approval by theArgentineCongress and the deposit of the instrument in thecountryappointedasdepositorybytheConvention.AccordingtotheArgentineConstitution,internationaltrea-

tiessupersedelocallawsandregulations.

2.8 Does your jurisdiction make use of any taxation benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal of aircraft?

Asregards taxationbenefits for the tradingofaircraft, itmustbe first considered whether revenue derived from the transac-tions will be earned by an international transport company or by otherindividuals.

If it is an international transport company, any potential revenue derived from the trading of aircraft is exempt fromArgentine taxes when the owner or lessor is incorporated in:

b) InArgentina,theStampDutyisaProvincialTax,chargedby23ProvincesandtheCityofBuenosAires;eachonehasitsownregulationsandpercentagesforStampDuty.

In general, there are no specific exemptions for aircrafttrading operations, unless a Bilateral Treaty to avoiddoubletaxationprovidessuchanexemption.

Provincial regulations also state that any agreements concludedoutsideArgentinaaresubjecttothetaxifthey“haveeffects”intheprovincialjurisdiction.

In this sense, the Fiscal Code of the City of BuenosAires (Decree No. 59/18, consolidated text), states:“Acts performed abroad: Section 429. In all cases, actsperformed abroad shall be subject to the tax in accord-ance with the provisions of this law while having effects in thejurisdictionoftheCityofBuenosAires.”TheFiscalCodeof theProvinceofBuenosAires (LawNo.10397)includes a similar provision: “Section 255. In all cases,actsperformedabroadshallbesubjecttothetaxinaccord-ance with the requirements of this Title, while having effectsinthejurisdictionoftheProvince.”

2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)?

Argentina is a signatory state to the main internationalConventions:■ Decree-LawNo.15110/46andLawsNo.13,891and25,622

(ratificationofthe1944ChicagoConvention).■ LawNo.22028,23399and23519(ratificationofthe1977,

1984 and 1980 Montreal amendments to the ChicagoConvention).

■ LawNo.14111(ratificationofthe1929WarsawConvention).■ LawNo.17386(ratificationofthe1955HagueProtocol).■ LawNo.23556(ratificationofthe1975MontrealProtocols

modifyingtheWarsawandHagueConventions).■ Decree-LawNo.12359/57(ratificationofthe1948Geneva

ConventionontheInternationalRecognitionofRightsinAircraft).

■ LawNo.17404(ratificationofthe1952RomeConventiononDamageCausedbyForeignAircrafttoThirdPartiesontheSurface).

■ Decree-Law No. 18730/70 (ratification of the 1963Tokyo Convention onOffences and CertainOther ActsCommittedonBoardAircraft).

■ LawNo.19793(ratificationofthe1970HagueConventionfortheSuppressionofUnlawfulSeizureofAircraft).

■ Law No. 20411 (ratification of the 1971 MontrealConventionfortheSuppressionofUnlawfulActsagainsttheSafetyofCivilAviation).

■ LawNo.23111(ratificationofthe1933RomeConventionfor the Unification of Certain Rules on PrecautionaryArrestofAircraft).

■ LawNo.23915(ratificationofthe1971TokyoProtocolfortheSuppressionofUnlawfulActsofViolenceatAirportsServingInternationalCivilAviation).

■ Law No. 25806 (sub-regional agreement with Bolivia,Brazil, Chile, Paraguay, Peru and Uruguay (FortalezaAgreement) for the exchange of traffic rights on routesoutside the scope of the bilateral air services agreements betweenthosecountries).

■ Law No. 26451 (the Convention for the Unification ofCertainRules for InternationalCarriagebyAir signedatMontrealon28May1999).

40 Argentina


If the lessee does not voluntarily return the aircraft to the lessoruponnon-compliancewiththetermsofthelease/financeagreement, the lessor must request repossession of the aircraft tothecourtsinthejurisdictionstipulatedintheagreement.Ifthe agreed jurisdiction to request repossession of an aircraftis a country other thanArgentina, once the court decision isobtained, the lessor/financier must request the execution oftheforeign-countrydecisiontoanArgentinecourt,whichwillrequest the plaintiff to first comply with certain formalities; for example,thattheforeigndecisionmustbeapostilledundertheRules of the 1960Hague Convention, or consularised by thenearestArgentineConsulateinthejurisdictionofthecourtthathastakenthedecision.The court procedure to enforce a foreign judgment in

Argentina is regulated by the Procedural Code, which statesthattheArgentineStatemustrecogniseaforeignsentenceifthemovable goods involved were located in that foreign country at thebeginningofthecorrespondingtrial(Section517).Insuchcases,theArgentinecourtwillrequirethattheforeignsentencedoes not affect the public order principle and that the defendant isabletoexercisehis/herrights;theArgentinecourtmayalsorequireaguaranteeofcompliancewithitsdecision.Notwithstanding this, both Customs regulations and the

ArgentineAircraftRegisterrequiretheapprovalofthelesseetoallowCustomsandtheAircraftRegistertore-exportanddereg-ister the aircraft so that the lessormay repossess the aircraft.Otherwise,thelessormustfilearequestwithacourttoprovideevidence of a breach of the terms of the agreement by the lessee toobtaintherepossessionoftheaircraft.

3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases are brought?

Section198oftheAACsetsforththatFederalCourts,includingtheSupremeCourtofArgentina,havejurisdictiontohearanddecide in cases relating to air navigation or commercial aviation ingeneralandanyoffencesoccurringtherein.Further,Section199oftheAACestablishesthatanyevents,

actsoroffencestakingplaceinArgentineterritoryoritsjuris-dictionalwatershavetobedecidedbyArgentineFederalcourtsandinthelegalframeworkofArgentinelawsandregulations.Section200establishes the same jurisdictionandapplicabilityoftheArgentinelegalsystemiftheevents,actsoroffenceshavebeencommittedagainstanArgentinelegitimateinterest,eitheroftheArgentineStateorofindividualsdomiciledinArgentinaor on board an Argentine-registered aircraft, even if thoseevents, acts or offences have occurred over foreign territory or intheeventthatthefirstlandingtookplaceinArgentina.Section200of theAAC sets forth thatwhen an event, act

or offence is committed on board a private foreign aircraft, the jurisdiction ofArgentine courts and application ofArgentinelawshallcorrespondifsuchevent,actoroffence:A) violatesArgentinesecurityormilitaryortaxregulations;B) violatesairnavigationregulations;C) jeopardisessafetyorpublicorder,oraffectstheinterestsof

theStateorofpersonsdomiciledinArgentina;orD) thefirstlandingtookplaceinArgentineterritory.Inotherwords,allthecasestowhichtheWarsawConvention

SystemisapplicablearetriedbyFederalCourts.

Belgium; Brazil; China; Colombia; Cuba; Ecuador; Greece;Iran; Israel; Japan; Luxembourg; Malaysia; the Netherlands;Norway;Panama;Paraguay;Peru;Poland;Portugal;Spain; theUnitedKingdom; theUnited States; Uruguay; andVenezuela.This isbecauseArgentinahassignedtreatieswiththosecoun-tries toavoiddouble taxationon international transport trans-actionsand,assuch,thecountryhasrecognisedtheexemptionofArgentinetaxesforrevenuethatmaybeearnedbyaninterna-tional transport company as a result of transactions carried out inArgentina.

If the operation generates revenue for a foreign individual that is notaninternationaltransportcompany,applicationofArgentinetaxes to such revenuewill dependonwhether it is coveredbythe general treaties to avoid double taxation,whichArgentinahas signed with: Australia; Belgium; Bolivia; Brazil; Canada;Chile;Denmark;Finland;France;Germany; Italy;Mexico; theNetherlands;Norway;Russia; Spain; Sweden; Switzerland; theUnitedKingdom;theUnitedStates;andUruguay.LawNo.20.628onIncomeTaxestablishes,initsArticles91

and93.E,thetaxthatthelocaltenant-lesseemustwithholdoverthesumsthatarepaidtotheforeignlessor.Article 91 establishes that any resident must withhold as

IncomeTax 35% of the net benefits paid to a “foreign bene-ficiary”, and Article 93 establishes that, in case of leasing ofmovablepropertytotenantsresidingabroad,40%oftheamountremitted is presumed to be a taxable gain; thatmeans the taxamountabove14%(40×35÷100=14).

3 Litigation and Dispute Resolution

3.1 What rights of detention are available in relation to aircraft and unpaid debts?

Section71oftheAACsetsforththatallaircraftaresubjecttoattachmentexcept forpublicaircraft. Section37of theAACestablishes that public aircraft are those that are at the service of publicauthorities(suchasaircraftusedbypublicauthoritiesformilitary,policeandcustomsactivities).

In order to attach an aircraft, the court order must be regis-tered in the Argentine Aircraft Register and may be imple-mented on the basis of the dates on which the attachment was registered(Section72oftheAAC).Section73oftheAACliststhecasesinwhichtheattachment

producestheimmobilisationoftheaircraft,asfollows:1. whentheattachmentisorderedbyacourtdecision;2. whentheattachmentisbasedonanunpaidloanobtained

to perform the flight even if the aircraft is ready to take off; or

3. whentheattachmentoriginates inanunpaid loanoftheseller of the aircraft for breach of any provisions of the salescontract,orfornon-compliancewithanyinstalmentsofaleasecontractregisteredintheAircraftRegister,withprovisional registration in accordance with Sections 42and43oftheAAC.

3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement?

BasedonthefactthatArgentinaisruledbyContinentalLaw,itdoesnotprovideaself-helpregimeforalessororfinanciertoreacquire possession of an aircraft or enforce any of their rights underthelease/financeagreement.



In respect of civil proceedings, the second review principle applies, whereby every judgment entered by a court can bereviewed by a higher court unless the amount of the sentence is belowisAR$150,000(approximatelyUSD2,700).Inthecaseofadministrativeproceedings,theArgentinelegal

system applies the specific principle that every decision taken by an administrative authority can be reviewed by a judicialtribunal.Itmustbenotedthat,inthecaseofafine,thisreviewissometimesconditionedtoitspriorpayment.

4 Commercial and Regulatory

4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors?

Although there is no specific reference to joint ventures intheArgentine aeronautical legislation,weunderstand that thefollowingsectionisapplicabletothiskindofagreement.Section 110 of theAAC sets forth that any agreements for

the pooling, connection, consolidation or merger of services orbusinesstransactionsmustbesubmittedtotheAeronauticalAuthority for approval. If the Aeronautical Authority doesnotobject to theagreementswithin90days, theagreement isconsideredapproved.Code share agreements were afterwards included in this

sectionbymeansofExecutiveDecreeNo.1401/98.Inotherwords,ifajointventureagreementissignedbetween

airlines, it is our understanding that the petition for approval mustbefiledwithANAC.IfANACconsiders that the file shouldbe reviewedby the

FairTradingAuthority (Agencia de Defensa de la Competencia ), itwillsubmitittothisagencyforreview.

4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions?

The authority that determines the “relevant market” for thepurposesofmergersandacquisitionsistheNationalAntitrustCommission.MergersandacquisitionsmustbenotifiedtothisCommission.LawNo.25,156introducesapreventivecontrolthat aims at avoiding the abnormal operation of the market.A commercial operation is considered to be detrimental tothegeneralpublicwhenabiddergains controlof themarket.LawNo.25,156aimstopreventtheirreversibleeffectsthataneconomic concentration of corporations might have on compe-tition,andtheresultsthatsuchaconcentrationmightproduce.

4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies?

Yes, Argentine laws and regulations provide for a system bywhichtheFairTradingAuthoritycanissueapermissiontotheparties for making certain agreements that can have harmful effectsoncommercialcompetence(Section29,LawNo.27442).Asregardsmergers,thesystemprovidesformandatorynoti-

fication to the Fair Trading Authority when the whole busi-ness volume of the companies involved is higher than AR$2,000,000,000 (at the current rateof exchange, approximatelyUSD35,571,365.05);thentheauthoritymustdecidewhetherornot the merger will have harmful effects on commercial compe-tence(Sections9and14,LawNo.27442).

3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

The service of documents relating to court proceedings is regu-lated by the Federal Procedural Code in each province. Thegeneral regime is that the parties to a trial must establish a legal domicilefortheserviceofprocesswithintheareaof jurisdic-tionofthecourt(Section40),regardlessofthe“real”domicileofthecompany/individual.Forthatreason,theserviceofdocu-ments is effected in the legal domicile where lawyers are domi-ciled.Nevertheless,itshouldbenotedthatthegeneralruleisthat court orders are considered to be served on certain days (TuesdayandFriday),andtheserviceofdocumentstothelegaldomicile is only effected in cases which the law considers rele-vant(Article133).

In addition, it must be said that in the last few years the Supreme Court has implemented the electronic notificationsystem( JudicialDecreeNo.38/2013)thatnowadayshaspartlyreplaced the service of documents to the legal domicile regis-teredwiththecourtbythelawyersofeachparty.

The preceding considerations apply to both domestic and non-domestic airlines. In fact, as the regulations state thatnon-domestic airlines must establish a local branch of theforeign company as a mandatory requirement to obtain a permit to operate, they also have a valid address in the country for legal purposes.

3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis?

TheremediesavailablefromArgentinecourtsareasfollows:i) Onaninterimbasisandinthecontextofajudicialprocess,

precautionary measures may be applied for in order to prevent further damages. The requirements for theirgrantingby thecourtsare that:1) there isahighproba-bility that the petitioner has reason in his/her claim; 2)there is a high risk of damages if the measures required are nottaken;and3)aguaranteehastobeofferedinthecasethattheclaimiseventuallyrejected.

ii) On a final basis, a legal process must be initiated andobtainajudicialdecisionforthecase.Thetypeofprocessdepends on whether the claims are brought against the Stateorprivatecitizens.

If claims are brought against the State, the processmaybegin with an administrative dispute against the corre-sponding administrative authority and, once it is finished, itmaybesubjecttojudicialrevision.

Iftheclaimisbroughtagainstaprivatecitizen,thelegalprocess is basically a lawsuit against the individual, and it develops before the judicial courts in its entirety. Itmust be noted that, before a lawsuit is commenced, it is mandatory to comply with a previous mediation process according to LawNo. 26.589 that applies in the city ofBuenosAires.SomeoftheprovincesofArgentinahaveasimilarregulation.

3.6 Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise?

TheArgentine legal systemprovides for the right to appeal afirstdecisionandgetarevisionfromajudicialtribunal.

42 Argentina


No.25326and27275.Thesepiecesoflegislationestablishthefollowingitems:■ thetreatmentofpersonaldataisconsideredlegalwhenits

holder has given its consent for such treatment;■ thecreationofdatabasesisdeemedlegalwhenitsholder

hasbeendulyregisteredintheAgencyofAccesstoPublicInformation.Inthissense,aircarriersmustcomplywiththis registration;

■ thepersonaldataissavedinsuchamannerthatitsholdercouldeventuallyexercisetherighttoaccess,rectification,update and suppression; and

■ the persons involved in the treatment of personal datamustcomplywiththedutyofprofessionalsecrecy.

TheAgencyforAccesstoPublicInformationconsidersthatanaircarrierwhichcomplieswiththeGeneralDataProtectionRegulation (“GDPR”) of the European Union ensures thestandardsacceptedbytheArgentinelawsonpersonaldata.

4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the data and are there any applicable sanctions?

LawNo.25326establishestheobligationstobecompliedwithbytheholderofthedatabank.Section9statesthattherespon-sible person or the user of the database must take all neces-sary technical and organisational measures to avoid the loss of personaldata.Additionally,itisforbiddentoregisterpersonaldata in files, registers or data banks that do not satisfy the tech-nicalconditionsofintegrityandsecurity.TheAgencyforAccess toPublicInformation is theagency

responsibleforoverseeingcompliancewithLawNo.25326.As regards penalties, Section 31 establishes that in case of

non-compliance, the aforementioned Agency is able to applydifferent penalties such as warning, suspension or a fine varying from AR$ 1,000 to AR$ 100,000 (USD 18 to USD 1,750).Criminalpenaltiescouldalsobeapplied.

4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature?

Law No. 11723 on Intellectual Property establishes differentaspectsrelatedtotheprotectionofintellectualproperty:■ Thereisnoneedtoregisteracreationbecauseintellectual

propertyisprotectedasofthemomentofitscreation.■ Theuseofworkswithouttheauthor’spermitispunishable

bylawwithimprisonment.In the case of trademark rights, these are acquired through

registrationwiththeIndustrialPropertyOffice. Unregisteredtrademarks are protected exceptionally in cases of bad faith(fromathirdpartywhoknowinglyregisteredorusedsomeoneelse’s trademark). Trademarks are granted for 10 years fromthe registration date and can be indefinite, subject to use.Registrations canbe cancelledon the groundsofnon-use formorethanfiveyears.

4.11 Is there any legislation governing the denial of boarding rights and/or cancelled flights?

Yes. Resolution No. 1532/98 by the Ministry of Economy,Public Works and Services establishes passenger protectionrulesregardingthedenialofboarding,cancellationsanddelays.

4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures?

Argentine laws and regulations classify mergers as follows:1)mergerof companies; 2) transferof thepoolof assetsof acompany;3)acquisitionofsharesoranyothertypeofinterestgranting the right to vote; and 4) any other agreement thatimplies the transfer of the pool of assets or the granting of a decisiveinfluenceofonecompanyoveranother(Section7,LawNo.27442).Pleaseseealsotheresponsetoquestion4.1.

4.5 Please provide details of the procedure, including time frames for clearance and any costs of notifications.

Asregardsmergers,theprocedurethatbeginswiththenoticeto theFairTradingAuthority shouldnot takemore than twomonths.Iftheauthorityfindsthatthemergercanbeharmfultocommercial competence, the parties are summoned to a special hearing to evaluate any measures that could mitigate the nega-tive impact of the merger, in which case the procedure may beextendedbyat leastsixmoremonths(Section14,LawNo.27442).Regarding anticompetitive agreements between companies,

inthesecasestheFairTradingAuthoritystartsaninvestigationwhose length depends on the amount of informative measures takenbytheauthority.Inanycase,theregulationsestablishamaximumofninemonthsfortheauthoritytoendthisinvesti-gation stage and begin the accusatory stage, during which the parties prepare their defence. This stagemight take anotherseven months until the authority delivers its resolution, which mayimposeafine(Sections34to43,LawNo.27442).Pleaseseealsoquestion4.1.

4.6 Are there any sector-specific rules which govern the aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid?

Yes. There are sector-specific rules that govern financialsupport to individual companies by the Government, namely Section138oftheAACandSection6ofLawNo.19030.TherearealsoseveralStateaid regulations that support theaviationsectorinfuelandfare-relatedmatters.

4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these subsidies?

Yes. AccordingtoSection138oftheAACandSection44ofLawNo. 19030, theArgentineGovernment can subsidise airtransport services or determine special fares for routes that are ofgeneralinterestforArgentina.TheArgentineGovernmentwill determine the requirements that should be fulfilled to obtainthesesubsidies.

4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, and what rights do passengers have in respect of their data which is held by airlines and airports?

In Argentina, the comprehensive protection of personal datacontained in files, registries or databases is regulated by Laws



operators. Users base this concept on Law No. 24,240 onConsumerRightsProtection.Furthermore, theNationalConsumerProtectionProcedure

(“COPREC”) is keen to accept claims that should normallybe ruled by Federal Courts. Most consumers find a way ofsubmittingaclaimbeforeConsumerProtectionAgenciesbasedon a breach of the right to receive clear, relevant and simple information.

4.15 What global distribution suppliers (GDSs) operate in your jurisdiction?

OnlyAmadeusandSabreoperateinArgentina.

4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction?

TherearenospecificregulationsinArgentinaapplicabletoGDSownership requirements. Amadeus operates as an Argentinecorporation named Amadeus Argentina SA, and Sabre is anArgentinebranchofSabreInternationalLLC.

4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

There are no specific regulations in relation to vertical integra-tionbetweenairoperatorsandairports.Nonetheless,itmustbenotedthat,inthishypotheticalcase,theFairTradingAuthoritymust request the opinion of ANAC and eventually resort toORSNA,eventhoughitsopinionisnotbinding(Section17ofLawNo.27,442).

4.18 Are there any nationality requirements for entities applying for an Air Operator’s Certificate in your jurisdiction or operators of aircraft generally into and out of your jurisdiction?

Pleaseseequestion1.2.

5 In Future

5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of attention in the next two years or so?

TheAAC,which rules the aviation industry,was issued on 23May1967bymeansofLawNo.17285,andafterwardsamendedby Law No. 22390. In 1982, the Code was implemented byExecutiveDecreeNo.326/82.

In view of the changes that have taken place in the industry, it isclearthatmanymodificationshavetobemade.ItisimportanttomentionthattheCodemaybedescribedasapieceofart,sinceitwasabletocoverthechanges,particularlyasregardsSection2whichestablishesthat, ifamatter isnotruledbytheCode, itshould be solved with regard to the general principles of aviation law or custom and usage in the aviation industry; if the matter still cannot be solved, then similar laws or the general principles of the law should be applied, taking into account the circumstances ofthecase.

Ineffect,Section12ofAppendixIestablishesthatapassengerhas the right to:1)board thenext flight to theoriginaldesti-nation; 2)obtain an endorsementofhis contract; or 3)boardanyotherflightbywayofrerouting.Itisestablishedthatifthepassenger accepts one of these options, on the one hand, the carrier must provide him with all the services until the flight ends(telephonecalls,snacksandbeverages,hotelaccommoda-tion,transportation)and,ontheotherhand,thepassengerwillnotbeentitledtomakefurtherclaimstothecarrier.

The preceding considerations may be summed up in the properdefinitionof“incidentalservices”,whichthementionedResolutiondefinesasfollows:“referstoanyservicerenderedbya carrier on account of unforeseen contingencies or force majeure, which derive in passenger’s rerouting, changes in route orschedule or any other circumstances whose cost must be borne bythecarrier.”

4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights?

AccordingtoArticle24,subparagraph8ofExecutiveDecreeNo.326/82,theauthoritiescanapplyfinestotheinfringingcompany.

4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities?

AccordingtotheAAC,amanagermustbeappointedinallpublicairports, who will be the highest authority regarding airport coordination, directives and internal regime, and who must be electedbytheAeronauticalAuthority.Therequirementstobeanairportwillbeestablishedbyfurtherrules(Section88oftheAAC).TheAeronauticalAuthoritywillestablishtherightsandobligationsoftheairportmanager(Section89oftheAAC).TheauthoritythatcontrolstheArgentineAirportNationalSystemisORSNA.ThisagencyissuedResolutionNo.96thatestablishestheGeneral Rules of theUse andOperation of theNationalAirportSystem(Reglamento General de Uso y Funcionamiento de los Aeropuertos del Sistema Nacional de Aeropuertos ).Broadlyspeaking,theobligationsoftheairportauthoritiesarethefollowing:■ Non-discriminationintheuseoftheairport.■ Environmentalprotection.■ Coordinate the operation of the airport and make it

compatiblewiththesurroundingcommunity.■ Take the necessary measures to adapt the airport for

compliance with the laws applicable to individuals with reducedmobility.

■ Issue,executeandconstantlyupdatetheEmergencyPlan.■ Takethenecessarymeasuresandensurethesafetyofair

operations.■ Complywithinternationalsignageregulationspertaining

totheinformationtousers.■ Takethenecessarymeasuresforthesafetyofindividuals

andpropertyattheairport.■ Providemedicalservices.ConcessionairesofairportssuchasAA2000mustappointa

manager,andtheAirportAuthorityappointsanotherone.

4.14 To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger?

Even when the AAC regulates airports and airfields, usersmay invoke a consumer relationship between users and airport

44 Argentina


Registertoadaptitsrulestothenewenvironment.TheArgentineAircraftRegistryhasbeendesignatedasapointofentry(“PoE”).TheRegistrymay issueanAEPCODEorregisteranIDERA.BothregistrationsareruledbyFORM-ANAC-DRNA-RI-02.Newproposedregulationsregardingairportslotallocationmay

createacompletelynewscenarioforobtainingairportslots.Thiscould change the way foreign carriers schedule their operations inArgentina.ItcouldespeciallyaffectthosecarriersflyingfromIATALevel3Airports.

Nevertheless, the Code should be modernised, along withExecutiveDecreeNo.326/82thatinterpretsit.AgoodnumberofsectionsofDecreeNo.326/82havealreadybeendeleted.Itisnecessarytoconsolidateaviationlawsandregulations.Another matter that must be taken into account is that in

ordertoimplementthe“openskies”inArgentina,it isofpara-mount importance to provide adequate infrastructure, not only with airports but also to install radars and new equipment in the country.ThefactthatArgentinahasratifiedtheCapeTownConvention

anditsProtocolbymeansofLawNo.27357issuedon5May2017andinforcesince1August2018,hasforcedtheArgentineAircraft

45

Aviation Law 2020

Freidenberg, Freidenberg & Lifsic

Elizabeth Mireya Freidenberg (LL.B. 1967; LL.M. 1973) is a Partner at Freidenberg, Freidenberg & Lifsic.Elizabeth gained a Master’s in Aeronautical and Space Law from the Instituto Nacional de Derecho Aeronáutico y Espacial, Argentina. She taught at the Faculty of Law and Social Sciences of the University of Buenos Aires and for 15 years was a professor, obtaining a Master’s degree.She is recognised as an expert: on Air Legislation by the ‘Guide to the World’s Leading Aviation Lawyers’ of the International Finance Law Review, Euromoney Publications PLC; on Aeronautical Law by American Lawyer ; and on Aeronautical Law by the Who’s Who of Aviation Lawyers, Law Business Research Ltd.Elizabeth is a member of the Advisory Board for the Journal of Air Law and Commerce (Southern Methodist University School of Law) and for the International Law Office Aviation Newsletter, Globe Business Publishing Ltd. She is a fellow of the International Academy of Trial Lawyers.She was named by the International Aviation Women’s Association as an Aviation Industry Woman of Excellence, and is a member of its Honorary Board.Languages: English; French; Portuguese; and Italian.

Freidenberg, Freidenberg & Lifsic25 de Mayo 611, 3rd Floor, Office 3Block II (1002ABM)Buenos AiresArgentina

Tel: +54 11 4311 0598 / 4991 / 0481Email: [email protected]: www.freidenberglifsic.com

Juan Manuel Llobera Bevilaqua (LL.B., Universidad de Buenos Aires) is an Aviation and Space Law Specialist (I.N.D.A.E.). He joined Freidenberg, Freidenberg & Lifsic in 2011. Prior to joining Freidenberg, he worked as a legal clerk at the Federal Administrative Court of Appeals. His main areas of practice are aviation, regulatory and corporate law. He is fluent in Spanish, English and Italian.

Freidenberg, Freidenberg & Lifsic25 de Mayo 611, 3rd Floor, Office 3Block II (1002ABM)Buenos AiresArgentina

Tel: +54 11 4311 0598 / 4991 / 0481Email: [email protected]: www.freidenberglifsic.com

Freidenberg, Freidenberg & Lifsic law firm was founded in 1940 by Dr. Lazaro Freidenberg, accountant and lawyer. It started as a law firm specialised in commercial law and real estate. Today, it is heavily involved in providing advice to Argentine and foreign clients in a wider field of the law, commercial transaction, corporations, joint ventures, foreign invest-ments, air law and air policy, among others.

www.freidenberglifsic.com


Aviation Law 2020

Chapter 946

Austria

Benn-Ibler Rechtsanwaelte GmbH Mag. Irena Gogl-Hassanin, LL.M.

Austria



As a member of the EU, most issues in aviation are regulated by or in accordance with the respective EU legislation.

Aircraft, crew, operations and aerodromes that are not within the scope of harmonised EU law are subject to the applicable national laws and regulations (e.g. the Regulation on Civil Aircraft (ZLLV 2010), the Regulation on the Noise Emission of Civil Aircraft (ZLZV 2005), the Regulation on Aviation Personnel (ZLPV 2006) and the Regulation on Aerodromes (ZFV 1972)).


No, there is no difference.


No, they are subject to the same regime.


As a result of the liberalisation of the aviation industry in the European Union, there are basically no more limitations on the operation of Community air carriers operating under an oper-ating licence under EU Regulation No. 1008/2008 on common rules for the operation of air services in the Community. Non-Community air carriers, which are those operating under an operating licence of a non-EU country, face restrictions, in particular with regard to cabotage.


Austria’s airports are mostly privately owned; however, some airports have state participation to a certain degree, e.g. Vienna International Airport, Austria’s main airport, is a listed stock corporation and is currently 40% state-owned (city of Vienna and lower Austria).

1 General


The principal legislation applicable to aviation law is – apart from the harmonised EU legislation – the Austrian Aviation Act and related regulations, providing relevant provisions relating to the aircraft register and aircraft operation.

The competent authority is the Austro Control GmbH and the Ministry of Transport, Innovation and Technology.


The requirements which need to be fulfilled to obtain an oper-ating licence are set out in EU Regulation No. 1008/2008 on common rules for the operation of air services in the Community. Pursuant to Art. 4 of this regulation, the following needs to be fulfilled: ■ theprincipalplaceofbusinessmustbelocatedinaMember

State;■ the carrier must hold a valid Air Operator’s Certificate

issued by a national authority of the same Member State whose competent licensing authority is responsible for granting, refusing, revoking or suspending the operating licence of the Community air carrier;

■ thecarrierhasoneormoreaircraftatitsdisposalthroughownership or a dry lease agreement;

■ thecarrier’smainoccupation is tooperateair services inisolation or combined with any other commercial operation of aircraft or the repair and maintenance of aircraft;

■ its company structure allows the competent licensingauthority to implement the provisions of the respective regulation; and

■ Member States and/or nationals of Member States ownmore than 50% of the carrier and effectively control it, whether directly or indirectly, through one or more inter-mediate undertakings, except as provided for in an agree-ment with a third country to which the Community is a party.

In addition, certain financial needs, insurance requirements and provisions as to good repute need to be complied with.

47Benn-Ibler Rechtsanwaelte GmbH



There are no specific rules particular to a financed aircraft operation.


Engines are considered movable property of their own and do not follow the legal status of the airframe. Title (ownership) to an engine is therefore not annexed when detached from an airframe and then installed on an aircraft owned by another party.

However, regarding security interests, a particularity of Austrian proprietary law called the “dead pledge” principle needs to be considered by financiers of aircraft registered in Austria.

This particular Austrian rule of law provides that security over a movable asset can only be created by physically handing over the asset to the secured party. The secured party may, however, also indirectly possess the aircraft, i.e. instruct a third party (which can also be the operator of the aircraft) to possess the aircraft on behalf of the secured party. If the asset is handed over by the operator (or lessee) to another party not instructed by the secured party to possess the aircraft on their behalf, then the security interest risks being eliminated.


There is no VAT for aircraft bought or imported by airlines. Repairs, chartering, maintenance and the reconstruction of an aircraft, according to section 9 of the Austrian Value Added Tax Act (UStG), are also exempt from VAT.


Austria is a signatory of the Montreal Convention, which is also implemented by EU law and therefore part of the EU acquis, and the Geneva Conventions. However, Austria has not rati-fied the Cape Town Convention, which is therefore not appli-cable in Austria.


The provisions of the ratified conventions are directly applicable.


There are no specific Austrian requirements imposed by airports on carriers. The carrier is required, based on its state of regis-tration, to comply with the air laws applicable by international treaties or European regulations, and will need an allocated time slot for landing and take-off. As in other jurisdictions, carriers will need to pay the applicable airport charges.


The Austrian Accident Investigation Act (Unfalluntersuchungsgesetz – UUG) and EU Regulations No. 56/9 and No. 996/2010 are applicable to air accidents.

Furthermore, in cases of injuries or death of persons, crim-inal proceedings will be initiated by the Federal Criminal Prosecution.


Currently, proceedings before the European Court of Justice (ECJ) are pending regarding the interpretation of the notion of “accident” under Art. 17 of the Montreal Convention. The Austrian Supreme Court was confronted with the question of whether burns caused by spilt coffee on board an aircraft result from an accident under the Montreal Regime and presented this question to the ECJ for a preliminary ruling. The Attorney General stated in his opinion that it does not matter whether the realised risk is specific to air transport, so that any risk that is realised in the air should be considered an “accident”. The deci-sion of the ECJ is still outstanding.



No, the Austrian Aircraft Registry is an operator-based Registry. The owner therefore is not registered in the Registry; however, the owner must be notified to the Austro Control GmbH as the relevant body administering the Registry and certain changes in the Registry will require that ownership and the proper chain of transfer is disclosed to the authority.


No, there is no register for aircraft mortgages and charges. Austria has also not ratified the Cape Town Convention on International Interests in Mobile Equipment, which is therefore also not applicable.

48 Austria



For claims before district courts under EUR 5,000, the parties do not require legal representation; for any other claims, legal representation is mandatory. For the initiation of court proceed-ings in the first instance (or subsequently, in second and/or third instance), one-time court fees, which are calculated on the basis of the value of the claim, need to be paid. There are no differ-ences between domestic and non-domestic airlines.


Before the courts or arbitral tribunals, a claim for performance, damages, injunctive relief or a declaratory motion can be made. In cases where the plaintiff fears an irreversible loss, a prelimi-nary injunction can be filed which, however, may not anticipate the final judgment that is sought.


Any kind of judgment can be appealed. According to section 482 of the Code of Civil Procedure (Zivilprozessordnung–ZPO),the appellate court may only decide on the basis of the content of the proceedings before the court of first instance.

An arbitral award can be contested only if it goes against the ordre public or if the matter decided was a matter which was not arbitrable.



Mergers and joint ventures between competitors, whether it is an airline or a company operating in another industry, are subject to merger control by the Austrian Federal Competition Authority (Bundeswettbewerbsbehörde) if certain thresholds are reached. Consequently, a merger has to be notified to the Austrian Federal Competition Authority if the parties have achieved the following turnover in the last financial year before the merger:■ worldwide,atotalofmorethanEUR300million;■ domestically,atotalofmorethanEUR30million;and■ foratleasttwocompanies,eachmorethanEUR5million

worldwide.Excluded from this provision are mergers where the parties

achieved the following revenue totals in the last financial year before the merger:■ only one of the parties, domestically, more than EUR 5

million; and■ theotherparties involved,worldwide, a total ofnomore

thanEUR30million.Mergers also require notification if:

■ theundertakingsconcernedachievedanaggregateworld-wide turnoverofmore thanEUR300million in the lastbusiness year preceding the transaction;

■ theundertakingsconcernedachievedanaggregatedomesticturnover of more than EUR 15 million in the last business year preceding the transaction;


No, Austria does not make use of such benefits.



Rights of detention subject to Art. 471 of the Austrian Civil Code apply in civil relationships where the retaining party has made expenses with regard to the detained object or was damaged by that object. A connectivity element is required between the object and the reason of the detention. The retaining party may refuse to hand over the object but does not have any right to realise the retained object in order to satisfy its claim.

Amongst entrepreneurs, the commercial detention right pursuanttoArt.369oftheAustrianCommercialCodeapplies,which goes beyond the right of detention under the Austria Civil Code insofar as it does not require connectivity and furthermore entitles the retaining party to realise the retained object in the same way as a lien.


A lessor remains the owner of an aircraft throughout the lease and therefore, as an owner, can at any time repossess the aircraft. A financier, who holds a security interest in the aircraft may also repossess the aircraft, unless the security interest has expired due to breach of the “dead pledge” principle. However, rights of detention (e.g. of suppliers, maintenance companies or airports) might make it harder for the lessor or financier to repossess the aircraft if the lessor/financier does not pay the outstanding debt resulting in the detention of the aircraft.


Austrian civil courts are competent to handle aviation disputes; depending on whether one party of the dispute is a consumer or not, either the pure civil courts or the commercial courts (which are, however, also civil courts, but only handle disputes between entrepreneurs) are competent.

Depending on the value of the claim, either the district court (Bezirksgericht), for claims of a value up to a total amount of EUR 15,000, or the competent regional court (Landesgericht), for claims of a higher value, are competent.

Civil courts do not handle criminal charges; such proceedings are subject to the jurisdiction of the criminal courts.

49Benn-Ibler Rechtsanwaelte GmbH



No, they are not.


The main legislation applicable to the acquisition, retention and use of passenger rights by airlines and airports is: ■ General Data Protection Regulation (EU) 2016/679

(GDPR); ■ theDataProtectionAct(Datenschutz gesetz ); and■ the Passenger Name Record (PNR) Act, by which the

EU Directive on the use of PNR data for the preven-tion, detection, investigation and prosecution of terrorist offences and serious crime was implemented.

Passengers generally have a right to enquire about which data is stored by the data-collecting party. Pursuant to the GDPR, any entity using personal data must provide a data protection declaration outlining which data is used and how it is used and how long it is stored. The declaration must be made publicly available.

Pursuant to the PNR Act, airlines which transport passengers from an EU country to a non-EU country are required to submit extensive passenger data to the newly established Passenger Information Unit at the Ministry of Interior.


The carrier is obliged to inform the passenger of any data loss and may be subject to civil claims by the passenger if the carrier did not comply with data protection or safety regulations appli-cable in the respective case. Any regulation violation by the carrier resulting in a data loss may additionally be sanctioned by the respective data protection authority through fines.


Trademarks and utility models can be registered in a register with the Austrian Patent Office or as a Union trademark orutility model with the European Union Intellectual Property Office(EUIPO).

Any claim for violation of protected IP rights can be either addressed directly to the competent patent office or brought before the competent commercial courts in Austria, depending on the type of relief claimed (deletion of the registered IP right itself, compensation for damages, injunctive relief ).


In Austria, EU Regulation No. 261/2004, establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights,

■ thevalueofthetransactionismorethanEUR200million;and

■ theundertakingtobeacquiredisactivetoalargeextentinthe domestic market.


The relevant market is determined on a case-by-case basis by looking closely at the type of activity of the concerned parties. With regard to commercial airlines, the relevant market is typi-cally determined on the basis of the flight routes, aircraft types and additional services provided.


There is no specific notification system. The parties need to determine whether their merger must be notified or not. However, the parties may enter into pre-notification talks with the Austrian Federal Aviation Authority to determine particu-lars of the matter (in particular, a common understanding of the relevant market).


See the answer to question 4.1.


The Austrian Federal Aviation Authority provides a form on its website that needs to be filled in by the parties and submitted to the authority in four identical hard copies. Additionally, a fee ofEUR3,500mustbepaidtotheauthoritybytransfertotheauthority’s account.

After receipt of the notification, the Austrian Federal Aviation Authority has a fixed time limit of four weeks to clear the merger. If the authority or the Federal Cartel Prosecutor, who receives a copy of the filed merger notification from the Federal Competition Authority, comes to the conclusion that the merger cannot be cleared within the four-week period or if they come to the conclusion that the merger is critical from a competition perspective, they will apply for examination of the merger (Phase II) at the Cartel Court by that time. The Cartel Court will then initiate ordinary proceedings and give both sides a chance to submit their arguments.

Parties therefore typically try to clarify with the Austrian Competition Authority in pre-notification talks or during the four-week examination phase what needs to be done in order to avoid entering Phase II. If Phase II is entered, the time until clearance (if at all) is not foreseeable.


No, there are not.

50 Austria



The main GDSs operating in Austria are: Amadeus, Sabre, and Travelport.


No, there are no specific ownership requirements.


Yes, vertical integration is permitted between air operators and airports. There are no particular conditions that apply thereto.


Yes, please see the answer to question 1.2.

5 In Future


With the intention of increasing Austria’s competitiveness in international aviation and strengthening Austria’s position as an aviation hub for Central Europe, the Austrian Ministry of Transport, Innovation and Technology recently published the so-called “Aviation Road Map 2020”. This overall strategy, devel-oped together with stakeholders in the Austrian aviation industry, offers the aviation industry a comprehensive planning and deci-sion-making structure for the coming years. The main goals for Austria as a centre of air transport, according to this paper, are: ■ Increasing the competitiveness of the Austrian aviation

industry.■ Developingstrongandsustainableinfrastructure.■ Ensuringthataviationisregardedasanintegratedsystem.

applies in case of denied boarding and/or cancelled flights. Under this Regulation, an airline is required to pay compensa-tion in case of denied boarding, cancelled and delayed flights as well as possible on-site support, such as rerouting, accommoda-tion or supply of food and drinks at the airport.

Depending on the distance between the place of departure and the passenger’s final destination (of one booking), the awardable compensation varies from EUR 250 to EUR 600 per passenger.


There are no particular powers of the authorities in relation to late arrival and departure of flights.


Airports require an operating licence under the Austrian Aviation Act and the Civil Airport Regulation (Zivilflugplatz-Verordnung – ZFV 1972).

The Austrian Aviation Act establishes a two-step proce-dure to obtain a licence: in the first step the airport project has to be presented to and approved by the Minster of Transport, Innovation and Technology as the competent authority, whereas in the second step it verifies that the airport was built according to the approval given and then grants an operating licence. This procedure not only applies to the construction of airports but also to the extension or restriction of an airport.

With regard to the provision of ground handling services, either by the airport itself or a third-party ground handling company, the Austrian Ground Handling Act (Flughafen-Bodenabfertigungsgesetz – FBG) provides particular provisions.


There are no particular rules deriving from consumer protec-tion legislation that apply to the relationship between the airport operator and the passenger. Generally, consumer protection laws apply in contractual relationships. Passengers typically have contractual relationships with the air carrier or a travel agency, but not directly with the airport. Therefore, any claims of passengers will typically be brought to the attention of these contracting parties.

51

Aviation Law 2020

Benn-Ibler Rechtsanwaelte GmbH

Mag. Irena Gogl-Hassanin, LL.M. is an attorney at law with Benn-Ibler since 2018 and has been a member of the Austrian Bar since 2009. She is also a lecturer on finance for aviation Master’s students in Graz, Austria. Before joining Benn-Ibler, she gained vast finance and corpo-rate law experience in renowned international business law firms in Vienna, Warsaw and London, specialising in, amongst others, aviation finance.

Benn-Ibler Rechtsanwaelte GmbHTuchlauben 81010 ViennaAustria

Tel: +43 1 531 55 163Email: [email protected]: www.benn-ibler.com

Benn-Ibler was founded in March 2010 by experienced, highly-reputed commercial lawyers. The establishment of the firm was driven by the partners’ determination to provide their clients with direct, personal service of the highest quality. Its lean organisational structure makes it possible to build internal teams for the efficient solution of specific problems as needed. The firm’s fields of practice comprise all areas of commercial law. The comprehensive service we offer our business clients – companies, inves-tors and private persons – ensures reliable, customised solutions. Our clients profit from the high-quality expertise and long-standing experi-ence acquired by our partners over years of cases and transactions in all major areas of corporate law. For special legal issues, Benn-Ibler draws on the case-related experience of seasoned cooperation partners. This

guarantees that our clients receive optimum legal advice in every situation without any waste of time or resources. One of our core competences which we have acquired over the years is our special expertise in aviation finance, regulatory and litigation. Our knowl-edge of the industry allows us to master complex technical and organisa-tional issues relating to legal questions which are assigned to us to resolve.

www.benn-ibler.com


Aviation Law 2020

Chapter 1052

Belgium

Monard Law

Belgium

Tine Bogaerts

Birgitta Van Itterbeek

Willem De Vos


navigation (as amended) (OG 26 July 1937) and its Royal Decree of 15 March 1954 with respect to air navigation (as amended) (OG 26 March 1954).

■ Skeyes(previouslyknownas‘Belgocontrol’) isresponsiblefor air traffic control and civil air navigation services for LuxembourgandBelgium,andwascreatedbytheLawof19December1997,fortherationalisationofBrusselsNationalAirport (OG 30 December 1997).

■ The Belgian Supervising Authority for Air NavigationServicewascreatedinthecontextoftheSingleEuropeanSkybytheRoyalDecreeof14February2006forthecrea-tion of the national supervising authority for air navigation services(OG28February2006).


Regulation(EC)No.1008/2008of24September2008isdirectlyapplicableinBelgium.TheMinisterialDecreeof3August1994(OG 1 October 1994) further sets out the licence requirements for the commercial operation of aircraft.Thelicenceandtheairoperator’scertificate(AOC)areissued

bytheCivilAviationAuthority.Theapplicantsmusthavetheirprincipalplaceofbusinessand,

ifany,theirregisteredofficeinBelgium.ApplicantsmusthaveatleastoneaircraftregisteredinBelgium,

adequate insurance and evidence that the company is and will continue to be owned directly or through a majority shareholding by a company established and controlled by a company or person establishedintheEEA.Theapplicationmustbeaccompaniedbythedocumentsthat

identify the applicant and its shareholding structure and the routes it wishes to operate, together with all the documents required pursuanttoRegulation(EC)No.1008/2008.ExceptforcertainexceptionssetoutintheRoyalDecree,an

operating licence may not be granted if the operator has not previ-ously obtained a certificate affirming that the operator has the ability and resources to ensure the safe operation of the aircraft fortheactivitiessetoutinthecertificate.TheAOCisalsoissuedbytheCivilAviationAuthority.ThefinancialfitnesscriteriaarethoselaiddowninRegulation

(EC)No.1008/2008.

1 General


A distinction should be made between: international conventions and treaties that are directly applicable and their implementation instruments,EUregulationsanddirectives;andBelgianlaw.TheChicagoConventionwasratifiedinBelgiumon30April

1947(BelgianOfficialJournal(OG)2December1948)andwasimplemented by the Royal Decree of 15 March 1954, which has beenamendedseveraltimes.TheLawof30April1947hasbeenfurther implemented by another 25 royal and ministerial decrees. In effect, that law, together with the Law of 27 June 1937 and the Royal Decree of 15 March 1954, are the basic regulations for avia-tionoperationsinBelgium.

At a national level, the basic regulations with respect to tech-nical operations are laid down in the Royal Decree of 9 January 2005 regulating the conditions for technical operations of aircraft belonging to general aviation (OG7February2005) and,withrespect to flight operation licences, as set out in the Royal Decree of 25 October 2013 (OG 16 December 2013) implementing Regulation(EU)No.1178/2011asamendedbyRegulation(EU)No.290/2012. TheMinisterialDecreeof13February1970asamended (see especially Ministerial Decree of 20 October 2003) sets out further technical requirements for the operation of aircraft of 5,700kg or more, as well as organisational requirements for the airline and the maintenance of aircraft (OG 4 April 1970).As a result of Regulation (EC)No. 3922/91, the JAR rules

(subsequently replaced by EU-OPS and then by IR-OPS) alsoapplyinBelgiumandhavebeenfurtherimplementedbytheRoyalDecrees of 25 June 2001 (OG 15 August 2001) and of 9 January 2005(OG7February2005).WiththecreationoftheEuropeanAviationSafetyAgency,manysafetyissuesarenowfurtherregu-latedandharmonisedatEUlevel,namelybyRegulation(EC)No.216/2008of20February2008as replacedbyRegulation (EU)No.2018/1139(OJL212,22August2018).TherearethreeregulatorybodiesinBelgium:

■ GeneralauthoritylieswiththeCivilAviationAuthorityoftheFederalPublicService(FPS)ofMobilityandTransport(BCAA), whichwas created by the Law of 27 June 1937amendingthelawof16November1919withrespecttoair

53Monard Law


TheRoyalDecreedated18August2010regulatesthealloca-tionoftrafficrightstonon-EUcountries.OnlyEUaircarriersestablished inBelgiumare entitled to traffic rights tonon-EUMember States. These airlines must submit a formal appli-cation to theBCAA, togetherwith: a copy of theirAOC andoftheir insurancecertificate;evidencethattheairline isestab-lishedinBelgiuminaccordancewithCommunitylaw;informa-tionon their operational and financial sustainability; informa-tionontheplannedflights;andthepossibleacceptanceoftheapplicant to cover, in exceptional circumstances, any required capacity to fulfil the national or international requirements of Belgium.Theallocationoftrafficrightsandthepossiblelimitson the number of flights will be determined by the terms and conditionsoftheapplicablebilateraltreaty.Anon-Communitycarrier is not allowed to operate regular air transport services unless it has received prior authorisation from the Minister of Transport, either through bilateral agreements or specificauthorisation. Such bilateral treaties or authorisation will setout specific conditions with which the airline has to comply. Moreover, such airline may not be blacklisted as an unsafe airline bytheEuropeanCommission,pursuanttoRegulation(EC)No.2111/2005.AnycarrierthathasatradingactivityinBelgiummustalsobe

registered in the commercial register and obtain a value-added taxnumber.IfsuchaircarrieropensabranchofficeinBelgium,it must also fulfil the formalities for the opening of a branch officeinBelgiumasstipulatedintheBelgianCompanyCode.


A distinction has to be made between the ownership of the airports themselvesandtheexploitationthereof. Theairportsthemselves are state property and belong to the public domain.The infrastructure at Brussels Airport, which is the main

airport in Belgium, is owned by Brussels Airport Company(BAC, previously called BIAC). The exploitation of BrusselsAirport isalsograntedtoBrusselsAirportCompany,which isa private limited company. Although the state still owns 25 per cent of the shares, the other 75 per cent are privately owned.Skeyes manages safety, policing at the airport, air traffic

control and civil air navigation services.Theother airports inBelgiumare:LiègeAirport atBierset,

close to Liège, Brussels South Charleroi Airport in Charleroi,Ostend-Bruges InternationalAirport, andAntwerpAirport inDeurne.The infrastructure at both Ostend-Bruges International

AirportandAntwerpAirportareownedbytheFlemishRegion–respectively,byLOMOostende-BruggeandLOMAntwerpen–butthemanagementofbothairportshasbeengrantedtoLEMOostende-BruggeandLEMAntwerpen,whichareprivatelyheldcompaniescontrolledbyEGISProjects.The infrastructure of LiègeAirport is state-owned, but the

exploitationisgrantedtoLiègeAirportSA,whichis50percentownedbytheLeasingandFinancingCompany,25percentbythe Walloon Region (Walloon Airport Society, established in2001 by Decree of 6 May 1999) and 25 per cent by Paris Airport Management.The infrastructure of Brussels South Charleroi Airport is

owned by theWalloon Region and the exploitation thereof isgranted to Brussels South Charleroi Airport NV (BCSA), ofwhich the largest shareholders are SOWAER, Sambrinvest (aprivateinvestmentvehicleoftheWalloonRegion)andSave(anItalian company).


Please see question 1.1 above.


Theairsafetyregulationsdepend,firstofall,ontheweight.Aircraft above 5,700kg are regulated by the Royal Decree of

9January2005andtheMinisterialDecreeof13February1970as amended from time to time (see above). Aircraft weighing less than 5,700kg are regulated by the Ministerial Decree of 12 September1991(OG8November1991)andultra-lightaircraftare regulated by the Royal Decree of 25 May 1999 (OG 26 August 1999).TheRoyalDecreesof9January2005withrespecttotech-nicaloperations,andRegulation(EU)No.1178/2011asamendedbyRegulation(EU)No.290/2012withrespecttoflightopera-tion licences, make a clear distinction between the different types of aircraft.TheRoyalDecreeof15March1954appliestoallcivilaircraft,

whether they are used for commercial or cargo transport. However, with respect to the licence requirements for commer-cial transport, a distinction is drawn between taxi services and other commercial operations. A taxi service is defined as an aircraft with no more than 10 seats and in respect of which the destination is fixed by the users without any seat going to othercommercialpassengers.Thelicencerequirementsfortaxiservices are less stringent than for other commercial operations. If an aircraft is not used for commercial transport, the licence requirements for commercial operations do not apply.


Regulation(EU)No.1008/2008makesnodistinctionbetweenregularservicesandcharteredservices.TheRoyalDecreeof15March 1954 provides, in article 47, specific licence requirements for charter services, and specifies that non-scheduled flights or a series of non-scheduled flights are subject to the specific author-isationoftheMinister.Non-scheduledairservicesareconsid-ered on a case-by-case basis within the framework of the bilat-eral treaties.


There are no specific taxes other than those applicable to allcompanies.

As to flight and operating restrictions, a distinction has to be madebetween:anEUaircarrier;anyotheraircarriersandflightswithintheEU;andflightstoanon-EUMemberState.Inaccord-ancewitharticle15ofRegulation(EC)No.1008/2008,anyEUair carrier duly licensed by its home country in accordance with theabove-mentionedECRegulationcanfreelyoperateintra-Eu-ropeanroutes. NoMemberStatescansubmittheCommunityaircarriertoanyfurtherformalitiesorconditions. This istheessenceoftheSingleEuropeanSky.

54 Belgium


conduct a proper analysis of the ground-based stations used in Inmarsat’sEuropeanAviationNetwork(EAN)underBelgianorEUlawbeforegrantingittherighttooperate.SintTruidenDroneporthasbeencompleted,with a formal

opening taking place on 21 December 2018. At the Droneport, companies active in the drone industry can open their offices, and there is a dedicated area for drone operations and courses.

A further area of interest is the progress towards the creation ofasingleBelgianairspace,andco-operationbetweencivilianand military operators in airspace management.Belgium has several zones in the air, including a large

numberofzonesreservedforthemilitary,whichoftenpreventcommercial airlines from choosing the most efficient route. Given the increase in air traffic, due to the surge in commer-cial aviation and the emergence of drones, this distribution of airspace should be reorganised. In addition, the division of airspace management between three different players – namely Skeyes, the Belgian army and EUROCONTROL (MaastrichtUpperAreaControlCentre,orMUAC)–isnotefficient.Thisshould hopefully become a thing of the past, due to the crea-tionofasingleairspaceinwhichthedeploymentofzoneswillbedynamic,insteadofthestaticno-gozonesoftoday,whichisconsistentwiththecreationoftheSingleEuropeanSky(SES)on theEuropean level. This should ensure that the availableairspace for commercial aviation is enlarged. To this end,Skeyes,theFPSofMobilityandTransportthroughitsBCAA,thearmyandEurocontrolconsultedeachother.Asaresult,thepartiesdraftedthe‘BelgianAirspaceVision2030’.Thisexpansionofairspacecapacitycallsfor jointair traffic

control. That iswhythemilitary’sair trafficcontrolandthatoftheirciviliancolleaguesfromSkeyesarenowbeingbroughttogetherattheairtrafficcontrolcentreinSteenokkerzeel.Forthe time being, however, each party is still working with its own airtrafficcontrolsystem,pendingthecreationoftheSES.



Rights in remareregulatedbytheBelgianCivilCode.Accordingtoarticle89of theInternationalPrivateLawCode, therightsof aircraft are determined by the law of the country where the aircraft is registered.The Royal Decree of 15 March 1954 provides that the

following aircraft can be registered in the Belgian aviationregister:■ civil aircraft that are fullyownedbynationalsof anEU

Member State or nationals of anEEA countrywho aredomiciledinBelgium;or

■ civil aircraft wholly owned by legal entities incorpo-rated under Belgian law and whose main shareholders,managing shareholders, directors or agents are nationals ofanEUMemberStateoranEEAcountry.

In case of an ownership registration, proof of ownership has tobefiledattheBCAA.Buttheregistrationofanaircraftdoesnot constitute proof of ownership.


Belgium ratified theGenevaConventionon the InternationalRecognition of Rights in Aircraft on 22 October 1993, but


Theoperatinglicenceoftheairportoperatorssetsoutwhichtypeof aircraft may land at the airport and when and how landing fees canbecharged.Thelandingfeesarecalculatedbasedonparam-eters ofweight, noise and the time of landing. Every airportoperator has its own specific rules with respect to the landing fees.There are specific noise restrictions relating to the type of

aircraft,itsweightandthetimeoflanding.Theserestrictionsaredifferent for each airport.Further noise restrictions for aircraft are laid down in the

RoyalDecreeof25September2003 (OG26September2003)setting out operating restrictions at Brussels Airport, and bytheMinisterialDecreeof3May2004(OG11June2004).TheBrusselsRegionhasissuedstrictnoiserestrictionswhichareverymuch debated (Decree of 17 July 1997 as amended by Decree of 19April2018;decisionsof27May1999and19May2016).Seealsotherestrictionsforchapter2aircraftlaiddowninCouncilDirective2006/93/EC. Morerestrictionsarecontained intheRoyalDecreeof16December2005(implementingECDirective2004/36)withrespecttothesafetyofaircraftofthirdcountrieswishingtolandataBelgianairport(OG23January2006).


Pursuant to the Royal Decree of 9 December 1998 (OG 29 December 1998) as amended by Royal Decree of 27 April 2007, an independent unit has been created within the Ministry of Transport, namely the accidents and incidents investigationunit.Theunitisresponsiblefortheindependentinvestigationof any accident or incident and is especially independent from theCivilAviationAuthority,which is responsible for, amongother things, monitoring the airworthiness of aircraft.The accident and incident investigationunitwill, following

any accident or incident, carry out a full investigation and draft a report within 12 months to be available on a database for those responsibleforsafetyinaerospace.Suchreportis,furthermore,communicated to the companies involved, the Civil AviationAuthority,theEuropeanCommissionandtheinternationalcivilaviationorganisations.Theinvestigatorshavefreeaccesstoalldata relating to the aircraft and accident or incident.Followinganaccident,norepaircanbecarriedoutwithout

priorapprovaloftheCivilAviationAuthority,unlesssuchrepairis carried out in accordancewith themanufacturer’smanualsand maintenance programme.Skeyes is also responsible for safety in the air and on the

ground.


TheBrusselsCourtofAppealannulledbyits judgment(dated14 March 2018) a decision by the Belgian telecoms regu-lator allowing UK satellite company Inmarsat to operate itsin-flight high-speed broadband service in the country. TheannulmentdecisionupheldargumentsbyUS-UKcommunica-tionscompanyViasat,whichclaimedthattheBelgianInstitutefor Postal Services andTelecommunications (BIPT) failed to

55Monard Law


commentingonthenewlyadoptedVATpackage,spec.No.125)contains an administrative favour in case the aircraft is actually bought by a company which is not a qualifying airline, provided the sale is realised for the sole purpose of leasing the aircraft to aqualified carrier. This is provided the following conditionsare fulfilled:1. Thesaleagreementhastoreferexplicitlyto:(i)theimme-

diate leasing of the aircraft to an airline operating for reward chiefly on international routes; (ii) the aircraft,modelmakeandregistration;(iii)theVATCertificate;and(iv) the exemption of the sale of the aircraft pursuant to article42§2(1)oftheBelgianVATCode.

2. The seller has to issue an invoice containing the samereferences.

Therearenostampdutiesordocumentarytaxes.


Belgiumisasignatoryto:(i)theGenevaConvention(Lawof6August1993,OG18December1993);(ii)theChicagoConvention(Law of 30 April 1947, OG 2December 1948), theWarschauConvention(Lawof7April1936,OG24September1936);andthe Montreal Convention (Law of 13 May 2003, OG 18 May2004).BelgiumisnotasignatorytotheCapeTownConvention.


AlloftheConventionsareratifiedbylawandhavetobeappliedby court.


Belgiumhasaveryextensivenetworkoftreatiesfortheavoid-ance of double taxation, but has no specific taxation benefits which enhance aircraft trading and leasing.



TherearethreetypesofliensunderBelgianlaw:lienssuchasrepairmen’sliens,statutoryliensorlienswithrespecttosalvageand conservation costs (see Geneva Convention); temporaryseizure;andforcedsale.Temporaryseizuresareregulatedbyarticle1413et seq. of the

JudicialCode and are limitedby theConventionofRomeonPrecautionaryArrest. Theexerciseofthisright isconditionalon there being urgency and a manifest undisputed claim that is certain, due and liquid.Theseizureforforcedsaleisregulatedbyarticle1494et seq. of

theJudicialCodeandbytheGenevaConvention.Aforcedsalerequires an enforceable title (such as a judgment) and a manifest undisputedclaimthatiscertain,dueandliquid.Noself-helpispossibleunderBelgianlaw.

failed, until recently, to implement a law on the recording of securityinterestsonaircraftinapublicregister.TheLawdated11July2013asamendedfromtimetotimeonSecurityInterestson Mobile Goods introduced a national register for all secu-rity interests on mobile goods, including aircraft pledges, which records any security interest created over such mobile good (the PledgeLaw).Itenteredintoforceon1January2018.Thecostof registering a pledge over an aircraft or engine depends on the value thereof, but themaximum isEUR500. The registeredpledgefunctionsasamortgage. Theperfectionofthepledgetowards third parties is achieved through its registration in the national register. The date of registrationwill determine theranking. Theregister isapublic registerandwill relate toallmobile goods and not only aircraft.

A registered aircraft pledge creates a security right in rem over an aircraft, which gives the pledgee rights similar to those of a mortgagee;namelyaright,intheeventofdefaultbythedebtor,to sell or lease the aircraft and a preferential right to the sale and/orleaseproceeds.


In case of unpaid airport charges or flight charges, the airport is permitted to prevent the aircraft from taking off until those charges are paid. Maintenance providers have a retention right with respect to work performed on aircraft or a fleet of aircraft, and such retention right gives the maintenance providers a similar right to that of a pledge, except that no enforcement measures can be taken.


Pursuanttoarticle551oftheBelgianCivilCode,theownerofthe main asset is presumed to be the owner of the ancillary assets or parts. However, in the case that the part which is owned by a third party is united with the main asset but can be separated therefrom, the owner of the main asset can acquire ownership of the part by paying a fair price. In the case that the united asset is worth considerably more following annexation and such annex-ation has taken place without consent of the owner of such part, hecanrequesttheseparationthereof.Furthermore,theownerof the main asset has to act in good faith. It is therefore advis-able for the owner to attach ownership plates to the parts and obtain a recognition of title.


Pursuanttoarticle42§2(1)oftheBelgianVATCode,asupplyofaircraft destined for use by an airline which chiefly operates on internationalroutesforreward,isexemptfromVAT.CircularLetterNo. 6/1983 (referred to in Circular LetterNo. 3/2010

56 Belgium


In the case that the aircraft is owned by the lessor, he can requestofthecourtofseizure,asaninterimmeasure,aposses-soryseizuretogetherwiththeappointmentofasequester.The courts in summary proceedings can order, in case of

urgency, interim measures, such as storage or maintenance of the aircraft or payment of undisputed claims, and even repossession.Suchinterimmeasurescanalsobeaskedofthenormalcourts,

provided they are purely interim measures.2. Final judgmentFirstofall,judgments,unlessotherwisestated,areenforceablenotwithstanding appeal. The creditor in caseof enforcementthen has to pay damages if the debtor wins in appeal.Thecreditorcanthenrequestofthejudgeofseizuresanexec-

utoryseizure,whichneedstobeenforcedbythebailiff.Pledgees of a registered pledge do not need prior court approval

for the enforcement of the registered pledge, but can only take possessionuponjudgmentbythejudgeofseizures,whoisalsocompetent for any appeal against the unilateral enforcement.AnarbitralawardcanonlybeenforcedinBelgiumfollowing

a judgment of the court of first instance.Thecourtoffirst instancehasonlyamarginalappreciation

right, such as incapacity or illegality of the arbitration agreement or clause, in case of breaches of the right to defence, where the actual case does not fall under the arbitration clause or agree-ment, where the arbitration award is not duly motivated, where the award is not yet binding, or where the arbitration tribunal has exceeded its competence.Executoryseizureandrepossessionareonlypossiblefollowing

an enforceable title, such as a judgment or notarial deed.


Any judgment obtained at first instance before the civil, commercial or criminal courts can be appealed against.

Arbitral awards are only subject to appeal in cases where the parties have explicitly agreed upon the possibilities of appeal in their arbitration agreement or clause. An arbitration award can otherwise be nullified before the commercial or civil courts in thelimitedcircumstancessetoutintheJudicialCode.



Joint ventures on the basis of a joint venture company are subjecttoBelgianmergercontroliftheturnoverthresholdsaremet. Joint ventures based solely on a cooperation agreement may be subject to the rules on the prohibition of cartels, which aresimilartoEUantitrustlaw.


The Belgian Competition Authority (BCA) follows the EUapproach,knownasthe‘pointofdepartureandpointofdesti-nation’approach,whichmeansthateverysinglerouteisseenasa separate product market.

Pledgees of a registered pledge can proceed to the sale and enforcement of their title without a prior court decision.

Pursuant to article 37 of the Law of 27 June 1937, aircraft which do not comply with airworthiness standards or in respect of which the charges, fees or other duties are not paid in accord-ance with the applicable regulations, can be prevented from taking off until full compliance therewith or payment thereof, respectively. Nospecificmeasureshavebeen implemented inBelgiumwithrespecttotherightsofEurocontrolpursuanttoAnnex4oftheprotocoltotheEurocontrolConventionof27June 1997.


Self-help is forbidden for lessors, and judicial authorisation isalways necessary for a lessor to take possession of an aircraft orengine.Forfinancierswhoarepledgeespursuanttoaregis-tered pledge, no prior judicial authorisation is required for the enforcement of the pledge, but no possession can be acquired without judicial authorisation.


Belgium makes a distinction between commercial and civilclaims. In the case that the operator is an airline, or the owner of a private jet is a company, the commercial court will be compe-tentforanycommercialdisputesbetweentheparties.Thecrim-inalcourtsareexclusivelycompetentforcriminaloffences.Thejudgeofseizureiscompetentforanyconservatoryorexecutoryseizureoranydisputeswithrespecttoenforcementofsecurityinterests. Administrative proceedings have to be brought before the competent administrative courts.


The service requirements are regulated by: the Judicial Codewithrespect tocivilandcommercialproceedings; thecodeofcriminal procedures for criminal procedures; and, in case ofadministrative law, by the administrative procedural laws.WithintheEU,therulesofservicearefurthermoresetoutin

Regulation(EC)No.1393/2007.


1. Interim basisIn case of urgency and an undisputed claim which is certain, dueand liquid, aconservatory seizurecanbeobtainedbeforethe court of seizure on unilateral request. Togetherwith theconservatoryseizure,thecreditorcanalsoaskfortheappoint-ment of a sequester of the aircraft (subject to the Rome Convention,assetoutinquestion3.1above).Theconservatoryseizurerequiresownershipbythedebtoroftheaircraft.

57Monard Law



EU rules and criteria apply. Airport infrastructure projectsof a certain size do not have to be notified to the EuropeanCommission,sincetheyhavebeenincludedinthegeneralblockexemptionregulation.(RegulationNo.651/2014of17June2014asamendedbyCommissionRegulation(EU)No.2017/1084of14 June 2017 declaring certain categories of aid compatible with the internal market in application of articles 107 and 108 of the Treaty.)


ThepassengerDataProcessingActof25December2016(OG25January2017)transposestheEUPassengerRecordDirectiveintoBelgianlaw.ThePassengerDataProcessingActcameintoforce on 25 January 2017. A Royal Decree containing the obli-gations imposed on air carriers was adopted on 18 July 2017 (OG 28 July 2017) and entered into force on 7 August 2017.The EU General Data Protection Regulation (GDPR)

governsthecollectionanduseofanindividual’spersonaldata.TheGDPRappliestoallentitiesbasedinanEUcountrythatprocess personal data, as well as all entities worldwide that processpersonaldatabelongingtoEUresidents.TheBelgianAct of 30 July 2018 on the protection of natural persons with regard to the processing of personal data addresses the areas wheretheGDPRleavesroomforEUMemberStatestoadoptcountry-specificrules.TheGDPRalsoappliestoairports.

Passengers have the following rights under the GDPR in rela-tion to their personal data:1. the right to be informed about the collection and use of

theirpersonaldata;2. therighttoaccesstheirpersonaldata;3. the right to rectification – to have inaccurate personal data

rectified,orcompletedifitisincomplete;4. therighttohavepersonaldataerased;5. the right to request the restriction or suppression of the

processingoftheirpersonaldata;6. the right to data portability, which allows individuals to

obtain and reuse their personal data for their own purposes acrossdifferentservices;

7. the right to object to the processing of their personal data incertaincircumstances;and

8. specific rights in relation to automated decision-making and profiling (e.g. an information obligation, or a request for human intervention).


Thedatacontroller (i.e. theairline)must reportpersonaldatabreaches (e.g. data loss of its passengers by a carrier) to the competent Data Protection Authority, unless the data breach is unlikely to result in a risk to the rights and freedoms of indi-viduals. Such notificationmust bemade within 72 hours ofbecoming aware of the breach, where feasible.


Yes, parties can obtain regulatory clearance for mergers from theBelgianCompetitionAuthority under the termsof articleIV.9oftheCodeofEconomicLaw(CEL).ItisonlynecessarytonotifytheBCAofmergersthatmeetthefollowingturnoverthresholdsaslaidoutinarticleIV.7CEL:■ undertakings with a total turnover in Belgium of more

thanEUR100million;and■ atleasttwooftheundertakingseachgenerateaturnover

inBelgiumofatleastEUR40million.Thereisnosystemofclearanceforcartels.


A‘merger’withinthemeaningoftheCELreferstoanoperationthatresultsinalastingchangeofcontrolofanundertaking;inother words, the possibility of exercising decisive influence over its activity. A merger can, in particular, occur when: two inde-pendent undertakingsdecide to integrate; oneundertakingorone person having control of an undertaking purchases another undertakingorpartofitsactivities(acquisition);ortwounder-takings create a lasting common undertaking between them (joint venture).TheBelgianapproachisverysimilartotheEUapproach.


In view of the nature, or of the small market shares, of the under-takings concerned, certain mergers are unlikely to raise competi-tionproblems.Thenotifyingpartiescanthenrequesttheappli-cationofthesimplifiedprocedure(articleIV.63§1CEL).When the conditions for the application of the simplified

procedurearenotsatisfied,thefirstphase(PhaseI)begins.TheCompetitionCollegeadoptsadecisionwithin40businessdaysafter acceptance of the notification.Whenthereareseriousdoubtsas to themerger’seligibility,

the Competition College can decide to launch the so-calledsecondphase(PhaseII)procedure. TheCompetitionCollegeissues its decision within a time limit of 60 business days after its decision to launch the second phase.CostsforPhaseIrangebetweenEUR2,000and8,000,while

Phase II proceedings are much more expensive.


The(EU)GuidelinesonStateaidtoairportsandairlineswereadoptedonFebruary2014,replacingtheolder2005guidelinesandthe1994aviationsectorguidelines.TheyarefurthersetoutinRegulation(EU)No.2019/712oftheEuropeanParliamentandoftheCouncilof17April2019onsafeguardingcompetitioninairtransport,andrepealingRegulation(EC)No.868/2004.

58 Belgium


or long delay of flights, and repealingRegulation (EEC)No.295/91,whichgrantspassengersarighttofixed-ratecompensa-tion, a right to reimbursement or re-routing, as well as a right to care in case of denied boarding and cancellation.


The enforcement body of the Regulation is SPF Mobilité &Transport – Direction Générale Transport Aérien, CelluleStratégique,Droitsdespassagers,CityAtrium,RueduProgrès56,1210Brussels–[email protected]é&Transport –DirectionGénérale Transport

AérieniscompetentfortheimplementationofRegulation(EC)No.261/2004. Apart fromthe implementationof theregula-tion, it has no specific powers in relation to the late arrival and departure of flights.


BrusselsAirportisregulatedbytheLawof19December1997,by the Royal Decree of 27 May 2004 (OG 24 June 2004) and bytheRoyalDecreeof21June2004(OG15July2004).TheWalloonairportsareregulatedbytheDecreeof23June1994(OG15July1994)andtheFlemishairportbythedecreeof10July 2008 (OG 22 October 2008).The slots are regulated byRegulation (EEC)No. 95/93 of

theCouncildated18January1993(OJL14,22January1993);withrespecttoBrusselsAirport,theyareregulatedbytheRoyalDecree of 23 June 2003.Further noise restrictions for aircraft are laid down in the

RoyalDecreeof25September2003(OG26September2003)setting out operating restrictions at Brussels Airport, and bytheMinisterialDecreeof3May2004(OG11June2004).TheBrussels Region has issued strict noise restrictions which arevery much debated (Decree of 17 July 1997 as amended by the Decree of 19 April 2018, decision 27 May 1999 and 19 May 2016). Seealsorestrictionsforchapter2aircraftlaiddowninCouncilDirective2006/93/EC.MorerestrictionsarecontainedintheRoyalDecreeof16December2005(implementingECDirective2004/36)withrespecttothesafetyofaircraftofthirdcountrieswishingtolandataBelgianairport(OG23January2006).

Ground handling is regulated by the Royal Decree of 6 November2010(OG17November2010)asamendedbyRoyalDecree of 21November 2016 (OG 28November 2016)withrespect toBrusselsAirport, and by theMinisterialDecree of9 June 2010 (OG 24 June 2011) with respect to theWalloonairportandbytheFlemishdecisionof17December1999(OG7March2000)withrespecttotheFlemishairports.


ThereisnospecificBelgianconsumerprotectionlegislationthatapplies to the relationship between the airport operator and the passenger.Nonetheless,airportoperatorsmustcomplywithRegulation

(EU) No. 1107/2006/EC to provide assistance to disabledpersons and those with reduced mobility.

If the breach is likely to result in a high risk of adversely affecting individuals’ rights and freedoms, the data controllermust also inform those individuals without undue delay. Notificationoftheaffectedindividualsis,however,notrequiredif the data controller has implemented technical safety measures (e.g.dataencryption)and/ororganisationalmeasures(e.g.robustbreach detection, investigation and internal reporting proce-dures) limiting the privacy risk of individuals, or where notifying the affected individuals would involve disproportionate effort.Thedatacontrollermustalsokeeparecordofanypersonal

data breaches, regardless of whether it is required to notify.InBelgium, theDataProtectionAuthority (DPA)monitors

data protection compliance. Data breaches can be notified to theDPAviaanonlineformavailableathttps://www.datapro-tectionauthority.be/data-breach-notification-form.

Depending on the nature of the personal data breach, the DPA mayimposeadministrativepenaltiesofuptoEUR20millionor4percentofacompany’sglobalannualturnoveroftheprecedingfinancial year. Personal data breaches may also lead to criminal penaltiesrangingfromEUR800to240,000.Individualsalsohave a right to compensation in respect of proven material and non-material damage (not punitive damages).


Trademarks – any sign or combination of signs used to iden-tify a product as distinct from products manufactured or sold by others–canbeprotectedviatheBeneluxOfficeforIntellectualProperty (BOIP)atTheHague. Trademarkprotection that issoughtinBelgiumappliestotheNetherlands,Belgium,andtheGrandDuchy of Luxembourg (Benelux trademark). There isalso the option of obtaining trademark protection throughout allEUMember States (EU trademark). The applicationmustbe done at the European Union Intellectual Property Office(EUIPO)inAlicante,Spain.Copyrightsprotectartisticorliteraryworksfromthemoment

the original expression is created, without registration. In Belgium, copyright is valid for up to 70 years after the deathof the author, or the last surviving author. It includes, among others:■ the right to control the method of reproduction and

communicationofthework;■ therighttohaveauthorshipknown;■ therighttodecidewhentheworkwillbedisclosed;and■ therighttoopposemodificationofthework.

Patent protection covers inventions that are new, involve an inventive step, and that are useful to industry – even if they contain biological material or a process that involves or uses biologicalmaterial.PatentsaregovernedbytheBelgianPatentAct. Patent holders have the right to exploit, grant licences to, or assign the patent, with some exceptions. Patent protection lasts for 20 years, and the holder must pay annual taxes.Additionally,onecanobtainprotection inBelgiumfor soft-

ware (copyright), designs and models, databases and trade secrets.


This is regulated by Regulation (EC) No. 261/2004 of theEuropeanParliamentandoftheCouncilof11February2004establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation

59Monard Law


dronehavefallenoutsidethecompetenceoftheEU.Onlydroneswhich weigh more than 1kg are regulated. All small drones for recreational use are therefore not regulated. A difference is made between drones with a low risk profile (weighing less than 5kg) (class 2) and drones with a high or medium risk profile (class 1). Class2dronescanflyupto150ftandclass1dronesupto300ft.AllsuchdronesmustberegisteredwiththeBCAA.Thepilotmust,atalltimes,havevisualcontact.Notransportofgoodsorpassengersisallowed.Thereisamandatoryinsuranceobligationand specific rules apply for each class with respect to minimum ageand trainingof thepilot,dependingon theclass. Class1dronesmustbecertifiedbytheBCAA.Transfer of competence to the EU – the Basic RegulationOn 11 September 2018, the new Basic Regulation on avia-tion safety rules came into force including, for the first time, a newsectionfordrones(UnmannedAircraftSystems,orUAS).Untilrecently,allUASweighinglessthan150kgwereregulatedat national level, creating disparate rules throughout the EUMemberStates.Nowcompetenceforalldrones,includingsmalldrones(lessthan150kg),hasbeentransferredtotheEU.Thebasic regulation confers powers on the Commission to adoptmore detailed rules with regard to drones. They have takentheformofDelegatedandImplementingRegulations(ChapterIII,SectionVII). This isnecessary,asAnnexIXtotheBasicRegulation only contains essential requirements for drones – the starting point for design, production, maintenance and opera-tion; generic requirements for all drones; and more detailedrequirements for classes subject to certification or declaration.Drone RegulationsSubsequently, the European Commission has adopted, on 12March 2019 and 24 May 2019 respectively, a Delegated and an Implementing Regulation, which came into force on 1 July 2019, andwhichshallapplyfrom1July2020onwards.Thisisfollowedby a transitional period of two years in order to suspend certain open-categoryrequirements.TheRegulationswillbefullyappli-cableby2022.Consequently,theclassificationsandprovisionsin theBelgian ‘DroneKB’willhave tobechanged inaccord-ance with the new Regulations, as they are directly binding and replacealargepartofthisBelgianRoyalLegislativeAct.CategoriesThe implementing regulation creates three categories: open;specific;andcertified.The ‘open’category is, inprinciple, for low-riskUAS. They

do not require prior authorisation from the competent authori-ties or a declaration from the drone operator before the operation takesplace.Nevertheless,ifthedroneweighsmorethan250g,thedroneoperatormustbe registered. This isclearlyadiver-sionfromthecurrentBelgian legislation,where it is thedronethatneedstoberegistered.Therequirementsoftheoperationsfalling under this category include the need for visual flights, a maximum weight of 25kg for the platform, a maximum altitude of 120m above sea level (except when flying over a fixed obstacle of more than 70m), limited flight over non-involved persons, and tomeetthecriteriaofclassesC0-C4.Theremotepilotalwaysneeds to be able to take control, excluding the possibility of autonomous flights.Underthe‘specific’category,thedroneoperationsareconsid-

eredtobemorehazardousandthereforerequireanauthorisationbythecompetentauthoritybeforetheoperationtakesplace.Noauthorisation needs to be obtained when the operation adheres to standard scenarios for which a declaration by the drone oper-ator is sufficient, or when the operator holds a light drone oper-ator certificate with privileges.

Said regulation places obligations on airport operators toprovide access to air travel for persons with reduced mobility, subjecttosomesafetyandsecurityissues.Theseincludeobliga-tions on airport operators to: provide assistance throughout the passengerjourneyattheairport;set,publishandmonitor‘qualitystandards’onserviceperformance; traincustomerfacingstaff;and charge airlines for provision of the service.


Radixx,Amadeus,SabreandGalileooperateinBelgium.


No.However, itshouldbenotedthat,pursuanttoRegulation(EC) No. 80/2009 of the European Parliament and of theCouncilof14January2009onaCodeofConductforcomputer-isedreservationsystemsandrepealingCouncilRegulation(EEC)No.2299/89(“Regulation(EC)No.80/2009”),asystemvendorshall publicly disclose, unless this is otherwise made public, the existence and extent of a direct or indirect capital holding of an air carrier or rail-transport operator. A system vendor within themeaningofRegulation(EC)No.80/2009meansanyentityand its affiliates which is or are responsible for the operation or marketing of a computerised reservation system.


TheRoyalDecreeallowsonlytwogroundhandlersforeachofthefollowingactivities:baggagehandling;cargohandling;fuelsupply; and platform handling at Brussels Airport. None ofthem may be directly or indirectly owned by more than 25 per centby the airportor anyof its users. The selectionmustbebased on objective, transparent and non-discriminatory criteria.


Theapplicantsmusthavetheirprincipalplaceofbusinessand,ifany, theirregisteredoffice inBelgium. Theapplicant isandwill continue to be owned, directly or through a majority share-holding, by a company established and controlled by a company orpersonestablishedintheEEA.

5 In Future


Since25April2016,theuseofprivatedronesweighinglessthan150kghasbeenregulatedinBelgium.Sincethatdate,commer-cialusehasbeenallowed inBelgium. Todate, these typesof

60 Belgium


The ‘certified’ category is foroperations requiring thecerti-fication of the drone, as well the registration of the drone itself anditsoperator. Furthermore,thelicensingoftheflightcrewismandatory. This isthemost ‘futuristic’ofthecategories,asit applies toUASwithdimensionsofmore than3m,or if thedrone transports dangerous goods or people. Under currentBelgianlaw,thetransportationofgoodsorpassengersbyaUASis prohibited.

Delegated RegulationTheDelegated Regulation sets out the product andmanufac-turing requirements for drones, with a focus on open-category droneoperations.Itdividesthemintofiveclasses(classesC0–C4),whichmust be labelled on the drone. Furthermore, thisregulation provides for an electronic identification system in the form of direct remote identification.

61

Aviation Law 2020

Monard Law

Birgitta Van Itterbeek (1965, Leuven) advises and litigates in the following areas:■ Transport Law, particularly Aviation Law, with a specific focus on aircraft finance and leasing, regulatory and insurance matters.■ Financial Law, including secured and unsecured financing, project, asset and structured finance, leasing and acquisition finance.■ Insurance Law, with a specific focus on directors’ liability and errors and omissions insurance, reinsurance and retrocessions and regulatory

issues.She regularly advises airlines, charter companies and lessors. She has also counselled Belgian and foreign companies, venture capital funds and banks on matters of acquisition finance and secured and unsecured lending and leasing. Birgitta regularly assists reinsurance and insurance companies.She regularly publishes papers on selected topics in the field of Aviation Law and financing, and is frequently invited to speak at seminars.Birgitta is widely recognised as a leading practitioner. Her aviation practice is ranked tier 2 by The Legal 500, and she was selected by Who’s Who Legal of Aviation Lawyers and Business Lawyers, The Legal 500, IFLR and The Expert Guide as a world-leading aviation lawyer. She is a member of Women on Board.She is a member of the Brussels Bar.

Monard LawTervurenlaan 2701150 BrusselsBelgium

Tel: +32 2 234 67 10Fax: +32 2 280 47 79Email: [email protected]: www.monardlaw.be/uk

Tine Bogaerts (1982) specialises in Commercial and Competition Law (Belgian and EU).She holds a Master’s degree in Law (Catholic University of Leuven, 2005) and a Post Master degree in Criminology (University of Leuven-la-Neuve, cum laude).In October 2016 she obtained an LL.M. in EU Competition Law & Economics (magna cum laude), at the Brussels School of Competition. Tine wrote her dissertation about ‘assessment of dual distribution set-ups’. As a result of her in-depth research on this topic, she became an all-round expert in Distribution Law.Tine is a member of the Brussels Bar.


Tel: +32 2 234 67 10Fax: +32 2 280 47 79Email: [email protected] URL: www.monardlaw.be/uk

Monard Law is a full-service independent Belgian law firm with around 90 lawyers, of whom there are 30 partners (including associate partners). It is established in four different cities; namely Brussels, Antwerp, Ghent and Hasselt.Monard Law offers a comprehensive range of legal services to both local and foreign corporations as well as governments, financial institutions and private individuals.It has a leading aviation practice which is primarily focused on aircraft finance, but also deals with regulatory issues and litigation.The firm has a very strong corporate and M&A practice consisting of about six partners, with a strong focus on medium-sized companies, and is ranked by The Legal 500 as a tier 3 law firm.

Willem De Vos specialises in Commercial Law, Competition Law, Internet Law and Intellectual Property Law.He obtained a Master of Law degree in 2009 (Catholic University of Leuven) as well as a degree in European Competition Law and Intellectual Property Rights in 2010 (University of Liège, cum laude). He was also the winner of the 2010 Lamy Moot Court competition organised by the French Competition Authority.Willem has been a member of the Brussels Bar since 2010. He joined Monard Law in 2014.


Tel: +32 2 234 67 10Fax: +32 2 280 47 79Email: [email protected] URL: www.monardlaw.be/uk

It is further recognised for its healthcare and life science, real estate, banking & finance, litigation, tax and white-collar crime expertise.

www.monardlaw.be/uk


Aviation Law 2020

Chapter 1162

Brazil

ASBZ Advogados Renan Melo

Guilherme Amaral

Brazil



ANAC and DECEA (Air Space Control Department) regu-late air safety, and are responsible for guaranteeing operational air safety, aiming to prevent accidents and improving aviation service levels. The principal pieces of legislation related to air safety are the Brazilian Aeronautical Code, ANAC and DECEA regulations, mainly regarding operational issues and air traffic control.


Air charters are regulated originally under one system, but there are specific provisions for commercial, cargo and private operations.


Brazil has a limitation for international carriers operating domestic routes (cabotage) and, like several other jurisdictions around the globe, that right is reserved for national carriers.


Brazilian airports were historically state-owned, but recently a big group of them, including some of the most relevant, were included in auctions for concessions for periods of up to 30 years. At this point, we have: airports administered by Infraero, a state-owned company; airports administered by private companies; and also airports administered by groups including Infraero and private companies.


The main requirements on carriers flying to and from Brazilian airports are brought from ANAC. Nevertheless, for certain airports, certain requirements are expected regarding the char-acteristics of the aircraft operating the flights or even the frequency of flights.

1 General


The principal legislation for aviation in Brazil is the Brazilian Aeronautical Code (Law 7,565/86), which is outdated and very likely to be replaced by a new version, currently being discussed in Congress. Several other pieces of law such as the Federal Constitution, the Civil Code, the Consumer Protection Code, National Civil Aviation Agency regulations and international treaties are also relevant for the industry in Brazil.

The main regulatory body for aviation in Brazil is the National Civil Aviation Agency (ANAC), responsible for, among other things:■ licensingandsupervisingairlines’activities;■ monitoringandregulatingairsafety;■ enhancingcompetitionbetweenairlines;and■ improvingairtransportationservicelevels.


There are three main steps brought by the Brazilian Aeronautical Code that should be followed by international carriers: (i) desig-nation by the country where the company is established; (ii) issu-ance by ANAC of an authorisation to function in Brazil after being formally established in the country; and (iii) issuance by ANAC of an authorisation to operate in Brazil.

To be formally established in Brazil there are several docu-ments to be presented before the local Board of Trade, the tax authorities and other governmental bodies before the company obtains its Taxpayer ID number.


ANAC administers air safety, and is responsible for guaran-teeing operational air safety, aiming to prevent accidents and improving aviation service levels. The principal pieces of legis-lation related to air safety are the Brazilian Aeronautical Code, ANAC and DECEA (Air Space Control Department) regula-tions, mainly regarding operational issues and air traffic control.

63ASBZ Advogados



Every aircraft’s change, such as the exchange of engines andother parts, must be registered with ANAC, under the terms of local regulation.

The document that supports the installation of the engine on such aircraft must be registered with ANAC and in such condi-tion that there is no exposure to title annexation. In order to mitigate risks, owners and financiers of engines must request the registration of any deal involving the engine in the RAB.


The tax implications of aircraft trading depend on several aspects, such as: whether the trade is local or overseas; the type (fare code classification) and finality/usage of the aircraft; if the owner is located in Brazil or abroad; and if there is leasing or not, etc.

As a general rule, VAT and GST are levied; however, depending on the intended transaction, tax benefits may apply (e.g. tax exemptions, lower tax rates); special customs regimes may also be an alternative to make the transaction more efficient from a tax perspective.

Please note that VAT and GST are composed of different taxes, charged at Federal, State, and Municipal levels. Accordingly, the context of each case must be considered in order to appraise the impacts in the legislation of each tax.

Brazil does not have a documentary tax per se; however, licences and formal registers may be necessary; in this case, fees can be charged.


Yes, among several other international Conventions regulating multiple aspects of aviation, Brazil is a signatory to the main ones such as Montreal, Geneva, and Cape Town.

Moreover, the Brazilian Supreme Court recently determined the prevalence of the Montreal Convention in light of the Consumer Protection Code, in cases involving air transporta-tion contracts.


The international conventions are signed by the President and then must be ratified by the Brazilian Parliament; through the publication of a decree, they become part of the local legal system, applicable in the country. Historically, Courts challenged several aspects of the International Conventions applying local law in case of a conflict. The recent decision from the Supreme


Investigations of air accidents are conducted by the Aeronautical Accidents Investigation and Prevention Centre (CENIPA), the investigations being conducted in accordance with Annex 13 of the Chicago Convention.


The main recent development is the concession of airports for private groups, leading to relevant investments and the modern-isation of the main terminals in the country, as well as a relevant increase in the cost to rent areas on such airports.

In the first half of 2019 the current government promoted the auction of 12 airports, divided into three regions: Northeast; Midwest; and Southeast. Winners will be required to provide investments for the expansion and maintenance of airports through the signing of Concession Agreements. The govern-ment believes that such measure will enable the modernisation and development of these airports.

The events of the first half also boosted ANAC, which published Resolution No. 515/2019, which amends the secu-rity inspection procedures of public agents operating at airports. The Resolution obliged airport operators to implement the minimum infrastructure and specific procedures for the adop-tion of the new security inspection system of public agents for access to restricted security areas of airports.



In Brazil, proof of ownership, including the effect for third parties, comes from the Brazilian Aeronautical Registry (RAB), managed by ANAC. However, changes at the RAB are under discussion at ANAC.


Every change in aircraft ownership, including any register of mortgages and charges, must be made through the RAB and must be reported to ANAC for the purposes of article 72 of the Brazilian Aeronautical Code.


For operations based on dry lease or wet lease contracts, a copy of the contract must be presented to ANAC for an evaluation of the conditions of the contract and its parties to carry out the operation of the aircraft.

64 Brazil


amount requested; and the description of the evidence by which the plaintiff intends to prove the truth of the alleged facts. Payment of court fees is usually mandatory.

These rules apply to all airlines, regardless of whether they are domestic or foreign carriers.


In Brazil, a jurisdiction known for a huge volume of litigation and for long-lasting judicial proceedings, there are provisional remedies, basically to protect the effects of the final decision to be granted in the longer term. Urgency, likelihood of a positive outcome based on the evidence presented, and the possibility to reverse the effects of the provisional remedy are among the points to be evaluated to grant such decision, which may include payments, orders to do or not to do something, and to anticipate the production of evidence that could be at risk if left for future stages of litigation.

The same diversity of decisions is possible during the final stages of litigation, before courts or arbitral tribunals.


The decision of a first-level court may be subject to appeal, even if the appeal is based exclusively on the disagreement of one of the parties with the contents of the decision. Even inter-mediate decisions are subject to interlocutory appeals. From second- degree decisions, the right to appeal to superior courts is more limited and will only be possible under two circumstances: violation of Federal Law (STJ); and violation of the Federal Constitution (STF). The Special Courts cannot analyse facts and proofs. In arbitration, the arbitral decision is not subject to appeal to the Arbitral Tribunal and a review depends on the existence of material error, obscurity, doubt, contradiction or omission. Furthermore, an arbitration decision can only be reviewed by the Judiciary in very specific cases.



The joint ventures between airline competitors in Brazil are subject to approval by: ANAC, the National Civil Aviation Agency; and the Administrative Council for Economic Defence (CADE), the antitrust agency.


There are two main aspects for the definition of the relevant market in Brazil for the purposes of mergers and acquisitions: the product; and the geography.■ Thefirstaspectistheevaluationofwhichproductcanbe

considered a competitor or a substitute (non-stop flights or adding connecting flights in case of intercontinental flights, for instance).

Court regarding the prevalence of the Montreal Convention was a major change to this and brought relevant safety in terms of the application of the Conventions in Brazil.


For the leasing and trading of aircraft, there is a specific regime for each type of air transportation that will be carried out and specific provisions must be observed at the time of acquisition.

Brazil has double tax treaties with 34 countries. Besides that, the VAT is only levied in case of aircraft trading; however, when it comes to aircraft leasing, such tax is not applied.



According to the Brazilian Aeronautical Code, a creditor may seize the aircraft in compliance with a judicial order in case of contractual default. Thereby, the seizure of an aircraft can be sought before the Court on the basis of documents evidencing the debt.


Apart from the regular judicial procedures that could lead to repossession, Brazil is also a signatory to the Cape Town Convention which provides that in case of a breach of an agree-ment, a lessor or financier is entitled to request withdrawal of registration of the aircraft and promote its due exportation.


In Brazil, there is no court specialising in aviation disputes. Generally, aviation cases would be filed before the Civil Courts, but the value of the dispute will influence the exact Civil Court. If the amount claimed does not exceed 40 times the Brazilian minimum wage, the lawsuit can be filed before the Small Claims Court. However, if the value of the case exceeds that amount, the claim must be filed before a Civil Court. Criminal cases are always brought before a specific Criminal Court, separated from the Civil Courts.


To file a lawsuit in Brazil, some requirements must be met, such as complete information on the parties: mainly, address and taxpayer’s ID; the factual and legal groundsof the claim; the

65ASBZ Advogados



In Brazil, the protection of personal data of consumers, including passengers, is mainly based on the Federal Constitution, the Consumer Protection Code and the Civil Rights Framework for the Internet – Federal Law 13,709/2018 (the latter, for data collected via the Internet). In February 2020, the new Brazilian General Data Protection Law will come into force and will become the main instrument governing the acquisition, reten-tion and use of passenger data. The main rights passengers will have in respect of their data held by airlines and airports are: access to their data; correction of incomplete, inaccurate or outdated data; portability of the data to other service providers; and elimination of their personal data.


Based on the provision that consumer data is confidential, in case of data loss, sanctions may be applied based on provisions of the Consumer Protection Code, and carriers could be liable on a case-by-case basis for damages caused to each particular passenger. Once the new Brazilian General Data Protection Law comes into force in 2020, airlines will have to notify the supervisory authority and the data subject of the occurrence of a data loss that may result in any relevant risk or damage to the data subjects. The airlines will be subject to administrative sanctions varying from a simple warning to fines of up to 2% of the sales revenue of the legal entity of private law, group or conglomerate in Brazil in its last fiscal year; limited, in the aggre-gate, to BRL 50 million per infraction.


The regulatory agency responsible for the regulation and supervi-sion of intellectual property in Brazil is INPI (National Institute of Intellectual Property). A company wishing to register a new trademark should verify with this agency (INPI) if there is a similar trademark and file a formal request for the new trade-mark registration. After the approval, the trademark is registered with INPI, and the protection is effective before third parties.


The Brazilian Civil Code, in articles 730 and 756, brings general aspects about the transportation contract. Since March 2017, ANAC’s Resolution No. 400 brings the general terms andconditions of air transportation contracts that apply to flight delays, cancellations and denied boarding (Chapter II, Section II of the Resolution). The usual protection includes, in case of denied boarding, the payment of immediate compensation directly to the passenger, reallocation for the next flight, and

■ The geographical aspect is the evaluation of where themarket power can be relevant (which routes are affected, for instance).


In accordance with Federal Law 12,529/2011 (Brazilian Competition Law), in any transaction, for both Brazilian and foreign investors, an approval by CADE is necessary prior to the closing of the transaction if certain thresholds are met. In such cases, CADE will grant regulatory clearance before closing.


Any concentration act submitted to CADE and to ANAC will be evaluated considering the definition of the relevant market, but also considering the competition effects. The approach for mergers, acquisitions and full-function joint ventures is very similar. Historically, Brazil is a friendly jurisdiction for mergers and acquisitions in the airline business; but joint ventures, even though there is no relevant regulatory limitation, are not a very common business model.


The concentration acts to be presented to CADE in Brazil that are subject to the ordinary procedure should be decided within 240 days, but that deadline may be extended for another 90 days through a justified decision. Other acts that are consid-ered less complex and are qualified for summary approval will be analysed within 30 days. In both cases, the companies must provide detailed information about the parties, the timing, the exact kind of deal, the amounts involved and the relevant market share information. This filing currently has a cost of roughly GBP 20,000.00.


There are no relevant provisions on financial support for private air operators or airports, and Brazil has a significant track record on bankruptcy of airlines.


Since 2015, the Brazilian Government has worked on meas-ures to stimulate regional aviation, and some forms of subsidy on prices for fares on such routes, as well as exemption from airport taxes at specific airports, are currently in place. The main criteria for obtaining such subsidies is the operation of routes in the regional market.

66 Brazil



There are no specific requirements regarding GDS operation.


There is no piece of law regulating such vertical integration but, since the concession of airports is recent in Brazil, until now there was no case to be evaluated. Up to this point it would be hard to imagine such integration, due to the conditions of the auction of airports and the requirements for a company to participate. But that could be a scenario to be evaluated in the future in new rounds of airport concession.


There is no requirement in our legislation regarding the nation-ality of the operator of aircraft or for the issuance of the Air Operator’sCertificate.Theabsenceofsucharequirementcanbe seen in the Brazilian Aeronautical Code (Law 7,565/1986) and Crew Law (Law 13,475/2017). These two laws only require that the operator of the aircraft have the certificate issued by the Brazilian Civil Aviation authority, which is ANAC in amend-ment nº 7 of the Brazilian Regulation of Civil Aviation nº 61. This agency reports on what the requirements and necessary documents are for the issuance of the certificate.

5 In Future


The new version of the Brazilian Aeronautical Code is expected to be discussed by Congress and eventually approved; this could be a source of significant changes. The regulation on slots is also likely to be reviewed, since the changes made during the Avianca Brasil crisis are likely to influence a new model. Resolution 400 is expected to be reviewed by the end of 2021, but discussions are already taking place and ANAC is likely to collect data and opinions to evaluate changes.

assistance including communications, food and lodging where applicable due to the period of time between the original and the new flight. The regulation also encourages the airline to seek to avoid such sanctions voluntarily. For cancelled flights, even though there is no punitive compensation to be paid immedi-ately to the passengers, the assistance is basically the same.


ANAC, the National Civil Aviation Agency, is the agency that can penalise and impose fines on air carriers. Such fines are mentioned in article 302 of the Brazilian Aeronautical Code, and alsoinANAC’sResolutionNo.400.Apartfromsuchregula-tions, the volume of delays and cancellations is currently a rele-vant criterion for slot allocation. Passengers are also used to seeking indemnifications for such events from the Courts.


There is a specific piece of legislation governing the airport authorities (Federal Decree No. 7,554/2011), and most obliga-tions are connected to monitoring performance, participating in the development of new plans for the airports, and admin-istering compliance by the airports with all proper regulation.


In Brazil, the Consumer Protection Code (Federal Law 8,078/1990) regulates any consumer relationship, whether regarding passenger/air carrier or passenger/airport oper-ator. Additionally, in accordance with this code, liability for service failure, whether caused by the carrier or by the airport operator, will be strict, and that does not eliminate the right of recourse one could use against the other. Airports used to be administered by the government through Infraero, and due to the consequences of such fact for the development of a lawsuit, most passengers would not include the airport in a claim. With the concession of the airports to private opera-tors, that is changing and lawsuits against airports are becoming more common. Lastly, concerning passenger protection, in February 2020 the new Brazilian General Data Protection Law will aim to protect the fundamental rights of freedom, privacy and consumer protection. Accordingly, the personal informa-tion of the passenger to the airlines and the airport itself cannot become public.


The main GDSs that operate in Brazil are Amadeus, Sabre, TravelSpan, Travelport CMNet and Mysky.

67

Aviation Law 2020

ASBZ Advogados

Guilherme Amaral is the head of the firm’s aviation practice and is one of the few aviation experts in Brazil. He actively participates in discus-sions regarding this sector in governmental and private forums in Brazil and abroad. He has been recognised as a distinguished lawyer by the legal publication Anuário Análise Advocacia 500 and has been assisting Brazilian and international clients on litigation matters for more than 15 years.

Education■ Bachelor of Laws – Pontifícia Universidade Católica de São Paulo (PUC-SP).■ Postgraduate Diploma in the Law of Economics and Business – Fundação Getulio Vargas.

ASBZ AdvogadosAvenida Brigadeiro Faria Lima4285, 4º andarSão Paulo, SPBrazil

Tel: +55 11 3145 6000Email: [email protected]: www.asbz.com.br

Renan Melo is a litigation lawyer with more than four years of experience in aviation and consumer law. His practice focuses on the civil aviation industry in matters related to consumer law and regulatory and administrative issues. His experience also includes areas such as banking, securities, family law and corporate restructuring.

Education■ Doctor of Laws in Civil Law – Universidade de Buenos Aires (UBA) (ongoing). ■ Master of Laws – Philosophy of Law – Pontifícia Universidade Católica de São Paulo (PUC-SP). ■ Postgraduate Diploma in International Law – Escola Paulista de Direito. ■ Postgraduate Diploma in Contracts Law – Pontifícia Universidade Católica de São Paulo (PUC-SP). ■ Bachelor of Laws – Pontifícia Universidade Católica de São Paulo (PUC-SP) — including time spent at the Universidade de Coimbra

(Portugal).

ASBZ AdvogadosAvenida Brigadeiro Faria Lima4285, 4º andarSão Paulo, SPBrazil

Tel: +55 11 3145 6000Email: [email protected]: www.asbz.com.br

At ASBZ Advogados, we build genuine and long-lasting partnerships with our clients. We are straightforward and direct, working closely with them to cater to their every need. Our services are focused on achieving the best results. We strive to be the change the market needs and clients are looking for. We are open and flex-ible. Following ethical standards, we provide whatever is required to find the best possible solutions to a wide range of challenges. Our responsible performance offers focused, secure and assertive opin-ions: our business focus is exactly where our client’s goals are.Practice Areas: Antitrust; Arbitration and Mediation; Commercial Contracts; Consumer Law; Corporate; Insolvency, Restructuring and Debt Recovery; Investment Funds; Labour; Litigation, Prevention and Dispute Resolution;

Mergers and Acquisitions; Project Finance; Real Estate and Litigation; Social Security and Executive Compensation; Tax; and Wealth Management.Sectors: Aviation; Banking; the Credit and Debit Card Industry; Energy; Logistic and Cargo Transportation; Pharmaceuticals; Retail and Consumer Products; and Sports and Entertainment.

www.asbz.com.br


Aviation Law 2020

Chapter 1268

British Virgin Islands

Maples Group Rebecca Lee

Michael Gagie



■ to acquire, own, operate, control, manage, develop,administer and maintain any designated airport in the BVI as a commercial undertaking and for the benefit of the economy of the BVI;

■ toprovideandmaintainonacommercialbasis,facilitiesandservicesforairtransportandsuchotherfacilitiesandservicesasarenecessaryordesirablefor,orinconnectionwith, the international airport or any designated airport;

■ to collect such dues and charges as theBVIAAmay beauthorised (by an enactment) to collect;

■ to use, develop and manage on a commercial basis, alllandsvestedin,transferredorleasedto,theBVIAA;

■ generallytocarryouttheprovisionsoftheAA;and■ todoanythingthatisincidentaltoorconnectedwiththe

objectivesoftheBVIAA.


Anair carriermusthave itsprincipalplaceofbusiness in theBVI in order to apply for an air operator certificate (“AOC”) and be involved in commercial air transport. AnAOC indi-cates that its holder is competent to secure the safe operation of aircraft (of the types specified thereunder) on flights (of the descriptionandforthepurposesspecifiedthereunder).TheaircarriermustcompleteitsapplicationforanAOCto

theGovernor (asdefinedbelow)not less than90daysbeforethe date of intended operation, unless a shorter period is accept-abletotheGovernor.InordertoqualifyforanAOC,theaircarriermustsatisfyalloftheconditionsundertheANOTOandrequirementsundertheOTAR;thatis,anAOCwillbeissuedto an air carrier if:1. itsprincipalplaceofbusinessislocatedwithintheBVI;2. itmeets the applicable requirementsofSubpartBunder

theOTAR;3. the accountable manager for the operation is a person

competenttotakeoverallresponsibilityfortheoperationand safety of each flight operated;

4. itsnominatedpostholders requiredby theOTAR (para-graph119.53(a)(1)and(2))arefitandproperpersons;and

5. thegrantingofsuchAOCisnotcontrarytotheinterestsofaviationsafety.

“Governor”means the person for the timebeing adminis-tering thegovernmentof theBVIand includesanypersonasbeingdesignatedtosuchfunctionsundertheANOTO.

1 General


TheprincipalaviationlegislationapplicableintheBritishVirginIslands (“BVI”) is as follows:1. the Air Navigation (Overseas Territories) Order 2013, as

amended (“ANOTO”);2. theOverseasTerritoriesAviationRequirements(“OTAR”);3. theAirportsAct2003(“AA”);4. theMortgagingofAircraftandAircraftEnginesAct,2011;

and5. the Mortgaging of Aircraft and Aircraft Engines

Regulations,2012.TheANOTOisthehighestlevelofcivilaviationregulation

applicable in the United Kingdom (“UK”)overseasterritories,includingtheBVI.ItisadministeredbytheAirSafetySupportInternational (“ASSI”), a not-for-profit, wholly-owned, subsid-iarycompanyoftheUKCivilAviationAuthority(“CAA”).Historically, airports in theBVIwere runbyagovernment

department(theDepartmentofCivilAviationintheMinistryofCommunication),whichhandledboththeoperationandregu-lationofairportsintheBVI.AfterthepassingoftheAAandincorporation of the BVI Airports Authority (“BVIAA”), a limited liability company, both functions are now separated with theBVIAAowningandoperatingallairportswithintheBVI,whiletheASSIhandlestheregulationofairportsintheBVI.ASSIThekeyfunctionsperformedbytheASSIare:■ overseeingtheUKoverseasterritoriesinrelationtoavia-

tion matters;■ providingacohesivesystemofcivilaviationsafetyregula-

tionintheUKoverseasterritories;and■ supportingexistingauthorities in theUKoverseas terri-

tories through processes by which aircraft operators, aviationpersonnelandprovidersof relatedservicesgainapprovals, licences and certificates, including air trafficcontrol(asdescribedintheOTARundertheANOTO).

BVIAATheobjectivesoftheBVIAAare(asdescribedins5oftheAA):■ toacquire,own,operate,control,manage,develop,admin-

isterandmaintaintheinternationalairportandanyexten-sion thereof, as a commercial undertaking, in a manner which recognises its role as an international airport and for the benefit of the economy of the BVI;

69Maples Group


of an accident or incident in order to make safety recommenda-tions forpreventionpurposeswithin theUKand itsoverseasterritories.


No,therehavenotbeenanyrecentcasesofnoteorothernotabledevelopmentsintheBVI.



TheBVI has aUS Federal AviationAuthority CategoryOneaircraftregisterstatusundertheInternationalSafetyAssessmentprogramme and aircraft may be registered in the BVI bearing aircraft registrationprefix“VP-L”(namely, theVirginIslandsAircraftRegister).Part2oftheANOTOdescribestherelevantregistrationandmarkingrequirements,withguidancefromPart47oftheOTAR.UponsuccessfulapplicationtotheGovernor,acertificateof

registration will be issued relating to an aircraft including details such as the relevant aircraft type, the manufacturer’s serialnumberandregistrationmark,etc.Issuanceofsuchcertificateindicatesthatitsholderisconsideredtobequalifiedforregis-trationandmaythereforebeconsideredevidenceofownership.


Following the implementation of the Mortgaging of AircraftandAircraftEngineAct,2011andtheMortgagingofAircraftand Aircraft Engines Regulations, 2012, aircraft and engines(owned by or otherwise in the lawful possession of a BVI busi-ness company) may also be made the subject of a mortgage for thepurposesofregistrationintheRegisterofAircraftMortgagesand the Register of Aircraft Engine Mortgages, respectively.Notethatamortgageeinsuchcircumstancesshallnotbedeemedtobetheowneroftherelevantaircraftoraircraftengine.TheMortgagingofAircraftandAircraftEnginesRegulations,

2012 also provide for filing of priority notices (such prioritynoticesaretobeenteredintotheRegisterofAircraftMortgagesand/or theRegisterofAircraftEngineMortgages, as the casemaybe)whichreservesandprotectsaparticularprioritypositionforaprospectivemortgagefor14days–i.e.thisprioritywillbevalidoveranymortgagesofthataircraftoraircraftenginemadeonorafterthedateoftheprioritynotices.Thesearemaintainedby the registrar who is a public officer designated by the minister undertheMortgagingofAircraftandAircraftEngineAct,2011.In addition to the Register of Aircraft Mortgages and the

RegisterofAircraftEngineMortgages, it ispossibletofurtherprotect a lender in an aircraft transaction involving securitycreated either by BVI holding companies owning aircraft (“BVI AC Holdco(s)”), or in respect of issued shares in a BVI ACHoldco, notwithstanding the absence of statutory perfection requirementstorecognisethevalidityorenforceabilityofsuchsecurity.

The following filings and notations will ensure that a lender is conferred with priority against unsecured creditors and subse-quentsecuredcreditors:


TheASSIisthemainairsafetyregulatorresponsibleforover-seeing the BVI’s international aviation safety obligations andagreements,includingtheconductofqualitycontrolactivities,inaccordancewiththeOTARundertheANOTO.


No,thesefallundertheASSI.


No,thesefallundertheASSI.


There are restrictions on foreign aircraft operations as described under Part 15 of the ANOTO. Restrictions with respect tocarriageforvaluableconsiderationinaircraftregisteredoutsideoftheBVIandtheapplicablefilingandapprovaloftariffsaredetailedunders135ands136,whiles137dealswithrestrictionsonaerialphotography,aerialsurveyandaerialworkinaircraftregisteredoutsideoftheBVI.


AirportsinBVIareStateowned.TheBVIAAownsandoper-atesallairportsintheBVI(TerranceB.LettsomeInternationalAirport, Taddy Bay Airport and Auguste George Airport),NorthSoundWaterAerodromeandvarioushelipads.


Thisisnotapplicable.


ProvisionsundertheANOTO(includinguseofflightrecordingsystemsandpreservationofrecordsintheeventofairaccidents,as well as implementation of flight data monitoring programme and mandatory occurrence reporting) will apply together with regulations under the OTAR, in line with the requirementsof ICAO Annex 13 (please see question 2.7 on the ChicagoConvention).Aircraftaccidentand incident investigationsare required to

be carriedoutby theASSI in theBVI, supportedby theUKAirAccidentsInvestigationBranch(“UK AAIB”).Theobjec-tiveoftheUKAAIBistodeterminecircumstancesandcauses

70 British Virgin Islands



Thoughnotlistedunderquestion2.6,theChicagoConventionplacesresponsibilityonallcontractingStates(includingtheUK)to implement programmes as identified by the International CivilAviationOrganisationondevelopingframeworkswithininternational air transport (i.e. ICAO’s Standards and recom-mendedPracticesorSARPS)andsuchprovisionsextendtotheUKoverseasterritories(includingtheBVI)andarereflectedintheANOTO.TheOTARarevehiclesfortheapplicationofrelevantSARPS

within theBVI legal system. Anexamplewouldbe theStateSafetyProgrammefortheUKOverseasTerritoriesofAnguilla,BVI,MontserratandSt.HelenapublishedbytheASSI.AnothernotableconventionistheNewYorkConventionon

theRecognitionandEnforcementofForeignArbitralAwards1958towhichtheBVIis,byorder-in-councilfromtheUK,aparty.TheBVIcourtsarerequiredbylawtoenforce,withoutre-examinationofthemeritsofthecaseorre-litigationofthematters arbitrated upon, such award. However, enforcementof such award may be refused if the person against whom it is invokedproves:■ thatapartytothearbitrationagreementwas,underthelaw

applicable to that party, under some incapacity;■ thatthearbitrationagreementwasnotvalidunderthelaw

to which the parties subjected it or, if there was no indi-cation of the law to which the arbitration agreement was subject, under the law of the country where the award was made;

■ thatthepersonwasnotgivenpropernoticeoftheappoint-ment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case;

■ thattheawarddealswithadifferencenotcontemplatedbyor not falling within the terms of the submission to arbi-tration or contains decisions on matters beyond the scope of the submission to arbitration;

■ thatthecompositionofthearbitralauthorityorthearbi-tral procedure was not in accordance with the agreement of the parties or if there was no such agreement, with the law of the country where the arbitration took place; or

■ thattheawardhasnotyetbecomebindingontheparties,or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.


No.Pleaseseequestion2.5.



The rights of detention exercisable over aircraft in the BVIinclude aircraft liens and the right to detain, sell, or cause to be forfeited,undertheANOTOandProceedsofCriminalConductAct,1997.

■ where a BVIACHoldco creates a relevant charge undersection 163 of the BVI Business Companies Act (asamended) (the “BVI Act”),forexample,anaircraftmort-gage – particulars of the charge may be filed with theRegistryofCorporateAffairs(the“Registry”) for a fee of US$200.TheparticularsofthechargewillthenbeplacedontheBVIACHoldco’scorporaterecordsattheRegistrytoputthirdpartiesonconstructivenoticeoftheexistenceofsuchsecurity.Thefilingalsoactsasaprioritydetermi-nant vis-à-vissubsequentfiledsecurityinrespectofthesamesecured asset and the claims of unsecured creditors; and

■ wherealenderhastakensecurityovertheissuedsharesofaBVIACHoldcothenit isadvisableforanotationtobeplacedontheBVIACHoldco’sregisterofmemberswhichevidences theexistenceof the share security. Again, thisacts as amethod of giving notice to third parties of theexistenceofsuchsharesecurityiftheyreviewtheregisterofmembers.Itisalsopossible,wherethecommercialpartiesagree,fortheannotatedregisterofmembersoftheBVIACHoldco tobe filedpubliclywith theRegistryand therebyrecordedontheBVIACHoldco’scorporaterecordsattheRegistry.


There are no regulatory requirements in the BVI outside ofthosedescribedabove.


Thereisnolocallawcoveringthisissue.


UnderBVIlaw,VAT,GSTandstampdutyarenotapplicableintheBVIforaircrafttrading,financeandleasing.Further, companies incorporated or registered under the

BVIActarecurrentlyexemptfromincomeandcorporatetax;in addition, theBVI does not levy capital gains tax on thosecompanies.


TheBVI isneither signatorynorpartybyextension fromtheUKtothemaininternationalConventionslistedabove.

71Maples Group


For foreign airlines/parties, being a company incorporatedout of the BVI “Non-BVIco”,serviceofaclaimformmaybedoneoutoftheBVIwiththepermissionoftheECSC.Oncepermission is obtained, the serviceprocessmust complywiththe laws and regulations of the Non-BVIco’s jurisdiction ofincorporationorthecountryinwhichtheNon-BVIcoistobeserved,which servicemay require the involvementof foreigngovernment,judicialandconsularauthorities.Civilproceedingsarecommencedbyfilingoriginatingdocu-

mentswith theECSC (including a claim form or originatingapplicationinthecaseofinsolvencyproceedings).AclaimanthassixmonthstoservethefiledclaimformintheBVI,or12monthsinthecaseofserviceoutsidetheBVI.


The BVI court has jurisdiction to grant interim remedies, which include:a) an interim declaration;b) an interim injunction;c) an interim freezing order;d) anorderdirectingapartytoprovideinformationaboutthe

location of property which is the subject of a claim (“rele-vant property”)orassetsortoprovideinformationaboutrelevantpropertyorassetswhichareormaybethesubjectof an application for a freezing order;

e) an order for a specified fund to be paid into court or other-wisesecuredwherethereisadisputeoveraparty’srighttothe fund;

f) an order directing a party to prepare and file accounts relating to the dispute;

g) an order for interim costs;h) an order for the:

■ carrying out of an experiment on or with relevantproperty;

■ detention,custodyorpreservationofrelevantproperty;■ inspectionofrelevantproperty;■ paymentofincomefromrelevantpropertyuntilaclaim

is decided;■ saleofrelevantproperty(includingland)whichisofa

perishable nature or which for any other good reason it isdesirabletosellquickly;and

■ takingofasampleofrelevantproperty;i) an order authorising a person to enter any land or building

in the possession of a party to the proceedings for the purposeofcarryingoutanorderlistedat(h)above;

j) an order permitting a party seeking to recover personalproperty to pay a specified sum of money into court pending the outcome of the proceedings and directing that, ifthepartydoesso,thepropertymustbegivenuptotheparty;

k) an order restraining a party from:■ dealingwithanyassetwhetherlocatedwithinthejuris-

diction or not; and■ removingfromthejurisdictionassetslocatedthere;

l) anordertodeliverupgoods;m) anorderrequiringapartytoadmitanotherpartytoprem-

isesforthepurposeofpreservingevidence,etc.;n) theappointmentofareceiverwhereitisjustorconvenient

to do so; and o) an order for payment by a defendant on account of any

damages, debt or other sum which the court may find the defendantliabletopay.




Commercially significant civil litigation is tried by a Judgesitting without a jury in the High Court of the EasternCaribbean Supreme Court (the “ECSC”). The ECSC is thesuperior court of record for theBVI and eight otherEnglishcommon-lawCaribbeanjurisdictions.Aviationdisputeswouldbeheard intheECSCandmost likelywithintheCommercialDivisionoftheEasternCaribbeanSupremeCourtsittingintheBVI,whichdealswithcommercialclaimswithavalueofatleastUS$500,000 or claims which the CommercialDivision Judgeconsiders to be of a commercial nature even if themonetaryvalue requirementhasnotbeen satisfied. Commercial claimsinclude claims relating to business contracts, companies, part-nerships,insolvency,trusts,insuranceandreinsurance,mercan-tile agency and usages, the carriage of goods by sea, air or pipe-line, banking and financial services and arbitration. Courtproceedings are conducted in accordance with the EasternCaribbeanCivilProcedureRules 2000, as amended (“CPR”), andtheCommercialDivisionhasitsownsetofrulesandprac-ticedirectionswhichsupplementtheCPRfortheeffectivereso-lutionofcommercialdisputes.For criminal cases, the Magistrates’ Court in the BVI has

jurisdictiontotrysummaryoffencesonly,i.e.offencesthataretriableeitherwayandthathavenotbeencommitteduptotheECSCfortrial.TheECSC,whichusuallysitstohearcriminalmatters three times a year, is the superior court of record for indictable offences where the defendant has been committed up fortrial.Therearenospecialisedcriminalcourtsforparticularcrimes.InNovember2016,theBVIInternationalArbitrationCentre

opened for the purpose of facilitating commercial arbitration intheBVI.


Fordomesticairlines/parties,beingacompanyincorporatedinthe BVI (“BVIco”),serviceofadocumentmaybeeffectedontheBVIcobyaddressingthedocumenttotheBVIcoandleavingitat,orsendingitbyaprescribedmethodto(a)theBVIco’sregis-teredoffice,or(b)theofficeoftheBVIco’sregisteredagent.Theprescribed methods are: a) byproperlyaddressing,preparingandpostinganenvelope

containingthedocumenttotheaddressforservice;b) bypersonalservice;c) bydirectdeliverytothesecretaryorclerkoftheBVIco’s

registered agent; andd) byemailattachingthedocumentprovidedthat:(a)theorig-

inal of the document shall be sent by post; and (b) it shall notmatterwhetherthedocumentwasservedinascannedor other form so long as it is legible and in the form of the originaldocument.

72 British Virgin Islands



SubjecttotheprovisionsofitsmemorandumofassociationandarticlesofassociationandtheBVIAct,aBVIbusinesscompanycan merge with one or more BVI business companies, or foreign companies, and the surviving entitymay be domiciled in theBVIorinaforeignjurisdiction.BVICompaniesarefrequentlypartiestojointventurearrangements.




TheBVIdoesnothavesuchrules.




There is currently no data protection legislation in the BVI though theBVIcourtswillobserveEnglishcommonlawprinciples(e.g.adutyonconfidentialityandprivacy)whicharehighlypersuasive,thoughnotbinding.TheASSIfollowstheinformationsecuritypoliciesandproce-

duresoftheCAAincludingmeasurestosafeguardagainstunau-thorised or unlawful processing of personal data, and against accidental loss or destruction of, or damage to, personal data.In particular, these policies cover the securemanagement andcontrolled access to information, business continuity, information rights,managementandprivacy,andcybersecurity–forexample,policystatement51dealswithsafetydate/informationprotectionsharingandexchangeconsistentwithICAOAnnex19.A user of theASSI can request for information ormake an

enquiry about how the ASSI has processed his/her personalinformation under the General Data Protection Regulation(GDPR)andexpectaresponsewithinamonthfollowingthedateofreceiptbytheASSIofalltheinformationnecessarytodealwithsuchrequest.


The ANOTO provisions for safety management system andflight data monitoring, including mandatory occurrence reporting, detail the obligations on airlines for proper data main-tenance.ThesearesupportedbyguidelinesundertheOTAR.

TheBVIcourtcanalsograntfree-standinginjunctivereliefin support of foreign court proceedings and foreign arbitrations withouttheneedforsubstantiveproceedingsintheBVI.Astofinalremedies,theBVIcourtcangrantawidevariety

oflegalandequitableremediesincludingdamages,injunctions,specific performance, rescission, rectification and declaratory relief.Section 33 of theBVIArbitrationAct 2013makes interim

remedies available in arbitrationsheard in theBVIunless theparties agree otherwise. Section 43 of the BVI ArbitrationAct2013permitstheECSCtograntinterimmeasuresinrela-tion to any arbitral proceedingwhich have need or are to becommenced in or outside the BVI and such interim measures arenotsubjecttoappeal.


CivilandcriminalappealsfromtheECSCaremadetotheCourtof Appeal of the ECSC and then, ultimately, to the JudicialCommitteeofthePrivyCouncil inEngland. Suchappealstothe Privy Council are either as of right following a substan-tiveappealorrequirepermissionoftheCourtofAppealoftheECSC.FortheCourtofAppealofECSCtograntsuchleave,the applicantneeds to show that thequestion involved in theappeal is one of great general or public importance or other-wiseoughttobesubmittedtothePrivyCouncilfordetermina-tion.ItispossibletoapplyforspecialleaveofHerMajestyinCounsel ifpermissionfromtheCourtofAppealoftheECSCisnotgranted.Appeals to theCourt ofAppeal of theECSC are either as

of right following a substantivedecision that is determinativeoftheproceedings(e.g.followingatrial)orrequirepermissionfromtheECSCortheCourtofAppealoftheECSCinthecaseofinterlocutorydecisions.PursuanttotheBVIArbitrationAct2013,partiestoanarbi-

trationagreementcanagreetoincludeaprovisionontherightto appeal the final award to theECSC on a question of law.However,suchanappealisonlypossiblewiththeagreementofalltheotherpartiestothearbitralproceedingsorwithleaveoftheECSCandwherethearbitraltribunalhasgivenreasonsforitsaward.



Thereisnorelevantcompetitionorotherregulatorylawlegis-lationintheBVI.


TheBVIdoesnothaveacompetitionauthority.


ThereisnosuchregimeundertheBVIlaw.

73Maples Group







Pleaseseequestion1.2inrelationtorequirementsforapplica-tionofanAOC.

5 In Future


The BVI remains well placed tomeet demand via its role asthe vehicle (i.e. a BVI ACHoldco) in the financing, acquisi-tion and leasing of aircraft. In addition to the use of a BVIbusiness company in aircraft trading, finance and leasing struc-tures,recentamendmentstotheBVIActhaveexpandedtheuseof segregated portfolio companies (“SPCs”) beyond licensed insurers and professional, private or public funds. SPCs cannow,amongotheroperations,engageinpropertydevelopmentandmanagementofanaircraft.Thisprovidesmoreoptionsandflexibilityfortheaviationindustry.Brexit implications should be followed closely given the

BVI’scurrentcommitmentsandobligationsunderitsstatusasaEuropeanUnionoverseascountryandterritoryviaitsUKover-seasterritorystatus.

AcknowledgmentThe authors are grateful to Aisling Dwyer for her contribu-tiontothischapter.AislingisapartnerinMaplesandCalder,theMaplesGroup’s law firm in theHongKongoffices. Sheis on theDispute Resolution& Insolvency team and special-isesincomplex,high-value,internationalcross-borderlitigationinvolvingBVI andCaymanentities and/or assets, and acts insome of Asia’s largest offshore corporate, insolvency/restruc-turingandshareholderdisputes.Tel:+85236907449/Email:[email protected].


TheBVIhasalocalpatentsandTradeMarksregistry.ThePatentsAct1906aswellasthePatentRegulations1906,

setout theprocedureandrequirements for theregistrationofpatents and the rights and powers that those who register them hold, including those who may apply to register a patent and the formbywhichanapplicationmustbemade.PatentsacceptedbytheBVIRegistrarofTradeMarks,PatentsandCopyrightwillbeadvertisedintheBVIGazette.TheTradeMarksAct,2013, togetherwiththeTradeMarks

Rules,2015providefortheregistrationandprotectionoftrademarks in the BVI, and related matters including the assignment andchargeoftrademarks.TradeMarksacceptedbytheBVIRegistrarofTradeMarks,PatentsandCopyrightwillbeadver-tised in the BVI Gazette, and a certificate of registration will be issuedtotherelevantapplicantwhichisprima facieevidenceofsuchperson’srighttotheexclusiveuseofthetrademark.






Pleaseseequestion1.1inrelationtotheBVIAA.




VIAirlink,alsoknownasVirginIslandsAirlink,isaBVIairlinewith a fleet of three aircraft registered in the BVI which uses GCS (global consolidation services) under an agreementwithHahnAirSystems.Effectively,thisallowsVIAirlink,whichhasnoGDSpresenceofitsown,tobedistributedinallGDSsunderthereservationcodeH1,i.e.allVIAirlinkflightsmarketedviaH1arethereforeavailableonmajorGDSsincludingAmadeus,Apollo,SabreandTravelsky.

74

Aviation Law 2020


Michael Gagie is the Singapore office Managing Partner at Maples and Calder, the Maples Group’s law firm and Global Head of the British Virgin Islands law practice. Michael practises both British Virgin Islands and Cayman Islands law and his experience and areas of practice cover corporate, downstream private equity work, commercial, banking and structured finance.Michael joined the Group in 2010. He was previously head of the Hong Kong office of an offshore firm, having relocated to Hong Kong from the British Virgin Islands in 2006. Prior to moving offshore, Michael worked for Weil, Gotshal & Manges and Simmons & Simmons in London. He also spent time on secondment at the London Stock Exchange and as in-house counsel with Shell International Limited. Michael has been ranked as a leader in his field in Chambers Global, IFLR1000 and Who’s Who Legal.

Maples Group1 Raffles Place #36-01 One Raffles Place Tower One Singapore 048616

Tel: +65 6922 8402Fax: +65 6222 2236 Email: [email protected]: www.maples.com

Rebecca Lee is a corporate and finance associate at Maples and Calder, the Maples Group’s law firm in the Singapore office. With a particular focus on the aviation industry, she has represented various financiers, borrowers and lessors on a wide range of asset financing and leasing transactions.Rebecca joined the Group in 2017. Prior to that, she was with Clifford Chance in Tokyo, Hong Kong and Bangkok.

Maples Group1 Raffles Place #36-01 One Raffles Place Tower One Singapore 048616

Tel: +65 6922 8405Fax: +65 6222 2236 Email: [email protected]: www.maples.com

The Maples Group, through its leading international law firm, Maples and Calder, advises global financial, institutional, business and private clients on the laws of the British Virgin Islands, the Cayman Islands, Ireland, Jersey and Luxembourg. With offices in key jurisdictions around the world, the Maples Group has specific strengths in areas of corporate commercial, finance, investment funds, litigation and trusts. Maintaining relationships with leading legal counsel, the Group leverages this local expertise to deliver an integrated service offering for global business initiatives. For more information, please visit: maples.com/services/legal-services.

www.maples.com


Aviation Law 2020

Chapter 13 75

Cayman Islands

Maples Group Shari McField

Sherice Arman

Cayman Islands


LegislationThe principal legislation which applies to and regulates avia-tion in the Cayman Islands is the Air Navigation (Overseas Territories) Order 2013 (“ANOTO”).

Other notable legislation pertaining to the aviation industry is as follows: ■ AirNavigation(Fees)Regulations,2010.■ AirNavigation (OverseasTerritories) (Amendment) (No.

2) Order, 2014. ■ AirNavigation(OverseasTerritories)(Amendment)Order,

2014. ■ AirNavigation(OverseasTerritories)(Amendment)Order,

2015. ■ Air Transport (Licensing of Air Services) Regulations,

1977. ■ Aircraft (Landing and Parking Fees) Regulations (1995

Revision).■ AirportRegulations(1995Revision).■ AirportsAuthorityLaw(2005Revision).■ CivilAviationAct1949(OverseasTerritories)Order1969

SINo.592of1969.■ Civil Aviation Act 1982 (Overseas Territories) (No. 2)

Order2001SINo.3367of2001.■ CivilAviationAct1982(OverseasTerritories)Order2001

SINo.1452of2001.■ CivilAviationAuthorityLaw(2015Revision).■ Civil Aviation (Investigation of Air Accidents and

Incidents)Regulations,2019.■ MortgagingofAircraftOrder,1972.■ MortgagingofAircraftRegulations,2015.TheOverseasTerritoriesAviationRequirements(“OTARs”)

provide guidance to the aviation industry in the Cayman Islands (and other UK overseas territories) on the effective implemen-tation of the standards and recommended practices under the Chicago Convention and the ANOTO.


Application for an AOC must be made to the CAACI as the competent authority in the Cayman Islands with responsibility for issuing an operator’s licences.

The operation of aircraft on a foreign air operator’s certificate is permitted; however, the grant of air transport permits and operating licencesby theCAACIwill be required for foreignregistered scheduled and non-scheduled carriers to operate in the Cayman Islands. There are minimum requirements thatmust be met for non-scheduled/charter air transport operations

1 General


The Cayman Islands is a British Overseas Territory. The Secretary of State of the United Kingdom government takeslead responsibility for ensuring that the Cayman Islands (and other overseas territories) comply with the obligations of the Chicago Convention. The Civil Aviation Authority of the United Kingdom has established a subsidiary company, Air SafetySupportInternational(“ASSI”), to oversee, support and promote aviation safety regulation in its overseas territories, including the Cayman Islands. ASSI is responsible for supporting theUK’soverseas territories in all aspects of aviation safety regulation. Regulatory Body: The Civil Aviation Authority of the Cayman IslandsThe Civil Aviation Authority of the Cayman Islands (the “CAACI”) is the body responsible in the Cayman Islands for ensuring that civil aviation in the Cayman Islands conforms to the standards of the International Civil Aviation Organization (“ICAO”).

The CAACI’s functions include the following: (a) the regulatory oversight of the aviation industry throughout

the Cayman Islands; (b) the certification and licensing of aerodromes, heliports

and air transportation services; (c) registration of aircraft, including maintenance of

the Cayman Islands Aircraft Register (the “Aircraft Register”) and the issuance, renewal, cancellation, revo-cation and variation of certificates of airworthiness of aircraft;

(d) the validation of crew and maintenance personnel licences; (e) the safety oversight of Cayman Islands Air Operator

Certificate (“AOC”) holders;(f ) the issuance of air transport permits and operating

licences for foreign-registered scheduled and non-sched-uled carriers operating in the Cayman Islands;

(g) the regulation of charges levied by airport operators; (h) acting as liaison between the Government of the Cayman

Islands and the UK Department for Transport; and (i) regulation of air traffic.Itshouldbenotedthat theAircraftRegister isprimarilyfor

aircraft undertaking private use operations, and aircraft regis-teredontheAircraftRegistermustnotbeusedforcommercialoperations (i.e. for hire or reward) unless an AOC is obtained or theaircraftfallswithinanArticle83bis agreement.

76 Cayman Islands



There are extensive laws, regulations and guidelines that regu-late the reporting and investigation of accidents and incidents that are applicable in the Cayman Islands. These include the following:a) ICAO Annex 13 Aircraft Accident and Incident

Investigation.b) TheCivilAviationAct1982(OverseasTerritories)Order

2001 – Article 75.c) Memorandum of Understanding between the Governor

andtheUKAAIB2006.d) Civil Aviation (Investigation of Air Accidents and

Incidents)Regulations,2019.e) Air Navigation (Overseas Territories) Order 2013 –

Articles 5, 7, 174, 175.f ) OverseasTerritoriesAviationRequirement (OTAR)Part

13OccurrenceReporting(OTAR13Issue4datedApril2012).

g) Overseas Territories Aviation Circular (OTAC) 13-1 Occurrence Reporting (OTAC 31-1 Issue 4 dated July2015).

The Manual of Aircraft Accident and Incident Reporting– Part I and Part II issued by the CAACI sets out in detail a summary of the legislation, regulations and guidelines relating to aircraft accident and incident reporting.

The Civil Aviation (Investigation of Air Accidents and Incidents)Regulations, 2019provide for theGovernor of theCayman Islands to, amongst other things, appoint a chief inves-tigator to carry out investigations into accidents involving aircraftinvolvedincivilaviation.Accidents,SeriousIncidentsand Incidents (each as defined in ICAO Annex 13 Aircraft AccidentandIncidentInvestigation)arerequiredtobereportedand investigated.


We are not aware of any cases dealing specifically with air oper-ators and/or airports.



The registration of title to an aircraft on theAircraft Registermaintained by the CAACI constitutes proof of title to the aircraft. However, such evidence is not conclusive.


Mortgage RegistrationThe CAACI maintains an aircraft mortgage register (the “Mortgage Register”) inaccordancewiththeMortgagingofAircraftRegulations,2015 (the“Mortgaging Regulations”), thereby offering a system for obtaining the priority and perfec-tion of security interests over aircraft. Registration on the

to the jurisdiction as well as scheduled/charter air transport operations to the jurisdiction together with payment of the applicable fees. In addition, companies that supply more than one-off ad hoc charters or who provide air ambulance services can be issued with either a blanket permit or verification letter.


The principal legislation in the Cayman Islands that governs air safety is the ANOTO. The CAACI is responsible for admin-istering air safety in the jurisdiction under the provisions of ANOTOandtheCivilAviationAuthorityLaw(2015Revision).


The CAACI regulates all aspects of safety in the aviation industry.


Air charters are not regulated separately for commercial, cargo and private charters.


TheAirportsAuthorityLaw(2005Revision)providesthatoneof the functions of the Airports Authority is to ensure airports in the Cayman Islands conform to the standards and recom-mended practices of ICAO.

Pursuant to Article 135 of ANOTO, all foreign-registered aircraft operating into the Cayman Islands for valuable consid-erationarerequiredtobelicensedtodosobytheCAACI.


Airports in the Cayman Islands are state-owned.


Airports in the Cayman Islands prescribe and regulate condi-tions of use, as well as charges. Users of airports are subject to charges, which are regulated by the Cayman Islands Airports Authority under the Airport Regulations (1995 Revision),the Airports (Security Tax) Regulations (2016 Revision), theAirportsAuthority(Charges)Regulations,2008andtheAirportsAuthorityLaw(2005Revision).

77Maples Group


Islands law, Cayman Islands law recognises the concept of acces-sion which is similar to annexation.

Based on the example above, where an engine owned by one party is installed ‘on wing’ of any aircraft owned by another party, it is common market practice for relevant parties to requireentryintoacontractual‘recognitionofrights’agreement(which is typically governed by English law) as a condition to installing an engine on a different airframe. As noted previ-ously, while aircraft engines are not capable of being registered with the CAACI, relevant parties are able to make filings on the InternationalRegistryundertheCapeTownConventioninrela-tion to engines.


The Cayman Islands currently has no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax.

Customs duty may apply to an aircraft which is brought into the Cayman Islands from any other jurisdiction unless theCollector (asdefined in theCustomsLaw (2017Revision)(the “Customs Law”)) has exercised his discretion pursuant to section 21(1) of the Customs Law to permit the import of such aircraft free of duty, for retention in the Cayman Islands on a temporarybasiswithaviewtoitssubsequentexportation,foraperiod not exceeding six months or such extended period as the Collector may authorise.


TheCaymanIslandsisnotsignatorytotheMontrealConventionor Geneva Convention. Cape Town ConventionThe Cape Town Convention came into force in the Cayman Islands on 1 November 2015 pursuant to the International Interests inMobileEquipment (CapeTownConvention)Law2015.The Chicago Convention While the Cayman Islands is not signatory to the Chicago Convention of 1944 on International Civil Aviation, certain provisions thereof are reflected in the ANOTO.


Cape Town ConventionThe UK government ratified the Cape Town Convention with UNIDROIT on 27 July 2015. The Cape Town Conventionentered into force for the UK, and by extension the Cayman Islands, on 1 November 2015.

The Cayman Islands Government passed enabling legis-lation entitling the Cayman Islands to international recogni-tion as a territorial unit of a contracting state to the Cape Town Convention and to recognition of the declarations deposited by the UK government on behalf of the Cayman Islands govern-ment, with the International Institute for the Unification of

MortgageRegisterconstitutesexpressnoticetoallpersonsofallfactsappearingontheMortgageRegister.

The Cape Town Convention came into force in the Cayman Islands on 1 November 2015 pursuant to the International Interests inMobileEquipment (CapeTownConvention)Law,2015 (the “Cape Town Law”). As a result, there exists a dual system for perfection and priority of security over Cayman Islandsregisteredaircraftforentitiesthatqualifyasfollows:(i) where there is a registerable ‘international interest’ under

the Cape Town Convention (as defined in the Cape Town Law), any such international interest in respect of an aircraft may be recorded on the international registration facilities established under the Cape Town Convention (the “International Registry”) for aircraft that meets the requirementsunder theCapeTownConvention. Incircumstances where an international interest has been registered against an aircraft that is registered with the CAACI in accordance with the Cape Town Convention, priority of a mortgage over that aircraft will be determined solely by the filings on the International Registry. Noadditional registrations are requiredwith theCAACI inrelation to a mortgage over such aircraft; or

(ii) if the Cape Town Convention does not apply, then the priority of a registered mortgage against the particular Cayman Islands registered aircraft will be determined in accordance with registration on the Mortgage RegisterpursuanttotheMortgagingRegulations.

Priority NoticesIt is also possible to file a priority notice with the CAACI by filing the applicable documentation and paying the applicable fee. If the relevant mortgage is filed within 14 days of the date of such a priority notice, it will be deemed to have priority from the time when the priority notice was registered.


Asmentionedinquestion1.1,theAircraftRegisterisprimarilyfor aircraft undertaking private use operations and a separate air operator’s certificate must be obtained before undertaking commercial operations.

Taking physical possession of the aircraft is permitted under Cayman Islands law. Cayman Islands law recognises self-help remedies in the context of security interests in aircraft (often over the shares of the aircraft owning vehicle) without the need to obtain a court order (subject to any liens and other statutory detention or retention rights of third parties); however, it is open to the relevant enforcing party to seek a court order.Permissionof theCAACI isnot requiredprior topursuing

remedies on enforcement. However, possession via either a transfer of title or change of details of the entity registered with theCAACIwillrequirethecooperationoftheCAACI(and,assuch,compliancewithanytransferrequirementsoftheCAACI).


While there is no concept of title annexation under Cayman

78 Cayman Islands


Forcreditorsthathavetakensecurity,itispossibletoenforcecertain security rights without a court order; for example, if the documentation allows the mortgagee to take possession of the aircraft or appoint a receiver. Both are self-help remedies (i.e. they are methods by which a secured creditor can enforce its security, realise the assets secured and obtain the repayment of the debt outstanding). A receiver may be appointed by the secured creditor in accordance with the terms of the security document pursuant to which the appointment is to be made and without an order of the court. The receiver acts principally in the interests of his appointor and not for the general body of creditors.Receivershipsaregovernedexclusivelybythetermsof the documents and the common law. The powers granted to a receiver are therefore primarily derived from the security docu-ment(s) pursuant to which the receiver is appointed. The powers are usually wide and should generally enable him to do all things necessary to realise the secured property for the benefit of the secured creditor. In the unlikely event that the security docu-mentation does not contain a right to appoint receivers (or the right is disputed or subject to doubt), the secured creditor may apply to the court for the appointment of a receiver.

The Cape Town Convention also provides creditors with self-help remedies. These remedies include:■ takingpossessionorcontrolofanyaircraft;■ sellingorgrantingaleaseofanyaircraft;■ collectingorreceivinganyincomeorprofitsarisingfrom

the management or use of any aircraft; ■ procuring the: (i) de-registration of the aircraft; and (ii)

export and physical transfer of the aircraft from the terri-tory in which it is situated; and

■ certain interim relief pending the determination of anyclaim.


Aviation disputes will be heard by the Cayman Islands Grand Court (Civil Division). While the Cayman Islands Grand Court has a Financial Services Division, the majority of disputeswhich arise in the aviation context are unlikely to fit within the meaning of ‘financial services proceedings’.


Fordomestic airlines/parties that are companies incorporatedin the Cayman Islands, any originating process must be served on their registered office in the Cayman Islands.For non-domestic airlines/parties, leave of the court is

requiredbeforetheserviceoutofthe jurisdictionofanyorig-inatingprocess.Order11oftheGrandCourtRules(“GCR”) sets out a prescribed list of proceedings that may be served out of the jurisdiction with the leave of the court – an aviation dispute is likely to fall within this list. Before the court will order that a party has leave to serve out of the jurisdiction, it must be satisfied that:■ theapplicanthasdemonstratedagoodarguablecasethat

the claim has an appropriate nexus to the Cayman Islands under one or more heads set out in Order 11, rule 1 of the GCR;

PrivateLawactingasdepositorypursuanttoArticle62(1)oftheCape Town Convention and Article XXXVII(1) of the Protocol –UNIDROIT.Chicago Convention Asmentioned in question 2.6, the Cayman Islands are not asignatory to the Chicago Convention, but certain provisions thereof are reflected in the ANOTO.


No, the Cayman Islands do not make use of any taxation bene-fits which enhance trading and leasing.



Under Cayman Islands law, rights to detain (or potentially sell) anaircraftcanariseunderthecommonlaworlegislation.Suchrights may arise in the following circumstances:(a) Airport charges: aircraft can be detained and sold for

non-payment of airport charges; default of payment creates a statutory lien.

(b) Possessory lien: where a person has carried out work to an aircraft with the authorisation of the owner, thereby enhancing the aircraft’s value; that person may have a lien on the aircraft to the extent that they remain unpaid for the work carried out and may refuse to return the aircraft until theyarepaid.Suchalienarisesfromthecommonlaw.

(c) Customs: where anything becomes liable to forfeiture under theCustomsLaw(2017Revision),anyaircraftusedforthecarriage, handling, deposit or concealment of that thing shallalsobe liabletoforfeiture. Forfeitureofanaircraftmay also occur where it has been adapted to be used for or is used for the purposes of smuggling or concealing goods.

(d) Crimes: where a person is convicted of an offence, any aircraft in his or her possession or under his or her control that was used in connection with such an offence or intended to be used for that purpose may be forfeited to the Crown by order of the court.

(e) War or national emergency: regulations made under the EmergencyPowersLaw(2006Revision)cangivepowersto the Governor of the Cayman Islands to authorise the takingpossessionoracquisitionofanyproperty.

(f ) Terrorism: where a person is convicted of an offence under theTerrorismLaw(2018Revision), thecourtcanmakeaforfeiture order in respect of any property in that person’s possession or control which he intended to use or it was suspected he would use for the purpose of terrorism.


Self-help remedies are available under Cayman Islands law(under both the common law and the Cape Town Convention).

79Maples Group







We are not aware of any sector-specific rules which would apply.


Sofarasweareaware,therearenostatesubsidieswithrespectto particular routes that apply in the Cayman Islands.


The Data Protection Law, 2017 of the Cayman Islands (the “DPL”)cameintoforceon30September2019.

A data controller must comply with the data protection prin-ciples in respect of personal data which it processes, or which is processed on its behalf by any “data processor”. Broadly, personal data must only be processed by a data controller for purposes of which a data subject is aware and would expect. It is incumbent on the data controller to ensure that the personal data for which it is responsible is protected by its data proces-sors.Adatacontrollerisalsorequiredtodisclosehowandwhypersonal data is processed in the context of its activities, and by whom. This is customarily set out in a privacy notice.

Personal data shall be obtained only for one or more speci-fied, explicit and legitimate purposes, and shall not be further processed in any manner incompatible with that purpose or those purposes. Legal bases for processing personal data are set out in the DPL. Additional conditions apply to the processing of sensitive personal data.

Personal data processed for any purpose shall not be kept for longer than is necessary for that purpose. Retention periodsshould be considered and determined by the data controller.

The DPL grants specific rights to individuals, including the right to be informed, the right of access, the right to rectifica-tion, the right to stop/restrict processing, the right to stop direct marketing, the right to complain and seek compensation and rights in relation to automated decision making.


The DPL prescribes actions to be taken by a data controller in the event of a personal data breach.

■ thereisaseriouscasetobetriedonthemerits;and■ it isproperintheexerciseofitsdiscretiontograntleave

and particularly that the Cayman Islands are the appro-priate forum.


Although remedies will vary depending on the nature of the dispute, generally the following may be available:On an interim basis:■ an injunction relating to the aircraft and other aviation

assets (for example, an order for detention of the aircraft or a freezing injunction preventing the disposition of the aircraft); and

■ interimreliefavailableundertheCapeTownConvention(seequestion3.2).

On a final basis:■ damages;■ apermanent injunctionrelatingtotheaircraftandother

aviation assets;■ anordertotakecontrolofanaircraftandotheraviation

assets; ■ anorderforthesaleofanaircraftandotheraviationassets;

and■ remediesavailableundertheCapeTownConvention(see

question3.2).


Appeals from the Grand Court are to the Cayman Islands Court of Appeal (“CICA”), which usually sits three times a year. Subject to certain restrictions, there is an automatic right ofappeal to the CICA from any final decision of the Grand Court. Ingeneral,leaveofthecourtisrequiredtoappealaninterlocu-tory decision.

An appeal may lie to the Privy Council from the CICA.



There are no restrictions or regulations affecting joint ventures between airline competitors in the Cayman Islands.


Pleaseseequestion4.1.Therearenorestrictionsorregulationsapplicable to airline competitors in the Cayman Islands.


Please see question 4.1. There is nonotification systemwithapplication to such parties.

80 Cayman Islands



There is no specific Cayman Islands legalisation regulating late arrival and departure of flights.


The Cayman Islands Airport Authority (“CIAA”) is governed primarilybytheAirportsAuthorityLaw(2005Revision).

Broadly speaking, the obligations imposed on the CIAA include the following: (i) plan, develop, redevelop, construct, administer, control

and manage airports in the Cayman Islands; (ii) provide and maintain runways, terminals and other

services and facilities as necessary for the efficient opera-tion of airports in the Cayman Islands;

(iii) provide rescue and fire-fighting equipment and servicesat airports, and carry out regular drills and exercises and otherchecksofallsecurityandsafetyequipment;

(iv) provide meteorological services to users of the airports;(v) provideadequate facilities for theexerciseof theregula-

tory powers of the Cayman Islands, including customs, immigration and health and security checks;

(vi) collect prescribed or approved dues, rents, landing and parking fees and charges; and

(vii) ensure that the airports conform to ICAO-recommended standards and practices.


There is no consumer rights legislation in the Cayman Islands that applies to the aviation sector.


The major air carriers operating in the Cayman Islands use the mainGDSplatforms–suchasSabre,Amadeus,WorldspanandApollo. Information regarding whether these GDSs operatefrom the Cayman Islands is not publicly available at the time of this publication.




There are no restrictions on vertical integration between air operators and airports under Cayman Islands law.

A “personal data breach” is defined in the DPL as “a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorized disclosure of or, access to, personal data transmitted, stored or otherwise processed”. However, Ombudsman guidance provides that a personal data breach does not need to be reported if it is unlikely to prejudice the rights and freedoms of the affected data subjects.SanctionsundertheDPLincludefinesofuptoCI$100,000

(approximately US$120,000) and monetary penalty orders ofuptoCI$250,000(US$300,000).TheDPLalsoprovidesthataperson who suffers damage due to a contravention of the DPL has a cause of action against the data controller for that damage.


The Cayman Islands Intellectual Property Office (“CIIPO”) and relevant Cayman Islands laws provide for a robust and modern regime in the Cayman Islands for the protection of intellectual property rights to the highest international standards.Trade MarksCayman Islands law provides for trade marks to be registered with the CIIPO and also for, inter alia, assignments, licences and security interests be recorded with the CIIPO against a regis-tered trade mark.Patents Cayman Islands law provides for the recordal in, and exten-sion to, the Cayman Islands of: (i) a patent that is current and effective in the United Kingdom; (ii) a patent granted under the Convention on the Grant of European Patents designating the United Kingdom, and which under the law of the United Kingdom is treated as if it were a patent granted under such law; or (iii) a patent granted under the Community Patent Convention. Design RightsCayman Islands law provides for the recordal in, and extension to, the Cayman Islands of existing registered UK and EU design rights.

The effect of the recording of an extension of the UK or EU patent or design right in the Cayman Islands is to afford in the Cayman Islands to the owner of the right so recorded all the equivalentrightsandremediesavailabletotheownerinrespectofsuchpatentordesignrightintheUK.Suchprotectionandrights in the Cayman Islands continue from the time the right arose in the UK and continue in force so long as the protection and rights remain in force in the UK. Copyright The Copyright (Cayman Islands) Order, 2015 and the Copyright (Cayman Islands) (Amendment) Order, 2016 (the “Orders”) cameintoforceon30June2016,extendingcertainprovisionsoftheUKCopyright,DesignsandPatentsAct1988totheCaymanIslands. The copyright regime provides modern IP protection for computer software and databases, among other things such as original literary work, dramatic, musical or artistic work.


There is no specific Cayman Islands legislation governing the denial of boarding rights and/or cancelled flights. Certain provisions of the Warsaw Convention may apply by extension to the Cayman Islands via the United Kingdom, subject to the flightinquestionbeingclassifiedasaninternationalflight.

81Maples Group


AcknowledgmentsThe authors are grateful to Partners, MarkWestern, AbrahamThoppil and Tim Dawson and Of Counsel, Nick Herrod for their contribution to this chapter. Mark is theHongKong officeManaging Partner ofMaples

and Calder, theMaplesGroup’s law firm, where he is head ofthe finance practice in Asia and the global head of asset finance. Markrepresentsmajorfinancialaspectsofbanking law,special-isinginassetandacquisitionfinance.Hehasworkedextensivelyintheaircraftfinancesector.(Tel:+85236907407/Email:[email protected].)Abraham’s expertise covers a rangeof areas includingM&A,

privateequity,hedgefund,insuranceandstructuredfinancetrans-actions. He also has extensive experience in local Cayman Islands business matters and all types of general corporate and commer-cial law; in particular, technology, fintech, patent, trade mark and otherintellectualpropertymatters.(Tel:+13458145366/Email:[email protected].)TimisamemberoftheFinancialServicesRegulationteam.He

provides all aspects of regulatory and financial services advice, including in respect of Cayman Islands licensing, prudential and conduct of business requirements, reporting and informationexchangeobligations(includingthosederivingfromFATCAandtheCommonReportingStandard),andadviceondutiesofdataprotection and confidentiality, anti-money laundering and combat-ting of terrorist finance. Tim is a member of both industry and Cayman Islands Government legal and regulatory working groups. (Tel:+13458145525/Email:[email protected].)

Nick provides a wide range of advice on international restruc-turings, contentious and non-contentious insolvency issues, struc-tured finance and derivatives. In particular, Nick specialises in cross-border insolvency, schemes of arrangement and structuring transactions to mitigate against the risks of insolvency. (Tel: +1 3458145654/Email:[email protected].)


Inordertoqualifytoholdanairoperator’scertificate,anappli-cant must have a physical presence in the Cayman Islands. As a result, operators generally establish a company in the Cayman Islands or register in the Cayman Islands, a branch of an existing company incorporated outside the Cayman Islands.

5 In Future


Developments in the data protection and consumer protection sectors are likely to feature as major focus areas for the Cayman Islandsinthenextyearortwo.Followingtheimplementationof data protection legislation in September 2019, operators inthe aviation industry will need to put policies and procedures in place to ensure they meet their obligations under the legislation.Further, legislative proposals are being made to introduce

safeguards for consumer interests in matters relating to the supply of goods and services which will be worthy of attention by the aviation sector over the course of the next couple of years, particularly during the consultation phase of the process.

82

Aviation Law 2020

Cayman Islands

Sherice Arman is a partner at Maples and Calder, the Maples Group’s law firm in the Cayman Islands where she specialises in financing transactions, including banking and asset finance, fund and corporate finance. Sherice heads up the shipping group and is recognised as an industry leader in asset finance in the Cayman Islands, in particular for ship and aircraft finance. She also has significant experience in the field of regulated M&A transactions and Cayman Islands regulatory advice.

Maples Group PO Box 309, Ugland HouseSouth Church Street, George TownGrand Cayman, KY1-1104Cayman Islands

Tel: +1 345 814 5248Fax: +1 345 949 8080 Email: [email protected] URL: www.maples.com

Shari McField is an Of Counsel at Maples and Calder, the Maples Group’s law firm in the Cayman Islands and has extensive experience advising on asset finance transactions with an emphasis on aircraft financing and leasing transactions, including transactions with a capital markets or Islamic element, aircraft registrations, vessel financing and registrations, and general corporate commercial matters. She princi-pally advises commercial banks, financial institutions, European export credit agencies, airlines and aircraft lessors.

Maples Group PO Box 309, Ugland HouseSouth Church Street, George TownGrand Cayman, KY1-1104Cayman Islands

Tel: +1 345 814 5551 Fax: +1 345 949 8080Email: [email protected]: www.maples.com


www.maples.com


Aviation Law 2020

Chapter 14 83

China

Clyde & Co

Samuel Yang

Victor Yang

China

Peter Coles



The principal legislation governing air safety in China includes:(i) the Regulations on Civil Aviation Security of the People’s

Republic of China (《中华人民共和国民用航空安全保卫条例》), issued by the State Council;

(ii) the Provisions on the Administration of Civil Aviation Safety (《民用航空安全管理规定》), issued by the Ministry of Transport; and

(iii) the Provisions on the Administration of Civil Aviation Safety Information (《民用航空安全信息管理规定》), issued by the Ministry of Transport.

Air safety is administered by the CAAC and its RAs with the cooperation of local governments.


No. The above-mentioned legislation is applicable to all of those transport categories, except military operations.


No. The CAL, which governs air charters, does not regulate separately for commercial, cargo and private carriers.


For the purpose hereof, we define “international air carrier” as the carrier with an operating licence issued by a foreign avia-tion authority.

In accordance with the Certification Rules for Operation of Foreign Public Air Carrier (《外国公共航空运输承运人运行合格审定规则》), an international air carrier is required to

1 General


The principal legislation applying to aviation in China includes:(i) the Civil Aviation Law of the People’s Republic of China

(《中华人民共和国民用航空法》, “CAL”), which is the general governing law;

(ii) administrative regulations issued by the State Council, such as the Regulations of the People’s Republic of China for the Administration of the Airworthiness of Civil Aircraft (《中华人民共和国民用航空器适航管理条例》) and the Regulations on Civil Aviation Security of the People’s Republic of China (《中华人民共和国民用航空安全保卫条例》); as well as

(iii) governmental provisions under the China Civil Aviation Regulations (《中国民用航空规章》, “CCAR”), issued by the Civil Aviation Administration of China.

As per the authorisation of the CAL and the State Council, the Civil Aviation Administration of China (中国民用航空局, “CAAC”), under the Ministry of Transport, is the competent authority in civil aviation responsible for national aviation issues. Under the CAAC, there are seven regional administrations (地区管理局, “RAs”) in China, namely in the north, east, north-east, north-west, south-west, central and southern, and Xinjiang RAs, responsible for regional issues as authorised by the CAAC.


A domestic air carrier needs to complete the following three steps in order to obtain an operating licence:■ Step1:theaircarrierneedstosubmitallthelistedapplica-

tion documents online.■ Step2:thecorrespondingRAswillreviewthedocuments

and make a decision within 20 days after receiving theapplication.

■ Step3: if theapplication isapproved, thecorrespondingRAs will issue an operating licence to the air carrier within 10workingdaysafterapproval.

84 China


aviation products recognised by the CAAC will only need to get procedural review in order to be recognised by the FAA, and vice versa, which simplifies the recognition procedure of exporting and importing aviation products between the two countries.

It is also noteworthy that the development plan for Guangdong–Hong Kong–Macao Greater Bay Area (《粤港澳大湾区发展规划纲要》) instructs to build airport clusters in the Greater Bay Area, reconstructing and expanding airports in Guangdong, Hong Kong and Macao.



Yes. In accordance with the CAL, the Property Law of the People’s Republic of China (《中华人民共和国物权法》, the “Property Law”) and its judicial interpretation, registration of ownership in the aircraft register constitutes valid proof of ownership. However, the creation, change, transfer or elimi-nation of ownership of aircraft can still become effective even without registration and valid interests of bona fide third parties are protected even if not registered.


Yes. In accordance with the CAL and the Property Law, mort-gages of civil aircraft shall be registered with the competent avia-tion authority under the State Council, i.e. the CAAC and its RAs.

In line with the principles surrounding the registration of ownership, the creation, change, transfer or elimination of mort-gages can still become effective without registration and the valid interests of bona fide third parties are protected even if not regis-tered. In addition, registered mortgage rights will be preferred over unregistered ones.


In accordance with the CAL, a civil aircraft lease contract has to be made in writing; in the case of a finance lease, or other leases covering a period of six months or longer, registration shall be made with the competent civil aviation authority under the State Council, otherwise the interests under such lease shall not be valid against a third party.

During the period of a finance lease, the lessee is legally enti-tled to the rights of possession, utilisation and earnings from the relevant civil aircraft, and the lessor has to ensure to the lessee the right to possess and use the civil aircraft without interference.


No. In accordance with the CAL, title annexation does not apply to aircraft engines.

receive documentary inspection of its foreign operating licence, aircraft documents and safety documents, and obtain a Foreign Public Air Carrier Operating Specification (《外国公共航空运输承运人运行规范》) from the corresponding RAs in order to operate in China. In addition, an international air carrier will only be allowed to operate within the scope as approved by its foreign operating licence. Nevertheless, there is no difference in substance on the daily operation compared to domestic carriers.


In accordance with the CAL and the Regulation on the Administration of Civil Airports (《民用机场管理条例》), there is no specified rule prohibiting or limiting the establish-ment of privately owned airports. Notwithstanding, the airports in China are usually state-owned or state-controlled.


The airports do not impose specified requirements on the iden-tity of a carrier flying to and from Chinese airports, so long as the carrier is legally licensed and obeys all Chinese aviation legis-lation when it is within Chinese territory.


Air accident investigations are subject to the Regulations on Civil Aircraft Accident and Flight Accident Investigation (《民用航空器事故和飞行事故征候调查规定》). In accordance with this Regulation, the CAAC and its relevant RAs are responsible for conducting air accident investigations. The country of aircraft registration, design and manufacture and the air carrier’s home country have the right to participate in some procedures of the investigation.

In addition, it is noteworthy that the CAL sets up a two-cat-egory liability limitation system for air accidents, dependent on whether the air transport is domestic or international. For air accidents which occur during domestic air transports, the limitationof liabilityadoptedby theCAL isCNY70,000perpassengerforpersonalinjury,CNY50perkilogramfordamageand/orlossofcheck-inluggageandCNY2,000perpassengerfor damage of carry-on luggage. For air accidents which occur during international air transports, the 1999 MontrealConvention should be applicable. Advanced payment is not required by legislation, while in practice it may be achieved by the insurer.


One notable development is that the new Beijing Daxing International Airport (IATA: PKX) commenced operations in September2019.TheairportaimstoservetheJing-Jin-JiCapitalMegalopolis and ease up the current traffic at the Beijing Capital Airport (IATA: PEK).

In addition, the CAAC and the FAA have signed the Implementation Procedures for Airworthiness (《适航实施程序》). After the signature and ratification of this agreement,

85Clyde & Co


In addition, local governments may have their own taxation benefit policies on aircraft trading and leasing.



In accordance with the Property Law, in case a debtor fails to pay its due debts arising from a civil aircraft, such as the main-tenance fees, the creditor may take the lien of the specified civil aircraft which he has lawfully possessed. Moreover, a debtor may pledge its civil aircraft to the creditor for possession.

In addition, the court may arrest the civil aircraft with the assistance of an airport or aviation authority for the purpose of enforcing a civil aircraft lien, which includes remuneration for rescuing the civil aircraft and necessary expenses incurred for the custody of the civil aircraft, as well as enforcing a pledge, mortgage or other security set upon the civil aircraft. Moreover, for a case where it may be difficult to execute a judgment or any other damage may be caused to a party, the court may also issue a ruling on property preservation of the civil aircraft before and during the judicial procedures.

It is noteworthy that China has made the declaration that the above-mentioned rights shall not be affected by any provision in the Cape Town Convention.


No. In accordance with the CAL, the lessor/financier who intends to retake possession of an aircraft, either pursuant to a lease agreement or an aircraft mortgage, will have to resort to judicial proceedings, otherwise the lessee is legally entitled to the rights of possession of the civil aircraft during the period of the finance lease, and the lessor/financier shall ensure that the lessee possesses the civil aircraft without interference. Only when the lease contract comes to an end is the lessee obliged to return the civil aircraft to the lessor/financier.


Unlike maritime disputes, there is no special court for aviation disputes; such disputes will be heard before the corresponding People’s court as other general disputes. The Chinese courts are divided into a four-level court system; namely, the Supreme People’s Court, Higher People’s courts, Intermediate People’s courts and Basic People’s courts, hearing cases depending on the value and influence of the dispute.

Notwithstanding, there is an arbitration institution special for aviation disputes – Shanghai International Aviation Court of Arbitration (“SHIACA”),whichwasestablishedin2014.

The People’s courts handle both civil and criminal cases in different divisions.


(a) The tax implications in China vary according to the circumstances:■ For domestic aircraft trading in China, the value-

added tax (“VAT”) is13%and thereare threeaddi-tional VAT taxes; namely, the urban maintenance and construction tax, the educational surtax as well as the local educational surtax are levied.

■ Foraircraftimport,anextraimportcustomsdutymaybelevied in addition to the VAT and additional VAT taxes, depending on the destination country of the aircraft.

■ Foraircraftexport,VATwillnotbeleviedorwillberefunded. In addition, no export customs duty will be levied since aircraft fall outside the list of goods for which export customs duty should be charged.

(b) Stamp duty is levied on specified documentation, including contracts involving sale and purchase, loan and the leasing of aircraft.


Yes.ChinaratifiedtheMontrealConventionin2005,theGenevaConventionin1999andtheCapeTownConventionin2008.


Unlike other jurisdictions, ratified international conventions do not automatically come into force as domestic legislation. The application of international conventions will depend on the specified legal provisions in domestic legislation.

Where the provisions of an international treaty concluded or acceded to by the People’s Republic of China are different from those of the CAL, the provisions of that international treaty shall apply. For instance, the Montreal Convention prevails on issues relating to limitation of liability and the Geneva Convention prevails on issues relating to property rights of aircraft. It is noted that issues relating to internal transactions under the Cape Town Convention are not applicable in China.

In addition, the CAAC has issued some regulations in order to implement the Conventions, for instance, the Measures for the Management of Interests Registration Authorisation Code in Civil Aircraft International Interests Registry of the People’s Republic of China (《中华人民共和国民用航空器国际利益登记处利益登记授权代码申办管理办法》) for the implementa-tion of the Cape Town Convention.


Generally, there is a taxation benefit for import VAT of aircraft withadeadweightover25T,reducingtoamuchlowerrateof5%.

86 China




The establishment of joint ventures is subject to the Anti-monopoly Law of the People’s Republic of China (《中华人民共和国反垄断法》, the “Anti-Monopoly Law”) and corre-sponding enterprise legislation depending on the form of the joint venture, such as the Company Law of the People’s Republic of China (《中华人民共和国公司法》, the “Company Law”).

In case one of the airline competitors is a foreign entity, the establishment of a joint venture is further subject to the Law of the People’s Republic of China on Chinese–Foreign Equity Joint Ventures (《中华人民共和国中外合资经营企业法》, the “Chinese–Foreign Equity Joint Ventures Law”) and the Provisions on Foreign Investment in Civil Aviation (《外商投资民用航空业规定》).


In accordance with the Anti-Monopoly Law, a relevant market consists of the range of the commodities for which, and the regions where, undertakings compete against each other during a given period of time for specific commodities or services.

The Guidelines on the Definition of a Relevant Market (《关于相关市场界定的指南》), issued by the Anti-Monopoly Commission under the State Council (国务院反垄断委员会), further clarify that the approach to determine the relevant market should focus on analysing product substitutability from both demand and supply perspectives, with the main focus on demand, considering elements such as the product/service’s characteristics, application, pricing and sales channels. Where the market scope is uncertain or is in dispute, the “hypothetical monopolist test” may be adopted.


No. Instead, in accordance with the Anti-Monopoly Law, when the intended concentration of undertakings reaches the threshold level as set by the State Council, undertakings shall declare in advance to the authority for enforcement of the Anti-Monopoly Law under the State Council, otherwise they shall not implement the concentration in the absence of such declaration. The decision of approval made by the authority does not consti-tute regulatory clearance or anti-trust immunity.


Currently, only mergers and acquisitions among companies are regulated in China by the Company Law. In addition, joint ventures between Chinese and foreign enterprises are specifically regulatedbytheChinese–ForeignEquityJointVenturesLaw.

There is no division between full-function and non-full-func-tion joint ventures in Chinese legislation, since currently only joint ventures taking the form of companies are regulated.


In accordance with the Civil Procedure Law of the People’s Republic of China (《中华人民共和国民事诉讼法》), for parties with domiciles or habitual residences in China, service of litiga-tion documents can only be made via the following approaches: directly serving to the recipient; serving to any of the recipient’s adult family members; serving by another entrusted People’s court; serving by postal service; forwarding to the political organ or the prison; as well as serving by public announcement. A receipt shall be required for every litigation document that is served.

For parties without domestic domicile or habitual residence, service of litigation documents shall be made in accordance with bilateral treaties and/or the Hague Service Convention or, in case there is no bilateral treaty and the other country is not a member of the Hague Service Convention, through diplomatic channels.


The following remedies are available:i) On an interim basis, the courts and arbitral tribunals are

permitted to issue a ruling on preservative measures for a case where it may be difficult to execute a judgment or any other damage may be caused to a party.

ii) On a final basis, there are three types of judgments avail-able for civil and commercial cases in China, namely: (1) judgments ordering parties to undertake civil obli-gations, which include compensatory damages, specific performance, injunction and restitution; (2) affirmativejudgments, which are similar to declaratory remedies in commonlaw;aswellas(3)modificationjudgments,whichmodify the legal relationship between parties.

In addition, for consumer, admiralty and criminal cases, punitive damages may be given by the court for the purpose of punishment.


For the decision rendered by the court of first instance, a party who refuses to accept it may bring an appeal only once to the People’s court at the next higher level. There is no substan-tive requirement on an appeal so long as it is filedwithin 15days after the date on which the written decision was served. Notwithstanding, if the decision is rendered by the Supreme People’s Court as the court of first instance, it cannot be appealed.

Furthermore, for the decision of an arbitral tribunal, there is no right of appeal for the substantial contents of an arbitration award.Notwithstanding,inaccordancewithArticle58oftheArbitration Law of the People’s Republic of China (《中华人民共和国仲裁法》), a party may apply to set aside an arbitration award to the intermediate People’s court in the place where the arbitration procedure was defective, e.g., there was no binding and effective arbitration clause.

87Clyde & Co



In accordance with the Civil Law and the Consumer Protection Law, the obligations on a carrier may include the following:■ Cessationofinfringement.■ Eliminationofdanger.■ Compensationforloss.■ Paymentofliquidateddamages.■ Eliminationofadverseeffects.■ Makinganapology.

Prior to and during the court proceedings, the People’s court may, at the application of the passenger or of itself when neces-sary, order the airline to or not to conduct certain acts for the purpose of ensuring the security of passenger data. Interim attachment of assets is also available in either litigation or (domestic) arbitration, providing certain requirements are met.


Intellectual property is mainly protected by four mechanisms, namely: copyright is protected by the Copyright Law of the People’s Republic of China (《中华人民共和国著作权法》); patents are protected by the Patent Law of the People’s Republic of China (《中华人民共和国专利法》); trademarks are protected by the Trademark Law of the People’s Republic of China (《中华人民共和国商标法》); and trade secrets are protected by the Anti-Unfair Competition Law of the People’s Republic of China (《中华人民共和国反不正当竞争法》).


At present, there is no legislation governing the denial of boarding rights, but different airlines and airports may apply their own rules. Notwithstanding, the draft of the Provisions on the Administration of Public Air Transport Passenger Service (《公共航空运输旅客服务管理规定（征求意见稿）》) is worded to regulate the order of denying passengers’ boarding rights under the circumstances of overbooking. This draft has recentlycompletedtheprocedureofpublicconsultationinJuly2019anditmaytakesomeyearsforthefinalversiontobeissuedand come into force.

Flight cancellation is governed by the Provisions on the Punctuality Management of Flights (《航班正常管理规定》). The Provisions stipulate that in the event of a flight depar-ture delay or cancellation, a carrier shall provide services to passengers including accommodation services, as well as ticket refunding services or rescheduling services.


In accordance with the Provisions on the Punctuality Management of Flights, at the time of flight departure delay or cancellation, carriers shall publish the information about the flight departure delay or cancellation to the airport manage-ment bodies, air traffic administration, ground service agents andaviationsalesagentsevery30minutes,includingthecauseof the delay or cancellation as well as the dynamic information of the flights.


In accordance with the Company Law, as for a corporate merger/acquisition, the companies involved shall conclude an agreement with each other and formulate a balance sheet and checklist of properties. Moreover, the companies involved shall notifythecreditorswithin10daysasofmakingthedecisiononthe merger/acquisition, and make a public announcement in a newspaperwithin30days.

In addition, in case the merger/acquisition reaches the level of declaration, the companies shall declare in advance to the competent anti-monopoly authority under the State Council. The competent authoritywillmake a decisionwithin 30daysas to whether to approve the merger/acquisition or conduct a further review. If a further review is needed, the competent authoritywillmakeafinaldecisionwithin90daysastowhetherto approve it.


No. Financial support in the aviation sector is usually achieved by policies which may change from time to time instead of fixed legislation.


Yes. For instance, state subsidies are given to long-distance inter-national routes departing from small domestic cities, new inter-national routes and short-distance branch routes.

Notwithstanding, there is no uniform criteria for these subsi-dies but it depends on the certain policies.


Passenger data is currently protected by the General Provisions of the Civil Law of the People’s Republic of China (《中华人民共和国民法总则》, the “Civil Law”) and the Law of the People’s Republic of China on the Protection of Consumer Rights and Interests (《中华人民共和国消费者权益保护法》, the “Consumer Protection Law”). Moreover, it is noteworthy that the legislator is drafting a new Personal Data Protection Law (《个人信息保护法》) in order to protect personal data systematically.

In accordance with current legislation, airlines and airports shall legally obtain and ensure the security of passenger data. Passengers have the right to claim for cessation of infringement and compensation in the case that airlines and airports: illegally collect, use, process or transmit the personal information; or illegally buy, sell, provide or publish the personal information.

88 China



Yes. There is no specified provision prohibiting or limiting vertical integration between air operators and airports.

Notwithstanding, as one type of concentration of undertak-ings, vertical integration is subject to the Anti-Monopoly Law. If such vertical integration may lead to a monopoly position, it shall not be implemented.


Yes. In accordance with the CAL and the Provisions on the Business Licensing for Public Air Transportation Enterprises (《公共航空运输企业经营许可规定》), in order to apply for a business licence for public air transport, the entity shall be established under Chinese Law and registered in China.

In accordance with the CAL and the Provisions on the Administration of Business Licensing for General Aviation (《通用航空经营许可管理规定》), in order to apply for a busi-ness licence for general aviation, not only shall the entity be established under Chinese Law but the legal representative of the entity also needs to be a Chinese citizen.

5 In Future


The public consultation on the draft Measures for Price Administration of International Air Transport (《国际航空运输价格管理办法（征求意见稿）》) was recently completed. The proposed draft authorises the CAAC to approve airfares for the international air transport of both passengers and cargo; in other words, it puts international airfares under the CAAC’s management and supervision.


In China, the management of airports is undertaken by legal-ly-established or commissioned corporate institutions (i.e. airport management bodies) under the supervision of the CAAC and its RAs.

Subject to the Regulations on the Administration of Civil Airports (《民用机场管理条例》), the airport management bodies are obliged to carry out safety and operation management functions, solve the safety and operation issues of airports upon coordination, and create a safe environment at civil airports.


The relationship between the airport operator and the passenger is regarded as a supplier-consumer relationship arising from an implied service contract. Therefore, general consumer protec-tion legislation, namely the Consumer Protection Law, fully applies to such a relationship.


The main GDS operating in China is the domestic one, Travelsky. In addition, China is open to foreign GDSs, such as Amadeus, Sabre and Travelport, allowing them to help Chinese travel agents issue tickets for international flights.


By the issuance of the Interim Provisions on the Licensing of the Direct Access to and Use of Foreign Computer Booking Systems by the Sales Agents within the Chinese Territory Designated by Foreign Air Transportation Enterprises (《外国航空运输企业在中国境内指定的销售代理直接进入和使用外国计算机订座系统许可管理暂行规定》), China is now opening up to foreign GDS players, but they are required to appoint local travel agents in order to operate in China.

89

Aviation Law 2020

Clyde & Co

Victor Yang is a hybrid lawyer handling regulatory, commercial and litigious matters for the aviation industry, but with a focus on airlines and ground handlers in mainland China and internationally. He also handles product liability coverage, defence and subrogation work, along with advising on product safety and recall. On the non-contentious front, he has substantial experience in advising Chinese and foreign clients on their investment activities in China, including joint ventures, wholly foreign-owned enterprises/representative offices, and M&A activities.Victor is fluent in Mandarin, English and German.

Clyde & CoLevel 23, Shanghai Two IFC8 Century AvenueShanghai 200120P.R. China

Tel: +86 21 6035 6108Fax: +86 21 6035 6199Email: [email protected]: www.clydeco.com

Samuel Yang works in our aviation team in Shanghai. He has extensive experience in handling Chinese litigation-related advice, as well as CIETAC arbitration, HKIAC arbitration and London arbitration, in addition to cross-border dispute resolution matters for a number of indus-tries, including aviation.Samuel is a member of the Shanghai Bar Association. He is also qualified to practise as a solicitor in England and Wales.Samuel is fluent in Mandarin and English.

Clyde & CoLevel 23, Shanghai Two IFC8 Century AvenueShanghai 200120P.R. China

Tel: +86 21 6035 6112Fax: +86 21 6035 6199Email: [email protected]: www.clydeco.com

Consistently recognised as the world’s premier aviation law firm, Clyde & Co has extensive industry know-how stretching across the entire sector. It is often found at the forefront of developments in aviation law. The team is known for handling major aviation losses and multi-jurisdictional claims, as well as for our non-contentious work including aviation finance, regulatory and employment.

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Peter Coles has 27 years’ experience working for the aviation industry, including working for a Hong Kong airline in the early 1990s and working for legal practices in Singapore and Hong Kong over the last 22 years. He handles a broad range of matters including regulatory, commercial, employment, insolvency and enforcement matters, contingency planning, incident/accident response, health and safety prose-cutions, multi-jurisdictional catastrophe and attritional loss handling.Peter qualified in England and Wales in 1996 and Hong Kong in 2003.“Peter is described as ‘a bright and well-known aviation lawyer’, highly sought after by clients for his strong expertise on regulatory and liability matters.” – Who’s Who Legal: Aviation 2018“Peter Coles attracts praise from clients for the ‘excellent advice’ he offers in relation to aviation-related insurance claims. His counsel is sought by major international insurers and companies within the aviation sector to act on high-value cross-border claims across the Asia-Pacific region.” – Chambers Asia Pacific 2019

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Aviation Law 2020

Chapter 1590

Colombia

Gongora Reina & Associates Jorge Gongora

Colombia


10. Reglamentos Aeronáuticos de Colombia (“RAC”) (Colombian Aeronautical Regulations), last updated by Resolution 3597 of 2015 of AEROCIVIL.


In order to obtain an operating licence, an air carrier needs to obtain two authorisations: safety authorisation; and economic authorisation.

Any person wishing to operate a civil aircraft must obtain a safety authorisation from AEROCIVIL and have the following (RAC 4):1. A valid certificate of airworthiness.2. A valid registry certification.3. An annual renewal certification.4. A log book.

All carriers who wish to perform scheduled or non-scheduled flight services must obtain prior certification from AEROCIVIL, submitting the following information (RAC 4):1. Proposal of economic feasibility.2. Compliance with RAC regulations, in terms of operation

and safety requirements.3. A viable and sound administrative, operational, training

and maintenance plan.Foreign air carrier applications are also analysed by

AEROCIVIL and the prospective air carrier must meet certain requirements, including, but not limited to:■ AdesignationorpermitgrantedbythesignatoryStateofthe

bilateral agreement.■ Adetaileddescriptionofrequestedroutes,frequencies,fares

and liberties.■ Adetaileddescriptionofequipment.■ Insurancepolicies.■ Adescriptionofnetcapacity.■ Incorporationofthecompanyinthecountry.■ Securities.


The safety of air transport is exclusively regulated by AEROCIVIL.AEROCIVIL, applying RAC 4, sets minimum standards and

other requirements for aircraft operation, aircraft maintenance and repair, and the possession of certification for airports owned andcontrolledbytheState.

1 General


Aviation in Colombia is primarily regulated by:■ Unidad Administrativa Especial de Aeronáutica Civil (“UAEAC”

or “AEROCIVIL”). AEROCIVIL: regulates authority approval and consumer protection; negotiates and imple-ments international transportation agreements; regulates aviation safety and security, including but not limited to minimum standards for operating and maintaining aircraft, air traffic control, and certification and registration of aircraft and their parts; manages airports controlled and operatedby the State; and investigates civil aviation acci-dents and incidents, and accidents involving other modes of transportation within Colombia.

■ The Ministry of Transport, which regulates economicauthority approval and general laws regarding transportation.

■ TheSuperintendenceofPortsandTransport,whichinspectsand controls airport concessions in terms of infrastructure.

■ TheNationalCustomsPolice,whichassistsAEROCIVILwith aviation safety by screening airline passengers, baggage and cargo, and with the control of narcotics and money laundering in Colombian airports.

The primary aviation laws are:1. Decree Law 410 of 1971: Commercial Code – Title V – Part

2 – Aeronautics.2. Law 105 of 1993, Title IV of which dictates basic provisions

on Air Transport, and sets the planning basis of the Air Transport Industry.

3. Law336of1996–theNationalStatuteforTransportation.4. Law 12 of 1947, by which the Chicago Convention of 7

December 1944 was ratified by Colombia.5. Law 19 of 1992, by which the Amendment to Article 83b of

the Chicago Convention was ratified by Colombia.6. Decree 260 of 2004, which modifies the structure of Unidad

Administrativa Especial de Aeronáutica Civil (AEROCIVIL).7. Decree 823 of 2017, which modifies and updates the struc-

ture of AEROCIVIL.8. Decree 1078 of 2015, which unifies the regulation on

Information Technologies and Communications.9. Decree 1079 of 2015, which unifies the regulation

on the Transportation Industry, including Airport Decentralisation, regulations on reports of narcotics in MaritimeandAirTransport,andtheRegulationsonCrew.

91Gongora Reina & Associates


■ Insurancepolicies.■ Adescriptionofnetcapacity.■ Incorporationofthecompanyinthecountry.■ Securities.


There are 476 airports in Colombia, of which 75 are owned by the State,313areprivate,and88areownedbylocalgovernments.Eighteen of the airports owned by the State are granted in

concession to private airport operators such as OPAIN in Bogotá, and Aeropuertos de OrienteinMedellín.

There are 13 international airports in the country


Most airportsmaintainminimum standards of safety and effi-ciency. Enforcement of these standards is undertaken by AEROCIVIL.

Accordingly, airports are allowed to manage their operations as long as they provide access to all authorised carriers without discrimination.

Airports may enter into lease agreements with all air carriers, granting access to gates and facilities in exchange for regulated charges. Airports often establish their own rules and regulations, including hours of operation, noise restrictions, baggage handling requirements, ground transportation and fuelling requirements.


AEROCIVILconducts independent investigations,as theStateauthority, into all transportation accidents and major incidents within Colombian territory. Investigations involving criminal conduct are coordinated with the Fiscalía General de la Nación, the public entity in charge of criminal investigations.

The purpose of an AEROCIVIL investigation is to gather, collect and record all available information regarding the acci-dent or incident, to publish recommendations on air safety, to determine the probable cause of the accident/incident, whenever possible, and to complete a final report.

According to Article 1948 of the Commercial Code, AEROCIVIL’s investigation is independent from any judicial or administrative process aimed at determining liability.

The main stages of the investigation are: notification and setting up; on-the-ground investigation; documentary evidence; analysis of lab evidence; and submission of the final report.


On 24 May 2019, United Continental Holdings Inc. oustedAviancaHoldingsSA’schairmanandlargeststakeholder,GermanEfromovich, just six months after the two airlines agreed to form a jointventure. TheUSairline took legal action inBogotáona defaulted $456 million loan it made to the Avianca chairman as part of a proposed partnership. It also secured Efromovich’s majority stake in Avianca – collateral for the loan – by placing KingslandHoldings,thesecond-largestshareholder,intheBoardof Directors.

AEROCIVIL also investigates aviation accidents to determine the probable cause of the accident and issue safety recommenda-tions in order to prevent similar accidents from occurring in the future (RAC 8).

Finally, in accordance with RAC 98, AEROCIVIL is in charge ofallSearchandRescue(“SAR”)operations.


Aviation safety rules are contained in RAC 3 and RAC 4.RAC 3 divides commercial civil aerial activities as follows:

A. Scheduledcommoncarriers.1. Domestic common carriers.

a) Trunk.b) Secondary.c) Cargo.

2. International common carriers.a) Nationalaircarriers.

i) Passengers.ii) Cargo.

b) Foreign air carriers.i) Passengers.ii) Cargo.

B. Private carriers.1. Statecivilaviation.

a) Statecivilaviation.b) General aviation.

i) Business.ii) Sports.iii) Aeroclubs.


Aviation safety rules for non-scheduled flights are contained in RAC 3 and RAC 4.

RAC 3 divides non-scheduled aerial activities as follows:1. Domestic.

a) AirTaxiServices.b) Charter.

2. International.a) AirTaxiServices.b) Charter.


Bilateral aviation agreements prevent Colombia from discrim-inating against foreign air carriers seeking to operate in the country. As a result, foreign air carriers are treated the same as domestic air carriers and are subject to similar regulations.

To ensure safety, foreign air carriers must meet the require-ments set out in 3.6.3.3.2.2 of RAC 3, including, but not limited to:■ AdesignationorpermitgrantedbythesignatoryStateofthe

bilateral agreement.■ Adetaileddescriptionofrequestedroutes,frequencies,fares

and liberties.■ Adetaileddescriptionofequipment.

92 Colombia


For any other types of lease, they are subject to a VAT of 19%, andaGSTof25%.

There are no documentary taxes such as stamp duty.


Yes. The Republic of Colombia is a signatory to the main inter-national Conventions. The Conventions entered into force in Colombia on the following dates:■ TheGenevaConvention–10July2003.■ TheMontrealConvention–21November2001.■ TheCapeTownConvention–13July2005.


The Conventions are applied in Colombia pursuant to the proce-dures that govern the implementation of international treaties, requiring ratification and, in some cases, regulatory implementa-tion. With the exception of the Cape Town Convention (imple-mented by RAC 20 of AEROCIVIL), international conventions on aviation have been self-executing and therefore have not required legislative or administrative implementation.


No, there are no taxation benefits which enhance aircrafttrading and leasing.



Rights of detention are primarily governed by Articles 590–604 of the General Procedure Code (“CGP”). Generally, when an aircraft owner or operator has unpaid debts, a creditor may seek to obtain an enforceable court judgment and foreclose upon a lien. Such court judgment shall be registered in theNationalAeronauticalRegistryadministratedbyAEROCIVIL,according to 20.7.3 of RAC 20.However,Article1908of theCommercialCodeestablishes

that the actual seizure of the aircraft cannot be enforced until a final decision from the court is rendered.


Although Colombia is a signatory of the Cape Town Convention, as ratified through Law 967 of 2005, Colombian constitutional principles prohibit any regime of self-help available to a lessor or a financier of an aircraft for reacquiring possession of the aircraft under the lease/finance agreement.



Yes. According to Article 1792 of the Commercial Code, the NationalAeronauticalRegistryisadministratedbyAEROCIVIL,and its main objectives are:■ Toserveasameansofproofofownershipandtransferof

domain of aircraft.■ Togivepublicityovercontractsregardingaircrafttrading

and leasing.■ To provide warranties of authenticity and security into

titles, acts or documents subject to registry.■ Toperfectanyact,contractorcautionregardinganaircraft.


Yes. The National Aeronautical Registry is a public registryfor recording conveyances that affect title to, or interest in, an aircraft. The rules of the Registry are set forth in Chapter VII of RAC 20. A notarised public deed referring to the mortgage or charge must include:■ Namesofcontractingparties.■ Aircraft identification, including themake,model, serial

number and registration number.■ Thekindofmortgageorchargeincorporated.■ Anindicationofregistrydataregardingtitleto,orinterest

in, an aircraft.


Aircraft operations are regulated by AEROCIVIL in RAC 20. Accordingly, the lease or other agreement must be regis-teredintheNationalAeronauticalRegistry,includingcontractsconcluded abroad with effect in Colombia. 20.7.3 RAC.


No,thereisnoconceptoftitleannexationinColombia.


Pursuant to the Colombian Tax Code and its regulations, inter-nationaloperationalleasesaresubjecttoaGSTof1%,aslongasthey incorporate a buy option in the contract of lease.




Depending on the circumstances surrounding the case, civil courts, at the plaintiff’s request, may order equitable remedies (specific performance of injunctive relief, such as embargoes, seizures, repossession, freezing of accounts, etc.) on an interim basis.

In administrative matters, administrative courts, at the plain-tiff’s request, may order the provisional suspension of decisions issued by, or fines or penalties imposed by, public entities.


The judicial system in Colombia is fundamentally based on the principle of double instance.Incivilmatters,exceptforcasesdecidedbyMunicipalCivil

Courts in which the amount of the controversy does not exceed theequivalentinCOPofUS$36,000,onceacaseisdecidedbya trial court, a party may appeal as a matter of right to the next-level appellate court for review, as described in question 3.3, paragraph 1 above.

In administrative matters, except for cases decided by the Administrative Courts in which the amount of the controversy cannot be determined, once a case is decided by a trial court, a party may appeal as a matter of right to the next-level appellate court for review, as described in question 3.3, paragraph 2 above. If the decision is against a public entity acting as defendant, and it is not appealed in due course, it will automatically be consulted by the next-level appellate court for review, as described in ques-tion 3.3, paragraph 2 above.

As regards arbitration parties, once a case is decided by an Arbitration Tribunal, a party is entitled to request the annulment asamatterofrighttotheSuperiorTribunal.



PursuanttoLaw1340of2009,theSuperintendenceofIndustryand Commerce primarily regulates joint ventures.However,Article8ofLaw1340of2009,exclusivelyforthe

aviation industry, allows AEROCIVIL to keep its jurisdiction in all matters related to authorisations of commercial operations between airline competitors, including codeshare agreements, joint ventures, charters, interchange and block space.


The Superintendence of Industry and Commerce, as thenational antitrust authority, according to Colombian antitrust policy, for the prior analysis and in the final guidelines expected to be issued with respect to horizontal mergers subject to its control, shall take into account microeconomic variables such as the cross-elasticity of demand, in order to accurately determine the relevant market.


All civil claims, including civil aviation disputes, can be heard before the civil jurisdiction:■ The Civil Municipal Courts hear cases in which the

amount in controversy does not exceed the equivalent in COPofUS$36,000.

■ TheCivilCircuitCourtshearcasesinwhichtheamountincontroversyexceedstheequivalentinCOPofUS$36,000,and the second instance (appeal) of cases is decided by the CivilMunicipalCourts.

■ TheSuperiorTribunalshearthesecondinstance(appeal)of cases decided by the Civil Circuit Courts.

■ The Supreme Court of Justice hears an extraordinaryappeal (recurso de casación) in cases decided in the second instancebytheSuperiorTribunals,inwhichtheamountincontroversyexceedstheequivalentofCOPofUS$245,000,and under very special and restricted circumstances.

Cases in which a public entity is involved, including aviation claims, can be heard before the administrative jurisdiction:■ TheAdministrativeCircuitCourtshearcasesinwhichthe

amount in controversy does not exceed the equivalent in COPofUS$120,000.

■ The Administrative Tribunals hear cases in which theamount in controversy exceeds the equivalent in COP of US$120,000, and the second instance (appeal) of casesdecided by the Administrative Circuit Courts.

■ TheCouncilofStatehearsthesecondinstance(appeal)ofcases decided by the Administrative Tribunals.

■ If the contracting parties agree, they can settle theirdisputes through arbitration, which is regulated by Law 1563 of 2012. The decision of the Tribunal is subject to annulment, decided by the Tribunal of the incumbent District.


In civil matters, service of process is regulated by Article 290 of the CGP.Servicemaybecompletedby:

1. Personal delivery of a summons to the defendant’s resi-dence or last known place of business.

2. If personal delivery fails, papers shall be mailed to the defendant’s residence or last known place of business.

3. If the defendant’s residence or last place of business is unknown, service may be completed by publication, followed by the appointment of a public defender.

In administrative matters, service of process is regulated by Article 621 of the CGP.1. Servicemay be completed bymailing the papers to the

electronic mailbox of the public entity: a mandatory requirement for these entities.

2. In the case of private defendants, service may be completed by mailing the papers to their registered electronic address, if such is applicable, or by mailing the papers to the defend-ant’s residence or last known place of business.

94 Colombia



There are no State subsidies available in respect of particularroutes.However,asstatedinquestion4.6above,theGovernmentprovidesfinancialsupporttoSATENA,allowingittoprovideservices on routes not operated by common carriers.


3.10.1.4 of RAC 3 establishes that passengers’ personal data shall only be used for the purposes of managing the reservation and ensuring the performance of the contract of carriage by air.

Air carriers must protect personal data in order to avoid unlawful use, and data may not be commercialised in any case.

There are no specific regulations regarding airports.


While 3.10.7.18 of RAC 3 allows individuals to file a complaint, there are no specific sanctions or fines regarding the loss of private consumer data within the aviation industry.


Protection of intellectual property in Member States of theAndean Community is primarily regulated in Colombia by the Superintendence of Industry andCommerce, as perDecision486 of 2000 of the Andean Community. To protect intellec-tual property and other assets of a proprietary nature, an indi-vidual or company may file a patent, register a trademark or register a copyright with the Patent and Trademark Office of the SuperintendenceofIndustryandCommerce.


3.10.2.13.2 of RAC 3 governs the denial of boarding rights in cases of delay, cancellation and overbooking.

In cases of delay, the carrier must provide the passenger with refreshments, a phone call and a meal, whenever the delay is less than five hours. If the delay exceeds five hours, the carrier must compensate the passenger for at least 30% of the price of the ticket.

In cases of cancellation, the carrier shall be exonerated of any liability if it reimburses the passenger for the total price of the ticket.

In cases of overbooking, the carrier must ensure that the passenger is able to embark on the next available flight.

TheSuperintendenceshalladoptthecriteriaofsubstantiallylessening competition in order to analyse the adverse competi-tive effects that this kind of operation may cause in the market. Additionally, aspects such as the capacity of supply substitution and the execution of free trade agreements shall be taken into account in the above-referenced analysis. Article 9 of Law 1340 of 2009.

In aviation matters, AEROCIVIL is in charge of the above-mentioned analysis.


No.Thereisnosuchsystemofregulatoryclearance/antitrustimmunity in Colombia’s jurisdiction. According to Article 9 of Law 1340 of 2009, companies shall always notify or request prior authorisation from the antitrust authorities.


Depending upon the amount of operational income or the amount of total assets, individually or combined, in the previous fiscal year, parties seeking to merge with or acquire another company, or to form a cooperative agreement or joint venture,must request authorisation fromtheSuperintendenceof Industry and Commerce, and from AEROCIVIL in the avia-tion market, prior to closing.

If the two parties combined do not reach 20% of the relevant market, only a notification is needed. Article 9 of Law 1340 of 2009.


Parties seeking the approval of mergers, acquisition mergers and jointventuresmust fileanapplication to theSuperintendenceof Industry and Commerce, or to AEROCIVIL for aviation matters, containing a pre-evaluation request and a brief report of the operation, according to the instructions set forth by the Superintendence’sregulations.TheSuperintendenceshallpublishdetailsoftheapplicationin

a national newspaper, in order to allow third parties to provide useful elements for the analysis of the projected operation.

Within three months, authorities must reach a final decision. Article 10 of Law 1340 of 2009.


Decree 2344 of 1971 and Decree Law 2180 of 2014 created and organised air services into National Territories, underthe umbrella of a State air carrier, SATENA. The CentralGovernment provides some kind of direct financial support to this air carrier, in order to provide services to communities in remote areas or on non-profit routes.




There is no specific prohibition on the subject of vertical inte-gration. Air operators do not own equity in airports, but they may enter into long-term use and lease agreements. The air operator agrees to the terms of use and other regulatory respon-sibilities in terms of gates, ticket counters and terminals.


According to 20.8.1 of RAC 20, ownership or effective control of commercial aircraft may only be granted to Colombian nationals.Non-commercial aircraft may be owned by Colombians or

foreigners residing in Colombia.

5 In Future


By the end of 2019, 36 million passengers will have arrived at El Dorado Airport, doubling the capacity recorded a decade ago. This problem represents an enormous challenge for the aviation industry.TheMinistryofTransport,AEROCIVIL,theairportoperator (OPAIN/ODINSA) and the airlines are designing aroute plan in order to improve the conditions and technology of both current runways, the construction of a third runway, the modernisation of the terminal and, in the long term, the construction of a new airport in another location.


AEROCIVIL is in charge of enforcing the regulations estab-lished in 3.10.13.2 of RAC 3 as stated above and, in accordance with RAC 7, it has the legal power to impose fines on air carriers.AircarriersmustestablishaCustomerServiceSystem,with

counters in every airport in which to perform operations, with the purpose of assisting passengers’ complaints or requests regarding delays, cancellations and diversions.


Airport operators are primarily governed by AEROCIVIL, pursuant to Articles 1813 and 1815 of the Commercial Code. RAC 14 requires airport operators to obtain a construction and/or reform certificate, which is part of the process of any oper-ating certificate.

RAC 14 also requires airport operators to obtain an airport operating certificate, whether they are public or private. They must comply with specific conditions regarding safety, mainte-nance and operational conditions.

For public airports, the certificate does not expire. For private airports, the certificate expires after three years.


According to RAC 3, the proper authority to enforce provisions of the National Statute of the Consumer in aviation matters(Law 1480 of 2011) is AEROCIVIL. This applies to the rela-tionship between the airport operator and the passenger.


Amadeus,TravelportandSabreoperateinColombia.


No.TherearenoownershiprequirementspertainingtoGDSsoperating in Colombia.

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Jorge Gongora is a principal of the firm Gongora Reina & Associates in Bogotá, which also has offices in Cali. He graduated as a lawyer from the University of Los Andes in Bogotá, 1985. He has an LL.M. in Insurance Law from Xaveriana University in Bogotá, 1985. He has an LL.M. in Commercial Law from the University of Los Andes, 1991, and an LL.M. in Air & Space Law from McGill University, Montreal, 1995. He was the Director of the Insurance Division of the Colombian Financial Superintendence, the Legal Manager of Grancolombiana Insurance Company, an in-house lawyer at AVIANCA, and the Aeronautical Advisor for the Government of Belize. In 1997, he entered private practice with Gongora Reina & Associates. His areas of specialty involve litigation and consulting in commercial, insurance and aviation law. He is Ombudsman for the Financial Consumer for several insurance companies, and a Post-Graduate Professor in Transportation Jurisprudence and Aviation Insurance at Externado de Colombia University.

Gongora Reina & AssociatesCarrera 4 # 18-50, Office 1606Bogota, D.C.Colombia

Tel: +57 1 286 8788 +57 3 102 8170 73Email: [email protected]: www.gongoralaw.com

Gongora Reina & Associates is a second-generation boutique law firm based in Colombia, with offices in Bogotá and Cali, and correspondents in several cities. The firm specialises in aviation, insurance and commercial law. With over 30 years of experience, we offer reliable and personal service to our national and international clients, seeking to maintain long-term rela-tionships and to provide professional expertise.

www.gongoralaw.com


Aviation Law 2020

Chapter 16 97

Denmark

IUNO Aage Krogh

Denmark


■ The other pertaining to aircraft with a maximum certificated take-off mass of less than 10 MTON and/or fewer than 20 seats.

Operating licences are granted by the CAA. The application forms can be found on the CAA’s website (www.trafikstyrelsen.dk).


The Air Navigation Act is the main legislation governing air safety in Denmark. The legislation is supplied by the relevant BLs and the EC Regulations regulating the area. Air safety within Danish aviation law is furthermore dependent on a vast quantity of guidelines from the European Aviation Safety Agency (“EASA”).

As a signatory to the Chicago Convention, Denmark must also ensure that air navigation equipment and operations comply with standards from the International Civil Aviation Organisation (“ICAO”).

The CAA administers and supervises air safety in Denmark and is responsible for enforcing Danish law, as well as international regulations and standards applicable to air safety, in Denmark.


In general, safety regulations for commercial, cargo and private carriers are the same.

The most noticeable difference in air safety regulation between commercial, cargo and private carriers is within the area of Continuous Airworthiness Management Organisation (“CAMO”), subject to EC Regulation no. 1321/2014.


Air charters by non-EU carriers are separately regulated by the CAA’s executive order BL 10-1, whereby such non-EU carriers shall submit an application to the CAA 48 hours in advance of the intended landing in Denmark, and 30 days in advance of the intended landing, if the intention is to carry out more than four chartered flights within two months in Danish air space.

No separate regulation applies to EU carriers operating air charters in Denmark.

1 General


Danish legislationThe main framework legislation governing Danish aviation law is Act no. 1149 of 2017 (the “Air Navigation Act”).

The Danish Transport Agency issues binding executive orders, so-called “BLs”, which constitute the more detailed Danish aviation law regulations. European Union Orders (“EC Regulation”)Denmark is subject to the vast quantity of EC legislation concerning aviation law, which are directly applicable under Danish Law.International conventionsDenmark has ratified:■ The 1993 Rome Convention, signed in Rome on 29 May

1933. ■ The 1944 Chicago Convention, signed in Chicago on 7

December 1944. ■ The 1948 Geneva Convention, signed in Geneva on 19

June 1948. ■ The 1999 Montreal Convention, signed in Montreal on 28

May 1999. ■ The 2001 Cape Town Convention, signed in Cape Town

on 16 November 2001. ■ The Cape Town Implementation Act, which entered into

force on 1 February 2016 in Denmark.Regulatory bodiesThe main national regulatory bodies are:■ The Danish Transportation Agency (the “CAA”). ■ The Danish Competition Council. ■ The Danish Consumer and Competition Authority.


The conditions of obtaining an operating licence are stipulated in EC Regulation no. 1008/2008, as amended by EU Regulation 2018/1139, specifically in Article 4.

There are two types of operating licence:■ One pertaining to aircraft with a maximum certificated

take-off mass of 10 MTON or more and/or fewer than 20 or more seats.

98 Denmark




A registration of ownership can lead to the presumption that the registered owner is the owner of the aircraft but, in some cases, it does not constitute proof of ownership by itself. Ownership will be determined case-by-case and will depend on the specific details regarding the aircraft.


Yes. The register is referred to as the Danish Register of Rights over Aircraft and is administered by the CAA. It is a prerequisite, for the registration of rights over an aircraft in the Danish Register of Rights over Aircraft, that the said aircraft is registered in the Danish Nationality Register. The processing time is required by law not to exceed 10 days from the entry. Entries are given priority based on the date of the entry. Both security interest by agreement and by judicial order can be and are perfected by registering the aircraft.

International interests are registered in the International Registry of Mobile Assets as according to the Cape Town Convention. The registry is recognised by all ratifying states and priority is determined on a first-to-file basis. Registration of interest serves as a notification and is considered best practice for owners, creditors, debtors, lessors, lessees, agents and others in protecting their financial interest.


Denmark has implemented the Cape Town Convention; however, the Cape Town Convention only applies to rights established after 1 February 2016. That means that registrations made before 1 February 2016 are subject to the previous regime under the Danish Aircraft Registration Act, i.e. the Geneva Convention set-up, where ownership and mortgage rights over aircraft also cover attached components, and it is not possible to register specific rights over components. Consequently, a lessor or financier needs to be aware of whether they have an interest in an aircraft or an engine in a fleet which is subject to a component pooling arrangement, which includes aircraft registered in Denmark before 1 February 2016. If this is the case, the related component is at risk of transferring mortgage and ownership rights to an aircraft to which it is more than temporarily attached.




International carriers from outside the EU are subject to more restrictions than EU carriers, as aircraft arriving from or departing to airports outside the EU VAT area, which have not been pre-approved by the Danish Customs and Tax Administration, will be subject to customs search and control. There are no taxes applied exclusively to international air carriers (inside or outside the EU) and none to domestic air carriers.


Larger airports in Denmark are, generally, fully or partly owned by the state or local municipalities. Copenhagen airport, CPH (Københavns Lufthavne A/S) is a public limited company listed on the Danish Stock Exchange (NASDAQ OMX Copenhagen).


Carriers will enter into an agreement with the relevant airport about the terms of use of the airport. Such agreement will include, in addition to provisions under general contract law, some of the provisions on airport regulation imposed by the CAA.

In addition to the general terms and conditions applicable to the airport, the airport will determine airport charges payable by the carriers. The determination of such airport charges is subject to prior authorisation by the CAA.


Air accidents and investigative procedures related hereto are regulated by the Air Navigation Act and by EC Regulation no. 996/2010.

In case of an air accident within the territory of Denmark, the air carrier must inform the Danish Accident Investigation Board of the accident, supplying all information on the aircraft and flight in question as soon as possible.

According to the Air Navigation Act, Section 127, the owner of an aircraft has strict liability for any personal injury or property damage caused.


In recent years there has been a large increase in the number of court cases for claims for compensation for flight delays, flight cancellations and denied boarding. These cases are regulated by EC Order no. 261/2004. This increase is seemingly caused by a rise in the number of claims agencies in Denmark.

99IUNO


In order to maintain an attachment once levied, the creditor must initiate confirmatory action with the civil courts no later than one week after the attachment is levied by the Bailiff’s court.

In addition to the above, it is possible, on a non-statutory basis, for a creditor to exercise a right of retention in an asset if the asset is in the creditor’s possession and the debt is related to it (much like a garage keeper’s lien).

The Air Navigation Act further provides for a specific right for airport operators to retain an aircraft for unpaid take-off or landing charges, provided the due take-off or landing charges in question concern a recent take-off or landing in the relevant airport.


No. All repossessions of aircraft or collection of debt require the assistance of a competent court; see also question 3.1.


The Danish courts are competent in all civil cases, as well as criminal cases.


Normally, a Danish court would informally use the same procedure for service abroad as within Denmark and send out court documentation with a request for the receiving party to sign and return an evidence of service. If this does not work, EC Regulation no. 1393/2007 can be applied on the service in Member States of judicial and extrajudicial documents in civil or commercial matters.


Please refer to question 3.1 above. Interim precautions are not available in arbitration.


Except for claims of less than DKK 20,000, all decisions by Danish courts can be appealed once (i.e. from the city courts to the high courts or from the high courts to the Supreme Court). In cases of general principal importance, a third instance appeal can be granted by a special appeal board. It is also possible to appeal claims of less than DKK 20,000 if they are granted appeal by the special appeal board.


The sale of aircraft to carriers where the aircraft is mainly meant for operating outside of Denmark is VAT-exempt.


Yes. See question 1.1 above.


The Conventions can either be ratified and then implemented into Danish law or there can be a specific law that directly incorporates a Convention into Danish law. A Convention is not applicable in Denmark just by its mere ratification.


Danish Double Tax Treaties are based on the OECD Model Tax Convention. The Convention stipulates that profits from the operation of aircraft in international traffic, i.e. leasing and trading, are taxable only in the contracting state in which the place of effective management of the enterprise is situated.

Some Danish Double Tax Treaties may have a provision stating that the above-mentioned rule only applies to the Danish shares of the Nordic airline SAS.



Under the Danish Administration of Justice Act, it is possible to levy execution against a debtor’s assets through the Bailiff’s court for the purpose of having the asset sold on public auction, the proceeds of which may then be applied for the satisfaction of the creditor’s claim. Usually, it is a requirement that the debt is confirmed by judgment of a civil court (or arbitration tribunal).

If execution cannot be levied, it will be possible to have the Bailiff’s court levy as an attachment on the aircraft, provided that the creditor’s possibility of collecting the debt would be severely impaired without the attachment. In the case of aircraft, however, no attachment can be made if the aircraft is i) used exclusively for public purposes, ii) used on regular routes in public air traffic, or iii) determined for carriage of goods or passengers, if the aircraft is ready for such carriage, provided that the debt for which the attachment is sought was not estab-lished in connection with the contemplated carriage or during the carriage.

100 Denmark



A concentration that is notifiable in Denmark must not be put into effect before it has been approved by the Danish Competition Council or the Council’s time limits have expired.

This creates waiting periods of 25 working days (Phase I) after a complete notification has been received, or additionally 90 working days (Phase II) after the expiry of the first waiting period. The Danish Competition and Consumer Authority must declare whether a notification is complete within 10 working days upon receipt of the notification. In practice, the Authority may have several additional questions and may sometimes even begin negotiating possible commitments with the parties before the Phase I period is triggered.

The filing fee amounts to DKK 50,000 for simplified notifications and 0.015% of the parties’ turnover for non-simplified notifications. The filing fee is capped at a maximum of DKK 1.5 million.


There are no sector-specific Danish rules which govern financial support for air operators and airports.

The relevant regulatory framework for such support consists of the Danish and EU State aid rules.

According to Section 11a of the Competition Act, the Danish Competition Council may order the termination or repayment of aid that distorts competition and that is not granted lawfully according to public regulation. In practice, the Danish State aid rules mainly target municipal aid, which can be of interest with regard to municipality-owned airports.

When a State aid measure affects trade between EU Member States, the Danish Competition Council may refrain from dealing with an aid case and the EU State aid rules will generally apply. Of particular importance are the Commission’s guidelines on State aid to airports and airlines (OJ 2014/C 099/03), which were adopted in 2014 and replaced the previous guidelines from 2005.


Subsidies, in respect of particular routes, are given by the local airports or local authorities. The Danish State does not offer state subsidies to routes directly but offers financial support to certain airports instead. The criteria for obtaining these subsidies are determined by the bodies granting the subsidies, but they must comply with applicable State aid rules.


As of 25 May 2018, the EU General Data Protection Regulation (“GDPR”) is directly applicable under Danish law. Passengers have numerous rights under the GDPR, namely the data subject’s:

Except with respect to specific matters regarding formality, which can be tried by the ordinary courts, arbitral awards cannot be appealed.

Denmark has ratified and implemented the 1972 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.



Joint ventures between competing airlines are subject to the general competition rules as applied by the Danish Competition Council and the Danish Competition and Consumer Authority.

The Competition Act provides the overall regulatory framework. According to the preparatory works of the Competition Act, its provisions must be interpreted in accordance with EU competi-tion rules. The Competition Act is complemented by a consider-able amount of secondary legislation, including executive orders and guidelines.


The competition authorities generally tend to follow the European Commission’s market definitions for the purpose of assessing a merger or an acquisition. The point of origin and the point of destination, in practice a specific route, could specify a relevant market.


Unlike the EU, Denmark has not abolished the notification system for agreements. According to Section 8(2) of the Competition Act, parties can notify an agreement in order to obtain an individual exemption. The competition authorities may, however, refrain from considering a notification if the agreement may appreciably affect trade between the EU Member States. As a result, the notification system is rarely applied.


Mergers, acquisition mergers and full-function joint ventures are subject to mandatory notification if one of the two sets of turnover thresholds in Section 12(1) of the Competition Act is exceeded:■ the combined aggregate turnover in Denmark of all the

undertakings concerned is more than DKK 900 million and the aggregate turnover in Denmark of each of at least two of the undertakings concerned is more than DKK 100 million; or

■ the aggregate turnover in Denmark of at least one of the undertakings concerned is more than DKK 3.8 billion and the aggregate worldwide turnover of at least one of the other undertakings concerned is more than DKK 3.8 billion.

101IUNO



General Danish consumer protection legislation is fully applicable in the relationship between the airport operator and the passenger.


The main GDSs operating in Denmark are Amadeus, Galileo, Sabre, Worldticket and Worldspan by Travelport.


There are no specific Danish regulation requirements pertaining to GDS ownership.


Vertical integration between air operators and airports is not prohibited as such in Denmark. Any such constellation would have to comply with applicable competition law rules and the specific regulatory requirements for both businesses.


To obtain a Danish AOC, the applicant must submit an application to the CAA. The entity must, among other things, submit documentation evidencing that the company’s principal place of business is located in Denmark. Furthermore, the company will be required to supply a variety of financial information pursuant to EC Regulation no. 1008/2008, Articles 5 and 8.

A third-country operator (i.e. a non-EU and non-EFTA State) that intends to perform commercial air transport operations into an EU Member State or an EFTA State requires a Third Country Operator (“TCO”) Authorisation, issued by the EASA.

5 In Future


As mentioned under question 1.10, there has been a large increase in the number of court cases relating to the application of EC Regulation 261/2004; this increase is expected to continue. Therefore, it is more important than ever that passenger airlines are familiar with the relevant regulation and know their obligations in case of a delay, cancellation or denied boarding.

right of access; right to rectification; right to be forgotten; right to restriction of processing; right to be informed; right to data portability; right to object; and right to not be subject to a decision based solely on automated processing.


In the event of a personal data breach, GDPR requires that the data controller notifies the Danish Data Protection Agency without undue delay and, where feasible, not later than 72 hours after having become aware of the breach. Before the Agency is notified, the data controller is obliged to carry out thorough investigations to ensure that the nature of breach is known. If the data breach poses a high risk to those individuals whose data has been affected, they should be informed about the breach without undue delay.

If a data loss is caused by any non-compliance with the GDPR, the data controller may be subject to penalties by the Danish Data Protection Agency and be liable in damages towards the data subjects involved.


The main Danish regulation on intellectual property rights is the regulation on the protection of copyrights, trademarks, patents and design rights. The ordinary courts are competent to handle intellectual property cases. Nevertheless, intellectual property cases will often begin in the Commercial and Maritime Court.


EC Order no. 261/2004 regulates matters relating to compensation and assistance to passengers in the event of delays, cancellations and denied boarding.


Passengers who have been subject to late arrivals or departures can complain to the CAA or file a complaint directly to the Danish courts. The CAA will not handle complaints regarding cargo delays, damage to cargo or passengers or a carrier’s liability towards the passenger under the contract made between the carrier and the passenger. Claims regarding the latter are to be made directly to the Danish Courts.

The CAA supervises the carrier’s compliance with EC Regulation no. 261/2004 and the relevant regulation under the Air Navigation Act.


Subject to the Air Navigation Act, the CAA grants licences for the establishment and operation of airports in Denmark and supervises the airports’ compliance with regulations on the operation of airports.

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Aage Krogh is head of the transport and aviation team at IUNO. He is a specialist in aviation law and he represents some of the world’s largest and most prominent airlines.Aage is recognised in The Legal 500 as one of Denmark’s leading lawyers within transport law. He is recognised by his clients for his ability to communicate complex matters and for his thorough understanding of how aviation law works in practice. Aage is a certified member of the Danish Association of Board Attorneys, and he frequently speaks to networking groups within aviation law.

IUNONjalsgade 19C2300 Copenhagen SDenmark

Tel: +45 5374 2702Email: [email protected] URL: dk.iuno.law

IUNO is an internationally oriented law firm. With the newest technology and a non-traditional approach, we provide highly specialised advice in the most important business law areas to our clientele, consisting mainly of large and medium-sized companies in Denmark and abroad. IUNO can assist air carriers with the many requirements and restrictions that apply to aviation. In case of injuries to passengers or damage to luggage or the aircraft, we are by your side right from the initial claim and, if necessary, all the way until the Supreme Court has handed down a ruling.

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Aviation Law 2020

Chapter 17 103

Dominican Republic

Raful Sicard Polanco & Fernández María Fernanda Pou Fernández

María Esther Fernández A. De Pou

Dominican Republic


the JAC; and (iv) obtain an acknowledgment certificate issued by the IDAC in accordance with the operation specifications from the country of origin. Both national and foreign operators must submit an operator’s security manual to the CESAC for valida-tion and approval.


Law No. 188-11 on Aviation Security and Civil Aviation and its complementary regulations as well as the Dominican Aviation Regulations (RAD), which are issued by the IDAC in accord-ance with international treaties and conventions duly ratified by the Dominican Republic.

The IDAC is in charge of the oversight of security in air navi-gation and for ensuring operational safety and the CESAC is the competent authority on civil aviation security for the applica-tion of Law No. 188-11 and the government agency responsible for the fulfilment of the National Programme on Civil Aviation Security.


All air safety matters are regulated by the IDAC and CESAC as per the legislation stated above, irrespective of if they are commercial, cargo or private carriers.


All charter flights are regulated by the same regulatory bodies; any foreign air operator without an operation licence must apply for a charter flight authorisation through a foreign air operator aircraft by a consignee in charter flights.


The Civil Aviation Law reserves air transport services for national air operators; however, permits can be granted to foreign air operators from countries that have entered into agreements

1 General


In addition to the generally applicable provisions contained in the Civil and Commercial Codes of the Dominican Republic and the international treaties and conventions duly ratified by the Dominican Republic, the key domestic statute applicable to civil aviation is the Civil Aviation Law No. 491-06 (the Civil Aviation Law), as amended by Law No. 67-13, as well as Law No. 188-11 on Aviation Security and Civil Aviation. Said statutes specifically regulate civil aviation in the Dominican Republic, as well as providing the legal framework necessary for the over-sight and control of all aviation activities under the jurisdiction of national sovereignty.

The regulatory bodies that oversee civil aviation activities in the Dominican Republic are the Dominican Institute of Civil Aviation (IDAC), the Civil Aviation Board ( JAC), and the Specialised Airport and Civil Aviation Security Body (CESAC).

The JAC is the main civil aviation regulatory agency which is tasked with advising the executive branch of the government on commercial aviation, as well as regulating all economic aspects of commercial aviation in the Dominican Republic. The IDAC is a specialised and independent body that is tasked with the supervision and control of the technical aspects of civil avia-tion and security in the Dominican Republic that are not under the jurisdiction of the JAC. Lastly, the CESAC is an office of the Ministry of Armed Forces in charge of the security aspects related to aircraft, airports, aerodromes, and of the infrastruc-ture and facilities that provide civil aviation services, as well as providing for the wellbeing of passengers, crew, ground staff and the general public.


In order to operate in the Dominican Republic, an air carrier must obtain the corresponding authorisations based on whether it is a national or foreign operator. National air carriers must obtain: (i) a certificate of economic authorisation that is issued by the JAC; and (ii) an air operator certificate that is issued by the IDAC. Foreign air carriers that are protected by a bilat-eral agreement or have obtained proof of reciprocity with the Dominican Republic must: (i) establish a branch; (ii) obtain a certificate of compliance with the aviation security standards issued by the CESAC; (iii) obtain an operation permit issued by

104 Dominican Republic


Dominican territory, and incidents abroad concerning aircraft with Dominican registration.


On 26 January 2018, the JAC suspended Pan Am World Airways Dominicana, S.A (PAWA Dominicana), the leading national air carrier at the time and the first Dominican carrier to operate international flights to and from the United States after the country was upgraded to Category I by the US Federal Aviation Administration (FAA), because the operator had failed to comply with tax obligations and airport service fees (amassing a debt of approximately USD68.5 million with public and private institutions).

PAWA Dominicana later declared bankruptcy and filed a restructuring suit with the Mercantile Restructuring Court, a process that is still ongoing, but the regulatory bodies have expressed their intention to permanently cancel PAWA’s air operator certificate.

Due to PAWA Dominicana’s sudden suspension, thousands of passengers were stuck in airports or left to claim reimburse-ment and compensation for issued tickets; approximately 500 staff were left unemployed.



No, the effect of registration is declaratory in nature, establishing legal presumption of the registered owner’s liability with regard to statutory and regulatory obligations stemming from the oper-ation of the aircraft in question or any damages caused by it. It also provides prima facie, not definitive, evidence of ownership. Pursuant to article 91 of the Civil Aviation Law, the registration issued in accordance with said Law is not considered proof of ownership in any procedure under Dominican law in the case that the ownership of the aircraft of a particular person is or could be questioned. As further explained in RAD-47, the IDAC issues an Aircraft Registration Certificate to the person who appears to be the owner based on the supposed evidence of ownership submitted with the request for registration of the aircraft.


Pursuant to articles 85 and 92 of the Civil Aviation Law, the RNA, administered and maintained by the IDAC, is a system whose purpose is to record all Dominican aircraft; that is, aircraft owned by either: (i) Dominican individuals or corpo-rations; (ii) foreign individuals or corporations that have an established domicile in the Dominican Republic; or (iii) the Dominican State.

The RNA includes:a) nationality and registration marks and adequate specifica-

tions for the purposes of identifying individual aircraft;b) titles or instruments that incorporate, transfer, recognise,

modify, extinguish or in any way affect the rights over an aircraft or accessories that are being used or are intended to be used in Dominican aircraft;

or treaties with the Dominican Republic or that have obtained proof of reciprocity. In light of the foregoing, requirements for the issuance of operating permits to foreign air carriers differ from those imposed on national air carriers.

The Dominican Republic is a party to air service agreements or memoranda of understanding with the following countries: Antigua and Barbuda; Argentina; Aruba; Austria; Bahamas; Belgium; Bolivia; Brazil; Canada; Chile; China; Colombia; Costa Rica; Cuba; Curaçao; Czech Republic; Denmark; Dubai; Ecuador; El Salvador; Finland; France; Germany; Guatemala; Guyana; Haiti; Hungary; Iceland; India; Ireland; Israel; Italy; Jamaica; Jordan; Kenya; Kuwait; Luxembourg; Mexico; Morocco; Netherlands; New Zealand; Nicaragua; Norway; Panama; Paraguay; Peru; Poland; Portugal; Qatar; Russia; Rwanda; Saint Martin; Serbia; Seychelles; Singapore; Spain; Sweden; South Africa; Sri Lanka; Switzerland; Trinidad and Tobago; Turkey; United Arab Emirates; United Kingdom; United States; Uruguay; and Venezuela.


There are both privately owned and state owned airports.The busiest airport in the country to date, Punta Cana

International Airport, is a privately owned commercial airport in Punta Cana, eastern Dominican Republic. Likewise, a private entity (Aeropuertos Dominicanos Siglo XXI or Aerodom) has an exclusive concession to operate six state owned airports in the Dominican Republic, including the Las Americas International Airport.


Since there are no specific regulations for assigning a slot, each airport agrees on the terms with air operators pursuant to their requirements.

It is also important to note that Aerodom has a security committee, a security audit programme, a security equipment maintenance programme and a baggage security programme in order to implement supervision measures that it deems neces-sary to ensure passenger safety and the appropriate handling of baggage and cargo.


The Aviation Accident Investigation Commission (CIAA) is in charge of the technical investigation of any accidents and serious incidents involving civil aircraft within the territory of the Dominican Republic and those involving aircraft with Dominican registration in international waters or airspace that is not under the sovereignty of another State. It also has the authority to participate in the investigation of accidents and serious incidents involving an aircraft registered in the Dominican Republic that occur in the territory of a foreign country, in accordance with any treaty, convention or other arrangement between the Dominican Republic and the State in whose territory the accident occurred.

The CIAA follows the guidelines set out in appendix 13 of the Chicago Convention on Aircraft Accident and Incident Investigation. The owners, operators or crew members must promptly inform the CIAA and IDAC of any accidents or incidents involving aircraft under their responsibility within

105Raful Sicard Polanco & Fernández


over an engine that is not installed on the aircraft in question or specifically referenced in the corresponding mortgage agree-ment. Whenever an engine is encumbered as a result of being installed in an encumbered aircraft, we understand that said engine would cease to be encumbered upon being replaced by another engine or upon being expressly released from encum-brance by the corresponding parties. If that engine has been encumbered individually (i.e. as a spare engine), then, as a result of the in rem nature of the encumbrance, it would only become unencumbered when the parties expressly release it.


Aircraft trading and leasing is subject to VAT (known as “ITBIS” in the Dominican Republic) at the current applicable rate of 18%. Payments made abroad or to a non-resident indi-vidual (individual or corporate entity) are subject to a 10% with-holding tax which replaces applicable income tax, with the exception of principal payments in the context of a loan.

Stamp duty is levied on: most written contracts and docu-ments evidencing loans, debts and guarantees; and all docu-ments prepared or recorded by notaries or public registrars. The rates vary depending on the type of document or the taxable amount.

There are no tax exemptions or benefits for non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations. The only tax exemption granted by the Civil Aviation Law is with regard to the customs tax on lubricants, spare parts, and aviation engines that are imported by domestic and foreign air operators for the exclusive use of their aircraft according to aircraft inventory and technical recommendations of the manufacturers.


The Dominican Republic is a party to the following major air law treaties:a) the Warsaw Convention for the Unification of Certain

Rules Relating to International Carriage by Air, dated 12 October 1929, and the Hague Protocol modifying said Convention, dated 28 September 1955; in both cases, rati-fied on 25 February 1972 and in force since 25 May 1972;

b) the Rome Convention on Damage Caused by Foreign Aircraft to Third Parties on the Surface, dated 7 October 1952, to which it is one of the original signatories but has not yet ratified, hence it is not in force;

c) the Chicago Convention on International Civil Aviation, dated 7 December 1944, ratified on 25 January 1946 and in force since 4 April 1947. Protocols have been ratified regarding: article 45 on 28 December 1954; articles 48(a), 49(e) and 61 on 28 December 1954; article 50(a) on 24 November 1961; article 50(a) on 2 October 1976; article 56 on 30 May 1972; article 83bis on 21 March 2006; article 93bis; and the Authentic Quinquelingual Text, with reser-vation, on 29 September 1995. All of these articles are in force with the exception of the last;

c) judicial decisions that recognise, transfer, modify or extin-guish property over aircraft or liens over aircraft, aircraft engines, etc.;

d) foreclosures, injunctions or any other preventative or cautionary measures that may affect aircraft;

e) contracts for the use of aircraft;f ) cessations in the activities of aircraft;g) disabling or loss of aircraft and any substantial modifica-

tions that aircraft may be subject to;h) documentation regarding the owners of a Dominican

aircraft;i) insurance policies over aircraft or aircraft engines; andj) any event or document that may alter or be linked to an

aircraft’s legal status.As indicated above, mortgages, liens and charges over aircraft

can be registered in the RNA upon the request of the interested party by providing the evidentiary documents. However, regis-tration certificates do not include fields expressly dedicated to liens or mortgage interests over the registered aircraft, although this information is included under the label of “relevant infor-mation” in some rare cases.

The information in the RNA is in the public domain and may be requested from the IDAC by third parties with regard to specific aircraft. Pursuant to article 232 of the Civil Aviation Law, an interested party may oppose the amendment, suspen-sion or cancellation of a registration certificate via written protest addressed to the JAC.


Liens as a result of due and unpaid taxes or unpaid salaries and severance benefits have priority over all other security interests.

The Dominican Republic is not a party to the Cape Town Convention on International Interests in Mobile Equipment, dated 16 November 2001.

Pursuant to Schedule A of RAD-47, deregistration or export of registered aircraft requires either evidence of the cancella-tion of any registered liens or the express written consent of the person or entity in whose favour the lien in question was anno-tated. However, the applicable statutes and regulations do not expressly require the IDAC to give notice of any such requests to potentially interested parties.


In principle no, since interests over aircraft engines are subject to a separate registration in the RNA and, under Dominican law, security interests are in rem rights, hence they pursue the asset itself, not the person who owns or is making use of it. Registration certificates are not issued with regard to aircraft engines or spare parts, but letters that attest to the ownership of said parts or their encumbrances may be requested from the IDAC on a case-by-case basis.

Nevertheless, it is important to note that, unless otherwise specified, a security interest over an aircraft includes security interest over its installed engines if they are also owned by the debtor. An effective security interest would not be created





Pursuant to the Civil Aviation Law aircraft and aircraft engines are subject to mortgage as provided under the Civil Code for real estate, even if they are movable property. Enforcement of secu-rity interest requires the mortgagee to perform an immovable asset seizure process provided for under the Civil Procedure Code. The courts of the Dominican Republic will be involved in this execution process.

Where the mortgagee’s credit is additionally guaranteed by collateral guarantees such as authentic promissory notes, drafted by and before a notary public, which are of an executive nature, then an ex parte proceeding is technically available via execu-tive seizure, pursuing the collection of debt owed in respect of the debtor’s assets in general, including the mortgaged aircraft. This procedure is much less tedious than an immovable asset seizure and, in principle, only one judicial officer is involved (the bailiff ), without the need for court intervention.

The aircraft is the asset in respect of which the guaranteed credit will be collected through its sale pursuant to a public auction, both in the immovable assets seizure process as well as in the executive seizure process. These processes, once executed, do not automatically authorise the mortgagee to retain the property of the seized asset (the aircraft), but to recover the amount of its debt from the auction. That said, sometimes, if at the auction there are no interested parties who submit a bid for the initial price, the auction will be declared “not awarded” and, consequently, the mortgagee may keep the property of the seized asset.


Following the lease’s termination or in the event of a default under the lease, if the lessee does not voluntarily hand over control of the aircraft, the lessor cannot take possession of it without judicial intervention. In order to obtain possession, the lessor must procure a judgment for the delivery of the aircraft in question pursuant to the corresponding lease agreement. It must then issue a writ for specific delivery once the term estab-lished in the judgment for such delivery has expired.


There are no specialised courts for aviation disputes. Administrative procedures are carried out before the regulatory bodies pursuant to the Civil Aviation Law and there are admin-istrative courts for cases filed against the government.

There is a distinction between courts in which criminal, commercial and civil disputes are brought and there are also levels of jurisdiction, based on the nature of the case or the value of the dispute. Each court has its own jurisdiction, which means that it has the authority to decide specific types of cases.

d) the Geneva Convention on the International Recognition of Rights in Aircraft, dated 19 June 1948, to which it is one of the original signatories, but has not yet ratified, hence it is not in force;

e) the Montreal Convention for the Unification of Certain Rules for International Carriage by Air, dated 28 May 1999, ratified on 21 September 2007 and in force since 20 November 2007;

f) the Tokyo Convention on Offences and Certain Other Acts Committed on Board Aircraft, dated 14 September 1963, ratified on 3 December 1970;

g) the Hague Convention for the Suppression of Unlawful Seizure of Aircraft, dated 26 June 1971, ratified on 22 June 1978;

h) the Montreal Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, dated 23 November 1971, ratified on 28 November 1973, although it has not ratified its Supplementary Protocol, dated 24 February 1988;

i) the Montreal Convention on the Marking of Plastic Explosives for the Purpose of Detection, dated 1 March 1991, ratified on 9 March 2011; and

j) the Beijing Convention on the Suppression of Unlawful Acts Relating to International Civil Aviation, dated 10 September 2010, ratified on 27 November 2012 and in force since 1 July 2018. The Supplementary Protocol of the same date was ratified on 22 March 2013 and has been in force since 1 January 2018.

The Dominican Republic has neither signed nor ratified:a) the Rome Convention for the Unification of Certain Rules

Relating to the Precautionary Arrest of Aircraft, dated 29 May 1933; or

b) the Cape Town Convention on International Interests in Mobile Equipment, dated 16 November 2001.


The conventions are applied and respected in our jurisdiction if they were ratified and entered into force as indicated above for each particular case. To a significant extent, the principal legis-lation on aviation and the rules issued by the regulatory bodies have transcribed or implemented the applicable conventions.

It is important to note that both the Civil Aviation Law and Law No. 188-11 state that local regulations may not contradict or hinder the application of the international treaties and multilat-eral agreements duly ratified by the Dominican Republic; in the event of a contradiction between the Law or local regulations and the provisions of a convention, the provisions of the inter-national treaty shall prevail.


There is no tangible favourable treatment or taxation benefits which enhance aircraft trading or favourable tax treatment on the disposal of aircraft. However, the Dominican Republic has signed and ratified double taxation treaties with Canada and Spain.



agreements require the approval of the JAC, who, as part of the approval process, will evaluate the competition aspects of such agreements and their implications for consumers.


Law No. 42-08 does not set forth any provisions on mergers, corporate reorganisations or acquisitions, and states that obtaining a dominant position in the market or increasing it does not constitute per se a violation to the Law.

In the context of abuse of dominant position, Law No. 42-08 stipulates that the relevant market will be determined by the following elements:a) identification of the product or service whose relevant

market is to be determined;b) identification of the corresponding geographical area;c) the effective probability of replacing the good or service in

question with another sufficiently similar in terms of func-tion, price and attributes, of national origin or foreign, to be considered by consumers as reasonable substitutes, in the time and cost required to make the replacement, consid-ering them with the sufficient degree of interchangeability;

d) the cost of distribution of the good or service, taking into account freight, insurance, tariffs and any other measure that affects its trade, as well as the limitations imposed by other agents and the time required to supply the market from other places;

e) the replacement of the demand – in particular, the cost and the probability that suppliers of other products or services that are not substitutable in principle, from the demand point of view, could easily go on to produce and offer products or services that are likely to meet the consumer demand; that is, that consumers can go to other alterna-tive markets for products and services that produce results similar enough to meet their demands for a good or service; and

f) national or international regulatory restrictions that limit consumers’ access to alternative sources of supply, or suppliers’ access to alternative customers.


No, there is no such system in the Dominican Republic.


Mergers, acquisition mergers and full-function joint ventures are recognised by the law for both national and foreign entities with branches or interests in the Dominican Republic.

The parties are at liberty to contractually determine the terms of any private mergers and acquisitions. However, particular rules may apply to different types of local entities, such as a statu-tory right of first refusal for stakeholders in an LLC and, in some cases, tag-along rights.

Currently there are no public companies in the Dominican market but the legal framework exists. Securities are regulated by Law No. 249-17 and the Securities Market Superintendence, which provide several statutes on the execution and performance of mergers and acquisitions. Additionally, regulated operations


Service requirements are the same for domestic airlines and non-domestic airlines.

Service of court proceedings, citations and communica-tions regarding judicial processes are primarily carried out by appointed bailiffs pursuant to the applicable procedural codes or by consular officers abroad. Due process of law is established in both the Constitution and the laws to guarantee the protec-tion under the law of both Dominican nationals and foreigners.


In non-criminal cases, there are both legal and equitable reme-dies available. In most cases, only actual damages are awarded by the courts for both material and moral indemnities. With regard to equitable remedies, specific performance, injunctions, and restitutions can be awarded by the courts.


The Dominican Constitution stipulates that every decision can be appealed in accordance with the law. Hence, most adminis-trative, criminal, commercial and civil matters have access to an appeal process before the court of appeals or a comparable proce-dure. Also, the Dominican Republic has a Constitutional Court, which is the highest court on the interpretation of constitutional matters and oversees the protection of fundamental rights.

Nonetheless, the Dominican laws also provide for exceptions to the rule of “double degree of jurisdiction” or right of appeal. The suppression of said principle is expressly provided for in specific laws and takes into account the nature of the matter or its economic importance.



There are no specific competition laws for the aviation industry in our jurisdiction. However, Law No. 42-08 on the Defense of Competition (Law No. 42-08) has the primary objective of promoting and defending the effective competitiveness of all industries to increase the economic efficiency of all markets of goods and services within the Dominican territory, and to create benefit and value in favour of consumers.

Pursuant to Law No. 42-08, all acts, agreements and arrange-ments among competing economic agents, express or implied, verbal or written, with the objective or effect of imposing unjus-tified barriers in the market are considered as “concerted prac-tices” and/or “anti-competition agreements” and are prohibited by Law No. 42-08.

It is important to note that the Civil Aviation Law states that an operation permit could be denied or suspended if the traffic needs, according to the JAC, are completely satisfied in that the actions of the operator or operators are deemed to be clearly an anti-commercial practice for the purpose of eliminating other air carriers through unfair competition. Likewise, code-share




The main regulatory instrument enacted in the Dominican Republic with regard to the treatment of personal data is Law No. 172-13, which is aimed at the integral protection of personal data recorded in archives, public records, databases or other technical means of data processing for reporting, whether public or private (G.O. No. 10737 of 15 December 2013). The law contains diverse provisions regarding the protection, collec-tion, storage, use, treatment and handling of personal data, as well as a few scarce provisions on international transfer of data.

In that sense, pursuant to Law No. 172-13, the protection provisions are applicable to personal data registered in any data bank that is susceptible to “treatment or processing” and to any subsequent use of such data in the public and/or private sectors. Treatment or processing of personal data is considered any operation or procedure that allows, within a database, data regarding consumers to be collected, organised, stored, elabo-rated, selected, exacted, compared, shared, communicated or transferred.

Broadly speaking, Law No. 172-13 guarantees to passen-gers the right to consultation, access, rectification, cancellation and opposition, as well as the right to indemnifications upon non-compliance with the Law and the Judicial Action of Habeas Data to enforce their rights.


Pursuant to Law No. 172-13, air carriers must adopt and imple-ment technical, organisational, and security measures to guar-antee the security of personal data and prevent its alteration, loss, or potential unauthorised access. In the case of private data banks that are not regulated, contrary to credit bureaus, there are no administrative sanctions applicable. However, the Law does provide for the possibility of any interested party to pursue compensation or damages under common law upon any viola-tions, as would be the case if a carrier failed to adopt or imple-ment security measures to prevent the loss of data.


The Constitution of the Dominican Republic recognises and protects the exclusive property rights of authors and inventors over their work, trade names, trademarks, distinctive signs and any other creation of their intellect, as established by law. More specifically, Law No. 20-00 on Industrial Property protects and governs the registration of inventions, utility models, indus-trial designs, trademarks, trade names, signs, logos, geograph-ical indications and designations of origin. Law No. 65-00 on Copyright protects the rights and interests of authors of any intellectual work of a creative nature, whether literary, artistic, or scientific in character.

The National Office of Industrial Property (ONAPI), a dependency of the Ministry of Industry, is in charge of the registry of industrial property rights. Any inventions or trade-marks must be registered before ONAPI in order to be protected;

such as banking, energy and aviation are subject to special regu-lations and oversight.

It is important to note that capital gains derived from the sale of assets or shares are included in gross income and are subject to the corporate income tax rate of 27%, including the transfer of shares of an offshore corporation if the underlying assets are located in the Dominican Republic. Additionally, acquisitions of real property are subject to a special tax rate of 3% and a signif-icant portion of goods are subject to VAT at a rate of up to 18%.


Prior to the merger process, it is mandatory to inform the tax authorities of the intention to merge and request approval to proceed with the merger. Likewise, the parties must appoint one or more special accounts commissioners to verify that the value attributed to the shares is appropriate and that the rate of exchange is equitable.

Pursuant to the corporate statute, mergers are defined as a transfer made by one or more entities of their assets and liabil-ities, either to an existing entity or to a new one, whereby the shareholders of the company that makes the transfer receive shares in the company or companies that received the assets and liabilities. Mergers must be executed by a merger agreement, as well as approved in a shareholders’ extraordinary meeting; they entail the dissolution of the entities that disappear and the transfer of all their assets and liabilities to the beneficiary company. When a new company is incorporated as a result of a merger, the by-laws must be approved by a meeting of all the companies that will cease to exist, and the new company must confirm and acknowledge those approvals.

Within 30 days of the execution of the merger agreement and extraordinary shareholders’ meetings, the parties must file the applicable documents before the corresponding chamber of commerce. Additionally, an extract with the main terms of the merger agreement must be published in a newspaper with national circulation.

On the other hand, acquisitions are normally asset purchases that are documented by private agreements unless an entity is selling all its assets, in which case a shareholders’ meeting must approve the sale. Nevertheless, the law and principles that govern the particular asset agreements will be the common law.

Stamp duty is levied on most written contracts, corporate documents and all documents prepared or recorded by notaries or public registrars. The rates vary depending on the type of document or the taxable amount.

Lastly, it is important to note that changes in the shareholder composition of entities that have been awarded licences by the JAC must be notified to said entity and comply with the appli-cable procedures if an amendment to the licence is necessary.


There are no such rules in the Dominican Republic.


No such subsidies are available.




Passenger rights are protected and regulated by Law No. 358-05, the Consumer Rights Protection Act, which aims to protect the economic interests of consumers through equitable treat-ment and the prevention of discriminatory or abusive behav-iour from providers of goods and services. Said Law provides for the general protection principles that must be observed by all service providers in the country, including airport operators.


The GDSs operating in the Dominican Republic are Amadeus and Sabre.


Not to our knowledge.


In principle, there is no prohibition on vertical integration between air operator and airports in our jurisdiction. However, certain behaviours could constitute an abuse of dominant posi-tion by the carrier or create unjustified barriers in the market, which is sanctioned by Law No. 42-08.


The Civil Aviation Law reserves air transport services for national air operators; in order to consider an entity that is incor-porated in the Dominican Republic as a “national company”, the authorities will take into consideration the following:a) that the capital or substantial property over the entity

belongs to Dominicans, in at least 35%, and its board of directors is made up of Dominicans in at least equal proportion to foreigners;

b) that at least half plus one of the company’s management staff, not board members or directors, is comprised of Dominican nationals; and

c) that its main business and commercial office is in national territory.

In addition to the foregoing, if an operator wishes to exploit commercial air services in internal or cabotage operations, it will only be considered a “national company” if at least 51% of its capital or substantial property belongs to Dominicans, two-thirds of its management personnel are Dominican nationals and it maintains effective control over its air fleet.

Nevertheless, permits can be granted to foreign air opera-tors from countries that have entered into agreements or trea-ties with the Dominican Republic, or that have obtained proof of reciprocity. In light of the foregoing, requirements for the issuance of operating permits to foreign air carriers differ from those imposed on national air carriers.

however, priority rights are recognised for industrial property registered in other countries on the basis of international agree-ments ratified by the Dominican Republic.

Infringement of industrial property rights and copyright is subject to criminal and administrative penalties, as well as compensation and damages.


There is no specific legislation or regulations governing the denial of boarding rights. However, The Dominican Republic has ratified the Montreal Convention, which is applicable in conjunction with the provisions of the Civil Aviation Law regarding passenger rights; these provisions are widely recog-nised by Dominican courts in regard to civil liability.

With regard to cancelled flights, due to interpretation of the applicable operational and logistics regulations, carriers must inform the IDAC and JAC of the cancellation of sched-uled flights. There is no need for approval; carriers must simply inform the authorities via written communication.

Please note that all licensed air operators must file and main-tain an adequate compensation policy as indicated by the JAC. Additionally, in principle the JAC could modify, suspend, or cancel the economic certificate or other authorisations issued to a carrier, in whole or in part, if the air operator is not suitable, willing or able to properly exercise its transport commitments.


There is no specific legislation or regulations regarding late arrival and departure of flights. However, the JAC has estab-lished passenger assistance counters in several airports to facili-tate enquiries or claims to air carriers pursuant to the applicable compensation policy, and regularly follows up on operators to ensure that the claims are answered and no violations of passenger rights occur.


The Airport Department (DA) and the Airport Commission were created and are ruled by Law No. 8 of 1978 and its comple-mentary regulation.

The DA takes the necessary measures to ensure the proper operation of airports in accordance with Law No. 8 and its Tariff Regulation No. 2658 on Fees and Rights for the Use of Aerodromes and Airports. It is also tasked with ensuring the profitability of privately owned or operated airports so that they can be self-financed and maintenance projects can be carried out.

For 22 years, the DA was in charge of the administration and operation of all the airports in the country, until the concession of the main state airports was formalised in the year 2000 and the government entered into contracts with private airports. After said transition, the DA assumed a new role as supervisor of the contractual obligations established therein, going on to super-vise the administration and operation of the “concessioned” and private commercial airports in the country. Nevertheless, the DA is currently still in charge of the operation and maintenance of state airfields.



5 In Future


The Dominican Congress is in the process of approving a new Law on Security Interests which would modify some of the existing legislation on guarantees on movable property and would create a regulatory framework so that the financial system has the necessary instruments to provide loans with this type of guarantee; with greater legal certainty for investors and financial inclusion for all types of businesses.

For its part, the JAC has been working on minimum guide-lines and further regulations with regard to flight cancellation and delays, which it has yet to make public for discussion.

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Aviation Law 2020

Raful Sicard Polanco & Fernández

María Esther Fernández A. De Pou is a partner at Raful Sicard Polanco & Fernández and has extensive experience in the fields of aeronautics and airports. She has been the Legal Counsel to Asociación de Líneas Aéreas (ALA – Airlines Association) for several years, as well as the Airports Association. She provides specialised consulting services to private sector clients in different branches of industry with regard to all their legal needs in the country. She has worked for many years in the maritime, corporate (mergers and acquisitions), foreign investment and finance structuring, customs, tax, concessions, privatisation, agreements, real estate and dispute resolution domains.Throughout her professional career, María has advised leading companies in these sectors in their business operations in the Dominican Republic. In addition, she has represented the Dominican Republic before the International Civil Aviation Organization (ICAO) and the Latin American Civil Aviation Commission (LACAC). She has participated as a speaker in numerous national and international conferences on the subject, and has been a professor at several national universities and institutions in her areas of legal expertise, as well as in the field of arbitration and mediation.María has made contributions to various national and international publications and has collaborated internationally on several books on aeronautics. She also contributed, as part of the Dominican delegation, to IT AEREO Madrid – an international training course on aviation and airports. She has participated in various committees for the review and promotion of laws such as the Civil Aeronautics Law, the Company Law, the Arbitration Law, the Mercantile Restructuring and Judicial Liquidation Law, the Ports Draft Bill, the Customs Draft Bill, and the Maritime Code Draft Bill, among others.

Raful Sicard Polanco & FernándezFrank Félix Miranda #8Naco10119 Santo DomingoDominican Republic

Tel: +1 809 565 1111Email: [email protected]: www.legalrsp.com

María Fernanda Pou Fernández began her professional experience in May 2014 as an Internal Paralegal, where she was responsible for conducting investigations for all the Departments (Intellectual Property, Family, Immigration, Litigation, Corporate, Commercial, Business and Aviation) and the monthly “Situation and Perspective” newsletter. In 2015, she took on the role of External Paralegal, supporting the Departments of Intellectual Property and Family, and in 2016 she was promoted to Senior External Paralegal for the Corporate, Commercial, Business and Aviation Departments, where she worked on due diligence investigations, follow-up of commercial and tax processes, with particular emphasis on aviation matters, supporting regulatory writs and processes for licences, permits for airlines and related matters, with a widespread practice.From September 2017, María performed the functions of Intern Lawyer for the Aviation Area, working closely with clients and aviation author-ities on the technical process of aircraft inclusion, handling approvals for code share agreements, operating permits, special and charter flight approvals, schedule matters and insurance topics with, among others, the Civil Aviation Board. She also worked on fleet interchange, licences for airport services, actualisation of a traffic collision avoidance system (TCAS) for a client’s fleet with the Dominican Institute of Civil Aviation (IDAC), and security manual support to clients with CESAC (Special Force for Airport and Aviation Security).After acquiring this experience at Russin Vecchi & Heredia Bonetti, she moved in February 2018 to her position as Associate Lawyer at Raful Sicard Polanco & Fernández, where she works in the recently created Aviation Practice Group, with clients such as UPSCO, United, Delta, Copa, Condor, Aeromexico, Aero República, Longport Aviation Security, Universal Weather Aviation, J.J. Roca, among others.

Raful Sicard Polanco & FernándezFrank Félix Miranda #8Naco10119 Santo DomingoDominican Republic

Tel: +1 809 565 1111Email: [email protected]: www.legalrsp.com

Raful Sicard Polanco & Fernández (“RSPF”) was founded in 2003 with the primary goal of providing our clients with a legal service of the highest quality, with a personalised touch. The firm is made up of four partners, 11 associate attorneys, in addition to our paralegals. It is a vanguard firm, able to manage basic as well as complex legal transactions, litigation and legal counsel in general, with the same ease, effectiveness and professionalism. We are a full-service law firm with the characteristics of a boutique firm, where members of our staff are able to work in five languages (Spanish, English, French, German and Portuguese). RSPF stands out in the local market for the quality of its work as well as its continuous striving for the highest ethical standards. In addition to the usual work done by law firms in the Dominican Republic, RSPF has, throughout its 17 years of incor-poration, been able to develop a niche and special recognition in specific industry sectors, such as civil aviation, in which we have the highest level of aviation expertise, providing creative and efficient solutions to the full range of aviation-related matters and needs. We have successfully represented

airlines, financiers, lessors, insurers and airports, among others. We are a source of reference in this sector, acting for many years as legal counsel to the Airline Association and the Courier Association of the Dominican Republic. Our practice areas include corporate, customs, finance and securities, government, public procurement, labour and the Industrial Free Zone, litigation and dispute resolution, real estate, shipping and maritime, telecommunications, agency & distribution, business, and tax.

www.legalrsp.com


Aviation Law 2020

Chapter 18112

France

Clyde & Co Benjamin Potier

Maylis Casati-Ollier

France


■ the main occupation of the company is to operate airservices in isolation or combined with any other commer-cialoperationofaircraftortherepairandmaintenanceofaircraft;

■ the company’s structure allows the competent licensingauthority to implement the provisions mentioned in this chapter;

■ Member States and/or nationals of Member States ownmorethan50%oftheundertakingandeffectivelycontrolit, whether directly or indirectly through one or more inter-mediateundertakings,exceptasprovidedforinanagree-ment with a third country to which the Community is a party;

■ thecompanysubmitsabusinessplanforat leastthefirsttwoyearsfromthestartofoperationsandincompliancewith the financial requirements provided byArticle 5 ofRegulation(EC)1008/2008;

■ thecompanycomplieswithinsurancerequirements;and■ the personswhowill continually and effectivelymanage

theoperationsofthecompanyareofgoodreputationandhaveneverbeenbankruptasspecifiedinArticle7oftheRegulation.

The Direction de la Régulation Economique (DRE), located at the DGACinParis,should issuethe licencewithinthreemonths;for small operators (non-scheduled services with aircraft offewerthan20seatsandturnovernotexceedingEUR3millionperyear),thelicencewillbedelivereddirectlybythelocalDAC(i.e.thesamedepartmentthatdeliveredtheAOC).Theseauthoritiescanwithdrawthelicenceif itappearsthat

the conditions are no longer met.


Firstly,airsafetyisregulatedbytheInternationalCivilAviationOrganisation (ICAO), asFrance is a signatory to theChicagoConvention1944andmustthereforeensurethatairnavigationequipmentandoperationscomplywithICAOstandards.AirsafetyisalsoregulatedbytheEuropeanAviationSafety

Agency(EASA)andEuropeanlegislation,forexample:■ Regulation (EC)1315/2007of8November2007,which

establishesoversightofsafetyinairnavigationservices,airtrafficflowmanagementandairspacemanagement.

■ Regulation(EC)300/2008of11March2008oncommonrules in the field of civil aviation security and repealingRegulation(EC)No2320/2002.

■ Regulation(EU)340/2015of28April2015,whichsubsti-tutesRegulation805/2011of10August2011,whichlays

1 General


Regulatory bodiesAviationisregulatedbytheMinistryofTransport,whichisthecompetent administrativebody in the fieldof aviation and, assuch,canissueregulationsandmeasuresinthefieldofaviation.TheCivilAviationAuthority,knownastheDGAC(Direction

Générale de l’Aviation Civile),advisestheMinistryofTransportonaviation matters and makes administrative decisions regarding all aspectsofaviation.TheEuropeanAviationSafetyAgency(EASA)hasauthority

inrespectofaviationsafetyregulationwithinEUMemberStates.LegislationAsinotherMemberStatesoftheEuropeanUnion,aviationinFranceisincreasinglyregulatedbyEUlegislation,mostofwhichisofdirectapplicationinFrance.Until 2010, the aviation sectorwas regulated by the French

CodeofCivilAviation.ItisnowregulatedbythesixthsectionoftheCodeofTransport,whichcoversallmeansoftransport.ItshouldbenotedthatcertainprovisionsoftheCodeofAviationremain applicable pending decrees to incorporate them into the newCodeofTransport.Finally,Franceisalsoapartytothe1999MontrealConvention

fortheUnificationofCertainRulesforInternationalCarriagebyAir,whichsetsouttheliabilityregimeofaircarriersinthecaseof an accident;European regulationhas extended this liabilityregime to domestic accidents.


Article 4 of theRegulation (EC) 1008/2008 of 24 September2008setsout theconditionsforgrantinganoperating licence,whicharethat:■ itsprincipalplaceofbusinessislocatedinFrance;■ the company holds a valid Air Operator’s Certificate

(AOC),issuedbythelocaldepartmentofthecivilaviationauthority where the company will be established (Direction de l’Aviation Civile–DAC),whichisresponsibleforgranting,refusing,revokingorsuspendingtheoperatinglicenceoftheCommunityaircarrier;

■ thecompanyhasoneormoreaircraftatitsdisposalthroughownershiporadryleaseagreement;

113Clyde & Co


■ Astonon-communityaircarriers,theymustseekauthor-isationfromtheDGACtooperate intooroutofFrance,whether they are carrying out intra-community air services orextra-communityairservices.Suchauthorisationwillbegrantedonlyifthenecessarytrafficrightsexist.


All French airports are directly owned by the State or publicbodies,exceptforParis-CharlesdeGaulle,Paris-Orly,Paris-LeBourget and other aerodromes in the Paris region (région Ile de France).TheseareprivatelyownedbytheAéroportsdePariscompany;

however,theFrenchStatemustownmorethan50%(currently52%)ofthecompany’sshares(ArticleL6323-1oftheCodeofTransport).


Conditionsofuseareimposed,aswellascharges.Inparticular,there are regulations on noise and curfews in some airports,especially in Roissy-Charles de Gaulle.


FranceisapartytotheChicagoConvention1944.Article26andAnnex13ofthatConventioncontainprovisionsfortheinvesti-gationofairaccidents.Regulation(EU)996/2010alsoregulatestheinvestigationand

preventionofaccidentsandincidentsincivilaviation(amendedbyRegulation(EU)376/2014).The French Code of Transport (Article L62231) (Article

L6223-1) obliges any regulated actor to report to the aviationauthoritiesanyeventwhichhasorislikelytohaveaffectedthesafetyofairoperations.Thefailuretoreportsucheventsmayresultinpenaltiesofone

year’simprisonmentandafineofEUR15,000(Article6232-10oftheFrenchCodeofTransport).

The Bureau d’Enquêtes et d’Analyses(BEA)isresponsiblefortheinvestigationofcivil aircraft accidentsandserious incidents inFrance.Inadditiontocivilinvestigation,investigationsintoseriousinju-

ries or deaths are usually carried out by the French Gendarmerie, in addition to penal investigations which are undertaken by a judgeofthelocalcriminalcourt.An airline’s liability is generally governed by the Montreal

Convention 1999, which provides a strict liability regime with the possibilitytoexcludeliabilityfordamagesabove113,100SpecialDrawingRights(SDR)(approximatelyEUR115,000)whensuchdamagewasnotduetothenegligenceorotherwrongfulactofthe carrier or its servants or agents and when the accident is a resultsolelyofathirdparty’sfault(Article21).


In 2015, theFrenchSupremeCourt (Cour de cassation) decided thatathird-partyactionbyanaircraftmanufactureragainstan

downdetailedrulesforairtrafficcontrollers’licencesandcertaincertificates.ThisRegulationappliesasof30June2015. Bywayofderogation fromparagraph1,MemberStateshadtheopportunitytodecidenottoapplyAnnexesI to IV, in whole or in part, before 31 December 2016(Article11).

Inordertomakeuseofthispossibility,MemberStatesneededtonotifytheCommissionandtheAgencyby1July2015atthelatest.InFrance,differentDGACdepartmentsareresponsiblefor

enforcingairsafetyregulation,whetherFrenchorEuropean;inparticular,theOSAC(OrganisationforCivilAviationSecurity)and the DCS (Safety Oversight Directorate). The MinisterforTransportalsohaspowers in respectof safety inspectionsof aircraft, equipment and organisations and their employees.French safety rules are contained in Article L6341 and thesubsequentArticlesoftheCodeofTransport.Anyaircraft,whetherFrenchorforeign,ataFrenchairport,

andanypremisesandfacilitiesatwhichcontrolledactivitiesarecarried out, may be inspected to ensure compliance with French andEuropeancivilaviationregulations.Incaseofanybreachoftheseregulations,theministermayprescribeanymeasuretocorrect and restrictoperations, including thegroundingof anaircraft.


Theregulatorybodiesarethesameforcommercial,cargoandprivatecarriers;however,therulesandstandardsvary.Inparticular,ArticleL6343 and the subsequentArticles of

theFrenchCodeofTransportcontainprovisionsforthesecu-ritycontrolofcargoandairmailcarriage.Similarly,Regulation(EU)859/2011(amendingRegulation(EU)85/2010)providesfor specific security measures on air cargo and mail comingfromnon-EUcountries.


The rules and regulatory bodies are the same for these threecases.


There are no limitations, as France is a party to the 1944 Chicago Convention,whichprovidesforavailability,sofaraspracticable,ofaerodromesinitsterritoryandequalityofconditionsofuseofaerodromesforinternationalanddomesticaircraft.Article15oftheChicagoConventionfurtherprovidesforequalityforchargesfortheuseofaerodromes.As to authorisations, a distinction is to be made between

communityandextra-communitycarriers:■ Communitycarrierswhichhaveavalidlicencecanoperate

intra-community services in France without a permit or authorisation. AcommunitycarriermustonlynotifytheDGACoftheintendedoperationinFrance(ArticleR330-8oftheCivilAviationCode).Extra-communityservicesarestillsubjecttoauthorisationbytheDGAC(ArticleR330-8oftheCivilAviationCode).

114 France


agreementprovidesthatthemortgageisgrantedforaperiodinexcessof10years,are-filing/re-recordationisrequiredupontheexpiryofthe10-yearperiod.Therequestforderegistrationofamortgagemustbefiledby

themortgagee.NoderegistrationoftheaircraftfromtheFrenchregistry may be done unless the mortgage has been released or the mortgagee has agreed.Anaircraftmortgagedoesnotgivearighttopossession,but

only to cause the sale, and priority over the proceeds of sale.Severalmortgagesmaybetakenonasingleaircraftandthemort-gagesregisteredfirstwillhavepriorityoverthesubsequentones.Consistent with the rules of theGeneva Convention, some

rightshavepriorityoverthemortgagee’s:(i)legalcostsofpublicauction sale; (ii) costs incurred for salvage; (iii) costs that areindispensable for preserving the aircraft; and (iv) mechanics’liensifregisteredpriortothemortgage.

The registered mortgagee is entitled to receive insurance proceedsuptothesecuredamountincaseoflossordamagetotheaircraft,subjecttoalternativeprovisionsagreedbetweentheparties.


Leases(i.e.drylease)arenotrequiredtoberegistered.However,theymayberegisteredontheFrenchaircraftregistry.Whenaleaseisrecorded,theowner’sliabilitytothirdpartiesissubjecttoproofofnegligenceoftheowner.Theregistryonlyrecordstheexistenceoftheleasetotheoperator,anditsduration.Public transport aircraftmay only be arrested in France in

a very limited number of circumstances; for example, in theeventof sumsdueby theowner for acquiring the aircraft, orfortrainingormaintenance(Article6123-1oftheFrenchCodeofTransport),andalsoforairportortrafficduesandfinesforcurfewandsimilarviolations.


Engines installed on an aircraft are deemed to belong to theaircraft and so to theownerof the aircraft. An engineplateshowing different ownership can mitigate risk with limitedsuccess as there is no engine registry.


Enginesalesaresubject toa20%VAT. However, there isanexemption for carriers which operatemore than 80% abroad(Article262II.4.oftheFrenchTaxCode).

airlinearising fromthedeathofpassengers inanair accidentwasnotgovernedbytheWarsawConvention.In thismatter, the victims’ families sued themanufacturer

forallegeddesigndefectsontheaircraft.Thefamiliesclaimedcompensationfordamagesarisingfromthedeathofthepassen-gers.Themanufacturerbroughtathird-partyactionagainsttheairline for indemnity. The airline raised a jurisdiction excep-tionbasedontheapplicableWarsawConvention(theMontrealConvention was not applicable as it had not been ratified byoneof thecountries involved). TheCourtofAppealgrantedthe jurisdiction exception. TheCour de cassation quashed theCourtofAppealdecisiononthegroundsthattheConventiononly governs actions brought against an airline directly by the passengersandnotbythemanufacturer.Thisdecisionisabreachoftheprincipleofexclusivityofthe

Convention(nowtheMontrealConvention).



FranceisapartytotheGenevaConventionof19June1948andrightsinrelationtotheownershipofaircraftareconsistentwiththe rules set out therein.Registrationofownershipconstitutesproofofownershipand

isbindingonthirdparties(ArticleL6121-1oftheFrenchCodeofTransport). No transferof title isbindingon thirdpartiesuntil the owner is registered as the owner on the register which iskeptbytheDGAC.Forthepurposeofregisteringanaircraftorachangeofownership, theDGACwill requireanoriginalbillofsaleandothersuchdocumentationnecessarytoverifytheauthenticityofthetransfer.


MortgagesonaircraftregisteredinFrancemustberegisteredontheFrenchaircraftregisterinordertobebindingonthirdparties(ArticleL6122-8oftheFrenchCodeofTransport).Mortgagesmayonlybetakenonanentireaircraft(forexample,onemaynottake a mortgage on an engine only). Mortgagesmustbean instrument inwritingsignedbyboth

parties(theownerasmortgagor,andthecreditoroftheowneras mortgagee). The amount secured must be indicated; themortgagemaysecuretheprincipalplusthreeyearsofpastdueinterest, in addition to the interest accrued during the year ofenforcement.Thesecurityconsistsoftheaircraft,enginesandallotherparts; itmayalsobeextendedtosparepartsprovidedthatalist identifyingeachofthemisincludedinthemortgageagreement.MortgagesmaybeobtainedbycontractonlyandnotbyCourtOrder.Asinglemortgagemaycoverseveralaircraftorevenanentire

fleet (if the entire fleet is registered in France) as long as allaircraftincludedinthesecurityareidentified.Anoriginal of themortgage agreementmustbe sent to the

DGACforthepurposeoffilingamortgage.Inthesamemannerasforregistrationofownership,theDGACwillrequireanumberofdocumentsinordertoverifytheauthenticityofthemortgage;the mortgage agreement does not need to be notarised. The registrationofthemortgageisvalidfor10years;ifthemortgage

115Clyde & Co



There isnosuchself-helpregimeunderFrench law. A lessororafinancierhasnochoiceotherthantoseekaninjunctiontorepossessanaircraft.


TheFrenchjudicialsystemisnotbasedonsector/industry,butonthenatureandvalueofthedispute.Commercial courtswillhave jurisdictiononall commercial

claimsorotherdisputesrelatedtotrade,financeandcommerce.As such, commercial courts will have jurisdiction for claimsbetween a lessor and a lessee, or between an airline and a repair company, etc.Criminalcasesareheardbycriminalcourts.Prosecutionsfor

manslaughter will be heard by the Tribunal correctionnel, which can alsomakedecisionsonacivilvictim’scompensationforharmarisingfrommanslaughter.Civilmattersareheardbycivilcourts;mainlytheTribunal de

Grande InstanceforclaimsaboveEUR10,000(includingclaimsarisingfromdeathorinjury),andtheTribunal d’instance and Juge de proximitéforsmallclaimsbelowEUR10,000(includingbaggageclaims,claimsfordelayedflights,etc.).DisputeswiththeFrenchadministration(forexample,airport

taxes and navigation service taxes) are heard by the Tribunal administratif.


TheusualwaytostartlitigationinFranceistoserveaWritinSummonsontheDefendant. Theserviceisdonebyabailiff.ThentheoriginaloftheWritinSummonsisfiledwiththerele-vantcourtwhichhasjurisdictionoverthematter.Serviceonpartiesresidingabroadvariesaccordingtowhether

theDefendant’sstateisamemberoftheEuropeanUnionorhassigned a bilateral or multilateral convention with France.Astonon-EUMemberStates,serviceisusuallydoneviathe

diplomatic channel. The French court has no obligation to wait for evidence that: the service on the foreign Defendant wasactuallycompleted;serviceisdeemedcompleted;anditissuffi-cienttogiveevidencetothecourtthattheSummonswassenttothepublicprosecutorwhowilltakecareofserviceabroad.Ifittranspiresthatservicewasnotdone,resultinginaJudgmentbyDefault,thiswouldbeaspecificcauseforanappeal.


Remediesvarydependingonthenatureofthedispute.Onaninterimbasis,theClaimantcanstartaprocédure de référé

forurgentcasesinordertoobtainanordonnance de référéfor:■ aprovisionalInjunctionOrdertopreventtheotherparty

fromdoingsomethingthatclearlyviolatesthelaw;or■ aprovisionalpaymentfordamages.


Franceisasignatoryofandhasratifiedmostinternationalavia-tion conventions, including, inter alia:■ The1929WarsawConvention,asamendedbytheHague

Protocolof28September1955.■ The1944ChicagoConvention.■ The1963TokyoConventiononoffencesandcertainacts

committedonboardaircraft.■ The1952RomeConventionondamagecausedbyforeign

aircrafttothirdpartiesonthesurface.■ The1968GenevaConventionontheinternationalrecog-

nitionofrightsinaircraft.■ The1999MontrealConvention.

The Cape Town Convention on international interests in mobileequipmenthasbeensignedbyFrance;however,todateithasnotbeenratified.


Ratifiedconventionsarerecognisedandenforcedbythecourtand prevail over French domestic law.


Article39CII.1.oftheFrenchCodeoftaxes(Code Général des Impôts)providesforamechanismcalledGIE Fiscal, which allows specialtaxtreatmentforreleasersofaircraftindetailedcircum-stancesandunderspecificconditions.



Anypersonwhohaspossessionofanaircraftcanretainituntilpaymentofcharges,feesorcosts,whicharosefromthesubjectpossession,suchasrepairandmaintenancecosts,hangarfees,etc.,havebeensatisfied.Aircraftthatarededicatedtopublictransportationortostate

servicesareprotected, inthesensethattheycanbesubjecttofreezinginjunctionsonlyfordebtsrelatedtothesaleormainte-nanceoftheaircraftortraining(ArticleL6123-1oftheFrenchCodeofTransport)andforunpaidairportorairservicecharges(ArticleL6123-2oftheFrenchCodeofTransport).In other circumstances, freezing injunctions can be sought

pursuant to the common rulesprovidedby theLawof9 July1991,beforetheJuge de l’Exécution.Theconditionsare:■ Thedebtmustappearcertain.■ Undercertaincircumstances,thecreditorcanassumethat

hewillhavedifficultyingettingpaid.A freezing injunction is not necessary when the creditor

alreadyhasajudgmentwhichisnotyetenforceable,orasimilardocumentsuchasanunpaidchequeoranotarisedagreement;insuchcircumstances,thefreezingofanaircraftcanbepursueddirectlybyabailiff.

116 France


4.1.2 ConcentrationsEuropeanUnion law (Article 2ofRegulation (EC) 139/2004)and French law (Article L430-6 of the Code of Commerce)forbidconcentrationswhichwouldsignificantlyimpedeeffectivecompetitioninthecommonmarketorinasubstantialpartofit.TheEuropeanCommission(seepoint4.1.2.1)ortheFrench

authorities (4.1.2.2) will have jurisdiction over the concentra-tion dependingon the turnover of the undertakings involved.Concentrations which have very little impact on the market giventhesizeoftheundertakings,arenotsubjecttoanycontrol(4.1.2.3).4.1.2.1 European competenceRegulation (EC) 139/2004 sets thresholds to define theCommunitydimensionof theconcentration,andtherefore thecompetenceoftheEuropeanCommission.AconcentrationhasaCommunitydimensionwhere:

■ the combined aggregate worldwide turnover of all theundertakingsconcernedismorethanEUR5,000million;and

■ theaggregateCommunity-wideturnoverofeachofatleasttwooftheundertakingsconcernedismorethanEUR250million,

unlesseachoftheundertakingsconcernedachievesmorethantwo-thirds of its aggregate Community-wide turnover withinoneandthesameMemberState.Alternatively,aconcentrationthatdoesnotmeetthethresh-

oldslaiddownpreviouslyhasaCommunitydimensionwhere:■ the combined aggregate worldwide turnover of all the

undertakingsconcernedismorethanEUR2,500million;■ in each of at least three Member States, the combined

aggregate turnover of all the undertakings concerned ismorethanEUR100million;

■ in each of at least threeMember States included for thepurposeoftheabovepoint,theaggregateturnoverofeachofatleasttwooftheundertakingsconcernedismorethanEUR25million;and

■ theaggregateCommunity-wideturnoverofeachofatleasttwooftheundertakingsconcernedismorethanEUR100million,

unlesseachoftheundertakingsconcernedachievesmorethantwo-thirds of its aggregate Community-wide turnover withinoneandthesameMemberState.4.1.2.2 French competenceIf the above-mentioned thresholds are not met, the FrenchAuthorityinchargeofcompetitionwillhavejurisdiction.4.1.2.3 Absence of controlConcentrations which will not have a substantial impact on the market are not controlled.This is the casewhen the following thresholds are notmet

(ArticleL430-2ofCodeofCommerce):■ the combined aggregate worldwide turnover of all the

undertakings concerned is more than EUR 150million;and

■ theFrenchaggregateturnoverofeachofatleasttwooftheundertakingsconcernedismorethanEUR50million,

or alternatively, if at least two of the undertakings concernedoperate one or several retail store(s), or at least one undertaking operatesalloranypartof itsactivity inoneorseveralFrenchoverseas departments or in the French overseas collectivities of Mayotte, Saint-Pierre-et-Miquelon, Saint-Martin and Saint-Barthélemy,and:■ the combined aggregate worldwide turnover of all the

undertakingsconcernedismorethanEUR75million;and■ theFrenchaggregateturnoverofeachofatleasttwoofthe

undertakingsconcernedismorethanEUR15million.

Onafinalbasis,theClaimantcanstartaprocédure au fonds in order toobtainadecisiononthemeritsofhisclaim.Forexample:■ damages;■ aninjunctiontodoornottodosomething;■ adecisionontheownershipandrepossessionorder;or■ other.It shouldbenoted that there is nodefinitive list ofwhat a

French court may order.Regardingthearbitralaward,ithastheauthorityofres judicata

orcanbedeclaredprovisionallyenforceableinaccordancewithArticle1484oftheFrenchCodeofCivilProcedure.


Except for small cases below EUR 4,000, there is a right ofappealtoaCourtofAppeal(Cour d’appel ).TheCourtofAppealhas the power to make a new decision on all aspects of thematter,bothonquestionsoffactandquestionsoflaw.After aCourt ofAppeal decision, or if the appealwas not

open,thereisalsoanappealbeforetheFrenchSupremeCourt(Cour de cassationforcivilmattersorConseil d’Etatforadministra-tivematters).TheSupremeCourtonlyrulesonmattersoflaw:it merely ensures that the lower court has correctly applied the lawtothefacts,withoutcontradictingtheCourtofAppealastowhatthefactsare(withtheexceptionofaclearmisrepresenta-tionordistortionofthefacts).Arbitraldecisionscannotbe subject to anappeal, except in

very limited circumstances.



Therearenosector-specificcompetitionlawrulesthatapplytothe aviation sector.Jointventuressuchasalliancesorcodesharescanbeconsid-

ered to be agreements which are incompatible with the market (seepoint4.1.1below)orasaconcentration(seepoint4.1.2).4.1.1 Agreement incompatible with the marketArticle101§1oftheTreatyontheFunctioningoftheEuropeanUnion (TFEU)prohibitsall agreementsbetweenundertakings,decisions by associations of undertakings, and concerted prac-ticeswhichmayaffecttradebetweenMemberStatesandwhichhaveastheirobjectoreffecttheprevention,restrictionordistor-tionofcompetitionwithintheinternalmarket(i.e.theEuropeanSingleMarket).TheEuropeanCommissionwillhavejurisdictionifitfindsthat

anagreementfallswithinthescopeofthisArticle.TheEuropeanCommissionmaydeclarethatArticle101§1of

the TFEU shall not apply to certain categories of agreements,decisionsofassociations,andconcertedpractices,intheairtrans-portsector(seequestion4.3).InFrance,ArticleL420-1of theCodeofCommerce forbids

joint actions, agreements, explicit or implicit collusions or alli-ances which have as their object, or can have as their effect,the prevention, restriction or distortion of competition withinamarket, directly or even indirectly through a foreignholdingcompany.If the scope of such an agreement affects only the French

market,theFrenchAuthorityinchargeofcompetition(Autorité de la Concurrence)willhavejurisdiction(ArticlesL420-1andL420-2oftheCodeofCommerce).

117Clyde & Co


wereconsideredessentialtofacilitatetheentryorexpansionofcompetitorsonroutesbetweenLondonandseveralairports.Itwas an important step because slots are seen as market barriers.

Regarding incompatible agreements with the market, under Regulation(EC)487/2009,theEuropeanCommissionmay,byRegulation,declarethatArticle101§3TFEUshallnotapplytocertaincategoriesofagreementsandconcertedpracticesintheair transport sector.


Thereisnocontrolofforeignownership.Jurisdiction is distributed between French and European

authoritiesdependingonthecombinedaggregateturnoverofalltheundertakings(seequestion4.1).Under Articles L430-1 and subsequent of the Code of

Commerce,concentrationsshallbenotified,andcannotbeimple-mentedbefore theyareauthorised (seequestion4.5 for furtherdetails).Under French law, joint ventures can only be considered

concentrationsifthey“willbeperformingonalastingbasisallthefunctionsofanautonomouseconomicentity”(ArticleL430-1IIoftheCodeofCommerce).


4.5.1 In French lawConcentrations shall be notified to the French CompetitionAuthorityprior to their implementation. TheAuthoritymustthenrespondwithin25workingdays.Itcanthenfindthattheagreementdoesnotfallwithinthe

scopeofArticlesL430-1andL430-2oftheCodeofCommerce.Itcanalsoauthorisetheagreement,ororderafurtherin-depthexamination.Withinfiveworkingdaysfromthedayhe/sheisinformedof

theAuthority’sdecision,theMinisterofEconomycancallforafurther in-depthexaminationof theagreementaccordingtoArticleL430-7-1.Intheabsenceofsuchacall,theagreementwillbedeemedauthorisedbytheAuthority.4.5.2 In European Union lawConcentrationsinthescopeoftheEuropeanRegulation(EC)139/2004(seequestion4.1)havetobenotifiedtotheEuropeanCommission prior to their implementation.ProceedingsbeforetheEuropeanCommissionaresetoutin

Articles4et seq.ofRegulation(EC)139/2004.Itsdecisionshallbemadewithin25workingdaysstartingfromthereceiptofthereasoned submission by the Commission.Itcanthenfindthattheagreementdoesnotfallwithinthe

scopeoftheRegulation. Itcanalsodecidenottoopposetheconcentration, or declare the concentration incompatible with the common market.


ThisisaEuropeanUnionlawmatter.UnderArticles107to109oftheTFEU,stateaidthatdistortsorcoulddistortcompetitionis basically incompatible with the common market, although someaidmightbeexemptedinconsiderationofitspurpose.


The “relevant market” comprises all the goods and serviceswhich can be regarded as substitutable.

They are determined by analysing the relevant product market and the relevant geographicmarket. As regards the relevantproduct market, both supply and demand will be taken into account, which implies looking closely at the goods or services provided by competitors.TheFrenchAuthoritydefines the relevantmarketby refer-

encetoEuropeancaselaw,astheMinisterofEconomydidinadecisionof27April2000concerningthemergerbetweenAirFranceandBritAir.The European Commission later defined several relevant

marketsbetweenairlinecompetitorsinadecisionof27February2013concerningthemergerofRyanairandAerLingus.Here,relevant markets included routes, types of flights, types ofpassengersandtypesofservices. TheEuropeanCommissionconsidersthatanOriginandDestinationarenotsubstitutableby another, but two airports serving the same city can be. The substitutability betweendirect andnon-direct flights dependson the lengthof the flight. Differentcategoriesofpassengercanconstitutedifferentrelevantmarkets.Themarketpackagingoftheflightalsohasaninfluenceonthedefinitionoftherele-vantmarketbecauseofthedifferentservicesthatcanbelinkedtotheflight.


4.3.1 In French lawYes.ThepartiestoaconcentrationcannotifytheprojecttotheAuthority in charge of competition (Autorité de la Concurrence), with commitments which aim to make the concentration compatiblewith themarket. UnderArticle L430-5 II of theCode of Commerce, the Authority can then authorise theconcentration, provided that the undertakings comply with their commitments.

Parties to an anticompetitive agreement may also obtain regulatory clearance. Under Article L420-4 of the Code ofCommerce, they must prove that said agreement contributes to promotingeconomicprogress,whileallowingconsumersafairshareoftheresultingbenefit,anddoesnotaffordthepartiesthepossibilityofeliminatingcompetitioninrespectofasubstantialpartoftheproductsinquestion.4.3.2 In European Union lawSimilar provisions apply in European Union law when theEuropeanCommission has jurisdiction (see question 4.1): theagreementmustbenotifiedtotherelevantEuropeanauthority.UnderArticles6and8ofRegulation(EC)139/2004, ifthe

European Commission finds that the concentration raisesserious doubts as to its compatibility with the common market, undertakings can offer commitments to make the concen-tration compatible with the common market. The European Commissionwillauthoriseit if itfindsthattheconcentration,followingthecommitments,nolongerraisesseriousdoubts.By a decision of 14 July 2010, the European Commission

authorised an alliance between British Airways, AmericanAirlinesandIberia,whichwasfirstseenas incompatiblewiththe common market. But the undertakings committed to make landingandtake-offslotsavailableatLondonHeathrow,which

118 France


hours of first becoming aware of the breach) to the relevantdata protection authority, unless the breach is unlikely to result in a risk to the rights and freedomsof thedata subject(s). Aprocessormustnotifyanydatabreachtothecontrollerwithoutundue delay.Thenotificationmustincludethenatureofthepersonaldata

breach, including the categories and number of data subjectsconcerned,thenameandcontactdetailsoftheDataProtectionOfficer or relevant point of contact, the likely consequencesof the breach and themeasures taken to address the breach,includingattemptstomitigatepossibleadverseeffects.


InFrenchlaw,therearenospecificprovisionsrelatingtointel-lectual property rights in relation to aircraft. All themecha-nismsavailableareprovidedbytheFrenchCodeofIntellectualProperty.Asregardsjurisdiction,specialcourtsareestablishedtodeal

with intellectual property issues.Furthermore, the European Union joined the Cape Town

Treatyin2009.TheaccessioncoversthosemattersinrespectofwhichlegalcompetencehasbeentransferredtotheEUfromtheMemberStates. Ratification is therefore requiredbyeachMemberStateinorderforthebenefitstoberealised.


Regulation(EC)261/2004,directlyapplicableinFrance,providesfor the rights of the passengers in case of denial of boarding(passengersmayreceivecompensationuptoEUR600).IncaseofadisputeontheapplicationoftheRegulation’sprovisions,civilstatecourtswillhavejurisdiction.Regarding Regulation (EC) 261/2004, the European

Commission proposed the modification of the existing airpassengerrightsregulations,toaddressthecourt’sdecisions.TheParliamentadopted itsfirst-readingpositionontheproposal inFebruary2014.ButtherevisedRegulationhasnotyetcomeintoforce:althoughtheCouncilhasmadesomeprogressonthefile,ithasnotyetagreedonageneralapproachfornegotiationswiththe Parliament.In case of a dispute that is not covered byRegulation (EC)

261/2004,Frenchlawapplies(nospecificregulation).


Regulation (EC) 261/2004 also provides for the rights appli-cableincaseofdelay.According to Article R160-1 of the French Civil Aviation

Code, the French Commission administrative de l’aviation civile may imposeapenaltyofuptoEUR7,500fornon-compliancewithRegulation(EC)261/2004(includinglatearrivalofflights).Inordertocontestsuchapenalty,anactionmaybebrought

beforetheAdministrativeCourt(ArticleR160-14oftheFrenchCivilAviationCode).

UnderArticles87and88oftheECTreatyandArticle61oftheEEAAgreement,theEuropeanCommissionhassetguide-linesregardingstateaidintheAviationSector(94/C350/07OJC950/1994;OJC312/2005).Those guidelines concern the financing of airports and

start-upaidforairlines.The aim of the airport financing guidelines is to allow an

airport under public ownership to behave as a private firm.Consequently, a reduction in airport fees is free of aid if theairportisguidedbylong-termprofitability.InFrance,therearemanyexamplesofsmallairportsconcedingreductions in feestoRyanair,whichhaveallowedthemtodevelopsignificantly.Start-upaidforairlineshasthemainobjectiveofmaintaining

certainroutes(seequestion4.7).InFrance, therearenosector-specificprovisionsthatregu-

latedirectorindirectfinancialsupporttocompaniesorairports.


Frenchlawhasnotmadeavailableanyspecificnationalaidforairlinessince2005. AssistancemustbesoughtataEuropeanlevel.Article86of theECTreaty rules that stateaid in the form

ofpublicservicecompensationmaybegrantedtoundertakingsentrustedwith the operation of services of general economicinterest. Within thisArticle,Regulation (EEC) 2408/92 andaDecision from theEuropeanCommission of 28November2005settherulesthatMemberStateshavetoapplytoprovidepublicservicecompensationtoairlines.Themaingoalfollowedbytheregulationistomaintainroutesconsideredvitalfortheeconomicdevelopmentofcertainregions.


Asof25May2018,theprincipaldataprotectionlegislationinthe EU, and so in France, is Regulation (EU) 2016/679 (theGeneralDataProtectionRegulationor“GDPR”).TheGDPRrepeals Directive 95/46/EC (the Data Protection Directive)andleadstoincreased(thoughnottotal)harmonisationofdataprotectionlawacrosstheEUMemberStates.UndertheGDPR,passengers’rightsareasfollows:

■ Rightofaccesstodata/copiesofdata.■ Righttorectificationoferrors.■ Righttodeletion/righttobeforgotten.■ Righttoobjecttoprocessing.■ Righttorestrictprocessing.■ Righttodataportability.■ Righttowithdrawconsent.■ Righttoobjecttomarketing.■ Right to complain to the relevant data protection

authority(ies).


Thecontrollerofthedataisresponsibleforreportingapersonaldata breach without undue delay (and in any case within 72

119Clyde & Co



SincemostFrenchairportsarecontrolledbytheState,suchinte-gration would presuppose political will.Inanycase,therearenolegalimpedimentstoverticalintegra-

tion between air operators and airports.


There are no such nationality requirements, except that theholderofaFrenchAOCcanonlyoperateaircraftregisteredinFrance (there are exemptions).

5 In Future


The most likely change in regulation is the amendment ofRegulation (EC) 261/2004, which provides for the rights ofpassengersinthecaseofdenialofboardingandcancelledflights.TherehasbeenalotofcriticismoftheEUandFrenchcourts’interpretationoftheRegulation,extendingtherighttocompen-sationtodelayedflightsanddramaticallyrestrictingthepossibil-itiesforairlinestoavoidfinancialcompensation(extraordinarycircumstances).Theburdenoffinancialcompensationpaidbyairlines topassengers issignificant. Anamendmenthasbeensoughtforyearsbuthasnotyetbeenachieved.Clarificationastowhether theEUCommissionwill accept the courts’ inter-pretation by implementing their decisions within the revised versionofRegulation(EC)261/2004,orcounterthesaidinter-pretations, is expected.


Airports,andconsequentlyairportauthorities,aregovernedbytheTransportCode,Section6,BookIII,whichprovidesforthelegalstatusapplicabletoairports,forsafetyrulesandfornoiseregulations.Inaddition,airportsaregovernedbyEuropeanRegulations,

suchas(EC)216/2008,implementingcommonrulesinthefieldofcivilaviation,and(EU)219/2014,whichdealswithairportcertification.


Mostofthedisputesthatarisebetweenairportsandpassengersrelatetobodilyinjury.Incaseofsuchdisputes,administrativeliability applies.

The general consumer protection legislation in France mainly stemsfromEUlegislationandisfocusedonsafety,theprotec-tionoffinancialinterestsandthedutyofinformation.MostofthesegeneralRegulationsdealwiththeconsumer’sprotectionwithinthecontextofsaleoruseofgoods,andarethereforenotrelevant to the relationship between the airport operator and its passengers.However,thegeneralconsumerprotectionlegislationapplies

to the relationship between the airport operator and passengers using airport parking.


Amadeus,SabreandGalileoarethemostcommonGDSsusedin France.


No,therearenot.

120

Aviation Law 2020

France

Maylis Casati-Ollier’s expertise covers counselling (aircraft financing, purchase, charter and lease agreements) as well as litigation and arbitration for airline companies and their insurers in all aspects of aviation law, and aviation and aeronautical activities, including: major accidents; disputes relating to freight; ground handling; product liability; sports and leisure aviation; regulations; and airline insurance law.Maylis holds a Diploma of Advanced Studies (DEA) from the University of Paris X (Nanterre) (1976), as well as a Master of Comparative Law from the University of Michigan Law School (1979).Maylis’ expertise in aviation law is recognised by Who’s Who Legal, Chambers, The Legal 500 and Best Lawyers 2011.

Clyde & Co134 Boulevard Haussmann75008 ParisFrance

Tel: +33 1 44 43 88 88Fax: +33 1 44 43 88 77Email: [email protected]: www.clydeco.com

Benjamin Potier advises his clients mainly in the field of aviation. He practises litigation before civil, commercial, administrative and criminal courts.Benjamin’s expertise in transport is recognised by Who’s Who Legal – France. He also holds a private pilot’s licence.

Clyde & Co134 Boulevard Haussmann75008 ParisFrance

Fax: +33 1 44 43 88 77Email: [email protected]: www.clydeco.com

The Clyde & Co Paris aviation department is currently the largest aviation legal practice in France. Our experience spans more than 35 years, acting for a number of airlines including, inter alia, Air France and the various airlines in its group.We are specialists in aviation law and our expertise covers important disputes arising from major aircraft accidents as well as aircraft financing, purchase, charter and lease agreements, litigation and arbitration for airline companies and their insurers. We advise on all aspects of aviation law, including aeronautical activities, disputes relating to freight, ground handling, product liability, sports and leisure aviation, regulations and airline insurance law.We appear in court frequently, whether representing clients in individual or in major accident cases.

www.clydeco.com


Aviation Law 2020

Chapter 19 121

Germany

Urwantschky Dangel Borst PartmbB Claudia Hess

Rainer Amann

Germ

any



As Germany is a Member State of the EU, Regulation (EC) No. 1008/2008 applies and licensed activities are governed by this Regulation.

According to Article 3 para. 1 of Regulation (EC) No. 1008/2008, “no undertaking established in the Community shall be permitted to carry by air passengers, mail and/or cargo for remuneration and/or hire unless it has been granted the appropriate operating licence”.

Under Article 15 of Regulation (EC) No. 1008/2008, air carriers from European Economic Area (EEA) Member States are entitled to operate flights within the Community; a special application or notification is not required. This also applies to air carriers from Switzerland.

Regulation (EC) No. 1008/2008 does not apply to the following undertakings:■ foreigncarriersbasedoutsidetheEEA;and■ carriersbasedinGermanythatoperateround-tripsorcarry

passengersorcargobyhot-airballoon.Inrespectofscheduledairtraffic,aircarriersfromnon-EEA

Member States have to obtain an operating licence from the LBA prior to commencing scheduled air services from and to Germany.In respect of non-scheduled air traffic, an entry permis-

sionmustberequestedforcommercialflightsofnon-EEAaircarriers to and from Germany. The permission for entry will only be granted if the state registry of the air carrier submitting the application grants entry to German air carriers in the same way (reciprocity clause).


In Germany, safety issues are largely governed by EU regula-tions, especially Regulation (EC) No. 216/2008.

The national rules governing air traffic safety are primarily the German Air Traffic Regulation (Luftverkehrsordnung – LuftVO), the Regulation for the Operation of Aircraft (Betriebsordnung für Luftfahrtgerät – LuftBO) and the Regulation on the Examination of Aircraft (Verordnung zur Prüfung von Luftfahrtgerät – LuftGerPV ). The German provisions apply in cases where the EU regulations are not applicable.

In Germany, the European Aviation Safety Agency (EASA) based in Cologne, Germany, the LBA based in Braunschweig and the Federal Agency for Aircraft Accident Investigation (Bundesstelle für Flugunfalluntersuchung – BFU ) based in Braunschweig are the

1 General


In Germany, aviation law is mainly governed by international treaties and European law.

Germany is a party to the main following multilateral agree-ments relating to international carriage:■ ConventiononInternationalCivilAviation(Chicago)–8

June 1956.■ InternationalAirServicesTransitAgreement(Chicago)–

8 June 1956.■ Conventionon the international recognitionof rights in

aircraft(Geneva)–5October1959.■ Convention for the unification of certain rules relating

to internationalcarriagebyair (Warsaw)–29December1933.

■ ProtocoltoamendtheWarsawConvention(TheHague)–1 August 1963.

■ Convention, supplementary to the Warsaw Convention,for the unification of certain rules relating to interna-tional carriage by air performed by a person other than the contractingcarrier(Guadalajara)–31May1964.

■ Conventionfortheunificationofcertainrulesrelatingtointernationalcarriagebyair(Montreal)–28June2004.

■ Conventiononoffencesandcertainotheractscommittedonboardaircraft(Tokyo)–16March1970.

Furthermore, the European Regulations on aviation law apply in Germany.

Where international treaties and regulations are not applicable, German national law applies, especially the German Air Traffic Act (Luftverkehrsgesetz – LuftVG), the Air Traffic Regulation (Luftverkehrs-Ordnung – LuftVO) and the Aviation Security Act (Luftsicherheitsgesetz – LuftSiG).

The German Civil Aviation Authority (Luftfahrt-Bundesamt – LBA) in Braunschweig is the main government body regu-lating the aviation industry. It is responsible for granting certif-icates of airworthiness and operating licences. It is the compe-tent authority for aircraft registrations and entry permissions. It furthermore deals with environmental issues, aviation safety and security as well as aviation personnel. The LBA is also the main supervisory body in the aviation industry and, as such, the National Enforcement Body regarding various European Regulations.

122 Germany



Under German law, accidents of civil aircraft must be reported immediately to the German authority for the investigation of acci-dents and disruptions, the Federal Agency for Aircraft Accident Investigation (Bundesstelle für Flugunfalluntersuchung – BFU ), by the pilot, a crew member or the owner of the aircraft.

Incidents that endanger or could endanger an aircraft, its passengers or third persons must be reported to the LBA.

A danger to air traffic must be immediately reported by the pilot to the competent air traffic control (ATC).

Under German law, accident investigation and reporting is governed by the Law on the Investigation of Accidents and Disruptions in the Operation of Civil Aircraft (Gesetz über die Untersuchung von Unfällen und Störungen bei dem Betrieb ziviler Luftfahrzeuge – FlUUG),whichisthetranspositionofDirective94/56/ECintoGermanlaw.

The FlUUG applies to accidents and disruptions that occur in the Federal Republic of Germany and applies to:■ accidentsinwhich:

■ apersonsuffersafatalorsevereinjuryonboardorinconnection with an aircraft; or

■ anaircrafthassuffereddamagebecauseofwhichtheaircraft’s performance, its structural strength or flight characteristics are impaired and the repair involves considerable efforts or a replacement of the damaged part;

■ disruptionsthatimpairorcouldimpairthesafeoperationof a flight; or

■ fatalandsevereinjuries.The BFU establishes a report on every investigation in which,

inter alia, the details of the accident or disruption, the aircraft concerned, the external circumstances, the results of the inves-tigations and the discovery of the (potential) cause of the acci-dent or disruption are indicated. When establishing the report, the BFU may hear the operator of the aircraft, the manufacturer, the crew, representatives of foreign states, ATC and the German Meteorological Service. The BFU may also request assistance, information, documents and equipment from other states for conducting the investigation.

The aim of the BFU is to determine the cause of an accident but they do not establish liability.


German courts often interpret Article 5.3 of Regulation (EC) 261/2004(“An operating air carrier shall not be obliged to pay compen-sation in accordance with Article 7, if it can prove that the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken”) in such a way that it is not only relevant whether the extraordinary circumstance itself could have been avoided (e.g. the ATC restriction or the medical emergency) but also whether the airline has undertaken all reasonable measures to carry the passenger to his/her final destination as quickly as possible.

In a landmark decision of 15 January 2019 (X ZR 15/18), the German Federal Court of Justice (the highest German Civil Court) held that, according to the clear wording of the Regulation, it is only relevant whether the extraordinary

competent authorities for air safety. Air traffic control is admin-isteredby theDeutscheFlugsicherungGmbH (DFS)based inLangen.


In Germany, an individual framework of regulations on air safety for commercial, cargo and private carriers does not exist.


Non-EEAchartercarriersmustapplyforanentrypermissionif they wish to fly to Germany. The permit can be obtained for a single flight or for several flights. The permit is only granted if the home country of the charter carrier grants entry permis-sions to German charter carriers in the same way (reciprocity principle).


Under Article 3 of the LuftVG, an aircraft can only be regis-tered in the German Aircraft Register if it is exclusively owned by EU nationals or German nationals. In the case of owner-shipbyGerman-registeredentities,themainpartofthecapitaland the actual control thereof must be owned by EU or German nationals, and the majority of representatives or personally liable shareholders must be EU or German nationals.

Under the German Air Traffic Tax Act (Luftverkehrssteuergesetz – LuftVStG), carriers whose registered place of business is not inGermanyorintheEUmustdetermineaGerman-basedtaxrepresentative. The Air Traffic Act requires air carriers to pay a tax for each passenger departing from Germany on their flights; the tax amount is calculated on the basis of the distance flown. Thetaxrepresentativetobedesignatedbynon-EUaircarriersisthe intermediary between the tax authorities and the air carrier, and bears the same obligations as the air carrier himself. The tax representative is also the tax debtor next to the air carrier. For German or EU air carriers, such tax representative need not be appointed.


In Germany, airports can be either state owned, privately owned or partly state and partly privately owned.

German airports are mainly state owned by way of operating companies organised under private law.


The airports impose airport charges on the air carriers flying to and from the relevant airport. The charges are levied in accord-ance with the applicable Airport Charges Regulation issued by each airport. Such Regulation requires prior approval by the supervisory authority.

123Urwantschky Dangel Borst PartmbB


■ Generalinformationontheaircraft,includingthe:■ page number of the Aircraft Register on which the

aircraft is registered;■ nationalityandregistrymarkoftheaircraft;■ aircrafttype;■ serialnumberoftheairframe;and■ nameandplaceofresidenceoftheaircraftowner.

■ An affidavit confirming that the mortgagor is the soleowner of the aircraft and that the aircraft is not mortgaged to another person or entity.

■ Anaffidavitconfirmingthevalueoftheaircraft.■ Confirmationthatthemortgagorowesthesecuredobliga-

tions to the mortgagee.■ Adeclarationsubjectingtheaircrafttoimmediateenforce-

ment proceedings in the case of default under the mort-gage, which includes enforcement measures against the mortgagor.

■ Confirmation that themortgagee canobtain an enforce-able copy of the notarial deed.

■ Confirmation that themortgagormust bear the costs ofthe notarial deed and of registration of the mortgage in the Aircraft Mortgage Register.

On receipt of the application, the Local Court of Braunschweig will request payment of the registration fees. The amount of these fees is based on the value of the mortgage, and is calculated in accordance with the provisions of the German Court Fee Act (Gerichtskostengesetz ).

The aircraft mortgage is registered once the payment of the registration fees is made and once the Court has reviewed and approved the required documents. Registration of an aircraft mortgage takes about two to three days from receipt of payment by the Court.

There is no separate mortgage register for aircraft engines and spare parts in Germany. An aircraft mortgage can only be regis-tered over the whole aircraft. Spare parts or engines attached to the aircraft are not identified separately in the Aircraft Mortgage Register. The engines and spare parts are considered as parts of the aircraft. A registered aircraft mortgage will also cover spare parts and engines if both:■ Theaircraftownerisalsotheownerofthesparepartsand

engines.■ Theenginesandsparepartsareattachedtotheaircraft.

The parties can agree that an aircraft mortgage extends to engines and spare parts that are located elsewhere and are not attached to theaircraft. However, it isnotpossible tograntamortgage solely over the engines and/or spare parts.

To perfect an aircraft mortgage, the mortgage must be regis-tered in the German Aircraft Mortgage Register (Register für Pfandrechte an Luftfahrzeugen). A registered aircraft mortgage takes priority over any subsequently registered mortgage. The buyer of an aircraft will become the owner subject to any previously regis-tered mortgage (and free of any mortgage that was not registered at the time of the purchase).


There is no specific register for aircraft leases in Germany.An aircraft lease is not in itself registered in the Aircraft

Register.However,ifboththeownerandtheoperator(thatis,the lessee) of the aircraft are registered when the aircraft is regis-tered, it is implied that the aircraft is a leased aircraft.

An aircraft lease must be approved by the LBA. The applica-tion form must be filed with the LBA at least four weeks before

circumstance itself could have been avoided and not whether the airline arranged for the fastest possible transport for the passenger despite the delay/cancellation.

The Federal Court stated as follows: “The measures that can be reasonably expected of an airline

in order to avoid extraordinary circumstances leading to a considerable delay of a flight or giving rise to its cancel-lation are determined by the circumstances of the indi-vidual case; the reasonableness is to be assessed depending onthesituation(ECJinWallentin-Hermann,judgmentof22December2008,C-549/07,ECJinEglītisandRatnieks,judgmentof12May2011,C-294/10).Ontheonehand,itdepends on what precautions an airline must take in accord-ance with good professional practice so that minor impair-ments do not render the airline incapable of fulfilling its contractual obligations and essentially adhering to the flight schedule even during the normal course of air traffic. On the other hand, if a more than minor impairment actu-ally occurs or threatens to occur in a recognisable manner, the air carrier must take all the measures at its disposal in this situation in order to prevent, if possible, the resulting cancellation or long delay.

Within the framework of Article 5.3 of the Air Passenger Rights Regulation, only measures by which the operating air carrier could have avoided a cancellation or delay of the flight affected by the event giving rise to the extraordinary circumstances need to be taken into account. Whether a considerably delayed arrival of a passenger booked on this flight as well as on a direct connecting flight at his final destination can be prevented by a rebooking on another (connecting) flight, however, is only relevant in connection with Article 5.1 c of the Regulation.”



The aim of registering an aircraft in the German Aircraft Register is so that the aircraft is authorised to operate in Germany.However,registrationintheAircraftRegisterdoesnotestab-

lish ownership over the aircraft. Therefore, an incorrect regis-tration does not create a legal presumption of ownership for a person registered incorrectly.


In Germany, aircraft mortgages can be registered in the Aircraft Mortgage Register (Register für Pfandrechte an Luftfahrzeugen) at the Local Court in Braunschweig.

An application for registration of an aircraft mortgage can only be filed once the aircraft is registered on the Aircraft Register. The application for registration of an aircraft mortgage must:■ indicate the aircraft register number for the relevant

aircraft; and■ bedraftedandfiledbyaGermannotarybywayofnotarial

deed in the German language.The notarial deed must be filed with the Local Court in

Braunschweig and include the following documents and information:■ Theapplicationforregistrationofthemortgage,whichindi-

cates the mortgage amount and the interest specifications.

124 Germany


undertakes international air carriage (Articles 4 and 8, paragraph 2, no.1, German Value Added Tax Act (Umsatzsteuergesetz – UStG)). The German Federal Ministry of Finance has published a list of the companies that mainly operate international air carriage.

If the conditions for VAT exemption are not met, import VAT maybepayableatarateof19%.However,pre-taxallowancesmay apply.


Germany is a party to the main following multilateral agree-ments relating to international carriage:■ ConventiononInternationalCivilAviation(Chicago)–8

June 1956.■ InternationalAirServicesTransitAgreement(Chicago)–

8 June 1956.■ Conventionon the international recognitionof rights in

aircraft(Geneva)–5October1959.■ Convention for the unification of certain rules relating

to internationalcarriagebyair (Warsaw)–29December1933.

■ ProtocoltoamendtheWarsawConvention(TheHague)–1 August 1963.

■ Convention, supplementary to the Warsaw Convention,for the unification of certain rules relating to interna-tional carriage by air performed by a person other than the contractingcarrier(Guadalajara)–31May1964.

■ Conventionfortheunificationofcertainrulesrelatingtointernationalcarriagebyair(Montreal)–28June2004.

■ Conventiononoffencesandcertainotheractscommittedonboardaircraft(Tokyo)–16March1970.

GermanysignedtheCapeTownConventionon17September2002 but has not ratified it. Germany has no current plans to ratify the Cape Town Convention.


The International Conventions are ratified and thereby imple-mented into directly applicable national and EU law.


GermanyhastransposedtheSixthDirective77/388,asamendedbyDirective92/111,intonationallaw.

The European Court of Justice ruled, on 19 July 2012, that: “Article15(6)ofDirective77/388,asamendedbyDirective

92/111, must be interpreted as meaning that the exemp-tion for which it provides also applies to the supply of an aircraft to an operator who is not itself an ‘airline oper-ating for reward chiefly on international routes’ within the meaning of that provision but which acquires that aircraft for the purposes of exclusive use thereof by such an undertaking.”

the intended start of the lease. The following documents and information must be provided to the LBA with the application form:■ Aircrafttype.■ Aircraftregistrationnumber.■ Aircraftserialnumber.■ Nameandaddressoftheoperatorandtheowner.■ Copyofthecertificateofairworthiness.■ Copy of the lease agreement or description of the lease

agreement, including the financial agreements.■ Adeclarationsignedbythelesseethatthepartiesareaware

of their responsibilities.■ Proofthattheforeignaircarrier(ifany)hasavalidoper-

ating permit and a valid air operator certificate (AOC), and that the aircraft subject to the lease is listed in the AOC of the foreign air carrier (in the case of a wet lease).

■ Proofthattheaircraftisinsuredagainstdamagescoveredby the statutory liability of German air carriers.


Under German law, spare parts cannot individually be subject to an aircraft mortgage. A mortgage can only be registered over the whole aircraft. Spare parts or engines are not identified separately in the Aircraft Mortgage Register.

Spare parts are considered as parts of the aircraft. A regis-tered aircraft mortgage also covers spare parts if both the:■ Owneroftheaircraftisalsotheownerofthespareparts.■ Sparepartsareaffixedtotheaircraft.

If the spare parts are not affixed to the aircraft but are located in a different place, the parties can agree that the aircraft mort-gage also covers these spare parts. The extension of the mort-gage over these spare parts must also be registered in the Aircraft Mortgage Register.However,itisnotpossibletoregisteramortgagesolelyover

spare parts in the Aircraft Mortgage Register.The following other forms of security can be taken over spare

parts under German law:■ Retentionoftitle(Article 449, German Civil Code (Bürgerliches

Gesetzbuch – BGB)).■ Chattelmortgage(Articles 929 and 930, BGB).■ Lien(Articles 1204 et seq., BGB).

These forms of security are not registered in any official register, but are solely based on the agreement between the grantor of the security and the secured party.


The import of an aircraft into Germany is exempt from VAT if the aircraft is to be used by a company that predominantly



The court and the LBA can ask the airlines from non-EUMember States to determine a person or entity in Germany who is authorised to accept service on the airline’s behalf. The rele-vant correspondence will then be sent to this designated entity.

When service on foreign parties is effected abroad, the courts often arrange for a translation of the court documents.

The losing party has to bear the costs for the translation and also the service costs.


Concerning passenger claims, on 1 November 2013, the concil-iationinstrumentofalternativedisputeresolution(ADR)cameinto force in Germany to avoid court proceedings in the case of delays, cancellations and denied boarding as well as baggage claims. A framework for voluntary conciliation has been created, so that passengers can make use of this if an airline does not satisfy their claims within two months. Claims of up to €5,000 are dealt with by the conciliation institutions. There are private lawADRbodiesthathavebeencertifiedbytheGermanauthor-ities and which airlines can join. If an airline has not joined such ADRbody,thepassengercanturntotheADRauthoritywithinthe German Ministry of Justice. The conciliation proceedings are free of charge for the passenger.

The German Civil Aviation Authority (Luftfahrtbundesamt – LBA) is the national enforcement body regarding Regulation (EC)261/2004and regardingRegulation (EC)1107/2006. Ithandles passenger complaints free of charge for the passenger. However,theLBAdoesnothavethepowertoorderanairlineto pay compensation or to undertake certain measures towards the passenger, but only to impose a fine on an airline for not paying compensation or for not providing certain assistance.

The most common and important remedy is the filing of a lawsuit with the competent courts to pursue one’s rights. Representation by a lawyer is not mandatory for claims not exceeding €5,000.

Concerning civil court cases, the Local Courts (Amtsgericht) handle cases with a dispute value of up to €5,000. Cases with a dispute value of more than €5,000 as well as appeal cases coming from the Local Courts are heard before the Regional Courts (Landgericht). If the Regional Court is the competent court in thefirst instance(disputevalueexceeding€5,000), theHigherRegional Court (Oberlandesgericht) is the competent appeal court. An appeal against a judgment is not possible if the dispute value is €600 or less, unless the Regional Court explicitly grants an appeal if the case is of major importance or if an appeal is consid-ered to be necessary for the development of the law.

In certain cases, the appeal court can admit a further appeal (Revision) to the Federal Court of Justice (Bundesgerichtshof – BGH ). This is only possible if the appeal court considers the case to be of major importance or if a further appeal is consid-ered to be necessary for the development of the law.


If the first instance court is a Local Court, an appeal is possible if the dispute value exceeds €600. In such a case, an appeal can be filed with the Regional Court.

If the first instance court is a Regional Court, the competent appealcourtistheHigherRegionalCourt.



First, the creditor has to obtain an enforceable title in respect of the outstanding debts by filing legal proceedings before a civil court.

If the aircraft in question is registered in the German Aircraft Register, the creditor can file an application with the Local Court in Braunschweig (where the Mortgage Register is kept) for the entry of a registered mortgage on the aircraft. With the mortgage, the creditor can force the aircraft owner (in rather formal proceedings) that the aircraft is sold in a public auction.

If the aircraft is not registered in the Aircraft Register (e.g. because it is a foreign aircraft), the title in respect of the outstanding debts can be enforced by instructing a bailiff with the seizure of the aircraft.

As a further measure, the creditor can apply for an arrest of the aircraft until the enforcement proceedings actually start.


Self-helpremediesarenotrecognisedinGermany,includinginthe event of default. The lessor or financier must abide by the remedies and procedures provided by German laws to reacquire possession of the aircraft.


In Germany, special courts for aviation disputes do not exist.Civil claims have to be brought before the German civil

courts, and administrative or criminal claims have to be brought before the German administrative/criminal courts.

Concerning civil court cases, the Local Courts handle cases with a dispute value of up to €5,000. Cases with a dispute value of more than €5,000 as well as appeals are heard before the Regional Courts. An appeal against a judgment is not possible if the dispute value is €600 or less.


In principle, the court documents shall be delivered to the Plaintiff or, if known to the court, to the person or entity author-ised to accept service on behalf of the Plaintiff. There are no distinctions between foreign and domestic parties.

When service on foreign parties has to be effected abroad, the procedure of service depends on whether service is made in an EUoranon-EUcountry.ServiceinEUcountriescanbemadevia a registered letter, whereas service in non-EU countriesmust be effected in compliance with the relevant bilateral agree-ments between the sending and the receiving state. Service to certainnon-EUcountrieshas tobeeffectedvia formaldiplo-matic channels.

126 Germany


personnel and material expenditure of the cartel authority under consideration of the economic significance of the concentration. According to Article 80 para. 2 sentence 2 No. 1 of the Act against Restraints in Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB), the fee may not exceed €50,000; in exceptional cases it may be double (Article 80 para. 2 sentence 3 of the GWB).


Sector-specificrulesdonotexistbuttherearediverseformsofsupport, e.g. tax relief regarding kerosene and VAT, and also state aid for airlines.


The state subsidies are regulated under the so-called “publicservice obligations” according to Article 16 and the following of Regulation (EC) No. 1008/2008. The single criteria are deter-mined in the public tender procedure (Articles 16 para. 10 and 17Regulation(EC)No.1008/2008).


The main regulatory instruments governing the acquisi-tion,retentionanduseofpassengerdataaretheGeneralDataProtectionRegulation(Regulation(EU)2016/679),theGermanFederal Data Protection Act (Bundesdatenschutz gesetz – BDSG) andtheGermanPassengerDataAct(Fluggastdatengesetz ).TheGDPRandtheBDSGapplytotheprotectionofpersonal

data of an individual, thus also passenger data. According to Article 6 of theGDPR, personal datamay only be collected,saved, used and processed if:(a) the data subject has given consent to the processing of his

or her personal data for one or more specific purposes;(b) processing is necessary for the performance of a contract

to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract;

(c) processing is necessary for compliance with a legal obliga-tion to which the controller is subject;

(d) processing is necessary in order to protect the vital inter-ests of the data subject or of another natural person;

(e) processing is necessary for the performance of a task carried out in the public interest or in the exercise of offi-cial authority vested in the controller; or

(f ) processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject which require protection of personal data, in particular where the data subject is a child.

The German Passenger Data Act is the transposition ofDirective2016/681ontheuseofpassengernamerecord(PNR)data for the prevention, detection, investigation and prosecution of terrorist offences and serious crime into German law.

In special cases, a further appeal is admitted, which is dealt with by the Federal Court of Justice, being the highest German civil court.



Joint ventures between airline competitors are subject to merger control if the joint venture is designed as a merger.

If the joint venture is created on the basis of a cooperation agreement, German cartel law can be relevant.


Much like European law, under German law, to avoid domi-nant market positions, the cartel authority can control company growth in respect of the merging of companies. The essential authority with regard to mergers and acquisitions is the Federal Cartel Office (Bundeskartellamt).

The relevant legal framework in this regard is the German Act against Restrictions on Competition (Gesetz gegen Wettbewerbs-beschränkungen). Germancartel lawfullyappliestoaviation-re-lated companies (e.g. airlines).


According to Article 35 and the following of the Act against Restraints in Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB), parties can obtain regulatory approval for mergers from the Bundeskartellamt.


Article37oftheActagainstRestraintsinCompetition(Gesetz gegen Wettbewerbsbeschränkungen – GWB) legally defines a merger as an acquisition of assets, acquisition of joint or sole control, acquisition of shares (50% or at least 25%) or an exercise of competitively significant influence.


Once the Bundeskartellamt has received the complete notifica-tion, the examination procedure begins. The authority then has one month to assess whether the project needs to be exam-inedmorecloselyorwhetheritcanbeapproved(so-called“firstphase”). The vast majority of the more than 1,000 merger control proceedings per year can be concluded with a clearance in the first phase.

If there are indications of competition problems that cannot be resolved within the preliminary examination procedure, a formal main examination procedure is initiated (so-called“second phase”), which can take a total of four months from the date of notification.

The notification of mergers is subject to charges. The amount of the notification proceeding is determined on the basis of the



German Copyright Act (Urheberrechtsgesetz ) is to be determined in accordance with the type of work.

German copyright is not subject to any registration proceeding. In fact, copyright protection arises automatically with mere crea-tion of the work. Thus, neither any registration nor any publica-tion is required.

A breach of an industrial property right can be pursued in court proceedings.


In Germany, passenger rights are mainly governed by EU regu-lations, especially Regulation (EC) No. 261/2004 regardingflight cancellations and delays, as well as denied boarding and overbooking. Also, the Montreal Convention applies in respect of passenger rights.




Airport operators are subject to German and EU legislation and the international agreements signed by Germany.

Under the LuftVG, the construction and operation of an airport is subject to the permission of the relevant authority. Environmental law and construction law requirements have to be taken into account.

Airport coordination is based on EU law. The airports of Berlin (Schönefeld and Tegel), Bremen,Dresden,Düsseldorf,Erfurt,Frankfurt/Main,Hamburg,Hannover,Cologne/Bonn,Leipzig/Halle, Munich, Münster/Osnabrück, Nuremberg,Saarbrücken and Stuttgart are coordinated airports as perRegulation (EC) No. 95/93. The slots are allocated by Airport Coordination Germany (FHKD), which is an independent non-profit organisation financed by German airlines andairports.


Consumer protection law is a very broad field of law which appears as a cross-sectional subject in awide variety of areas.Consumer protection regulations can be found in various fields of law and legal codes; there is no independent set of regulations.

The aim of consumer protection law is to protect consumers, who can regularly find themselves in a weaker negotiating and knowledge position than the companies. Consumers should be protected when concluding a contract or making a purchase. That is why transparency and consumer information are very important for the German market.

The consumer protection regulations protect the general inter-ests of consumers with regard to unfair commercial practices, misleading and comparative advertising, price indications and labelling, unfair contract terms, distance selling and doorstep selling, time sharing and package tours and rights of holiday or business travellers.

This law stipulates that the Federal Criminal Police is the Passenger Information Unit that maintains a Passenger DataInformation System and regulates the transmission of passenger data to this unit, the processing and transmission by this unit as well as data protection.

The processing of passenger data is intended to prevent and prosecute terrorist offences and serious crime.

Passenger data are checked by the Passenger Information Unit to determine whether, for example, a person is searched for by the police or if there are indications that police action is necessary to prevent or prosecute terrorist offences or serious crime. If this is the case, the Federal and State security authorities responsible for further measures are informed. If not, the data will remain exclusively with the Passenger Information Unit.

The data that are transmitted to the Passenger Information Unit are the data indicated in the PNR in respect of bookings for flights departing from Germany and landing in another country, or departing from another country and landing in Germany.

After transmission by the air carrier, the passenger data are saved in the Passenger Information System of the Federal Policeforfiveyears.Dataelementsenablingidentificationaremade unrecognisable (depersonalised) six months after their transmission.


In the event of a data loss by a carrier, the airline must notify such data loss immediately (without undue delay), and not later than72hoursafterhavingbecomeawareofit,tothecompetentsupervisory authority, unless the personal data breach is unlikely to result in a risk to the rights and freedoms of natural persons.

The loss of data must also be reported to the data subject concerned.Thesanctionfornon-compliancewiththereportingobliga-

tions is a fine of up to €10 million or up to 2% of the annual worldwide turnover of the preceding financial year in case of an enterprise, whichever is greater.


Intellectual property refers to creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce. Intellectual property is divided into two categories: industrial property includes patents for inventions, trademarks, industrial designs and geographical indications. Copyright covers literary works (such as novels, poems and plays), films, music, artistic works (e.g. drawings, paintings, photographs and sculp-tures) and architectural design.

In Germany, intellectual property is protected by industrial property rights against the unauthorised use of such signs, which could mislead consumers, and against misleading practices in general.

The German Patent and Trademark Office (Deutsches Patent- und Markenamt) is the administrative body dealing with industrial property rights.

German copyright law protects works of literature, science and art, provided such works are the intellectual creation of the author.

The most important requirement for copyright protection under German law is the creative and individual nature of the work. The level of originality required for protection under the

128 Germany


5 In Future


1. Climate plans of the German Government: an increase in the German Air Traffic Tax and a ban on dumping prices for flight ticketsOn 20 September 2019, the Federal Government of Germany agreed on a package of measures for climate protection. A formal law has not yet been passed but can be expected in the coming months.

In this law for climate protection, the Federal Government also intends to amend the LuftVStG.

Under this law, airlines departing from a German airport have to pay an air traffic tax per passenger. There are certain exemp-tions, e.g. the tax does not have to be paid for passengers under the age of two years if they do not have their own seat. The tax amount to be paid depends on the distance between Germany and the destination country.

In 2019, the tax amount per passenger is:■ €7.38forshortdistances.■ €23.05formediumdistances.■ €41.49forlongdistances.

The air traffic tax shall now be increased as from 1 January 2020, although the concrete tax amounts have not yet been spec-ified by the Government. The increase shall reflect that the VAT onlong-distancetrainticketscanbereducedfrom19%to7%.The reduction of VAT on train tickets will lead to costs of about €400million,whichisaboutone-thirdoftheairtraffictaxpaidbyairlinesin2019.Anincreaseintheairtraffictaxbyone-thirdis thus possible.

In addition, the new law shall include a ban on dumping prices, i.e. prices for airline tickets below the applicable taxes, surcharges, fees and charges.2. Planned opening of a new Berlin Airport: October 2020Theseeminglynever-endingstoryofBerlinAirportmayat lastcome to a happy conclusion. According to current announce-ments, BER Airport is finally scheduled to open in October 2020.

The construction works began in 2006 and the initial opening date in November 2011 has meanwhile been postponed so often (November 2011, June 2012, autumn 2012, August 2013, spring 2014, autumn 2017, 2018, October 2020) that BERAirport isconsidered one of the most protracted construction projects in Germanpost-warhistory.

The reasons for the continued delay are considerable construc-tion deficits and planning errors, especially concerning fire protection. According to media reports, other construction obstacles included, for instance, escalators that were too short, rainwater dripping into the ventilation system, IT cooling issues and more than 1,000 trees planted in the wrong place.

The costs have increased considerably and are meanwhile more than seven times higher than initially planned.

Constant staff changes staff within the airport company, espe-cially the director of the supervisory board, the general manager of the airport and the technical manager, were also not very bene-ficial for the progress of construction of the airport.

Now, October 2020 has been announced as the effective opening date. All necessary permits have meanwhile been granted and the fire protection system is no longer a problem. Although scepticism is understandable, the opening could finally come true.

As a general rule, however, there is no contractual relationship between passengers and airport operators. Passengers normally enter into air carriage contracts with airlines or tour operators. The airlines, in turn, enter into agreements with airport oper-ators for the provision of services to passengers. Therefore, passengers and airport operators do not have a direct contrac-tual relationship and many consumer protection rules are there-fore not directly applicable between these parties.

Special transparency is required with regard to airport charges payable by passengers. There are also many general public regu-lations relating to safety and security in Germany in order to protect customers in airports. As an example, Regulation (EC) No. 1107/2006 concerning the rights of disabled persons andpersons with reduced mobility when travelling by air provides that passengers with a disability or reduced mobility must be appropriately assisted by airport operators.


After several consolidations, there are essentially only three global systems left: Amadeus; Galileo/Travelport; and Sabre.


No. In Germany, there are no ownership requirements pertaining toGDSs.


Vertical integration is permitted between airport operators and airports, i.e. it would be possible for an air operator to buy shares inanairport.However,potentialrestrictionscouldapplyunderthe relevant laws.


The general requirements for the application of an Air Operator’s Certificate are as follows:■ Theundertaking’sprincipalplaceofbusinessmustbe in

the Member State in which the application for an oper-ating licence is made.

■ Themain activity is the provision of air services, eitheralone or in conjunction with any other form of commercial operation of aircraft or repair and maintenance of aircraft.

■ Theaircarriermustbeowneddirectlyorthroughmajorityownership by Member States and/or nationals of Member States.

■ ItmustatalltimesbeeffectivelycontrolledbythoseStatesor their nationals.

■ Aircarriersmusthaveatleastoneaircrafteitherasowneror under a dry lease contract.

■ Theaircrafttobeusedbyanaircarriershallbelistedinthe relevant national registers or within the Community.

■ Germanapprovalauthoritiesgenerallyrequireregistrationin the German Aircraft Register.

129

Aviation Law 2020

Urwantschky Dangel Borst PartmbB

Rainer Amann joined Urwantschky Dangel Borst in 2000 and has been a partner since 2006. The firm has specialised in aviation law since 1955.Mr. Amann has extensive experience in German and international aviation law. He mainly acts for airlines, aircraft manufacturers, insurers and reinsurers.He has considerable expertise in many extra-judicial and litigation matters on passenger, hull, cargo and baggage claims and subrogation claims for airlines and their insurers. He is regularly involved in the negotiation and drafting of air transport agreements and terms and condi-tions of carriage. He also advises on product liability claims, airports, ground handling, regulatory matters and financing. His clients have the benefit of his links with aviation law experts throughout the world.Mr. Amann studied at the University of Constance from 1993 to 1998 and worked with the Regional Court in Ulm from 1998 to 2000. He was admitted to the German Bar in 2000.He was awarded a specialist degree in transportation law from the Bar Association.Mr. Amann is an active member of the Aviation Insurance Association, the European Air Law Association and the Transportation Lawyers Association.He is regularly mentioned in the annual editions of Who’s Who Legal, in Best Lawyers in Germany and in the Expert Guides by the world’s leading lawyers.

Urwantschky Dangel Borst PartmbBInsel 189231 Neu-UlmGermany

Tel: +49 731 70 70 937Fax: +49 731 70 70 999Email: [email protected]: www.udabo.de

Claudia Hess joined Urwantschky Dangel Borst in April 2007. She graduated from the law school of the University of Passau and completed a law and language education in English, French and Chinese law. She completed her legal traineeship at the Higher Regional Court Nuremberg. Moreover, she has studied at Sichuan University in Chengdu, China, and has worked in Beijing for a German-Chinese law firm and a German automobile manufacturer, as well as for the Sichuan-American Chamber of Commerce in Chengdu, China.Ms. Hess has been a partner in the firm since 2012. She handles cases for airlines and their insurers worldwide related to both German and EU law. She provides advice and assistance out of court and represents her clients in court proceedings and proceedings initiated by admin-istrative bodies.She deals with cases and queries involving liability and regulatory issues, compliance, commercial and contractual matters, consumer protec-tion claims against airlines, as well as claims related to EU Regulations and international treaties. She drafts and reviews terms and conditions as well as data protection policies, and assists airlines in complying with the requirements of the EU’s emissions trading system (ETS).Ms. Hess is a member of the European Air Law Association (EALA), the International Aviation Women’s Association (IAWA) and the French Society of Air and Space Law (SFDAS). Ms. Hess is fluent in German, English, French and Chinese (Mandarin).She is regularly invited as a speaker and panellist to international air law conferences. She is recommended in various legal publications such as Who’s Who Legal, The Legal 500, etc.She regularly writes articles in air law publications and is a co-author of The Aviation Law Review, Aviation Finance, Lexology Aviation Navigator and Getting the Deal Through – Aviation Liability.

Urwantschky Dangel Borst PartmbBInsel 189231 Neu-UlmGermany

Tel: +49 731 70 70 941Fax: +49 731 70 70 999Email: [email protected]: www.udabo.de

The law firm Urwantschky Dangel Borst PartmbB acts for clients nationally and internationally and has offices in Neu-Ulm and Ulm.We are active in specialist fields of law and we attach great importance to the comprehensive and personal support of our clients. We act for our clients both in litigation and out of court. Experience, expertise and commit-ment are necessary prerequisites with which we successfully counsel and represent our clients.We have very good professional and personal contacts in other law firms worldwide, as well as with tax advisors, authorities, institutions and experts.In the international field, we are active in commercial law, aviation law and Chinese law. Our clients profit from our comprehensive knowledge, our 50 years’ experience in the international legal business, as well as our close cooperation with law firms all over the world.Since 1955, we have been active in the field of German and international aviation law.We consult and represent German and foreign air carriers and their insurers and reinsurers in all fields of aviation law and we have acted on almost all major air crash disasters involving Germany and/or German nationals.Our aviation law team advise on all aspects of national and international

aviation liability cases, including legal matters arising out of air crashes, injuries onboard aircraft, passenger claims, damage and loss of cargo, and damage to aircraft. Moreover, we also deal with regulatory and financing matters and advise on product liability claims and airport and ground handling issues.We also assist our clients in reviewing and designing contracts. For instance, we are involved in the negotiation and drafting of air transport agreements and General Conditions of Carriage. With regard to the increasing number of EU Regulations and Directives in the aviation field, we assist and consult air carriers in complying with European provisions.Our experienced and specialist lawyers provide qualified and skilled advice by tailoring our range of services to our clients’ needs.

www.udabo.de


Aviation Law 2020

Chapter 20130

Hong Kong

Clyde & Co

Justin Yuen

Alastair Long

Hong Kong

Peter Coles



Hong Kong registered air carriers require an Air Operator’s Certificate (AOC) granted by the Director-General of Civil Aviation (DGCA). In general, the DGCA will take into account an applicant’s previous conduct and experience, his equipment, organisation, staffing, maintenance and other arrangements, and grant an AOC subject to such conditions as the DGCA thinks fit. Detailed AOC compliance requirements are set out in CAD360 Part 1. Foreign carriers who operate into Hong Kong under an overseas AOC require an Operating Permit from the DGCA. All carriers (domestic and foreign) operating into and out of Hong Kong also need a licence to operate scheduled air services issued by the Air Transport Licensing Authority (ATLA) in accordance with Cap 448A.


Hong Kong legislation is primarily found in the Civil Aviation Ordinance (Cap 448) and the ANO. Air safety is further governed by the Aviation Security Ordinance (Cap 494) and Dangerous Goods (Consignment by Air) Safety Ordinance (Cap 384). The CAD is responsible for administering air safety.


In Hong Kong, the CAD is responsible for the regulation of all aspects of the aviation industry. However, there are different regulations that must be complied with pertaining to commer-cial, private and cargo operations and different standards that are required to be met for different types of carriers.


Air charters are not regulated separately for commercial, cargo and private carriers. These rules apply whether the service is a charter or scheduled service.

1 General


The source of regulation relating to aviation in Hong Kong comes from Articles 128 and 129 of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China (the Basic Law). Article 128 of the Basic Law provides that the Hong Kong Government shall provide conditions and take measures for the maintenance of the status of Hong Kong as a centre of international and regional aviation. Article 129 of the Basic Law provides that the Hong Kong Special Administrative Region (HKSAR) shall continue the previous system of civil aviation management in Hong Kong and keep its own aircraft register in accordance with provisions laid down by the Central People’s Government concerning nationality and registration marks of aircraft. Please note that under Article 29 of the Basic Law, access of foreign state aircraft to the HKSAR shall require the special permission of the Central People’s Government.

The Carriage by Air Ordinance (Cap 500), the Civil Aviation Ordinance (Cap 448) and its subsidiary regulations – in particular, the Air Navigation (Hong Kong) Order 1995 (Cap 448C) (ANO) – are the primary sources of legislation governing civil aviation, incorporating primary sources of international aviation treaty law and International Civil Aviation Organization (ICAO) requirements, recommendations and practices.

Other important aviation-related legislation includes the Airport Authority Ordinance (Cap 843), Civil Aviation (Aircraft Noise) Ordinance (Cap 312), and Carriage by Air Ordinance (Cap 500).

The ANO is supported by policy and procedure documents such as Hong Kong Civil Aviation Department (CAD) docu-ments, Hong Kong Aviation Requirements and Aeronautical Information Circulars, which are published by the CAD – the governmental department responsible for regulating the avia-tion industry in Hong Kong.

131Clyde & Co


preserve evidence, and to inspect any place, building or aircraft for the purposes of an investigation. At the completion of an investigation, the Chief Inspector must submit an investigation report to the Chief Executive.

The Chief Inspector may at any time publish information relating to an accident or incident.


At the time of writing, HKIA has installed enhanced security checkpoints for restricted landside access to the airport, due to heightened tensions, local protesting and political activism.



There is no ownership or asset registry in Hong Kong. The regis-tration at CAD only reflects the details of the Registered Owner(s).


There is no particular register of aircraft mortgages and charges. Nevertheless, a fixed charge created on an aircraft (a) owned by a company incorporated in Hong Kong, or (b) registered in Hong Kong and owned by a registered non-Hong Kong company, is registrable with the Hong Kong Companies Registry. The aircraft mortgage must be registered within one month after the date of its creation, failing which a court order granting an extension will be required. An aircraft mortgage that is not registered will be void against any liquidators or other creditors, and the mortgagor may be subject to criminal liability.


A Certificate of Airworthiness is a prerequisite to operating an aircraft registered in Hong Kong. For an aircraft type that has not previously been issued with a Certificate of Airworthiness in Hong Kong, a Type Certificate is required.

The operator is also required to hold an AOC issued by the CAD. The issuance of the certificate will depend on the oper-ator’s organisation, method of control and supervision of flight operations, training programme, ground handling and mainte-nance arrangements.


There is no concept of title annexation in Hong Kong. Engines and spare parts may form part of the subject matter of an aircraft mortgage under Hong Kong law.


Hong Kong is party to a number of international bilateral air services agreements (ASAs) with other countries. Under these ASAs, access on broadly equal terms to Hong Kong aviation infrastructure is granted to international carriers designated under the relevant ASA to develop route networks to and from Hong Kong. The HKSAR government encourages investment, particularly in respect of cargo operations, in order to maintain Hong Kong International Airport’s (HKIA) status as a major global hub. However, this is subject to capacity constraints and availability of slots at HKIA.


HKIA is owned by the Airport Authority Hong Kong (AAHK), of which the Hong Kong Government is the primary shareholder. However, it is financially independent of the Government.

Shek Kong Airport is used by the People’s Liberation Army (PLA) for military purposes and the Hong Kong Aviation Club is owned by the Hong Kong Government. Some of the helipads are privately managed, with the land leased from the government.


Conditions of use and charges are imposed on carriers flying to and from HKIA. These are set by the AAHK. Other require-ments such as those relating to noise abatement (aircraft that do not comply with the noise standards stipulated in Chapter 3 of Volume I, Part II of Annex 16 to the Convention on International Civil Aviation may not be scheduled to operate in HKIA between the hours of 11:00pm and 7:00am) and slot availability also apply.


Hong Kong is a party to the Chicago Convention 1944 which provides, at Article 26 and Annex 13, provisions for the inves-tigation of air accidents. The Chicago Convention has been incorporated into the Hong Kong Civil Aviation (Investigation of Accidents) Regulations (Cap 448B).

The Air Accident Investigation Authority (AAIA) is the Hong Kong investigation authority responsible for the investi-gation of civil aircraft accidents and serious incidents in Hong Kong. Formed in September 2018, the AIAA is independent from the CAD and also reports to the HKSAR Government’s Transport and Housing Bureau (THB).

Cap 448B requires the pilot in charge of an aircraft, or the operator, as soon as is practicable, to give notice after an acci-dent or a serious incident, to the Chief Inspector and, if such accident or serious incident occurs in or over Hong Kong, to the Commissioner of Police.

The Chief Inspector has the power to secure the site of an accident or serious incident. For the purposes of investigating an accident or incident, the Chief Inspector has the powers of enquiry, to take statements from any person, to detain and

132 Hong Kong




The rights of detention are available to:(a) creditors regarding unpaid debt;(b) the AAHK regarding unpaid airport charges;(c) the Commissioner of Inland Revenue regarding unpaid

profit tax of aircraft owners and charterers; and(d) the DGCA regarding the unpaid air passenger departure

tax.Under sub-clauses (b), (c) and (d), the respective party has the

right to dispose of the aircraft to settle the unpaid debts.


Self-help remedies are recognised under the common law, the legal system existing in Hong Kong.

For a financier of an aircraft, if the aircraft mortgage has set out specific repossession procedures allowing the creditor to take possession of the aircraft without a court order, provided that the debtor (i.e. mortgagor) is not contesting the repos-session, the express provisions will allow the financier to take possession of the aircraft.

For the lessor of an aircraft, self-help repossession is possible so long as the repossession is not disputed by the lessee and is in compliance with the repossession arrangement as prescribed in the lease agreement. However, if the lessee seeks an injunction order to restrain the lessor’s repossession, the lessor will then be required to commence legal proceedings to reacquire posses-sion of the aircraft.


The jurisdiction limit of the courts depends on the value of the dispute. The Small Claims Tribunal has jurisdiction over civil claims up to HK$75,000; the District Court has jurisdic-tion over civil claims up to HK$3 million and claims over this amount will be handled by the Court of First Instance. Criminal cases are first brought to a Magistrate’s Court.


For domestic airlines/parties that are companies incorporated in Hong Kong or registered in the Hong Kong Companies Registry as non-Hong Kong companies, service is effected by leaving a copy of the document with any officer at the registered address in Hong Kong of that particular company.

For airlines/parties that are not registered in Hong Kong, leave of the court is required before service outside the jurisdic-tion. Aviation disputes are likely to fall under the list prescribed in Order 11 of the Rules of High Court of situations in which


Hong Kong does not have any value-added tax, goods and services tax, import tax, capital gains tax or stamp duty for the sale and purchase of aircraft.


Hong Kong itself is not a signatory to the Montreal Convention 1999, the Geneva Convention 1948 or the Cape Town Convention 2001. The People’s Republic of China (PRC) is, however, a party to these Conventions.Montreal Convention 1999The Montreal Convention did not automatically apply to Hong Kong until the PRC Government applied it on 15 December 2006. It came into force by way of the Carriage by Air (Amendment) Ordinance 2005.The Geneva Convention 1948Hong Kong was declared by China to be covered by its ratifi-cation of Conventions I–IV and Protocols I–II of the Geneva Convention 1948 from 1 July 1997.The Cape Town Convention 2001Although the PRC signed and ratified the Cape Town Convention in 2009, the PRC did not extend it to Hong Kong. Therefore, the Cape Town Convention 2001 does not apply to Hong Kong.


As mentioned in question 2.6, the Montreal Convention 1999 came into force through domestic legislation when it was incor-porated into the Carriage by Air Ordinance (Cap 500).


Sections 14G to 14N of the Inland Revenue Ordinance were introduced in 2017 to provide tax concessions to qualifying aircraft lessors and qualifying aircraft leasing managers in Hong Kong. In general, qualifying aircraft lessors are entitled to a tax concession under which only 20% of the net lease rentals are assessed to compensate for their non-entitlement to a depreci-ation allowance on the aircraft. The profits derived by quali-fying aircraft lessors and qualifying aircraft leasing managers from qualifying activities are charged at 8.25%, i.e. one-half of the Corporate Profits Tax rate. If the withholding tax on aircraft rentals is borne by the lessor, qualifying aircraft lessors satisfying the requirements (i.e. central management and control being exercised in Hong Kong and substantial activity gener-ating profit in Hong Kong) will be able to obtain a certificate of resident status from the Inland Revenue Department.

133Clyde & Co



See the answer to question 4.1 with regard to mergers. For the purposes of the Second Conduct Rule, the Hong Kong Competition Commission will holistically assess the product(s) and service(s) provided by the party or parties to determine ‘market share’ from the perspective of both the products and services, and their geographical reach.


Undertakings to whom an exclusion or exemption applies in respect of the First and/or Second Conduct Rules do not need to apply to the Competition Commission. However, a Party to an agreement may apply to the Competition Commission for a clearance decision concerning an exclusion and exemption under section 9 of Cap 619.


Please refer to question 4.1.


Time frames for clearance depend on the circumstances of the case. Fees payable for the application for a decision start from HK$50,000 and depend on the exclusion and exemption being sought by the parties. The Commission must refund the fee if it declines to consider the application.

After the applicant’s submission of an application for a deci-sion, the Commission may, after conducting a preliminary assessment, decide to proceed or decline to consider the appli-cation. Then the Commission will review the application and the representations made by other parties. Further informa-tion-gathering or meeting with the applicant and/or other parties may be needed. If there is a likely decision of the Commission, it may schedule a meeting with the applicant to indicate this, or have a discussion regarding certain conditions or limitations, before finalising the decision.


Under the Airport Authority Ordinance, the AAHK may borrow or raise money as it sees fit and the Government may give undertakings, guarantees or make agreements relating to the financial affairs of the Airport Authority and its subsidiary. For air operators, the Government’s policy is that they should be run by the private sector, in accordance with commercial prin-ciples, to enhance efficiency and cost-effectiveness. Rules akin to state aid for airlines to develop route networks, such as those existing in the European Union, do not exist in Hong Kong.

service out of jurisdiction is permissible. Such an application would require an affidavit stating the following:■ thegroundsonwhichtheapplicationismade;■ thatinthedeponent’sbelieftheplaintiffhasagoodcause

of action; and■ inwhatplacethedefendantis,orwillprobablybefound.


Remedies will vary depending on the nature of the dispute, but generally the following remedies are available:On an interim basis:■ Interiminjunction.On a final basis:■ Damages.■ Permanentinjunction.■ Specific performance (i.e. an order for the sale of the

aircraft).


The Court of Appeal hears appeals on all civil and criminal matters from the Court of First Instance and the District Court. Its decision may be further appealed to the Court of Final Appeal, which is the final appellate court of Hong Kong.

Courts in Hong Kong have minimal intervention regarding arbitral decisions. Parties are not allowed to appeal the arbitral awards to courts. The only recourse against a Hong Kong arbi-tral award is by applying to the Court of First Instance for an order setting aside the award under one of the limited grounds set out in the Arbitration Ordinance (Cap 609), which include, but are not limited to, the incapacity of parties, procedural defects, and deviation from the scope of arbitration.



On 14 December 2015, the Competition Ordinance (Cap 619) introduced rules to combat anti-competitive behaviour and some limited merger control rules (for businesses operating as licence holders in the telecommunications industry). As such, airline joint ventures between competitors are not currently subject to merger control by the Hong Kong Competition Commission.

However, joint ventures still have to comply with the First and Second Conduct Rules under Cap 619 in terms of anti-com-petitive behaviour and practice:■ TheFirstConductRuleprohibitsbusinessesfrommaking

or giving effect to an agreement, engaging in a concerted practice, or making or giving effect to a decision of an association, if the object or effect is to harm competition in Hong Kong.

■ The Second Conduct Rule prohibits businesses with asubstantial degree of market power from abusing that power by engaging in conduct that has the object or effect of harming competition in Hong Kong.

134 Hong Kong


CopyrightThere are no formalities required to obtain copyright protection for works in Hong Kong. The basic protection period of copy-right is 50 years after release or after the decease of the author. A copyright owner may take civil action against the infringer and seek remedies including an injunction to prevent further infringement, and damages. Hong Kong law also imposes crim-inal sanctions for infringing activities conducted for commercial purposes; the maximum penalty is imprisonment for four years and a fine of up to HK$500,000. The criminal sanctions have an extra-territorial coverage to the extent that the purpose is to enable the infringing copies to be imported into Hong Kong.Design RightsA registered design owner has the exclusive right to make for sale or sell any article in respect of which the design is regis-tered. Civil infringement claims are also available and remedies include an injunction, an order for delivery up, damages or an account of profits.


There is no legislation governing the denial of boarding rights and/or cancelled flights in Hong Kong.


The Hong Kong Schedule Coordination Office (HKSCO) under the Civil Aviation Department conducts slot moni-toring to ensure the compliance of the allocated time slots. For consistent late arrival and departure of flights, HKSCO may consider such operations as slot misuse and may refuse to process new slot requests, or may consider full or partial confis-cation of the slots allocated to the operators if intentional slot misuse is proven.


The AAHK is governed under the Airport Authority Ordinance (Cap 483). Major obligations include providing, operating, developing and maintaining an airport, conducting its busi-ness in accordance with prudent commercial principles; and have regard to conducting airport operation, safety, security, economy and operational efficiency, and the safe and efficient movement of aircraft, air passengers and air cargo.


Consumers who have bought any item in the terminal and found that the price is higher than that of an identical item charged at a comparable outlet located in downtown Hong Kong, may apply to the airport operator for a refund of the price difference or for the return of the item. The AAHK has also inserted similar provisions into every tenancy agreement that it has entered into, and has the right to terminate the tenancy term if the tenant operator violates such a provision.


See the answer to question 4.6. There are no formal subsidies provided by the HKSAR Government with respect to route development, public service obligations or other forms of state aid to maintain route networks into and out of Hong Kong.


The Personal Data (Privacy) Ordinance (Cap 486) (PDPO) protects privacy and individuals’ personal data. This legisla-tion took into account the OECD Privacy Guidelines 1980 and the EU Directive, and contains six data protection principles. Passengers are entitled to lodge a data access request (fee applies) to the data user for a copy of their personal data. However, the regime is not as strict as the EU General Data Protection Regulation (GDPR). For example, there is no breach notifica-tion procedure (within 72 hours of the breach) and other rules are less stringent.

Hong Kong-based airlines handling personal data of EU indi-viduals, including commercial targeting of EU citizens living in EEA Member States, may also be subject to the GDPR in respect of their processing activity.


In the event of a data breach or loss, data controllers are advised to submit a data breach notification to the Privacy Commissioner for Personal Data of Hong Kong. Nevertheless, such notification is not a statutory requirement.


The Intellectual Property Department is responsible for the protection of intellectual property in Hong Kong and for oper-ating the registries of the jurisdiction’s licensing bodies on trade-marks, patents, designs and copyright. Note that the registration systems regarding intellectual property rights in the HKSAR are separate from those in the PRC.TrademarksTrademarks are registrable under Hong Kong law. Registered trademark owners can take civil action to prevent unauthorised use. Well-known trademarks are also protected, as the juris-diction is a party to the Paris Convention for the Protection of Industrial Property (1883). Fraudulent use of trademarks may also attract criminal liability to the user. Unregistered trademarks may only be protected by the common law action of passing off.PatentsStandard patents, upon registration, receive a term of protection of up to 20 years. A patent owner may take civil action to prevent any infringement and seek remedies including an injunction, an order for delivery up, damages or an account of profits and a declaration that the patent is valid and has been infringed.

135Clyde & Co


only grant an operating licence for scheduled air services if the Hong Kong AOC holder has and keeps its principal place of business in Hong Kong (Article 134(2) Basic Law). ‘Principal place of business’ means that decision-making about opera-tions, network, fleet acquisition and other strategic issues must be made independently and locally in Hong Kong. ASAs also contain ownership requirements for designated carriers of Hong Kong and the relevant signatory country.

5 In Future


We anticipate that the AAIA will receive stricter powers to interview witnesses to accidents and incidents, for the purposes of compelling them to answer questions and co-operate with investigators. Hong Kong privacy law is likely to be strength-ened to align it with other, stricter data privacy regimes such as the GDPR in the EU, and a separate dedicated cyber-security law may be on the horizon to protect key infrastructure, such as aviation, against such threats. The head of the Competition Commission recently raised the possibility of the merger rule applying beyond the telecommunications sector; and finally, new rules on the use of drones (UAVs) in Hong Kong are imminent.


The major air carriers operating in Hong Kong use the main GDS platforms – Amadeus, Apollo, Galileo, Worldspan (Travelport platforms) and SABRE.


There are no specific ownership requirements with respect to GDS operations in Hong Kong above and beyond legislation applying to all businesses (e.g. competition law, privacy, etc.) in the HKSAR.


Under the Airport Authority Ordinance, the AAHK is incorpo-rated to operate, develop and maintain HKIA. The AAHK may carry on any airport-related activity jointly with another party. There is no express prohibition of vertical integration between air operators and airports; however, the AAHK has to ensure that itself and any of its subsidiaries do not engage in or carry on any activity which the AAHK might not itself lawfully engage in or carry on.


Provided there is compliance with Article 4 of the ANO (general ownership requirements) and CAD 360 Part 1, a Hong Kong AOC holder may be foreign-owned. However, the ATLA will

136

Aviation Law 2020

Hong Kong

Alastair Long acts for various aviation service providers, such as ground handling companies, maintenance and repair organisations (MROs), aircraft operators and airlines, on a range of commercial and regulatory legal matters.His principal areas of work include assisting clients with concluding agreements for passenger and cargo handling services, airport opera-tions, MRO services, technical inventory management, aircraft component engineering and repair work, aircraft wet leasing, airline conditions of carriage and other commercial projects. He also assists multinational clients with cross-border commercial dispute resolution (pre-litiga-tion) and non-insurance-related claims between aviation stakeholders from time to time.On the regulatory front, Alastair advises on aviation safety, security and economic regulatory compliance matters, as well as discrete compe-tition law issues. His practice also involves broader advisory work on intellectual property, data privacy and cyber security within the aviation industry.Alastair is recommended by the The Legal 500 UK 2017. He is admitted as a solicitor in Hong Kong and England & Wales.



Justin Yuen is a legal manager in Clyde & Co’s APAC aviation team in Hong Kong, where he specialises in commercial aviation matters. His principal areas of work include assisting clients with: concluding agreements for aircraft, engine and equipment acquisitions, and for passenger and cargo handling services; airport operations; MRO services; start-up airlines; blockchain; and data privacy – in aviation and other commercial projects. Justin has completed his training as a solicitor and is expected to be admitted in Hong Kong shortly.



Consistently recognised as the world’s premier aviation law firm, Clyde & Co has extensive industry know-how stretching across the entire sector. It is often found at the forefront of developments in aviation law. The team is known for handling major aviation losses and multi-jurisdictional claims, as well as for our non-contentious work including aviation finance, regulatory and employment.

www.clydeco.com

Peter Coles has 27 years’ experience working for the aviation industry, including working for a Hong Kong airline in the early 1990s and working for legal practices in Singapore and Hong Kong over the last 22 years. He handles a broad range of matters including regulatory, commercial, employment, insolvency and enforcement matters, contingency planning, incident/accident response, health and safety prose-cutions, multi-jurisdictional catastrophe and attritional loss handling.Peter qualified in England and Wales in 1996 and Hong Kong in 2003.“Peter is described as “a bright and well-known aviation lawyer”, highly sought after by clients for his strong expertise on regulatory and liability matters.” – Who’s Who Legal: Aviation 2018“Peter Coles attracts praise from clients for the ‘excellent advice’ he offers in relation to aviation-related insurance claims. His counsel is sought by major international insurers and companies within the aviation sector to act on high-value cross-border claims across the Asia-Pacific region.” – Chambers Asia Pacific 2019




Aviation Law 2020

Chapter 21 137

India

AZB & Partners Rishiraj Baruah

Anand Shah

India


and international carriage by air, irrespective of the nation-ality of the aircraft performing the carriage.

5. Airports Economic Regulatory Authority of India Act, 2008 (“AERA Act”) provides for: (i) the establishment of AERA; (ii) regulates tariff and other charges for services rendered at airports; and (iii) establishes an appellate tribunal for the adjudication of disputes.

6. Aircraft (Security) Rules 2011: deal with the air safety and security regulations for aerodromes and aircraft.


Rule 134 of the Aircraft Rules, 1937 provides that no person shall operate any scheduled air transport service from, to, in, or across India except with the permission of the central govern-ment, granted in accordance with the provisions Schedule XI of the Aircraft Rules.

The aforesaid permit is equivalent to the Air Operator’s Certificate that is required to be issued by a Member State of the International Civil Aviation Organization (“ICAO”). Besides other requirements, the issuance of a permit shall depend on the applicant demonstrating adequate organisation, method of control and supervision of flight operations, a training programme and maintenance arrangements consistent with the nature and extent of the operations specified. The CAP 3100 Air Operators Certification Manual provides guidance to an applicant seeking an air operator’s permit on the systematic procedures to be followed during a certification process. The entire certification process has been classified and divided into different phases as listed below:1. Pre-application phase – Wherein the applicant is

required to submit a letter of intent to the DGCA outlining the proposal, and apply to the MCA for issuance of a No-Objection Certificate upon examining the proposal from financial, economic and legal perspectives, which may also include a pre-application meeting. The MCA, upon satisfaction of these aspects, may issue the No-Objection Certificate.

2. Formal application – The applicant is required to submit a complete application in the prescribed form to the DGCA, along with prescribed fees and relevant supporting docu-ments; upon completing the assessment of the applicant’s proposal, the DGCA may invite the applicant for a formal meeting to discuss further details relating to the certifica-tion process.

3. Document evaluation – During this phase, the DGCA shall conduct a series of discussions to assess the appli-cant’s capability to conduct aircraft transport operations

1 General


The Ministry of Civil Aviation (“MoCA”) is the nodal Ministry responsible for the formulation of policy and regulation of civil aviation in India. The MoCA oversees the planning and imple-mentation of schemes for the growth and expansion of civil air transport, airport facilities, air traffic services and carriage of passengers and goods by air. The following are the principal regulatory authorities functioning under the authority of the MoCA:1. The Directorate General of Civil Aviation (“DGCA”)

enforces civil aviation regulations and regulates air trans-port services, air safety and airworthiness standards.

2. The Airports Authority of India (“AAI”) creates, upgrades, maintains and manages civil aviation infrastruc-ture both on the ground and in the air space of India.

3. The Airport Economic Regulatory Authority (“AERA”) determines the tariff for aeronautical services and Passenger Service Fees to monitor performance standards relating to quality, continuity and reliability of service.

4. The Bureau of Civil Aviation Security (“BCAS”) ensures that the aviation security standards follow national and international obligations/treaties on air safety, to which India is a signatory.

Based on the field of activity concerned within the aviation sector, the applicability of regulatory laws may also differ. Some of the principal regulations are as follows:1. The Aircraft Act, 1934 (“Aircraft Act”) and the Aircraft

Rules, 1937 (“Aircraft Rules”): (i) regulates the manu-facture, possession, use, operation, sale, and the import and export of aircraft; and (ii) stipulates the parameters for determining air worthiness, maintenance of aircraft, general conditions for flying and safety, registration of aircraft and the conduct of investigations.

2. The Airports Authority of India Act, 1994 (“AAI Act”): (i) establishes the AAI; and (ii) makes the AAI responsible for the development, finance, operation and maintenance of all government airports in India.

3. The Civil Aviation Requirements (“CARs”): the CARs are issued by the DGCA under Rule 133A of the AR1937 and provide the standards expected to be met before a licence, certificate, approval or permission is granted/accorded.

4. The Carriage by Air Act, 1972: governs the rights and liabilities of air carriers and is applicable to both domestic

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The safety of commercial, cargo and private carriers are not regu-lated by differential safety conditions. However, the application processes for obtaining an Air Operator’s permit for commer-cial, cargo and private carriers are different.


No air transport service, other than a scheduled air transport service, can be operated by any undertaking except with the special permission of the central government or under a non-scheduled operator’s permit granted by the central government.

Air charter operations are regulated for passenger services which only apply to twin engine aeroplanes with seating capacity of not more than nine seats, single-engine aeroplanes and single-piston engine aeroplanes. Cargo operations can only be under-taken by non-scheduled air transport operators which operate multi-engine fixed-wing aircraft (freighter version) and single or multi-engine helicopters.

The DGCA also regulates the operation of tourist charter flights to and from India as part of an Inclusive Tour Package under the Aeronautical Information Circular dated December 22, 2015.


The DGCA and Airports Authority of India (“AAI”) regu-lates foreign aircraft operating in India and Indian airports. As per the bilateral air services agreements entered into between India and other foreign countries, every such foreign country is required to designate airline(s) for operating the agreed services on the specified routes and to withdraw or alter such designa-tions. However, international flights are not permitted to pick up passengers/load at any place in India and disembark/discharge at any other place in India, i.e. ‘cabotage’ is not permitted.

AIC 16 dated August 2, 2019 on “Requirements for grant of Operating Authorisation to Foreign Airlines under the Bilateral Air Services Agreements” imposes conditions on ownership, effective control and the safety qualifications of foreign airlines.

The Airports Authority of India (Ground Handling Services) Regulations, 2018 and the AVSEC Order No. 03/2009 dated August 21, 2009 also contain certain restrictions on foreign airlines undertaking self-handling in respect of passenger and baggage handling activities.


Airports in India can be owned, developed and operated by State entities, such as the AAI under the AAI Act, as well as private parties after they have obtained a licence to operate airports from the DGCA and by entering into operation, management and development agreements (“OMDAs”) with the AAI. All airports, whether managed by AAI or private parties, must be operated according to the provisions of the AAI Act as well as the Aircraft Act.

by verifying the documents submitted by the applicant. The documents shall reflect precisely the mode and way the applicant intends to conduct the proposed operations and, upon approval, they shall form a part of the under-standing between the DGCA and the operator regarding future functioning of the operator.

4. Demonstration and inspection – The applicant is then required to demonstrate to the DGCA its capability of conducting the proposed operations in accordance with the procedures detailed in the documents/manuals reviewed during the previous phase. All the details provided by the applicant shall be scrutinised in detail, including inspec-tion of facilities and sufficiency of resources. In the event the DGCA is satisfied with the authenticity of the docu-ments and the inspection process, approved flight(s) will be conducted to destinations of intended operations, as determined by the DGCA. In the event the DGCA requires the applicant to make operational changes, the same shall be carried out by the applicant prior to moving on to the next phase.

5. Certification – Upon completion of the procedure stated in the previous phases and the fulfilment of criteria stipu-lated by the DGCA in this regard to the DGCA’s satisfac-tion, an Air Operator’s Permit shall be issued by the DGCA along with the associated operations specifications.

Once certified, the operator is responsible for continued compliance with the initial conditions of certification and appli-cable legislative requirements and the DGCA’s requirements promulgated from time to time.


India follows the ICAO guidelines on safety and Standards and Recommended Practices (“SARPs”). The DGCA regulates the safety requirements to be observed by aircraft, including foreign aircraft operating in India. The Aircraft Rules in Part II (General Conditions of Flying), Part III (General Safety Conditions) and Part VI (Airworthiness) give the conditions of safety that an aircraft is required to be compliant with in order to be operated in Indian airspace. The DGCA issues a Certificate of Airworthiness prior to the flying of aircraft, confirming that they conform to the design standards, are safe for operation, and meet minimum requirements with respect to engineering, inspection and main-tenance. Each aircraft either manufactured in India or imported into India for which a Certificate of Airworthiness is issued must conform to the design standards and be in a condition for safe operation. To be eligible for issuance of Certificate of Airworthiness, an aircraft must be Type Certified, its type certif-icate validated or its type accepted by the DGCA.

Section 5 of the CARs released by the DGCA provides mech-anisms for reporting air accidents and reporting. Further, it requires every aircraft operator to formulate a flight safety manual and get it approved by the DGCA. The flight safety manual shall clearly lay down the operator’s safety policies, flight safety awareness and accident/incident prevention programme.

The DGCA has released a five-year National Aviation Safety Plan (2018–2022) which promotes and supports the prioriti-sation and continuous improvement of aviation safety in India. Being one of the first countries in the world to have a State Safety Programme (“SSP”) consistent with ICAO requirements, India’s National Aviation Safety Plan incorporates the Safety Enhancement Initiatives (“SEI”) contained in the Regional Safety Plan of RASG-APAC, and is in line with ICAO’s Global Aviation Safety Plan.

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1. Jet Airways (India) Limited suspended all flight opera-tions on April 17, 2019, owing to financial difficulties. The airline is undergoing a corporate insolvency resolu-tion process (“CIRP”) under the (Indian) Insolvency and Bankruptcy Code, 2016 from June 20, 2019. The CIRP is a 180- to 270-day process during which the company is run as a ‘going concern’ by a court-appointed resolution profes-sional, and a committee of creditors is formed to undertake all commercial decisions; efforts are made by the resolution professional along with the assistance of the committee of creditors to revive the company under the CIRP.

2. The DGCA vide public notice dated March 13, 2019 decided that the operation of Boeing 737 Max aircraft will not take place to/from Indian airports and transit or entering into Indian airspace is prohibited, effective from March 13, 2019 until further notice. This decision was taken by the DGCA in light of the fatal crash of Ethiopian Airline B737 Max 8 Aircraft ET-AVJ which occurred after take-off on March 10, 2019 near Addis Ababa, Ethiopia, while on a flight from Addis Ababa to Nairobi.

3. The DGCA, as part of the Airworthiness Directive, had directed two Indian Airlines (IndiGo and Go Air) to address certain issues regarding use of the Pratt & Whitney engines powering their A320 neo planes. Both the carriers together operate around 82 such planes.

4. Aviation fuel makes up about 40% of the operating cost of an airline, while fuel prices in India are higher than elsewhere, by about 35%. Aviation turbine fuel (“ATF”), at present, attracts an excise duty of 11% and over this central levy, States charge different rates of value-added tax (“VAT”) that takes the final tax up to 30%. Airlines have been lobbying hard to bring aviation turbine fuel within the GST.

5. The AAI has asked various State governments such as that of Vishakhapatnam, Jaipur, Pune, Ahmedabad, Rajkot, Patna, Kolkata, Chennai and Bangalore to identify places where secondary airports could be built, because majority Indian airports are handling passengers way beyond the built capacity of the terminals.

6. The AAI has proposed to install biometric ‘Digi Yatra’ to enable a paperless boarding process for domestic flyers. Passengers will be automatically processed using a facial recognition system at checkpoints. This move comes in furtherance of Prime Minister Shri Narendra Modi’s ‘Digital India’ vision. Initially, the government plans to roll out this service at two airports in Hyderabad and Bangalore, and extend it to Varanasi, Kolkata, Pune and Vijayawada. However, Digi Yatra is not compulsory; passengers can choose to continue with the conventional method.

7. The government has cleared a proposal to manage six AAI-run airports on public-private partnerships, for which it received 32 technical bids from 10 companies; of these, in six airports Adani Group emerged as the highest bidder.



An aircraft in India is registered in terms of Rule 30 of the Aircraft Rules 1937. The register of the DGCA is merely a

In line with the government’s open-skies policy, the AAI has collaborated with private entities for operation, management and development under the public-private partnership model (“PPP model”). The airports of Mumbai, Delhi, Bangalore, Hyderabad, Cochin, and Navi Mumbai are currently oper-ated under the PPP model by way of entering into operation, management and development agreements with the AAI. The AAI currently operates 125 airports and 26 civil enclaves out of 464 airports and airstrips located throughout India. Further, the Government of India has granted ‘in principle’ approval for setting up about 18 greenfield airports in the country, to be developed by private parties, State government or other govern-ment agencies.

The government has approved a proposal to manage Ahmedabad, Jaipur, Lucknow, Mangalore, Thiruvanantha-puram and Guwahati under the PPP model to revamp these airports to meet international standards.


The Aircraft Rules and the AAI Act restrict and qualify access to airports in India. Further, AIC 16 dated August 2, 2019 on the “Requirements for grant of Operating Authorisation to Foreign Airlines under Bilateral Air Services Agreements” imposes certain requirements.


Developed by ICAO, the SARPs contained in the 19 Technical Annexes to the Convention on International Civil Aviation are applied universally and produce a high degree of technical uniformity which has enabled international civil aviation to develop in a safe, orderly and efficient manner. According to the provisions laid down in ICAO Annex 13 to the International Civil Aviation Convention – Aircraft Accident and Incident Investigation, States are required to investigate or delegate the investigation of accidents which have occurred in their territory.

The Aircraft (Investigation of Accidents and Incidents) Rules, 2017, provide for the establishment of the Aircraft Accident Investigation Bureau of India, which is responsible for the inves-tigation of accidents or incidents arising out of, or during, navi-gation in or over India of any aircraft, and prescribes a list of powers and functions of the investigating body, procedure of investigation, reporting of incidents and powers of the inquiry officer. The schedule also lists out guidance on damage to the aircraft and various instances of serious accidents.

Section 5 of the CARs issued by the DGCA also provide for implementing Flight Safety Awareness, and an Accident/Incident Prevention Programme for all operators engaged in scheduled or non-scheduled air transport services.

Further, AIC S. No. 05/2019 issued by the DGCA on January 31, 2019 provides for a voluntary reporting system of anyone who witnesses or is involved in or has knowledge of a situation which may possess a potential hazard/threat to flight safety and provides for maintenance of confidentiality of the reporter.

140 India


title and beneficial interest in relation to the parts (present and future) and also on the spare parts (present and future), whether such spare parts are repaired or replaced. Title ‘f’ of replace-ment parts would not automatically transfer to the aircraft owner where the replacement part is annexed, and specific title transfer documentation would have to be entered in order to transfer title.


Indirect Tax (a) GST is applicable on taxable supply of goods or services in

India. For a transaction of supply of goods or services to be taxable under GST, its place of supply should be located in India.

(b) Under GST, the place of supply of goods, inter alia, would be as follows:(i) If the supply of goods involves movement of goods,

then the place of supply would be the location of goods at the time at which the movement of goods terminates for delivery to the recipient.

(ii) In case where the supply does not involve movement of goods, then the place of supply would be the location of such goods at the time of delivery to the recipient.

Based on the above, if the place of supply of the aircraft is determined to be outside India, then in our view, GST would not apply to such a transfer of aircraft.

Further, import of aircraft into India is subject to customs duty and integrated goods and services tax (“IGST”). The applicability of customs duty and IGST on the import of aircraft is subject to any exemption provided under the relevant law.

It may be noted that subject to certain conditions, the GST law provides for IGST exemption on the import of leased aircraft into India. One of the prescribed conditions is that the importer undertakes to pay IGST on lease rentals. Stamp DutyUnder Indian laws, stamp duty differs from State to State; some States have enacted their own stamp duty laws, whilst other States have adopted the Indian Stamp Act, 1899 (with State amendments in respect of the rates of the prescribed stamp duty). The liability to pay stamp duty in a particular State arises: (i) if the instrument is executed in that State; (ii) if it is executed outside that State, such instrument is brought into the State and relates to a matter or thing done or to be done in that State; or (iii) if it relates to property located in that State. Any instru-ment which is not duly stamped is not admissible in evidence for any purpose, nor shall it be acted upon unless it bears the stamp prescribed by law.

In some States such as Maharashtra, where the city of Mumbai is located, copies of instruments relating to a property situated therein or in relation to a thing done or to be done must also be stamped with the same duty as the original.


India is a party to the Warsaw Convention (1929), the Hague Protocol (1955) and the Montreal Convention (1999); the provi-sions provided therein, subject to the provisions of the Carriage

‘notation’ register; courts in India would accept the certificate of registration, issued by the DGCA, as prima facie evidence of lessor, lender or owner interest in the aircraft. It would be diffi-cult to defend a case in the courts against third parties if the owner has no title or a defective title as per the records of the DGCA.


There is no separate register of aircraft mortgages in India. However, the CARs require the owner of an aircraft to file a notarised and apostilled copy of the mortgage documents evidencing the creation of the charge with the DGCA, which will endorse the name of the mortgagee on the certificate of registration.

As per law, if the mortgagor is an Indian company or a company with a registered place of business in India, the mortgagor must, within a prescribed period, register any charge (which includes a mortgage) created with the relevant Registrar of Companies (“ROC”) in the prescribed form. The Indian company laws require such filing to be made within 30 days of the creation of the charge, in the prescribed form, along with the complete particulars of the charge, including the instrument creating such charge.


India has ratified Article 83 bis of the Chicago Convention and therefore, prior to an Indian operator leasing an aircraft to/from a foreign operator, it is mandatory to obtain permission from the DGCA. There is no specific requirement for a lease to be in any specified form/format or in any particular language. However, the terms of the lease need to be in compliance with the CAR prescribed by the DGCA (CAR Section 3 Air Transport Series ‘C’ Part 1 dated December 30, 1993 as revised on March 24, 2017 in respect of Airworthiness and Operational Control of Foreign Aircraft Leased by Indian Operators) and such other CARs as may be issued by the DGCA from time to time. Further, the lessor/financier should also ensure compliance with the Aircraft leasing Manual (CAP 3200), relevant taxation laws, contract laws, foreign exchange laws and stamp duty laws.


No, there is no automatic concept of ‘title annexation’ of engines in India. An aircraft in India is registered wholly with its engines, spare parts and other components attached to the aircraft. As mentioned earlier, the Aircraft Registry of India is only a nota-tion register and does not confer title upon registration, and in the event of dispute, title will have to evidenced through relevant transfer of title documentation.

In our experience, provisions in relation to title, security and obligations or restrictions in relation to spare parts are set out in the lease agreement, which also records evidence of the owner’s

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Code, the Authority would need the leave of the Tribunal before exercising its right to detain the aircraft.


Typically, the lease agreement should set out the powers and responsibilities as well as the recourse in case of disputes, etc. There is no specific statutory provision for self-help in India.

Reaching an amicable settlement for repayment or resched-uling of payment deadlines with the lessee/borrower is, perhaps, the only self-help available to a lessor or a financier. Alternatively, contractual rights can be enforced by approaching the courts or initiating deregistration and repossession proceed-ings with the DGCA.

Clause (iv) of sub-rule (6) and sub-rule (7) of Rule 30 of the Aircraft Rules 1937 govern the process of deregistration of an aircraft prior to the expiry of the lease agreement on receipt of an application from the IDERA holder by the DGCA. The DGCA must accept a valid IDERA and deregister the aircraft within a time frame of five days when accompanied with a certificate stating that all registered interests ranking in priority have been discharged, or that the holders of such interest have consented to such deregistration and export.


The subject matter of the dispute determines the forum for adju-dication; for instance, disputes with respect to the Competition Act, 2002 are dealt with by the Competition Commission of India; individual consumer complaints are dealt with by consumer courts; accidents in the aircraft are to be looked into by the Aircraft Accident Investigation Bureau as per the Aircraft (Investigation of Accidents and Incidents) Rules, 2017; and compensation-related matters under Section 9B of Aircraft Act, 1934 are dealt with as per the existing agreement or by an arbitrator appointed by the central government. Further, the value and nature of the dispute (civil or criminal) also deter-mines which court shall have jurisdiction in the matter.

The Supreme Court of India is the final court of appeal concerning all forms of disputes. The High Courts under their Writ Jurisdiction are a preferred forum for adjudication of avia-tion disputes. Lessors have taken to the High Courts for lodging winding-up petitions against defaulting lessees, or praying for issuance of writs directing the DGCA to act upon their dereg-istration request in time. Petitions of lessees requesting delay in the de-registration process so that they could reach settlements with financiers/lessors are not unheard of at the High Courts.

Aviation disputes concerning consumers vis-à-vis airlines and airports authorities are preferred in the three-tier consumer disputes redressal forums established under the Consumer Protection Act, 2019, with appeals lying before the Supreme Court.

Furthermore, the Airport Economic Regulatory Authority Appellate Tribunal was established under Section 17 of the Airport Economic Regulatory Authority of India Act, 2008 to adjudicate any dispute between service providers and consumers. The appeals against the orders of the Tribunal lie before the Supreme Court under Section 31(1) of the Act.

by Air Act 1972 (Carriage Act), have the force of law in India in relation to any carriage by air irrespective of the nationality of the aircraft performing the carriage.

India ratified the Cape Town Convention on March 31, 2008. India has not ratified the Geneva Convention.


India acceded to the Cape Town Convention on International Interests in Mobile Equipment and the Protocol to the Cape Town Convention on International Interests in Mobile Equipment (Protocol) on March 31, 2008. However, only specific provi-sions of the Cape Town Convention and the Protocol became effective from July 1, 2008. From February 2015, the Aircraft Rules were amended to give the central government of India the power to cancel the registration of an Indian-registered aircraft, to which the provisions of the Cape Town Convention or the Protocol apply by way of an application from the IDERA holder, prior to the expiry of the lease.


The Income Tax Act, 1961 (“ITA”) provides that a person who is eligible to avail benefits under a Double Taxation Avoidance Agreement (“DTAA”) signed by India has the option to be governed by the provisions of the ITA or the DTAA, whichever are more beneficial to him. Lease rentals payable to a non-resi-dent for use of aircraft for the purpose of a business carried on in India by the payer (whether resident or non-resident) are taxable in India as royalties under the domestic tax law, and are subject to withholding tax at the rate of 10% (plus applicable surcharge and cess) on a gross basis. Availability of DTAA benefits will be subject to the general anti-avoidance rule (“GAAR”) contained in the ITA. GAAR applies to ‘impermissible avoidance arrange-ments’ which means an arrangement whose main purpose is to obtain a ‘tax benefit’ (i.e. a reduction or avoidance of tax that would be payable under the ITA), and, amongst other things, such arrangement ‘lacks’ or is ‘deemed to lack’ commercial substance in whole or in part. This could, if alleged by the tax authorities as applicable and successfully invoked by them, result in denial of a tax benefit, including denial of DTAA benefits. There is an exemption from applicability of GAAR; however, the same applies only to income arising from a transfer of invest-ments made prior to April 1, 2017.



DGCA, the central regulatory body for civil aviation in India, is expressly empowered under clause (b) of subsection (1) of Section 8 of the Aircraft Act, 1934, to detain any aircraft if it is of the opinion that such detention is necessary to secure compli-ance with any provisions of the Act or rules framed thereunder, or to implement an order made by any court. If, however, the operator is insolvent or undergoing insolvency proceedings at the company law tribunals under the Insolvency and Bankruptcy

142 India


price-fixing, bid-rigging, limiting production, supply, etc. A limited exception to Horizontal Agreements is the agree-ments entered into between competing enterprises, which are in the nature of a joint venture (“JV Exemption”). However, the JV Exemption applies only when such an arrangement demonstrably increases efficiency in produc-tion, supply, distribution, storage, or acquisition of control of goods or services.

(b) The CA02 prescribes for a mandatory notification require-ment for mergers and acquisitions (including, in certain circumstances, JVs) (“Combination”) if the asset value and turnover of the parties involved a breach of the juris-dictional thresholds prescribed under the CA02 and no other statutory exemption is applicable. The CA02 provides for a suspensory regime. As such, in case of a notifiable Combination, parties are required not to complete or close the transaction until receipt of the CCI approval or the lapse of 210 days (subject to statutory exclusions) from the date of filing of the notification, whichever is earlier.


While assessing a pre-merger notification, the CCI is required to determine the relevant market with reference to the rele-vant product market (“RPM”) and relevant geographic market (“RGM”). For the purposes of determining (a) the RPM, the CCI is required to consider various factors including physical characteristics, price, consumer preference, industrial classifica-tions, etc. to map potential overlaps between products/services, and (b) the RGM, the CCI is required to make its determina-tion based on factors such as regulatory trade barriers, transport costs, language, local specifications, etc.


As stated above, the CA02 provides for a mandatory suspen-sory regime whereby all notifiable Combinations that meet the jurisdictional thresholds and do not benefit from any statutory exemption are required to be notified to and approved by the CCI. The CCI (Procedure in regard to the transaction of busi-ness relating to combinations) Regulations, 2011 prescribe the thresholds/exemptions.

However, there is no other anti-trust immunity or any other approval mechanism under the CA02 for any agreement entered into between competing enterprises: (a) that are not in the nature of a Combination; or (b) that do not entail a notifiable transac-tion to the CCI.


The CA02 creates no distinction between the assessment of any notifiable Combination, i.e. a merger, acquisition or full-function joint venture. Irrespective of the type of transaction, the assess-ment of the CCI is based on whether the proposed Combination would potentially cause an appreciable adverse effect on combi-nation in India.

As stated above, in case of a non-notifiable combination or an arrangement between competitors as a full-function JV, the parties would need to self-assess if the JV results in any of the

Criminal proceedings shall be initiated by the Regional Director/Head of Directorate as per the procedure laid down in the Code of Criminal Procedure, 1973. In view of the fact that offences under the Aircraft Act, 1934 and Aircraft Rules, 1937 (except violation of Rule 91 of the Aircraft Rules) are non-cog-nizable and bailable, the criminal complaint can be filed in the court of a Magistrate of competent jurisdiction depending on the Police Station where the offence was committed. In case of violation of Rule 91 of the Aircraft Rules, 1937 (cognizable offence), a First Information Report (“FIR”) may be registered with the police, who will prosecute the offenders directly.


Section 27 and Order V of the Code of Civil Procedure, 1908 govern the applicable service requirements for service of court proceedings. Summons are issued by civil courts and served to the defendant in person or to his/her legal representative, by way of paper publication, or are posted to his/her last known place of residence or work, for the defendant to appear and answer the claim within 30 days of the institution of the suit.

For non-domestic airlines/parties, the procedure is addition-ally governed by The Hague Convention, 1965, to which India is a signatory, and therefore the civil court hearing the suit has to forward a summons request to the central authority of the State concerned, along with the document to be served.


Interim injunctions, ex parte decrees, final injunctions and final orders/awards covering aspects such as damages, compensation, repossession or sale of aircraft are available.


Yes, rights of appeal exist and may arise as a matter of right or upon exercise of discretion by the courts. For example, a judg-ment of a court may be challenged before a superior court if it is certified by the inferior court as involving a substantial question of law of general importance; or an arbitral award may be chal-lenged on the ground that it suffers from legal mala fides, where enforcement would be contrary to public policy or that the arbi-tral tribunal did not have jurisdiction over the matter.



The Competition Act, 2002 (“CA02”) is the principal statute that governs the antitrust regime in India. The CA02 does not specifi-cally deal with or govern the airline sector. However, more gener-ally, a joint venture between two competing airlines may require assessment under the following two provisions under the CA02: (a) The CA02 prohibits any anti-competitive agreement between

competing enterprises, including cartels (“Horizontal Agreements”). Such anti-competitive agreements include

143AZB & Partners


to the Green Channel, CCI’s Deemed Approval will be consid-ered as having been granted once the Combination has been notified in Form-I and the CCI has acknowledged the receipt of the notification.

With regard to the costs of notification, a Form-I must be accompanied with a filing fee of INR 0.15 crores (approximately USD 21,000) while a Form-II will have to be accompanied with a filing fee of INR 0.5 crores (approximately USD 70,000).


There are no sector-specific rules that prescribe financial support or aid to air operators and airports. The central government may, at its discretion, grant such aid or other financial support and facilities to the aviation sector as a matter of State policy, keeping in mind the growth and development of the aviation sector.

The current pattern of financing is predominantly based on internally generated resources of the AAI. Funding through external assistance, external commercial borrowings, loans and equity has been negligible. The allocation of budgetary grants is limited to certain airports in remote and inaccessible areas.

The National Civil Aviation Policy, 2016 (“NCAP 2016”) introduced the Regional Connectivity Scheme (“RCS”) that, inter alia, seeks to provide various concessions and support to air oper-ators, airports and other stakeholders; for example, an excise duty of 2% is levied on aviation fuel, no airport charges are levied for operations under RCS, etc.

Under the UDAAN Scheme, efforts have been made to provide support to Selected Airline Operator(s) in the form of Viability Gap Funding and other concessions/support offered by the central government, State governments and airport operators, including: reduction of VAT to 1% or less on ATF at RCS airports located within a particular State for a period of 10 years from the date of notification; provision of minimum land, if required, free of cost and free from all encumbrances for development of RCS airports; providing multi-modal hinterland connectivity (road, rail, metro, waterways, etc.) as required; providing security and fire services free of cost at RCS airports through appropri-ately trained personnel and appropriate equipment as per appli-cable standards and guidelines by relevant agencies; provision of, directly or through appropriate means, electricity, water and other utility services at substantially concessional rates at RCS airports; and provision of a certain share (20%) towards viability gap funding (“VGF”) for respective RCS routes (pertaining to the State), provided the share of States in the North-Eastern region of India and Union Territories would be 10%.


The NCAP 2016 seeks to sustain and nurture a competi-tive market environment in the civil aviation sector, including enhancement of regional connectivity through fiscal support and infrastructure development, providing for an RCS. The opera-tion of the scheme is proposed to be through a market mech-anism where operators will: assess demand on routes; submit proposals for operating/providing connectivity on such route(s); seek VGF, if any, while committing to certain minimum oper-ating conditions; and the same shall be finalised in interaction with other market participants.

efficiencies set out in question 4.1. above, in order to ensure compliance with the provisions of Section 3 of the CA02, which seek to prohibit Horizontal Agreements.

Besides the CA02, the Companies Act, 2013 and Securities Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (the “Takeover Code”) also govern mergers and acquisitions of unlisted and listed compa-nies, respectively. The NCLT is the adjudicating authority in case of unlisted companies, whereas SEBI is the nodal agency when it comes to mergers and acquisitions of listed companies as well as companies proposing to be listed on the stock exchange. The Takeover Code specifies situations where any acquisition may trigger open offer requirements.

Further, the exchange control-related aspects of mergers and acquisitions are regulated by the Reserve Bank of India (“RBI”) under the extant FEMA regulations, which prescribe strict reporting and pricing requirements. Foreign investment-related aspects are dealt with by the Ministry of Commerce.


As stated in response to question 4.3 above, all notifiable Combinations are required to be notified to and approved by the CCI. A brief overview of the timelines, costs and procedure is set out below: (a) Form of the notification – The Combination Regulations

specify that a Combination may either be notified in the shorter ‘Form-I’ or a longer ‘Form-II’ depending on the combined market shares of the parties to the Combination in the relevant market for overlapping business activi-ties and in the markets that are vertically linked to each other. The parties may choose to notify a Combination in Form-II if their combined market share is (i) more than 15% in the relevant market for overlapping business activi-ties, or (ii) more than 25% in the markets that are vertically linked to each other.

(b) Obligation to notify – In the case that a Combination involves an acquisition of shares, voting rights or assets, the acquirer is required to notify the Combination to the CCI. However, in case of a merger, the merging parties collec-tively are required to notify the Combination to the CCI.

(c) Timing of the notification – A Combination can be noti-fied to the CCI at any time after the binding transaction documents have been executed between the parties.

(d) Timeline for the approval – The CA02 mandates that the CCI should form its prima facie opinion on actual or likely AAEC of a Combination within 30 days from the date of notification. In the event that the CCI prima facie observes that a Combination either has or is likely to have an AAEC in a relevant market in India, it has an additional 180 days to investigate further into the likely anti-competi-tive impact of the Combination on the relevant market, and either disallow or approve the same with necessary modifi-cations if any, which may either be proposed by the CCI or the parties themselves. Upon expiry of 210 days from the date of notification, the Combination will be deemed to be approved by the CCI.

The CCI has recently introduced a deemed approval mecha-nism process which is called the Green Channel approval. The parties may avail of Green Channel approval only if they are not engaged in providing any similar/substitutable products, verti-cally linked products, or complementary products either directly or through any of their controlling or non-controlling stakes in any entity. In the case that a Combination is notified pursuant

144 India


obtain a summary of their personal data held with the data fidu-ciary; (ii) the right to seek correction of inaccurate, incomplete, or outdated personal data; (iii) the right to have personal data transferred to any other data fiduciary in certain circumstances; and (iv) the right ‘to be forgotten’, which allows the data principal to restrict or prevent continuing disclosure of their personal data.

Under the draft, the Data Protection Authority may levy penal-ties on the fiduciary for various contraventions to the law. In the event that such body corporate that possesses or deals with sensi-tive personal data is negligent in securing such data, resulting in wrongful loss or gain to any person, such body corporate shall be liable for civil penalties and to pay damages by way of compen-sation to the person.


The Information Technology (Indian Computer Emergency Response Team and Manner of Performing Functions and Duties) Rules, 2013 (“CERT-in Rules”) impose an obligation on all corporate entities, which includes airlines, to notify the Indian Computer Emergency Response Team (“CERT-in”) in case of a cybersecurity breach.


Since India has acceded to the Agreement on the Trade Related Aspects of Intellectual Property Rights (“TRIPS”), various other pieces of legislation have been enacted over the years to protect Intellectual Property Rights (“IPRs”). The following statutes provide protection and remedies available to the respec-tive IPRs:■ theTradeMarksAct,1999,asamendedbytheTradeMarks

(Amendment) Act, 2010. The remedies available are in the form of damages, account of profits, injunction, search and seizure, and forfeiture. Trademark infringement and coun-terfeiting are cognizable offences. False entries, applica-tions or trade descriptions are offences and are punishable by way of imprisonment or fine.

■ The Copyright Act, 1957 as amended by the Copyright(Amendment) Act, 2012. The remedies available under the Act are similar to those under the Trademark Act; further-more, infringement of copyright is punishable with impris-onment that may extend up to three years, or a fine of up to INR 200,000.

■ The Patents Act, 1970, as amended by the Patents(Amendment) Act, 2005.

In addition to the above-mentioned remedies, criminal reme-dies are also available for offences such as false entries in the register, false claims and false information given to the govern-ment. According to the Designs Act, 2000, the remedies avail-able for the infringement of copyright are also available for the infringement of registered design owners. In recent times, the courts in India have strictly enforced IPRs.

While injunctions still remain the prominent and effective remedy, as can be seen above, courts have in exceptional cases awarded punitive damages. Recently, intellectual property owners have increasingly been recording their IPRs, especially trademarks, before the relevant customs authorities to prevent counterfeit products from entering the Indian market.

Further, the RCS scheme provides that for up to 10 years from the date of commencement of flight operations under an RCS, there will be no airport charges levied for operations under the RCS; landing, parking and Terminal Navigation Landing Charges (“TNLC”) shall be waived; and Route Navigation and Facilitation Charges (“RNFC”) will be levied on a nominal basis. Prioritisation of routes will be carried out and reviewed from time to time so that there is balanced growth of regional connectivity in different parts of the country. The UDAAN scheme provides for the eligibility criteria, such as having a valid air operating permit, including the minimum performance spec-ifications for an RCS flight.

As per the scheme, a State will identify international routes for which the AAI will determine a subsidy amount per seat and invite bids from domestic carriers. This will be followed by airlines submitting their proposals, which will include the routes they wish to connect as well as the subsidy needed by them. The government will grant financial aid only for the actual number of passenger seats that are unsold, even if the airline had sought subsidy for a higher percentage of seating capacity at the time of bidding.


In India, data privacy and protection are governed by the provi-sions of the Information Technology Act, 2000 (“IT Act”), which provides legal recognition to transactions carried out by means of electronic data interchange. Sensitive personal data includes, inter alia, information relating to: passwords; credit/debit card information; biometric information; and condition of physical, physiological and mental health, etc. The Personal Data Protection Bill 2018 in India follows the implementation of the General Data Protection Regulation (“GDPR”). The Telecom Regulatory Authority of India (“TRAI”) has stated that each user owns his data and the entities processing such data are mere custodians.

The transfer of personal data (defined as sensitive personal data or information) is governed by the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (“SPD Rules”). The SPD Rules were issued under Section 43A of the IT Act which holds a body corporate liable for compensation for any negligence in implementing and maintaining reasonable security practices and procedures while dealing with sensitive personal data or information. The SPD Rules expand on the scope of these reasonable practices and procedures. They define sensi-tive personal data and mandate the implementation of a policy for dealing with such data. Further, various conditions such as consent requirement, lawful purpose, purpose limitation, subse-quent withdrawal of consent, etc. have been imposed on the body corporate collecting such information.

The SPD Rules also require the prior consent of the provider of the information while disclosing sensitive personal data to a third party. Transfer of sensitive personal data outside India is permitted on the condition that the same level of data protec-tion is adhered to in the country, which is applicable to the body corporate under the SPD Rules.

The draft Bill sets out certain rights of the data principal whose data is being processed. These include: (i) the right to

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In case of airline operators and passengers, the DGCA has set up the “AirSewa” web-portal/mobile application to deal with travel-related passenger grievances. The CAR (Section 3, Series M Part IV – Facilities to be provided to passengers by airlines due to denied boarding, cancellation of flights and delays in flights) also provides for passengers to file for grievance related to delays, cancellations, etc., on the AirSewa App or through the portal. The AirSewa portal launched by the DGCA provides a facilitative platform for passengers to file complaints with the respective airline. The Consumer Protection Act, 2019 also provides an additional remedy for passengers to claim compensation for any deficiency in the service provided by airlines.

In case of airport operators and passengers, there is no specific legislation and the general consumer protection legislation, i.e. the Consumer Protection Act, 2019 as amended from time to time, shall apply. In the case of Geeta Jethani vs. Airport Authority of India, the National Consumer Disputes Redressal Commission (“NCDRC”) held the AAI liable for deficiency in service in maintaining an escalator, resulting in the death of a young child at the Indira Gandhi International Airport. The NCDRC, while holding that a complaint was maintainable under the Consumer Protection Act, 1986, stated that maintenance of the airport is a statutory function of the AAI. It is the duty of the AAI to manage the airports, to provide air traffic service and air transport service, air safety service, to regulate the entry and exit of passengers and visitors at the airports, to provide trans-port facilities to the passengers travelling by air and to have due regard for the safety of such service. The quantum of penalty in this case was decided on the basis of the criteria set out under the Carriage by Air Act, as the complainants were non-residents.


Computer Reservation Systems (“CRSs”) or Global Distribution Systems (“GDSs”) are computerised systems that contain infor-mation about air carriers’ schedules, availability, fares and fare rules, through which reservations can be made or tickets may be issued. In India, GDSs are not governed by specific legis-lation. However, the DGCA has issued CARs to regulate and promote fair competition in the airline sector and to ensure that consumers do not receive inaccurate or misleading infor-mation on airline services. The said CAR on the Computer Reservation System and Global Distribution System prescribes obligations on system vendors and participating carriers, as well as subscribers.


The DGCA CARs are applicable to all GDSs, and to their essen-tial elements operating in India displaying or selling air services, irrespective of: (i) the legal status or nationality of the system vendor; (ii) the source of the information used; or (iii) the loca-tion of the relevant data processing centre, and irrespective of where the air services are provided. There are no specific ownership restrictions.


The DGCA has issued CARs (Section 3, Series M Part IV – Facilities to be provided to passengers by airlines due to denied boarding, cancellation of flights and delays in flights), which govern the rules and regulations relating to denial of boarding rights and/or cancelled flights. The CAR in question provides for the refund of the ticket fare amount and compensation in the event of denied boarding, even though the passenger has been given a confirmed booking for travel on the flight and has checked in for the flight well within the specified time ahead of the depar-ture of the flight.

Airlines are required to inform the passenger of the cancel-lation at least two weeks before the scheduled time of depar-ture and arrange an alternate flight/refund as acceptable to the passenger. In case the passengers are informed of the cancel-lation less than two weeks before and up to 24 hours of the scheduled time of departure, the airline shall offer an alter-nate flight or refund the ticket, as acceptable to the passenger. Additionally, the airline shall provide passengers with facili-ties at the airport in accordance with the CAR in the event the passengers have already reported for their original flight and whilst they are waiting for the alternate flight.

In case of foreign airlines, the amount of compensation paid to the passengers can be made in accordance with the regula-tions of their country of origin or as prescribed by the CAR.

Further, the airlines are required to display their policies in regard to compensation, refunds and the facilities that will be provided by the airline in the event of denied boarding, cancel-lations and delays on their respective websites as part of their passenger Charter of Rights.


As per the CAR (Section 3, Series M Part IV – Facilities to be provided to passengers by airlines due to denied boarding, cancellation of flights and delays in flights) issued by the DGCA, in the event of delay, the airlines are required to provide facilities such as meals, refreshments and/or hotel accommodation depending on the number of hours of delay of the flight. An exception to the above has been provided for delays caused due to extraordinary circumstances, as defined in the CAR, which could not have been avoided even if all reasonable measures had been taken.


The AAI is the nodal authority controlling all airports in India. It was established under the AAI Act, 1994, later amended by the AAI (Amendment) Act, 2003 to provide a legal framework for airport privatisation and the functions of the AAI, which includes the efficient management of airports, civil enclaves and aeronautical communication stations. Further, it states that it is the duty of the AAI to provide an air traffic service and air trans-port service at any airport and civil enclave. In the discharge of its functions, the AAI shall have due regard to the development of the efficiency, economy and safety of the air transport service.

146 India


the Bill is that the Cape Town Convention and Protocol have been given the force of law in India and have been appended to the Bill as first and second schedule, respec-tively. The declarations made by India have also been made a part of the Bill as the third schedule. The Bill also contains a provision that will accord primacy to the provi-sions of the Convention/Protocol in the case of conflict with any other law. It also empowers the government to make rules, if necessary, for implementing the Convention and the Protocol in India. The Bill was open for public consultations for a period of 30 days from publication. Since the public consultation period has expired, the Bill will now need to be passed by both houses of Parliament when they are in session.

2. The AAI has asked various State governments, such as that of Vishakhapatnam, Jaipur, Pune, Ahmedabad, Rajkot, Patna, Kolkata, Chennai and Bangalore, to identify places where secondary airports could be built, as the majority of Indian airports are handling passengers way beyond the built capacity of their terminals.

3. The AAI has proposed to install biometric ‘Digi-Yatra’ to enable a paperless boarding process for domestic flyers. Passengers will be automatically processed using a facial recognition system at checkpoints. This move comes in furtherance of Prime Minister Shri Narendra Modi’s ‘Digital India’ vision. Initially, the government plans to roll out this service at two airports in Hyderabad and Bangalore, and extend it to Varanasi, Kolkata, Pune and Vijayawada. However, Digi Yatra is not compulsory; passengers can choose to continue with the conventional method.

4. The Civil Aviation Ministry has organised the ‘Aviation Conclave 2019’, with the theme of ‘Flying for All’ covering aspects such as the Drone-Ecosystem Policy Roadmap, the Roadmap for Manufacturing Aircraft and associated equip-ment, including Regional Transport Aircraft, the Project Rupee Raftaar-Aircraft Financing and Leasing from India, the National Air Cargo Policy, and the Mission to Transform Indian Airports into Next-Gen Aviation Hubs. The Indian civil aviation industry is undergoing an unprecedented era of expansion, driven by factors such as favourable changes in legislation, low-cost carriers (“LCCs”), modern airports, Foreign Direct Investment (“FDI”) in domestic airlines, advanced information technology (“IT”) interventions and a strong focus on regional connectivity.

5. The DGCA has issued CARs on the operation of drones and various guidance materials/directions for drone oper-ation this year. In October 2019, the DGCA granted approval for the manufacturing of drones to five firms.

6. The MoCA, on January 16, 2019, published the ‘Project Rupee Raftaar’ report from the Project Rupee Raftaar Working Group, which was established in 2018 to review and recommend measures for developing an aircraft financing and leasing industry in India. The report contains a roadmap for developing aircraft financing and leasing as an asset class from institutional investors in India and proposed a structure to provide a platform to set up India’s first companies, whose primary business is the undertaking of aircraft financing and/or aircraft-leasing activities. The report identifies Gujarat International Finance Tec-City as the ideal location for India’s aircraft financing and leasing industry.


A vertical integration which is in the nature of a combina-tion between an air operator and an airport is not specifically governed under the provisions of the CA02. Accordingly, such a combination, if permitted under other applicable laws, would be assessed by the Competition Commission of India (“CCI”) for any appreciable adverse effect on competition in India.

The AAI entering into an OMDA with private parties for the development and modernisation of airports is one such example. The OMDA sometimes does prescribe restrictions on vertical integration between airline operators and airport operators.

To date, only horizontal mergers have taken place between airline operators in India, such as Air India and Indian Airlines, Jet Airways and Sahara Airlines, Kingfisher Airlines & Deccan Airlines, etc.


Yes, the DGCA has prescribed conditions for effective control of airlines in the following manner:1. A scheduled or non-scheduled operator’s permit can be

granted to:(a) a citizen of India; or(b) a company:

■ thatisregisteredandhasitsprincipalplaceofbusi-ness in India;

■ whosechairmanandatleasttwo-thirdsofitsdirec-tors are Indian citizens; and

■ thatissubstantiallyownedandeffectivelycontrolledby Indian nationals.

2. An air cargo operator’s permit can be granted to:(a) a citizen of India; (b) a group of individuals of Indian nationality or a regis-

tered trust or society; (c) a non-resident Indian or overseas corporate body; or(d) an Indian-registered company having its principal place

of business in India with or without foreign equity participation (excluding non-resident Indian equity).

5 In Future


The principal developments in the sector are as follows:1. The Ministry of Civil Aviation published the Cape Town

Convention Bill, 2018 (the Bill) on October 8, 2018 to implement the Convention/Protocol in India with a view to discharging the treaty obligations and availing of the bene-fits of Indian accession to the treaty. The main feature of

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Aviation Law 2020

AZB & Partners

Anand Shah is a Senior Partner at the Mumbai office at AZB & Partners. He represents major international aircraft leasing and financing companies and airlines and is experienced in advising across jurisdictional regulations governing civil aviation in India. His expertise also covers deregistration and repossession of aircraft, operating and finance leasing, and commercial financing for corporate jets.Anand’s practice areas also include banking and finance, structured finance transactions, mergers and acquisitions, private equity transac-tions and the private client practice. He is also a part of the firm’s regulatory advisory practice advising clients on banking and securities laws and regulations. Due to the fact that his background covers both debt and equity, in recent times, he has been particularly active in the restructuring and insolvency space.Anand’s key relationship clients include JM Financial, Goldman Sachs, Tata Capital, Standard Chartered – Aviation, Dubai Aerospace Enterprise, GECAS, John Deere, Sterlite Technologies, Eaton Corporation, Bank of America Merrill Lynch and Facebook.

AZB & PartnersAZB House, Peninsula Corporate ParkGanpatrao Kadam Marg, Lower ParelMumbai 400013India

Tel: +91 22 4072 9999Fax: +91 22 6639 6888Email: [email protected]: www.azbpartners.com

Rishiraj Baruah primarily works with AZB & Partners’ aviation practice. Rishiraj graduated from Leiden University with a specialisation in aviation and space law and was previously a research scholar at UNIDROIT, Rome. He has been instrumental in managing end-to-end trans-actions with a particular focus on aircraft purchase, re-structuring, re-financing and novations. He has also advised banks and operating lessors on issues in relation to filings under the Cape Town Convention and Protocol, and has been involved in providing advice in relation to commercial short- and long-term debt towards the acquisition cost of aircraft, finance and operating lease agreements, finance lease agreements, security documents and related documents. Rishiraj has also been active in advising clients on issues relating to insolvency law, restructuring of leasing arrangements, drafting of documents for repossession and making regulatory filings, and has interacted with regu-latory authorities regarding the impact and implementation of treaties and conventions affecting the aviation industry in India, and provided general advisory services on insurance, creation of charges, registration and stamp duty-related issues.Rishiraj is also involved with the firm’s banking, finance and insolvency-related practice.

AZB & PartnersAZB House, Peninsula Corporate ParkGanpatrao Kadam Marg, Lower ParelMumbai 400013India

Tel: +91 22 4072 9999Fax: +91 22 6639 6888Email: [email protected]: www.azbpartners.com

AZB & Partners is one of the prominent law firms in India. Having grown steadily since its inception, AZB & Partners now has offices across Mumbai, Delhi, Bangalore and Pune. Our greatest strength is an in-depth under-standing of legal, regulatory and commercial environments, in India and elsewhere. This strength enables us to provide bespoke counsel to help our diverse clients negotiate any dynamic or volatile business environment.AZB is proud of the quality of professional talent it fosters. Every lawyer is firmly dedicated to serving clients and delivering effective counsel at all times. Though our lawyers represent a diverse mix of backgrounds, they each share a proven record of academic and professional excellence.The Firm’s clients include an array of domestic and international companies. These range from privately-owned to publicly-listed companies, including

Fortune 500 entities, multinational companies, investment banks, private equity firms and more across the world. The Firm has also built, through its many professional engagements, strong relationships with specialists, regulatory authorities and several international law firms.

www.azbpartners.com


Aviation Law 2020

Chapter 22148

Ireland

Maples Group Mary Dunne

Donna Ager

Ireland


7. the Aviation Act 2006;8. the Air Navigation (Notification and Investigation of

Accidents, Serious Incidents and Incidents) Regulations 2009;

9. the State Airports Act 2004;10. the State Airports (Shannon Group) Act 2014;11. EC (Access to the Ground Handling Market at Community

Airports) Regulations 1998 (S.I.505/1998);12. EC (Common Rules for the Operation of Air Services in

the Community) Regulations (S.I.426/2008); 13. EC (Rights of Disabled Persons and Persons with Reduced

Mobility when Travelling by Air) Regulations 2008 (S.I.299/2008);

14. Regulation EC/95/93 on common rules for the allocation of slots at community airports;

15. Regulation EC/261/2004 establishes common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights;

16. Regulation EC/1107/2006 concerning the rights of disa-bled persons and persons with reduced mobility when trav-elling by air;

17. Regulation EC/1008/2008 on common rules for the oper-ation of air services in the community;

18. Regulation EU/373/2017 – the Air Traffic Management Common Requirements Implementing Regulation (ATM/IR) – effective 2 January 2020;

19. Commission Delegated Regulation (EU) 2019/945 of 12 March 2019 on unmanned aircraft systems and on third-country operators of unmanned aircraft systems, and Commission Implementing Regulation (EU) 2019/947 of 24 May 2019 on the rules and procedures for the operation of unmanned aircraft, were published in June 2019 to ensure drone operations across Europe are safe and secure; and

20. Irish Aviation Authority (Standardised Rules of the Air) Order.


An aircraft operator involved in commercial air transport must be the holder of a valid Air Operator Certificate (“AOC”) issued by the IAA and a valid Air Carrier Operating Licence (“ACOL”) issued by CAR.

In order to qualify for an ACOL, an applicant must satisfy all of the conditions for granting an operating licence set out in Article 4 of principal regulation EC1008/2008.

The applicant must, among other things, have its principal place of business and registered office (if any) in Ireland, and its main occupation must be air transport, in isolation or combined

1 General


The Department of Transport, Tourism and Sport (“DOTTS”), is the Government department responsible for aviation policy in Ireland. It is assisted in carrying out its functions by the following public bodies: ■ TheCommissionforAviationRegulation(“CAR”).■ TheIrishAviationAuthority(“IAA”).■ The Air Accident Investigation Unit (“AAIU”), which

is responsible for air accidents that take place in Ireland and air accidents that occur outside Ireland involving Irish registered aircraft.

■ TheEnvironmentalProtectionAgency(“EPA”), which is responsible for the implementation of the EU emissions trading scheme.

CARThe key functions performed by the CAR are:1. regulation of airport charges at Dublin airport and air

traffic control charges at airports with more than 1 million passengers per year;

2. licensing of air carriers under EU Regulations;3. regulation of tour operators and travel agents;4. approval of ground handlers;5. overseeing slot allocation at Dublin airport in accordance

with EU law; and6. overseeing consumer protection in the aviation sector,

including the application of EU Air Passenger Rights and Reduced Mobility.

IAAThe key functions performed by the IAA are:1. provision of air traffic management and related services in

Irish controlled airspace and on the North Atlantic;2. the safety regulation of the civil aviation industry in Ireland; 3. the oversight of civil aviation security in Ireland; and4. the registration of aircraft in Ireland.

The principal aviation legislation applicable in Ireland is as follows:1. the Air Navigation and Transport Acts 1936–1998;2. the Irish Aviation Authority Act 1993;3. the Package Holidays and Travel Trade Act 1995;4. the Aviation Regulation Act 2001;5. the Air Navigation and Transport (International Conventions)

Act 2004; 6. the International Interests in Mobile Equipment (Cape

Town Convention) Act 2005;

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the EU. Under the single market, all EU carriers can operate services on any intra-EU route.

Outside the EU single market, access to the air transport market is still heavily regulated under the framework set down in the Chicago Convention. Under the Chicago Convention, Ireland has negotiated bilaterally with a wide range of States to agree market access rights for both passenger and cargo services. A list of States with which Ireland has a bilateral air trans-port agreement is available on DOTTS’ website: www.dttas.ie. Following the “Open Skies” judgment in the European Court of Justice in 2002, all market access rights negotiated by each of the EU Member States in their bilateral agreements must be equally available to all EU carriers.

Furthermore, under the EU’s external aviation policy, the European Commission has been mandated to negotiate air trans-port agreements on behalf of the EU and its Member States with certain third countries. Under this process, so-called “Open Skies” agreements have been negotiated, removing restrictions on capacity, routing and other limits, creating a free market for services between the parties to that agreement.

Most bilateral air transport agreements require that substantial ownership and effective control be maintained by nationals of each party to the agreement. Within the EU, community airlines are required to be at least 50% owned by EU nationals. The EU has indicated its willingness to negotiate these current ownership and control limitations with States prepared to similarly waive the requirement on a reciprocal basis. However, progress on this matter has been slow.


The three main airports are Dublin, Cork and Shannon. Dublin and Cork airports are owned by daa plc. Shannon Airport is a publicly owned commercial airport owned by Shannon Airport Authority plc.


Dublin Airport is the only Irish airport currently subject to economic regulation of the charges it imposes on airlines. Economic regulation of charges at Dublin Airport is based on the Aviation Regulation Act 2001 and is implemented by CAR.


The AAIU is responsible for conducting technical investiga-tions into air accidents in Ireland, as well as incidents outside of Ireland involving Irish-registered aircraft.

The Air Navigation (notification and investigation of acci-dents, serious incidents and incidents) Regulations 2009 (“2009 Regulations”) give effect to the requirements of Annex 13 of the Chicago Convention and give the AAIU the powers it needs to carry out full and detailed technical investigations.

EU Regulation 996/2010 on the Investigation and Prevention of Accidents and Incidents in Civil Aviation is directly appli-cable in Ireland.

Following an investigation, the AAIU will issue safety recom-mendations to the appropriate aviation authority. The AAIU does not purport to apportion blame or liability in respect of an accident.

with any other commercial operation of aircraft or repair and maintenance of aircraft.

The applicant must also meet the ownership and control require-ments of the legislation (i.e. Member States and/or nationals of Member States own more than 50% of the undertaking and effec-tively control it).

In addition, applicants must meet requirements regarding finan-cial fitness and insurance cover.


The IAA is responsible for administrating Ireland’s international aviation safety obligations and agreements in accordance with standards set by the International Civil Aviation Organisation (“ICAO”) and the European Aviation Safety Agency (“EASA”).

The Safety Regulation Division of the IAA ensures specific compliance with safety objectives set down under section 14 of the Irish Aviation Authority Act 1993 and the annexes to the Chicago Convention which are implemented through a combi-nation of EU and domestic Irish legislation.

The IAA’s remit with respect to safety includes certification and registration of aircraft airworthiness, licensing personnel and organisations involved in aircraft maintenance, incident reporting and management, the protection, storage and collec-tion of information, licensing pilots, air traffic controllers and aerodromes and approving and monitoring air carrier operating standards.

There are EU safety regulations relating to initial and contin-uing aircraft airworthiness that are directly effective in the EU (including Ireland), for example: Regulation (EU) No 748/2012 regarding the implementation of essential requirements for envi-ronmental protection; and Regulation (EU) No 1321/2014, amended and updated by EU Commission Implementing Regulation 2019/1383 relating to the continuing airworthiness of aircraft and aeronautical products, parts and appliances, and on the approval of organisations and personnel involved in these tasks.

In April 2019, the European Commission adopted perfor-mance targets for air navigation services for the period 2020–2024. (Commission Implementing Decision (EU) 2019/903 of 29 May 2019.)


No, the IAA regulates commercial cargo and private carriers.


No, the IAA and the CAR regulate the sector.


The creation of the EU single market for aviation in the 1990s removed all commercial restrictions on airlines flying within

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For the UK to build an independent regulatory framework would be a huge task and it is inconceivable that this could be done within the nine-month transitional period (even the most optimistic analysis estimates that for the UK Civil Aviation Authority to rebuild its safety regulation capability would take five to 10 years). The most likely outcome, therefore, is that the UK will seek third-country membership (there is precedent for this – Switzerland currently occupies a third-country position). However, there will likely be difficulties for the UK with this; for example, they would need to agree to accept European Court of Justice jurisdiction (direct or indirect) as the ultimate arbiter in airline safety disputes – a challenging political sell. It is hard to envisage any other option for the UK, however, with the result that the UK will be subject to European jurisdiction over matters in relation to which they will no longer have any voting rights or influence.


Belair Holdings Limited v. Etole Holdings limited & Anor 2015 IEHC 569 – the Irish High Court discharged a non-consensual interest registered on the International Register under the Cape Town Convention.

DOTTS published a Request for Tenders in November 2016 for a Review of Future Capacity Needs at Ireland’s State Airports. A key feature of this review will be the timing and financing of a third terminal at Dublin Airport as well as an analysis of future expansion requirements at the three airports.

DOTTS published a policy statement on airport charges in September 2017 which sets about reforming the prices charged by Dublin Airport to airlines, with the purpose of ultimately benefitting customers.

In an unreported judgment in 2017, the Irish Commercial Court made an order to discharge a validly created and regis-tered international interest relating to a terminated sub-lease agreement on the International Register under the Cape Town Convention.



The Irish aircraft register is operated and maintained by the IAA. It is a registry of nationality and not of title. Registration of an aircraft in the name of a person does not establish that person’s title to the aircraft and it cannot be regarded as giving notice (whether actual or constructive) of a person’s interest in an aircraft.

In order to register an aircraft in Ireland, the aircraft must have a connection to Ireland and, save in the rare case where the IAA grants a specific exemption, the applicant must demonstrate that the aircraft is either: wholly owned by an Irish citizen or EU citizen having a place of residence or business in Ireland; or owned by a company registered in and having its principal place of business in Ireland or the EU, with not less than two-thirds of the directors also being Irish or EU citizens. Notwithstanding the foregoing, an aircraft may also be registered in Ireland if it is “chartered by demise, leased or on hire to, or is in the course of being acquired under a lease-purchase or hire-purchase agree-ment by a citizen or company” where such charter, lease or hire is to an individual or corporate satisfying the requirements set

Impact of Brexit on EU Aviation While much mention has been made in the press regarding the default application of World Trade Organisation (“WTO”) rules to the UK in the event of a no-deal exit from the European Union, it should be noted that WTO rules do not apply to the aviation industry. There is no safety net. In this context, and in light of the growing possibility of a no-deal Brexit, the Commission has rushed out rudimentary measures to tempo-rarily govern traffic rights and regulation.

So, what does the Commission’s plan entail and what are the potential issues that may arise?

Two measures have been adopted:1. to ensure temporarily (for 12 months) the provision of

certain air services between the UK and EU; and2. to extend temporarily (for nine months) the validity of

certain aviation safety licences.Air ServicesThe Commission measures cover direct flights, looking to ensure that point-to-point flights by a UK airline from the UK to Europe (and vice versa) will be allowed to continue, pending implementa-tion of new permanent arrangements. However, the measures do not provide specific guidance regarding intra-European flights (so, for example, BA flights from London to Paris will continue to be allowed but there is a question mark over the status of an onward BA flight from Paris to Rome).

Currently, in order to maintain an operating licence for intra-EU flights, EU rules require that air carriers be majority EU owned and controlled. It should be noted in this context that Ryanair and Iberia, for example, are both UK companies. Absent specific guidance in the Commission measures, there is a tangible possi-bility that a Ryanair flight from Dublin to Prague, or an Iberia flight from Madrid to Berlin, will not be permitted following a no-deal Brexit.

Ryanair and Iberia each point to their ability to restrict voting rights for non-EU shareholders as sufficient qualification under the EU ownership rules. It is important to note, however, that while Michael O’Leary, Willie Walsh, the Spanish govern-ment (Iberia, Vueling) and the Irish Commission for Aviation Regulation (Aer Lingus) have all made reassuring noises on these lines, the drawing of a distinction between economic and voting rights as a basis for ownership qualification is not some-thing that has ever been countenanced by the EU. Even in a best-case scenario, i.e. that the Commission is minded to allow this, it would require specific EU dispensation, and it remains to be seen what quid pro quo the EU may ask for in return.

The measures, in addition, state that flights will be capped at 2018 numbers, and there is no provision to allow the opening of new routes or the expansion, constriction or scrapping of existing routes. So, even on a liberal interpretation, the temporary rules will be extremely limiting for certain airlines and routes.

All of this is quite apart from the burden that the UK faces in negotiating multiple individual air services agreements to regulate bilateral travel access rights once the transitional period is over.RegulationOver the past 50 years, a complex layer of aviation legislation has developed governing manifold areas around air safety and secu-rity (much of which the UK was at the forefront in formulating, developing and implementing, perhaps somewhat ironically). The European Union Aviation Safety Agency (“EASA”) is the organ-isation tasked with certifying, regulating, standardising, investi-gating and monitoring European aviation safety.

With a no-deal Brexit, the UK immediately ceases to be a member of EASA. The Commission measures provide a bare-bones, short-term arrangement for continued recognition of certain licences, pending implementation of permanent arrangements.

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Strict liability is imposed on owners under section 21 of the Air Navigation and Transport Act 1936 (as amended) where mate-rial damage or loss is caused by any item falling from an aircraft in-flight. Lessors and financiers, unless holding an interest akin to an owner, will be unlikely to be held to be liable under section 21 and, in any event, owners can be indemnified against the risks under section 21 by a third party. Section 21(2) of the Air Navigation and Transport Act 1936 (as amended) also provides that an owner will not be liable where the aircraft is subject to a charter or lease arrangement for 14 days or more and the pilot and crew are not in the employ of the owner.

Save as set out above, liability for financiers, owners and lessors is based in negligence and a failure on the part of the relevant party to discharge a duty of care. Thus, lessors, owners and financiers are unlikely to be held to be responsible for losses resulting from the operation of an aircraft, unless they are actu-ally aware of a defect or issue and failed to take reasonable action in respect of such defect or issue in order to prevent loss.


Under Irish law, there is no concept of title annexation, therefore title to an engine remains with the engine owner, even where such engine is installed temporarily or otherwise on another aircraft. Title to such engine needs to be expressly transferred by the owner.


Ireland is an EU Member State and, as such, EU VAT rules are relevant to the sale/purchase and leasing of aircraft. The VAT treatment of the sale of an aircraft will depend on the loca-tion of the aircraft at the time of sale and the intended use. If the aircraft were supplied while within the territory of Ireland, Irish VAT at the standard rate (23%) would apply. However, the supply of aircraft can be zero-rated for VAT purposes where either (i) the aircraft is used by an airline operating for reward chiefly on international routes, or (ii) the aircraft is used and enjoyed outside the EU. VAT could arise in another EU juris-diction if the aircraft was imported into that jurisdiction by an Irish purchaser.

Where an Irish-based lessor is leasing aircraft to an entity outside Ireland, no Irish VAT should arise, on the basis that the place of supply under a lease arrangement is the jurisdiction where the lessee is located. VAT may be chargeable in the juris-diction of the lessee. Where the lessee is located in Ireland, the supply may be zero-rated for Irish VAT purposes where the lessee

out above with respect to Irish or EU citizenship. When relying on the operator as a connection to Ireland, the IAA may impose any conditions of such registration as it deems fit.

The IAA has concluded a number of arrangements with foreign civil aviation authorities which serve to delegate the responsibility for regulation and safety oversight for Irish regis-tered aircraft from the IAA to the aviation authority in the oper-ator’s home state. These agreements are entered into pursuant to Article 83bis of the Chicago Convention, which permits bilat-eral agreements between two aviation authorities located in the Chicago Convention contracting States.


The IAA does not operate a register of aircraft mortgages or third-party rights or interests in aircraft or engines, and will not agree to requests to note a mortgage or third-party interest on the aircraft register or related file. The IAA acknowledges the Irrevocable De-Registration and Export Request Authorisation Register (“IDERA”) pursuant to its obligations under the Cape Town Convention as enacted by the International Interests in Mobile Equipment (Cape Town Convention) Act 2005 (the “CTC Act 2005”), but this does not serve to notify third parties or perfect any security interest in an aircraft.

Aircraft mortgages and other “charges” (as defined in the Companies Act 2014 (the “CA2014”) over aircraft granted by Irish companies and Irish registered branches of foreign compa-nies) are registrable with the Companies Registration Office (the “CRO”) in Ireland within 21 days of the creation of the charge. The register maintained by the CRO operates as a priority register, with priority based on the time of filing, not the time of the interest being granted. Under the CA2014, priority interests can be filed up to 21 days prior to the date on which the charge is actually granted, with a full filing being made upon the charge actually being granted. Parties may elect to make a single filing upon the charge actually being entered into. If the charge is not registered within 21 days of the date on which it is granted, the charge becomes void against a liquidator and any creditor of the party granting the charge.

The CTC Act 2005 provides for the registration of certain interests in airframes and engines with the International Registry of Mobile Assets, to ensure priority. Aircraft mort-gages are amongst the interests which constitute “International Interests” (as defined in the Cape Town Convention) to the extent the mortgage is granted by an owner in a contracting State or the aircraft is registered in a contracting State. The International Registry is an online register but, due to it being located in Dublin, disputes over registrations are heard or enforced in the Irish High Court regardless of the country in which the claim originates.

In the English law case of Blue Sky One and Ors v. Mahan Air, the court considered the impact on perfection of an English law aircraft mortgage when the asset was located outside of England and Wales at the time the mortgage interest was granted, and concluded that a mortgage granted in such circumstances would not serve to create a right in rem in the aircraft. Although this is an English law judgment, unless or until the Irish courts hand down a judgment which takes a different position, the decision of the English court will be considered as persuasive by the Irish court should the same issue be considered by the Irish courts where an Irish law mortgage is involved.

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of the International Registrar under the Cape Town Convention or the Aircraft Protocol as defined in the 2005 Act and the State Airport (Shannon Group) Act 2014.

The Montreal Convention was implemented in Ireland by the Air Navigation and Transport (International Convention) Act 2004. The court system in Ireland is the suitable forum for enforcement of the Montreal Convention. CAR, which has a significant consumer protection role, is the national enforce-ment body tasked with the monitoring and regulation of EU legislation covering air passenger rights and the provision of assistance to passengers with reduced mobility.


Ireland has a significant double tax treaty network which continues to grow every year. There are currently 74 agreements in place, of which 73 are in force.

The majority of Ireland’s double tax treaties provide for reduced withholding tax rates on payments such as lease rental and interest payments, and aircraft leasing is a focus when trea-ties are being negotiated. In terms of particular treaties and jurisdictions, the rate of withholding tax between Ireland and China can be reduced to as little as 5% under the relevant treaty, which compares well with most other countries, where the lowest rate achievable is between 10% and 15%. The trea-ties with the US and India also offer reduced withholding rates of between 0% and 15%. The terms of Irish domestic tax law and relevant double taxation agreements also generally provide credit relief to Irish lessors for foreign tax paid.



Irish law recognises certain liens and rights of detention for unpaid debts or charges. The rights may arise in law, equity, under contract or statute.

At common law, the third-party liens available are similar to other common law jurisdictions such as England and Wales. An unpaid seller may seek to exercise a seller’s lien, although typical aircraft finance structures mean that aircraft manufac-turers are not in a position (and in most instances do not need) to exercise such rights. A possessory lien may be exercised, for example, where aircraft are subject to a claim for unpaid repairs. In order to exercise such a lien, the aircraft must be, and remain, in the possession of the party who carried out the repairs, and the specific aircraft over which the lien is sought to be exercised must have been improved through the labour of that party, with the knowledge and authorisation of the owner (note that main-tenance is probably insufficient), resulting in an unpaid debt. Such a lien would only extend to the cost of unpaid repairs to the specific aircraft in question, and would not allow for a right of sale without court intervention. Contractual liens can also be created, and if provided for in the agreement between the airport user and the owner or operator of an airport, aircraft can be detained, and sold, for non-payment of certain airport charges.

The Air Navigation and Transport (Amendment) Act 1998 (section 40) affords certain airports operated by specified Airport Authorities the right to detain and, if necessary, to sell aircraft in

is operating chiefly on international routes. Where the supply is zero-rated, the lessor should be entitled to a credit for any VAT incurred on the acquisition of the aircraft and any related costs.

Irish stamp duty generally applies to the transfer or sale of immovable property, intangible assets and shares in Irish compa-nies. However, transfers of direct ownership in an aircraft or part of an aircraft are expressly exempt from stamp duty and this exemption extends, on a concessionary basis, to transfers of shares in a company which owns aircraft.


Ireland is a signatory to the following conventions (as amended and updated) in relation to international airline operations:1. The 1929 Warsaw Convention for the Unification of

Certain Rules Relating to International Carriage by Air, as amended by the Hague Protocol of 28 September 1955 – ratified 20 September 1935 and 12 October 1959.

2. The 1944 Chicago Convention on International Civil Aviation – ratified 31 October 1946.

3. The 1956 Geneva Agreements on the Joint Financing of Certain Air Navigation Services in Greenland/Iceland – ratified 3 June 1960.

4. The 1962 Rome Protocol Relating to an Amendment to the Convention on International Civil Aviation – ratified 14 February 1963.

5. The 1971 New York Protocol Relating to an Amendment to the Convention on International Civil Aviation – ratified 15 June 1971.

6. The 1971 Vienna Protocol relating to an amendment to the Convention on International Civil Aviation – ratified 11 July 1972.

7. The 1963 Tokyo Convention on Offences and Certain Other Acts Committed on Board Aircraft – ratified 14 November 1975.

8. The 1970 Hague Convention for the Suppression of Unlawful Seizure of Aircraft – ratified 24 November 1975.

9. The 1999 Montreal Convention for the Unification of Certain Rules for International Carriage by Air – ratified 29 April 2004.

10. The 2001 Cape Town Convention on International Interests in Mobile Equipment – ratified 29 July 2005.

11. The 2001 Protocol to the Convention on International Interests in Mobile Equipment on matters specific to Aircraft Equipment – ratified 23 August 2005.

Ireland has also signed, but has not yet ratified, the 1948 Geneva Convention on the International Recognition of Rights in Aircraft.


The Cape Town Convention became law in Ireland on 1 March 2006, following the passing of the CTC Act 2005. The appli-cation of the Cape Town Convention was further extended to introduce a bespoke insolvency regime for assets covered by the Cape Town Convention following the granting of an order in May 2017 pursuant to the State Airports (Shannon Group) Act 2014. The court system, and in particular the Commercial Court in Ireland, is the appropriate means of enforcing the Cape Town Convention. The Commercial Court has exclusive juris-diction to hear any proceedings in connection with any function

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million, and enjoys enhanced case management procedures. This Court also deals exclusively with proceedings in connec-tion with any function of the Registrar under the Cape Town Convention or the Aircraft Protocol.


As most disputes will invoke the High Court jurisdiction, the Rules of the Superior Courts prescribe the relevant methods of service. Personal service on individuals may be effected in the State. Service on a company in the State must be effected in accordance with section 51 of the Companies Act 2014, by leaving the proceedings at or sending it by prepaid post to the registered office of the Company. Where the company has not notified the Registrar of Companies of its registered office, the documents may be served on the Registrar.

For parties located outside the State but within the EU, Council Regulations (EC) 1215/2012 on jurisdiction and 1348/2000 on effecting service may apply. For parties outside the EU, leave of the Irish Court to issue and serve proceedings may be required, with service thereafter effected pursuant to the Hague Service Convention.


In general, the Irish courts have jurisdiction to order and direct the full range of common law and equitable remedies to include making orders providing for interim and interlocutory relief, together with final orders including declaratory orders, injunc-tions and associated damages and costs awards.

The Arbitration Act 2010, which adopted the UNCITRAL Model Law, as amended in 2006 (the “Model Law”), with some minimal amendments, applies to all arbitrations, both domestic and international, commenced in Ireland after 8 June 2010. Unlike England and Wales, Ireland deliberately avoided whole-sale amendments and additions to the Model Law. Therefore, Articles 9 and 17 in respect of interim measures apply.


Appeals of High Court decisions as the court of first instance may be made to the Court of Appeal, and thereafter, on certain limited grounds, to the Irish Supreme Court.

Ireland ratified the New York Convention in 1981 and no reservations have been entered. The relevant legislation is now the Arbitration Act 2010, which does not provide for a right of appeal against an arbitral award.

The grounds for challenging an arbitral award before the High Court under the 2010 Act are limited to those expressly enumer-ated under Article 34(2) of the Model Law (which mirrors the grounds on which recognition and enforcement might be refused under the New York Convention as per Article 36 of the Model Law). Challenges must be brought within three months from the date of receipt of the award. Section 12 of the 2010 Act, however, requires that any challenge on the basis of public policy must be brought within 56 days of the date from which the circumstances giving rise to the application became known

respect of certain unpaid airport charges. This power to detain extends beyond the particular aircraft in respect of which the charges were incurred to any other aircraft of the operator or registered owner. This can cause problems for new operators assuming liability for pre-existing debts. If the owner or oper-ator disputes the charges and offers sufficient security pending determination of the dispute, the power to detain is limited. As regards the power of sale, it can only be exercised with leave of the Irish High Court.

Parties in possession of judgments may also be entitled to exercise certain rights against an aircraft or shares in an aircraft holding company, provided appropriate judgment enforcement procedures have been followed, but an Irish court will have regard to prior and superior interests in granting any such reliefs.


Ireland is generally seen as a creditor-friendly jurisdiction, allowing self-help repossession and interim relief and other self-help remedies provided the contractual arrangements between the parties provide for the same. Standard default remedies under leasing and security agreements often include powers to take possession or control of the aircraft in order to: sell or grant a new lease of the aircraft; receive income or profits that result from the management or use of the aircraft; and/or procure the deregistration, export and physical transfer of the aircraft from the territory in which it is located. In Ireland, provided the requirements of the Convention are met, it is not necessary to make an application to the High Court for leave to exercise that remedy unless the terms agreed between the parties expressly require the creditor to make such an application.

While self-help remedies may be available, there are risks for the lessor associated with non-consensual repossession without ancillary judicial relief, such as a lessee claiming breach of lease terms for quiet enjoyment and use of the aircraft. It is often considered prudent for the lessor to institute recovery proceed-ings where the lessee is considered uncooperative, or where a liquidator or examiner has been appointed to the lessee.

As a member of the EU, the relevant Declaration pursuant to Article 55 of the Convention and the application of Council Regulation (EC) No 1215/2012 on jurisdiction and enforcement of judgments applies to interim relief under the Convention.

Ireland is a signatory of and has ratified the Cape Town Convention and has given effect to the Aircraft Protocol. In May 2017, the Irish Government made an order giving imme-diate effect to Article XI (Alternative A) of the Aircraft Protocol, which further enhances Ireland’s position as a leading jurisdic-tion for aircraft finance as it allows creditors to gain access to their aircraft assets in the event of insolvency of a debtor after a 60-day waiting period.


Aviation disputes in Ireland will typically be dealt with in the civil courts, in particular the Commercial Court division of the High Court which deals with commercial disputes where, amongst other things, the quantum of the claim exceeds €1

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A merger notification application is lodged by the parties involved in the relevant transaction to the CCPC in relation to the merger, acquisition or joint venture. The application describes the transaction proposed and the roles of each party within the market in question; and gives a breakdown of the horizontal and vertical overlaps of the parties within the market, and the impact of the transaction on such overlaps.

The CCPC then has 30 working days to give a Phase I clear-ance or to determine that the issues are sufficiently complex to require a Phase II clearance, for which the CCPC has 120 working days. These timelines can be extended by the CCPC by requesting further information. If it does this, the clock stops ticking until such time as the CCPC has received satisfactory replies to all ques-tions, at which point time starts to run from the start again i.e. it has 30 working days.

In general, however, the CCPC deals with the majority of cases in Phase I without extending the timeline, so the system works efficiently. The CCPC will try to agree conditions or changes with the proposed parties to the merger, rather than refuse to clear it.

The fee charged by the CCPC for a Merger Notification is €8,000.


Ireland applies EU law on State Aid.In the aviation sector in particular, it applies the EU

Commission Guidelines on State Aid to airports and airlines (2014/C 99/03). These Aviation Guidelines set out the condi-tions under which Member States can grant State Aid to airports and airlines.

Key features are:■ State Aid for investment in airport infrastructure is

allowed if there is a genuine transport need and the public support is necessary to ensure the accessibility of a region. The guidelines define maximum permissible aid intensi-ties depending on the size of an airport, in order to ensure the right mix between public and private investment. The possibilities to grant aid are therefore higher for smaller airports than for larger ones.

■ Operating aid to regional airports (with fewer than 3 million passengers a year) will be allowed for a transitional period of 10 years under certain conditions, in order to give airports time to adjust their business model. To receive operating aid, airports need to work out a business plan paving the way towards full coverage of operating costs at the end of the transitional period. As under the current market conditions, airports with an annual passenger traffic of below 700,000 may face increased difficulties in achieving full cost coverage during the transitional period, the guidelines include a special regime for those airports, with higher aid intensities and a reassessment of the situa-tion after five years.

■ Start-upaidtoairlinestolaunchanewairrouteispermitted,provided it remains limited in time. The compatibility conditions for start-up aid to airlines have been stream-lined and adapted to recent market developments.

or ought reasonably to have become known. The jurisprudence suggests Irish courts will construe the ground of public policy as extending only to breaches of the most fundamental notions of morality and justice.



Joint ventures between airlines are subject to Irish compe-tition law which implements and complies with EU compe-tition law. Therefore, joint ventures are subject to Sections 4 and 5 of the Irish Competition Act 2002 (as amended) which implement Articles 101 (anti-competitive agreements) and 102 (abuse of a dominant position) of the Treaty on the Functioning of the European Union. Mergers and acquisitions are subject to a merger notification regime to the Irish Consumer and Competition Protection Commission (“CCPC”).

There are no particular Irish rules on highly integrated airline alliances, codeshare agreements or similar arrangements. The CCPC follows EU precedent in relation to such alliances and will not block them unless in the specific instance it will lead to a substantial lessening of competition for consumers in Ireland.


The relevant body is the CCPC (www.ccpc.ie).There is no statutory definition of “relevant market” and the

market may be defined broadly or narrowly in the context of the particular case.

Market sectors used in EU case law such as origin and destina-tion city pairs, premium and non-premium passengers, non-stop and one-stop flights and airport substitution will equally be considered by the CCPC in Ireland, using EU case law as precedent.


All mergers and acquisitions of legal entities, including airlines, that fall within the remit of the Competition Act 2002 (as amended) and satisfy certain financial thresholds, require manda-tory pre-clearance by submitting a notification to the CCPC.


Ireland’s competition policy is closely aligned with EU princi-ples of competition law. The test is whether the merger, acquisi-tion or joint venture will substantially lessen competition in the market for consumers in Ireland.

The CCPC is responsible for enforcing Irish and European competition law in Ireland. They can enforce by way of criminal or civil proceedings, with heavy fines and prison sentences avail-able. However, the CCPC applies these sparingly. In the case of a merger or acquisition, the transaction does not become effec-tive until the CCPC has either cleared the transaction, refused to clear it or imposed conditions to the merger or acquisition, the aim of which will be to prevent a substantial lessening of compe-tition in the market as a result of the merger or acquisition.

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It was intended to replace the E-Privacy Directive sometime in 2018 with a new E-Privacy Regulation which will bring more GDPR-type privacy obligations (e.g. similar fines) to this area of regulation; however, this now looks more likely to take place in 2020.

The EU PNR Directive (2016/681) was transposed into Irish legislation on 25 May 2018 (the same date as GDPR became effective) by Statutory Instrument S.I.177 2918. That Directive provides for the collection by air carriers of PNR data for all extra-EU flights entering or departing from the EU, as well as the transfer of such data to EU Member States and sharing mechanisms across borders. Note that under Article 2 it can be extended in the future to intra-EU flights.

Following on from the Schrems case (which successfully chal-lenged Safe Harbor, the predecessor to Privacy Shield), the Irish High Court, at the request of the Data Protection Commission, has referred a legal challenge to the validity of the EU Standard Contractual Clauses (“SCCs”) to the Court of Justice of the European Union (“CJEU”) to determine a number of questions regarding the use of SCCs and their validity under EU law. The outcome of that case may have significant implications for data transfers beyond the EU.


Irish data protection law includes obligations to notify affected data subjects in the event of a data breach and a requirement to report breaches to the Data Protection Commission. The notification and reporting requirements vary based upon the specific circumstances of the data loss/breach. The Irish Data Protection Commission has approved a personal data security breach Code of Practice as a guide to organisations dealing with breaches of security involving customer or employee personal information. The timeframes for reporting and notification are extremely limited (24 hours in certain instances), and a failure to adhere to the required reporting requirements can lead to regu-latory sanction. Irish law also includes a requirement to notify the Irish police where the data breach potentially involves the commission of a crime, i.e. a cybersecurity attack or fraud. The Data Protection Commission is still in the process of updating its website to cater for GDPR and there could be changes to this Code of Practice as a result.


Registration of intellectual property in Ireland is carried out at the Irish Patents Office.

Registration of trademarks is governed by the Trade Marks Act 1996 (as amended). A trademark is usually registered for an initial 10-year period but can be renewed indefinitely. Unregistered trademarks may also be protected by the common law tort of passing-off.

Applications for an EU-wide trademark can be made through the EU Intellectual Property Office (“EUIPO”). Applications for international trademarks can be made under the Madrid Protocol and are administered by WIPO.

Patent registration is governed by the Patents Act 1992 (as amended). Irish patents are protected for a maximum of 20 years. Short-term, 10-year patents can also be obtained. Protection can be sought for other countries in Europe by an application for a European Patent through the European Patent

The Irish Government supports Ireland’s regional airports (Donegal, Ireland West Airport Knock (“IWAK”), Kerry and Waterford) through the Regional Airports Programme 2015–2019. That financial support is administered by DOTTS through three separate schemes:■ A Regional Airports Capital Expenditure Grant

(“CAPEX”) Scheme.■ A Core Airport Management Operational Expenditure

Subvention (“OPEX”) Scheme.■ APublicServiceObligation(“PSO”) Air Services Scheme.

All funding of regional airports by the State must comply with the Aviation Guidelines on State Aid to airports and airlines referred to above.

Support under the CAPEX Scheme is only paid to the regional airports for essential safety and security work with an associated economic activity.

OPEX subvention is paid to compensate the regional airports for costs incurred in providing core airport services, insofar as these costs cannot be fully met by prudent commercial manage-ment and from any surpluses generated by non-core activities such as car parking and catering.

Two services operate from regional airports under the PSO Air Services Scheme – Kerry/Dublin and Donegal/Dublin.

The current scheme ends on 31 December 2019 and the scheme for 2020–2024 is due for publication.


As set out at question 4.6 above, two PSO services from two airports in Ireland are supported by the Irish Government on the basis that these services are considered necessary for the economic development of their regions and that they would not be provided on a commercial basis. Contracts are in place for air services between Dublin and the regional airports in Kerry and Donegal, and will run until 31 January 2022.


The Data Protection Act 2018 came into force in Ireland on 25 May 2018. That Act and the directly effective EU General Data Protection Regulation (2016/679) (“GDPR”) are currently the primary pieces of legislation governing data protection in Irish law. In keeping with the relevant EU principles, data collectors and processors in the airline industry must adhere to the core requirements of: fairly obtaining and fairly processing personal data; keeping collected data only for one or more specified lawful purposes; processing such data only in ways compatible with the purpose for which it was given; as well as keeping the data safe and secure; and ensuring that it is kept accurate and up to date.

The GDPR has far reaching extra-territoriality; non-EU carriers will be subject to the GDPR, if their marketing is targeted at travellers within the EU or where they engage in monitoring the behaviour of data subjects in the EU. Data processors will also be directly caught by specific obligations under GDPR.SI 336/2011 European Communities (Electronic Communications Networks and Services) (Privacy and Electronic Communications) Regulations 2011, giving effect to Directive 2002/58 (the “E-Privacy Directive”), which also apply to the airline industry, and in particular, the collection and use of passenger data in electronic marketing.

156 Ireland


Whether a delay comes within the terms of Regulation 261/2004 depends upon the distance of the route involved and the delay itself must be at least two hours. The Regulation shall apply to:(a) delays of two hours or more in the case of flights of

1,500km or less;(b) delays of three hours or more in the case of all Intra-

Community flights of more than 1,500km, and of all other flights between 1,500km and 3,500km; and

(c) delays of four hours or more in the case of all other flights.The operating air carrier must provide care and assistance in

the event of such delays. This must consist of the following:■ Information: the air carrier shall provide a written

notice setting out the rules for assistance in line with the Regulation. In addition, a sign must be displayed at the check-in area referring to air passenger rights under the Regulation.

■ Mealsandrefreshmentsshallbeofferedfreeofchargeandin reasonable relation to the waiting time.

■ Hotel accommodation shall be providedwhere a stay ofone or more nights becomes necessary, as well as transport between the hotel and the place of accommodation.

■ Communications:passengersshallbeofferedfreeofchargetwo telephone calls, telex or fax messages, or emails.

■ Reimbursement:wheretheflightdelayisatleastfivehours,passengers shall be offered reimbursement within seven days of the full cost of the ticket at the price at which it was bought for the part or parts of the journey not completed. If, however, the purpose of the journey is no longer attain-able, then reimbursement must be offered for the part of the journey already made, e.g. a flight from Cork to Dublin will be reimbursed if the purpose of the flight was to travel on a connecting flight to London for a function at which attendance is no longer possible due to the delay. In addi-tion, there is a right to a return flight to the original point of departure where relevant. The right to reimbursement applies where the passenger decides not to travel as a result of the delay – it is not possible to travel and also claim reim-bursement under the Regulation.

If the airline is unable to provide the above provisions free of charge, the airline should reimburse passengers for expenses incurred.CompensationAlthough the Regulation itself does not expressly state that compensation is payable in cases of delay, the ruling delivered by the European Court of Justice in the cases of Sturgeon v. Condor Flugdienst GmbH and Bock and Others v. Air France SA maintains that compensation may be payable to passengers who arrive at their destinations three hours or more after the scheduled arrival time.

The amount of compensation which may be payable in the aforementioned circumstances depends on the distance of the flight, the reason for the delay and, in the case of point (c) above, it may be reduced by 50% where the delay on arrival was less than four hours.

If an airline can prove that the delay was caused by an extraor-dinary circumstance which could not have been avoided even if all reasonable measures were taken, no compensation will be payable.

The amount of compensation payable depends on the distance of the flight. If the flight is classed as:■ shorthaul,theamountpayableis€250perperson;■ mediumhaul,theamountpayableis€400perperson;and■ longhaul,theamountpayableis€600perperson.

Office which includes 40 countries, or throughout the world under the Patent Cooperation Treaty administered by WIPO which covers 145 countries.

Registration of designs is governed by the Industrial Designs Act 2001 (as amended). Protection is granted initially for five years, which can be renewed four times, giving a maximum protec-tion of 25 years. Protection throughout the EU can be obtained by applying for a Community Design through EUIPO. Protection in additional countries can be obtained under the Hague Convention operated by WIPO. Protection is also available for unregistered designs for up to a maximum of three years.

Copyright protection in Ireland is governed by the Copyright and Related Rights Act 2000 (as amended). There is no system of registration. Copyright protection for literary works lasts for 70 years after the death of the author. Copyright protection for computer-generated works lasts for 70 years after the date they are first made available to the public.

Other non-registrable intellectual property such as confiden-tial information, trade secrets, knowhow and the like are normally protected by non-disclosure agreements or other forms of contract.


Ireland complies with Regulation (EC) No 261/2004 in relation to denied boarding rights.

Where a flight is overbooked and an air carrier reasonably expects to deny boarding, it shall first call for volunteers in exchange for benefits to be agreed. If there is an insufficient number of volunteers, the airline may deny boarding to passen-gers against their will but must compensate them and offer the following assistance:■ Information: theaircarriershallprovideawrittennotice

setting out the rules for assistance in line with Regulation 261/2004. In addition, a sign must be displayed at the check-in area referring to air passenger rights under Regulation 261/2004.

■ Passengers shall be offered the choice between reim-bursement of the cost of their ticket if they decide not to travel; and rerouting to their final destination at the earliest opportunity. Passengers may choose to travel at a later date at their convenience, subject to the availability of seats.

■ Mealsandrefreshmentsshallbeofferedfreeofchargeandin reasonable relation to the waiting time.

■ Hotel accommodation shall be providedwhere a stay ofone or more nights becomes necessary, as well as transport between the hotel and the place of accommodation.

■ Twofreetelephonecalls, telexorfaxmessages,oremailsshall be offered.

■ Compensationassetoutinthetable(below).Theamountof compensation payable may be reduced by 50% if the rerouting offered allows the passenger to arrive at his/her final destination close to the original planned arrival time.

Compensation amounts related to denied boarding■ Forflightswithadistanceof1,500kmorless:€250.■ Forintra-Communityflightsofmorethan1,500kmandall

other flights between 1,500km and 3,500km: €400.■ Forallflightswithadistanceof3,500kmormore:€600.


Ireland complies with Regulation No 261/2004 in relation to late arrival and departure of flights.

157Maples Group


However, Regulation EC 1008/2008 is enforced and imple-mented in Ireland by Statutory Instrument 426 of 2008. This requires an applicant for an Air Carrier Operating Licence to have its principal place of business and registered office in Ireland. It also requires that the applicant is owned and controlled by EU Member States or EU nationals.

5 In Future


The most noteworthy developments are as follows:1. The Irish Government’s expressed and continued support

for the wider aviation industry contained in “A National Aviation Policy for Ireland” policy document will ensure that, when enacting new legislation in Ireland, aviation and the significance of the industry to the Irish economy will be at the forefront of the legislators’ considerations, whilst the implementation of the “Alternative A” insolvency regime in Ireland further strengthens the country’s appeal as a hub for owning, leasing and financing aircraft, as well as its position as a global centre for aviation.

2. The ongoing OECD/G20 Base Erosion and Profit Shifting Project (“BEPS”) is likely to result in changes to interna-tional tax treatment of certain tax practices. On 7 June 2017, Ireland and over 70 countries signed up to a multilat-eral convention (the “MLI”) that is intended to implement a number of BEPS-related measures swiftly. Ireland deposited its instrument of ratification with the OECD on 29 January 2019 and therefore the MLI came into force in respect of Ireland on 1 May 2019. The effect of the MLI is that coun-tries (including Ireland) will transpose certain provisions relating to the BEPS project into their existing networks of bilateral tax treaties without the requirement to re-negotiate each treaty individually. The MLI will implement a series of measures to update Ireland’s existing network of bilat-eral tax treaties, with the intention of reducing opportuni-ties for tax avoidance by multinational enterprises. However, the impact on the Irish aviation industry is expected to be minimal due to the robust legislative framework already in place in Ireland and the tax treatment of the aviation industry in Ireland. In fact, the OECD’s recommendation may well serve to enhance the appeal of Ireland as an attractive juris-diction for the owning, financing and leasing of aircraft as compared to competing jurisdictions.

Ireland is also required to adopt certain measures intro-duced by the Anti-Tax Avoidance Directive (Directive (EU) 2016/1164) in relation to limitation of interest deduct-ibility and Council Directive (EU) 2017/952 which amended Directive (EU) 2016/1164 as regards hybrid mismatches. The rules relating to hybrid mismatches will apply from 1 January 2020. These changes are unlikely to have a signifi-cant impact on the aviation industry in Ireland, although the interest limitation rules may result in changes to the struc-tures used to hold aircraft in certain cases.

3. On 15 November 2016, Ireland formerly enacted the European Union (Anti-Money Laundering Beneficial Ownership of Corporate Entities) Regulations 2016 by the introduction of SI/560/2016. The statutory instrument provides for every Irish-incorporated entity (other than those

CAR is the designated enforcement body in Ireland. Section 45 of the Aviation Act 2001 (as amended) gives CAR the right to issue a direction to any airline in breach of Regulation 261/2004 requiring compliance. If the airline fails to comply, it is guilty of an offence. Whilst an airline can make representations to CAR during the process, it can only challenge its decision by way of judicial review in the High Court.


The airport authority for Dublin and Cork Airports is the daa plc.

The airport authority for Shannon Airport is the Shannon Airport Authority plc.

The relevant legislation is the State Airports Act 2004 and the State Airports (Shannon Group) Act 2014.

This legislation dictates that the airports are owned by the State and the policy position is that this will not change in the foreseeable future. Governance and structure of the airport authorities is set out in the legislation as well as detailed provi-sion on operation of the airports.


Ireland implements EU consumer law. The general legislation applicable in Ireland is the Sale of Goods and Supply of Services Act 1980 (as amended). This applies to aviation-related matters also.

The CCPC is responsible for the enforcement of consumer protection laws.


Many of the major GDSs operate in Ireland, including Amadeus, Sabre, Travelport, etc.


No, there are no ownership requirements specific to GDSs oper-ating in Ireland.


There is no particular prohibition on vertical integration between air operators and airports, though competition law will be relevant.


Currently, there are no nationality requirements imposed by the IAA for entities applying for an Air Operator’s Certificate.

158 Ireland


clients on domestic and multinational commercial disputes and enforcement proceedings. He is experienced in acting in both ad hoc and institutional forms of arbitration. (Tel: +353 1 619 2042 / Email: [email protected].)

The authors are also grateful to Lynn Cramer for her contribu-tion to this chapter from a tax law perspective. Lynn is a partner in the Dublin office’s Tax team and advises both domestic and international clients on Irish and international tax matters. (Tel: +353 1 619 2066 / Email: [email protected].)

The authors would also like to thank Kevin Harnett for his contribution from an IP and data protection perspective. Kevin is a partner in the Dispute Resolution & Insolvency team and has extensive experience advising both domestic and multinational clients from diverse backgrounds on large and complex commer-cial disputes, including proceedings before the Commercial Court, as well as all forms of alternative dispute resolution. He has a particular focus on the financial services, technology, construc-tion and property sectors. (Tel: +353 1 619 2036 / Email: [email protected].)

listed on regulated markets and subject to EU (or equivalent) disclosure requirements) to take steps to obtain and disclose information in respect of its beneficial interest holders. In terms of aviation, this may cause an issue where a company and its assets are held in trust structures and there is no discernible beneficiary; however, in these circumstances it may be possible to rely on an exemption to the require-ment and to simply list the company directors and executive officer in lieu of the beneficiaries such that these structures can continue to be used.

4. DOTTS is carrying out a review of the role of CAR and IAA in light of Single European Sky regulation, which may change the role of these two bodies and necessitate legislation.

AcknowledgmentsThe authors are grateful to Brian Clarke for his invaluable contri-bution to this chapter. Brian is a partner in the Litigation & Dispute Resolution practice of Maples and Calder, the Maples Group law firm. He advises both domestic and international

159

Aviation Law 2020

Maples Group

Donna Ager is Head of the European Aviation practice at Maples and Calder, the Maples Group law firm, advising on tax-efficient leasing and financing structures, in addition to platform establishments and transportation business acquisitions and disposals, all from an Irish law perspective.Having worked on the acquisition, finance, leasing and disposal of transportation assets for more than 18 years, Donna has extensive industry and structuring knowledge, notably in the aviation sector where she specialises. Regarded by her clients as practical and commercial, Donna’s expertise extends across all transportation assets and her London city training provides for a unique and refreshing approach to the role of Irish counsel.Donna joined the Group in 2015, following time spent as a partner in the asset finance team of Simmons & Simmons, London. Prior to that, Donna worked for nine years at Clifford Chance, London, having started her career with Freshfields before moving to Airbus S.A.S. in Toulouse, France where she gained sought-after manufacturer’s experience as well as technical and commercial knowledge of maintenance, repair and operations.Donna has been described by The Legal 500 as being part of a “new generation of partners” who focus on finding innovative solutions to ensure the spirit of the deal remains paramount. She has been ranked by Chambers Global and listed as a leading lawyer in her field by IFLR 1000.

Maples Group 11th Floor200 Aldersgate StreetLondon, EC1A 4HDUnited Kingdom

Tel: +44 20 7466 1712Email: [email protected] URL: www.maples.com

Mary Dunne joined Maples and Calder, the Maples Group law firm, in 2012. Prior to this, she was a partner with a leading Irish law firm, from 2007 to 2012. Mary also worked as Head of Legal at the National Development Finance Agency and the Strategic Investment Board in Belfast. She has been highly regarded in independent legal directories such as Chambers Global and The Legal 500.Mary’s areas of expertise include:■ Infrastructureprojectsandprojectfinanceintheenergy,road,rail,education,water,wastehealth,nursinghomeandhousingsectors,

with particular expertise in PPPs.■ Construction law: Mary advises on all forms of Irish and international construction and engineering documentation.■ Public Procurement and Competition law: Mary acts as an expert to the OECD and World Bank on public procurement and project

financeandhasdraftedlawsandproceduresformanygovernmentsseekingtodobusinesswiththeEU,suchasCroatia,Macedonia,Jamaica and Morocco.

Maples Group 75 St. Stephen’s GreenDublin 2, D02 PR50Ireland

Tel: +353 1 619 2021Email: [email protected]: www.maples.com


www.maples.com


Aviation Law 2020

Chapter 23160

Israel

Gross, Orad, Schlimoff & Co. (GOS) Omer Shalev

Israel


■ The Israel Airport Authority (IAA):■ holds,managesandoperatesIsrael’sairports;and■ actsasnecessarytomaintainthesecurityoftheairports,

passengersandaircraftwithinairportpremises.


An Israeli air carrier needs to obtain a commercial operating licencefromtheMinistryofTransportation.AnIsraelicarriermustbeanatural person who is a perma-

nentresidentinIsraeloranIsraelicitizenwhohasamajorplaceof business in Israel, or acorporation which was established inIsrael,hasnoothermainbusinessplaceoutsideofIsraelandthecontrolofsuchcorporationiswithinthehandsofanIsraelicitizenorpermanentresidentinIsrael.“Control”shallmeanatleast50%ofthecontrolmeasures,equityorvotingrights.TheMinisterofTransportationmaydetermineconditionsfor

an operating licence, which may include, inter alia:■ Anything related to operation of aircraft and services

requiredforsuchoperation.■ Types of services, which may be offered through the

aircraft.■ Approveddestinationstowhichthecarrier isallowedto

operate.■ Fares,tariffs,transportationcostsandotherrelevantfees.■ Thewaysandmeansbywhichthelicenseewillensurethe

paymentofcompensationfordamages,includingdamagetoathirdparty,causedbytheoperationoftheaircraft.

■ Conditionstomaintainreciprocitywithothercountries.An Israeli carrier or a foreign carrier will not operate any

aircraft for commercial purposes unless they have an oper-ationalpermitgrantedby theGeneralManagerof theCAAI.Theoperationalpermitwillbelimitedtoacertaintimeforeachpermitteddestination(apermitmayincludeconditions).TheCAAImanagermayalsoestablishconditionsfor:

■ Aircraftwhichthecarrierisallowedtooperate.■ Types of services, which may be offered through the

aircraft.■ Numberofpassengersorcargowhichthecarrierisallowed

totake,capacityofseats,frequenciesofoperation.■ AnyotherconditionthattheCAAImanagerdetermines.

A foreign carrier will not be granted any operational permit unlessthecarrierhasappointedalocalrepresentativeinIsrael,whichwill be authorised to actonbehalfof the carrier in allmattersrelatingtotherelevantaviationlaws.

1 General


Theprincipal legislation in Israelwhich regulates aviation is asfollows:■ The Aviation Law – 2011, which is the primary legislation

fortheaviationindustryinIsrael.TheAviationLawisrela-tivelynewandisthereforemodernanduptodate,providingthelegalframeworkforaviationoperationinIsrael.

■ The Air Transport Law – 1980,whichadoptstheMontrealConvention (MC99) into Israeli law. The Air TransportLawprovidesthattheliabilityofacarrier,itsemployeesandagentsforanydamage,includingthedeathofapassenger,shallbedeterminedsolelypursuanttotheprovisionsofthislawandtherewillbenoclaimforcompensationaccordingtoanyothercauseofaction.TheAirTransportLawalsoreferstoalimitationperiod,asstatedintherelevanttreaties(i.e.twoyears).

■ The Aviation Services Law (Compensation and Assistance due to Cancellation of a Flight) – 2012, which statestherightsofpassengerstocompensationandassistanceduetothecancellationofaflightorachangeinitscondi-tions. TheLawisa localversionofEuropeanRegulation261/2004,butitcontainsspecificprovisionsregardingIsrael.

TheLawdeterminestheconditionsforentitlementtobene-fits,typesofbenefits,entitlementincaseofcancellationofflight,delayinflightorearlyflight.

TheLawestablishesaspeciallimitationperiodoffouryears.Theprincipal regulatorybodies in Israel foraviationmatters

are:■ The Ministry of Transportation:

■ regulatestheaviationindustry;and■ has the authority to initiate new laws and enact

regulations.■ The Israel Civil Aviation Authority (CAAI):

■ establishes andmaintains procedures and regulationsfordomesticandinternationalaviation;

■ grants licences and permits in accordance with theAviation Law (including for aircraft, air personnel,airportsandaircraftmanufacturers);

■ supervises aviation operations regarding transportsafetyandefficiency;and

■ implementsinternationalagreementsandtreaties.

161Gross, Orad, Schlimoff & Co. (GOS)



TheairportsinIsraelarestate-owned.TheIAAisthegovern-mentalcompanywhichisinchargeoftheoperationofairports.


Yes–therearerequirementsinrespectofthehoursofopera-tionoftheairports,e.g.theclosureofBenGurionInternationalAirporttotake-offsforseveralhoursduringthenight(“nightcurfew”).


The relevant legislation which applies to air accidents is as follows:■ AviationLaw–2011.■ Air Transportation Law – 1980 (Montreal Convention

–1999).■ Aviation Regulations (Aircraft Accident and Incident

Investigation)–1984.■ ChicagoConvention–1944.■ CivilAviationAuthorityLaw–2005.■ AviationRegulations(TypesofSevereIncidents)–2014.AccordingtotheAviationLaw,theMinisterofTransportation

will appoint the Chief Investigator within the Ministry ofTransportationtoinvestigate.TheChiefInvestigatorisresponsiblefor:

■ Collection, documentation and analysis of all relevantinformationregardingsafetyincidentsoraccidents.

■ Determinationofthereasonsforanincidentoraccident.■ Preparation of the final accident report with

recommendations.■ Follow-up on the fulfilment of recommendations and

drawingconclusions.TheAviationLaw,theAviationRegulations(AircraftAccident

andIncidentInvestigation)andtheAviationRegulations(TypesofSevereIncidents)setoutthefollowingmainsubjects:■ Proceduresincaseofanaccident.■ The Chief Investigator’s authority, which includes his

righttovisitanyrelevantplaceandactinanymannertopreservethesiteoftheaccidentforthecompletionoftheinvestigation.

■ The possibility of the CAAI manager to suspend thelicenceofapersoninvolvedinanaccidentuntiltheinves-tigationisfinalised,forreasonsofflightsafety.

■ Typesof incidentwhichwill be considered “severe inci-dents”forthepurposeofthelaw.


TheAviationLaw,whichwasenactedin2011aftermanyyearsofdraftinganddiscussions,setsoutanewandmodernregula-toryregimeforaviationservicesinIsrael.TheOpen Skies Agreement signed between Israel and the

EuropeanUnioninfluencedIsrael’saviationsectorbystrength-ening competition and prompting many new airlines to begin operatinginIsrael.


TheprincipallegislationinIsraelwhichgovernsairsafetyistheAviationLaw–2011.IsraelhasadoptedtheChicagoConventiontoensurethatair

navigationequipmentandoperationscomplywiththestandardsoftheInternationalCivilAviationOrganization(ICAO).TheCAAIsupervisesaviationoperationsregardingsafety.The air carrier must prove its maintenance and technical

abilityandprovideanoperationalandtechnicalmanualfortheapprovaloftheCAAI.Thecarriermustalsohaveanapprovedsafetymanagementsystem.TheCAAI issuesand renewsairworthinesscertificatesand

airoperatorcertificates,approvesthemaintenanceprogrammesandcarriesoutinspectionsofaircraftoperatedwithinIsrael.The air carrier must prove its professional and technical

ability, appoint relevant officers (including the safety officer),provideanoperationalandtechnicalmanualfortheapprovaloftheCAAIandprovideasafetymanagementsystem.Specific regulations apply to maintenance facilities, which

alsorequirerelevantlicences.Recently, an amendment to the Aviation Regulations

(Operating Aircraft and FlightGuidelines) – 2016 came intoeffect, regarding flight and duty time limitations and a restschemeforcrewmembers,inordertoensurethatpilotfatiguedoesnotendangerflightsafety.Thisamendmentisinaccord-ancewiththeUSFlightTimeLimitations(FTL)regulationsanditappliesonlytocommercialoperationoflargeaircraft.


No. TheCAAI regulates all aspectsof the aviation industry.Thoughthesameregulatoris inchargeforcommercial,cargoandprivatecarriers, therearedifferent regulationsandstand-ardswhichhavetobeadheredto.


No.TheCAAIregulatesallaviationactivity.


Inprinciple,therearenoparticularlimitationsforinternationalaircarriersoperatinginIsraelincomparisontolocalcarriers.AsIsraelhasadoptedmanyinternationalaviationagreements,

including theEU-IsraelOpenSkiesAgreement, theUS-IsraelOpenSkiesAgreementandvariousbilateralagreements,mostoftheaboveagreementsarebasedontheprincipleofreciprocity.An example of a requirement from a foreign carrier is the

AviationServicesLicensingLaw–1963,whichstates that forthepurposeofobtaininganoperatingpermit,theforeignoper-atormustappointarepresentativeinIsraelwhoisauthorisedtoacton itsbehalf inproceedingsunder this lawandunder theAviationLaw.TheCAAIpublishesonitswebsitethedetailsofrepresentativesofforeignoperators.

162 Israel


owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks?

According to Israeli law, there is no concept of title annexa-tion whereby ownership or security interests in a single engine areatriskofautomatictransferorotherprejudicewheninstalled“on-wing”onanaircraftownedbyanotherparty.The enginesmaybe registered alongwith the aircraft at the

Registry,butnotindependently.Any mortgage on the engines may be registered within the rele-

vantgeneralregistry,i.e.CompaniesRegistrarorPledgeRegistrar.Thepracticalsolutionforsuchriskmaybethroughcontractual

liabilityoftherelevantparties,i.e.itisoftenagreedbyallrelevantlessorsandfinancierstorecognisetheirsoleownershipoftheirownengineandtherebymutuallywaivetheirrightstoclaimanytitleforotherenginesinstalledonanotheraircraft,suchaspoolagreement.


ThereisnotaxliabilityinIsraelforaircraftsaletoamerchantwhosepractice is scheduledaviation service forpassengersorcargo,orfortheimportofaircraftbysuchmerchant.The above-zero value-added tax also applies to service

providedinconnectionwiththeentryorexitofaircraftto/fromIsraelorforthetransportationofgoods.Itshouldbementionedthatotherfeesmayapply,mostlyfor

the use of airport facilities, and in addition, air operators areentitledtoestablishcertainsurchargesonticketfares.Nostampdutyisapplicable.


Israel has signed the main international Conventions – theMontreal Convention and the Geneva Convention. TheMontrealConventionwasratifiedinIsraelinMarch2011.IsraelhasnotsignedtheCapeTownConvention.


Ingeneral,thelocallawshouldratifytheConventionsandapplythemtolocallegislation.Forexample,theAirTransportLawadoptedtheMontrealConvention(andbeforethat,theWarsawConvention)intothelocallegislation.


Thereareno taxationbenefitswhichenhanceaircraft tradingandleasing.

Recently, an amendment to the Aviation Regulations(Operating Aircraft and FlightGuidelines) – 2016 came intoeffect, regarding flight and duty time limitations and a restschemeforcrewmembers,inordertoensurethatpilotfatiguedoesnotendangerflightsafety.Thisamendmentisinaccord-ancewiththeUSFlightTimeLimitations(FTL)regulationsanditappliesonlyoncommercialoperationoflargeaircraft.



The Register of Aircraft, maintained by the CAAI, is not aregisteroflegalownership,andthereforeregistrationofowner-shipintheregisterdoesnotconstituteproofofownershipofaparticularaircraft.The Registermay provide non-binding evidence of owner-

ship,astheconditionsestablishedbytheCAAIfortheregistryofaircraftincluderelevantdocumentation.InordertoregistertheaircraftintheIsraeliaircraftregister,

an application should be filed alongwith the bill of sale andpurchaseagreement,andfeesshouldbepaid.Furtherinformationinrespectoftherequirementsforregis-

trationofaircraftintheIsraeliRegisterofAircraftisavailableatwww.caa.gov.il.


The procedure for registration of aircraftmortgages, encum-brancesandother interests is inaccordancewith theAviationRegulations(AircraftRegistrationandMarking)–1973.Anymortgagesontheaircraftshallberegisteredunder the

AircraftRegisterofIsrael,administeredbytheCAAI.However,assuchregistryisdeclarative,themortgagesorpledgesareregis-tered within the relevant general registry, i.e. the CompaniesRegistrarorPledgeRegistrar.Deeds and actions pertaining to any imposed restraints or

encumbrances on the ownership title of the aircraft shall bereportedtotheCAAI.Theregisterisopentothepublicandinformationonmort-

gages and charges shall be provided to any interested personuponrequest.Anychangeoramendmenttotheregistrationoftheaircraft

shallbemadeonlywiththeconsentofthepersonforwhomthemortgagewasregisteredandrelevantdocumentationfromthegeneralregistry.


TherearenospecificregulatoryrequirementswhichalessororafinancierneedstobeawareofasregardsaircraftoperationinIsrael.

2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an aircraft



punishmentofuptosevenyears’imprisonment.Incivilmatters,thesecourtshavejurisdictioninmattersuptoNIS2.5million.Thesecourtsalsohavejurisdictionovertheuseandpossessionof realproperty. MagistratesCourts also act as traffic courts,municipalcourts,familycourtsandsmallclaimscourts.

Generally, a single Judge presides in each case unless the PresidentoftheMagistratesCourtdirectsthatthecasewillbeheardbyapanelofthreejudges.Thereare28MagistratesCourtsinIsrael.ThejurisdictionofaMagistratesCourtextendstothelocalityinwhichitsitsandthedistrictwhereitissituated.District CourtsDistrict Courts are themiddle-level courts of the Israeli judi-ciarysystem.TheDistrictCourtshavejurisdictioninanymatterthatisnotwithinthesolejurisdictionofanothercourt.Incrim-inalmatters,DistrictCourtshavejurisdictionforcaseswherethepotentialpunishment ismore than sevenyears’ imprisonment.Incivilcases,DistrictCourtshavejurisdictioninmatterswheretheamountofclaimexceedsNIS2.5million. DistrictCourtsalsohaveuniquejurisdictionoverseveralissues–theeconomicdivisionoftheDistrictCourtinTelAviv,whichwasestablishedin2010,isagoodexampleofspecialjurisdictionforfinancialandcapitalmarketmatters.TheDistrictCourtsalsohandleappealsagainstjudgmentsoftheMagistratesCourts.Generally,asingleJudgepresidesintrials;however,apanelof

threeJudgesisestablishedwhenthecourthearsanappealofaMagistratesCourt’sjudgment,whentheaccusedischargedwithanoffencepunishablebyimprisonmentof10yearsormore,orwhen thePresident orDeputy President of theDistrictCourtsodirects.TherearesixDistrictCourtsinIsrael:inJerusalem;TelAviv;Haifa;Lod(CentralDistrict);Beersheba;andNazareth.The Supreme CourtTheSupremeCourthas jurisdiction tohear criminal andcivilappealsfromjudgmentsoftheDistrictCourts.CasesthatbeginintheDistrictCourtareappealable,asofright,totheSupremeCourt. OthermattersmaybeappealedonlywiththeSupremeCourt’spermission.The Supreme Court is also the High Court of Justice

(BAGATZ) for specialmotions against theStateof Israel andgovernmentbodies.TheSupremeCourtalsohasspecialjuris-diction for various other matters such as the elections to theParliament(Knesset),civilrightsmattersandothers.TheSupremeCourtservesasanappellatecourtforrulingsof

theDistrictCourt.TheSupremeCourtisbasedinJerusalem.


Pursuant to the Regulations of Civil Procedures, service ofdocuments within the jurisdiction of Israel may be processedbyvariousmethods includingpersonalservice,postaldelivery,servicetothedefendant’slawyer(ifknown),byfacsimileorotherelectroniccommunication.AccordingtotheaboveRegulations,theaddressforservice

shallbetheplaceofresidenceorplaceofbusinessofapersonwhowasnominatedtoacceptserviceofcourtproceedings.Serviceofdocumentstoadefendantwhichisanentityshall

bedonetothecompany’sformalofficeaddress.Thecourtmayapproveserviceofcourtproceedingsoutside

thejurisdictionofIsraelinseveralcases,andforthesematters,theclaimantmustfilearequestforcourt.Theserequirementsdonotdifferfordomesticairlines/parties

andnon-domesticairlines/parties.



Israelilawacknowledgesdetentionasalegalrightofpossessioningoodsuntilpaymentofdebt.Therightofdetentionwillbeprovidedonlyinspecificmatterswhicharestatedinthelaworagreeduponbytheparties.Intheory,detentionisaself-remedywithouttherequirement

to approach legal instances, and carries with it the exemption from tort liability fordamages incurredby theoperationof adetention.Israeli lawdoesnot statewhen such right is applicable, but

requires a few conditions for its exercise. Such conditionsinclude, inter alia:thatthedebtshouldbefromaspecifictrans-action,onwhichdatepaymentarrived;andthattheexerciseofdetention should be made bona fide.Although a creditormay seize the aircraft according to the

saidlegalright,thepracticalexerciseofsuchrightmaybediffi-cultduetoseveralreasons(suchasthefactthattheaircraft islocatedinaplacethattheownerofthedetentionrightcannotindependently reach). In such case, the creditorwill have toapplytocourt.


A regimeof self-helpmaybe available to a lessor or a finan-cier of an aircraft in case it needs to reacquire possession oftheaircraftorenforceitsrightsundertheleaseagreement.Inpractice, the lessoror financierwill ask for aDe-RegistrationPowerofAttorneywhichwillprovidethemwiththeoptionforself-remedy.Inthecasethattheself-remedymaynotbeexercisedandan

applicationtocourthastobemade,itisarelativelyfastproce-dure,asadeclarativeinjunctionwillusuallysufficeforthelessororfinancier,andthisdoesnotrequirealongprocedure.


Israelisaunitarystatewithasinglesystemofgenerallawcourts.Ingeneral,theJudiciarysysteminIsraelestablishesthreelevelsof courts: the Magistrates Court (first instance); the DistrictCourt(secondinstance);andtheSupremeCourt(thirdinstance).Allofthesecourtsareappropriateforaviationdisputesand

thereforethematterwillbehandledattherelevantcourt,basedonthedistinctionsspecifiedhereunder.TheMagistratesCourtisatrialcourt;theDistrictCourtserves

as a trial court aswell as an appellate court; and theSupremeCourtisessentiallyanappellatecourt,whichalsooperatesastheHighCourtofJustice.There are no juries in Israel and the courts are served by

professionalJudges.Magistrates CourtsTheMagistratesCourtisthebasictrialcourtoftheIsraelisystem.These courts have jurisdiction in criminal matters where theaccusedischargedwithanoffencethatcarrieswithitapotential

164 Israel


For joint ventures, each case will be decided in accordancewiththeIsraelicompetitionrules,whichwilltakeintoaccount,inter alia,themarketshareandtheturnoveroftheparties.Thespecificlegislationforjointventuresbetweenaircarriers

in Israel is the Antitrust Rules for Agreements between AirCarriers–2008,which setout the typesof arrangements thatare exempted from the prior approval of the CompetitionCommissionerandthereforeshallnotberegardedasrestrictivearrangements.In respect of code-sharing agreements and air carrier joint

ventures, until recently only specific code-sharing agreementsdid not require the Commissioner’s prior approval and couldbe approved after self-assessment of the parties and notifica-tion to the Commissioner, as specified in the Antitrust Rulesfor Arrangements Regarding Marketing Flights between AirCarriers inDestinationsGovernedbyOpenSkiesAgreements–2012.OnNovember2018,theCompetitionCommissioneramended

the Antitrust Rules for Agreements between Air Carriers.The amendment enabled, in addition to technical and oper-ational agreements which were already exempted from theCommissioner’spriorapproval, thesame legal regimeof“self- assessment” to be applied to Frequent Flyer Program agree-ments, Interline agreements andCodeShare agreements (withseveral exclusions), as long as the essence of such agreementswouldnotdecreasecompetition.OnJanuary2019,theIsraeliParliamentapprovedanamend-

menttotheRestrictiveTradePracticesLaw,whichwasrenamedwithin the framework of the Amendment to the “EconomicCompetitionLaw”.Likewise,thenameoftheIsraeliAntitrustAuthority was changed to the “Competition Authority” andtheAntitrustCommissionerwaschanged to the“CompetitionCommissioner”.Thereformintroducesbroadandsignificantchangesregarding

restrictivearrangements,monopolyandmergercontrol.AspartofthesaidamendmenttotheLaw,theCompetition

Authority’s powers were increased, and it now may impose amonetarypaymentofuptoNIS100million(approximatelyUSD28million).


TheCompetitionAuthoritywilldefinetherelevantmarketforthepurposesofmergersandacquisitionsbasedonthespecificmatter.TheCompetitionAuthoritywilllookspecificallyattheavia-

tionsectorandevenmorenarrowlyatthespecifictypeofavia-tion sector in which the transaction occurred (passenger or cargotransportation).Inrecentaviationcases(mostlyforcode-sharingagreements),

the Competition Authority has defined the relevant marketregardingtheaviationsectorsasOriginandDestination(O&D)CityPairs.Thisevaluationconsidersademand-sideperspective,whereby

customersconsiderallpossiblealternativesoftravellingfromacityoforigin to a cityofdestination, forbusiness and leisurepassengers(time-sensitiveandprice-sensitive).Theabovealsoconsidersdirect(non-stop)flightsandone-stopflights(subjecttoacertainperiodofconnectiontime).The relevant tribunal for competitionmatters is the special

AntitrustCourtwhichispartoftheDistrictCourtinJerusalem.Hearingsareheldinfrontofatribunalofthreepersons:aJudge


There are various remedies, which depend on the nature ofthe dispute. In general terms, there are both (for historicalreasons) legal and ‘equitable’ remedies, and the followingmaybeavailable:■ On an interimbasis, the remediesmaybe an injunction

ordertopreventtheotherpartyfromanactionuntilfinaljudgmentisgivenandalsodamagesmaybeapplied.

■ Onafinalbasis,theremediesmaybedamages,aninjunc-tionpreventingacertainactionorstating that theotherpartyshouldundertakeacertainaction. Thefinal judg-ment may also include orders (based on the original requests)forsale,registerorpossessionofanasset.


Thereare rights toappeal to thecourts from thedecisionof a“lower” court. Therefore, the SupremeCourt is essentially anappellate court for the District Courts for criminal and civilappealsfromjudgmentsoftheDistrictCourts.The Supreme Court has special jurisdiction to hear appeals

in matters of Knesset elections, rulings of the Civil ServiceCommission,anddisciplinaryrulingsoftheIsraelBarAssociation.DistrictCourtshearappealsof judgmentsof theMagistrates

Courts.IfanappealwasheardbytheDistrictCourt(onaMagistrates

Courtjudgment),thereisanoptiontofilearequestforanotherappealtotheSupremeCourt,whichwillbeheardonlyaftertheSupremeCourt’s special approval (suchmethod isalso relevantfor appeals for small claims courts whichmay be filed to theDistrictCourts).Inrespectofarbitration,ingeneral,thereshouldbenoappeal

against an arbitrator’s ruling. However, the Arbitration Lawnotes that thereareseveralcauses forannulmentofanarbitra-tor’sruling,andalsoenablesanappealbeforeanarbitratorifsuchconditionwasagreedwithinthearbitrationagreement.



Joint ventures between airline competitors are subject to theCompetitionLaw.TheCompetitionAuthority(formerlyknownastheAntitrust

Authority)istheauthorityresponsibleforpromotingcompetitioninIsraelandforpreservingexistingcompetitionintheeconomy.TheCompetitionAuthorityisauthorisedtoenforcedifferent

rules, which it does in accordance with the policies that it has formulatedovertheyearsandwiththeguidelinesthatitpublishes.TheCompetitionAuthorityusescriminal enforcement tools

toinvestigateandprosecutecartelcrimesandtendercoordina-tion.TheCompetitionAuthoritywasalsograntedtheauthorityto impose monetary sanctions, which it uses in accordance with itsmanifestothatemphasiseshowviolationofthelawinterfereswithcompetition. Inaddition to these tools, theCompetitionAuthoritymayissuedeclarativeorders,includingtothemonopolyowner,aswellastodefinetermsformergersandexemptions.



thatsectorwouldbesignificantlyharmedorthepublicwouldbeharmedinoneofthefollowingregards:(1) Thepricelevelofanassetoraservice.(2) Thelowqualityofanassetorofaservice.(3) Thequantityoftheassetorthescopeoftheservicesupplied,

ortheconstancyandconditionsofsuchsupply.The Commissioner shall publish a notice of his decision

toconsent toamergerofcompanies, toobject to itor tostip-ulateconditions for it, in theOfficialGazetteand in twodailynewspapers.ShouldtheCommissionerobjecttoamergerofcompaniesor

stipulateconditionsforit,eachofthecompaniesseekingtomergemayappealtotheTribunal(AntitrustCourt,whichispartoftheDistrictCourtinJerusalem)within30daysofthedateonwhichtheCommissioner’sdecisionisreceived.Should the Commissioner consent to a merger of compa-

nies, whether conditionally or unconditionally, any person who is liable to be harmed by the merger, any trade association and anyconsumers’ association,mayappeal to theTribunal againsttheCommissioner’sdecision,within30daysofthedateonwhichnoticeoftheCommissioner’sdecisionwaspublishedintwodailynewspapers.TheTribunalmayaffirmtheCommissioner’sdecision,revoke

itoramendit.


In Israel, there are no sector-specific rules which govern theaviationsectorinrelationtofinancialsupportforairoperatorsandairports.The only matter which may be considered state aid is the

IsraeliGovernment’sdecisiontoparticipateinaspecificportionofthesecurityexpensesoftheIsraelicarriers,whichwasnoti-fiedinaccordancewiththesigningoftheIsrael-EUOpenSkiesAgreement.


Ingeneral, therearenostatesubsidiesavailable forparticularroutes.However, the IsraeliMinistryofTourism issued adirective

detailingthecriteriaforsomeparticipationinthecostsofoper-atingdirectflightstothenew“Ramon”airportnearthecityofEilat(insouthIsrael),asitwishestoencouragedirectinterna-tionalflightstoEilat inordertoincreasethenumberoftour-istsvisitingthecity.Thedirectiveisforalimitedtimeperiodandsubjecttothe

approvaloftheMinistryofTourism.


TheProtectionofPrivacyLawincludesrulesforthesafetyofpersonal data,which are also relevant in respect of passengerdata.

(of theDistrictCourt); and two representatives of thepublic.Appeals against the judgments of this court aremade to theSupremeCourt.


According to the Israeli Competition Law, agreementswhichmay include restrictive arrangements are required to beapproved, in advance, by the Israel Competition Authority.Thereare severalexceptions,whichareusuallygovernedbyaspecificexemptionor“typeexemption”,wherenopre-approvalis required (there might be reporting and notification dutiesaftersigningtheagreement).


Allmergersandacquisitionsoflegalentities,includingairlines,that fallwithin theconditionsof theIsraeliCompetitionLawand satisfy certain financial thresholds, require mandatorypre-approvalbysubmittinga“NotificationofaMerger”totheIsraelCompetitionAuthority.The financial thresholdsmay include the joint share of the

parties after the merger, a minimum amount of the annualturnoverof thecompanies, andwhetheroneof theentities isamonopoly.AccordingtotherecentamendmenttotheCompetitionLaw,

afirmwhichholdsamarketshareofunder50%maybedeemedamonopolyifsuchfirmholdssignificantmarketpower.Thisamendmentwill requiremany firmswitha significantmarketstanding to review their business position in order to ensurewhethersuchfirmswouldbeconsideredasmonopolies(unlikethepreviouslegalstatuswhereonlyafirmholdingmorethan50%marketsharewasconsideredamonopoly).


AccordingtotheIsraeliCompetitionLaw,companiesmaynotmergeunlessapre-mergernotificationhasfirstbeenfiledandtheconsentoftheCompetitionCommissionertothemergerhasbeenobtained,and–ifsuchconsentisconditional–inaccord-ancewiththeconditionsstipulated.Eachofthecompanies intendingtomergeshallgivenotice

thereof, providing all details as shall be determined by theRegulations. The Commissioner may request further infor-mation if he deems it necessary for the examination of theapplication.Within30daysofthedateonwhichtheCommissionerreceives

apre-mergernotification fromallof the companies seeking tomerge, the Commissioner shall notify the companies as towhetherheconsentsorobjectstothemerger,orstipulatecondi-tionsforit,asshallbeprovidedinsuchnotification;failuretogivesuchnotificationwithinthe30daysprovidedshallbedeemedtoconstituteanoticeofconsent,unlesstheperiodisextended.Submitting a pre-merger notification to the Commissioner

isconditioneduponthepaymentofafee,asdeterminedintheRegulations.TheCommissioner shallobject to amergerof companiesor

stipulateconditionsforitif,inhisopinion,thereisareasonableriskthat,asaresultofthemergerasproposed,thecompetitionin

166 Israel


According to the Regulations, any database controller isresponsiblefordocumentingeverycaseinwhichaneventwasdiscovered which raised concern regarding a breach of dataintegrity, unauthorised use thereof or deviation from authori-sation. In somecases,dependingon the severityof thecase,the database controller is obligated to immediately notify theRegistrarandreportonthemeasureshetookfollowingtheinci-dent. The Privacy Protection Authority is the Israeli regula-tory and enforcing authority for personal digital information,in accordancewith the Privacy Protection Law. The PrivacyProtection Authority is responsible for the protection of allpersonalinformationheldindigitaldatabases.Thelegislationincludesadministrativeandcriminalenforce-

ment,andappliestoallentitiesinIsrael–private,businessandpublic–thatholdorprocesspersonaldigitalinformation.


InIsrael,intellectualpropertyrightsareprotectedunderseverallawswhichapplytopatents,trademarksandotherIPrights.TheIsraelPatentOffice(ILPO)istheauthorityinIsraelwhich

provides legal protection of industrial intellectual property,through the registration of Patents, Designs and Trademarks.TheofficeispartoftheMinistryofJustice.The granting of a right is subject to the examination of an

application,whichensuresthattheexclusivityoftheprotectionwillnotharmthelegalrightsofthegeneralpublic.TheILPOprovidesfreebilingualdatabases,bothinHebrew

andinEnglish,regardingpatents,trademarksanddesigns:■ The Patents Department handles the examination

of national and international patent applications, usingE-filing capabilities. The ILPO receives internationalpatent applications according to the Patent CooperationTreaty(PCT).

■ The Trademarks Department handles national and international trademark registration applications under itscapacityasaReceivingOfficeandanOfficeofOriginin accordance with the Madrid Protocol, using E-filingcapabilities.

■ The Designs Department handles the registration of national design applications following a formal andsubstantiveexamination.

The courts which deal with these matters are the ordinarycourts in Israel; there areno special courts established todealwiththeseissues.


TheAviationServicesLaw–2012isthe legislationgoverningthedenialofboardingrights.Thelawoffersassistance,reim-bursementandcompensationforflightdelaysandcancellations,aswellasdenialofboardingforflightstoandfromIsrael.TheLawisbasedonEURegulation261/2004,withadapta-

tionsmadespecificallyforIsrael.Thelawprovidespassengerswithremediesfordelaysofmore

thantwohours,flightcancellationsanddeniedboarding.Incaseofoverbookingoranyothercaseofdenialofboarding,

passengersareentitledtothefollowingbenefits:■ Assistanceserviceswithoutpayment,whichincludemeals

and refreshments in reasonable relation to the waitingtime;hotelaccommodationifanovernightstay(orlonger)

ThePrivacyProtectionAuthorityistheIsraeliregulatoryandenforcing authority for personal digital information, in accord-ancewith thePrivacyProtectionLaw. ThePrivacyProtectionAuthorityisresponsiblefortheprotectionofallpersonalinfor-mationheldindigitaldatabases.AccordingtothePrivacyProtectionLawandtheProtectionof

PrivacyRegulations(DataSecurity)5777-2017,thedutiesofthedata holder are:■ Prohibition from using data other than for the purpose

forwhich the information is intended. TheLaw furtherprohibits the use of information about a person’s privateaffairsforpurposesotherthanthepurposeforwhichtheinformationwasprovided.

■ Dutyofinformationsafety–thedatabaseowner,databaseholder and database administrator are obligated to ensure thesecurityofthedatacontainedinthedatabase.

■ Dutyofsecrecy–theownerofthedatabaseandwhoeverholdsitmustpreservetheconfidentialityoftheinformationtowhichtheyareexposedwhileperformingtheirwork.

■ Obligation to give notice – notice must be given to thesubjectoftheinformation(thepersontowhomtheinfor-mation pertains). Such notice will include whether theinformationownerhasalegaldutytoprovidetheinforma-tion, thepurpose forwhich the information is requested,towhom the informationwill be provided, and forwhatpurposes.

■ Obligation to document every case in which an eventwasdiscovered, raisingconcernregardingabreachof thedata integrity,unauthoriseduse thereofordeviation fromauthorisation.

■ Restrictordenytheoptiontoconnectportabledevicestothe database systems in a manner which is compatible with the information security level applicable to the database,datasensitivity,andthespecialriskstothedatabasesystemsortothedata,stemmingfromconnectingportabledevicesand with the existence of appropriate safeguards againstsuchrisks.

■ In some cases, there is a duty to appoint a data securityofficerwhoisresponsibleforvarioussecuritymatters,suchas preparing a plan for regular monitoring in regard tocompliancewiththeregulations.

TheLawfurtherrequiresadatabaseownertoregisterthedata-basebeforeitisused.Theregistrationrequirementsapplytodata-basesmeetingoneofthefollowingcriteria:■ Thenumberofsubjectsof informationwhich is found in

thedatabaseexceeds10,000.■ Thedatabasecontainssensitiveinformation.■ Thedatabaseincludesinformationthatwasnotprovidedby

thesubjectsoftheinformation.■ Thedatabaseisownedbyapublicbody.■ Thedatabaseisusedfordirectmailservices.InMay2018,theGeneralDataProtectionRegulation(GDPR)

cameintoeffectandappliedenhancedobligationsastothereten-tionanduseofdataofpassengersintheEU.Asaresult,airlinesandairportshavetoadheretotheGDPRwithregardtodataofpassengersintheEU.


Generally,aircarriers inIsrael,similar tootherentitieswhichcollectdata,arerequiredbylawtoprotectthedata.TherelevantlawsarethePrivacyProtectionLaw–1981andtheProtectionofPrivacyRegulations(DataSecurity)5777-2017.




AllthemajorGDSsoperateinIsrael.


No, there are no ownership requirements specific to GDSsoperatinginIsrael.The regular rules and requirements relating to non-Israeli

companieswhichoperateinIsraelshallapplytoGDSs,e.g.therequirementtohavearegisteredaddress(officeorlocalrepre-sentative)inIsrael.Nospecificrequirementforapercentageoflocalshareholdersisrequiredforsuchoperation.


AsairportsinIsraelareownedbytheStateofIsrael,theabovequestion of vertical integration between air operators andairportsisnotrelevant.Legally,thereisnoprohibitiononverticalintegrationbetween

air operators and airports; however, the relevant competitionrulesshallapply,includingprohibitionontheabuseofadomi-nant position and the monopoly rules (if such party may beconsideredamonopoly).


Under the Aviation Law – 2011, themanager of CAAI shallgrant an applicant anAirOperator’sCertificate only to: (a) anatural personwhoisapermanentresidentinIsraelanddoesnothaveamajorplaceofbusinessoutsideofIsraeloranIsraelicitizen who has a major place of business in Israel; or (b) acorporationwhichwasestablishedinIsrael,hasnoothermainplaceofbusinessoutsideofIsraelandthecontrolofsuchcorpo-rationiswithinthehandsofanIsraelicitizenorpermanentresi-dentinIsrael.“Control”shallmeanatleast50%ofthecontrolmeasures,equityorvotingrights.

5 In Future


Inthenearfuture,thereisexpectedtobeafocusonamendmentstocurrentregulations,followinglessonslearnedbytheindustry.We expect an amendment to the Aviation Services Law

(CompensationandAssistanceduetoCancellationofaFlight)toenterintoforce,asthereisapendingproposalforchangestotheabovelawinfrontoftheParliament.Inaddition, thedevelopments indataprotection forgeneral

matters may affect the specific issues relating to passengers’personaldata.

is required; transportation between the airport and thehotel;andtwotelephonecallsandthesendingofafaxoremail,attheelectionofthepassenger.

■ Reimbursement of the cost of the flight ticket if thepassenger decides not to travel, or a replacement flighttickettothefinaldestination.

■ CompensationasdetailedinthescheduletotheLaw.The Law further authorises the court to award exemplary

damages in an amount that shall not exceed NIS 10,390 inseveral cases, includingwhere the operator has not given therequiredbenefitstoapassenger.


TheAviation Services Law states the rules for compensationandassistancetobegiventopassengers incaseof latearrivalor departure of flights. Under the said Law, theMinister ofTransportationisresponsiblefortheexecutionoftheLaw.Inaddition,theAviationServicesLicensingLawenablesthe

CAAInottograntanoperatinglicenceunlesstheapplicanthasundertaken to appoint a representative to assist passengers torealisetheirrightsundertheAviationServicesLawonanyflightwhichisoperatedbytheapplicant.


Yes.TheIsraelAirportAuthorityLaw–1977isaspecificlawwhichappliestotheoperationofairportsinIsrael.Accordingto this Law, the obligations imposed on the airport authorities areasfollows:■ tohold,manageandoperateIsrael’sairports;and■ toactasnecessarytomaintainthesecurityoftheairports,

passengers, equipment, buildings and aircraft withinairportpremises.

TheLawfurtherclarifiesthatwhilefulfilling itsduties, theIAAwillbegovernedby theprinciplesofdevelopmentofairtransportation, efficiencyofoperationof the airports, aswellasprovidingandmaintainingtheproperlevelofflightsafety.It shouldbenoted that the IAAhas the authority to cease

the operation of an airport for a period to be determined inadvanceoruntiltheconditionsanddatestobedeterminedbytheIAAarefulfilled,allofwhichissubjecttotheapprovaloftheMinisterofTransportation.


TheConsumerProtectionLaw–1981alsoappliestoaviation-re-latedmatters.TheConsumerProtectionLawsetsoutthedutiesof a merchant, mainly in respect of prohibition of deception,prohibition of acting using unfair influence, disclosure duties,andmore.The Consumer Protection Law states the duties in case

of cancellation of a transaction (distinguishing between thedifferenttypesoftransactions).The Consumer Protection Law provides the Consumer

ProtectionandFairTradeAuthoritywithpowersofenforcementin relation to consumer legislation, which include, inter alia,finan-cialsanctionsandcriminalsanctionsinvariousmatters.

168 Israel


CompetitionLawbyacompanyoritsemployees.Breachofsuchdutymayleadtoacriminaloffence.ThisamendmentextendsthepotentialliabilityofofficerswhowerenotpersonallyinvolvedinaviolationoftheLaw,andtheymaybefoundliableiftheyhavenottakenallmeasurestopreventsuchviolations.Thescopeofpotentialproceedingsagainstofficersisworthyofattentioninthenextfewyears.

As shown in recent years, consumer rights legislation will continuetobeapartofmanyproposalsfornewlawsandregula-tions,includingtheconsumerprogrammes,dutiesofcallcentresforpromptreply,andpossiblechangestoconsumerrightsincaseofcancellationofatransaction.The recent changes in competition lawaddedan activeduty

oncorporateofficerstosuperviseandpreventviolationsofthe

169

Aviation Law 2020

Gross, Orad, Schlimoff & Co. (GOS)

Omer Shalev is the Managing Partner of Gross, Orad, Schlimoff & Co. (GOS).Mr. Shalev joined GOS as a Senior Partner in 2016 after a 10-year term as V.P., General Counsel & Corporate Secretary of EL AL Israel Airlines, and five years in a similar position with Arkia Israeli Airlines.Having practised law for 25 years and served for 18 years in the aviation industry, Mr. Shalev is highly specialised in aviation law.With his deep in-house experience of Israel’s largest airlines, and a broad perspective on how airlines work from the inside, Mr. Shalev brings a unique insight and legal perspective on the challenging airline sector in Israel.Mr. Shalev also specialises in directors’ and officers’ liability (D&O) insurance claims and various corporate and commercial matters.Mr. Shalev served as a member of the Legal Committee of the International Air Transport Association (IATA) for several years, and also served as Vice Chairman of the Legal Committee, and thus has in-depth experience in international aviation and the ability to understand key issues for the industry.

Gross, Orad, Schlimoff & Co. (GOS) is a boutique law firm specialising in insurance/reinsurance, aviation and commercial law.GOS has a solid reputation in representing foreign companies doing busi-ness in Israel, as well as local companies operating internationally.Apart from GOS’s best-known practice for insurance and reinsurance matters (mostly Directors & Officers, Financial Institutions, Professional Indemnity & Cyber Insurance), for which GOS was rated by The Legal 500 as a ‘Top Tier Insurance Firm in Israel’, GOS has expertise and reputation in aviation law and also represents international pharmaceutical companies in Israel.GOS provides legal services to airlines and companies in matters relating to aviation and tourism law, which include, inter alia, legal consulting on various aviation law, aviation security and aviation regulatory issues.GOS also specialises in aviation litigation, and represents airlines and insurers of air carriers in claims (litigation) filed in the relevant courts in Israel.

www.goslaw.co.il

Gross, Orad, Schlimoff & Co. (GOS)7 Menachem Begin Rd.Ramat Gan 5268102Israel

Tel: +972 3 612 2233Email: [email protected]: www.goslaw.co.il


Aviation Law 2020

Chapter 24170

Italy

Studio Pierallini Francesco Grassetti

Laura Pierallini

Italy


Other bodies are Assoclearance and the Ente Nazionale per l’As-sistenza al Volo (ENAV), which are entities with delegated authority in the fields of slot allocation and air traffic control, respectively.


Operating licences are granted by ENAC (namely, by its dedi-cated Department, called Direzione Licenze) pursuant to relevant provisions under the Italian Navigation Code, EC Regulation no. 1008/2008 and ENAC Circular EAL-016.

In order to obtain an operating licence, air carriers must file an application with ENAC. Such application must include:■ acertificateofregistrationwiththeRegistryofCompanies;■ astatementpursuanttoarticle46ofPresidentialDecreeno.

445/2000,underwhichthecompanydeclaresitselfnottobe subject to liquidation or any insolvency or bankruptcy procedure;

■ acertifiedcopyofthearticlesofassociation;■ acertifiedcopyoftheby-laws;■ anextractoftheregisteroftheshareholders;and■ acertificateofcitizenship,residenceandcriminalrecords

of the legal representative and any members of the board of directors.

The applicant air carrier must also submit a business plan relating to the initial three years of the prospective activity.

Pursuant to article 778 of the Italian Navigation Code, oper-ating licences are granted by ENAC to companies:■ established in Italy andwhose effective control isowned

directly, or through majority ownership by Member States orcitizensofMemberStates;

■ having, as their main objective, air transport alone orcombined with any other commercial activity involving the operationofaircraftorrepairandmaintenanceofaircraft;

■ owningavalidcertificateofairworthinessissuedbyENACand holding one or more aircraft in property or leased (dry lease), as provided by article 2.2 of Circular EAL-16 issued byENACon27February2008;and

■ providingsatisfactoryevidenceofadministrative,financialand insurance requirements, as provided by EU Regulation no.1008/2008andEURegulationno.785/2004.

Moreover, the air carrier must hold a valid Air Operator Certificate, issued by ENAC as well, which certifies that the air carrier has the professional capabilities and necessary standard of organisation to ensure the operation of its aircraft under safety conditions.

1 General


Italy is a signatory of, and has ratified, the main international conventions and treaties concerning air transport (the 1933 Rome Convention; the 1944 Chicago Convention; the 1948 GenevaConvention;andthe1999MontrealConvention).Italyhasalsosigned, but not yet ratified, the 2001 Cape Town Convention.

The main set of internal rules governing the aviation sector is the Italian Navigation Code, approved by Royal Decree no. 327 dated 30March 1942, as subsequently amendedbyLegislativeDecreeno.96dated9May2005andLegislativeDecreeno.151dated15March2006.

The primary Italian laws in the aviation sector are:■ Legislative Decree no. 250/1997, which established the

Italian Civil Aviation Authority (Ente Nazionale per l’Avi-azione Civile–ENAC);

■ LegislativeDecreeno.185/2005, implementingDirectiveno. 2000/79/EC concerning the European Agreement on the Organisation of Working Time of Mobile Workers in CivilAviation;

■ Legislative Decree no. 69/2006, implementing fines forthe breach of EC Regulation no. 261/2004 on compen-sation and assistance to passengers in the event of denied boarding,flightcancellations,orlongdelaysofflights;

■ Legislative Decree no. 197/2007, implementing finesfor breach ofECRegulation no. 785/2004 on insurancerequirementsforaircarriersandaircraftoperators;

■ Ministerial Decree dated 10 December 2008, providingguidelines in the matter of fares of airport services rendered onanexclusivebasis;and

■ Legislative Decree no. 24/2009, implementing fines forbreach of EC Regulation no. 1107/2006 on the rights of disabled persons and persons with reduced mobility when travelling by air.

Further essential rules are regulations and circulars issued by ENAC, which is the main body regulating aviation in Italy, as established under the above-mentioned Legislative Decree no. 250/1997andarticle687of theItalianNavigationCode. TheMinistry of Infrastructure and Transport, acting through its specific Department (Dipartimento per i Trasporti, la Navigazione, gli Affari Generali ed il Personale), is the body which has general competence in the aviation sector, and which holds supervising authority over ENAC.

171Studio Pierallini



No. Charter services (including: non-scheduled services; taxiflights; own-use charters; inclusive tour charters; advancebooking charters; special event charters; student charters;affinity charters; migrant worker charters; and cargo char-ters) were formerly governed by the Decree of the Ministry of Transport dated 18 June 1981 (regulation of non-scheduled services). Most of those rules, especially the ones concerning charter flights within the EU, have been superseded by EU regu-lations, international conventions and treaties, as well as national laws (see below).

In particular, with regard to air charters within the EU, the same are operated in the “open skies” regime (i.e. relevant author-isation is granted to EU air carriers subject to slot availability).

According to article 787 of the Italian Navigation Code (headed “Non-scheduled air services ungoverned by interna-tional agreements”), extra-EU non-scheduled air services areauthorised by ENAC, on a reciprocal basis, to carriers holding an EU air transport licence and to carriers of the country to/from which the flight operations are performed. The last paragraph of said article defers to ENAC the ruling of these air services, which are indeed governed by the ENAC Regulation named “Disciplineofextra-EUnon-scheduledairservices”of24April2007. Article 3 thereof specifies that “non-scheduled” flights include:ITC(i.e.inclusivetourcharterflights);thoserelatedtospecialevents;privateuse;transportofmailorfreight;transportofdangerousgoods;taxiservices;andemergencyandhumani-tarian aid.

A right of objection for charter flights operated in the so-called “fifth freedom regime” is granted to Italian air carriers.


No restrictions are provided for EU air carriers to operate to and from Italy, provided that they submit an application to the local coordinator in charge of the allocation of slots according to international rules provided by IATA conferences (clear-ance),EECRegulationno.95/93,asamendedbyECRegulationno.793/04,aswellasCircularEAL-18issuedbyENACon24August 2009.

Furthermore, domestic cabotage is allowed to EU carriers subject to slot availability and compliance with the require-ments set out by EC Regulation no. 1008/2008 (Air Operator Certificate and Air Transport Licence), as well as with article 38 of Law Decree no. 179/2012 (converted into law by Law no. 221/2012). Licensed EU carriers are entitled to apply to ENAC forthedesignationonextra-EUroutesto/fromItalyprovidedthat they hold a stable organisation within the Italian territory pursuanttoarticle7ofENACCircularEAL-14B(seequestion1.10 below).Extra-EU air carriers wishing to operate flights to and

from Italy according to traffic rights set out in either bilateral or multilateral air services agreements, have to be designated by the state holding the traffic rights. If no air services agree-ment is in force, the schedule can be authorised only upon prior request submitted by the Civil Aviation Authority of the country oforiginoftheextra-EUaircarrier.


Safety regulation falls within the institutional duties of ENAC. ENAC issues and renews airworthiness certificates and Air Operator Certificates, and it also approves maintenance programmes. Furthermore, ENAC carries out inspections and controls on aircraft operated either for private or commercial flights. Air traffic control is entrusted to ENAV.

Italy applies the international rules issued by the International Civil Aviation Organization (ICAO), the European AviationSafety Agency (EASA), EU-OPS as provided by article 2 of EC Regulation no. 1899/2006 amending Council EC Regulation no. 3922/1991 on the harmonisation of technical requirements and administrative procedures in the field of civil aviation, as well as all the European regulations.

ENAC issues its own circulars and regulations to implement and further clarify the international rules mentioned above. ENAC is also responsible for the regulation of crew skills assessments.

Italy has implemented all the EU rules related to air safety (in particular, EC Regulation no. 216/2008, EU Regulation no. 965/2012, EU Regulation no. 748/2012, EU Regulation no.1321/2014,EURegulationno.800/2013andEURegulationno.1199/2016).


In general, safety requirements governing commercial and private flights are the same. They cover the technical require-ments of aircraft and air traffic control, as well as public safety requirements. The differences relate to administrative, organi-sational and financial regulations.

On 31 October 2011, ENAC issued Circular Nav. 70-C on the continuing airworthiness management organisation approval certificate (CAMO) for commercial air transport operations. With respect toprivateoperations,ENACCircularNav.71-Bprovided that operators which do not perform commercial air transport must obtain the continuing CAMO when aircraft have aweightofmore than5,700kgormeetcertainother specifi-cations. Subsequently, ENAC has cancelled the said Circulars as the relevant contents are now covered by EU Regulation no. 965/2012andEURegulationno.1321/2014.

The criteria to determine whether operations constitute commercial operations rather than private operations are outlined by the ENAC Regulation dated 21 October 2003 (and following amendments) and the ENAC Regulation dated 30 June 2003. Such regulations provide, in relation to aircraft use, a general distinction between:■ commercialairtransportoperations,whichincludesched-

uled,charterandtaxiflights,bothpassengerandcargo;■ aerialworkoperations,whichinclude,amongothers,aerial

photography, advertisement, surveillance, fire prevention andemergencyservices;and

■ generalaviationoperations,whichincludeprivateaircraftuse and activities carried out by, among others, flying clubs and flying schools.

The private use of aircraft must correspond to the statement rendered by the aircraft’s captain to ENAC on landing. Such statement is subject to control by ENAC. The private use of aircraft must be free of charge.

172 Italy


supervised by the aforementioned ANSV, in cooperation with the judicial authorities responsible for the investigation of the events.

Pursuant to article 727 of the Italian Navigation Code, as soon as ENAC is informed of aircraft in danger or air accidents, it is entrusted to immediately provide relevant rescue and assis-tance, whilst also requesting the cooperation of other authori-ties, if appropriate.

ENAC has also issued Circular APT-18A, regulating the airport emergency plan in case of air accidents.

ENAC is also responsible for verifying that any air carriers – either EU or extra-EU and providing either commercial orprivate services – operating to and from Italy comply with EC Regulation no. 785/2004 on insurance requirements for aircarriers and aircraft operators.


On16 July2015,ENAC issued anewRegulationon remotelypiloted aerial vehicles (RPAVs, also called “drones”), which supersedes the previous Regulation of 2013 on the same matter.

The preliminary distinction made by ENAC is between “remotely piloted aircraft systems” (RPAS, highly regulated and subject to the applicable provisions of the Italian Navigation Code) and “model aircraft” (so-called aeromodelli,exclusivelyusedforrecreationalandsportpurposesandexemptedfromtheCodeprovisions).RPAS are classified on the basis of the maximum take-off

weight(MTOWlessthan25kg/MTOWequalto,ormorethan25kg) and canbeused for special operationsor research anddevelopment activities.

Furthermore, a distinction is made between flight operations in VLOS (“visual line of sight”, i.e. operations within vertical andhorizontal distanceswhich allow the remotepilot tokeepa continuing view of the RPAS, without the assistance of visual instruments) and BLOS (“beyond line of sight”, i.e. opera-tions beyond certain distances which do not allow a continuing view of the RPAS by the remote pilot). All RPAS must have a flight manual (or equivalent) and their pilots must be certified by ENAC. The Regulation also establishes a mandatory third-party insurance for any kind of flight operation performed with RPAS (in compliance with EC Regulation no. 785/2004) andsubordinates the treatment of personal data collected by means of RPAS to the Italian Data Protection Code (Legislative Decree no. 196/2003). Particular provisions are also established on the basis of the MTOW.



Yes, registration of ownership in the National Aircraft Registry constitutes proof of aircraft ownership.Pursuant to the firstparagraphof article 756of the Italian

Navigation Code, aircraft can be registered in the National Aircraft Registry in the name of the owner (when the EU nation-ality requirements pursuant to EC Regulation no. 1008/2008 are met)or,asperthesecondparagraphofarticle756,inthenameof the operator (holding an air operating licence and providing ENAC with a relevant title to operate the registered aircraft).

International air carriers are authorised to operate to/from Italy – on a reciprocal basis – under certain “open skies” air trans-port agreements in place between the relevant countries, such as the agreements signed by the European Union with the United States (2007), Morocco (2006), Israel (effective from 2018) and Ukraine(effectivefrom2015).Any change to existing authorisations (including but not

limited to any change to the Air Operator Certificate) has to be notified to ENAC for assessment and consequent actions pursuanttoENACrules(CircularEAL-15Adated5December2016).There are no taxes applied exclusively to international air

carriers but not to domestic air carriers.


Most of the Italian commercial airports are state-owned and managed under concessions granted by the state to private companies,accordingtoarticle2ofMinisterialDecreeno.521dated 12 November 1997.

Such airport managing companies can be public entities, such as regional, provincial, municipal or other local public entities (e.g.thechamberofcommerce).AnotableexceptionisAeroportidi Roma S.p.A., the managing company of Rome Airports (FCO and CIA), which is entirely owned by private shareholders. There are many private airports devoted to activities such as general aviation, flying schools, parachuting, etc.


Aircarriers,eitherEUorextra-EU,mustcomplywiththespecificrules (the so-called Regolamento di Scalo) provided by the airports to and from where they decide to operate. The airports set out such rules in accordance with the general guidelines provided by ENAC under Circular APT-19.

Moreover, air carriers must fulfil airport duties, as well as landing and take-off charges imposed by the relevant airport under ENAC surveillance. In that respect, according to article 802 of the Italian Navigation Code, ENAC is entitled, upon the request of the airport authorities and/or ENAV, to deny author-isation to aircraft taking off from Italian airports as long as airport taxes and duties, aswell as air navigation charges, areoutstanding.


Air accidents are regulated by articles 826 to 832 of the Italian Navigation Code. The airport manager and public security authorities have to immediately inform the judicial authority and the National Flight Safety Agency (Agenzia Nazionale per la Sicurezza del Volo – ANSV) of any accidents (Legislative Decree no.66dated25February1999,whichimplementedDirectiveno.94/56/ECcontainingthebasicprinciplesgoverningtheinvesti-gations of civil aviation accidents and incidents). Directive no. 94/56/EChasbeensupersededbyEURegulationno.996/2010on the investigation and prevention of accidents and incidents in civil aviation.

Pursuant to article 826 of the Italian Navigation Code, tech-nical investigations of air accidents, if any, are conducted or



Italiantaxesif:(i)thesellerand/orthebuyeraretax-residentinItaly;(ii)therelevantaircraftisregisteredintheItalianAircraftRegistry;and/or(iii)theaircraftislocatedinItalyatthetimeofthetransfer.Thatbeingsaid,specificexemptionsmayapplyonacase-by-casebasis,forinstance:thetransactionisVAT-exemptifanaircraftisexportedfromtheItalianterritorywithin90daysafterthetransferoftitlehasoccurred;andtheimportationofanaircraftisVAT-exemptifthesameismadebyanairlineoper-ating chiefly for rewards on international routes.


Italy is a party to the Montreal Convention dated 28 May 1999 (Convention for the Unification of Certain Rules for International Carriage by Air), which was ratified by Italian Law no.12datedJanuary2004andenteredintoforceonthe60th day (28June2004)afterthe30th ratification.

Italy is also a party to the Geneva Convention of 19 June 1948ontheInternationalRecognitionofRightsinAircraftandhas signed, but not yet ratified, the Cape Town Convention on International Interests in Mobile Equipment, together with the relevant Aircraft Equipment Protocol.

Due to the fact that the Cape Town Convention has not yet been ratified in Italy, the interests on aircraft are regulated by the Italian Civil Code, the Italian Navigation Code and the Geneva Convention.


Conventions are applicable in Italy subject to ratification by way of a national law. Upon ratification, conventions are applied under Italian jurisdiction equally to national laws.


Italy has entered into Double Taxation Treaties (DTTs)providingforreducedratesorexemptionforwithholdingtaxeson lease rents. For instance: the DTT with the United States establishesareducedrateat5%;undertheDTTwiththeUnitedKingdom,therateisreducedto8%;andtheDTTswithIrelandandAustriarecogniseafullexemption; inall instances,underthe condition that the lessor is not a resident in Italy for taxpurposes and is the actual beneficiary of the payments.



The Italian courts may order the detention of any Italian or foreign aircraft for unpaid charges provided under article 6 of Lawno.324dated5May1976,whichstatesthattheownerofthe aircraft and its operator are jointly liable for the payment of rights,taxesandintereststoairports.

An aircraft can also be detained pursuant to article 1023 of the Italian Navigation Code, which provides certain statutory preferred liens on aircraft by cause of their operation.


Mortgages are registered in the National Aircraft Registry. Registration is made by filing the notarised mortgage deed with ENAC. The mortgage is then recorded by ENAC on both the National Aircraft Registry and the Certificate of Registration of the relevant aircraft.Therearenopublicregistriesofaircraftcharges;neitherare

these recorded with the Italian Aircraft Registry.


Aircraft operation in Italy is subject to the surveillance of ENAC, regardless of where relevant aircraft are registered and whether or not they are owned by the operator. If an aircraft operated in Italy is registered with a foreign registry, the Civil Aviation Authority of the state of registration shall delegate surveillance of the aircraft to ENAC.

In compliance with article 83bis of the ICAO Convention, ENAC grants Italian carriers authorisation to operate aircraft registered in a foreign registry, subject to the existence of anagreement between Italy and the state of registration, regulating the delegation of functions and duties of surveillance over the operations, crews and continuing airworthiness of such foreign aircraft.Todate,ENAChasexecutedsuchagreementswiththefollowingstates:Austria;Denmark;Germany;Ireland;Lithuania;Luxembourg;Malta;Poland;Portugal;Slovenia;Spain;Sweden;andSwitzerland.Intheabsenceofanagreement,theauthorisa-tion can be granted on a case-by-case basis.

Please refer to question 3.1 below with regard to rights of detention available under the Italian system in relation to aircraft.


Under Italian law, if an engine is installed “on-wing” on an aircraft that is owned by a different entity, the engine does not cease to be the property of the titleholder and the latter main-tains the right to require the separation of the engine from the aircraft. The title in the engine can be enforced against third parties (including the owner of the host aircraft) only when they result from a formal legal document (e.g. purchase agreement or lease agreement) bearing data certa (i.e. undisputable date – anItalianlegalconcept–whichcanbeobtained,forexample,through a notarisation or a post seal on the document) or from the registration certificate of the aircraft.


Generally speaking, the transfer of an aircraft title may attract

174 Italy


With respect to criminal cases, the Criminal Justices of the Peace have jurisdiction over minor offences (e.g. negative and offensiveremarks;threat;oromissiontorescue)andtheauthorityto apply money penalties to the guilty party. Any other offences aresubjecttothejurisdictionoftheCriminalCourts,exceptforthemostseriouscrimes(e.g.criminalconspiracy;tradeinhumanbeings;andothercrimeswhosepenaltyisimprisonmentforlife),which are brought before the so-called Corte d’Assise.


The standard procedure for informing a defendant that he is being sued consists of serving the writ of summons to him by means of the court clerks. The service is carried out by the court clerks to the defendant’s registered office (for entities) or resi-dence(forindividuals).MinisterialDecreeno.55of3April2013also provides the facility for lawyers to serve writs of summons by certified email, as long as the defendant also holds a certified email address. Companies, public administrations and profes-sionals are required to have a certified email address and to make the email address public through specific registers.

The mechanism for serving court proceedings outside of Italy is ruled by bilateral or international conventions ratified by Italy. Our country has entered into certain bilateral conven-tions (e.g. with San Marino, Argentina and Australia) which specifically regulate the instruments for servicing civil acts. In respect of Member States of the European Union, the service rules are established by Council Regulation no. 1393/2007 (on “the service in theMember States of judicial and extrajudicialdocuments in civil or commercial matters”). For other coun-tries (i.e. extra-EU andwithwhich Italy has not executed anybilateral convention) the service is governed under The Hague Conventionof1March1954and15November1965,providedthat such countries are parties thereto. Otherwise, the service can be effected by the competent diplomatic office based in the country where the service has to be made.


Articles669to705oftheItalianCivilProcedureCodeprovidefor interim measures intended to protect the rights of the claimant outside proceedings, or to decide on the claim during proceed-ings. These are granted considering the preliminary evidence submitted by the claimant and the damage that might be suffered by the claimant’s rights if a precautionary measure is not applied at short notice. In certain cases, such as restraining orders or urgent measures granted under article 700 of the Italian Civil Procedure Code, the interim measure is not necessarily followed by an ordi-naryaction. Inothercases,suchasseizures,attachments,etc.,after interim measures are granted, the parties have 60 days within which ordinary proceedings must be commenced.

Remedies available from the courts on a final basis are the so-called sentenze, being the ordinary decisions issued by the judges to resolve a judicial dispute between the parties. Such decisions can (either alternatively or jointly): (1) order the losing party to (i) pay a certain amount of money, (ii) comply with a certain duty, and/or (iii) refrain from continuing a certain activity (the so-called sentenza di condanna); (2) recognise a specific rightof either party or otherwise deny such recognition (the so-called sentenza dichiarativa);and/or(3)establish/modify/revokeaspecificright of either party (the so-called sentenza costitutiva).

Moreover, according to article 802 of the Italian Navigation Code, ENAC is entitled, upon request of airport authorities and/or ENAV, to deny authorisation to aircraft taking off from Italianairportsaslongasairporttaxesandduties,aswellasairnavigation charges, are outstanding.


Under the Italian system, self-help remedies are not enforce-abletotheextentthattheywouldentitletheenforcingpartytotake enforcement measures with respect to the aircraft directly without seeking remedies through the judicial system, it being understood that any such self-help remedies would only be possibleiftakenwiththeexpressconsentofthelesseegivenatthe time when the relevant measures have to be taken.

In case of a lessee’s non-cooperation, a judicial order of the competent court is necessary to take possession of the aircraft. The owner/lessor cannot enforce the lease agreement by taking physical possession of the aircraft. Therefore, the inter-ested party may either act before the Italian competent court, or enforce a foreign judgment in the Republic of Italy (to the extent such judgment is recognised under the Italian system).Under the laws of Italy (article 633 of the Italian Civil Procedure Code), the owner/lessor can apply to the court for an injunction to return the aircraft, which can be granted inaudita altera parte and be either immediately enforceable or subject to a 40-daywaiting period for the possible opposition of the lessee. The achievement of an immediately enforceable order much depends on the actual event of the default claimed and on evidence that the owner/lessor is able to provide information to the court about its right to repossess. In detail, the insolvency of the lessee and the absence of disputes about the lessee’s default or thelikewouldexpeditetheproceedings,while–onthecontrary– disputes about amounts to be paid, and/or the owner/lessor’s righttorepossessand/ortheexistenceofanydefaultunderthelease, would slow the proceedings.Under article 1057 of the ItalianNavigation Code, aircraft

cannot be seized, confiscated, attached or be the target ofprecautionary measures to the extent that: (i) they are state-ownedaircraft;(ii)theyareoperatedforthetransportofpassen-gers and/or goods for profit and they are either ready to take off orareflying;or(iii)theyareoperatedforscheduledservicesinItaly, unless the prior authorisation of the Italian Ministry of Infrastructure and Transport is obtained.

Please note that, recently, certain Italian courts have granted precautionary attachments for aircraft operated for sched-uled services without requiring the prior authorisation of the Ministry of Infrastructure and Transport.


Italian ordinary courts are competent for aviation disputes and yes, there are distinctions regarding the courts in which civil and criminal cases are brought. In detail, civil aviation disputes of a valueuptoEUR5,000fallintothecompetenceoftheJusticesofthePeace.CivilaviationdisputesofavalueexceedingEUR5,000areinsteadbroughtbeforetheCivilCourts.



long-haul routes and medium- or short-haul routes that are then divided between European countries and the Mediterranean Sea. The relevant market for scheduled flights is defined on the basis of the single routes operated point-to-point or city-pair by air carriers involved in a competition assessment.


Article 16 of the Italian Competition Act provides for a manda-tory pre-merger notification of concentrations meeting the turn-overthresholds(seequestion4.4below).

The notification must be filed with the Italian Competition Authority before the transaction takes place (that is, before the acquiring entity can substantially influence the target entity’s behaviour).

The notification must be submitted after the parties to the transaction have reached an agreement on the essential aspects of the transaction.

For acquisitions of control of an undertaking, the requirement to file before the transaction takes place is considered fulfilled if the implementation of the agreement is made conditionally on the Italian Competition Authority’s approval.


Mergers, acquisition mergers and full-function joint ventures are subject to compulsory notification if the turnover thresholds – established by Law no. 287/1990 and subject to yearly indexa-tion – are met. Generally speaking, a concentration that does not have a Community dimension under article 1 of the EU Merger Regulation must be filed with the Italian Competition Authority when the following turnover thresholds are met: (i) the aggregate ItalianturnoverofalltheinvolvedundertakingsexceedsEUR492million;and(ii)theItalianturnoverofoneoftheinvolvedunder-takingsexceedsEUR30million(suchthresholdsareamendedona yearly basis by resolution of the Italian Competition Authority). Upon such filing, the Italian Competition Authority is called to grant clearance of the specific operation, assessing whether or not it may cause potential detriment or a decrease in competition within the relevant business field.


The procedure which the Italian Competition Authority follows for evaluating concentrations consists of two separate phases.■ First phase Underarticle16(4)oftheItalianCompetitionAct,within

30 days of receiving the notification (or of being informed of the concentration by any other means where the parties have failed to notify), the Italian Competition Authority must either: (i) clear the transaction if an investigation is not necessary, and immediately inform the notifying parties;or(ii)commenceasecond-phaseinvestigation,ifthe transaction raises competition concerns.

The30-daytimelimitisreducedto15daysinthecaseofpublic takeover bids. If the information provided in the notification is inaccurate, incomplete or untrue, the Italian Competition Authority can request clarification of the information provided and suspend the 30-day time limit until the parties respond to that request.


Generally speaking, the decisions of a first instance court can be appealed to a higher court, to the Court of Appeal (second instance) and finally to the Supreme Court of Cassation (third and final instance).

The three levels of jurisdiction are:■ First Instance Justice of the Peace, who is competent for civil disputes

of a value below EUR 5,000, and Tribunale, where the deciding body is a single professional judge.

■ Appeal Court of Appeal, where the deciding body is a panel of

three judges: the Court of Appeal reviews the first instance decision by reference to points of fact and law.

■ Supreme Court The Corte Suprema di Cassazione is based in Rome, with juris-

diction over the whole territory. This is the highest court of the judicial system and ensures the precise application and uniform interpretation of the law. It decides conflicts of competence between the lower courts, and conflicts of jurisdiction.Italsohasthepowertore-examinedecisionson appeal from the lower courts, but only on points of law. It is a collegial body and decides with a college of five judges. It has three civil divisions and hears cases of particular importance in joint session.

Under the Italian system, a dispute can also be deferred by the relevant parties to an arbitration procedure (unless the arbi-trationisexpresslyexcludedbylawforthespecifictopicofthedispute), governed by articles 806 to 840 of the Italian CivilProcedure Code. The parties can either choose arbitration by a written agreement once the event giving rise to the dispute has already occurred (so-called compromesso) or, alternatively, provide a general arbitration clause under any agreement they enter into.

Pursuant to article 818 of the Code, arbitrators cannot grant interim and precautionarymeasures (e.g. seizures),which staywith the competence of the ordinary courts.

Final awards can be appealed before the ordinary judge (CourtofAppeal),exceptwhen it isexpresslyexcludedbytheagreement between the parties.



Joint ventures between airline competitors are subject to the general competition rules applied by the regular competition authority, namely the Autorità Garante della Concorrenza e del Mercato.

The regulatory framework is provided for by Italian Law no. 287 of 10 October 1990 (the Italian Competition Act), which is the main reference since it establishes the Italian Competition Authority. The Italian Competition Act specifies that its substan-tive provisions must be interpreted in accordance with the prin-ciples of the EU.


In the aviation sector, the Italian Competition Authority has distinguished between the charter and scheduled flight markets. For charter flights, the geographical market is divided into

176 Italy


consistent with the European legal framework established by articles 16, 17 and 18 of EC Regulation no. 1008/2008 for public service obligations, the related public tender procedures and theexaminationbytheauthoritiesonhowsuchobligationsareperformed by the awarded carriers.


The acquisition, retention and use of passenger data are governed by the provisions set forth by Legislative Decree no. 196/2003 (Data Protection Code) and by Regulation (EU) 2016/679 (General Data Protection Regulation).

Pursuant to article 13 of the General Data Protection Regulation, the data subject shall have the right to obtain from the controller confirmation as to whether or not personal data concerning him or her are being processed, and, where that is the case, to access the personal data and the following infor-mation:(a)thepurposesoftheprocessing;(b)thecategoriesofpersonaldataconcerned;(c)therecipientstowhomthepersonaldatahavebeenorwillbedisclosed;(d)wherepossible,theenvis-aged period for which the personal data will be stored, or, if notpossible,thecriteriausedtodeterminethatperiod;(e)theexistenceof the right to request from the controller rectifica-tion or erasure of personal data or restriction of processing of personal data concerning the data subject or to object to such processing;(f )therighttolodgeacomplaintwithasupervisoryauthority; (g) where the personal data are not collected fromthe data subject, any available information as to their source;and(h)theexistenceofautomateddecision-making, includingprofiling, and meaningful information about the logic involved, as well as the significance and the envisaged consequences of such processing for the data subject.


Article15oftheDataProtectionCode–combinedwitharticle2050oftheItalianCivilCode–providesastrict liability,andrelevant indemnity obligation, for anyone (including air carriers) causing damages through the treatment of personal data (includingtheeventofdataloss),exceptifsatisfactoryevidenceis given that all suitable measures to avoid such damages have been taken.


Intellectual property rights are protected under the Italian Intellectual Property Code (Legislative Decree no. 30/2005).The public body with authority over intellectual property rights is the Italian Patents and Trademarks Office (Ufficio Italiano Brevetti e Marchi ), which holds public registries for, inter alia, trademarks, patents and utility models.

As far as the judicial protection of intellectual property rights is concerned, a specialised division of the Tribunal (the so-called Sezione Specializzata Proprietà Industriale ed Intellettuale) has been established by Legislative Decree no. 168/2003, as subsequently amended and updated.

■ Second phase Under articles 16(8) and 18 of the Italian Competition Act,

if the Italian Competition Authority decides to open an investigation, it must notify the undertakings concerned, within 45 days of commencing that investigation, as towhether it has decided to: (i) prohibit the concentration;(ii) clear the concentrationunconditionally; (iii) clear theconcentration subject to commitments offered by the undertakings which remove any aspects of the concen-tration that were initially deemed likely to distort compe-tition;or (iv) clear the concentration subject tomeasuresprescribed by the Italian Competition Authority to prevent the creation or strengthening of a dominant position.

The45-dayperiodcanbeextendedduringthecourseoftheinvestigation, for a further period of no more than 30 days, in cases where the undertakings concerned fail to provide information and data in their possession upon request.

As far as costs of notification are concerned, the amount of the notification depends on the total value of the transaction, which is adjusted to take into account the ratio between the Italian and the worldwide turnover of the target. At present, the notification feehasbeensetbytheItalianCompetitionAuthorityat1.2%ofthe transaction value, with a minimum limit of EUR 3,000 and a maximumofEUR60,000.


General state aid rules provided by the EC Treaty apply to the aviation sector in Italy. No sector-specific provisions regulating direct or indirect financial support to individual companies by the government or government-controlled agencies or compa-niesexist.

The main principles of the state aid rules are contained in article 107 of the Treaty on the Functioning of the European Union (TFEU). Pursuant to article 107, any aid granted by the state or through state resources in any form whatsoever is incom-patible with the common market when it distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods.

Most of Italy’s local airports are controlled by public entities and, therefore, their management and financing is subject to EU state aid rules as outlined under: (i) Communication 2005/C312/01 of the Community (guidelines on financing of airports and start-up aid to airlines departing from regional airports) and subsequent European Commission Communication 2014/C99/03;and(ii)theguidelinespublishedbytheItalianMinistryofTransport on2October 2014 in respectof support for aircarriers in starting up and developing air routes.


According to article 782 of Italian Navigation Code, the Italian government may impose public service obligations to guar-antee the right of mobility provided by article 16 of the Italian Constitution. The Italian government may impose public service obligations in respect of domestic scheduled air services serving a peripheral or developing region or on a thin route to any regional airport, when such route is considered vital for the economic development of the region in which the airport is located. Such rules imposed by the Italian government are



provided that, when the airport is state-owned, the relevant purchase transaction shall be carried out via a public tender procedure(regulatedbyLegislativeDecreeno.50/2016,whichimplemented European Directives no. 2014/24/UE and no.2014/25/UE).


Yes, holding an Air Operator Certificate is among the require-ments to obtain anOperatingLicence. Pursuant to article 4of Regulation (EC) 1008/2008, an entity can be granted an Operating Licence provided that, inter alia, Member States and/ornationalsofMemberStatesownmorethan50%ofthesameentity and effectively control it, whether directly or indirectly through one or more intermediate entities.

5 In Future


We believe that, in the next few years, the most interestingdevelopments affecting the aviation industry will be related to the regulation and operation of unmanned aircraft (also called “drones”), for both civil and military use. Indeed, drones are considered among the most dynamic and multi-purpose inno-vations of the 21st century, with a continuous trend of growth and applications ranging from movie and TV shoots to delivery services;fromagriculturetopatrolandsurveillancetasks.

The world market for commercial drones was valued at almost US$6 billion in 2018. In the United States, the Federal Aviation Administration believes that the drone market may treble by 2023,witha170%increaseinthenumberofregisteredcommer-cial drones (approximately 800,000 units in total). There aresimilarexpectations inEurope,where it isforeseenthat inthenext20yearsthedroneindustrywilldirectlyemploymorethan100,000 people and have an economic impact exceeding €10billion per year, mainly in services.

In terms of the regulatory framework in Italy, reference must be made to Regulation (EU) 2018/1139, also known as the “new BasicRegulation”oncommonrulesinthefieldofcivilaviation,which applies to all drones regardless of their operating mass (eitherbeloworabove150kg). Thepurposeof thenewBasicRegulation is to establish common provisions applicable to, inter alia, the design, production, maintenance and operation of aircraft (including drones), as well as their engines, parts, non-in-stalled equipment and equipment to control aircraft remotely.TheessentialrequirementssetoutbythenewBasicRegulation

have established only a preliminary regulatory framework for drones within the European Union. Detailed provisions have recently been laid down by way of delegated and implementing acts adopted by the European Commission, namely: DelegatedRegulation (EU)no. 2019/945of 12March 2019

on unmanned aircraft systems and on third-country operators of unmannedaircraftsystems;andImplementingRegulation(EU)no.2019/947of24May2019ontherulesandproceduresfortheoperation of unmanned aircraft. These Regulations came into force on 1 July 2019 but shall take effect in each Member State from 1 July 2020.


The provisions set forth by EC Regulation no. 261/2004 aredirectly applicable and enforceable in the Italian jurisdiction.

The Italian Parliament has issued Legislative Decree no. 69/2006, implementing fines for breach of the mentioned EC Regulationno.261/2004.


Italian Legislative Decree no. 69/2006 of 27 January 2006 empowers ENAC to issue fines to national and European air carriers which are in breach of rules under EC Regulation no. 261/2004containingrulesrelatingtoassistancetopassengersincase of, inter alia, late arrival and departure of flights.


The airport authorities are governed by the provisions set forth intheItalianAdministrativeProcedureAct(Lawno.241dated7 August 1990), applicable to the Italian administrative bodies. Consequently, the airport authorities are required to ensure that their actions conform to the principles of transparency and participation, and to the equal protection opportunities provided for therein.


General consumer protection applies to the relationship between the airport operator and the passenger to the extentthat the airport operator directly provides goods/services to the passenger against consideration. In that respect, each year the managing company of any Italian airport must issue an updated list of the services (so-called carta dei servizi ) provided within the respective airport facilities, which sets out the mandatory quality standards to be complied with in rendering those services.


The following global distribution suppliers (GDSs) operate in Italy: Abacus; Amadeus; Galileo; KIU; Patheo; Sabre; andWorldspan by Travelport.


The operations of GDSs in Italy are governed by the provisions set forth in EC Regulation no. 80/2009.


Generally speaking, vertical integration between air opera-tors and airports is permitted under the Italian system, always

178

Aviation Law 2020

Italy

Laura Pierallini, founder and named partner of the Firm, spent several years in the legal and tax department of the Arthur Andersen Worldwide Organisation and, from 2001 to 2005, was the managing partner of the international law firm Coudert Brothers in Rome.She is a professor of Commercial Law and Air Law at the LUISS University of Rome.Ms. Pierallini has practised aviation law since 1988, providing expert advice to clients across the whole of the international aviation sector, including aircraft finance and leasing, litigation and dispute resolution, employment and corporate issues. Her clientele include Italian and foreign airlines, manufacturers, lessors, financiers, airports, handlers and travel agents. She has assisted IPOs of Italian airlines and M&A of domestic airlines by foreign airlines, and has advised carriers and airport handlers in restructuring, bankruptcy and insolvency procedures. Ms. Pierallini regularly attends and organises conferences on aviation, delivering speeches and moderating panels at various Italian and inter-national symposia; in particular, organised by the International Air Transport Association (IATA), the European Air Law Association (EALA), the European Aviation Club (EAC) and the International Bar Association (IBA). Ms. Pierallini is also a committee member of the European Air Law Association (EALA), and a member of the International Aviation Women’s Association (IAWA) and the European Aviation Club (EAC).She is named as a leading lawyer by several guides, including: Expert Guides – Aviation Lawyers; Expert Guides – Women in Business Law; and Who’s Who Legal – Transport (Aviation Finance; Aviation Regulatory; and Aviation Contentious).Ms. Pierallini was shortlisted as “Best Aviation Lawyer” for the Europe Women in Business Law Awards from 2015 to 2019, and recognised as a “Thought Leader in Aviation” by Who’s Who Legal in 2018 and 2019.

Studio PieralliniViale Liegi 28Rome 00198Italy

Tel: +39 06 88 41 713Email: [email protected]: www.studiopierallini.it

Francesco Grassetti is a partner of the Firm with significant experience in the whole range of regulatory and legal advice to the aviation industry. Mr. Grassetti is enrolled at the Bar Association of Rome and, before joining Studio Pierallini in 2011, worked for reputable commercial law firms in the United States and Italy.He assists clients in connection with purchase, sale, leasing and financing transactions of commercial aircraft and helicopters, including single aircraft and multi-aircraft portfolios. He also focuses his practice on the business and private jet market, providing a full range of assistance to the industry (mainly to banks, lessors, owners, operators and manufacturers), such as structuring and finalising cross-border deals, perfection of securities over aircraft and engines, filings with civil aviation authorities and the international registry under the Cape Town Convention, aircraft operation and management, enforcement issues and local taxes.In addition, Mr. Grassetti provides airlines, business operators and other players in the aviation sector with a variety of support services, dealing on a regular basis with the negotiation and finalisation of sector contracts (transport, charter, dry-lease and wet-lease, management, maintenance, ground handling, supply, licensing, consulting) and regulatory advice in respect of the Italian jurisdiction and the European Union (authorisations and licences, traffic rights, slots, competition, data privacy, consumer protection).Furthermore, he advises clients in all aspects of corporate and commercial law, including relations with customers, suppliers and business partners, legal compliance, corporate governance, intellectual property protection, preparation of all types of commercial agreements, acqui-sition and management of assets, production and distribution issues.Mr. Grassetti is a regular attendee at aviation conferences worldwide and contributes to international publications on aviation law.

Studio PieralliniViale Liegi 28Rome 00198Italy

Tel: +39 06 88 41 713Email: [email protected]: www.studiopierallini.it

Studio Pierallini is a multidisciplinary law firm based in Rome and Milan. The Firm has acquired a globally recognised reputation in aviation over 20 years, providing expert advice to clients across the whole of the interna-tional aviation sector, including aircraft finance and leasing, litigation and dispute resolution, employment and corporate issues.The Firm also assists clients in regulatory matters, including advisory services, assistance and planning in connection with representation before governmental agencies, having continuous contact with the Civil Aviation Authorities, mainly in Italy and the European Union, but also abroad. Our clientele includes Italian and foreign airlines, manufacturers, lessors, finan-ciers, airports, handlers and travel agents. In the context of the most impor-tant transactions involving airlines ever carried out in the Italian market, the Firm recently advised the leading carrier Qatar Airways in connection with the purchase of a 49% stake in the Italian airline Meridiana.Moreover, the Firm has extensive experience in corporate and commercial law. It offers integrated teams of professionals focused on drafting and negotiating across all areas of commercial contracts, as well as on struc-turing and completing joint ventures, strategic alliances, spin-offs and

corporate restructuring. In M&A transactions, the Firm is competent to deal principally with the following issues: performing pre- and post-acquisition due diligence works; advising on corporate, employment, IP, tax and litiga-tion issues; setting up the structure of companies; pre- and post-merger notification with the Italian Antitrust Authority; and all other legal and regu-latory issues. Studio Pierallini has also advised Italian airlines and airport handlers in bankruptcy and insolvency procedures.The Firm has been named for many years as aviation law firm of the year in Italy by the most important publications focused on the aviation sector.The Firm is also a member of the European Business Aviation Association (EBAA).

www.studiopierallini.it


Aviation Law 2020

Chapter 25 179

Japan

Mori Hamada & Matsumoto Hiromi Hayashi

Japan


government or the local governments. Airports mean basic aeronautical facilities such as runways, aprons and navigation facilities, and do not include airport terminals and car parks. A unique aspect in Japan is that, in many airports, airport terminals and car parks were constructed and are owned and managed by a private entity or a “third sector” entity, i.e., a company jointly owned by a local government and private entities. This is one reason for the enactment of the Airport Concession Act. Please also see question 1.10.

The airport operator (kuukou kanrisha) under the Airport Act is essentially the national government or local government which owns and manages airports. It must submit to the MLIT prior notification of the landing fees and other fees to use the runways or relevant facilities. If the MLIT determines that such fees are (i) discriminatory, or (ii) extremely inappropriate, and the use of the airport is likely to be extremely limited, the MLIT may issue an order to the airport manager to change the fees (Airport Act, Article 13).

C. The Aircraft Mortgage Act (Koukuki Tetitou Hou) Under the Aircraft Mortgage Act, certain aircraft

registered pursuant to the Civil Aeronautics Act can be subject to security interests. Please see question 2.2.

D. The Aircraft Manufacturing Industry Act (Koukuki Seizou Jigyou Hou)

The Aircraft Manufacturing Industry Act provides that the manufacture and repair of certain aircraft and aircraft apparatuses requires a permit for each factory from the Ministry of Economy, Trade and Industry (“METI”), and must be carried out by methods approved by the METI.

E. Others The Act for the Establishment of the Japan Transport

Safety Board (Unyu Anzen Iinkai Secchi Hou) established the said board to investigate aircraft accidents, including their causes. The board also implements measures necessary to prevent such accidents. Please see question 1.9.

The Act on the Prevention of Damage caused by Aircraft Noise in Areas around Public Airports regulates noise problems caused by aircraft.


A. Aviation Transport Business (Koukuu Unsou Jigyo) The aviation transport business is the business of

transporting persons or cargo by aircraft for a fee (Civil Aeronautics Act, Article 2, Item 18).

1 General


The principal regulator of aviation is the Ministry of Land, Infrastructure, Transport and Tourism (the “MLIT”). Separate MLIT bureaus regulate specific areas relating to transportation, such as by air, road, railway and water. The MLIT bureau regulating aviation is the civil aviation bureau (koukuu kyoku).

The principal laws regulating aviation in Japan are described below. A. The Civil Aeronautics Act (Koukuu Hou) The purpose of the Civil Aeronautics Act is to ensure

the safety of aircraft and develop aviation by establishing order in the aviation business. This law is based on the Convention on International Civil Aviation (Chicago Convention) and its Annexes.

The Civil Aeronautics Act comprises 11 chapters. Chapters 1 to 6 and 9 to 11 apply to both commercial aviation and general aviation. Their provisions include: aircraft registration (Chapter 2); aviation safety, such as airworthiness (Chapter 3); qualifications of airmen (Chapter 4); designation, permission and management of airways and establishment of airports and air navigation facilities (Chapter 5); requirements for operating aircraft (Chapter 6); requirements for operating unmanned aircraft vehicles (Chapter 9); and penalties for violations of this law (Chapter 11). Chapter 7 regulates commercial aviation, such as the aviation transport business and businesses using aircraft (please see question 1.2 below). Chapter 8 regulates aircraft registered outside Japan and businesses conducted by foreign entities.

Certain provisions of the Civil Aeronautics Act do not apply to aircraft used by airmen employed by airports and air navigation facilities established by the Japan Self Defence Forces ( Jieitai ) (Act on Self Defence Forces, Article 107). Similarly, there is an exception for U.S. forces stationed in Japan (Agreement under Article VI of the Treaty for Mutual Cooperation and Security between Japan and the United States of America, regarding Facilities and Areas and the Status of United States Armed Forces in Japan).

B. The Airport Act (Kukouu Hou) Under the Airport Act, the MLIT is in charge of

policy-making for establishing and managing airports in Japan. With a few exceptions, airports in Japan were built and are owned and managed directly by either the national

180 Japan


of verifying the airworthiness of aircraft registered in Japan falls on the MLIT (Civil Aeronautics Act, Articles 10 and 11). The MLIT also issues certificates of competency which are required by anyone to fly an aircraft. Only persons with such a certificate can operate an aircraft, and must do so within the scope of the certificate (Id., Articles 22, 28, 65 and 67). Other requirements under the law cover restricted fly zones, minimum safety altitudes and speed limits.

ii. Requirements regarding the aviation business In addition to permits to start an aviation transport

business or a business using aircraft, the conduct of an aviation business is subject to requirements. Any domestic air carrier and any operator of a business using aircraft must pass the MLIT’s inspections on its facilities to ensure the safety of its aircraft operation, including facilities to manage, operate and maintain its aircraft (Id., Articles 102 and 124). Any domestic air carrier must have a manual regarding the operation and maintenance of its aircraft, which manual must stipulate the matters specified by applicable MLIT ordinances and be approved by the MLIT (Id., Article 104).

iii. Enforcements The MLIT may: (i) request persons engaging in the

manufacture or maintenance of aircraft, airmen, domestic air carriers and operators of businesses using aircraft to submit reports; and (ii) enter aircraft, airports, places where aircraft are located and business offices when it deems it necessary for the enforcement of the Civil Aeronautics Act (Id., Article 134).

Violation of the Civil Aeronautics Act is subject to criminal penalties. A person engaging in an aviation transport business without the MLIT’s permission may be imprisoned for up to three years or fined up to JPY 3,000,000, or both.

Other than the Civil Aeronautics Act, there are other laws such as: (i) the Act on the Punishment of Acts that Cause Danger in the Air, which penalises any person who damages airports or air navigation facilities, destroys aircraft or causes aircraft to crash; and (ii) the Act on the Punishment of an Unlawful Seizure of Aircraft, which penalises any person who hijacks or plans to hijack any aircraft while in operation.

B. Administrator The civil aviation bureau of the MLIT administers air safety.

It established an aviation safety programme which became effective on April 1, 2014, pursuant to ICAO’s policy to introduce State Safety Programmes. The programme applies to general aviation and commercial aviation by a person or a company. It has also started to operate VOICES (Voluntary Information Contributory to the Enhancement of Safety), through which any person may voluntarily report any incident which could have caused accidents by an aircraft, in order to prevent the occurrence of actual accidents.


Air safety is regulated by the Civil Aeronautics Act, which regulates aviation generally; however, Chapter 7 regulates only commercial aviation such as the aviation transport business and businesses using aircraft. Please see question 1.1.

A permit from the MLIT is required to start an aviation transport business (Id., Article 100, Paragraph 1). The application for a permit must state the applicant’s name and address, the name of its representative director, items to be transported by aircraft, maintenance, and the total amount and details of funding and financing (Id., Article 100, Paragraph 2). The MLIT will examine whether the business plan is suitable to ensure transport safety, whether the applicant is competent to conduct the aviation transport business and whether the applicant is disqualified on grounds listed in the Civil Aeronautics Act (Id., Article 101, Paragraph 1). This business is closed to foreign entities and persons. Please see question 1.6.

The application fee is JPY 150,000 and the standard processing period is two to four months after the MLIT has received all necessary documents.

The holder of an aviation transport business permit is referred to as a domestic air carrier (honpou koukuu unsou jig yosha). It is subject to mandatory inspection by the MLIT in connection with its facilities to control, operate and maintain its aircraft and air transport business; it cannot operate or maintain the aircraft if it fails the inspection (Id., Article 102, Paragraph 1).

As regards international carriers, please see question 1.6 below.

B. Business to Use Aircraft (Koukuuki Shiyou Jigyo) A “business to use aircraft” to provide services, other

than transporting persons or cargo by aircraft for a fee, is also regulated (Id., Article 2, Item 21). An example of this business is enabling the taking of photographs by using an aircraft.

A permit from the MLIT is necessary to start a business using aircraft (Id., Article 123, Paragraph 1). The application for the permit must state the applicant’s name and address, the name of its representative director, and the total amount and details of funding and financing (Id., Article 123, Paragraph 2). The MLIT will examine whether the business plan is suitable to ensure safety, whether the applicant is competent to conduct the business and whether the applicant is disqualified on grounds set forth in the Civil Aeronautics Act (Id., Article 123, Paragraph 2).

The application fee is JPY 90,000 and the standard processing period is two months after the MLIT has received all necessary documents.

The business operator is subject to inspection by the MLIT in connection with its facilities to control, operate and maintain its aircraft; it cannot operate or maintain the aircraft if it fails the inspection (Id., Article 124).


A. Legislation The principal legislation governing air safety is the Civil

Aeronautics Act, which is primarily based on the Chicago Convention. i. Requirements regarding aircraft and the operation of aircraft The law imposes requirements to ensure the safety of

aircraft and their operation. These include verification of airworthiness before an aircraft may be used, and restricting the use of aircraft to the purpose and scope stated in the verification of airworthiness. The task




The Act for the Establishment of the Japan Transport Safety Board created the Japan Transport Safety Board (Unyu Anzen Iinkai). The Board is one of the MLIT’s administrative organs, although the National Government Organization Act gave it some independence from the MLIT.

The Board is responsible for investigating: accidents involving aircraft, railroads and vessels; any situation which is likely to cause those accidents; the causes and extent of damage surrounding those accidents; and for requesting the MLIT or relevant parties to implement necessary measures in response to such accidents. This law is based on Annex 19 of the Chicago Convention. The Board’s investigative powers must meet the standards, methods and procedures set by the Chicago Convention and Annex 19 (Act for the Establishment of the Japan Transport Safety Board, Article 18, Paragraph 1).


There are two notable developments in connection with regulations on flights by unmanned aircraft vehicles (“UAVs”) and the privatisation of airports in Japan. A. Regulations on flights by UAVs – Amendment of the

Civil Aeronautics Act The Japanese public and government turned their

attention to drones after a drone landed on the roof of the Prime Minister’s office on April 22, 2015. The Civil Aeronautics Act was amended to introduce safety rules for unmanned aircraft vehicles, and the amended Act took effect on December 10, 2015. A further amendment was made in September 2019 to expand prohibited airspace and operation conditions.

The amended Act introduced restrictions on (i) areas for flight, and (ii) operation.(i) Prohibited airspaces for flight

The amended Civil Aeronautics Act requires a person who intends to operate a UAV in the following airspaces to obtain the MLIT’s permission:(a) airspace which is likely to affect the safe operation

of aircraft; and(b) airspace which is above densely populated areas.

An “airspace which is likely to affect the safe operation of aircraft” refers to airspaces above airports and their vicinity, and airspaces 150 metres above ground level or water surface level. A “densely populated area” is defined as a densely inhabited district ( jinko shuchu chiku) (“DID”), designated based on the results of the national census. A DID is, in principle, an area with a population density of 5,000 people or more per square kilometre.(ii) Operational limitations

The amended Civil Aeronautics Act lists the following operational conditions.Operators of UAVs must:(a) not operate UAVs while under the influence of

alcohol or medication, including illegal drugs;(b) confirm that all necessary preparations have been

completed, including confirming the externals


Yes, as discussed in question 1.2 on aviation transport businesses. Regulations on aviation transport businesses do not distinguish between cargo and persons.


A foreign entity or person cannot be a domestic air carrier (honpou koukuu unsou jig yosha) (please see question 1.2). However, it may obtain the MLIT’s permission to conduct an international aviation transport business (Civil Aeronautics Act, Articles 129 and 126).

A foreign entity or person who invests in Japan is subject to the Act of Foreign Exchange and Foreign Trade. Under that law, a foreign entity which wants to invest in the business of manufacturing aircraft, conducting air transport or using aircraft must give prior notification, through the Bank of Japan, to the Ministry of Finance, as well as the ministry with specific jurisdiction over the business (i.e., the METI or the MLIT). The foreign entity must wait for 30 days before making the investments; however, this period may generally be shortened to two weeks.


As described in question 1.1, with a few exceptions, airports in Japan were constructed and are owned and managed directly by either the national government or local governments. As of April 1, 2016, airports in Japan are classified as: (i) national airports established and managed by the national government (19 airports); (ii) special regional airports established by the national government but managed by local governments (five airports); (iii) incorporated airports established and managed by corporations under special laws (Narita, Kansai, Itami and Chubu airports) (four airports); (iv) regional airports established and managed by local governments (54 airports); (v) airports for joint use managed by either the Japan Self Defence Forces or the US forces stationed in Japan jointly with the national government (eight airports); and (vi) other minor airports. Among those airports, Sendai Airport, Kansai International Airport, Osaka (Itami) International Airport, Fukuoka Airport, Takamatsu Airport and a part of Kumamoto Airport are currently being operated by private companies through the concession. Please see question 1.10.


An airport operator must establish rules for the operation of the airport and publish them through the internet or other appropriate methods (Airport Act, Article 12). The rules must cover the airport’s operating hours, other services it is providing, landing and parking fees and requirements for airport users, among other things.

182 Japan


As mentioned above, in many airports in Japan, the govern-ment owns and operates basic aeronautical facilities, such as runways, aprons and navigation facilities, while private or third sector entities own and operate non-aeronautical facilities such as airport terminals and car parking facil-ities. Accordingly, the government cannot offer lower airport charges to airlines by generating income from non-aeronautical operations. By introducing the Airport Concession Act, the government aims to have one conces-sionaire manage both aeronautical and non-aeronautical operations under its concession.

A concession under the Airport Concession Act covers: (i) national airports; (ii) regional airports; (iii) civil aviation facilities at airports for joint use; and (iv) other minor airports established and managed by local governments. In 2014, the government started the bidding process to select the concessionaire who will operate Sendai Airport, one of Japan’s national airports. The operation of Sendai Airport, Fukuoka Airport, Takamatsu Airport and a part of Kumamoto Airport by private companies through the concession has started. Further, the operation of seven airports in Hokkaido by private companies will start from 2020 gradually.

Incorporated airports are not subject to the Airport Concession Act. However, the government has enacted another special law for the concession to operate Kansai International Airport and Osaka (Itami) International Airport. The operation of both airports by private companies, which include Vinci Airports and Orix Corporation, through the concession, started in April 2016.



At the owner’s application, the MLIT will register its ownership of an aircraft in the Aircraft Register (Civil Aeronautics Act, Article 3). The registration fee is JPY 30,000 multiplied by the weight (in tons) of the aircraft.

Any third party may request to see or have a copy of the Aircraft Register. Hence, the buyer of an aircraft can check whether the seller is registered as the aircraft’s owner. Further, as for a registered aeroplane (hikouki ) or rotorcraft (kaitenyoku koukuuki ), the buyer or transferee of that aircraft may assert its ownership by registering the acquisition or transfer (Id., Article 3–3). However, if the registration is false and there is a true owner who is not registered in the Aircraft Register, the buyer cannot acquire ownership. In this sense, the Aircraft Register is a very important piece of evidence to prove ownership, but it does not protect a third party who relies on a false registration.

As for other types of aircraft, such as gliders or airships, even if they are registered, the mere delivery of the aircraft to the buyer or transferee enables the said buyer or transferee to assert ownership.


There is a register of aircraft mortgages under the Aircraft Mortgage Act (Koukuuki Teitou Hou).

(e.g., batteries, propellers and cameras being firmly installed onto the drones) and functions of UAVs, weather and other flight conditions prior to operation;

(c) operate UAVs in a manner that prevents any collisions with aircraft or other UAVs;

(d) not operate UAVs in a manner that causes any issues with third parties, including by making unnecessary noise or causing UAVs to nosedive;

(e) operate UAVs only in the daytime;(f ) operate UAVs within the visual line of sight of the

operator;(g) maintain a certain operating distance (30 metres)

between UAVs and persons or properties on the ground or water surface;

(h) not operate UAVs over event sites where many people gather;

(i) not transport hazardous materials specified in the Ordinance by UAVs; and

(j) not drop any object from UAVs except for the goods specified in the Ordinance.

Any person who intends to operate UAVs beyond the limitations of items (e) through (j) must have approval from the MLIT. As for items (a) through (d), these conditions are absolute without exception.

With the MLIT’s permission or approval, it is possible to operate UAVs in prohibited airspaces or without meeting operational conditions. An operator must submit the application for permission or approval, in general, 10 business days before the flight of a UAV.

Violations will be penalised with a fine of up to JPY 500,000. Any person who operates UAVs while under the influence of alcohol or medication, including illegal drugs, above any public areas (e.g., roads, parks, public squares and stations) may be subject to imprisonment for up to one year or a fine of up to JPY 300,000.

UAV technology continues to advance rapidly. Hence, although the new regulations were created as an urgent response to the landing of a drone on the roof of the Prime Minister’s office, government regulations will continue to evolve to ensure the sound development of the UAV business in Japan, as affirmed in a supplemental provision of the amended Civil Aeronautics Act.

B. Introduction of concessions for operating airports The Act for the Operation of Government Controlled

Airports by Private Sector Entities (the “Airport Concession Act”), which took effect on July 25, 2013, allows the private sector to operate airports through concessions under the Act on the Promotion of Private Finance Initiative (the “PFI Act Concession”).

The need to reform airport management efficiently led to the PFI Act Concession. Under the current system, income from airport charges, such as landing fees, at all national airports is managed within a single national pool (i.e., the airport development sub-account under the social infrastructure development special account). In principle, airport charges are the same in all national airports in Japan, and each airport cannot set its own airport charges. Under the Airport Concession Act, however, the airport concessionaire of a specific airport may set its own airport charges and collect them as income.

Further, the separation between aeronautical and non-aeronautical operations in terms of ownership and management has also been criticised as being inefficient.




Japan is a signatory to (i) the Hague Convention, and (ii) the Montreal Convention, but is not a signatory to the ICAO Geneva Convention or the Convention on International Interest in Mobile Equipment, Cape Town, 2001.


Japan essentially applied the Hague Convention through the Law on the Punishment of the Unlawful Seizure of an Aircraft. Japan essentially applied the Montreal Convention through the Law on the Punishment of Acts that Endanger Aviation.


Yes. For example, if a Japanese company leases an aircraft from a company established in the U.S., generally, under the tax treaty between Japan and the U.S., there is no withholding tax on the lease payments which the Japanese company will make to the U.S. company.



Under the Civil Aeronautics Act, the compulsory execution and the execution of provisional seizure of registered aircraft are governed by rules issued by the Supreme Court (Civil Aeronautics Act, Article 8–4, Paragraph 2), and the Civil Execution Rules (Minji Shikkou Kisoku) and Civil Provisional Remedies Rules (Minji Hozen Kisoku) apply to the compulsory execution, and the execution of provisional seizure, of registered aircraft (Civil Execution Rules, Article 84 and Civil Provisional Remedies Rules, Article 34).

If a court starts the procedures for a compulsory execution, it must order a public auction of the aircraft, get the documents which are necessary to fly the aircraft, including verification of the aircraft’s nationality, and prohibit the aircraft’s departure (Civil Execution Law, Article 114 and Civil Execution Rules, Article 84).

The execution of a provisional seizure is done by (i) making an entry of the provisional seizure in the registration, or (ii) getting what is necessary to fly the aircraft, including the verification of the aircraft’s nationality (Civil Provisional Remedies Law, Article 48 and Civil Provisional Remedies Rules, Article 34).

Because aircraft without any registration certification cannot be used for aviation, they will be detained through the procedures for compulsory execution and execution of provisional seizure.

If it is likely that a compulsory execution will become significantly unfeasible unless the aircraft is in detention, a party may file an application with the district court with jurisdiction over the aircraft’s home base (teichijyo) before starting the compulsory execution procedures to request a court order for the delivery of the registration certification. If there are

Aircraft mortgages shall be made in the Aircraft Register in which the ownership is registered (please see question 2.1). To register an aircraft mortgage, the mortgagee and the mortgagor must jointly apply for registration and submit the document verifying the existence of the mortgage, such as the mortgage agreement, and other necessary documents. The aircraft mortgage registration fee is JPY 0.003 multiplied by the loan amount. It is customary to make a provisional registration of the mortgage and pay only JPY 2,000 as registration fee. As for the enforcement of the mortgage, please see question 3.1.


Please see question 2.4.


The Civil Act has a concept similar to title annexation. Under this concept, if a property (whether real property or moveable property) is attached to another property such that it is impossible to separate them without damage, the owner of the primary property acquires ownership of the non-primary property. In that case, the owner of the minor property loses ownership of, and any other right on, that property. However, because an engine can be generally separated from an aircraft without damaging either the engine or the aircraft, then the ownership or security interests on the engine would not be at risk of annexation. In addition, in a precedent case regarding the annexation of buildings, the court decided that security interests on the annexed buildings continue to exist on each annexed building pro rata based on the value of each building.


If a business provider transfers or lends any property or provides services to a third party for consideration within Japan, a consumption tax will be basically levied on the trans-action. The current rate of consumption tax is 8%. If the trans-action is considered an export under the Consumption Tax Law (Shouhizei Hou) and the business provider has an export permit, the transaction may be exempt from consumption tax. In the case of an aircraft which delivers people or cargoes outside Japan, the transfer of that aircraft may be exempted if certain requirements under the Consumption Tax Law are met.

The Stamp Tax Law (Inshizei Hou) requires that stamps be affixed to certain documents, including an agreement to sell and purchase an aircraft. The amount of the stamp depends on the purchase price. For example, if the price is more than JPY 100,000,000 but not more than JPY 500,000,000, the amount is JPY 100,000; and if the price is more than JPY 500,000,000, the amount is JPY 600,000.

184 Japan



A. Civil Cases Generally, the service of court proceedings should be

made at the address or business office of the person being served. If a foreign company has a representative to do business in Japan or a branch in Japan, the service of court proceedings to a foreign company can be made at the representative’s address or the branch’s address (Civil Procedure Law, Article 103, Paragraph 1).

If the service needs to be made outside Japan, the presiding judge will delegate the service of court proceedings to the competent governmental agency of the foreign jurisdiction, or the ambassador, minister or council of Japan in such jurisdiction (Id., Article 108). Japan is a signatory to the Convention Regarding Civil Procedures and the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.

B. Criminal Cases Service should be made in the way described in Article

108 of the Civil Procedure Law (Criminal Procedure Law, Article 54).


If an obligor does not perform its obligation, the obligee may file a lawsuit for performance. The obligee may also seek payments to force the obligor to perform the obligation, or may use a third party to perform the obligation and make the obligor pay the relevant costs. If the obligee obtains the court’s final and binding decision, and that decision is given with a declaration of provisional execution, or an arbitration award to which the competent court has issued an execution order, it can start the compulsory execution against the obligor’s properties (Civil Execution Law, Article 22).

The court can issue an interim decision with respect to specific or separate issues (Civil Procedure Law, Article 245), but the obligee cannot start the compulsory execution based on an interim decision.


A party who does not agree with the final decision of the district court at the first instance can appeal to the high court (Civil Procedure Law, Article 281, Paragraph 1). A party who does not agree with the final decision of the high court at the second or first instance can appeal to the Supreme Court. Further, a party who does not agree with the final decision of the district court at the second instance can appeal to the high court. An appeal to the Supreme Court requires specific grounds under the Civil Procedure Law; for example, if the high court’s decision violates the Constitution or other laws (Id., Articles 311 and 312).

As to the arbitration procedure, the award is binding on the parties and an appeal is basically unavailable.

pressing circumstances, a party may file the application with the district court with jurisdiction over where the aircraft is located (Civil Execution Law, Article 115 and Civil Execution Rules, Article 84). Even if the certification of registration is delivered, the possession of the aircraft is not deemed delivered to the party or the court. The party may file an application to appoint a custodian to maintain the aircraft until the compulsory execution starts (Civil Execution Law, Article 116).


A lessor or a financier of aircraft is basically required to do a compulsory execution, which needs to be filed with the court, to reacquire the possession of the aircraft or enforce any of its rights under the lease/finance agreement. If a lessor or financier has security interests on the aircraft or lease receivables, and the agreement has a provision that it may exercise the security interests against a debtor upon the occurrence of an event of default, it may enforce the rights without a court filing, unless the provision is terminated upon the filing of bankruptcy.


A. Civil Cases Applications for compulsory execution and the execution

of provisional seizure of aircraft must be filed with the district court with jurisdiction over where the aircraft is located when the procedures of such executions start (Civil Aeronautics Act, Article 8–4, Paragraph 2). This district court is not necessarily the same as the district court with jurisdiction over the aircraft’s home base.

A contractually agreed court to settle disputes between an aircraft financier and the borrower is valid (Civil Procedure Law, Article 11) and the court will be determined pursuant to such provision. If no jurisdiction has been agreed, the competent court will be determined pursuant to the Civil Procedure Law. Depending on the kind of lawsuit, the competent court may be one with jurisdiction over the defendant’s address, where the defendant should perform its obligation, or where the aircraft exists (Id., Articles 4 and 5).

B. Criminal Cases The jurisdiction over criminal cases is where the crime

was committed or where the criminal resides (Criminal Procedure Law, Article 2, Paragraph 1). However, if the crime was committed in an aircraft registered in Japan at a time when it was outside Japan, the jurisdiction, in addition to the place where the crime was committed and the criminal’s residence, could be the place where the aircraft lands (including on water) after the crime (Id., Paragraph 3).

C. Summary Court If (i) a plaintiff seeks damages of up to JPY 1,400,000, and

(ii) the crime is punishable by fines or lighter penalties, the lawsuit can be filed with the Summary Court (Kani Saibansho) (Court Law, Article 33, Paragraph 1).




A party planning a business consolidation can have a prior official consultation with the JFTC, by providing the JFTC with concrete details of the proposed consolidation, the relevant parties consenting to the disclosure of the details of the consultation, and the JFTC’s response.

The standard period for the JFTC to deal with any application for consultation is 30 days starting from the day after the JFTC has received the required documents. This period may be shortened pursuant to the acquirer’s request and if the JFTC does not see any issue under the Antitrust Law.

It is customary to have an unofficial consultation with the JFTC, which is different from the official consultation mentioned above, before the party planning any business consolidation submits all necessary competition clearance documents to the JFTC.


Please see questions 4.1 and 4.2.


If a party plans a business consolidation which exceeds certain criteria, it must obtain the JFTC’s clearance, which may take 30 days (but may be shortened) from the filing of the application for clearance and before any consolidation can proceed (please see question 4.3). The criteria depend on the type of acquisition. For example, in a share purchase, if: (i) the sales of the acquirer’s group in Japan exceed JPY 20 billion; (ii) the sales of the target company and its subsidiaries in Japan exceed JPY 5 billion; and (iii) the resulting voting rights of the acquirer will exceed 20% or 50% after the acquisition, the acquirer must file for JFTC clearance and submit the acquisition agreement, or its draft, the balance sheet, profit and loss statement and business report of the acquirer, a shareholders’ resolution to approve the transaction (if any is required) and the financial condition of the acquirer’s group.

It is customary to have an unofficial consultation prior to the application. The length of consultation depends on the transaction but, if the necessary information such as sales and market shares of the consolidated businesses is submitted properly, the JFTC will receive the application for consultation promptly.

If the JFTC finds any material problem under the Antitrust Law, the examination process will start. The JFTC will consider whether a cease-and-desist order should be issued to solve the problem until the later of either the lapse of 120 days after the receipt of the application or the lapse of 90 days after the receipt of the documents that the JFTC additionally requested from the acquirer.


A. Air Operators Air transportation to and from small local airports and

isolated islands generally faces financial difficulties, but it



The Civil Aeronautics Act grants Antitrust Immunity (“ATI”) if a domestic aviation carrier obtains the MLIT’s approval of the following items (Articles 110 and 111):(i) a joint management agreement between a domestic

air carrier and another air carrier, in case two or more domestic air carriers operate air transport services to ensure passenger transport that is necessary for local residents’ lives, in a route inside Japan where continuing the service is expected to be difficult due to a decreased demand for air transport service; and

(ii) an agreement between a domestic air carrier and another air carrier on joint carriage, a fare agreement and other agreements relating to transportation to promote public convenience in a route between a point in Japan and a point in a foreign country or foreign countries.

The MLIT will not grant the approval unless the subject agreement conforms to the following standards:(i) it does not unfairly impair the interests of users;(ii) it is not discriminatory;(iii) it does not unfairly restrict participation and withdrawal;

and(iv) the contents of the agreement are kept to the minimum

necessary for the purpose of the agreement.Before granting any approval, the MLIT will first discuss this

with the Japan Fair Trade Commission (“JFTC”).Since 2010, the signing or amendment of a joint venture

agreement needs the approval of the MLIT. As of July 2013, ATIs have been granted to four joint venture agreements between Japanese air carriers.


Under the Act on the Prohibition on Private Monopolization and on the Maintenance of Fair Trade (the “Antitrust Law”), consolidations of businesses, such as mergers and business transfers, are prohibited if (i) such consolidations will eventually restrict competition in any particular field of trade, or (ii) the consolidations involve unfair trade practices (Articles 14 to 17).

In 2004, the JFTC issued a guideline on how it assesses potential restrictions on competition, and this guideline has been continually amended. The guideline provides that a particular field of trade (ittei no torihiki bunya) is determined from the perspective of whether users have alternative goods or services to the subject of the trade, in terms of geographical area where such goods or services are traded. If necessary, the perspective of whether suppliers have an alternative is taken into account. The scope of goods or services is generally determined by examining whether goods or services, similar to those subject to the anti-competition assessment, are available to users. In evaluating similarity, the JFTC will consider, among other things, the uses and the cost of the goods or services.

The geographical area is also generally determined by whether users can have similar goods or services. In evaluating similarity, the JFTC will consider, among other things, where users can avail themselves of goods or services based on accessibility to users, distribution network, ability of suppliers to satisfy demand, whether the goods or services are easily deliverable, and delivery fees or costs.

186 Japan


right, a design right, a copyright, a trademark right, a right that is stipulated by laws and regulations on other intellectual property or a right pertaining to an interest that is protected by acts. Each of (i) a patent right, (ii) a utility model right, (iii) a plant breeder’s right, (iv) a design right, (v) a copyright, and (vi) a trademark right is protected under (i) the Patent Act, (ii) the Utility Model Act, (iii) the Plant Variety Protection and Seed Act, (iv) the Design Act, (v) the Copyright Act, and (vi) the Trademark Act. Each law has its own mechanism to protect intellectual property, although each basically protects registered intellectual property. For example, under the Trademark Act, a person holding a trademark may register it, and such registration is effective for 10 years and is renewable. A trademark holder basically has an exclusive right to use the registered trademark in connection with the designated goods or services.

The unfair acquisition or use of know-how or trade secrets, and the unfair creation or use of trademarks or trade names which are similar or identical to others that are well-known by consumers, is prohibited by the Unfair Competition Prevention Act.


The MLIT issued a guideline on the necessary measures to prevent acts which may make passengers uncomfortable, embarrassed or unsafe, and in 2002 requested air operators to comply with the guideline. Under the guideline, air operators must not allow passengers who are drunk to excess to board.

Air operators generally lay down their terms and conditions which passengers of domestic and international flights are required to follow. Such terms and conditions typically provide that the operator may deny boarding if a passenger is late. Further, the operator may deny boarding to passengers or may make passengers disembark if the operator finds it necessary to ensure air safety, to comply with laws and requests from administrative bodies, to deal with any act which is making other passengers uncomfortable, embarrassed or unsafe, or to deal with any mental or physical conditions. In addition, the terms and conditions typically provide that the operator may cancel flights based on certain reasonable grounds, and must take appropriate measures for passengers whose flights were cancelled.

Further, a pilot of the aircraft may, during taxiing, order a passenger to disembark if he has reasonable grounds to believe that the passenger has committed or will commit an act that may impede safety, to the extent that it is necessary to ensure the safety of the aircraft, to protect other passengers and property, and to keep order and discipline inside the aircraft (Civil Aeronautics Act, Article 73–4, Paragraph 1). The Civil Aeronautics Act does not explicitly deal with cancellation of flights.


The Civil Aeronautics Act does not explicitly impose sanctions directly due to the late arrival and departure of flights. However, the MLIT gathers and publishes information on the frequency of late arrivals and flight cancellations. Further, the MLIT may issue an order to improve the operation of aircraft or the business of air carriers if, for example, the technical ability of the airmen or pilots does not meet the standards of the Civil Aeronautics Act (Articles 20, 29 and 72).

is necessary to enable residents to have an ordinary life. To keep such air transportation active, air operators providing such transportation services are subsidised in relation to the purchase price of aircraft and equipment and landing charges, and may avail themselves of tax reductions in terms of fuel aviation tax and property tax.

B. Airports Income from airport charges, such as landing fees, at all

national airports is managed within a single national pool (i.e., the airport development sub-account under the social infrastructure development special account) (please see question 1.10). The pool provides airports with financial support for maintenance and operation.




The following laws and regulations are the basic legislation in Japan for the protection of personal information:(i) the Act on the Protection of Personal Information (Act

No. 57 of May 30, 2003, as amended – the “APPI”);(ii) the Act on the Protection of Personal Information Held

by Administrative Organs (Act No. 95 of 1988 of May 30, 2003, as amended);

(iii) the Act on the Protection of Personal Information Held by Independent Administrative Agencies; and

(iv) local regulations ( jyourei ) legislated by local governments. The APPI is the principal data protection legislation which

regulates the use of personal information by private businesses and sets forth the obligations of business operators handling personal information, which apply to all business operators using a personal information database for their businesses. Under the APPI, a passenger may request an airline or the operator of an airport to correct, add or delete his retained personal data, and the airline or the operator of the airport must comply. The MLIT also issued a guideline regarding data protection to business operators conducting a business under the jurisdiction of the MLIT, including airlines and operators of airports.




The Basic Act on Intellectual Property provides the framework for promoting measures for the creation, protection and exploitation of intellectual property. This Act defines intellectual property as a patent right, a utility model right, a plant breeder’s



5 In Future


Attention should be given to three possible changes or developments:A. Development of a Business Using UAVs According to the roadmap published in April 2016 at a

conference on UAV business, attended by governmental authorities and private companies, the goal is to be able to deliver goods to scarcely populated areas (e.g., mountainous regions and isolated islands) around 2018, and to urban areas in the 2020s. To achieve this goal, discussions on better regulations, such as certification of UAVs and licences to operate UAVs, are going on. In September 2017, the MLIT and the METI jointly established the Study Group on the Flying of Unmanned Aircraft (Drones) Beyond Visual Line of Sight and Over Third Parties. This Study Group estab-lished the guidelines for the use of UAVs for delivery busi-nesses at the end of March 2018.

B. Possible Expansion of Concession of Airports Sendai, Kansai, Itami, Fukuoka, Takamatsu and Kumamoto

airports have been privatised through concessions. Further, the concession agreement for seven airports in Hokkaido is expected to be signed in the autumn of 2019, and one national airport (Hiroshima) is being considered for priva-tisation using a concession scheme.

C. Increase of Flights to and from Haneda The desirability of increasing flights to and from Haneda,

which is closer to Tokyo than Narita, is under discussion. According to the MLIT’s website, if the flights are increased as planned, the number of international flights will increase from 60,000 per year (2015) to 99,000 per year (2020). The increase will be accompanied by changes in flight routes. In any case, the MLIT plans to continue discussions with residents near Haneda airport and the flight routes, and other concerned people. It plans to implement suitable methods to properly deal with effects that the increase may have on the environment.

AcknowledgmentThe author would like to thank Koji Toshima for his assistance in preparing this chapter. Koji is a partner at Mori Hamada & Matsumoto, where his main field of practice is aviation law.

Email: [email protected] / Tel: +81 3 5223 7789.




The Consumer Contract Act provides for the protection of consumers who enter into contracts with business operators. For example, any contractual provision which requires a consumer to pay a cancellation fee at an amount which exceeds the average amount of damages that a business operator would suffer in connection with the cancellation, is null and void (Consumer Contract Act, Article 9).


Japanese companies and foreign companies such as Fedex, DHL and UPS operate in Japan as global forwarders. Further, Japan has an association which includes international freight forwarders as members ( Japan International Freight Forwarders Association Inc.).


As a general rule, a foreign person, a foreign entity (whether private or governmental) or an entity of which one-third or more of the directors are foreigners, or one-third or more of the voting rights are held by foreign persons or entities, is prohibited from engaging in the freight forwarding business in Japan (Consigned Freight Forwarding Business Act, Articles 6 and 22), unless they are registered with or permitted by the MLIT (Id., Articles 35 and 45).


The JFTC will consider whether the vertical integration is an issue with regard to fair trade in the aviation business, pursuant to the Antitrust Law. There is no precedent regarding such vertical integration. The government has set certain standards for airport concessionaires, such as the disqualification of an aviation trans-port business operator, and any of its parent companies, subsid-iaries and other affiliates, from being an airport concessionaire.



188

Aviation Law 2020

Japan

Hiromi Hayashi is a partner at Mori Hamada & Matsumoto, which she joined in 2001. Her areas of practice are international and domestic transactions, corporate restructuring and regulatory matters, including regulations on the telecommunications industry and radio frequen-cies. Hiromi has been a member of the firm’s Robotics Group since 2015, and is a member of the Logistics Subcommittee of the Study Group on the Flying of Unmanned Aircraft (Drones) Beyond Visual Line of Sight and Over Third Parties, established jointly by the Ministry of Land, Infrastructure, Transport and Tourism and the Ministry of Economy, Trade and Industry (2017). Hiromi was admitted to the Bar in 2001 in Japan and in 2007 in New York. She worked at Mizuho Corporate Bank from 1989 to 1994, and at Davis Polk & Wardwell in New York from 2006 to 2007.

Mori Hamada & MatsumotoMarunouchi Park Building2-6-1 MarunouchiChiyoda-kuTokyo 100-8222Japan

Tel: +81 3 5220 1811Email: [email protected]: www.mhmjapan.com

Mori Hamada & Matsumoto is a full-service international law firm based in Tokyo, with offices in Fukuoka, Nagoya, Osaka, Beijing, Shanghai, Singapore, Yangon Bangkok and Ho Chi Minh, and a Jakarta desk. The firm has over 450 attorneys and a support staff of approximately 450, including legal assistants, translators and secretaries. It is one of the largest law firms in Japan and is particularly well-known in the areas of mergers and acquisitions, finance, litigation, insolvency, telecommunications, broad-casting and intellectual property, as well as domestic litigation, bankruptcy, restructuring and multi-jurisdictional litigation and arbitration. The firm regularly advises on some of the largest and most prominent cross-border transactions, representing both Japanese and foreign clients. In particular,

the firm has extensive practice in, exposure to and expertise on telecom-munications, broadcasting, the Internet, information technology and related areas, and provides legal advice and other legal services regarding the corporate, regulatory, financing and transactional requirements of clients in these areas.

www.mhmjapan.com


Aviation Law 2020

Chapter 26 189

Kenya


Ruth Kirunga

Peter Hime

Kenya

Matthew Arrumm


1 General


The principal legislation includes the following:■ TheCivilAviationAct,2013(the“CAA”) as amended by the

CivilAviation(Amendment)Act,2016(the“Amendment Act”). The CAA provides for the control, regulationand orderly development of civil aviation in Kenya andconnected purposes.

■ TheKenyaAirportsAuthorityAct,Chapter395oftheLawsofKenya (the “KAA Act”),which establishes theKenyaAirportsAuthority(the“KAA”)andprovidesforitspowersand functions and connected purposes.

■ UnderArticle2(5)oftheConstitutionofKenya,2010(the“Constitution”), the general rules of international law form partofthelawofKenya.Additionally,underArticle2(6)of the Constitution, any treaty or convention ratified byKenyaformspartofthelawofKenya.ThisisrelevanttotheConventionsandProtocolslistedinquestion2.6.

■ Kenya has acceded to the Convention on InternationalInterests in Mobile Equipment, 1929 (the “Cape Town Convention”) and the Protocol to the Convention onInternational Interests in Mobile Equipment on Mattersspecific to Aircraft Equipment (the “Cape Town Protocol”). Kenya has given effect to the Cape TownConvention and the Cape Town Protocol through theInternationalInterestsinAircraftEquipmentAct,2013(the“IIAE Act”).

Section4oftheIIAEActstatesthattheprovisionsoftheCapeTownConventionandtheCapeTownProtocolshallhavetheforceoflawinKenyatotheextentthattheyapplyto aircraft objects and as specified in the Declarations made byKenyawhicharelistedintheThirdScheduleoftheIIAEAct.TheIIAEActalsostatesthatitshallprevailinthecaseofanyinconsistencybetweentheIIAEActandanyotherlaw with respect to international interests in aircraft objects. The IIAE Act gives the High Court of Kenya jurisdic-tioninrespectofanyclaimbroughtundertheCapeTownConvention and the Cape Town Protocol, or any other

matterprovidedundertheCapeTownConventionandtheCapeTownProtocol,ortograntreliefandawarddamagesasprovidedunderthesame.

■ Kenya has also ratified theWarsaw Convention, 1929 asamended by theHagueProtocol, 1955 and this has beendomesticated throughTheCarriagebyAirAct,1993 (the“CBAA”).TheCBAAenablestheWarsawConventionasamendedbytheHagueProtocoltobeappliedtonon-inter-nationalcarriagebyairandconnectedpurposes.Itprovidesfor, inter alia, the liability for the death or injury of passen-gers, loss of or damage to cargo and damage caused by delay that occurs during carriage by air.

The principal regulatory bodies include the following:■ TheKenyaCivilAviationAuthority (the “KCAA”) estab-

lished under the CAA, which regulates civil aviation inKenya,regulationofairsafetylicensingofairservices,provi-sionof air navigation services, the certificationof aircraftoperators and the registration of rights and interests in aircraft.

■ TheKAA,whosefunctionsincludeprovidingacoordinatedsystem of aerodromes and facilities relating thereto, adminis-tering,controllingandmanagingaerodromesandproviding,developing andmaintaining such services and facilities asare, in its opinion, necessary or desirable for the efficient operation of aircraft.

■ TheNationalCivilAviationAdministrativeReviewTribunal(the“NCAART”)establishedunder theCAA,whichhasthe jurisdiction to hear and determine complaints or appeals arising from, inter alia,licencesgrantedbytheKCAAunderthe CAA or regulations made thereunder, any orders ordirections issuedbytheKCAAundertheCAAorregula-tions made thereunder, and consumer protection compli-anceandenforcementactivitiesintheaviationindustry.


Licensing of air services is regulated by the Civil Aviation(Licensing of Air Services) Regulations, 2018 (the “LAS Regulations”) enacted under the CAA. Under the LASRegulations,apersonwhointendstoprovideanyairserviceisrequiredtoapplytotheKCAAforalicence.

190 Kenya


Kenyaunlessthataircraftdisplaysthenationalityandregistra-tionmarkingsprescribedinthemannerrequiredbythelawofthe state in which it is registered.


Airportscanbeeitherstateorprivatelyowned.Currently,thereareeightmainairportsownedbythegovernmentofKenyaandoperatedbytheKAA.Therearealsoover400airstripswhichareprivatelyownedandoperatedinthecountry.Althoughtheseareprivatelyowned,theyaresubjecttotheminimumrequire-mentssetout intheCivilAviation(Aerodromes)Regulations,2013. There exists a “category E” aerodrome classification,which is a classification for aerodromes which are privatelyowned but maintain a limited public use aspect.


TheKAAimposesrequirementsforcarriersflyingtoandfromairportsinKenya,andprovidesairtrafficcontrolservices.TheKCAA is responsible for providing air navigation services inKenyanairspace.


TheCBAA,theWarsawConvention,andtheMontrealProtocolsNos.1and2,1975and1996whichamendtheWarsawConvention,arethemainlawsgoverningaviationliability.TheCivilAviation(AircraftAccidentandIncidentInvestigation)

Regulations, 2013 regulate aircraft accidents and incidents inconformity with the International Civil Aviation Organisation(ICAO)policydocuments.Theseregulationsdonotdiscriminatebetween domestic and international carriage by air.TheCBAAalsoensurescompensationisprovidedtopersons

who suffer damage while on an aircraft.


Nocasesofparticularnotehavearisen.



Theeffectofregistrationof theowner’s interest in theKenyacivilaircraftregisteristhatitconstitutespublicnoticetothirdparties of the owner’s ownership of the aircraft.


ThereisnoaircraftmortgageregistryinKenya.TherearenoprovisionsintheCAAtoregisteraircraftmort-

gages,eitherinanaircraftmortgagesregistryorontheKenya

UndertheLASRegulations,alicencemaybeissuedforanycategoryofairserviceandaircraftassetouttherein,andtheseinclude:scheduledairservicessuchastransportofpassengersorcargoormailandemergencymedicalservices;aerialworksservices such as advertising operations, agricultural spraying,seeding and dusting, fire spotting, control and fighting; andrecreational flying including microlights and balloons.An application for a licence is made to the KCAA in a

prescribedform.AlicencewillbegiventoanapplicantiftheapplicantsatisfiesalltherequirementsoftheLASRegulations.Anapplicantfora licenceisalsorequiredtodemonstratethatthey are able to comply with the CAA and other applicablelaws,andthattheyhavethefinancialandtechnicalcapabilitytoundertaketheproposedairservices.


Pleaseseeourresponsetoquestion1.1above.


No,itisnot.


No.TheCivilAviation(AirLicensing)Regulations,2009allo-cate charters into the category of non-scheduled air transport. TheKCAA,however,requirescharteroperatorswhomaintainregularfrequenciesandtimingsofcharters,toapplyforasched-uledoperator’sairservicelicence.


Anypersonseekingtouseoroperateanaircraftfortheprovi-sion of any category of air services within Kenya must belicensedundertheLASRegulations. Apersonqualifiesforalicenceif:thatpersonisacitizenofKenya;or,inthecaseofabodycorporateorapartnership,atleast51%ofthevotingrightsareheldbytheKenyanstateorbyacitizenofKenya,orboth.Whenitcomestoforeigncarriers,theKCAAmaygiveanoper-ating authorisation to an airline whose principal place of busi-ness isoutsideKenya tooperate scheduled services inKenya.SuchauthorisationwillbegrantedintheeventthatthereisinforcebetweenKenyaandthestate inwhichtheairlinehas itsprincipalplaceofbusiness,anairserviceagreementorarrange-mentunderwhichscheduledairservicesmaybeoperated.TheKCAAmayalso issue a licence to a foreign air carrier

tooperatenon-scheduledinternationalairservicesifthecarrieris appropriately certificated by a competent authority in the homestatefortheservices.Aforeignaircarrierissuedwiththelicencetooperatenon-scheduledairservicesmustonlytakethetrafficthatitoriginallybroughtin.Inadditiontomeetingtheoperational and maintenance standards, foreign-registered oper-ators are not permitted to operate a foreign-registered aircraft in

191Kaplan & Stratton Advocates


ActandundertheKenyaCustoms&ExciseAct.Aircraft,partsand accessories thereof, including engines for use by a national carrieroranyairlinedesignatedunderanairservicesagreementbetweentheKenyanGovernmentandaforeigngovernment,areexemptfromCustomsDuty.However,undertheMiscellaneousFeesandLeviesAct,2016

(the“Miscellaneous Fees and Levies Act”),arailwaydevel-opmentlevyof1.5%ofthecustomsvalueoftheaircraftshallbepaid by the importer of an aircraft for home use at the time of the aircraft’sentryintothecountry.Uponconfirmingthepaymentofthetaxandlevies, theCustomsServicesDepartmentoftheKenya Revenue Authority issues an importer with a customsclearance certificate.UndertheIncomeTaxAct(Chapter470oftheLawsofKenya)

(the“ITA”), there isnoobligationtodeductandwithhold taxfrom any payments of rent for aircraft or aircraft engines made to anon-residentpersonnothavingapermanentestablishmentinKenya.However,anypaymentofinterestandcommitmentfeesunderanaircraftleaseagreementissubjecttowithholdingtaxattherateof15%forpaymentstobotharesidentandtoanon-resi-dentpersonnothavingapermanentestablishmentinKenya.AtransferofanaircraftiseffectedbyaBillofSale.ABillof

Sale is subject toastampdutychargeat the rateof2%of thetransferamount.Suchaninstrumentisrequiredtobestampedinorder tobeadmissibleasevidence inaKenyancourt. Theinstrumentisrequiredtobestampedwithin30daysofitsdate.WheretheinstrumentisexecutedoutsideKenya,stampingmustbe donewithin 30 days of first being introduced intoKenya.Therefore,aslongastheBillofSaleisretainedoutsideKenya,itwillnotbesubjecttoKenyanstampduty.TheKCAAwillacceptanotarisedtruecopyofaBillofSaleexecutedoutsideKenyaasevidenceofownershipofanaircraftinsupportofanapplicationforregistrationoftheaircraftontheKenyaregister.AircraftLeaseAgreementsandNovationAgreementsrelating

tosuchleasesaresubjecttoastampdutychargeofKShs.200/-and they have to be stamped within 30 days of their date orwithin30daysoffirstbeingintroducedintoKenyainordertobeadmissibleasevidenceinaKenyancourt.


Pleaseseeourresponsetoquestion1.1above.Kenyahasalsoratifiedthefollowingconventionsandprotocols:(i) TheChicagoConvention,1944.(ii) TheRomeConventionontheUnificationofCertainRules

relatingtoPrecautionaryArrestofAircraft,1933.(iii) TheGeneralConventiononInternationalRecognitionof

RightsinAircraft,1948.(iv) TheMontrealProtocols,1975and1976Nos.1and2;and

theMontrealConventions,1991and1999.(v) The Rome Convention relating to Damage Caused by

ForeignAircrafttoThirdParties,1952.(vi) The Tokyo Convention onOffences and CertainOther

ActsCommittedOnBoardAircraft,1963.TheCBAAalsogiveseffecttotheprovisionsoftheWarsaw

Convention.ThedefinitionoftheWarsawConventionintheCBAAincludesanyconventionwhichmayamendorreplacethesaidconventionandisratifiedoraccededtobytheGovernment.The Montreal Convention 1999 was ratified by Kenya on 7January2002.AlthoughtheKenyanParliamenthasnotdomes-ticated thesame, it is applicable inKenyabyvirtueofArticle2(6)oftheConstitution.

civil aircraft register. The KCAA will, however, record theinterest of a financier or security holder on theCertificate ofRegistration (“CoR”) of the aircraft upon receipt of variouspieces of documentation when an application for registration of theaircraftontheKenyaregisterisfiledwiththeKCAA.An aircraft mortgage would, however, be required to be

registeredontheInternationalRegisterinaccordancewiththerequirementsunder theCapeTownConventionand theCapeTownProtocoland theRegulationsmade thereunder. WherethereisaregistrationofasecurityinterestattheInternationalRegistry, thesecuritywill takepriority inaccordancewith theprovisionsoftheCapeTownConvention.


PursuanttotheCompaniesAct,2015(the“Companies Act”), the Registrar of Companies maintains a register of charges(includingmortgages)createdbyaKenyancompany,includinga charge on an aircraft owned by a Kenyan company or inwhichithasaproprietorialinterest.Inordertoperfectasecu-rityunder theCompaniesAct, a securityagreementwouldberequiredtobestampedwithstampdutyand lodgedforregis-trationtogetherwiththerequisitestatutoryform(FormCR25).Thismustbedonewithin30daysfromthedayofthecreationofthesecurityinterest.IfcreatedoutsideKenya,thechargemustbepresentedforregistrationwithin21daysofthedayonwhichacopyofitcouldhavebeenreceivedinKenya.Ifthesecurityis not registered within the prescribed period, the charge will bevoidasagainstthirdparties.However,thisdoesnotaffectthe operation of the contract or obligation for repayment of the moneysecured.AchargeregisteredattheCompaniesRegistrywilltakepriorityoverallotherunregisteredchargesorchargessubsequentlyregistered.Commonlawandstatutoryrightsoflienordetentionrights

maytakepriorityoveraregisteredsecurityinterest.


UnderKenyanlaw,thereisnoconceptoftitleannexationofanengine which is installed on-wing on aircraft owned by another party.However,itisadvisabletorequirethelesseeofanaircrafttoaffixplaquesontheaircraftandenginesidentifyingtheowner.


The hiring, leasing and chartering of aircraft are presently exemptservicesundertheValueAddedTaxAct,2013(the“VAT Act”). Payments for these servicesdonotattractvalueaddedtax(“VAT”).Aircraft and helicopters of unladenweight exceeding 2,000

kgarealsocurrentlyexemptfromimportVATundertheVAT

192 Kenya


It is not clearwhether theKCAA andKAA are legallyentitled to detain the aircraft for outstanding charges dueonotheraircraftoperatedbyalessee.However,thewordingoftherelevantregulationsissufficientlywidetoallow detention of the aircraft for outstanding charges due on other aircraft operated by a lessee, but there is no prec-edent of this happening.


The lessor can enforce the lease by taking physical possession of the aircraft on default by the lessee without the need for judi-cialproceedings,providedthatthelesseedoesnotcontestthelessor’sright torepossessionoftheaircraft intheHighCourtofKenya.Nopermissionofanyotherpartyisrequiredforthelessortotakephysicalpossessionoftheaircraft,providedthatthe lessee has not obtained an injunction in any proceeding in theHighCourtofKenyainwhichithascontestedthelessor’sright to repossess the aircraft.Ifthelesseedoesnotcooperateandopposesthederegistra-

tion of the aircraft through court proceedings, obtaining an injunction in the process, the deregistration will be delayed until the outcome of the court proceedings, which may take at least three years from filing of the lessor’s response papers in court to reach a final hearing and final decision by the court.


TheHighCourtofKenyaistheappropriatecourtforaviationdisputes. It has unlimited original jurisdiction over civil andcriminalmatters.TheIIAEActalsogivestheHighCourtofKenyajurisdictioninrespectofclaimsbroughtundertheCapeTownConventionortheCapeTownProtocol,ortograntreliefandawarddamagesasprovidedunderthesame.


Serviceofsummons,plaints,defencesandotherpapersrelatingtocourtproceedingshavetobebyphysicalservice,unlessthecourtordersthatservicecanbebysubstitutedservicethroughadvertisement inKenyannewspapers. Where serviceof suchpapers is to bemadeoutsideKenya, an applicationhas to bemade for an order from the Kenyan court in which suchproceedingshavebeenfiled,authorisingserviceoutsideKenya.These requirements apply equally to domestic airlines/partiesandnon-domesticairlines/parties.


Intheeventthattheowner/lessor’srighttorepossessaleasedaircraft,undertheself-helpremedyreferredtoinquestion3.2,is disputed in court by the lessee, the court has powers to make the following orders:


Pleaseseeourresponsetoquestion1.1above.Wheretheprovi-sionsoftreatiesorconventionsratifiedbyKenyahavenotbeendomesticatedintospecificKenyanstatutorylaws,theystillformpartofthelawofKenyabyvirtueoftheprovisionsofArticle2(6)oftheConstitution.


Kenyan statutory law does not contain any taxation benefitswhichenhanceaircrafttradingorcontainfavourabletaxprovi-sionsfordisposalofaircraft,savefortheprovisionsoftheVATAct which exempt sales of aircraft and helicopters exceeding2,000 kg in weight. As regards payments of rentals underaircraftleases,pleaseseeourresponsetoquestion2.5.



(i) UnderKenyacommonlaw,repairers’liensmayariseoveran aircraft under normal common law principles, which arethesameasthoseinEngland,wherethelesseeallowsthe aircraft to be repaired or maintained by repairers.

Asageneralstatement,arepairercanonlyclaimaposses-sory lien whilst the aircraft is still in the repairer’s posses-sion,andtheholderofsuch liendoesnothavetherightto sell the aircraft in any circumstances, either directly or throughthecourts,saveincaseswheretherearerightsofsaleundercontractswhichprovideforcontractualliens.

Finally, it is tobenotedthatArticle39(1)(a)oftheCapeTownConventionprovidesthatlienscreatedbyrepairersonobjectsintheirpossessionshallhavepriorityoverregis-teredinternationalrights,whetherinoroutsideinsolvencyproceedings.

(ii) IfthelesseedefaultsinpayingnavigationfeesinrespectofanaircrafttotheKCAA,orlanding,take-offandparkingfees to the KAA, those two authorities have statutorypowers to seize and detain the aircraft until such fees are paid.TheKCAAandKAAActandRulesstatethatsuchauthorities are entitled to also look to the owner of the aircraft for the payment of such official fees. The only way to mitigate this potential situation is for the lessor to requireregularstatementsofaccountofoutstandingfeesfromtheKCAAandKAA,pursuanttolettersofauthor-isation sent by the lessee to the KCAA andKAA, andto provide periodical statements of outstanding officialfeesduetotheKCAAandKAAaspreconditionsfortheleasing of the aircraft.

TherightsoftheKCAAandKAAareprincipallyconfinedto detaining the aircraft until the fees referred to abovearepaid.However,ifthefeesarenotpaid,theycansuetheowneroftheaircraftintheKenyancourtsandobtainsummaryjudgment.Uponobtainingajudgment,theycanattachthedetainedaircraftandsellittorecoverfeesdueto them.



Additionally, pursuant to the Competition Act, no personmay implement a proposed merger unless the proposed merger isapprovedbytheCAKand implemented inaccordancewithanyconditionsattachedtotheapproval.TheCompetitionActdefinesamergerasanacquisitionofshares,businessorotherassets,whetherinsideoroutsideKenya,resultinginthechangeof control of a business, part of a business or an asset of a busi-ness in Kenya in anymanner, and includes a takeover. TheCompetitionActstatesthatamergeroccurswhenoneormoreundertakingsdirectlyorindirectlyacquireorestablishdirectorindirectcontroloverthewholeorpartofthebusinessofanotherundertaking,andthiscanbeachievedinanymannerincluding,inter alia,amalgamation,takeoveroranyothercombinationwiththe other undertaking.ItisalsoimportanttonotethattheCompetitionActdefines

an undertaking as any business intended to be carried on, including for gain or reward by a person, a partnership or a trust intheproduction,supplyordistributionofgoodsorprovisionofanyservice,andincludesatradeassociation.ItisalsonotablethattheCAKandKCAAhaveenteredintoamemorandumofunderstanding, which outlines a framework through which the tworegulatorshaveagreedtoworktogethertoregulatecompe-titionmattersinKenya’saviationindustry.Kenya is also aMember State of the CommonMarket for

EasternandSouthernAfrica(“COMESA”) and has ratified the CommonMarket forEasternandSouthernAfricaTreaty (the“COMESA Treaty”). Pursuant to theCOMESATreaty, theCOMESACompetitionRegulations (the “CC Regulations”) are binding in Kenya. The CC Regulations provide, inter alia, that all mergers (regardless of size) are notifiable to theCOMESACompetitionCommission(the“CCC”) if the buyer, thetargetorbothofthem“operate”intwoormoreCOMESAMember States and the threshold of combined annual turn-over or assets is exceeded. Currently the thresholds aremetwherethecombinedannualturnoverorvalueofassets(which-everishigher)intheCommonMarketofallpartiestoamergerequalsorexceedsUSD50million;andtheannualturnoverorvalueofassets(whicheverishigher)intheCommonMarketofeachofatleasttwoofthepartiestoamergerequalsorexceedsUSD10million,unlesseachofthepartiestoamergerachievestwo-thirdsof itsaggregate turnoverorassets in theCommonMarketwithinoneandthesameMemberState.TheCCRegulationsstatethatamergermeansthedirector

indirectacquisitionorestablishmentofacontrollinginterestbyone or more persons in the whole or part of the business of a competitor, supplier, customer or other person, whether that controllinginterestisachievedasaresultof:(a)thepurchaseorlease of the shares or assets of a competitor supplier, customer orotherperson; (b) the amalgamationor combinationwith acompetitor, supplier, customerorotherperson;or anymeansother than those specified in (a) or (b). Controlling interest,on the other hand: in relation to any undertaking, means any interestwhichenablestheholderthereoftoexercisedirectlyorindirectlyanycontrolwhatsoeverovertheactivitiesorassetsoftheundertaking;andinrelationtoanyasset,meansanyinterestwhich enables the holder thereof to exercise, directly or indi-rectly,anycontrolwhatsoeverovertheasset.Itshouldbenoted,however,thatforajointventuretoconsti-

tutea“merger”withinthemeaningofArticle23(1)oftheCCRegulations, itmust be a “full-function” joint venture. Thismeans that it must perform, for a long duration, all the func-tions of an autonomous economic entity, including:(a) operating on a market and performing the functions

normally carried out by undertakings operating on the samemarket;and

(1) Grantinteriminjunctionsagainstthelesseeorlessorfromleasing or selling the aircraft to any third party and from flyingtheaircraftoutofKenya,andaninteriminjunctionagainsttheKCAAorderingitnottoderegistertheaircraftandtoallowtheaircrafttobeexportedbythelessoruntilthe final determination of the court case.

(2) Grantapermanentinjunctionagainstthelesseepreventingthe lessor from repossessing the aircraft, deregistering it fromtheKenyaregisterandexportingitintheeventthatthelessee’scourtactiontopreventthelessorfromrepos-sessing the aircraft is unsuccessful.

(3) Order theKCAAtoallowtheaircraft tobederegisteredfrom theKenya register and flown out ofKenya by thelessorintheeventthatthecourtfinallyrulesthatthelessoris entitled to terminate the lease and repossess the aircraft.

(4) Order the lessee topaydamages to the lessor for lossofrevenuefromthelessor’sinabilitytorepossessandsubse-quentlysellorleasetheaircrafttothirdpartiesintheeventthat the lessee’s court action to prevent the lessor fromrepossessing the aircraft is unsuccessful.

(5) Ordertheunsuccessfulpartyinthecourtactiontopaytheother party the costs incurred by the other party in such court action.

InarbitrationproceedingstakeninKenya,thearbitratorcanissuethesameordersaslistedabove.Undersection36(1)oftheKenyaArbitrationAct,adomesticarbitralawardshallberecog-nised asbinding andupon application inwriting to theHighCourt,andshallbeenforcedsubjecttotheprovisionsofsection37oftheAct.Under section 36(2) of theAct, an international arbitration

award shall be recognised as binding and enforced in accordance withtheprovisionsoftheNewYorkConvention,subjecttotheparty relying on such an award, when applying for its enforce-ment, furnishing to the High Court the documents listed insection36(3)oftheAct.


ThereisarightofappealtotheKenyaCourtofAppealagainstanydecisionbytheHighCourtandagainstanydecisionofanarbitrator or arbitrators in an arbitration.



TheCompetitionAct,2010(the“Competition Act”)governscompetition matters in Kenya. Under section 21 of theCompetitionAct,agreementsbetweenundertakings,decisionsby associations of undertakings, decisions by undertakings or concertedpracticesbyundertakingswhichhaveastheirobjectoreffecttheprevention,distortionorlesseningofcompetitionintrade inanygoodsorservices inKenyaorapartofKenyaare prohibited. The contemplated agreements, decisions and concerted practices contemplated include agreements concluded between: parties in a horizontal relationship, being undertak-ingstradingincompetition;orpartiesinaverticalrelationship,being an undertaking and its suppliers or customers or both. It is possible to obtain an exemption from the CompetitionAuthorityofKenya(the“CAK”) when an undertaking is a joint venture that may be construed as a restrictive trade practiceundersection21oftheCompetitionAct.

194 Kenya


Dependingonthecomplexityof themerger, theCAKmayextendtheperiodsforafurther60days(maximum).TheCAKmay also call for a hearing conference to be held to consider the merger, inwhichcase theCAKmust respondwithin30daysafter its conclusion.

The merger filing fees are calculated on the basis of applicable turnoverthresholds,asfollows:■ Applicationforexclusion–nil.■ KES500milliontoKES1billion–KES500,000.■ KES1billiontoKES50billion–KES1million.■ KES50billionandabove–KES2million.


TherearenosuchrulesinKenya.


TheCharterIncentivesProgram(the“CIP”) was an scheme by theKenyaMinistryofTourismthatranfromJanuary2016to30June2018.The CIP provided the following subsidies in respect of all

tourist charter aircraft with passengers terminating at MoiInternationalAirportMombasaandMalindiAirport:(a) NolandingfeesduringthesubsistenceoftheCIP.(b) ApassengersubsidyofUSD30perseatfilledbyinterna-

tional passengers who terminate or disembark from the aboveairportsduringthesubsistenceoftheCIP.

Inorder toobtain the subsidies, thecharter airlineshad toensure that aminimumof80%of thepassengersbroughtbyanycharterairlineterminatedinMombasaorMalindi,andhadtocommit tooperate theKenya route foraminimumof twoconsecutiveyears.AlthoughtheCabinetSecretaryfortheMinistryofTourism,

onexpiryof theCIP in2018,unofficiallyannouncedthat theincentivewouldcontinuetorununtiltheyear2020,therehasbeen no official communication of this.


■ TheDataProtectionAct(the“Act”) is the main regulatory instrumentgoverningtheacquisition,retentionanduseofpassenger data.

■ Undersection26oftheAct,passengershavethefollowingrights:(a) tobeinformedoftheusetowhichtheirpersonaldata

istobeput;(b) toaccesstheirpersonaldatainthecustodyofthedata

controllerordataprocessor;(c) to object to the processing of all or part of their

personaldata;(d) tothecorrectionoffalseormisleadingdata;and(e) tothedeletionoffalseormisleadingdataaboutthem.

(b) having amanagement dedicated to its day-to-day opera-tions and access to sufficient resources including finance, staff and assets (tangible and intangible) in order toconduct,foralongduration,itsbusinessactivitieswithintheareaprovidedforinthejointventureagreement.

A joint venture established for a purposefully finite periodwillnotbeviewedashavingalongduration.TheCCCwillconsiderajointventurenottobefull-functionif

itonlytakesoveronespecificfunctionwithintheparentcompa-nies’businessactivitieswithoutaccesstothemarket,e.g.jointventureslimitedtoresearchanddevelopmentorproduction.

The strong presence of the parent companies in upstream or downstream markets is a factor to be taken into consideration inassessingthefull-functioncharacterofajointventurewherethis presence leads to substantial sales or purchases between the parentcompaniesandthejointventure.Thefactthatthejointventure reliesalmostentirelyonsales to itsparentcompaniesorpurchasesfromthemonlyforaninitialstart-upperiod(e.g.,three years) does not normally affect the full-function character ofthejointventure.Suchastart-upperiodmaybenecessaryinordertoestablishthejointventureonamarket.Ifthejointventuresellsorisexpectedtosellmorethanhalf

of its output to persons other than its parent companies, it will typically be considered to be full-function.




Yes,Kenyahassuchasystem.




UndertheCompetitionAct,eachpartytothemergerisrequiredto complete a prescribed merger notification form and submit the same to the CAK together with a copy of the collabora-tionagreement/acquisitionagreementandthesupportingdocu-ments specified in the merger notification form. A mergernotification formwith limited informationwouldbe requiredin instances where exclusion is sought. For non-contentiousmergers, the notification forms are submitted by the merging partiestotheCAKjointlywithanexplanatorycoverletter.The Competition Act prescribes the following timelines

withinwhichtheCAKmustrespondtoamergernotification:(i) within60daysofreceiptofthenotification;or(ii) if theCAK requests additional information (required to

bedonewithin30daysofthenotification),within60daysafter receipt of such information.




TheKAAActgovernstheKAAandlistsitsfunctionsandobli-gations as the authority owning, administering and operating airports.


Theconsumerprotection regime inKenya isgovernedby theConstitution (Article 46) and the Consumer Protection Act,2012(the“CPA”).TheCPAestablishesacomprehensivelegalmechanism for consumer protection inKenya. Article 46 ofthe Constitution provides that consumers are entitled to theright to goods and services of a reasonable quality, and theCPAsetsouttherightsandobligationsofconsumersgenerallyandunderspecificconsumeragreements.Section91(2)oftheCPAimposesanobligationonpassengeraircarrierstoprovidesuchovernightaccommodationormealsasmaybeprescribedinRegulationstobemadeundertheAct,topassengerswhoseflightshavebeencancelledoraresubjecttolongdelays.Todate,thoseregulationshavenotbeenpublished,butSection

93(2)oftheActindicatesthattheyshallprovideforpassengerrights and standards of service by air carriers, cancellations,overbooking, baggage concerns, compensation for passengersand the right to deplane where such rights are infringed. Section 92(3)statesthatsuchregulationsmayprovideforapenaltynotexceedingthesumofKShs.500,000orimprisonmentforbreachof the regulations.


ThereareseveralGDSsinvariousfields.Forcourierservices,weareawareofDHL,FedExandUPS.


Pursuant to theNational ICTPolicy (the“Policy”), any firm licensed to provide communication services (telecoms, postalorcourierorradiocommunicationsservices)asanoperatororserviceprovidershallberequiredtomaintainsuchserviceandshall ensure that, at the end of the third year from the date of the issuance of a licence, or earlier as the case may be, and there-afterforthedurationofthelicenceterm,ithasnolessthan20%ownershipandcontrolbyKenyanpersons,howsoeverachieved.


ThiswouldbesubjecttotheprovisionsoftheCompetitionActandtheCCRegulations.


Unlike the European General Data Protection Regulation,which specifically provides that appropriate security mustbeprovided toprotect against the accidental lossofdata, theKenyaDataProtectionAct is silent on the aspect of the lossofdata.However,undertheAct,adataprocessorinvolvedinthe processing of personal data must meet certain obligations, whichincludeprovidingsecuritymeasurestoensuretheprotec-tion of data.Insection65oftheAct,adataprocessorwillbeheldliablefor

damage caused by the processing of data if it has not complied with an obligation under theAct specifically directed at dataprocessors, or if it has acted outside, or contrary to, the data controller’s lawful instructions.Ifthelossofdatabyacarriercausesdamagetoadatasubject,

the carrier may be liable to compensate the data subject for the damage if it did not act in accordancewith the provisions oftheActtoensureadequatesecuritymeasureshadbeentakentoavoidthelossofthedata.The maximum fine is Kshs.3 million or an imprisonment

termof10years,orboth.Acarrierwillnotbeheld liablefordamageif itprovesthat

it was not responsible for the loss of the data leading to the damage.


TrademarkscanberegisteredundertheTradeMarksActandtrade mark infringement and passing off proceedings can be takenintheHighCourtofKenyaforprotectionofregisteredand unregistered trade marks. The Copyright Act providesprotection for copyright in works listed in the Act. TheIntellectualPropertyActconfersprotectiononregisteredindus-trialdesignsandpatents.UnderthoseActs,copyrightinfringe-mentcasescanbetakenintheHighCourttoprotectsuchrights,andinfringementactionscanbetakenintheIndustrialPropertyTribunal for infringement of registered industrial designs and registered patents.As regards protection of data of a proprietary nature, see

question4.8.


Saveforthe limitedprovisionsofsection91(2)oftheCPA,there isatpresentnoKenyan legislationrelating to theabovematters(seequestion4.14).


ThereisapenaltyleviedbytheKenyaCivilAviationAuthorityforlatearrivalanddepartureofflights.

196 Kenya




5 In Future


Atpresent,thereisnoindicationofanysuchpendingorregula-torychangesaffectingtheaviationindustryinKenya.

197

Aviation Law 2020


Peter Hime is a partner in the Corporate/Commercial Department of Kaplan & Stratton. He qualified as a Kenyan Advocate in 1970 and joined Kaplan & Stratton in the same year. His work encompasses aircraft leasing and the registration and de-registration of aircraft, and general advice on Kenyan aviation law, intellectual property and general commercial law. His wide experience also includes, amongst others, the law relating to trade marks, copyright, patents, industrial designs, and anti-counterfeit law.

Kaplan & Stratton AdvocatesWilliamson House4th Ngong AvenueP.O. Box 4011100100 NairobiKenya

Tel: +254 20 284 1000Email: [email protected]: www.kaplanstratton.com

Ruth Kirunga is a partner in the Corporate/Commercial Department of Kaplan & Stratton. She advises clients on a wide range of corporate/commercial matters, including: aircraft leasing and financing and advice on Kenyan aviation law; conducting legal due diligences and foren-sics; advising and preparing documentation for mergers, joint ventures and acquisitions; and loan financing arrangements. Ruth’s client portfolio comprises primarily local and international banks and developmental financial institutions, local and international corporate clients, and foreign investors looking to establish a business presence in Kenya.



Kaplan & Stratton is a premier law firm providing a comprehensive range of legal services and solutions for domestic and international clients. The firm has a reputation as one of the leading law firms in the East African region. International and cross-border work forms an important part of our busi-ness. The firm was established in 1938. The firm comprises 17 partners, all of whom are Kenyan citizens. There are 15 partners in the Commercial Department and seven partners practise in our Dispute Resolution Department, supported by a team of over 40 associates. A number of interns and paralegal staff make up our full complement. This makes us one of the largest legal practices in East Africa.Our clients are private and public companies from Kenya and abroad, local and international banks, development finance agencies and non-govern-ment organisations in all sectors of the economy.

Matthew Arrumm is an Associate in the Corporate/Commercial Department of Kaplan & Stratton. He advises clients on a wide range of corporate matters, including: conducting due diligences; advising and preparing documentation for mergers and acquisitions; loan financing arrangements; and drafting and reviewing various commercial agreements. Matthew specialises in banking and finance, capital markets and securities law, financial services and investment management, project finance and infrastructure, energy environmental and regulatory law.



We advise on aviation law, business law, corporate finance and capital markets, project finance, financial services, banking, power, telecommunica-tions law, infrastructure, transport, manufacturing, tourism, agriculture, and horticulture.We also represent clients in litigation and provide dispute resolution advice in all of these areas. The firm also works as Kenyan counsel for many inter-national law firms and their clients, mainly from Europe, North America, Asia and South Africa.

www.kaplanstratton.com


Aviation Law 2020

Chapter 27198

Malaysia

Azmi & AssociatesNazran Arvind Bin Nahdan Rengganathan

Norhisham Abd Bahrin

Malaysia



In order to obtain an operating licence, the following steps must be taken:1. Any person intending to undertake carriage by air or use

any aircraft for the carriage of passengers, mail or cargo for hire or reward for any journey between two or more places, of which at least one place is in Malaysia, is required to apply for an operating licence from MAVCOM as follows:(a) Air Service Licence (“ASL”) – for fixed, scheduled

journeys; or(b) Air Service Permit (“ASP”) – for unscheduled journeys.

2. Upon submitting the application form for the ASL or ASP (as the case may be), MAVCOM will conduct an evaluation of the applicant and, upon satisfactory conclusion, issue a Conditional Approval. The applicant is then required to apply for an Air Operator’s Certificate (“AOC”) from the CAAM, supported by the Conditional Approval issued by MAVCOM. An AOC certifies that the holder is compe-tent to operate flights, and that the aircraft operated by him on such flights is operated safely.

3. An ASL or ASP will then be issued to the applicant, subject to the applicant having obtained a valid AOC from the CAAM.

4. An application for an ASL or an ASP will require a minimum of 90 days to be processed by MAVCOM.

5. Documents to be submitted to MAVCOM on application for an ASL or ASP include details of the company, share-holding structure, organisational structure, financial status and projections, details of the applicant’s aircraft, aircraft certificate(s) of airworthiness, aircraft maintenance programme, and complaints management procedure.

6. Flights across Malaysia by air carriers from contracting states to the International Air Services Transit Agreement are exempted from having an ASP or an ASL.


The principal pieces of legislation which govern air safety are as follows:1. Civil Aviation Act 1969This Act prescribes or supplements requirements relating to, among others, maintenance of aircraft and components, certi-fication of airworthiness of types of aircraft and components, training organisations, and licences for maintenance engineers.

1 General


The principal pieces of legislation regulating civil aviation in Malaysia are as follows:1. Acts

(a) Civil Aviation Act 1969.(b) Aviation Offences Act 1984.(c) Carriage by Air Act 1974 (“CBAA 1974”).(d) International Interests in Mobile Equipment (Aircraft)

Act 2006.(e) Malaysian Aviation Commission Act 2015 (“MAVCOM

Act 2015”).(f ) Civil Aviation Authority of Malaysia Act 2017.

2. Subsidiary Legislation/Regulations/Code/Directives(a) Civil Aviation Regulations 2016.(b) Civil Aviation (Security) Regulations 2019.(c) Civil Aviation (Aerodrome Operations) Regulations

2016.(d) Civil Aviation (Fees and Charges) Regulations 2016.(e) Malaysian Aviation Commission (Aviation Services

Charges) Regulations 2016.(f ) Malaysian Aviation Commission (Regulatory Services

Charges) Regulations 2018.(g) Malaysian Aviation Consumer Protection Code 2016

(“Consumer Protection Code”).(h) Minister of Transport Directives 2016.

3. Regulatory Bodies(a) Ministry of Transport Principal policymaker for the aviation industry in

Malaysia.(b) Civil Aviation Authority of Malaysia (“CAAM”) Technical regulator overseeing safety, maintenance,

security and the development of the civil aviation industry.

(c) Malaysian Aviation Commission (“MAVCOM”) Economic regulator overseeing commercial, consumer

and economic matters related to civil aviation matters in Malaysia. MAVCOM is also an independent adviser to the Ministry of Transport on economic matters pertaining to civil aviation.

(d) Air Accident Investigation Bureau Independent investigation entity under the Ministry of

Transport responsible for investigation of all air acci-dents and incidents.

199Azmi & Associates


carriers such as the requirement for the provision of financial security via a security deposit or bank guarantee, and having valid aviation liability and/or other relevant insurances with appropriate coverage.


The following regimes apply to air accidents:Applicable Laws1. Part XXVI Investigation of Accidents, Civil Aviation

Regulations 2016.2. ICAO Annex 13 Aircraft Accident and Incident

Investigation.3. ICAO Manual of Aircraft Accident and Incident

Investigation.Procedures (a) All accidents and incidents involving Malaysian-registered

aircraft and any aircraft in Malaysia will be investigated by Inspectors of Air Accidents under the Air Accident Investigation Bureau.

(b) The Chief Inspector of Air Accidents shall have authority to appoint any other persons as experts to assist in the investigation. He may lead the investigation or appoint an inspector to be the investigator-in-charge.

(c) The pilot in command, owner, operator or hirer of an aircraft involved in an incident/accident is legally required to immediately notify any incident/accident to the inves-tigator-in-charge and shall also disclose to the Chief Inspector of Air Accidents and the Chief Executive Officer of the CAAM (“CAAM CEO”) the presence of dangerous goods on the affected aircraft.


The following are the recent notable developments in Malaysia involving air operators and airports:1. Establishment of the National Civil Aviation Security

Authority (“NCASA”): The Civil Aviation (Security) Regulations 2019 were passed on 29 March 2019, estab-lishing the NCASA to safeguard civil aviation against any unlawful interference and to regulate the security of civil aviation in compliance the provisions of Annex 17 of the Chicago Convention. The functions of the NCASA include: establishing civil aviation security policies; co-or-dinating civil aviation security activities between govern-ment entities, operators, aerodrome operators, air traffic control service providers and any other relevant persons; reviewing threat levels; and conducting risk assessments in respect of civil aviation security.

2. Enhancement of the Malaysian Aviation Consumer Protection Code 2016: On 1 June 2019, the Consumer Protection Code was amended to include new provisions on various matters, including full disclosure of the final price of an air fare, disclosure of key terms and conditions for air ticket purchase, compensation and care for flight rescheduling and route cessation, a wheelchair service for persons with disability, and obligations on airlines to publish on their website the consumer rights provided under the Consumer Protection Code.

2. Civil Aviation Regulations 2016 This Regulation sets out general rules relating to matters such as airworthiness of aircraft, environmental standards, maintenance of aircraft, aircraft crew and licensing, operation of aircraft, conduct of operations, air traffic control, carriage of munitions of war and dangerous goods, unmanned aircraft systems, and investigation of aircraft accidents and serious incidents.3. Aviation Offences Act 1984The Montreal Convention 1971 for the Suppression of Unlawful Acts Against the Safety of Civil Aviation Certain has been given force of law via the Aviation Offences Act 1984.4. Civil Aviation Authority Act 2017The main regulatory body that governs air safety is the CAAM. Its establishment, functions and powers are statutorily provided for under this Act.


Air safety is not regulated separately for commercial, cargo and private carriers.


Air charters are not regulated separately for commercial, cargo and private carriers.


There are a number of restrictions or requirements imposed on international air carriers with respect to non-scheduled services, as follows:(a) International air carriers are prohibited from carrying out

the following operations:(i) carrying any passenger, cargo and/or mail from Malaysia

that differs from the passenger/cargo manifest;(ii) uplifting any passenger, cargo and/or mail within points

in Malaysia; and(iii) uplifting any passenger, cargo and/or mail on the posi-

tioning sector.(b) International air carriers are prohibited from uplifting any

cargo and/or mail from Malaysia to any points beyond Malaysia unless they are able to provide no-objection letters from Malaysian ASL and ASP (cargo) operators.


Airports in Malaysia may be state-owned and/or privately owned.


A number of charges typically imposed by airports on air carriers such as landing charges, passenger service charges, security charges, parking charges, etc. are regulated by MAVCOM. Apart from the preceding, airports may impose other requirements on

200 Malaysia


from said aircraft, among others) have been made. Engine owners and financiers may also register an international interest in the International Registry of Mobile Assets.


The sale and purchase of aircraft is exempt from Sales Tax.The transfer of ownership of aircraft will be subject to stamp

duty which is chargeable up to a rate of 4% of the market value of the aircraft or the purchase price (whichever is higher). Section 4A of the Stamp Act 1949 further states that stamp duty is still payable even if the bill of sale is executed outside of Malaysia, provided that the aircraft is still in Malaysia.

If the transfer of the aircraft is effected within Malaysian territory, ad valorem stamp duty will be liable to be paid by the purchaser. Exemption from stamp duty is only applicable in the case of reconstructions or amalgamations of companies and in cases of transfer of property between associated companies. It is therefore advisable, for tax efficiency purposes, that the aircraft is transferred and a bill of sale is executed while the aircraft is over international waters (not governed under any jurisdiction), to avoid paying stamp duty on the bill of sale. This is especially so in the case where the aircraft is to be sold and transferred out of Malaysia.


Malaysia is a signatory to the following international Conventions:(a) Chicago Convention 1944: Malaysia deposited its notifica-

tion of adherence on 7 April 1958.(b) Montreal Convention 1999: Malaysia ratified this

Convention on 29 February 2008.(c) Cape Town Convention 2001: Malaysia submitted its

instrument of accession on 2 November 2005 and the Convention entered into force on 1 March 2006.

Other aviation-related Conventions signed and/or ratified by Malaysia include:(a) Warsaw-Hague Convention 1929, as amended at The

Hague 1955 (“Warsaw-Hague Convention”).(b) Convention on the Privileges and Immunities of the

Specialized Agencies.(c) Warsaw-Hague Convention further amended by Montreal

Protocol No. 4.(d) Guadalajara Convention 1961.


The Conventions referred to in question 2.6 above are given legal effect in Malaysia through the following statutes:(a) Chicago Convention 1944 via the Civil Aviation Act 1969.(b) Montreal Convention 1999 via the Sixth Schedule of the

CBAA 1974.(c) Cape Town Convention 2001 via the International

Interests in Mobile Equipment (Aircraft) Act 2006.(d) Warsaw-Hague Convention via the First Schedule to the

CBAA 1974.



Registration of ownership of aircraft in the Aircraft Register constitutes proof of ownership of a particular aircraft. The CAAM will issue a Certificate of Registration for aircraft regis-tered in Malaysia and the said certificate will state the brief details of the owner and the operator of the aircraft, respectively.


Yes. Any mortgage of a Malaysian-registered aircraft may be entered into the Aircraft Register. Once a mortgage is regis-tered, ownership of the aircraft cannot be transferred until the mortgage is discharged with the consent of the mortgagee.


Aircraft may be registered and operated for commercial air transport or aerial work in Malaysia if the said aircraft is regis-tered in the name of a qualified person, i.e. the Government of Malaysia, a citizen of Malaysia or a company incorporated in Malaysia.

If a foreign citizen or a foreign company having a place of resi-dence or business in Malaysia holds a legal or beneficial interest by way of ownership or a share in an aircraft, the aircraft may be registered by the CAAM CEO in that person’s name. However, the said aircraft cannot be operated for commercial air trans-port or aerial work in Malaysia unless the aircraft is leased to and operated by a Malaysian entity.


Malaysia recognises that aircraft engines and other ancillary items may have separate ‘titles’, though these are not reflected in the Certificate of Registration, which reflects ownership of the aircraft as a whole rather than the individual title of ownership of other components of an aircraft.

Notwithstanding the above, Malaysian law recognises that engines and other accessories of aircraft may be charged by a company in favour of a financier, as per the Companies Act 2016. In performing a company search, the charge will show the specific assets charged by the company in favour of a third party, including the engines and other accessories.

Additionally, the owners and financiers of engines and other ancillary parts can enter into an aircraft mortgage by including circumstances where the mortgage must be released before the transfer of ownership of the entire aircraft can be effected. This will allow protective measures to be incorporated to prevent the owner of the engines and accessories from being ‘dragged along’ to deal with new owners until the relevant and necessary meas-ures (i.e. redemption, removal of such engines and accessories




Pursuant to the International Interests in Mobile Equipment (Aircraft) Act 2006, enforcement action to reacquire possession of the aircraft may be carried out without court action. This self-help remedy must be exercised in a commercially reason-able manner pursuant to the provisions of the lease or financing documents. Further, it is strongly advisable that an Irrevocable Deregistration and Export Request Authorization (“IDERA”) is entered into by the lessor/financier to allow self-help proceed-ings. It is also advisable to enter into a Deregistration Power of Attorney in addition to the IDERA, to allow the lender/finan-cier to deregister the aircraft in the event that a repossession action is challenged in the Malaysian courts.

In addition, under the International Interests in Mobile Equipment (Aircraft) Act 2006, a chargee or lessor is allowed to take possession or control of the aircraft upon breach by the chargor or lessee. A chargee may also sell or grant a lease, or collect or receive any income from the management or use of the aircraft, without a court order. Before the selling or grant of a lease on an object, a chargee is required to give prior notice of the proposed sale or lease to the interested person.


The relevant court for aviation disputes would depend on the subject matter of the dispute and its monetary value. There is no specific court for aviation disputes. Proceedings in relation to aviation disputes may be tried in the courts or be referred to an alternative dispute resolution medium available in Malaysia (i.e. via arbitration, mediation, etc.), subject to the parties’ agreement.Courts

Courts Civil Matters (Value of the claim/Monetary Jurisdiction)

Criminal Matters (Trial Jurisdiction)

Second Class Magistrates’ Court

Not exceeding RM 10,000

The maximum term of imprisonment provided by the law does not exceed 12 months’ imprisonment; or matters which are punishable by fine only.

First Class Magistrates’ Court

Not exceeding RM 100,000

The maximum term of imprisonment provided by the law does not exceed 10 years’ imprisonment; or matters which are punish-able by fine only.

Sessions Court

Not exceeding RM 1 million

All cases except those punishable with death.

High Court Unlimited All offences committed within its local jurisdiction.

(e) Warsaw-Hague Convention further amended by Montreal Protocol No. 4 via the Fifth Schedule to the CBAA 1974.

(f ) Convention on the Privileges and Immunities of the Specialized Agencies via the International Organizations (Privileges and Immunities) Act 1992.

(g) Guadalajara Convention 1961 via the Second Schedule to the CBAA 1974.


Companies incorporated under the Labuan Companies Act 1990 in Labuan, a mid-shore asset leasing jurisdiction, are subject to a favourable tax framework which, among others, provides for low corporate tax, access to the Malaysian Double Taxation Network and exemption from stamp duties on financing, leasing, acquisition or disposal of certain assets which are other-wise applicable to companies incorporated in Malaysia under the Companies Act 2016.



(a) CAAMUnder the Civil Aviation Regulations 2016, detention of aircraft may be made by the CAAM if a person defaults on payment of any fees or charges to the CAAM.

Upon detention, details of detention such as amount due, date and time of detention, and date and time of the entry made should be recorded in the Aircraft Register and an aircraft lien shall be vested in the CAAM upon such entry in the Aircraft Register. A notice of detention must be given to the owner, operator, lessee, hirer, charterer or pilot-in-command of the aircraft or the person who has security interest in the aircraft.

The CAAM CEO may deregister the Malaysian aircraft if the outstanding amount is unpaid at the end of six months after the date of the aircraft lien, or may sell the aircraft with the leave of the High Court if the outstanding amount is unpaid at the end of one month after the date of the aircraft lien. The CAAM CEO shall also have right to recovery, by civil action, of any fees or charges.(b) Unpaid Seller An unpaid seller in possession of the aircraft may retain posses-sion of the aircraft until payment is received under the Sale of Goods Act 1957.(c) Income Tax AuthoritiesThe customs authorities may refuse clearance of any aircraft from any aerodrome or airport in Malaysia until the income tax is paid by the operator of the aircraft under Section 105 of the Income Tax Act 1967.(d) CreditorA creditor may obtain an injunction restraining an aircraft pending judgment and execution of the judgment debt. This remedy is equitable and discretionary in nature.

202 Malaysia


Permission to appeal will be given where the court considers that the appeal would have a real prospect of success or there is some compelling reason why the appeal should be heard.ArbitrationAs a general rule, an arbitral award is binding. There is no appeal against an award made in Malaysia under the Arbitration Act 2005. The only challenge that can be made is an application to the High Court to set aside the award, based on the following grounds as provided in Section 37 of the Arbitration Act 2005:(a) incapacity of the party to the arbitration agreement;(b) invalidity of the arbitration agreement;(c) no proper notice was given of the appointment of an arbi-

trator or of the arbitral proceedings, or the arbitrator was otherwise unable to present that party’s case;

(d) the award deals with a dispute not contemplated or not falling within the terms of the submission to arbitration;

(e) the award contains decisions on matters beyond the scope of the submission to arbitration;

(f ) the composition of the arbitral tribunal or procedure was not in compliance with the agreement of the parties; or

(g) the High Court finds that the dispute was not arbitrable or the award is in conflict with the public policy of Malaysia.



Joint ventures between airline competitors are mainly regu-lated by MAVCOM under the MAVCOM Act 2015, Guidelines on Substantive Assessment of Mergers and Guidelines on Notification and Application Procedure for an Anticipated Merger or a Merger. For the aviation sector, the merger control regime is voluntary.

Section 49 of the MAVCOM Act 2015 prohibits any agree-ment which has the object or effect of significantly preventing, restricting or distorting competition in any aviation service market. In addition, Section 54 of the MAVCOM Act 2015 provides that mergers (including joint ventures) that have resulted or may be expected to result in a substantial lessening of competition in any aviation service market are prohibited.

MAVCOM has the power to investigate any aviation indus-try-related mergers and is more likely to investigate an antic-ipated merger or a merger if (i) the combined turnover of the merger parties in Malaysia in the financial year preceding the anticipated merger or the merger is at least RM 50 million, or (ii) the combined worldwide turnover of the merger parties in the financial year preceding the anticipated merger or the merger is at least RM 500 million. In the event that MAVCOM finds a merger transaction to have the effect of substantially lessening competition, MAVCOM can, among others, order that the merger be dissolved or modified.


As per the Guidelines on Aviation Service Market Definition published by MAVCOM on 19 July 2018, MAVCOM utilises the hypothetical monopolist test and, among others, considers the service market and geographic market dimensions in order to identify the relevant aviation service market.

Disputes between Air Service ProvidersDisputes between air service providers may be referred to MAVCOM by virtue of Section 75 of the MAVCOM Act 2015 upon fulfilling the following prerequisites:(i) the dispute must be on any matter under the MAVCOM

Act 2015; and (ii) the parties must have first attempted to resolve their

dispute via mediation and it failed to be resolved. Parties must notify MAVCOM on the commencement date of mediation and parties will be told to resolve their disputes within 30 days or such longer period as MAVCOM may approve, but it shall not be more than 60 days.

In the event that the parties fail to resolve their dispute through mediation within the stipulated period, MAVCOM will commence deciding on the matter. Decisions made by MAVCOM will be published and the parties will be provided with a copy of the decision. MAVCOM’s decisions may be regis-tered as judgments of the High Court, and the High Court may make an order requiring the parties to comply with its decision if any party fails to do so.


Court proceedings in Malaysia may be initiated by a writ or orig-inating summons. Under Order 10 of the Rules of Court 2012, a writ and originating summons must be served on each defendant to the proceeding personally or by pre-paid A.R. registered post.

For non-domestic parties which do not reside in Malaysia, the court may permit a writ or originating summons to be served on the defendant out of jurisdiction under Order 11 of the Rules of Court 2010.


Remedies available vary based on the nature of the dispute. Generally, the following remedies may be awarded by the Malaysian courts or arbitration: On an interim basis:(a) damages; and(b) an injunction may be awarded to prevent a party from

doing something for a specified period or until final judg-ment is reached.

On a final basis:(a) damages;(b) injunctions to require another party to do something or

prevent the other side from doing something;(c) orders to take possession of an aircraft and other aviation

assets; and(d) orders for the sale of an aircraft.


CourtsThere are rights to appeal against the decision of a court. Cases heard in the lower courts may be appealed to a higher court. An appeal to the Court of Appeal or Federal Court requires the leave of the Court of Appeal and Federal Court, respectively.



In the event that MAVCOM determines that there are compe-tition concerns, MAVCOM may proceed to conduct an exten-sive assessment of the merger or anticipated merger, which will entail detailed discussions between MAVCOM and the merger parties, and procurement of public feedback. Upon comple-tion of MAVCOM’s further assessment, MAVCOM will then make an infringement decision or a non-infringement decision, or accept an undertaking from the merger parties to resolve any foreseeable competition concerns (provided that the competi-tion concerns are clear).

The timeframe for the above assessment will be determined on a case-by-case basis subject to the complexity of the issues and readiness of any information MAVCOM may require.


There is no specific rule which governs financial support for the aviation sector.


The Malaysian Government fully subsidises the operations of the Rural Air Services (“RAS”) through the appointment of a local operator to provide non-economic aviation services in order to connect rural areas in East Malaysia.


The Personal Data Protection Act 2010 (“PDPA”) is the main regulatory instrument governing the acquisition, retention and use of personal data in Malaysia for commercial purposes.

Passengers have the right, upon request, to obtain informa-tion on their personal data, limit the processing of personal data and also to update or make amendments to their personal data held by airlines.


Section 9 of the PDPA provides that when processing personal data, a data user shall take practical steps to protect the personal data, among others, from any loss. There is no specific obli-gation imposed on the airline with regard to the loss of data. However, the contravention of Section 9 by a data user amounts to an offence which shall, on conviction, be liable to a fine not exceeding RM 300,000 or to imprisonment for a term not exceeding two years, or both.


The protection of intellectual property in Malaysia covers the protection of patents, trade marks, industrial design,


Yes; parties to the proposed merger may notify MAVCOM of the merger or anticipated merger and apply to MAVCOM for a deci-sion on whether the merger or anticipated merger infringes or may infringe Section 54 of the MAVCOM Act 2015. In the case of anticipated mergers, MAVCOM’s non-infringement decision may be limited to a period specified by MAVCOM and parties are required to complete the merger within the period specified.

With regard to prohibited agreements under Section 49 of the MAVCOM Act 2015, the relevant parties may apply for:(a) an individual exemption from MAVCOM; or (b) a relief of liability for the infringement of Section 49 of

the MAVCOM Act 2015, and MAVCOM may grant an exemption subject to the prohibited agreement fulfilling the criteria under Section 50 of the MAVCOM Act 2015 which includes:(i) significant identifiable technology, efficiency or social

benefits directly arising from the agreement;(ii) the benefits could not reasonably have been provided

by the parties to the agreement without the agree-ment having the effect of preventing, restricting or distorting competition;

(iii) the detrimental effect of the agreement on competi-tion is proportionate to the benefits provided; and

(iv) the agreement does not allow the enterprise concerned to eliminate competition completely in respect of a substantial part of the aviation services.


There is currently no general merger control regime in Malaysia under the Competition Act 2010. However, there are sector-spe-cific laws and guidelines under the MAVCOM Act 2015 and the Communications and Multimedia Act 1998 which provide the framework for a voluntary merger control regime with respect to the aviation and communications & multimedia industries, respectively.


Currently, no fees are charged by MAVCOM for notification of mergers or proposed mergers and any applicable fees will be prescribed by MAVCOM via regulations in the future.

Notification of a merger or anticipated merger to MAVCOM and an application for a decision from MAVCOM on whether a merger or anticipated merger infringes the competition provi-sions in the MAVCOM Act 2015 shall be made in the form and manner determined by MAVCOM. Upon receiving a complete application, MAVCOM will:(a) determine whether a merger or anticipated merger will

or has occurred within the meaning of Section 54 of the MAVCOM Act 2015;

(b) publish a summary of the application for public consultation;(c) evaluate the competitive effects of the merger or anticipated

merger;(d) prepare a proposed decision and procure feedback from the

applicant and the public; and(e) proceed to make its final decision of non-infringement in

the event that there are no competition concerns.

204 Malaysia



The Civil Aviation (Aerodrome Operations) Regulations 2016 govern the establishment, maintenance and operation of aero-dromes, including setting out the obligations of an aerodrome operator in relation to the operation of aerodromes.

Among the obligations of an aerodrome operator set out under the above regulations are those in relation to the main-tenance and operation of an aerodrome, safety management systems, the storage of inflammable goods and dangerous goods, the removal of obstacles from aerodromes, environ-mental management programmes, lighting of obstacles, aero-drome operations and services, aerodromes’ physical character-istics, and aerodrome emergency planning.


The general consumer protection legislation does not compre-hensively govern the relationship between the airport operator and the passenger. Consumer protection for passengers is more specifically governed under the Consumer Protection Code.


The principal GDSs in Malaysia are Amadeus, Mercator (Navitaire), Sabre (Abacus) and Travelport (Galileo).


No, there are no such requirements.


Please refer to question 4.1 above.


No, there are no such requirements.

5 In Future


Please refer to question 1.10 above.

geographical indication, copyright and layout design which are respectively governed by the Patents Act 1983, Trade Marks Act 1976, Industrial Designs Act 1996, Geographical Indications Act 2000, Copyright Act 1987, and Layout Designs of Integrated Circuits Act 2000.

Patents, trade marks, industrial design and geographical indication may be protected by filing an application with the Intellectual Property Corporation of Malaysia (“MyIPO”). There is, however, no system of registration for copyright and layout design in Malaysia. Protection of copyrightable works and layout design is provided automatically under the Copyright Act 1987 and the Layout Designs of Integrated Circuits Act 2000, respectively, based on certain criteria of eligibility. Nevertheless, copyright owners may be afforded more tangible protection by voluntarily notifying and depositing a copy of the work eligible for copyright with the MyIPO.


Denial of boarding rights and flight cancellations are governed under the Consumer Protection Code as follows:(a) Paragraph 11 (Denied Boarding) of the Consumer

Protection Code states that when an operating airline reasonably expects to deny boarding on a flight, it shall first contact passengers to give them the option to volun-teer to surrender their reservations. Passengers who volun-teer shall be offered compensation and care in accordance with the First Schedule of the Consumer Protection Code. If the number of passengers who volunteer to surrender their reservations is insufficient, the operating airline may then deny boarding to any passenger and the airline shall immediately offer compensation in accordance with the First Schedule of the Consumer Protection Code.

(b) Paragraph 12 (Flight Delay and Cancellation) of the Consumer Protection Code states that when an operating airline reasonably expects a flight to be delayed for at least two hours in its scheduled time of departure or where the flight is cancelled, the operating airline shall offer passengers compensation and care as specified in the First Schedule of the Consumer Protection Code. The airline is liable for damage occasioned by delay in a flight or cancel-lation and such liability is limited to 4,694 Special Drawing Rights for each passenger unless such delay or cancellation is caused by extraordinary circumstances or the airline has taken reasonable steps to avoid such damage.


Late arrival and departure of flights are governed under the Consumer Protection Code.

MAVCOM has the right to impose a financial penalty on air carriers for an amount not exceeding RM 200,000 for the first non-compliance with provisions of the Consumer Protection Code governing late arrival and departure of flights. For subse-quent instance(s) of non-compliance, MAVCOM may impose a fine of up to 10 times the amount of the fine that was imposed for the first instance of non-compliance.

205

Aviation Law 2020

Azmi & Associates

Norhisham Abd Bahrin is a Corporate and Mergers & Acquisitions Partner at Azmi & Associates. His practice areas cover all corporate matters, aviation, mergers & acquisitions, private equity and venture capital.Hisham is an Advocate & Solicitor at the High Court of Malaya and graduated from the International Islamic University of Malaysia with an LL.B. (Hons.) in 1999. He also holds an M.B.A. in International Business from the Royal Docks Business School of the University of East London.Hisham’s work is recognised in The Legal 500, IFLR 1000 and Asian Legal Business. He is recommended in the fields of Corporate and Mergers & Acquisitions in The Legal 500 Asia Pacific for 2016 and 2015. He is also the co-author of the Malaysian chapter in the Mergers & Acquisitions Review for 2015 and 2016 (9th and 10th Editions), published by Law Business Research Ltd, London.

Azmi & Associates14th Floor, Menara Keck Seng203 Jalan Bukit Bintang55100 Kuala LumpurMalaysia

Tel: +603 2118 5000Fax: +603 2118 5111Email: [email protected]: www.azmilaw.com

Nazran Arvind Bin Nahdan Rengganathan is a Senior Associate in the Corporate and Mergers & Acquisitions group and advises clients on a broad range of matters including aviation, mergers & acquisitions, private equity and venture capital.Arvind obtained his LL.B. (Hons.) from Multimedia University in 2013, and was admitted as an advocate & solicitor of the High Court of Malaysia in May 2014.Over the years, Arvind has assisted and advised foreign aircraft leasing companies in their leases of aircraft to Malaysian entities, with regard to their rights as lessors and the security measures made available to lessors of aircraft leased and operated in Malaysia. He also assisted a lender in structuring a transaction involving a fleet reduction by the Malaysia Airlines Group in early 2017.

Azmi & Associates14th Floor, Menara Keck Seng203 Jalan Bukit Bintang55100 Kuala LumpurMalaysia

Tel: +603 2118 5000Fax: +603 2118 5111Email: [email protected]: www.azmilaw.com

Azmi & Associates is a full-service Malaysian law firm based in Kuala Lumpur with more than 70 lawyers.The Firm undertakes and handles various legal assignments including mergers & acquisitions, the capital debt market, banking transactions (both Islamic and conventional), intellectual property, aviation, employment and labour, conveyancing, civil litigation, alternative dispute resolution, shipping, taxation, cybersecurity and data protection, business process outsourcing, biotechnology, energy, foreign investments, franchising, tech-nology, communication and media, mining and natural resources, and international trade.Azmi & Associates participates actively in the TerraLex network of law firms based in Florida, USA and serves as a member in the Europe-based

First Law International. The Firm is also a member of the ASEAN Plus Group, a network of law firms providing seamless access to legal services in ASEAN member countries and North Asia. To cater to the growing demand from the Chinese-speaking markets, its China desk is staffed by Chinese-speaking professionals.

www.azmilaw.com


Aviation Law 2020

Chapter 28206

Malta

Dingli & Dingli Law Firm Dr. Tonio Grech

Malta


than in accordance with the terms of a certificate granted to the operator of the aircraft, certifying that the holder of the certifi-cate is competent to ensure that aircraft operated by him or her on such flights as are in question are operated safely.

Furthermore, market access within the European Union is regulated by virtue of Regulation (EC) No. 1008/2008. The Civil Aviation (Air Transport Licensing) Regulations contain the rules emanating from Regulation (EC) No. 1008/2008 on common rules for the operation of air services in the Community, which also apply to Malta as a Member State of the European Union.


Under section 9 of the Authority for Transport in Malta Act, the Authority has, inter alia, the following powers:■ to ensure a safe operational environment in accordance

with the Convention on International Civil Aviation created in Chicago on 7 December 1944;

■ to regulate: transport by air; the registration, licensingand use of aircraft; the licensing of all commercial oper-ations connected with air transport and service providers; the construction, maintenance, licensing and inspection of aerodromes and other facilities connected with air trans-port; and to make provision for any matter that is provided for under the Authority for Transport in Malta Act in connection with air transport;

■ to regulate air traffic management and airspace design,including communications, navigation, surveillance, airspace and air traffic management systems and proce-dures, as well as aeronautical information services;

■ generally,tosecurethesafety,efficiencyandregularityofair navigation and the safety of aircraft and of persons and property carried therein, to prevent aircraft from endan-gering other persons and property and, in particular, to detain aircraft for any purposes; and

■ to license flight crew, air traffic controllers and aproncontrollers and to monitor the conduct of their medical examination and to license aircraft maintenance engineers and other aviation personnel.

Furthermore, by section 3 of the Civil Aviation Act, the Authority has the power to appoint a person to act as director general for civil aviation in Malta to implement the strategies and objectives of the Authority and to act in accordance with the policies, strategies and directives of the Authority. In doing so, he uses the powers given to him by the several laws and regula-tions on civil aviation, such as the Air Navigation Order and the Civil Aviation (Air Operators’ Certificates) Act. Furthermore,

1 General


There are several laws regulating civil aviation in Malta, each governing the different aspects of civil aviation. These are mainly the following:■ theAuthorityforTransportinMaltaAct;■ theCivilAviationAct;■ theEurocontrolAct;■ theCivilAviation(AirOperators’Certificates)Act;■ theAirportsandCivilAviation(Security)Act;■ theCivilAviation(Security)Act;■ theAircraftRegistrationAct;■ the Code of Conduct for Computerised Reservation

Systems Act;■ subsidiary legislation promulgated on the basis of the

powers given to the Minister for Transport in the several enabling acts; and

■ EURegulationsoncivilaviation.The subsidiary legislation is vital in the regulation of civil

aviation in Malta because it is enacted specifically with regard to that aspect of civil aviation which it purports to regulate. The following are a few examples: the Air Navigation Order governing, inter alia, aviation safety; the Civil Aviation Joint Aviation Requirements Order making the JARs part of Maltese law; and the several regulations transposing EU directives into Maltese law.

In Malta, aviation is regulated by the Civil Aviation Directorate, which is a Directorate within the Authority for Transport in Malta. This Authority falls within the remit of the Ministry for Infrastructure, Transport and Communications.


On the basis of subsection 1 of article 6 of the Civil Aviation Act, no aircraft shall be used on any flight for reward or in connec-tion with any trade or business except under and in accordance with the terms of a licence granted to the operator of the aircraft. Under the Civil Aviation Act, this is called an “operator licence”, being a licence currently in force and authorising the operator to operate aircraft on such flights as are in question.

Moreover, pursuant to section 4 of the Civil Aviation (Air Operators’ Certificates) Act, an aircraft registered in Malta shall not fly on any flight for the purpose of public transport, other

207Dingli & Dingli Law Firm



The procedure for the investigation of air accidents is regu-lated by the Civil Aviation (Investigation of Air Accidents and Incidents) Regulations, which transposed into Maltese law Council Directive 94/56/EC. The sole objective of these Regulations is the prevention of accidents and incidents and not to apportion blame or liability.


To my knowledge there have been no recent cases of note in Malta involving air operators and/or airports.



An aircraft may be registered in the National Aircraft Register by any person referred to in article 6 and who may be:(a) an owner of the aircraft who operates the said aircraft;(b) an owner of an aircraft under construction or temporarily

not being operated or managed;(c) an operator of an aircraft under a temporary title which

satisfies the conditions which may be prescribed; or(d) a buyer of an aircraft under a conditional sale or title reser-

vation or similar agreement which satisfies the conditions which may be prescribed and who is authorised thereunder to operate the aircraft.

Moreover, when an aircraft is registered by a registrant under points (c) or (d) above, every person who holds any interest by way of ownership or title in the aircraft or a share therein may make a request in writing to the director general to have his name, address and ownership interests or title noted in the certificate of registration.

Yes, before a court of law in Malta this would constitute a presumption of ownership.


The Aircraft Registration Act contains specific provisions with regard to mortgages and other charges. Mortgages are recorded by the director general of civil aviation in the National Aircraft Register in the order of time in which they are produced to him for that purpose.

Where it is stated in the instrument of the mortgage that it is prohibited to create further mortgages on an aircraft without the prior written consent of the mortgagee, the director general shall make a note in the National Aircraft Register to such effect, and the director general shall not record such further mortgage unless the consent in writing of the holder of a prior mortgage is produced to him, and any mortgage registered in violation of this provision shall be null and void.

Provided that where such further mortgage is executed in favour of an existing creditor, no such consent shall be required from such creditor.

the aviation requirements issued by the European Aviation Safety Agency (EASA) have also enhanced air transport safety in Malta.


Under the Air Navigation Order, the main distinction between public transport and private flights is the question of payment or reward. The ordinary rules of airworthiness, safety and private pilot licensing and crew are still applicable to private flights. Moreover, any rule of EASA affecting private flights is adopted in Malta.


No, air charters are not regulated separately for commercial, cargo and private carriers.


In Malta, market access is regulated by bilateral air service agree-ments. Furthermore, as a Member State of the European Union, air services between Malta and other Member States are liber-alised. There are no particular limitations for international air carriers operating in Malta. According to article 9 of the Civil Aviation Act, an aircraft registered in any country or terri-tory other than Malta shall not take on board or discharge any passengers or cargo in Malta, being passengers or cargo carried or to be carried for hire or reward or in connection with any trade or business, except with the permission of the Authority for Transport in Malta, granted under article 9, to the oper-ator or the charterer of the aircraft or to the government of the country in which the aircraft is registered, and in accordance with any conditions to which such permission may be subject, unless such aircraft is being used in the exercise of traffic rights regarding access of European Union air transport undertakings on air routes in the territory of the European Union.


Malta International Airport, which is the only international airport in Malta, is privately owned. It is presently owned and operated by Malta International Airport plc.


Under the Allocation of Slots at Airports Regulations, a sched-uling coordinator is appointed and is solely responsible for the scheduling of slots. He may consult the Airport Scheduling Committee on the scheduling of the slots, and, subject to the provisions of Regulation 6, his decision is final.

On the basis of Regulation 6, an air carrier may submit a complaint, to be made in writing to the Airport Scheduling Committee, which shall investigate that complaint and may make recommendations to the scheduling coordinator to review or alter his decision.

208 Malta


Added Tax Act (Chapter 406 of the Laws of Malta), the following supplies are exempt with credit:(1) The supply of aircraft destined to be used by airline oper-

ators for reward chiefly for the international transport of passengers and/or goods.

(2) The supply to constructors, owners or operators of aircraft referred to in (1) of equipment incorporated or used therein.

(3) The supply of services consisting of the modification, maintenance, chartering and hiring of aircraft referred to in (1) or equipment referred to in (2).

(4) The supply to the owners or to the operators of aircraft referred to in (1) of goods for the fuelling or provisioning thereof.

(5) The supply of services other than those referred to in (3), carried out for the direct needs of aircraft referred to in (1) and for the direct needs of their cargo such as towage, pilotage, rescue services, valuation, use of the airports, services provided to aircraft operators by their agents acting as such, services necessary for the landing, take-off or stay in airports, and assistance provided to the passen-gers or the crew for the account of the airline operators.

With regard to the depreciation rates in relation to income tax, according to the Deduction for Wear and Tear of Plant and Machinery Rules, the depreciation rate for the airframe, engines and aircraft engine or airframe overhaul is 16.7% (in a six-year straight line). Insofar as the interiors are concerned, these depre-ciate by 25% (in a four-year straight line).

Article 47 of the Duty on Documents and Transfers Act (Chapter 364 of the Laws of Malta) deals with exemptions for certain marketable securities acquired or disposed of by persons defined therein. Amongst such persons are companies having more than half of their ordinary share capital, voting rights and rights to profits held by any person who is not resident in Malta and who is not owned or controlled by, directly or indirectly, nor acts on behalf of, an individual or individuals who are ordinarily resident and domiciled in Malta.

With regard to aircraft leasing, the VAT Department has issued guidelines applying the standard rate of VAT of 18% on the established percentage of the lease deemed to be related to the use of aircraft in EU airspace.


Yes, Malta is a signatory to the main international Conventions.


The Conventions are applied by the courts of Malta.


Under Maltese tax law, no withholding tax is payable on the lease payments when the lessor is not tax-resident in Malta. The tax legislation is very favourable to aircraft operators who are not tax-resident in Malta. Income derived by them from the owner-ship, leasing or operation of aircraft used in international aviation

This is provided, further, that the above does not hinder the registration of a special privilege where the Aircraft Registration Act requires registration for its continuing validity and effect.

Where it is stated in the instrument of mortgage that it is prohib-ited to effect the transfer of the aircraft which is being mortgaged or charged, or of a share therein, without the previous written consent of the mortgagee, the director general shall make a note in the National Aircraft Register to such effect, and the director general, notwithstanding any other provision of the Aircraft Registration Act, shall not record any transfer of such aircraft or of a share therein, unless the consent in writing of such mortgagee is produced to him, except where the transfer is made pursuant to a court order in a sale by auction of such an aircraft or pursuant to any other court order; any transfer registered in violation of this provision shall be null and void.

Where a creditor has registered an international interest in the International Registry in accordance with the first schedule of the Aircraft Registration Act, it shall be lawful for the debtor (being the registrant or the owner of the aircraft, or both) to execute and file a prohibitory notice in favour of one or more creditors, in the form prescribed, which shall be entered into the National Aircraft Register by the director general.

When a prohibitory notice is entered into the National Aircraft Register, the director general shall not thereafter record any secu-rity interest in the National Aircraft Register in accordance with this part, until the prohibitory notice is withdrawn by the creditor.


An international interest registered in the International Registry shall not be subordinate to any mortgage registered in the National Aircraft Registry, even if the international interest is registered at a later date. Consequently, it is advisable for a mortgagee to also have the mortgage registered in the International Registry.


Article 26 (4) of the Aircraft Registration Act (Chapter 503 of the Laws of Malta) lays down that where an engine has been attached to an airframe, which is not also owned by the airframe owner, each of the owners shall retain the ownership of their part and the engine shall not accede to the airframe. Moreover, any security over the aircraft does not extend to any engine attached to the airframe when such engine does not belong to the owner of the airframe who has granted the security, notwithstanding that the engines may be specifically referred to in the instrument of mortgage, the National Aircraft Register or elsewhere.


According to Item 7 of Part One of the Fifth Schedule of the Value



(d) have the power to lease the aircraft so as to generate income therefrom; and

(e) have the power to receive any payment of the price, lease payments, and any other income which may be generated from the management of the aircraft.


The Civil Courts are appropriate for aviation disputes. The Courts of Magistrates, in their civil jurisdiction, take cogni-sance of cases for an amount up to eleven thousand, six hundred and forty-six euros and eighty-seven cents (EUR 11,646.87) and the First Hall of the Civil Court takes cognisance of cases for a higher amount. In the event of cases before the Courts of Magistrates in their civil jurisdiction, appeals are heard by the Court of Appeal presided over by one judge; and in the case of the First Hall of the Civil Court, appeals are heard and decided by the Court of Appeal presided over by three judges. Criminal cases are heard and decided by the Criminal Courts, comprising the Courts of Magistrates in their criminal jurisdiction, the Criminal Court and the Criminal Court of Appeal, presided over by one judge or three judges depending on whether the appeal is made from a decision of the Courts of Magistrates in their criminal jurisdiction or the Criminal Court, respectively.


The sworn application by which a lawsuit commences is served on the defendant by a court marshall; other judicial acts are sent by registered mail by the court registry officers. This applies across the board, independently of who the parties are.


In respect of unpaid charges, an interim remedy may be achieved through a precautionary warrant. The process takes only a couple of days to obtain such a precautionary warrant. In such a case, the plaintiff has to institute court proceedings on the merits of the case within 20 days of the issuance of the precautionary warrant of arrest by the court. As a precautionary measure, the warrant of arrest may only be sued out by: (a) the holder of a mortgage or of an international interest, whatever the amount of the mortgage or the international interest; or (b) any other creditor in security of a claim of seven thousand euros (EUR 7,000) in the case of non-commercial aircraft, or one million euros (EUR 1,000,000) in the case of an aircraft being used for public transport. After obtaining judgment in his favour, the plaintiff would then be able to request the court to issue an executive warrant of arrest of the aircraft, and if still not paid, the plaintiff could also institute proceedings for the judi-cial sale of the aircraft and the ranking of creditors in the case that there are two or more creditors. This process will normally be effected within a year.

business is not taxed in Malta if such income is not received in Malta. This is so even if the aircraft is registered in, or operated from, Malta. Moreover, the applicable accelerated tax deprecia-tion rates are six years for the airframe and engines and four years for the interior of the aircraft.

With regard to the value-added tax, leasing of aircraft is charge-able to VAT, but only on the deemed use of the aircraft within European airspace. For this purpose, the VAT Department has issued a formula that establishes the percentage of such use taking into account the features of the particular aircraft. Through this scheme, the lessor may claim back the original VAT incurred upon acquisition of the aircraft. No VAT is charged in respect of the supply of aircraft destined to be used by airline operators for reward chiefly for international transport of passengers or goods.



The detention of aircraft in respect of unpaid charges may be achieved through a warrant of arrest of the aircraft, as a precau-tionary measure and/or as a means of enforcement. As a precau-tionary measure, the warrant of arrest may only be sued out by: (a) the holder of a mortgage or of an international interest, what-ever the amount of the mortgage or the international interest; or (b) any other creditor in security of a claim of seven thousand euros (EUR 7,000) in the case of non-commercial aircraft or one million euros (EUR 1,000,000) in the case of an aircraft being used for public transport.


Under article 33 of the Aircraft Registration Act, without preju-dice to any default remedies as may be applicable under the Cape Town Convention by virtue of the First Schedule to the Aircraft Registration Act, the mortgagee shall, in the event of default of any term or condition of a registered mortgage or of any docu-ment or agreement referred to therein, and upon giving notice in writing to the debtor:(a) be entitled to take possession of the aircraft or share

therein in respect of which he is registered; but, except so far as may be necessary for making a secured aircraft or share available as a security for the secured debt, the mort-gagee shall not, by reason of the mortgage, be deemed to be the owner of the aircraft or share, nor shall the mort-gagor be deemed to have ceased to be the owner thereof;

(b) have the absolute power to sell the aircraft or share in respect of which he is registered; but where there are more persons than one registered as mortgagees of the same aircraft or share, a subsequent mortgagee shall not, except under the order of a court of competent jurisdiction, sell the aircraft or share without the concurrence of every prior mortgagee; and if the proceeds of the sale, after discharging the secured debt, show a surplus in his hands, the mort-gagee shall hold under trust or deposit the same for the benefit of other creditors and of the mortgagor-debtor;

(c) have the power to apply for any extensions, pay fees, receive certificates, and generally do all such things in the name of the owner or registrant as may be required in order to maintain the status and validity of the registration of the aircraft;

210 Malta



In the case of State aid, which does not fall within the 26 catego-ries of the General Block Exemption Regulation, clearance must be obtained from the European Commission.

The procedural steps are those that are applicable to Member States of the European Union. The Member State must notify the Commission of its intention to grant or alter its aid. The Commission will make a preliminary examination and decide whether the measure submitted by the Member State qualifies as State aid and whether it raises serious concerns as to its compat-ibility, in which case the Commission will proceed to the formal investigation procedure.

The Member State is allowed to submit its observations on a decision of incompatibility of the proposed measure, upon which the Commission will issue another decision.


No, they are not.


Regulation (EC) No. 80/2009, which repealed Regulation (EEC) No. 2299/89, protects passengers with regard to comput-erised reservation systems. In 2007, the Maltese Parliament enacted the Code of Conduct for Computerised Reservation Systems Act (Chapter 434 of the Laws of Malta), which provides protection for passengers in relation to the data submitted by carriers.


The Computerised Reservation Systems Board, which is estab-lished under the Computerised Reservation Systems Act, may impose disciplinary penalties on system vendors, parent carriers, participating carriers and/or subscribers for infringements of the provisions of the Act up to a maximum of 10% of the annual turnover of the relevant activity of the undertaking concerned. In fixing the amount of the penalty, regard is had both to the seriousness and to the duration of the infringement.

Such decisions imposing disciplinary penalties are not of a penal nature, and any such penalties shall be recoverable as a civil debt by the Director of Civil Aviation by action before the competent court of civil jurisdiction.

Carriers, whether they are parent or participating carriers, subscribers, or system vendors, are subject to the jurisdiction and the procedures of, and the administrative penalties imposed by, the Computerised Reservation Systems Board.

3.6 Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal, and, if so, in what circumstances do these rights arise?

There is a right of appeal from a decision of a court and there is also a right of appeal from an arbitration award, unless the parties had renounced such a right in the arbitration agreement. Malta is a signatory to the New York Convention on the enforce-ment of arbitral awards.



There are no sector-specific competition rules which apply to aviation in Malta. The general competition rules found in the Competition Act apply. The responsibility for the application of competition rules in Malta lies principally with the Office for Competition, as established by article 13 of the Malta Competition and Consumer Affairs Authority Act.


So far, there has been no competition assessment by the Office for Competition regarding the aviation sector. It is therefore not certain that the SSNIP (Small but Significant and Non-transitory Increase in Price) test would be applied in Malta to define the rele-vant market for the purposes of a competition assessment in the aviation sector. What is certain is that the Office for Competition is bound to apply the decisions of the European Commission.

The criteria for assessing the competitive effect of a transaction are those that would be applied by the European Commission in assessing a similar transaction – that is: the welfare effects of the transaction on the consumer; whether the market entry by a new party is commercially viable; market dominance by two or more carriers; and so on.


Traders can obtain advice from the Office for Consumer Affairs established under the Malta Competition and Consumer Affairs Authority Act, Chapter 510 of the Laws of Malta.


Mergers, acquisition mergers and joint ventures are governed by the Companies Act, Chapter 386 of the Laws of Malta. The amalgamation of two companies may be effected by (a) merger by acquisition, or (b) merger by formation of a new company. The companies may be owned by foreign shareholders.


No procedure or time frames for the obtaining of advice are outlined in the Malta Competition and Consumer Affairs Authority Act, Chapter 510 of the Laws of Malta.



aerodrome licence has to submit for acceptance by the director general of civil aviation an aerodrome manual, and amendments thereto as may be required from time to time. The manual shall consist of five parts which shall contain the information speci-fied in appendix 1 to ICAO Document 9774.

The aerodrome manual shall:■ be typewritten or printed, and signedby the aerodrome

operator;■ beinaformatthatiseasytorevise;■ have a system for recording the currency of pages and

amendments thereto, including a page for logging revi-sions; and

■ beorganisedinamannerthatwillfacilitatetheprepara-tion, review and acceptance and/or approval process.

Furthermore, the operator of an aerodrome used for public transport purposes shall comply with the Standards and Recommended Practices of Volume 1 and Volume 2, Annex 14 to the Convention on International Civil Aviation, except for differences filed by Malta, and with national regulations, as well as with any conditions that are specified in the aerodrome licence.


By the Civil Aviation (Rights of Disabled Persons and Persons with Reduced Mobility) Regulations, the airport operator must comply with the obligations pertaining to it as specified in Regulation (EC) No. 1107/2006. Moreover, the airport oper-ator can impose airport charges only within the parameters of the Airport Economic Regulations. Furthermore, by the Civil Aviation Security Regulations, the airport operator must imple-ment and maintain such airport security programmes as are appropriate to meet the requirements of the national civil avia-tion security programme.


In relation to global distribution suppliers, the applicable law is Chapter 434 of the Laws of Malta, namely the Code of Conduct for Computerised Reservation Systems Act. There is no restric-tion as to the number of computerised reservation systems to be used.


There are no ownership requirements.


In the granting of an aerodrome licence, our law does not prohibit vertical integration; however, the need has never arisen to legis-late on vertical integration insofar as air operators and airports are concerned. The only international airport in Malta was, until 2002, owned and operated by the government and, although privatised now, it is not owned or operated by any air operator.


There is a register for trademarks and patents at the depart-ment of the Comptroller of Industrial Property. Trademarks are filed in accordance with the provisions of the Trademarks Act, Chapter 416 of the Laws of Malta, and patents are filed in accordance with the provisions of the Patents and Designs Act, Chapter 417 of the Laws of Malta. Copyright is protected by the Copyright Act. It enjoys civil protection, as well as a criminal sanction in the case of any dealing with infringed articles, such as the distribution of pirated goods. The courts which take cogni-sance of these matters are the ordinary courts and there are no special courts established to deal with these issues.


The Denied Boarding (Compensation and Assistance to Air Passengers) Regulations, 2011, implement Regulation (EC) No. 261/2004 of the European Parliament and the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No. 295/91 (Text with EEA relevance).

The Civil Aviation (Rights of Disabled and Persons with Reduced Mobility) Regulation implements Regulation (EC) No. 1107/2006 of the European Parliament and of the Council of 5 July 2006 concerning the rights of disabled persons and persons with reduced mobility when travelling by air and Regulation (EC) No. 2006/2004 of the European Parliament and of the Council of 27 October 2004 on cooperation between national authorities for the enforcement of consumer protection laws of the Regulation on Consumer Protection Cooperation.

The Package Travel, Package Holidays and Package Tours Regulation, which transposed into Maltese law Council Directive 90/314/EEC, grants protection to consumers of package holi-days and tours.


Under Regulation 5 of the Denied Boarding (Compensation and Assistance to Air Passengers) Regulations, 2011, the operating air carrier is guilty of an infringement punishable by an administra-tive fine of not less than four hundred and seventy euros (EUR 470) and not exceeding five thousand euros (EUR 5,000). In the case of non-compliance with a compliance order, the director general (Consumer Affairs) may impose a daily fine of not less than one hundred and twenty euros (EUR 120) and not more than two hundred and thirty euros (EUR 230) for each day of non-compliance.

Any person who feels aggrieved by a decision, order, adminis-trative fine or measure imposed or taken by the director general (Consumer Affairs) may file an appeal before the Competition and Consumer Appeals Tribunal in terms of the Act.


The licensing of airports is regulated by the Civil Aviation (Aerodrome Licensing) Regulations. The applicant for an

212 Malta


In considering the conduct and experience of such person, the Director of Civil Aviation may take into account the conduct and experience of his staff.

Article 4 also obliges the person applying for an air operator’s certificate to provide full access to any documentation, records, equipment, aircraft and facilities which the Director may wish to inspect or examine.

5 In Future


In our opinion, it is likely that more powers will be given to the mortgagee.


By Article 4 of the Civil Aviation (Air Operators’ Certificates) Act, Chapter 218 of the Laws of Malta, the Director of Civil Aviation shall grant to any person applying therefor an air oper-ator’s certificate if he is satisfied that that person is competent, with regard in particular to his previous conduct and experi-ence, his equipment, organisation, staffing, maintenance and other arrangements, to secure the safe operation of aircraft of the types specified in the certificate on flights of the description and for the purpose so specified. In assessing a person’s compe-tency to operate aircraft, the Director of Civil Aviation will take into account that person’s capability of meeting the relative safety requirements applicable, according to law, to his opera-tion of aircraft. The certificate may be granted subject to such conditions as the Director thinks fit, and shall remain in force for a period of one year unless suspended or revoked earlier.

213

Aviation Law 2020

Dingli & Dingli Law Firm

Dr. Tonio Grech is a Partner at Dingli & Dingli Law Firm, with extensive experience in civil and commercial law.1979–1984: Read law at the University of Malta and graduated as a lawyer.1984–1989: Practised as an advocate at the Attorney General’s Office dealing with, inter alia, transport matters as counsel to the Ports Department and the Department of Civil Aviation. Attended international conferences on civil aviation and drafted laws to update civil aviation legislation in Malta. Drafted the Eurocontrol Act which was enacted by Parliament in February 1989.1989 to date: Practising as a private litigation lawyer, dealing mainly with civil, commercial and maritime court cases, in particular where protection and indemnity matters are involved.2001: Joined Dingli & Dingli Law Firm as a Partner.2004: Successfully completed a course on the Law and Administration of Trusts organised by the Malta Financial Services Authority; became a member of the Institute of Financial Services Practitioners.

Dingli & Dingli Law Firm18/2 South StreetValletta 1102Malta

Tel: +356 2123 6206Fax: +356 2124 0321Email: [email protected]: www.dingli.com.mt

Dingli & Dingli Law Firm is a Maltese firm established in 1982 with offices at 18/2, South Street, Valletta 1102. Although by Malta’s standards it is a medi-um-sized firm, it enjoys a solid reputation for efficiency and effectiveness, leading to results. The firm handles all types of legal work and in completely new areas of practice it is ready to learn quickly. The firm is fluent in Maltese, English, Italian, French and Spanish, also having a basic understanding of German and Russian. Malta’s relatively recent entry as a Member of the European Union has opened a window of opportunity, and the firm leaves no stone unturned to face the future with confidence and expectation.The firm is particularly active in the area of maritime law, corporate law, taxa-tion and international tax planning, financial services, aviation law, intellectual property law, investment, residency, real estate, succession and trusts. The firm is often involved in the major maritime cases brought before the Courts

of Malta or the Malta Arbitration Centre. These include, to name a couple of these cases, the Normand Carrier case, which involved a collision in the Grand Harbour in Malta, and the Nuria Tapias case, relating to a collision between the Nuria Tapias and the Junior M in the Black Sea, where the limitation fund was set up in Malta.

www.dingli.com.mt


Aviation Law 2020

Chapter 29214

Mexico

Canales, Dávila, De la Paz, Enríquez, Sáenz, Leal, S.C. Aldo Álvarez Martínez

Bernardo Canales Fausti

Mexico


1 General


Regulatory bodiesAviation in Mexico is regulated by the Secretariat of Communication and Transportation (SCT), a part of the federal executive branch. As such, the SCT is the administrative body that can issue rules and regulations in the field of both private and public aviation in Mexico.

As of October 17, 2019, the Federal Civil Aviation Agency, or Agencia Federal de Aviación Civil (AFAC) (formerly, the General Dictatorate of Civil Aeronautics, or Dirección General de Aeronáutica Civil ), advises the SCT in all matters pertaining to air transpor-tation, airport and complementary services, their facilities and equipment, as well as with respect to the issuance of air operator certificates, concessions, permits and authorisations concerning the provision of regular, non-regular and private air transporta-tion services.LegislationCivil aviation in Mexico is regulated by the Civil Aviation Law and its regulations, which govern the exploitation and use of the Mexican air space with respect to the provision and development of State and civil air transportation services. Since Mexican air space is considered a general means of communication, it is also subject to the General Means of Communication Law and the General Law of National Property. From a procedural stand-point, the Federal Law of Administrative Proceedings, the Code of Commerce, the Federal Civil Code and the Federal Civil Proceedings Code are also applicable.

Mexico is also a party to the 1999 Montreal Convention for the Unification of Certain Rules for International Carriage by Air.


The Civil Aviation Law groups air transportation service in two main categories: (i) scheduled service, which is subject to concession and, in its domestic portion, can only be provided by Mexican entities; and (ii) non-scheduled domestic, sched-uled international and non-scheduled international, and private commercial service, which are subject to permit, and can be obtained, in the case of non-scheduled domestic, by Mexican entities; in the case of scheduled international, by foreign entities; in the case of non-scheduled international, by both Mexican and

foreign entities; and in the case of private commercial service, by both Mexican and foreign individuals and entities.

In order to obtain a concession for scheduled air transpor-tation service, or a permit for non-scheduled domestic, public scheduled and non-scheduled international, and private commer-cial service, the applicant must evidence: (i) its technical, finan-cial, legal and administrative capability to provide the service, (ii) the availability of aircraft and other air equipment that satis-fies all security, airworthiness and environmental requirements; (iii) the availability of hangars, service centres and duly trained aeronautic and administrative personnel; and (iv) experience that makes their permanence viable. Concessions are granted for up to 30 years and can be extended in one or more events, provided that the carrier is in performance of its obligations and such extension is applied for at least one year prior to the concession’s expiration, amongst other criteria. In the case of permits, they can be granted for an indefinite period of time.

As to scheduled air transportation service, the applicant must set forth the routes it intends to operate, and any additions or modifications are subject to approval by the Secretariat.


Pursuant to the Organic Law of the Federal Public Administration, the Secretariat of Communications and Transportation is respon-sible for the operation of transit control services, as well as air navigation information and security services. The Secretariat’s responsibilities and authority are further set forth in the Civil Aviation Law, the Airports Law and their regulations.

Air safety is administered by (i) AFAC, (ii) Airports and Auxiliary Services or Aeropuertos y Servicios Auxiliares (ASA), and (iii) Services for Navigation in Mexican Air Space, or Servicios a la Navegación en el Espacio Aéreo Mexicano (SENEAM).


Regulatory bodies are the same for commercial, cargo and private carriers. However, each type of transportation has its own requirements and criteria.


Rules and regulatory bodies for commercial, cargo and private carriers are the same.

215Canales, Dávila, De la Paz, Enríquez, Sáenz, Leal, S.C.


Upon its conclusion, Mexico City’s new airport would have been the largest infrastructure work in Mexico in a century, and the second-largest airport in the world today, with a capacity of 125 million passengers annually. However, on December 27, 2018, following a non-binding referendum organised by then President-elect, Andrés Manuel López Obrador, the Mexican government announced the offi-cial cease of construction of the planned airport, and in its place, a new airport will be built in the existing Santa Lucía Air Force base. Construction officially started on October 17, 2019.

2. In July 2019, Mexico and the United Arab Emirates signed a bilateral air services agreement to allow Emirates airlines to operate the UAE-Barcelona-Mexico City route on a daily basis. However, Aeromexico, Mexico’s flagship air carrier, which currently operates the route Barcelona-Mexico with three weekly flights, filed legal challenges with the Mexican authorities to impede Emirates’ operation of such route. However, on October 24, 2019, a federal court ruled that the Emirates flights, scheduled to commence on December 9, 2019, can continue despite the legal challenge filed by Aeromexico.



Mexico is a party to the Convention on the International Recognition of Rights in Aircraft, signed in Geneva on June 19, 1948. Therefore, rights in relation to the ownership of aircraft are consistent with the rules set out therein. Documents recorded with the Mexican Aeronautic Registry are binding on third parties as of the date and time of their filing with the Registry. For purposes of registering an aircraft or transfer of ownership, AFAC will require an original or certified copy of a bill of sale or document evidencing transfer of ownership; furthermore, if such document was issued abroad, such document must be apos-tilled and translated into Spanish by a court-approved translator. If the document was issued in Mexico, signatures thereto must be ratified before a Notary Public.


Mortgages on aircraft registered in Mexico must be registered on the Aviation Section of the Mexican Aeronautic Registry in order to be binding on third parties. Pursuant to article 14 of the Regulations of the Mexican Aeronautic Registry, any request to record a mortgage or any other lien must be filed in writing, setting forth the factual statements and attaching: (i) evidence of the incorporation and existence of the applicant, if the applicant is an entity, or a copy of its official identification, if the appli-cant is an individual; (ii) a power of attorney, if such applica-tion is being filed by a third party; (iii) a domicile within Mexico to receive any notices and documents; (iv) proof of payment of the recordation fees; (v) a description of the documents that are attached to the corresponding application; (vi) the date of filing and original signature of the applicant or its attorney-in-fact; (vii) originals of the certificate of registration marks and certificate of airworthiness; and (viii) the documents by means of which the corresponding mortgage was created (which must meet the formalities set forth in question 2.1 above).


There are certain limitations on international air carriers oper-ating in Mexico. For instance, pursuant to Civil Aviation Law, a scheduled air transportation service, in its domestic portion, can only be provided by Mexican entities; while foreign carriers are eligible only to obtain permits or concessions to provide inter-national scheduled, international non-scheduled and private commercial air transportation services. Likewise, foreign air carriers require a permit to provide international air transpor-tation service from or to Mexican territory. Foreign private commercial service providers do not have cabotage rights within Mexican territory.


Article 5 of the Foreign Investment Law establishes that the control, supervision and vigilance of ports, airports and heli-ports are considered activities exclusively reserved to the Mexican State. However, pursuant to article 10 of the Airport Law, the administration, operation, exploitation and, where applicable, construction of airports, are subject to concession granted by the SCT, the granting of which is generally subject to public bidding. Moreover, article 19 of the Airport Law estab-lishes that foreign investment in concession- or permit-holders of airports is limited to 49%, expressly empowering the National Commission of Foreign Investment to resolve any percentage in excess thereof.


Conditions of use are imposed, as well as charges.


Pursuant to article 79 of the Civil Aviation Law, investigation of accidents and incidents suffered by civil aircraft falls to the SCT. Moreover, pursuant to article 80 of that same legal body, the search and recovery in connection with any civil aircraft accidents are considered of public interest, and therefore every authority, owner, possessor, concession- or permit-holder, and crew are obligated to participate in any actions pursuant thereto. Title Six of the Regulations of the Civil Aviation Law sets out in detail the search, recovery and investigation of accidents that must be followed and observed.


Notable developments in the sector include the following:1. In 2016, former Mexican president Enrique Peña Nieto

announced that a new airport, then named Texcoco Airport, would be built to replace the existing Mexico City Airport.

216 Mexico



Mexico is a signatory to, and has ratified, most international aviation conventions, including:■ The1929WarsawConvention,asamendedbytheHague

Protocol of September 28, 1955.■ The1944ChicagoConvention.■ The 1968 Geneva Convention on the International

Recognition of Rights in Aircraft.■ The1999MontrealConvention.■ The 2001 Cape Town Convention on International

Interests in Mobile Equipment, and its Protocol on Matters Specific to Aircraft Equipment.


Pursuant to article 133 of the Political Constitution of the United Mexican States, the Constitution itself, the laws passed by the Congress of the Union and all treaties entered into by the President of the United Mexican States, and approved by the Senate, are the Supreme Law of the Union.


Pursuant to Section V, paragraph b) of article 106 of the Customs Law, concession- and permit-holders may import aircraft on a temporary basis for up to 10 years, provided that such aircraft are utilised in the provision of air transportation services.



The Code of Commerce regulates precautionary measures gener-ally. Aircraft are subject to such general regulations and, in any case, such measures must be applied for; and a judge, based on the merits, shall rule on whether such request is granted or not.


The repossession, entry, removal, sale, transfer or other disposi-tion of property or similar action in Mexico, pursuant to reme-dial provisions under any agreement, may not be made in Mexico without judicial intervention, pursuant to due legal process consistent with Mexican law provisions; including, without limi-tation, that the defendant is given the right to be heard and defended in court, as self-help remedies are not enforceable in Mexico.


Repossession of an aircraft in Mexico requires a court order issued on the basis of a final judgment. Self-help remedies are not available in Mexico. In connection therewith, the effec-tivity and enforceability of irrevocable deregistration powers of attorney are challengeable, since the document by which the lessee obtained possession of the aircraft must be legally termi-nated prior to repossession of an aircraft by the lessor.


Leases must be drafted in such a way that risk of annexation with respect to aircraft engines is minimised; a common – strongly suggested – practice is the installation of fireproof plates in the engines expressly stating the name of the owner thereof.


Pursuant to article 45 of the Civil Aviation Law, only (a) aircraft owned by or in the possession of Mexican individuals or enti-ties, or (b) those owned by foreign individuals for the exclusive rendering of private non-commercial air transportation, can be registered in Mexico.

The sale of aircraft owned by non-Mexican tax residents and registered in Mexico is not subject to VAT, irrespective of the type of aircraft or operation. However, it must be noted that if the aircraft which is the subject of the sale is registered in Mexico and has been imported by a concession- or permit-holder on a temporary basis (pursuant to Section V, paragraph b) of article 106 of the Customs Law, as per question 2.8 below), the aircraft must still be exported from Mexico no later than on the 10th anniversary of its import, in the same condition in which it was originally imported. Such period of time may be renewed as required.

The sale of aircraft owned by Mexican tax residents and regis-tered in Mexico is subject to the general 16% VAT. Furthermore, courts have resolved that if the seller is a Mexican tax resi-dent (which may include certain foreign entities established in Mexico), VAT is payable even if the transaction (understood as transfer of title and actual transfer of the aircraft itself ) occurs outside Mexican territory.

No stamp, registration or other taxes, duties, assessments or governmental charges of any nature whatsoever are payable in Mexico solely upon or in connection with the execution and delivery of aircraft purchase agreements in Mexico.



Arbitral decisions cannot be subject to an appeal, except in very limited circumstances (article 1457 of the Code of Commerce).



There are no sector-specific competition law rules that apply to the aviation sector. Generally speaking, any joint venture between airline competitors would be subject to scrutiny by the Federal Economic Competition Commission (COFECE), and the parties involved would be likely to obtain COFECE’s author-isation before giving effect to such joint venture. In its scrutiny, COFECE would analyse the relevant market and identify the main economic agents that serve the relevant market, the effect that such joint venture would have upon the relevant market and other competitors and clients, amongst other criteria.


Article 58 of the Federal Economic Competition Law sets forth the criteria that have to be considered to determine the rele-vant market: (i) the possibilities to replace the good or service, both domestic and foreign; (ii) distribution costs of the good or service, of its complements and replacements, considering the fleet, insurance and tariffs, amongst others; (iii) costs to, and probability of, users or consumers reaching other markets; and (iv) federal, local or international restrictions that limit user or consumers’ access to alternative sources, inter alia.


Article 86 of the Federal Economic Competition Law sets forth the concentrations that must be authorised by COFECE prior to their execution. Any clearance obtained therefrom remains valid for six months and can only be renewed once for duly justi-fied reasons.


The General Law of Business Entities sets forth the general requirements and formalities for mergers and spin-offs gener-ally. In the case that the merger, acquisition or joint venture results in a concentration, COFECE would: analyse the rele-vant market; identify the main economic agents that serve the relevant market, the effect that such merger, acquisition or joint venture would have upon the relevant market and other compet-itors and clients, amongst other criteria; and, if applicable, consent to such transaction.


The notice of concentration must be given in writing, and shall set forth: the identity of the parties; a description of the concentration; the type of operation; documental support that


The Mexican judicial system is not based on sector/industry, but on the nature of the dispute. Federal commercial courts will have jurisdiction for claims between a lessor and a lessee, or between an airline and any third parties acting in the capacity of traders. Criminal cases are heard by criminal courts; gener-ally speaking, crimes in connection with aircraft or airports/airdromes would be heard by a federal criminal court. Civil matters are heard by civil courts. Disputes with the Mexican government – namely, over airport taxes or navigation service taxes – are heard by federal administrative courts.


Service of process must be made personally to the addressee, or on their appointed process agent (apoderado). Mexican courts consider the service of process upon the process agent to whom a power of attorney has been granted, in accordance with Mexican law, by means of a notarial instrument, to be personal service of process meeting the procedural requirements of Mexico. It must be noted that service of process by mail, even when the process agent (apoderado) is duly authorised to do so, does not constitute personal service of process under Mexican law and, since such service is considered to be a basic procedural requirement, if for the purposes of proceedings outside Mexico, service of process is made by mail, even through its duly appointed agent for the service of process (apoderado), a final judgment based on such process would not be enforced by the courts of Mexico.


Remedies vary depending of the nature of the dispute. In commercial disputes, on an interim basis, the plaintiff may apply for general precautionary measures, including a restriction on individuals or withholding of goods. On a final basis, the plaintiff may request the payment of damages and lost profit, an injunction to do or not to do something, a decision on the ownership and repossession, inter alia. There is not a definitive list of what a Mexican court can order.

Regarding arbitral awards, they have the authority of res judi-cata and are enforceable to the extent they are final and not subject to appeal.


Except for small cases where the principal claim is under US$33,900.00 (approx.), decisions or courts are appealable before the same authority that ruled such decision. After a court of appeal decision, or if the appeal was not admitted, there is also an appeal available (amparo trial), which must be filed before the collegiate circuit courts located in the domicile of the authority that issued the decision which was the subject of the appeal.

218 Mexico


infringement that significantly affects the economic or moral rights of its holder must be communicated immediately so that the latter can adopt those measures deemed appropriate.


Protection of industrial property is subject to the Industrial Property Law (LPI) and the Federal Copyright Law (LFDA). The LPI regulates the granting of patents, utility models, indus-trial designs, trademarks and trade names, denominations of origin and geographic designations, as well as trade secrets, all of which are applied for and granted by the Mexican Industrial Property Institute (IMPI); while the LFDA regulates copy-right with respect to literary texts, music (with or without lyrics), drama, dance, pictorial, sculpture, cartoons, architectonic, cine-matographic and other audiovisual, radio and TV shows, soft-ware, photography and other forms of art, all of which are applied for and granted by the National Copyright Institute.


On June 26, 2017, the Civil Aviation Law was amended by way of adding Chapter X bis titled “Passenger Rights and Obligations”. Any delay in excess of four hours, or cancellation of the sched-uled flight, in both cases due to causes attributable to the conces-sion- or permit-holder, give the passenger the right to choose from: (a) a full fare refund on the non-utilised portion; (b) to receive from the concession- or permit-holder alternative means of transportation, telephone and internet access, lodging in a nearby hotel and ground transportation from the airport to the hotel, if needed; or (c) transportation on a future date; plus, in (a) and (c) above, an indemnity of no less than 25% of the fare paid. These regulations are supervised and enforced by the Federal Consumer Protection Agency (PROFECO).


Withrespecttopassengers,sectionVofarticle47bis of the Civil Aviation Law sets forth that in case of any delays of between one and four hours due to causes attributable to the concession- or permit-holder, the latter must compensate the passenger pursuant to its own compensation policy, which shall include, at least, discounts for future flights and/or food and beverages. For delays of more than two hours but less than four hours, such compensation cannot be less than 7.5% of the paid fare.


Airports, and airport authorities, are regulated by the Civil Aviation Law and by the Airports Law. All matters concerning the construction, administration, operation and exploitation of airports are subject to federal jurisdiction. As the airport authority, the SCT has amongst its obligations and responsibilities, all matters pertaining to the national airport system, construction, administration, operation and exploitation of airports, air transit rules and regulations, general safety measures, and the upkeep of the Mexican Aeronautic Registry, amongst others.

explains the object and motive of the concentration; financial statements of the parties involved, their capital structure prior to the proposed transaction and the result thereafter; and infor-mation about the parties’ participation in the relevant market, inter alia (article 89 of the Federal Economic Competition Law). All documentation must be ratified before a Notary Public or be certified copies. Upon admittance, COFECE may request any missing information, which must be provided within the following 10 days or else the notice shall be deemed as not filed. COFECE may request any additional information deemed appropriate. Once all requested information has been provided, COFECE shall issue a resolution within the following 60 days. All the timeframes set forth above may be extended in extraor-dinary, complex cases. As a result of the procedure, COFECE may: (i) request that the economic agents perform in a certain manner; (ii) transfer to third parties certain assets, rights, or shares; (iii) amend or delete terms of the intended transaction documents; (iv) bind the parties to execute certain acts, such as facilitating third parties’ access to the market; or (v) take any other measures to prevent the resulting concentration from diminishing, affecting or impeding free competition. The filings themselves do not have any cost; however, specialised counsel is strongly suggested and customarily retained.


There are no sector-specific provisions that regulate financial support to air operators and airports in Mexico.


There are no subsidies available in respect of particular routes in Mexico.


There are no sector-specific provisions that regulate the acquisition, retention and use of passenger data. The Federal Law on Protection of Personal Data Held by Private Entities (LFPDPPP) regulates generally the way in which private parties may collect and use personal data, and the way in which private parties may access, rectify, cancel and oppose the use of their personal information; all based upon the principles of legality, consent, information, quality, purpose, loyalty, proportionality and liability.


Article 19 of the LFPDPPP sets forth that every person or entity which handles personal data must establish administrative, tech-nical and physical security measures that allow the protection of personal data against: damage; loss; alteration; destruction; and non-authorised use, access and treatment. Any violation or




Air transportation services fall within the category of activ-ities with specific regulation for the purposes of the Foreign Investment Law. Pursuant to article 7, Section III, paragraph y), foreign investment is capped at 49% with respect to the provi-sion of: scheduled and non-scheduled national air transportation services; non-scheduled international air transportation services; andspecialisedairtransportationservices.Withrespecttopublicairport concession- or permit-holders, the National Foreign Investment Commission must authorise any foreign investment in excess of 49%.

5 In Future


The cancellation of the new Mexico City Airport was a major event in Mexico. By the time it was cancelled, over 30% of the aggregate works had already been concluded. The destination of the existing site is uncertain. In the meantime, works on the Santa Lucía Air Force Base have begun, with the opposi-tion of a significant portion of the population and organisations, including ICAO and IATA, which consider it to be unviable.


General consumer protection legislation mainly focuses on safety, protection of monetary interests and duty of information. Most of these regulations apply within the context of sale or use of goods, and therefore are relevant to the relationship between airlines and passengers, and not to the relationship between airport operators and passengers.


Sabre and Amadeus are the most common GDSs used in Mexico.


No, there are not.


No, it is not. Air transportation concession- and permit-holders, their controlling entities, subsidiaries or affiliates cannot own a stake in excess of 5% of any airport concession-holder or its holding entity. That same restriction applies for airport conces-sion-holders with respect to air transportation concession- and permit-holders (article 29 of the Airports Law).

220

Aviation Law 2020

Mexico

Bernardo Canales Fausti is a Partner in the Firm with more than 25 years of experience in corporate transactions, including mergers and acquisitions, financing, private equity, joint ventures and corporate restructurings, aviation transactional law; as well as in real estate trans-actions, such as real estate investment vehicles for asset acquisition and sale, leasing, project design and development. Bernardo’s practice includes corporate and finance law, project financing, mergers and acquisitions, debt restructuring, banking law, aviation and airport law and administrative law. Bernardo is also a director of various domestic and international companies and funds.

Canales, Dávila, De la Paz, Enríquez, Sáenz, Leal, S.C.Ricardo Margain 240, 3er PisoCol. Valle del CampestreSan Pedro Garza GarcíaNuevo León, C.P. 66265Mexico

Tel: +52 81 8378 1887Email: [email protected]: www.canales.com.mx

Aldo Álvarez Martínez is a Senior Associate in the Monterrey office of Canales, with over 10 years of experience, 9 of which have been at this Firm. His practice includes aviation transactional law, including aspects such as purchase, sale, managing, financing and issuance of guaran-tees related to aircraft, in Mexico and abroad. Aldo has extensive experience in real estate topics, especially in investment fund instruments for the acquisition, development and marketing of residential, commercial, service and mixed-use properties. Aldo has also advised Mexican and foreign customers regarding merger and acquisition transactions in various industries such as real estate, mining and energy, as well as in general issues of industrial and intellectual property. Aldo holds a J.D. from Universidad de Monterrey, and a Master of Laws in Securities and Financial Regulation from Georgetown University Law Center, and is admitted to practice in Mexico.

Canales, Dávila, De la Paz, Enríquez, Sáenz, Leal, S.C.Ricardo Margain 240, 3er PisoCol. Valle del CampestreSan Pedro Garza GarcíaNuevo León, C.P. 66265Mexico

Tel: +52 81 8378 1887Email: [email protected]: www.canales.com.mx

Canales is a boutique law and financial advisory firm with a solid reputa-tion in Mexico. Since 2001, our personalised service has characterised us and positioned us as a prestigious law firm, committed to the permanent evolution of our practice. Our team is focused on corporate and trans-actional practice, advising our clients in their day-to-day business, as well as participating in the design, structuring, implementation, and start-up of their projects. In 2018, as part of our evolution and to meet the needs of our clients, we decided to integrate financial practice as part of our services, adding a highly qualified team of financial advisors who are well regarded by the market. With offices in Monterrey and Mexico City, we are strategically located to continue serving the needs of our domestic and foreign clients.

www.canales.com.mx


Aviation Law 2020

Chapter 30 221

Nigeria

ǼLEX Oluwasemiloore Atewologun

L. Fubara Anga

Nigeria


information specified in the NCARs on or before a date not less than six months prior to the expected date of utilisation.


The CAA 2006 and the NCARs govern air safety in Nigeria, which is administered by the NCAA. Part 20 of the NCARs addresses the safety management requirements in conformity with the standards and recommended practices of the International Civil Aviation Organisation (“ICAO”).

Nigeria also subscribes to the standards and recommended practices of the Banjul Accord Group Aviation Safety Oversight Organisation for regional safety.


No. Air safety for commercial, cargo and private carriers is not regulated separately. Part 8 of the NCARs stipulates the regu-latory requirements for operation of aircraft in Nigeria, based upon the requirements of ICAO Annexes 2 and 6.


No. Air charters in Nigeria are regulated by the relevant provi-sions of the CAA 2006 and the NCARs.


Generally, no. The Foreign Carriers’ Operating Permit issued to international carriers depends on the terms of their Air Services Agreements.


Airports are licensed by the NCAA and owned by state enti-ties as well as private parties. In Nigeria, most of the airports are owned by the Federal Government of Nigeria (“FGN”) and operated by the FAAN.

1 General


The Constitution of the Federal Republic of Nigeria 1999 (as amended) (“Constitution”) places aviation matters within the exclusive jurisdiction of the National Assembly. In exercise of the powers vested in the National Assembly, it enacted the principal legislation in the aviation industry, which is the Civil Aviation (Repeal and Re-Enactment) Act 2006 (“CAA 2006”). The CAA 2006 recognises that the Federal Ministry of Transportation is responsible for the formulation of policies and strategies for the industry. In addition, the CAA 2006 establishes the Nigerian Civil Aviation Authority (“NCAA”), which is the regulator for technical and safety issues in the industry. The NCAA is empow-ered under the CAA 2006 to make regulations on various issues including aircraft registration, air navigation services, airworthi-ness standards, aviation safety and security, commercial air trans-port, personnel licensing, aerodrome and airspace standards, and the provision of allied aviation services.

The NCAA, pursuant to its regulatory powers under the CAA 2006, issued the Nigerian Civil Aviation Authority Regulations (“NCARs”) in 2015. The NCARs address issues ranging from aircraft registration and marking, to consumer protection, personnel licensing, and airworthiness, amongst others.

The CAA 2006 also establishes the Accident Investigation Bureau (“AIB”). The AIB is responsible for the investigation of accidents and incidents arising out of or during navigation in or over Nigeria, or occurring to Nigerian-registered aircraft else-where, and/or where the interest of Nigeria is involved.

Other legislation includes the:■ Federal Airport Authority of Nigeria Act 1996, which

creates the Federal Airport Authority of Nigeria (“FAAN”) that is responsible for the development, provision and maintenance of airports and associated services.

■ NigeriaAirspaceManagementAct1999,whichestablishesthe Nigerian Airspace Management Agency (“NAMA”) that is responsible for air traffic services, airspace manage-ment, aeronautical telecommunications, etc.


A written application must be made to the Director General of the NCAA for either an Air Transport Licence (“ATL”) or Airline Operating Permit (“AOP”), with the required documentation and

222 Nigeria


Individuals may access the register of legal interests by applying in writing to the NCAA and paying the prescribed search fees.


Yes. Paragraph 8.3.1.10 of the NCAR provides that the lessor of an aircraft must transfer the maintenance records of the aircraft in a manner acceptable to the NCAA at the time of the lease. It is advisable that the lessor or financier retains in its posses-sion/control the original certificates of registration and airwor-thiness, as these documents are required to be cancelled before deregistration.

Lessors or financiers also need to be aware that, as owners, they are liable for damages, injuries or losses arising from the activ-ities and operations of the aircraft without proof of negligence.


There is no law on title annexation in Nigeria. Nigeria is a party to both the Cape Town and Geneva Conventions, and it recognises the interest and rights created in respect of aircraft and engines.


■ VAT – the Federal Inland Revenue Service, in Information Circular No: 9701, provides for the exemption of aircraft, aircraft spare parts and ancillary equipment from payment of value-added tax.

Also, interest earned by a lessor on a finance lease is a return on investment and is thus not liable to a charge of VAT.

■ Capital Gains Tax (“CGT”) – CGT is a tax imposed on capital gains arising from the sale or disposal of chargeable assets at a rate of 10 per cent. Sale of an aircraft would attract CGT. It should be noted, however, that where the sale of aircraft is done with such frequency as to be classified as a source of income rather than the disposal of an asset, then income tax rather than CGT may apply in that instance.

■ Stamp Duty – stamp duty is payable on documentation and instruments including sale and lease agreements. For example, the rate of the duty payable on a lease agreement depends on the term of the lease. For a lease with a term of one to seven years, the applicable stamp duty is 0.78 per cent; although in some cases, the Commissioner for stamp duty has assessed stamp duty at 1.5 per cent.

■ Withholding Tax (“WHT”) – income on a property (rent, hire or lease payments or rights (royalties) situated in Nigeria is liable to tax, notwithstanding the place of payment. Where rent is to be paid to an individual or company, WHT at a rate of 10 per cent is applicable. It applies also to lease payment and loan payment. Grossing up is not unlawful.


Yes, principally safety and security requirements. The carriers also have to meet commercial terms. Generally, carriers flying to and from FAAN-managed airports are required to pay for various services including slots, landing fees, parking fees, passenger service charges and fuel charges.

For carriers flying to and from international airports, they are also expected to meet the formalities incident to customs, immi-gration, public health, animal and plant quarantines.


The CAA 2006 and the Civil Aviation (Investigation of Air Accidents and Incidents) Regulations 2016 regulate air accidents in Nigeria, and prescribe the investigative powers and procedures for investigation, as well as for reporting of accidents and incidents.


The FGN has taken steps to improve infrastructure in the avia-tion industry. For example, in 2018, the terminal renovation at the Port Harcourt International Airport was completed. More recently, in 2019, the reconstruction of the runway was completed and a new building terminal was opened at the Nnamdi Azikiwe International Airport, Abuja.

Also, a new airport was completed in Yenagoa, Bayelsa State by the Bayelsa State government.

Furthermore, in July 2019, Nigeria signed the African Continental Free Trade Agreement (“AfCFTA”) which seeks to liberalise trade by progressively eliminating tariffs and non-tariff barriers to trade. With the ratification of the AfCFTA, and the Single African Air Transport Market (“SAATM”) previously rati-fied by Nigeria, it is expected that the removal of trade barriers would positively affect airport and aviation business in Nigeria.



The NCAA is an owner/operator registry. Registration of an aircraft at the registry does not serve as conclusive/sole proof of ownership.


There is currently no formal separate register of aircraft mort-gages and charges. The CAA 2006 and Part 4 of the NCAR, however, stipulate that the NCAA should provide a legal interest in aircraft registry showing proprietary rights, interests, liens and other dealings of legal interest for every aircraft registered in Nigeria. In practice, mortgages, charges or other encumbrances are recorded in the file at the civil aviation aircraft registry.

223ǼLEX



By the combined reading of Section 251(k) of the Constitution and Section 63 of the CAA 2006, the Federal High Court has the exclusive jurisdiction to hear civil and criminal suits on avia-tion disputes – except where the matter in dispute is a labour matter, in which case the National Industrial Court is the court with jurisdiction to hear the suit.


The guidelines for the service of court processes are provided for in the Federal High Court (Civil Procedure) Rules 2019 (“FHCR”) and the Sheriff and Civil Processes Act (“SCPA”).

For domestic airlines/parties, by virtue of Order 6 Rules 2 and 8 of the FHCR, service is effected when the process is served personally on the principal officers or by leaving it at the office of the company. Where personal service cannot be conveniently effected, Order 6 Rule 5 of the FHCR provides for substituted service through various means including publication in the FGN Gazette, delivery at the last place of business and delivery to an agent of the airline.

Service on non-domestic airlines/parties can be effected in the same manner as above. However, where such airline is outside the jurisdiction and does not have an office within the country, Order 6 Rule 14 of the FHCR provides that leave of court must be obtained. Such leave is obtained by way of an application to the Federal High Court supported by an affidavit disclosing that the plaintiff has a good cause of action, the country in which the defendant can be located, and the grounds upon which the application is made. Also, Section 97 of the SCPA provides that where a writ of summons is to be served outside the jurisdiction, it must be endorsed, on the face of it, with a notice to that effect.


Generally, all civil remedies are available to the parties in a court or arbitration. With respect to arbitration, parties may contrac-tually agree to exclude interim reliefs from the jurisdiction of the tribunal.

On an interim basis, the remedies available include interim injunctions, prohibitory injunctions and interlocutory injunc-tions; whereas on a final basis, the remedies are damages, specific performance, perpetual injunctions, etc.


Rights of appeal from the decision of a court are governed by the Constitution and the Rules of Court. Section 251(1) and (2) of the Constitution provides that appeal from a decision of the Federal High Court (“FHC”) is either as of right or with leave of court. Appeal as of right exists in the following circumstances:■ afinaldecisionoftheFHC;■ wherethegroundofappealinvolvesquestionsoflawalone;


Nigeria is a signatory to the Montreal Convention, the Geneva Convention and the Cape Town Convention. In addition, it is a signatory to the Yamoussoukro Decision, the SAATM and the AfCFTA.


The conventions are ratified and domesticated as Nigerian law, which ensures their applicability and enforceability in Nigeria.


Yes. Nigeria has Double Tax Treaties (“DTT”) which apply to aviation business on the basis of reciprocity. Where a country has a DTT with Nigeria, it reduces the WHT payable by a company incorporated in such country from 10 per cent to 7.5 per cent. Countries that have entered into a DTT with Nigeria include the United Kingdom, France, Belgium, Pakistan, Romania, Canada, Kenya, Sweden and China.



Section 27(3) of the CAA 2006 empowers the NCAA to ground any aircraft and take all steps reasonably necessary to ensure compliance with the CAA and any regulations, guidelines or rules made pursuant to the Act.

In addition, the NCAA has the power to detain an aircraft involved in a violation for which a civil penalty has been imposed on its owner or operator.


Self-help is available and permitted in Nigeria, provided it is consistent with agreed contractual terms and the parties obey all applicable laws and regulations relating to deregistration and export of the aircraft. A special declaration was made pursuant to Article 54(2) of the Cape Town Convention and associated protocol which came into force in Nigeria on 14 November 2006, to the effect that any remedies available to a creditor under any relevant provision under the Cape Town Convention that do not require application to the court may be exercised without court action and without leave of court.

A court order is not necessarily required before a creditor can exercise their right of repossession or sale of an aircraft in the event of default, provided it is specifically provided for in the agreement. It is, however, advisable to involve the NCAA, the police and other enforcement agencies.

224 Nigeria



Yes, it does. Part 18 of the NCARs at Paragraph 18.15.19 provides that the NCAA “can grant conditional leniency, concessions and immunity for cooperation to persons who offer significant assistance in detecting and proving unfair methods of competition and anti-competitive conduct”.

Also, parties can obtain regulatory clearance from the Federal Competition and Consumer Protection Commission (“FCCPC”) in respect of any anti-competitive agreement among undertak-ings which ordinarily would be unlawful. To authorise such an agreement, the FCCPC has to be satisfied that:■ theagreementimprovestheproductionordistributionof

goods, services or the promotion of technical or economic progress and customers will be allowed a fair share of the resulting benefit;

■ inrelation to theundertakingsconcerned, theagreementonly imposes restrictions that are indispensable to the attainment of the objectives above; and

■ the possibility to eliminate competition in a substantialpart of the goods or services concerned is not given to the undertakings by the agreement.


Please refer to our response to question 4.1.


Part 18 of the NCARs provides for a 60-day waiting period from the date of receipt of the notification by the NCAA. This time-frame may, however, be shortened or extended by the NCAA for a period not exceeding 30 days.


Yes. The Central Bank of Nigeria provides for a Power and Airline Intervention Fund (“PAIF”) for the refinancing of existing leases and loans for airline projects undertaken by airlines incorporated and operating in Nigeria.


No, we are not aware of state subsidies for particular routes.


There is no primary designated regulation governing the acqui-sition of passenger data in Nigeria. However, the Nigerian Information Technology Development Agency recently issued the Nigeria Data Protection Regulations 2019 (“the Regulation”) which governs transactions involving the exchange of personal data.

■ wherethedecisionisontheinterpretationorapplicationof the Constitution; or

■ wherethebreachoffundamentalhumanrightsisbeingorlikely to be contravened.

Generally, in all other circumstances except the above-men-tioned, appeals are allowed only with the leave of court. Section 241(2) of the Constitution specifically states that where parties enter into consent judgment, or judgment is made as to costs only by the FHC, appeal must be with the leave of court. However, in the case of the FHC granting unconditional leave to defend an action, Section 241(2) of the Constitution provides that a party cannot appeal against a decision of the FHC granting uncondi-tional leave to defend an action.

Awards from arbitral tribunals are not appealable. The remedy available to the losing party is to make an application to court to set aside the award on one or more of the statutory spec-ified grounds, which includes misconduct of the arbitrator and improper procurement of the award.



The NCAA, as the regulator of the aviation industry, is notified of any business combination between airlines. Part 18 of the NCAR provides that the NCAA should be notified where there are mergers, takeovers, joint ventures or other acquisitions of control in the aviation industry, including interlocking directorships, whether of a horizontal, vertical or conglomerate nature, when:i. at least one of the joint venture companies is established in

Nigeria;ii. the resultant market share in the aviation industry or any

substantial part of it, relating to any product or service, is likely to create market power; and

iii. at least one of the joint venture companies derives income in or from Nigeria arising from the sale and rendering of services in the civil aviation industry, or there exists use of the firm’s assets in a manner that yields interest, royalties and dividends.

Furthermore, upon the receipt of a notification, the NCAA will conduct an investigation into the proposed arrangement. Depending on the outcome of the investigation, the NCAA may prohibit the proposed business combination where it substan-tially increases the “ability to exercise market power either by giving the ability to a company or group of companies acting jointly to profitably main-tain prices above competitive levels for a significant period of time or by any other anti-competitive means”.

The Federal Competition and Consumer Protection Commission Act (“FCCPCA”) also has provisions that regulate joint venture.


“Relevant market” is defined under the interpretation within Part 18 of the NCARs at Paragraph 18.1.2.94 as “the area of effec-tive competition within which an airline or service provider operates and includes geographic area, route, substitutability, close competitors and such other factors that may affect consumer choice”.

225ǼLEX



The FAAN is the statutory manager of Federal airports, and is governed by the FAAN Act. The FAAN Act imposes the following obligations on the FAAN:a. to develop, provide and maintain at airports and within

the Nigerian airspace all necessary services and facilities for the safe, orderly, expeditious and economic operation of air transport;

b. to provide adequate conditions under which passengers and goods may be carried by air and under which aircraft may be used for other gainful purposes and for prohib-iting the carriage by air of goods of such classes as may be prescribed;

c. to prohibit the installation of any structure which, by virtue of its high position, is considered to endanger the safety of air navigation;

d. to charge for services provided by the Authority at airports; and

e. to provide accommodation and other facilities for the effective handling of passengers and freight.


The FCCPA is the main legislation for consumer protection in Nigeria. Under the FCCPA, consumers/passengers have the right to enforce their rights or resolve any dispute in respect of services provided by airport operators either by engaging such airport operator, or the relevant industry sector regulator, or the FCCPC.

Furthermore, the FCCPA specifies various rights of consumers including timely performance of services, disclosure of prices and display of information accurately and plainly.


Sabre Travel Network, Travelport and Amadeus Nigeria are the global distribution suppliers (“GDSs”) operating in Nigeria.


There are no specific ownership requirements for GDSs oper-ating in Nigeria, other than registration as a Nigerian company with the Corporate Affairs Commission (“CAC”). GDSs can, therefore, be fully owned by foreign shareholders provided they meet the minimum capital requirement of N10,000,000.


Please refer to the response provided to question 4.1.

The Regulation defines personal data as “any information relating to an identified or identifiable natural person”. Therefore, passengers as natural persons have the following rights:■ toanyinformationrelatingtotheprocessingoftheirdata

in a concise, transparent, intelligible and easily accessible form in writing or orally where requested by the passenger; and

■ torequestthedeletionofanypersonaldatathatiseitherno longer necessary, has been unlawfully processed or for which consent has been withdrawn.

Also, the NCAA mandates operators in Part 17 of the NCARs to develop security programmes which provide for the safety of passengers, crew and their property. In addition, Part 20 of the NCARs provides for mandatory as well as non-punitive voluntary incident reporting on data collection by carriers. The NCARs also indicate the need for balance between the protec-tion of safety information in order to improve aviation safety, and the need for the proper administration of justice.


Please refer to our response to question 4.8.


Nigeria is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”). Various domestic statutes also exist to protect Intellectual Property Rights (“IPRs”) including the Trade Mark Act and the Patents and Design Act, which protects trademarks and patents, respec-tively. Each statute also provides for the procedure for regis-tration and protection of IPRs, mechanisms and procedure for filings, and also the action that can be taken against an alleged or actual infringement.


Yes, both CAA 2006 and Part 19 of the NCARs govern denial of boarding rights and cancelled flights.


The NCAA prescribes the obligations of carriers to passengers under Part 19 of the NCARs for delays in domestic and inter-national flights. For domestic flights, carriers are expected to inform passengers of the reason(s) for the delay within 30 minutes after the scheduled time of departure. In addition, depending on the length of delay, they are required to provide some form of compensation including refreshment, telephone calls, reimburse-ment and hotel accommodation.

Similarly, for international flights, when an operating air carrier reasonably expects a flight to be delayed beyond its scheduled time of departure, it shall provide compensation to the passengers.

In addition, the Montreal Convention domesticated in Nigeria as Schedules 2 and 3 of the CAA 2006 provides for monetary compensation for delays.

226 Nigeria


5 In Future


With the signing of the AfCFTA by Nigeria and the SAATM, it is expected that the aviation industry will experience regula-tory changes to ease trade relations between Nigeria and other African airlines.


There are nationality requirements for applicants for an Air Operator’s Certificate (“AOC”). Paragraph 9.1.1.6 of the NCAR specifies that the NCAA may issue an AOC if, after investiga-tion, it finds that the applicant:■ isacitizenofNigeria;■ hasitsprincipalplaceofbusinessanditsregisteredoffice,

if any, located in Nigeria; ■ meets the applicable regulations and standards for the

holder of an AOC; ■ isproperlyandadequatelyequippedforsafeoperationsin

commercial air transport and maintenance of the aircraft; and

■ holdstheeconomicauthorityissuedbyNigeriaundertheprovisions of this Regulation.

227

Aviation Law 2020

ǼLEX

L. Fubara Anga is one of the Founding Partners of the Firm and the head of the Firm’s aviation, maritime and financial services practice groups. Qualified to practise law in Nigeria, Ghana and England & Wales, he has a strong multi-disciplinary background in law, economics, management and fiscal policy.He has attended and facilitated several aviation-related courses and seminars around the world, including the annual IATA aviation legal semi-nars and the ABA aerospace law forum. Fubara is the founder and president of the Nigerian Aviation Law Society and the pioneer chairman for the aviation section of the Nigerian Bar Association’s Section on Business Law.He has been involved in advising and representing clients on various high-profile legal transactions and disputes including aircraft finance, passenger liability, aviation advisory, and shipping matters. He has been recognised by Who’s Who Legal 2019 as a global leader in aviation, banking & finance, and shipping.

ǼLEX4th Floor, Marble House1 Kingsway RoadFalomo, IkoyiLagosNigeria

Tel: +234 1 279 3365Email: [email protected]: www.aelex.com

Oluwasemiloore Atewologun is an Associate at ǼLEX with a specialisation in the transportation, arbitration, insolvency, company secretarial and corporate/commercial practice areas. She has advised international carriers and finance institutions on various issues including regu-latory compliance, aircraft financing and leasing, and labour & employment in the aviation industry. She also represents major international airlines in passenger, baggage and cargo-related claims before Nigeria’s superior courts of record.She is an associate of the Chartered Institute of Arbitrators and a member of the African Arbitration Association and the Lagos Court of Arbitration. Oluwasemiloore co-authored the Nigeria chapter for the 2015 and 2016 editions of Getting the Deal Through – Aviation Finance & Leasing. She also recently contributed an article on “Rights and obligations of passengers and airlines in carriage by air” for the August 2019 edition of Malimbe.

ǼLEX4th Floor, Marble House1 Kingsway RoadFalomo, IkoyiLagosNigeria

Tel: +234 1 279 3365Email: [email protected]: www.aelex.com

ǼLEX is a full-service commercial and dispute resolution law firm with its head office in Lagos and other offices in Port Harcourt and Abuja, Nigeria and in Accra, Ghana. ǼLEX has nine partners, two international counsel and over 60 lawyers operating from its various offices. Lawyers in the Firm are admitted to practice in several jurisdictions including Nigeria, New York, Ghana, and England & Wales.ǼLEX has significant experience in advising on aero-political, regulatory, competition and privatisation and aviation finance & lease matters. We act for airlines in respect of passenger, cargo and baggage claims and insur-ance disputes. Our experience includes: representing export credit agency lenders in a USD 400,000,000 aircraft acquisition transaction involving the sale, lease, mortgage and registration of an aircraft, advising on a tax-effi-cient structure for the transaction; and assisting a US airline in establishing operations in Nigeria and Ghana.

www.aelex.com


Aviation Law 2020

Chapter 31228

Pakistan

Kabraji & Talibuddin Mubeena Sohail Ellahi

Syed Ali Bin Maaz

Pakistan


vi. a bank guarantee, security deposit and licence issuance fee; and

vii. an undertaking from the chief executive that the company shall obtain the air operator certificate within 365 days from the date of issuance of the licence.

In order to operate an aircraft in Pakistan, the operator/air carrier shall hold a valid Air Operator Certificate (“AOC”) duly granted by the CAA. The term “Air Operator Certificate” is defined in the CAR to mean “a certificate granted under rule 54 or 187”. An operator is not permitted to undertake any flying activities for the purpose of (i) regular public transport, (ii) charter, or (iii) aerial work, without an “air operator certificate” being issued by the Director General of the CAA. Rule 187 of the CAR provides that an operator shall demonstrate to the satisfaction of the CAA that it has the equipment, organisation, staffing, maintenance and other arrangements in place to secure safe operations for the type of aircraft being requested to be included in the certificate, and that the operator is capable of establishing and maintaining a satisfactory method of supervi-sion of the flight operations. The Director General of the CAA may, however, require such additional information from the operator applying for the certificate as it may deem necessary.

A Pakistani operator wishing to undertake commercial air operations in the form of regular public transport, charter (if the service is an international service, or if the aircraft has a maximum permissible take-off mass greater than 5,700 kg), or aerial work must obtain an appropriate licence from the Director General of the CAA, who shall grant the same upon (i) obtaining prior approval of the Federal Government, and (ii) compliance with the provisions of rules 178 and 179 of the CAR relating to application, incorporation, registration, secu-rity deposit and minimum capital requirements set out therein for local operators.

Further requirements in respect of airworthiness compli-ance are set out in the Airworthiness Notice AWNOT-065-AWRG-4.0 dated 10 July 2013 and licensing requirements including but not limited to fees, paid-up capital and fleet requirements are set out in the Air Navigation Order (the Licensing/Certification of Flying Training, Commercial and Private Air Operations) ANO-001-ATNR-3.0 dated 30 May 2019 (“ANO-001”).


The principal piece of legislation governing air safety is the CAR. Pursuant to the CAR, the Director General has been addition-ally empowered to pass “airworthiness notices or circulars”,

1 General


The principal legislation that governs aviation in Pakistan is as follows:i. the Civil Aviation Ordinance 1960 (the “CAO”);ii. the Pakistan Civil Aviation Authority Ordinance 1982

(“1982 Ordinance”) pursuant to which the Pakistan Civil Aviation Authority was established;

iii. the Civil Aviation Rules 1994 (the “CAR”) which were promulgated by the Federal Government of Pakistan through powers conferred to it by, inter alia, the CAO and the 1982 Ordinance; and

iv. the Cape Town Convention and Aircraft Protocol (Implementation) Rules 2004 (the “Implementation Rules”) which incorporate the Cape Town Convention and Aircraft Equipment Protocol into domestic law.

The Pakistan Civil Aviation Authority (the “CAA”) is the regulatory body for the aviation industry in Pakistan.


To apply for a licence (including, but not limited to, regular public transport and charters), applications must follow a prescribed form as directed by the CAA and shall be duly executed by the chief executive of the applicant company (the applicant could be a company incorporated/registered with the Securities and Exchange Commission of Pakistan/Registrar of Firms, as may be applicable in accordance with the Companies Act 2017 or the Partnership Act 1932) and submitted along with the following documents, inter alia:i. a covering letter of the company;ii. a comprehensive feasibility report and business plan

supported by the preceding three years’ bank statements certified by a chartered accountant;

iii. a processing fee;iv. notarised copies of certificate of registration/incorpora-

tion; memorandum and articles of association; partner-ship deed, if applicable, duly verified by the Securities and Exchange Commission of Pakistan; and other necessary forms as may be prescribed by the Securities and Exchange Commission of Pakistan/Registrar of Firms;

v. an undertaking from the chief executive of the company to acquire and maintain valid insurances;

229Kabraji & Talibuddin


(c) the serial number of the aircraft; (d) the name and addresses of all persons or organisations

who have a legal interest as owners of the aircraft;(e) if the aircraft is the subject of a hire purchase or leasing

agreement, the name and address of the person or persons or organisation purchasing or leasing the aircraft; and

(f) a declaration as to the truth of the statement set out in the application.

Additionally, copies of any lease or sub-lease must be filed with the CAA. They may require the original or (in most cases) certified true copies of the documents in order to validate the contents following which the originals will be returned. Filing a copy of the lease will be required, as the CAA will need to see the nature of the lessor’s interest in the aircraft before making the appropriate notations in the Pakistan Aircraft Register and naming them as the owner in the certificate of registration, if applicable.

With respect to AOCs, please see our response to question 1.2.


In the event that an accident occurs with an aircraft registered in Pakistan or an aircraft registered in another state while being in Pakistan, the pilot-in-command, the operator, the owner, and the hirer (if any) shall each be responsible for ensuring that a notification of the accident is furnished to the Director-General by the quickest available means immediately after the accident, and by a written report to the Director General pursuant to rule 270 of the CAR. The written report shall contain the particu-lars specified in rule 270(2) of the CAR. Furthermore, a “volun-tary incidents reporting system” is also required to be estab-lished for obtaining information that may not be received under the mandatory incident reporting requirements. In the event of an accident, rule 272 provides that the Director General of the CAA shall have the custody of the aircraft and the same cannot be removed or otherwise interfered with, except with the permission of the Director-General or the chairman of a Board of Accident Inquiry. The expenses to be incurred in an aircraft accident and incident investigation conducted by the Safety and Investigation Board shall be borne by the operator of the aircraft registered in Pakistan. Such expenses in relation to foreign-registered aircraft in Pakistan may be provided by the CAA, which shall be later recovered from the operator of that aircraft through the State of Registry. Where an accident in Pakistan has been investigated under the CAR, the Federal Government may, whenever it is considered to be desirable in the public interest, appoint a Board of Accident Inquiry to inquire into the cause of the accident and into other such matters relating to the accident that may be referred to by the Federal Government.

Additionally, all air carriers are required, by the Air Navigation Order-020-FSXX-3.0 dated 1 January 2018, to ensure an acci-dent prevention and flight safety programme is maintained on a continuing basis as set out thereunder.


Not that we are aware of.

which are notices relating to, inter alia, air safety circulars and “air navigation orders”.

The Air Navigation Order ANO-011-FSXX-3.0 dated 1 January 2018 (“ANO 2018”) establishes the requirements on various safety-related matters pertaining to the safety of passengers, crew and the operational staff of both the air oper-ators and the ground handling agencies. In accordance with ANO 2018, operators/handlers are required to provide all the contents stated therein to the flight crew, cabin crew and all ground operations personnel related to any aspects of the safety requirements through the provision of the operations manual, passenger handling manual, baggage handling manual and/or policies as applicable.


No, the CAA is responsible for regulating air safety for all commercial, cargo and private carriers in accordance with its rules and regulations issued from time to time.


No, air charters are not regulated separately for commercial, cargo and private carriers.


Please see our response to question 4.18 below. Separate tax advice can be sought from a tax specialist on this issue in rela-tion to taxation.


All civil airports in Pakistan are owned and operated by the CAA which is a statutory authority created pursuant to the 1982 Ordinance, with the exception of Sialkot International Airport, which is the first private airport in Pakistan owned and operated by the Sialkot Chamber of Commerce & Industry.


Requirements are imposed by the CAA in Pakistan pursuant to the applicable law. Rule 7 of the CAR states that an aircraft other than a military aircraft shall not fly in Pakistan unless it has been included in the Pakistan Aircraft Register or has been regis-tered in a contracting state which is a party to the Convention on International Civil Aviation concluded in Chicago on 7 December 1944.

The requirements in respect of registration of an aircraft in Pakistan are set out in Rule 8(1) of CAR, which states that the application for the inclusion of an aircraft in the Pakistan Aircraft Register shall contain:(a) the name of the manufacturer; (b) the manufacturer’s designation of the aircraft;

230 Pakistan


by virtue of the Implementation Rules, as these have been imple-mented as a part of Pakistan’s municipal law and there is nothing under Pakistan law that would suggest a shift in title of an engine merely by virtue of it being fixed to another aircraft.


Stamp duty on a lease agreement between a lessor and the oper-ator, if executed in or brought into the province of Sindh, would be a nominal amount of PKR 500. A further USD 60 (which is subject to revision as may be deemed necessary by the CAA) would be payable to the CAA as a registration charge. Please seek tax advice from a tax specialist in relation to any other applicable taxes payable in respect of the relevant transaction.


Yes, Pakistan is a signatory to the Montreal, Geneva and Cape Town Conventions.


Much like the United Kingdom and other jurisdictions, in Pakistan a treaty must be implemented by domestic legislation in order to create or effect private rights and obligations within the state. It is another matter that the provisions of the treaty operate to bind the state itself in relation to other states which are party to it. This rule was affirmed by the Supreme Court of Pakistan in 1961 in a case reported at PLD 1961 SC 573 and related to the Geneva Convention and Protocol on Arbitration Clauses, 1924. In the case of the Cape Town regime, it was implemented by rules made by the Federal Government in the exercise of powers conferred to it under the CAO.


On this point, advice should be sought from a tax specialist.



Upon contravention of the applicable laws of Pakistan, aircraft can be detained or arrested as such powers are provided to the Federal Government and the CAA pursuant to the appli-cable laws. Section 8 of the CAO grants the CAA a right to detain any aircraft: if, in its opinion, the flight of such aircraft would compromise the safety of persons in the aircraft or of



Yes, provided the owner’s name is included in the application for the Certificate of Registration issued by the CAA.


With respect to aircraft, Pakistan does not have a separate register to record mortgages and charges and there are no provi-sions of Pakistan law which would enable an aircraft mortgage or any other security in an aircraft to be perfected in Pakistan by entry in any domestic register (either with the CAA or any other government entity) unless the aircraft is owned by a Pakistani company. In that case, the mortgage or charge will need to be registered at the Company’s Registration Office under Section 100 of the Companies Act 2017. The CAA is not required by law to maintain a register of mortgages or other security documents creating or evidencing security in respect of any aircraft, nor is any notice required to be given to third parties in respect of any security interests in the aircraft by registration of the secu-rity interest or otherwise. However, as the aircraft will be regis-tered in the Pakistan Aircraft Register, it is possible to avail of a practice developed over time, which is that a notation may be made in the remarks section of the Pakistan Aircraft Register to include a brief description of the security interest or interests in the aircraft. This may only be obtained if the lessor submits to the CAA a duly notarised, consularised and certified true copy of the relevant security agreement.


Given that Pakistan has implemented the Cape Town Convention and Aircraft Equipment Protocol, the recordation of an Irrevocable Deregistration and Export Request Authorization (“IDERA”) in favour of a lessor or a financier entitles the rele-vant authorised party named under the IDERA to exercise the self-help remedies set out under the Implementation Rules, including the right to de-register the aircraft from the Pakistan Aircraft Register and to export the aircraft from Pakistan. Please also see our responses to questions 1.2 and 1.8.


No. The Cape Town Convention has codified the prevailing legal opinion of the international aviation practice and explic-itly ensures that the registered international interest in an engine shall not be affected by its installation on or removal from an aircraft. If the engines are removed from the aircraft, and the international interest is appropriately registered in the interna-tional registry, then the interest would be enforceable in Pakistan




Pakistan declares that the following court(s) shall have jurisdic-tion over claims brought under the Implementation Rules:a. the High Court of Balochistan;b. the Lahore High Court;c. the Peshawar High Court; andd. the High Court of Sindh.

Yes, there is a distinction in our jurisdiction depending on the nature of the proceedings (i.e. civil or criminal).


The rules for service of civil court proceedings in Pakistan are set out under the Civil Procedure Code 1908 (“1908 Code”) and do not differ by reason of whether the airline is domestic or non-domestic, but rather, given that if a non-domestic airline does not have presence in Pakistan, there are modes to effect service on such airline where it resides. Once a suit has been duly instituted, the Court may issue a notice to the defendant to appear in the Court and answer the claim on a day as spec-ified thereunder. Upon personally delivering the summons, the serving officer must obtain an acknowledgment of service, and in the event that the defendant or his agent refuses to sign the acknowledgment or cannot be found, or there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, Rule 17 Order V of the 1908 Code provides that the serving officer shall affix a copy of the summons on the outer door or some other conspic-uous part of the house in which the defendant ordinarily resides or carries on business and shall then return the original to the Court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any), by whom the house was identified and in whose presence the copy was affixed. Pursuant to Rule 26 Order V of the 1908 Code, if the defendant resides outside Pakistan and has no agent in Pakistan empowered to accept service, the summons shall (except in the cases mentioned in rule 26-A thereto) be addressed to the defendant at the place where he is residing and sent to him by post.


Rule 21 of the Implementation Rules provides for speedy interim relief to creditors pending final determination of their claim, upon the provision of evidence of default by the defaulter/oper-ator. The Court may make any one or more of the following orders as requested by the creditor:(a) preservation of the aircraft object and its value;(b) possession, control or custody of the aircraft object;(c) immobilisation of the aircraft object;(d) lease or, except where covered by clauses (a) to (c), manage-

ment of the aircraft object and the income therefrom; and

any other persons or property; or in order to ensure compliance with the provisions of the CAO or the CAR. Additionally, Rule 46(2) of the Implementation Rules states that nothing in the Implementation Rules shall affect the exercise by any person, including any state entity, of powers to arrest or detain an aircraft object for violation of law, including safety-related and/or criminal violations, or for payment of any amounts owed to any such person and directly related to the services provided by it in respect of that aircraft object, provided that no such arrest or detention shall adversely affect the priority of an international interest held by a party not violating such law.


The laws of Pakistan provide for a variety of remedies to protect the interests of lessors and creditors especially in the event of a default. A chargee (which will include a creditor) may exercise any one or more of the following remedies without the necessity of applying to a Court for an order pursuant to Rule 13(1) of the Implementation Rules:(a) take possession or control of any aircraft object charged to

it, and the chargor shall be under a legal duty to give such possession or control in the manner and within the time the chargor has so agreed;

(b) sell or grant a lease of any such aircraft object; and(c) collect or receive any income or profits arising from the

management or use of any such aircraft object.Pursuant to Rule 13(2), the chargee may alternatively apply for

a court order authorising or directing any of the acts referred to in sub-rule (1). A chargee proposing to sell or grant a lease of an aircraft object under sub-rule (1) shall give reasonable prior notice in writing of the proposed sale or lease to:(a) interested persons specified in sub-clauses (a) and (b) of

clause (xxxi) of Rule 2; and (b) interested persons specified in sub-clause (c) of clause

(xxxi) of Rule 2 who have given notice of their rights to the chargee within a reasonable time prior to the sale or lease.

However, it must be noted that a chargee must give a reason-able prior written notice of “10 or more working days” of a proposed sale or lease to interested persons. The foregoing shall not prevent a chargee and a chargor or a guarantor from agreeing to a longer period of prior notice. Also, any sum collected or received by the chargee as a result of exercise of any of the remedies set out in sub-rule (1) or (2) shall be applied towards discharge of the amount of the secured obligations. Where the sums collected or received by the chargee as a result of the exer-cise of any remedy set out in sub-rule (1) or (2) exceed the amount secured by the security interest and any reasonable costs incurred in the exercise of any such remedy, then unless otherwise ordered by the Court, the chargee shall distribute the surplus among holders of subsequently ranking interests which have been regis-tered or of which the chargee has been given notice, in order of priority, as set out in Rule 36, and pay any remaining balance to the chargor. On occurrence of an event of default under the lease, assuming that the owner is permitted to do so, the owner can enforce the lease by taking physical possession of the aircraft by enforcing the IDERA if it is the authorised party thereunder, or apply for a court order to authorise or direct the same as per sub-rule 15(a) and (b) of the Implementation Rules, respectively. The language of this rule suggests that the owner may exercise his right to take possession of the aircraft without applying to the Court to authorise or direct the same.

232 Pakistan


The recognition and enforcement of the award may also be refused where the competent authority of the country finds that:i. recognition or enforcement would be against the public

policy of Pakistan; orii. the subject matter of the dispute is not capable of settle-

ment by arbitration under Pakistan law.



A joint venture arrangement shall require prior approval of the Competition Commission of Pakistan (the “CCP”) if it amounts to a collaborative arrangement by which two or more undertak-ings agree to devote their resources to pursue a common objec-tive, provided that such arrangement: (a) must be subject to joint control; (b) should perform the functions independently; and (c) on a lasting basis. Control, in relation to an undertaking, is regarded as existing if, by reason of securities (being not less than 10% of their market value), contracts or otherwise, influ-ence is capable of being exercised with regard to the activities of the undertaking and in particular, the following:i. ownership of, or the right to use all or part of, the assets of

an undertaking; andii. rights or contracts which enable decisive influence to be

exercised with regard to composition, voting or decisions of the organs of an undertaking.

Control through securities means shares in the share capital of the undertaking carrying voting rights and includes any secu-rity which entitled the holder to obtain or exercise voting rights.


Under the Competition Act 2010 (the “Competition Act”), the term “relevant market” means: “[T]he market which shall be determined by the

Commission with reference to a product market and a geographic market and a product market comprises of all those products or services which are regarded as inter-changeable or Substitutable by the consumers by reason of the products’ characteristics, prices and intended uses. A geographic market compromises the area in which the undertaking concerned are involved in the supply of prod-ucts or services and in which the conditions of competi-tion are sufficiently homogeneous and which can be distin-guished from neighbouring geographic areas because, in particular, the conditions of competition are appreciably different in those areas.”

Under the Competition Act 2010, the dominant position requirement is stated as 40%. An undertaking is presumed to be dominant if its relevant market share exceeds 40%.

The Competition Act defines “dominant position” as follows: “dominant position” of one undertaking or several undertak-ings in a relevant market shall be deemed to exist if such under-taking or undertakings have the ability to behave to an appreci-able extent independently of competitors, customers, consumers and suppliers and the position of an undertaking shall be presumed to be dominant if its share of the “relevant market” exceeds 40%. Therefore, the 40% threshold is only relevant in relation to market share and not in relation to an undertaking.

(e) if at any time the debtor/operator and the creditor specif-ically agree, sale and application of proceeds therefrom and, where so agreed, the mere existence of such an agree-ment shall be just and sufficient cause for the Court to make such an order and for the purpose of satisfying the requirements of any legal provision in this behalf.

Additionally, with respect to interim remedies, Order XXXIX of the 1908 Code provides for temporary injunctions and inter-locutory orders to be granted depending on the nature of the case and the facts surrounding thereto. An order for tempo-rary injunction is granted in instances where it is proved in a suit by an affidavit or otherwise that (i) the property in dispute in a suit is in danger of being wasted, damaged or alienated, or (ii) the defendant threatens or intends to remove or dispose of his property with a view to defraud his creditors. Thus, in order to restrain the defendant from taking such actions or to stay and prevent the wastage, damage, sale, removal or disposition of the property, the Court may grant a temporary injunction as it thinks fit until the final disposal of the suit or until further orders. A party under a contractual arrangement may apply to the Court for an interim injunction to restrain the counter-party to the contract from committing a breach of contract or other injury of any kind arising out of the same contract or relating to the same property or right. A party seeking relief on a “final basis” from the Court may obtain a decree for specific perfor-mance of a contract or a permanent injunction.

Pursuant to Section 3(2) of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act 2011 which incorporates the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Convention”) into domestic law, an application may be made to stay legal proceedings in a court where the proceedings are pending provided such proceedings stem from an agreement which provides for dispute resolution through arbitration.


Pursuant to the 1908 Code, a party aggrieved by a decree or order may have a right to appeal or file a review or revision against the decision of a court in accordance with the applicable law, and subject to the conditions set out thereunder. The nature of the appellate proceedings, however, shall depend on the underlying claim brought before the Court and the orders passed thereon.

The recognition and enforcement of a foreign arbitral award may be refused on one or more of the following grounds:i. incapacity of the parties; invalidity of the agreement under

the chosen law, or if no choice is indicted, under the laws of the jurisdiction where the award is made;

ii. improper notice of appointment of arbitrator or proceed-ings thereto, or lack of opportunity to present the case, in regards the party against whom the award is made;

iii. the award deals with issues not contemplated by or falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration;

iv. the composition of the arbitral authority or procedure is not in accordance with (A) the agreement of the parties, or (B) the law of the country where the arbitration took place; or

v. the award has not yet become binding on the parties, or has been suspended or set aside by a competent authority where the award was made.




The CCP is required to pass an order on the pre-merger clear-ance application within 30 days of the receipt of the application filed by the merger parties. Failure by CCP to make a determi-nation within 30 days shall be deemed as consent to the intended merger by the CCP. The CCP may, at any time after receiving the application, give notice to the applicant to provide additional information or documents within a stipulated period. Thus, the 30-day time frame shall not commence unless the non-con-formity as may be notified by the CCP, if any, is rectified by the applicant.


Please see our responses to questions 4.1 and 4.2 above.


Upon submission of an application in accordance with the Merger Regulations, the CCP shall carry out a preliminary assess-ment to analyse if the transaction falls within the description of a “merger” and the thresholds and presumption of dominance set out thereunder. Following which, the CCP shall conduct the first phase review, which shall be completed within 30 days. Upon completion of the first phase review, the CCP shall either issue a favourable decision and allow the merger transac-tion to proceed or carry out another review, i.e. a second-phase review. The decision shall be provided to the applicant through an order. If the CCP does not provide an order following the expiry of 30 days from the first-phase review, it shall mean that the CCP has no objections to the intended merger.

If the CCP is not satisfied with the information it has been provided under the first-phase review and cannot conclude as to whether or not there is a merger situation raising competition concerns, it shall carry out a detailed assessment in the shape of the second-phase review by notifying the merger parties and requesting additional information if necessary. The second-phase review shall be completed within 90 days and the CCP shall provide its decision thereon, provided the 90-day period shall commence after the CCP notifies the merger parties that the merger situation has proceeded to the second-phase review, and all the additional information, as and if requested, has been received by the CCP.


No specific rules are in place which provide for state aid or other financial support to operators and airports.


Pursuant to the National Aviation Policy 2019 (the “Policy”) and the ANO-001, a Commuter Air Services/Operators for

Pursuant to Regulation 3 of the Competition (Merger Control) Regulations 2016 (the “Merger Regulations”), a “merger” (which is defined to mean the merger, acquisition, amalgamation, combi-nation or joining of two or more undertakings or part thereof into an existing undertaking or to form a new undertaking, and the expression “merge” means to merge, acquire, amalgamate, combine or join, as the context may require) is deemed to have occurred if:(i) two or more previously independent undertakings merge

to form a new undertaking and cease to exist as separate legal entities;

(ii) one undertaking is absorbed into another with the latter retaining its legal entity and the former ceasing to exist;

(iii) one or more persons or other undertakings acquire direct or indirect control of the whole or part of one or more other undertakings;

(iv) the acquisition of shares or assets (including goodwill) or a substantial part of the shares or assets places the acquiring undertaking in a position to replace or substantially replace the other undertaking in the business or, as appropriate, the part concerned with the business in which that under-taking was engaged in immediately before the acquisition; or

(v) there is a collaborative arrangement through which two or more undertakings devote their resources to pursue a common objective. The agreement must be subject to joint control and should perform the functions of an autonomous entity and be on a lasting basis.

An undertaking is regarded as having “control” if, by means of securities (being not less than 10% of their market value), and/or contracts or any other means, it is capable of exercising decisive influence in the activities of the other undertaking, e.g. ownership of, or the right to use all or part of, the assets of the undertaking. For this purpose, control through securities means having shares in the share capital of an undertaking carrying voting rights and includes any other security which entitles the holder thereof to obtain or exercise voting rights. Such securi-ties also include all depository receipts carrying entitlement to the holder to exercise voting rights in the related undertaking.

Pursuant to Regulation 4 of the Merger Regulations, an appli-cation for clearance from the CCP will be required prior to acquisition if the:(i) value of the gross assets of either one of the parties to the

transaction or the target company (excluding goodwill) is not less than PKR 300 million, or the combined value of the gross assets of the parties and the target company is not less than PKR 1 billion; or

(ii) the annual turnover of either one of the parties to the transaction or the target company in the preceding year is not less than PKR 500 million, or the combined turnover of the parties and the target company is not less than PKR 1 billion; and

(iii) the shares sought to be acquired are for a value equal to or greater than PKR 100 million; or

(iv) the purchaser will acquire, as a result of the acquisition, 10% or more of the voting shares of the target company.

The Competition Act does not specifically place the obli-gation to file the application for pre-merger clearance on any one party to a transaction. However, in practice, and since the form of the pre-merger application requires information for all parties including the target company, the application is either jointly prepared and submitted by a representative of all parties who is authorised for the purpose or filed by the acquirer inde-pendently. A fee must also be paid upon filing which is deter-mined on the basis of the annual turnover of the merger parties.

234 Pakistan


to accord maximum protection to the recorded data, and shall be operational at all times during a flight. Furthermore, Rule 247 of the CAR provides that the flight data recorders shall be capable of retaining the data recorded during at least the last 25 hours’ operation and the cockpit voice recorders shall be capable of retaining the information recorded during at least the last 30 minutes of operation. The flight recorder data shall be retained under Rule 247 for a period of not less than three months, and shall then be made available for inspection by the Director General of the CAA, should he require it. Operators are also required under Rule 211 of the CAR to record in an aircraft journey log book the following details relating to each flight by a regular public transport or a charter aircraft:(a) the aircraft nationality and registration;(b) the date;(c) the names of the crew members;(d) the duty assignments of the crew members;(e) the place of departure;(f ) the place of arrival;(g) the time of departure;(h) the time of arrival;(i) the hours of flight;(j) the nature of the flight;(k) incidents and observations, if any; and (l) the signature of the person in charge.

Any person who contravenes or fails to comply with the provisions of the CAR shall be guilty of an offence pursuant to Rule 333 of the CAR and this may include the owner, operator, hirer and/or the pilot in command.


The mechanisms available to protect intellectual property in Pakistan stem from, inter alia, the Trade Marks Ordinance 2001 (the “Trade Marks Ordinance”), Trade Marks Rules 2004, Patents Ordinance 2000, Registered Design Ordinance 2000 and Copyright Ordinance 1962.

The Trade Marks Registry keeps a record of all registered trade marks with the names, addresses, description of the proprietors and activities that take place in terms of assignments and trans-missions. Pursuant to Section 22 of the Trade Marks Ordinance, any person claiming to be the proprietor of a trade mark used or proposed to be used by him who is desirous of registering it shall apply in writing to the Registrar in the prescribed manner. An infringement of a registered trade mark shall be actionable by the proprietor of the trade mark and, in an action for infringe-ment, all such relief by way of damages, injunctions, accounts or otherwise shall be available to the proprietor of the trade mark.

Under the Patents Ordinance 2000, a patentee may institute a suit in a District Court having jurisdiction to try the suit against any person who, during the continuance of a patent acquired by him under the Patents Ordinance 2000 in respect of an inven-tion, makes, sells or uses the invention without his licence, coun-terfeits it, or imitates it. In any suit for infringement, the Court shall have the authority to, inter alia: order prompt and effec-tive provisional measures to prevent an infringement and, in particular, to prevent the entry into the channels of commerce of goods, including imported goods after custom clearance; and grant relief by way of damages, injunctions or accounts, provided that, where permitted, effective provisional measures may also be ordered by the Court.

Tourism Promotion and Regional Integration (“TPRI”) licence will be issued to promote tourism (including religious and medical tourism) and regional connectivity, including helicopter services. The operator/licensee in this particular category will be encouraged to operate scheduled commuter services on Socio-Economic Routes and shall be entitled to the following facilities/incentives by the CAA.

In return, the following privileges have been set out in the Policy to be offered to the operators, inter alia:i. No landing, housing and air navigation charges on both

ends of the selected Socio-Economic Routes/Destinations.ii. The TPRI licence shall be issued within 60 days from the

acceptance of the completed application. The licence shall be valid for a period of five years.

iii. No rent will be levied for the use of aeronautical services, office space by these operators at Socio-Economic airports subject to scheduled operation.

iv. TPRI licence operator shall not be allowed to operate between trunk/primary routes; however, the flight may originate from or terminate at any of the trunk/primary stations.

v. Tax incentives may be provided to the TPRI licensee by the Federal Board of Revenue (the “FBR”) for Socio-Economic Routes.

vi. Charter Operators would be required to obtain a TPRI licence, in addition to Charter Licence, for commuter oper-ation on Socio-Economic Routes. For these operations, charter operators would also be entitled for the above-men-tioned incentives.

vii. TPRI operators can conduct flight operations on Socio-Economic Routes with aircraft having less than 40 seats.


There are no specific laws in place that govern passenger data applicable to operators and airports; however, the Prevention of Electronic Crimes Act 2016 sets out that an “information system” or “data”, which is not open for access to the general public of Pakistan, shall only be accessed, stored and transmitted if such information system or data is authorised by either (i) law, or (ii) the person empowered to make such authorisation under law. If any data pertaining to the passengers is accessed, stored or transmitted, it must be authorised by them. A contravention of this general principle shall result in punishment with impris-onment for three months or a fine of PKR 50,000, or both.


The CAR provides that an aircraft (which has a maximum permissible total mass of 5,700 kg) shall not commence a flight unless it is equipped with a serviceable flight data recorder capable of recording time, altitude, airspeed, vertical accelera-tion and heading, and an aircraft with a maximum permissible total mass over 27,000 kg shall, in addition to the flight data, be capable of recording the altitude of the aircraft and be equipped with a serviceable cockpit voice recorder capable of recording the aural environment of the flight deck. The flight data and cockpit voice recorders shall be constructed and located so as



Pursuant to Section 6 of the 1982 Ordinance, the CAA shall, subject to any other law being in force for the time being, have control over the following, inter alia:i. civil airports and aerodromes in Pakistan, including their

planning, construction, operation and maintenance;ii. air routes in Pakistan, in consultation with the Federal

Government; andiii. collection of revenue at airports and aerodromes and at

various offices of the CAA.


Each of the provinces in Pakistan, i.e. Sindh (Sindh Consumer Protection Act 2014), Punjab (Punjab Consumer Protection Act 2005), Khyber Pakhtunkhwa (KPK Consumer Protection Act 1997), Balochistan (Balochistan Consumer Protection Act 2003) and Islamabad Capital Territory (Islamabad Consumer Protection Act 1995), have separate consumer protection laws. A claim by a passenger in relation to damages suffered due to defective services provided by the airline may be brought to a consumer court of the relevant province where the cause of action accrues as long as the passenger can establish that it is a “consumer” as defined under the applicable consumer protection laws of that province.


Different global distribution systems are used by airlines in Pakistan; e.g., Pakistan International Airline Corporation Limited uses SABRE.


See our response to question 4.15.


There is no express prohibition under Pakistan law for vertical integration between air operators and airports; however, given that the airports are primarily owned and operated by the stat-utory authority, i.e. the CAA (with the exception of Sialkot International Airport), it is unlikely that such a vertical integra-tion would be practically possible.


Rule 179(2) of the CAR states that foreigners may not own more than 49% of the share capital of an air transport under-taking in Pakistan. Only Pakistani operators can apply for an Air Operator’s Certificate in Pakistan. There are, however, no explicit


No such legislation is in place that deals specifically with the denial of boarding rights and/or cancellation of flights. Ordinarily, the contract of carriage between the operator and the passengers is the instrument which governs their rights and liabilities with respect thereto. However, the Ministry of Interior of Pakistan is responsible for making policies with respect to the entry and exit of foreigners (which includes admission into and departure from Pakistan) and the regulation of movement of persons in Pakistan who are not domiciled in Pakistan. Furthermore, the Federal Investigation Agency of Pakistan (the “FIA”) is responsible for the enforcement of immigration laws while handling incoming and outgoing passengers at the FIA check-posts. Pursuant to Standing Order No. 27/2005, immigration officers are author-ised to refuse entry or exit by any passenger on the following grounds:i. where there is a restraining order passed by a court or the

Federal Government with respect to that passenger; orii. where the passenger’s travel documents are incomplete or

suspected to be forged or such entry or exit is otherwise not in accordance with the legal requirements.

Thus, the FIA has broad powers to disallow passengers to board and offload passengers if travelling on bogus or forged travel documents.

On a related note, we have seen, as a matter of practice, that passengers file appropriate legal proceedings in Consumer Courts pursuant to consumer protection legislation as a result of defective service provided by the airline which may result from, inter alia, denial of the passenger’s boarding or cancellation of their flights.


The powers with respect to late arrival and departure of flights may be dictated by the terms and conditions of the relevant licences and approvals issued by the CAA and any other contrac-tual arrangements entered into between the CAA and the operators.


Yes, the CAA was established pursuant to the 1982 Ordinance, and is responsible for ensuring the promotion, regulation and control of the civil aviation activities in Pakistan; and for the development of infrastructure for civil air transport services that are safe, efficient, economical and properly coordinated in Pakistan. Furthermore, the CAA has been empowered to frame a scheme with respect to the following, inter alia:i. the provision of civil airports and aerodromes;ii. the provision of air traffic services to aircraft;iii. the provision of navigational services to aircraft; iv. the provision of communication services at civil airports

and aerodromes in the country; andv. any other matter facilitating the achievement of the objects

of the 1982 Ordinance.

236 Pakistan


5 In Future


Under the National Aviation Policy 2019, the existing regula-tory mechanism of aviation safety and security oversight will be strengthened. Airports and airspace infrastructure will be devel-oped for efficient and sustainable air transportation in the country. The quality of airport services will be improved through state-of-the-art technology, modern infrastructure, improved logistics and the best international work practices.

nationality requirements that apply to foreign operators of aircraft coming into and out of Pakistan. However, there may be public policy considerations where the Indian or Israeli aircraft opera-tors were to fly into and out of Pakistan. With respect to foreign operators flying and operating foreign-registered aircraft domes-tically in Pakistan for private operations, compliance with Rule 254D of the CAR and ANO-001 is mandatory. The ANO-001 requires that any person or a company who intends to acquire a commercial or private aircraft operations licence in Pakistan must obtain prior security clearance in accordance with the procedure set out thereto where such a person or the chief executive/director of a company has dual nationality.

237

Aviation Law 2020

Kabraji & Talibuddin

Syed Ali Bin Maaz completed his LL.B. (Hons) from the University of London (External Programme) in 2007 and completed his Bar Vocational Course from the University of West of England, Bristol in 2008. Maaz was called to the Bar (Lincoln’s Inn) in 2008. He is a Member of the Sindh Bar Council, Karachi Bar Association and High Court Bar Association, and is enrolled as an Advocate at the High Court of Sindh.He has worked on various corporate and commercial matters, contentious and non-contentious, including: appearances in high courts, civil, district and banking courts across Pakistan; and advising in a wide range of commercial transactions including project finance and banking, debt and equity financing, mergers and acquisitions, foreign exchange regulations, enforcement of foreign arbitral awards and insider trading.

Kabraji & Talibuddin406–407, 4th FloorThe Plaza at Do TalwarBlock 9, CliftonKarachi 75600Pakistan

Tel: +92 21 3583 887 1–6 (six lines)Fax: +92 21 3583 887 9Email: [email protected]: www.kandtlaw.com

Mubeena Sohail Ellahi graduated with an LL.B. (Hons) from the University of Buckingham in 2012 and holds an LL.M. in International and Commercial Law with a specialism in oil and gas. In 2016, she graduated from Queen Mary University of London with another LL.M., in Energy and Natural Resources.She has worked on various corporate and commercial matters, contentious and non-contentious, with a particular emphasis on electronic and digital transactions, finance facility agreements, implementation agreements and power purchase agreements in respect of the power sector (coal, oil and gas-powered projects) as well as advising on aviation law, company law, labour law, data protection law, foreign exchange law and related queries.

Kabraji & Talibuddin406–407, 4th FloorThe Plaza at Do TalwarBlock 9, CliftonKarachi 75600Pakistan

Tel: +92 21 3583 887 1–6 (six lines)Fax: +92 21 3583 887 9Email: [email protected]: www.kandtlaw.com

Kabraji and Talibuddin (the “Firm” or “K&T”) was formed in Karachi in 1997 and has since built a reputation for its legal services in the domestic and international markets. The Firm is recognised as a leading firm in the Pakistan energy and aviation sector, having acted on a number of pioneer projects and transactions in Pakistan. The Firm’s in-depth experience and knowledge in this practice area is unparalleled, as recognised by many international publications and reputable legal directories. Having unri-valled experience in aviation finance and aircraft leasing matters, along with extensive insight of the aviation market and prominent stakeholders, the team at K&T ensures that the clients’ objectives are achieved in a stra-tegic, efficient and commercially viable manner.The Firm represents foreign and local investors interested in investing in Pakistan in a diverse range of corporate and commercial transactions. K&T’s portfolio of clients is varied and includes some of the leading banks/

financial institutions and multinational companies from across the globe. K&T also has extensive experience in corporate matters including, but not limited to, contentious and non-contentious matters, both domestic and trans-border, including joint ventures, inward foreign investment and mergers and acquisitions. The Firm’s profound knowledge of the local market and the legal and regulatory environment allows us to provide effi-cient, strategic and commercially viable solutions to our clients.

www.kandtlaw.com


Aviation Law 2020

Chapter 32238

Panama

Arias, Fábrega & Fábrega Sofía J. Cohen

Roy C. Durling

Panama



The principal piece of legislation in our jurisdiction governing air safety is Law No. 21 of 28 January 2003, which regulates civil aviation activities in Panama, and the Civil Aviation Authority is the authority that administers air safety in Panama.


Commercial, cargo and private carriers are all subject to Law No. 21 of 28 January 2003.


Air charters for commercial, cargo and private carriers are regu-lated equally under Law No. 21 of 28 January 2003.


Ownership of local airlines offering cabotage services (domestic operations) is restricted to national investors. The law requires that at least 60% of the issued and outstanding capital in a local airline offering cabotage services, be owned by Panamanians.

The issued capital of such local airlines must be represented by nominative shares in the name of Panamanians. Also, the effec-tive control of the airline must be exercised by Panamanians, and for such purposes: (i) at least 60% of the shares granting the right to vote must be nominative shares in the name of Panamanians; (ii) the right to vote with such shares must be effectively exercised by Panamanians; (iii) the board of direc-tors or similar administrative body must be composed, in its majority, by Panamanians; and (iv) the domicile or principal place of business of the airline must be in Panama.

In respect to taxes, there is no special treatment by virtue of nationality. Our income tax system taxes income produced within the territory of Panama. Therefore, income from domestic operations would be considered locally produced, and hence, 100% taxable; whereas income produced by international carriers outside of Panama would not be taxed in Panama.

1 General


The principal legislation on aviation in Panama is Law No. 21 of 28 January 2003, which regulates civil aviation activities in Panama. Panama has also adopted the RAC (Reglamento de Aviación Civil ) which includes regulations for civil aviation.

In addition, Law No. 23 of 28 January 2009 sets out the regu-latory framework for the administration of airports.

The principal regulatory body on aviation in Panama is the Civil Aviation Authority, an independent government entity, with legal capacity and its own resources, created by Law No. 22 of 29 January 2003.


In order to operate a passenger or cargo airline in Panama, it is necessary to obtain an Exploitation Certificate and an Operation Certificate, both issued by the Civil Aviation Authority.

There is a set of documents that need to be filed with the Civil Aviation Authority at the time of applying for an Exploitation Certificate and an Operation Certificate.

The evaluation process of the application for an Exploitation Certificate involves a public hearing according to local laws and is subject to the provisions of international conventions.

In addition to payment of the corresponding fees and charges set by the Civil Aviation Authority, the Civil Aviation Authority may require the posting of a bond for the purpose of securing the obligations of the airline to governmental authorities in Panama. The amount of such bond may be for a maximum of 30% of the estimated taxes, fees and charges applicable to two months of operation of the airline.

Once the Civil Aviation Authority grants the exploitation and operation certificates, the airline should meet the following requirements before starting operations:■ Evidenceofhavingliabilityinsurance.■ Airlinefarestobeapplied.■ Abondorsuretyunderthetermsestablishedbytheregu-

lations, unless an Air Transport Agreement or other rules exempt the airline from this requirement.

The Exploitation Certificate has a validity of three years, and may be extended indefinitely for the same period of time. The Operation Certificate is issued without an expiration date.

239Arias, Fábrega & Fábrega



Generally, no. However, in the case of lessors, the lessee/oper-ator of the aircraft has to qualify as a Panamanian national (the majority of its issued and outstanding shares must be directly or indirectly in the hands of Panamanian citizens).


There should be no risks if the owner of the engine has a valid title in its favour and it becomes possible to replace such engine with another one, without affecting the aircraft.


Panama has a territorial tax regime pursuant to which only income produced within the territory of Panama is subject to income taxes. Hence, if the sale of an aircraft is done in the fiscal territory of Panama, it would be subject to payment of income tax (in the case of any income resulting from the sale) and movable assets transfer tax and services (ITBMS) (which is a goods and services tax).


Panama is party to the Convention for the Unification of Certain Rules for International Carriage by Air, the Geneva Convention on the International Recognition of Rights in Aircraft and the Cape Town Convention on Interests in Mobile Equipment and its Protocol.


They are adopted by law and treated as such.


Yes, Panama has adopted Double Taxation Treaties with several jurisdictions, such as Ireland. Panama has also exchanged diplo-matic notes with other jurisdictions such as the United States, in regard to the treatment of certain taxes for aircraft/companies engaged in international transportation.


Generally, airports in Panama are currently owned directly or indirectly by the government. Law No. 23 of 29 January 2003 (which sets the regulatory framework for the administration of airports in Panama) provides that the government may incor-porate private companies, whose shares are to be wholly owned by the government of Panama, for the purpose of operating airports, as is the case of Tocumen International Airport, the main and largest international airport in Panama.


Except for requirements and regulations imposed by our general laws, airports do not impose specific requirements on carriers.


Law No. 21 of 2003 and the RAC (Reglamento de Aviación Civil ) make up the regulatory regime that applies to air accidents.


No. However, we would note that Tocumen International Airport is building new facilities to expand its operations.



Yes. Ownership of an aircraft must be recorded at the Public Registry of Panama in order for such interest to be effec-tive vis-à-vis third parties. The Public Registry of Panama is a government entity in which titles, mortgages and leases on Panamanian-registered aircraft are recorded.


The Public Registry of Panama is a substantive register governing the recognition and priority of interests of owners, lessors and secured parties.

Under Panamanian law, an aircraft mortgage is effec-tive between mortgagor and mortgagee upon its creation and becomes effective against third parties from the date it is filed for recordation at the Public Registry of Panama and such regis-tration is completed (i.e., filing of a mortgage may take place on day one and recordation completed on day three; the effec-tiveness of the mortgage against third parties will relate back to the date and time it was first filed at the Public Registry (i.e., day one)).

240 Panama


current or imminent harm or prejudice to the arbitral process itself; (c) provide a means of preserving assets from which a subsequent award may be satisfied; or (d) preserve evidence that may be relevant and material to the resolution of the dispute.

Contrary to interim measures that are issued after the tribunal has heard all interested parties, preliminary orders are requested and decided ex parte (without notice to any other party). Preliminary orders are orders whereby an arbitration tribunal directs a party not to frustrate the purpose of a requested interim measure. Preliminary orders shall expire after 20 working days from the date on which they are issued by the arbitration tribunal. However, the arbitration tribunal may issue an interim measure adopting or modifying the preliminary order after the party against whom the preliminary order is directed has been given notice and an opportunity to present its case.

Courts can issue interim measures as well as precautionary measures such as: (i) attachment or seizure of assets; (ii) seques-tration of the administration of the company of the counter-party; and (iii) measures to secure or obtain certain types of evidence, among others.


Parties are not entitled to appeal an arbitral award in Panama. For awards issued by arbitration tribunals seated in Panama, parties are only entitled to file a motion to set aside the award (to have it declared null and void), which will be heard by the Fourth Chamber of the Supreme Court.

In general terms, judgments and certain interim orders rendered by the judges at the first instance level are subject to appeal to a higher court. In the case of judgments or related orders issued by civil circuit judges, the affected party may appeal to the Superior Tribunal. Our judicial procedure also establishes the right in certain instances for an affected party to appeal against decisions of the Superior Tribunal to our Supreme Court under an extraor-dinary recourse known as “casación” or “cassation”.



Mergers and acquisitions of airlines or joint venture agreements between airlines fall within a general merger control regime.

There is no mandatory pre-merger control in Panama for the approval of mergers or other forms of business combina-tions. However, our Antitrust Law establishes a voluntary noti-fication process for potential mergers or economic concentra-tions with the Authority of Consumer Protection and Defence of Competition (ACODECO). If prior verification for the economic concentration is sought and approved, the economic concentration cannot be subsequently challenged (anti-trust immunity).

If the potential transaction involves a collaboration agree-ment between airlines (i.e., interline agreement, code-sharing agreement, leasing agreement, fleet exchange, route exploita-tion, among others), prior approval from the Civil Aviation Authority (CAA) must be obtained.

Also, airlines must notify the CAA of any changes related to (i) the management and control of airlines, (ii) stockholders and the percentage of stock ownership, (iii) amendments to the constitutional documents, or (iv) any amendment of the opera-tion manuals or technical information.



In the default case for unpaid debts under a facility agreement or a lease agreement, the lender/lessor may take physical posses-sion of the aircraft if the counterparty does not oppose it and there is no breach of the peace. In the absence of the fore-going conditions, the repossession by the lender/lessor must be authorised by the authorities (judicial proceedings and/or permission of a government entity). If the counterparty does not consent to the repossession or opposes the peaceful repos-session of the aircraft, the lender/lessor may commence execu-tory and/or summary proceedings in Panama and may also ask for the attachment of the aircraft in order to gain immediate possession of it.


Yes. Please see our answer to question 3.1 above.


In our jurisdiction, commercial aviation disputes should be heard by a civil circuit court. As to procedural rules, our courts will apply the rules set forth in the Judicial Code. Given the current value of aircraft (even in the case of a single-engine plane), it is very likely that Civil Circuit Courts will have juris-diction to hear cases involving aircraft.


In general terms, there are no differences in the serving process on domestic or foreign airlines. The same rules apply to local and foreign companies. It will depend on where the defendant is located (in Panama or abroad) or if its whereabouts are unknown. In the case that the service of proceedings has to be carried out outside of Panama, our courts will resort to letters rogatory.


In Panama, an arbitration tribunal is permitted to award two types of preliminary or interim relief: interim measures; and preliminary orders.

Interim measures are temporary measures that are issued in the form of an award or in another form by which, at any time prior to the issuance of the final arbitral award, the arbitration tribunal orders a party to: (a) maintain or restore the status quo pending determination of the dispute; (b) take action that would prevent, or refrain from taking action that is likely to cause,

241Arias, Fábrega & Fábrega


■ adescriptionoftheconcentration,itsobjectives,andtypeof operations;

■ specific details of the timing and stages relating to theconcentration process;

■ an outline of any non-compete clauses and theirjustification;

■ adescriptionofmaingoodsorservicesproducedorofferedby each Applicant, as well as (i) a list of the substitution goods or services, and (ii) information on the economic agents who produce, distribute, or commercialise such goods or services in the Panamanian territory, including their market participation data;

■ legalandeconomiclimitations,orthoseofanyotherkind,which should be accounted for to enter the product market in which the Applicants participate;

■ informationonthecompanieswhichhaveenteredorexitedthe market in the previous three years, if such information is known;

■ informationonanyparticipation,directlyorindirectly,ofthe Applicants in the capital, administration, or any other activity of any other economic agent that participates in the same market or activities as the Applicants; and principal suppliers and clients of the Applicant;

■ notwithstandingtheforegoinglist,(i)theApplicantsmaysubmit any additional information they consider neces-sary for purposes of the ACODECO analysis, and (ii) ACODECO reserves the right to request additional infor-mation it considers relevant within a span of 20 days after the initial filing. With respect to point (i), in order to better present the applicant’s arguments, although it is not strictly required, the information and data provided might be backed by an economic analysis which takes into account the areas that are covered by any concentration guide-lines issued by ACODECO (e.g. indexes, barriers to entry, economic benefits, etc.). With respect to point (ii), it is very common for ACODECO to request further information as applicable specifically to the relevant market; and

■ the cost for notification, which might be betweenUSD25,000 and USD30,000.


No, there are no such sector-specific rules in Panama.


No, there are no subsidies in our country for any particular routes.


Our political Constitution provides that all personal information and documents are confidential and inviolable, and such infor-mation may only be given to a competent authority pursuant to an order. This constitutional mandate is applied to all data, information and documents collected by airlines.

If advance verification for the economic concentration is sought and approved, the economic concentration cannot be subsequently challenged. In case no advance verification is sought, at any time within the three years immediately following the effective date of the transaction, ACODECO may file an action seeking that certain conditions be imposed on the parties to ensure competitiveness in the marketplace, in case ACODECO considers the economic concentration to unrea-sonably restrict or harm free competition. In extreme circum-stances, the ACODECO may even request a partial or complete divestiture of the concentration.


In order to determine the “relevant market” for a specific good or service, the Authority of Consumer Protection and Defence of Competition will consider two components: (1) “Product Market” (what are the competing goods in the relevant markets); and (2) “Geographic Market” (what is the geographic area of the relevant market).


Yes, please see our answer to question 4.1 above.


Please see our answer to question 4.1 above.


The filing consists of a written request before ACODECO, attaching the following documents or including the following information:Documents:■ acopyofthelegalact(i.e.,theJVagreement),identifying

the names of the parties involved (the “Applicants”);■ acopyof the financial statements for the last fiscalyear

with respect to each of the parties duly certified by author-ised public accountants;

■ Public Registry Certificate (or foreign-issued equiva-lent) with respect to each of the Applicants certifying the following information as applicable prior to the concentra-tion: legal existence; good standing; legal representation; and capital structure;

■ SecretaryCertificateissuedbytheApplicantsdescribing:the capital structure and shareholder participation before and after the concentration; and persons who have and will have control post-concentration; and

■ a copy of documents pertaining to the business projectanalysis and valuation.

Information:■ generalinformationoneachoftheApplicants;■ informationontheparticipationofApplicantsintherele-

vant market;■ informationon the representativesof theApplicantsand

their respective powers to represent them;

242 Panama



The principal suppliers are Amadeus, Galileo and Sabre, among others.


No, there are no ownership requirements pertaining to GDSs operating in Panama.


There is no provision that prohibits the integration of the air operator and airports. However, ACODECO might challenge or investigate this vertical integration in light of our antitrust laws, in order to determine if there is an antitrust conduct.


Please see our answer to question 1.6 above.

5 In Future


At this moment, there are no pending legislative or regulatory changes that we are aware of, nor any potential development that may affect the aviation industry in our jurisdiction.

AcknowledgmentThe authors would like to thank Pilar Castillo for her invalu-able assistance in the writing of this chapter. Ms. Castillo joined the firm in 2010, and became a partner in 2017. As an active member of ARIFA’s aviation legal team, Ms. Castillo represents leasing companies and investors in the most complex transac-tions, as COPA, the Panamanian airline, expands its fleet for international transport based at Tocumen International Airport. Ms. Castillo has an LL.M. from Fordham University and an LL.B. from Santa Maria La Antigua University. In 2016, Ms. Castillo was accepted as a member of IAWA (the International Aviation Women’s Association).

Tel: +507 205 7000 / Email: [email protected]

Our country has adopted rules regarding the advance delivery of PNR (passenger name record) information to authorities.

In addition to the above, there is no specific regulation related to passenger data in our country.


See question 4.8 above.


In general, intellectual property rights are subject to protection by the law of the Republic of Panama. Our law provides for the registration of trademarks, patents, industrial models and designs, utility models and/or copyright, depending on each case. The law also provides for judicial and administrative reme-dies to owners of IP rights to safeguard their rights.


Yes. Law No. 21 of 2003 governs such scenarios.


There are no specific powers that relevant authorities have in this regard.


Yes, Law No. 21 of 2003 and Law No. 23 of 2003 apply to airport authorities. Each airport has its own Operation Manual. Also, the ICAO (International Civil Aviation Organization) annexes apply to airports.


The Consumer Law applies to every economic agent that does business and is located in the Republic of Panama. This law will therefore apply to any airport operator in the Republic of Panama.

243

Aviation Law 2020

Arias, Fábrega & Fábrega

Roy C. Durling joined the firm in 1991, becoming a partner in 2001. He is a member of the firm’s Executive Committee and head of both the Aviation Practice Group and the Business & Corporate Law Practice Group.A versatile lawyer with skills in a wide range of corporate and commercial law areas, Mr. Durling brings his many years of experience in asset-based financing to the firm, advising international clients on the negotiation and structure of aviation financing deals. Recently, he has advised international financial institutions on the sale and delivery of aircraft as COPA, the Panamanian airline, expands its fleet for international transport based at Tocumen International Airport.Mr. Durling has a J.D. from Cornell University and a B.A. from Georgetown University.Before joining the firm, Mr. Durling worked for the law firm Haight, Gardner, Poor & Havens (today, Holland & Knight LLP) in New York (1986–1990). He is admitted to practise in Panama and New York.

Arias, Fábrega & FábregaARIFA Building, 10th Floor, West BoulevardSanta Maria Business DistrictP.O. Box 0816-01098Panama CityPanama

Tel: +507 205 7041Fax: +507 205 7001Email: [email protected]: www.arifa.com

Sofía J. Cohen joined the firm in 1999, becoming a partner in 2017. She is the head of the Regulatory Practice Group.Having served in the Civil Aviation Authority of Panama, Ms. Cohen brings an abundance of experience in corporate and regulatory matters regarding aviation and other modes of transport, transportation accident claims and aviation law to her legal practice in the aviation field.2010: Chief Negotiator of the Delegation of the Republic of Panama at the ICAO Third Air Services Negotiation Conference (ICAN/2010); Chief Negotiator of the Air Services Agreement with United Arab Emirates; and represented the Republic of Panama at the General Assembly of International Civil Aviation Organization (ICAO).2009–2010: Deputy General Director of the Civil Aviation Authority of Panama.1992–1994 & 1999: Director of Air Transportation of the Civil Aviation Authority of Panama.1990–1991: Assistant District Attorney.Ms. Cohen has a Master of Business Law from the Latin American University of Science and Technology, and an LL.B. from Santa Maria La Antigua University.

Regulatory experienceMs. Cohen heads the Regulatory Work Practice Group, serving the needs of clients affected by a myriad of highly technical, industry-specific and ever-increasing business regulations.Ms. Cohen is well regarded for her in-depth knowledge of the laws affecting regulated industries, and for her experience and skill in dealing with regulatory agencies.

Arias, Fábrega & FábregaARIFA Building, 10th Floor, West BoulevardSanta Maria Business DistrictP.O. Box 0816-01098Panama CityPanama

Tel: +507 205 7000Fax: +507 205 7001Email: [email protected]: www.arifa.com

Arias, Fábrega & Fábrega’s (ARIFA) legal team experience in the aviation sector includes: advising airlines, aircraft owners, aircraft lessors and lessees, banks, and industry providers such as fuel suppliers, in the negoti-ation and drafting of complex aircraft acquisition and leasing agreements; registration of aircrafts before the Civil Aviation Board; joint venture agree-ments; international IPOs of leading commercial airlines in the region; as well as airport infrastructure project financing and fuel procurement contracts.ARIFA’s wide range of services in the area of aviation law also includes providing legal advice to industry providers competing in the public procurement and public-private partnerships field, with full understanding of the requirements of the aviation contracting authorities and the various stages of the awarding process.

Over the last 20 years, ARIFA aviation group has been actively involved in the delivery, sale, and financing of aircraft leased to COPA Airlines, repre-senting leasing companies and investors in the most complex transac-tions, as the Panamanian airline expands its fleet for international transport based at Tocumen International Airport.

www.arifa.com


Aviation Law 2020

Chapter 33244

Romania

Furtună și Asociații Ioana Anghel

Mihai Furtună

Romania


■ thestructureofthecompanyshallallowthestateauthoritytoenforcetheprovisionsof(EC)Regulationno.1008/2008inrespectoftheoperatinglicence;

■ EUMemberStatesand/orresidentsthereofshallownover50%ofthesharecapitalinthecompanyandshallexercisedirectorindirectcontrolthereon,exceptinthecaseoftheexistenceofanagreemententeredintowithathirdcountry,towhichtheEUisaparty;

■ compliance with the financial conditions set forth inArticle5oftheRegulation;

■ compliancewiththerequirementsprovidedinArticle11of(EC)Regulationno.785/2004;and

■ compliancewiththerequirementsongoodwillsetforthinArticle7oftheRegulation.

Anoperatinglicenceisavailableaslongastheaircarriermeetsalloftheabove-mentionedconditions.The General Directorate of Civil Aviation is entitled at all

timestoassessthefinancialoutcomesofanaircarriertowhomit granted the licence, under which the authority may discontinue or cancel theoperating licence in the event that it is doubtfulwhether such an air carrier may comply with its existing orprospective obligations over a 12-month term. Nevertheless,the competent authority may issue a temporary licence for amaximumof12monthsuntilthefinancialrestructuringofthecommunityaircarrierhasbeencompleted.


AirsafetyisgovernedbytheEuropeanregulationrelatedtoairsafety (in particular, Regulation (EU) 2018/1139, Regulations(EU)no.965/2012,no.748/2012,(EU)no.1321/2014,etc.)andalsoby thenational legislation,namely theRomanianCivilAirCodeandsecondarylegislationimplementingtheEuropeanrules.TheEuropeanAviation SafetyAgency (EASA), founded in

2002by theEU, is responsible for theproper functioninganddevelopment of civil aviation safety and cooperates with thenationalauthoritiesinairsafetymatters.InRomania, thebody responsible for flight safetyoversight

istheRomanianCivilAviationAuthority,havingthefollowingmain duties:■ drafting air safety regulations andoverseeing the imple-

mentationofsuchregulations;■ airoperatorcertification,aviationpersonnellicensingand

aeronauticalproduct,partandappliancecertification;■ aerodromecertification;■ flightsafetyinspection;and■ civilaircraftregistration.

1 General


In Romania, the general legal framework regulating avia-tion law is structured on three levels: national, European andinternational.Romanian aviation law is in compliance with EU/

EUROCONTROL/EASARegulation.TheRomanianCivilAirCode (GOno. 29/1997, as further

amended) represents themain regulation at the national level,setting forth general ruleswhich are applicable in the field ofcivilaviation.The state authority in the aviation field is the Ministry of

Transportation, which has delegated some of its duties to theRomanian Civil Aviation Authority. The Romanian CivilAviationAuthority (RCAA)’smain duties include the applica-tion of national aviation regulations and monitoring compli-ance therewith by aeronautical operators, as well as the imple-mentationof internationalcovenantsandagreements towhichRomaniamustadhere.TheRCAA,togetherwiththeDefenceMinistry,coordinates

theuseofRomanianairspacebycivilandmilitaryaviation.


At the European level, the required conditions for obtainingan operating licence are provided under (EC) Regulation no.1008/2008governingmutualrulesfortheoperationofcommu-nity air services. Order no. 808/2011, issued by theMinistryofTransportation, sets forth theprocedures to award, discon-tinueorwithdrawtheoperatinglicenceatthenationallevel.Theapplication to obtain an operating licence shall be submitted to the Ministry of Transportation and Infrastructure – GeneralDirectorate ofCivilAviation, and the conditions that shall bemetbythecompanywithaviewtoobtainingsuchalicenceareenumerated hereunder:■ itsmainheadquartersarelocatedinRomania;■ itownsanavailableAirOperator’sCertificate(AOC);■ itownsoneorseveralaircraft,eitherinvirtueofaproperty

titleorunderadryleaseagreement;■ its main object of activity is either the exclusive opera-

tionofairservicesoritmaybecombinedwithanyothercommercialuseoftheaircraftoraircraftrepairandmain-tenanceactivities;

245Furtună și Asociații


intheRomanianairspace,withaviewtoprotectingtheenvi-ronment.Followinganapplicationbytheadministratoroftheairfield, theMinistry ofTransportation is entitled to approvetemporarymeasures andwaivers, thus allowing theoperationofcivilaircraftdespiteasignificantimpactontheenvironment.


FromaEuropeanstandpoint,Regulation(EU)no.996/2010oftheEuropeanParliamentandtheCouncilof20October2010ontheinvestigationandpreventionofaccidentsincivilaviationstipulatesthateachMemberStatehastheobligationtosetupanationalsafetyinvestigationauthority.In the light of the Regulation (EU) no. 376/2014 of the

European Parliament and the Council of 3 April 2014 onreporting, analysis and follow-upofoccurrences in civil avia-tion, for air accidents and incidents within the meaning ofRegulation (EU)no.996/2010, there isa reportingobligationtowardstheauthoritiesresponsibleforaviationinvestigations.Thenationallegislationregulatesairaccidentsunderdifferent

acts,amongwhichthemostrelevantaretheRomanianCivilAirCodeandG.D.no.741/2008fortheapprovaloftheRegulationof 9 July 2008 on emergencymanagement generated by civilaviationaccidents.TheRomanianCivilAirCodestatesthattheInvestigationand

ExaminationCentre forCivilAviation Safety is the authorityinchargeofmanaging,coordinatingandperformingtechnicalinvestigationsasaresultofcivilaviationeventswithaviewtodeterminingthefacts,thecausesandthecircumstancesthatledtotheaccident,aswellas identifyingpreventionmeasures. Itshouldbenotedthatthistechnicalinvestigationisindependentfromcriminalordisciplinaryinvestigation.TheRegulationof9July2008onthemanagementofemer-

gencysituationscausedbytheoccurrenceofacivilaviationacci-dentisaspecialregulationsettingforththeprocedurethatmustbe complied with, as well as the main institutions with duties in themanagementofairaccidents,namely:■ thestructuresthatprovidealertingservices(theRomanian

AdministrationofAirTrafficServices–ROMATSA;theNational Company ofMaritime Radio Communications– RADIONAV S.A.; and the Special CommunicationsService);and

■ the units responsible for coordinating rescue operationsdependontheplacewheretheaccidentoccurred.


The following are among the most notable developments tohavetakenplaceinRomaniainthelastyear:■ Romania ratified the Cape Town Convention of 16

November 2001, by Law no. 252 of 13December 2017,endorsing both theConvention and the Protocol to theConvention on international interests in mobile equip-mentonmattersspecifictoaircraftequipment;itisworthmentioning that the ratificationwasmadewith a decla-ration of reserve stating that all the creditor’s rightsaccordingtotheConventionmustbeexercisedonlywiththeRomaniancourts’approval.Anyproceedingsoutsidethecourtsareexcluded.


No.Ourdomesticlawdoesnotdistinguishbetweencommer-cial, cargo and private flights when it comes to flight safety;therefore, all air transport operators are subject to ongoingcertification and supervision by the Romanian Civil AviationAuthority,pursuanttotheprovisionsoftheCivilAirCode.


No,theyarenot.


According to theRomanianCivilAirCode, all aircraft oper-atinginthenationalairspaceareobligedtopayafeeinordertouseairnavigationservices. Allsuchfeesarenon-discrimi-natoryforthesamecategoriesofcivilflight,irrespectiveofthenationalityoftheairoperatorsorofthestatewheretheaircraftwas registered. TheMinistry ofTransportation has the righttotemporarilydenyaccesstothenationalairspaceforaircraftoperatorswhohavefailedtopaythefeestouseairnavigationservices.


Airports are both state and privately owned. Most airportsin Romania operate under the authority of the Ministry ofTransportation or local county councils. Bucharest BaneasaInternational Airport – ‘Aurel Vlaicu’ and Bucharest ‘HenriCoanda’InternationalAirportareadministeredbytheBucharestNationalAirportCompany,inwhichtheRomanianstateowns80%of the shares. Other airports are administeredby state-owned companies, for example Sibiu InternationalAirport orCluj‘AvramIancu’InternationalAirport.Alexandru Podgoreanu Tuzla Airport is the only private

airportinthecountry.


Yes, they do. In Romania, according to the Civil Air Code,airportadministratorssetcertainchargesfortheuseoffacili-tiesandservicesprovidedbyairports.Nevertheless,therearecertain aircraft which are exempt from the payment of suchfees, forexample:Romanianmilitaryaircraft; foreignmilitaryaircraftwhichoperateunderbilateral agreements (exemptionsareapplicableonlytoairportswheretheRomanianstateisthecontrolling shareholder); and aircraft that carry out humani-tarianandemergencyaidoperations.Ifacivilaircraftfailstocomplywiththesepecuniaryobliga-

tions,airfieldadministratorshavetherighttoconfinesuchanaircrafttothegrounduntilthedebtsarewrittenofforuntilasatisfyingsecurityinterestisgiven.Moreover, the Ministry of Transportation has the right to

restricttheoperationofcivilaircraftonRomanianairportsor

246 Romania



Romanian legislation does not provide any particular regula-toryrequirementswhichalessor/financierneedstobeawareofregardingaircraftoperation.Nevertheless, it is worth mentioning that, according to

Romanianlaw,thelessorcanenforceitsrightsdirectlywiththeenforcementbody,butonlyunderthefollowingconditions:(i)theleaseisauthenticated;and(ii)thebreachofcontractliesinthe failure to pay the rent in full for at least two consecutivemonthsorwhen,attheterminationoftheagreement,thelessordoesnotgainrepossessionoftheasset.


TheRomanianlegislationdoesnotprovidetheconceptoftitleannexation,wherebyownershiporsecurityinterestsinasingleengineareatriskofautomatictransferorotherprejudicewheninstalled‘on-wing’onanaircraftownedbyanotherparty.Insuchasituation,inpractice,thelegalstatusoftheowner-

ship/securityinterestsisconventionallyregulatedbytheparties’agreement,incompliancewiththecommonlaw.However, the ratification of Romania to the Convention

on International Interests in Mobile Equipment (Cape TownConvention)affordstheopportunityforengineowners,lessorsandfinancierstoregisteran‘internationalinterest’intheassetwiththeInternationalRegistryofMobileAssets.Followingtheregistrationoftheinternationalinterestagainstcertainaircraftobjects (engines,airframesandhelicopters), theholder is thenentitledtoexercisecertainremediesincasethedebtordefaults.


InRomania, theGST is assimilated tovalue-added tax (VAT)andaccordingtothenationaltaxlaw,VATisnotapplicableforall aircraft purchased and used by airlines primarily engagedin internationalpassenger and/or freight transport,namely: (i)aircraftdelivery,modification,repair,lease,rentaswellasaircraftequipmentdelivery,modification,repair,lease,rent,and(ii)fueldelivery.Foranyotheraircrafttransaction,theVATis19%.Thenationallegislationdoesnotregulatedocumentarytaxes

suchasstampdutyforaircrafttrading.


Romaniaisasignatoryto:■ TheGenevaConventionof19July1948,towhichitadhered

followingtheenactmentofActno.64of13July1994.

■ The Romanian Government project for launching apublic-private partnership to build Bucharest SouthAirport,bothforpassengersandcargo–theairportcouldbecomeatransitpointforpassengerstravellingonwardstotheAsia-PacificandEurope-Americaroutes.ThesizeofBucharestSouthAirportisprojectedfortrafficofapprox-imately30millionpassengersandwillhaveasurfaceareaof600hectares.

■ TheconstructionofBrasovAirport–theairport’sinvest-mentamountsto57millionEURanditisenvisagedtobecompletedin2020.Itisestimatedthatthepassengerflowwillexceed1millionpeople.

■ TheestablishmentofthefirstprivateaviationhighschoolinRomania,withdoublerecognitionbothinEuropeandtheUSA.Adolescentswhograduatewillhavethespecial-isationofanaviationtechnician.



No, it does not. According to the national legislation, civilaircraftregistrationdoesnotentailtheemergenceofrights,andits soleeffect lies in the fact that the registered rightsmaybeopposedtothirdparties.Furthermore,CivilRomanianAirRegulationno.RACR-IA,

“Registering civil aircraft”, edition1/2016, sets forth that thecivilaircraftregistrationandtheregistrationcertificatedonotconstituteproofoflegaltitleorownershipofacivilaircraftinthecaseoflitigationwhosecause-at-issueisownershipoftitleinthatparticularaircraft.Proofofownershipoftheaircraftmayonlybemadebythe

actualor legalowner thereof,and itmayrangefromatitleofproperty,asalesagreement,afinalcourtdecisionoranyotherlegaldocumentwherebyownership is transferred, toa titleofownership–wherebypossessionandausagerightintheaircraftaretransferred.


Yes,accordingtotheCivilRomanianAirRegulationno.RACR-IA,“Registeringcivil aircraft”, edition1/2016, the registerofaircraft mortgages and charges is operated by the RomanianCivilAviationAuthority.Themortgagesandchargesareregisteredintheabove-men-

tioned register based on the documentation submitted by the applicant to the Romanian Civil Aviation Authority, whichincludes (i) the registration request, (ii) the mortgage/chargetitle,and(iii)theproofofpaymentofthefeefortheregistrationservice(180EURperaircraft).Unlessotherwise stated, the firstmortgage/charge registra-

tion,aswellasthefollowingmodifications,areavailableforafive-yearperiod,with thepossibilityof renewing the registra-tion,basedonsupportingdocuments.The register of aircraft mortgages and charges is a public

register,and,uponrequest,theauthoritymayreleaseinforma-tionregardingmortgagesandchargestothepersonconcerned.



oncethecreditorobtainsanexecutionwrit.Dependingonthenatureofthedebt,abailmaybeneededwhosevalueisconsistentwiththereasonforwhichawritofattachmentissought.

■ Awritofjudgmentmaybeorderedagainstanaircraftintheeventthatthecause-at-issueofthelitigationbetweentheparties is representedbyanallegedclaimthereupon.Incertainsituations,awritofjudgmentmaybesoughtintheabsenceof litigation,provided thatanapplication tocourtisfiledinlessthan20days.Finally,intheeventthatthecourtadmitstheissuanceofajudgmentwrit,thebene-ficiarymaybeobligedtosetabail.


Romanianlegislationdoesnotprovideaspecificself-helpregimeforlessorsandfinanciers.Evenso,withregardtotheleaseagreement,ifitisauthenti-

catedandgovernedbyRomanianlaw,thelessorcantakephys-ical possessionof an aircraftwithout the lessee’s consent, butonlybystartingtheenforcementprocedure.Insuchacase,theauthenticated lease agreement represents a writ of executionregardingtherepossessionofaleasedasset,ifanysuchobliga-tionsariseoutoftheterminationoftheagreement.Inallothersituations,acourtorderisrequired.In respect of the financiers, according toGOno. 51/1997,

lease agreements, as well as personal and real securities agree-ments entered into in order to pledge the assumed obligations, areconsideredwritsofexecution.Asaresult,unlessotherwiseprovided forunder the agreement, if the lessee/userdoesnotcomplywiththeobligationtopayinfulltherentfortwoconsec-utivemonths,thelessor/financierisentitledtorescindtheleaseagreementwhilethelessee/userisobligedtoreturntheassetandpaythedueamounts.Intheeventthatthelesseefailstoreturntheaircraft,thefinancierisentitledtocommenceenforcementproceedingsagainstthelesseewithoutresortingtocourt.In addition, as Romania has ratified the Cape Town

Conventionon international interests inmobileequipmentonmatters specific to aircraft equipment, it isworthmentioningthe declaration of reserve affirming that: “all the creditor’srightsaccordingtotheConventionmustbeexercisedonlywithRomaniancourts’approval.Anyproceedingsoutsidethecourtsareexcluded.”


Pursuanttotheenforceablelegislation,therearenospecialisedcourtstodealwithcivilaviationdisputes.Nationalcourtshavethe competence to adjudicateboth civil and criminal cases inaccordancewithrulesofgeneral,materialandterritorialcompe-tenceasprovidedbytheCivilandCriminalProceedingsCodes.Incivilmattersregardingpecuniaryclaims,thedistrictcourts

have the competence to settle litigation claims that include amaximumvalueof200,000RONinclusive,whereasclaimsoverahigheramountareadjudicatedinthefirstinstancebytribunals.

■ TheMontrealConventionof28May1999,ratifiedbyGOno.107/2000,whichwasapprovedbyActno.14/2000.

■ The Convention on International Civil AviationOrganisation(ICAO),towhichRomaniaadheredin1965.

■ The International EUROCONTROL Convention onair safety cooperation and the “Multilateral agreementregardingairfees”(concludedinBrusselson12February1981),towhichRomaniaadheredin1995.

■ Cape Town Convention of 16November 2001, recentlyratifiedbyRomaniabyLawno.252of13December2017,endorsing both theConvention and the Protocol to theConventiononinternationalinterestsinmobileequipmentonmattersspecifictoaircraftequipment.


Acceding to the Romanian Constitution, the treaties ratifiedby the Parliament become part of the domestic legislation.Therefore,theprovisionsoftheconventionstowhichRomaniaisapartyaredirectlyapplicableintheRomanianlegislationonconditionofbeingratifiedbytheParliament.Compliancewithandenforcementof the treatiesandconventionsareprovidedthroughthecourtofjurisdiction.


Over time, Romania has concluded over 82 bilateral conven-tionswith a view to avoidingDoubleTaxation applicable alsotoaircrafttradingandleasing.Thesetreatiesarepubliconthewebsiteofthenationaltaxadministrationagency.Asmentionedabove,with respect to taxationbenefits,VAT isnotapplicableforallaircraftpurchasedandusedbyairlinesprimarilyengagedin internationalpassenger and/or freight transport,namely: (i)aircraftdelivery,modification,repair,lease,rentaswellasaircraftequipmentdelivery,modification,repair,lease,rent;and(ii)fueldelivery.Foranyotheraircrafttransaction,theVATis19%.



A creditor is entitled to commence the detention proceeding againstanaircraft.Romanianlegislationprovidesseveraltypesof detention depending on the nature of the title on whosegrounds such detention relies:■ Seizingtheassets,aspartoftheenforcementproceeding,

entails the existence of an execution writ (court deci-sion,arbitrationdecisionoranagreement).Theseizureiscommencedbythebailiffintheabsenceofacourtorder.When under seizure, the aircraft is grounded, and it istemporarilytakenoutofthecivilcircuit.Intheeventthattheaircraftismortgagedinfavourofathirdparty,itmaystillbeputunderseizureaslongastherightsofthemort-gagorarecompliedwith.

■ Attachment is a proceeding which entails freezing themoveableassetsofthedebtorwithaviewtorealisingthem

248 Romania


The arbitration courtmay also order provisional or attach-mentmeasuresbeforeorduringarbitrationandmayascertaincertainfactualcircumstances.


In respect of decisions of the court of jurisdiction, accordingtotheproceduralRomanianrules,thedecisionspassedbythecourt are subject to different challenges. Depending on thenatureof the litigation, theappealmaybe theonlychallenge,oranappealmaybefollowedbyasecondappealwhichexclu-sivelyenvisagesreasonsrelatedtotheillegalityoftheappealeddecision.Regardingarbitration,theRomanianlawmakerhasexcluded

both ordinary and extraordinary challenges in cases of arbi-tration. Nevertheless, the Civil Procedure Code stipulatesthe procedure according to which an arbitral award may be annulled.Theactionoftheannulmentmayconstitutefilesonlyon certain limited grounds, and the competence to rule on such groundsisvestedintheAppealsCourtlocatedwherethearbi-trationtookplace.As regards the New York Convention of 10 June 1958,

RomaniaadheredtheretounderDecreeno.186of10July1961.



Ournational legislationdoesnot set forth special regulationsfor joint ventures between air operators. Joint ventures areregulated by the national and European provisions, namelytheRomanianCompetitionActno.21/1996,theTreatyontheOperationoftheEuropeanUnionandCouncilRegulation(EC)no.1/2003of16December2002ontheimplementationoftherules on competition laid down inArticle 101 (ex.Article 81TEC)andArticle102(ex.Article82TEC)oftheTreaty.


The competent authority to receive a merger notification istheCompetitionCouncil. Inorder todetermine the relevantmarket,boththeCompetitionCouncilandthecourtsofjuris-dictiontakeintoaccountthemarketoftheproductorserviceon the one hand and the geographical location on the other.Thedeterminationcriteriaarespecifictotheaviationindustryand are applied depending on each particular situation. Forexample,inthecaseofairports,theservicemarketisrepresentedbythemainoperationsperformedinanairport,namelythoseconnectedtoitsexploitation,andtheycomprisebothinfrastruc-tureservices(runwayfacilities,runways,etc.)andservicesenvis-agingpassengerandmerchandisemanagement.


Yes,itdoes.Takeoversperformedthroughthemergeroftwoorseveralundertakingsmustbenotifiedbyeachoftheinvolved


As regards natural or legal entities residing in Romania, thesummonsandfurtherproceduraldocumentsareservedex officio throughproceduralcourtagents. Partieswhoareabroad,butwhose domicile or residence is known, are summoned, or proce-duraldocumentsareserveduponthembymeansofa recom-mendedletterwithdeclaredcontentsandreceiptconfirmation.In theevent that thedomicileor theresidenceof thepersonslivingabroadisnotknown,theseareservedbymeansofadver-tisement(thesummonsisdisplayedonthedoorofthecourt,onthecourt’sportaloratthelastknowndomicileofthesummonedperson). Also, a curator is appointedby thecourt to act as alawyerwhowillrepresenttheinterestsofthesummonedperson.Theabove-mentionedserviceisidenticaltothatusedforboth

companies registered in theUKand those registered inotherstates.


InRomania,bothcourts andarbitration tribunalspassprovi-sionalandfinaldecisions.Thedecisionsheldbythecourtsentailtheexaminationonthe

meritsoftheallegedright,andtheybecomefinalfollowingtheadjudicationofincidentalchallenges(appealand,insomecases,secondappeal)orasaresultoffailurebytheinterestedpartytochallengesuchdecisions.Litigation commences once the complaint is filedwith the

court, on the condition that it complies with the admissibility conditions. In the event that such conditions are met, thedefendantisservedwiththecomplaintinordertofileastate-mentofdefence.Incaseswherethecomplainthascertainflaws,thesearecommunicatedtotheplaintiffwhohastheobligationtoremedythem;otherwise,thecomplaintisannulled.Providedthat the defendant submits a statement of defence (which iscompulsory;non-compliancewiththisobligationshall leadtoaninterdictiononthepartofthedefendanttosubmitevidenceand raise exceptions), this is servedupon theplaintiff so thathe/shecouldfileananswertothestatementofdefence.Thisproceeding is solely carried out inwriting and, subsequent tothe settingupof the firsthearing and the summoningof theparties,thelawsuititselfisinitiatedandbecomesfinaloncethecourtpassesaruling.Challengestocourtrulingsaresubjecttothesameproceedingsasthecomplaint.Thedurationforafinalsettlementoflitigationdiffersdependingonitscomplexityandmayrangefromone-and-a-halfyearstoseveralyears.The provisional decisions passed by the court are mainly

aimedatorderingpreservationmeasures. Asarule, theseareorderedasaresultofamotionandtheyareenforceableuntilthemeritsofthecasearesettled.In theevent that thepartieschoosearbitration, thearbitra-

tionawardispassedafterthepartieshaveexposedtheirclaimsandnamely their defences. The award is final and it has thesame applicabilitywith a view to enforcementproceedings asthedecisionpassedbythecourt.Disputeresolutionbeforeanarbitrationtribunalisaflexibleproceedingandthepartieshavethepossibility to choose theprocedural rulesbymeansof anarbitration convention. The claims are settled faster, usuallywithinsixmonths.



normal competitive environmenthavebeen removed throughthe commitments proposed by the undertakings and accepted bytheCompetitionCouncil.PhaseIIhasamaximumtimescheduleoffivemonthsfrom

receivingacompletenotificationofamergercase,forwhichtheCompetitionCouncilsubsequentlydecidestostartaninvestiga-tionbecauseofdoubtsconcerningcompatibilitywithanormalcompetitiveenvironment.Thenotificationfeeis1,061EURforeachnotification.Thenationallegislationalsostipulatesanauthorisationfeefor

mergers. Thefee issetbetween10,000and50,000EURandthefinalamountof thefee isdeterminedby theCompetitionCouncil in relation to theauthorisationdecision issuedby theauthority.


Althoughtherearenonationalprovisionsinrespectoffinancialsupport for airports andair companies, theEuropean regula-tionsareapplied,namelytheEuropeanCommissionGuidelineson state aid to airports andairlines. Theguidelines establishrulesforstateaidforairportsandairlines,bythreecategoriesofstateaid:investmentinairportinfrastructure;operatingaidtoregionalairports;andstart-upaidtoairlinesto launchnewairroutes.For investment in airport infrastructure, theGuidelines set

percentages for themaximum amount of state aid going intoairport infrastructure. Thepercentagesdependonthesizeofanairport(foranairportwithpassengertrafficof3–5million,upto25%oftheinvestmentcosts;foranairportwithpassengertraffic of 1–3 million, up to 50%; and for an airport withpassengertrafficoflessthan1million,upto75%),inordertoensuretherightbalancebetweenpublicandprivateinvestment.Operatingaidtoregionalairports(withfewerthan3million

passengersayear)isallowedonlyfor50%oftheinitialaverageoperating funding gap calculated as an average of five yearsprecedingthetransitionalperiodof10years.Toreceiveoper-atingaid,airportsneedtoworkoutabusinessplanpavingthewaytowardsfullcoverageofoperatingcostsattheendofthetransitionalperiod.Essentially,thenewguidelinesareintendedtoinitiallyreduce,

and then eliminate, as soon and as much as possible, the public fundingofairportsandairlines.


Statesubsidiesmaybegrantedforservicesofgeneraleconomicinterest(SGEI),butalsointhecasecontemplatedbyArticle16of (EC)Regulation no. 1008/2008 regarding commonnormsfortheoperationofairservicesinthecommunity.

As a result, the public authorities may consider in some cases that certain economic activities performed by airports or airoperatorsfallintothecategoryofservicesofgeneraleconomicinterest and thus grant compensation for their performance.Thesubsidiesareintheformofcompensationforpublicserviceobligation and will be assessed in accordance with Decision 2012/21/EU of the Commission. Additionally, state subsi-diesforcertainroutesmaybegrantedundertheprovisionsofArticle16of(EC)Regulationno.1008/2008inthecaseofairroutes between a community airport and an airport situated

parties.Inalltheothercases,thenotificationmustbesubmittedbythepartywhogainsthecontrolovertheundertaking.Thetransactionmustbenotifiedbeforeittakeseffectandaftertheconclusionoftheagreement.Followingtheexaminationofthetransaction,theCompetition

Councilmayrenderoneofthefollowingdecisions:■ a resolution of non-objection when it is found that the

mergerdoesnotfallunderthescopeoftheCompetitionLaw;or

■ a resolution to start an investigation because of doubtsconcerningcompatibilitywithanormalcompetitiveenvi-ronment, inwhichcase theauthoritycan: (i)declare themerger incompatiblewithanormalcompetitiveenviron-ment; (ii) render an authorisation decision if themergerdoesnotraisesignificantobstaclesforeffectivecompeti-tionontheRomanianmarket;or(iii)renderaconditionalauthorisationdecisionestablishingtheobligationsand/orconditionswhichmustbefulfilledsothatthemergercanbecompatiblewithanormalcompetitiveenvironment.


There is no distinction in our domestic legislation between takeovers (mergers, acquisition mergers or full-function jointventures).Amergertakeseffectwhenthelong-termchangeofcontrol

resultsfromthemergingoftwoormorepreviouslyindependentundertakingsorpartsofundertakings,oroneormorepersons,who,alreadyholdingcontroloverat leastoneundertaking,orone or more undertakings directly or indirectly, or by purchase ofsecuritiesorassets,eitherbycontractorothermeans,acquirecontroldirectlyorindirectlyoveroneorseveralundertakingsorpartsthereof.Thesettingupofajointventurecompanywhichoperates like an autonomous economic entity also represents a merger.The obligation to notify the Competition Council applies

tomergerswhere the aggregate turnover of the undertakingsconcernedexceeds theequivalent inRONof10millionEURandat least twoundertakings involved in themergerhaveanindividual turnoverof theequivalent inRONofmore than4millionEUR.Fortheanalysisofanyotherkindofmerger,theCompetition

Councildecides,baseduponthefollowingcriteria:a)iftwoormoreholdingcompanieskeeprunning(toasignificantdegreemorethan20%or30%,asapplicable),theiroperationsonthesamemarketas the jointventure,oronamarketupstreamordownstreamfromthemarketofthejointventure,oronamarketincloserelationwiththismarket;orb)if,bysettingupthejointventure, the undertakings in question can eliminate competi-tionforasignificantpartoftheproductsorservicesinquestion.


ThenotificationprocedurestartswithPhaseIandlasts:(i)30days from receiving a complete notificationof amerger case,if the Competition Council concludes that the merger doesnot fall under the scope of the Competition Law; or (ii) 45days from receiving a complete notificationof amerger case,if theCompetitionCouncilwill issueadecisionofnon-objec-tionwhenitisfoundthatthemergerdoesfallunderthescopeof the Competition Law; and: a) there are no serious doubtsconcerning compatibility with a normal competitive environ-ment; or b) serious doubts concerning compatibility with a

250 Romania



Theinstitutionalandlegalframeworkwhichactsasasafeguardis mainly provided by two specialised institutions: the StateOfficeforPatentsandTrademarks,whichistheauthoritythatgrants protection for industrial property; and the RomanianCopyrightOffice,whichistheauthoritywithdutiesinrespectoftracking,observanceandinvestigationintotheapplicationoflegislationoncopyrightandaffiliatedrights.Theprotectionof industrialproperty rights ismainly regu-

lated by Act no. 64/1991 regarding patents, Act no. 84/1998regarding trademarks and geographical indications and Act no.129/1992regardingtheprotectionofindustrialdesignandmodels.Moreover,RomaniahastransposedanimportantpartoftheEuropeanlegislationinrespectofintellectualproperty.Finally,inrespectoflegalremediesawardedbycourts,there

are specialised panels adjudicating intellectual property cases,thus ensuring qualified platforms for the protection of suchrights.


Theapplicable legislationconsistsof theConvention tounifyprovisions regulating international air transportation, signedinMontrealin1999,and(EC)Regulationno.261/2004,whichsetoutjointprovisionsasregardscompensationandpassengerassistance in the event of boarding denial, cancellation orprolongeddelays.In the event that the air operator denies the boarding of a

passenger due to reasons other than poor health, safety andsecurity requirements or inappropriate travel documents, thepassenger isentitledtodamagesofafixedamount(consistentwith the flightdistance), assistance (refunding the costof theticket, transportation to his/her final destination by anotherairplane or means of transportation) and accommodatingservices (meals, accommodation, transfer, two free-of-chargephonecallsandfaxoremailmessages).In case of flight cancellation for circumstances other than

exceptional ones that could not have been avoided despitethe adoption of all possible measures, the passenger is enti-tledtodamages(calculatedbasedonflightdistance),assistance(refundingthecostoftheticket,transportationtohis/herfinaldestination by another airplane or means of transportation)andaccommodatingservices(meals,accommodation,transfer,twofree-of-chargephonecallsandfaxoremailmessages).Inrespect of the national authorities which have competence inthisarea,pleaseseetheanswertoquestion4.12below.


InRomania,theNationalAuthorityforConsumerProtectionisresponsible formonitoringcompliancewithpassengers’ rightsassetoutin(EC)Regulationno.261/2004.In the event that the parties fail to settle amicably, the

passengerisentitledtoseekredressfromtheNationalAuthorityforConsumerProtection(iftheincidentoccurredontheterri-toryofRomania)or fromthecompetentnationalauthority inthecountrywheretheincidenttookplace.ThecomplaintshallbemadeaccordingtothestandardformissuedbytheEuropeanCommissionanditmustbesolvedwithinthe30-daylegalterm.

onaperipheralorunder-developedareaonitsterritory,orforlow-trafficroutestoanyairportonitsterritory,ifsucharouteisessentialtothesocialandeconomicdevelopmentoftheareawheresuchanairportislocated.


Romanianairlinesandairportsshallprocesspassengers’datainaccordancewithEU regulation (Regulation (EU) 2016/679oftheEuropeanParliamentandoftheCouncilof27April2016ontheprotectionofnaturalpersonswithregardtotheprocessingof personal data and on the free movement of such data –GDPR) and also in accordancewith national regulation (Lawno. 190/2018 on implementingmeasures for Regulation (EU)2016/679).A passenger, as a data subject, can exercise his right of

access, right todataportability, right toobject, right torectifi-cation,righttoerasureorrighttorestricttheprocessingofdataprocessedbyRomanianairlinesandairports.Alltheaforemen-tionedrightscanbeexercisedonlyundertheconditionsprovidedbytheGDPR.According toRomanian law, the supervisory authority is the

National Supervisory Authority for Personal Data Processing(ANSPDCP).DatasubjectsmaysubmitquestionsorcomplaintsabouttheirrightsandaboutnationalandEuropeandataprotec-tion legislation by submitting applications to the [email protected].


Regardless of its position as a controller or a processor, thecarriermusthaveastrongprocedurereadytobeappliedincaseofadataloss.

It is essential to determine whether the carrier is the controller ortheprocessorinconnectiontolostdata.As a controller, the carrier should notify the supervisory

authoritynolaterthan72hoursafterhavingbecomeawareofthedatabreach,andanynotificationafterthe72hoursdeadlineshouldbefundamentallyjustified.Asaprocessor,thecarriershallnotifythecontrollerwithout

undue delay after becoming aware of a personal data breach,remainingavailabletoprovidethenecessaryinformationtothecontrollerandtheauthority.Dependingonthenatureofthelostdata(potentialhighrisk

to the rights and freedomsof thedata subject) and excludingthe exceptions provided for by the GDPR, the carrier shallalsonotifythepersonaldatabreachtothedatasubjectwithoutunduedelay.Inthecaseofsuchdataloss,thecarriermaybesubjecttoa

sanctionappliedbytheNationalAuthorityifthelossiscausedbyviolationoftheapplicableregulations.Also,whenestablishingthesanction,theNationalAuthority

will assess the security measures taken, how the situation was managedtoreducetheeffectscaused,andtheavailabilityofthecarriertocooperatewiththeNationalAuthority.



to ensure real competition between the participating carriers and the associated carriers, as well as ensuring compliance with non-discriminatoryprinciplesamongaircarriers,irrespectiveofwhether these areor arenotparty to a computerised reserva-tionsystem.


Verticalintegrationisnotexpresslyforbidden.Nevertheless,itmust abide by the conditions imposed by legislation in order to ensurelegalcompetitiondynamics.


ThenationalprovisionsregulatingtheconditionsforobtaininganAOCdonotexpresslystateanyrequirementsofnationalityfortheentitiesapplyingforanAOC.Nevertheless,pursuanttotheRegulation(EC)no.965/2012,

theapplicationforanAOCshallbesubmittedbeforethecompe-tent authority and the same regulation states that the competent authorityexercisingoversightoveroperatorssubjecttoacerti-ficationobligationshallbe,foroperatorshavingtheirprincipalplaceofbusinessinaMemberState,theauthoritydesignatedbythatMemberState.Therefore,theRomanianCivilAviationAuthorityshallissue

anAOConlyforentitiesthathavetheirprincipalplaceofbusi-nessinRomania.Moreover,inorderforanentitytoobtainanoperatinglicence

itmust,amongothers,haveitsmainheadquartersinRomaniaandownanavailableAOC.Pleaseseequestion2.1above.

5 In Future


With the entry into force of Regulation (EU) no. 1139/2018,thenewcommonEUrulesestablishingandmaintainingahighuniform level of civil aviation safety in the Union created acommonframeworkfordroneoperations.Therefore,inthenextcoupleofyearsweareexpectingtheemergenceofnewnationallegislationfortheoperationofunmannedaircraftinaccordancewithRegulation(EU)no.1139/2018.Additionally,probablybytheendofyear,theNewAirCode

will be adoptedby theRomanianParliament. Thedraft stip-ulates the followingmain changes: the applicabilityof theAirCodetomilitaryairoperationsaswellastocivilairoperations;thearticulationofprovisionsconcerningthecompetenceoftheaerodromeadministratortosetairportfees,aswellasconcerningtheprinciplesfortheimpositionofsuchfees,namelytranspar-ency and non-discrimination; withdrawing the competence oftheMinistryofTransportationtograntexemptionfrompaymentofairportfeesandgrantingsuchpowertotheaerodromeadmin-istrator; provisions regarding the right of the civil aerodromeadministratorandairnavigationserviceprovidertoretainontheground aircraftwhoseoperator failed topay the fees entitlinghim/hertousetheaerodromeinfrastructureorthefeesforair

TheNationalAuthorityforConsumerProtectionshallimposeafineontheairoperator,providedthatitfinds,uponinvestiga-tion,thatitfailedtoinformpassengersordidnotgranttheduecompensation/damages.In the event that the above-mentioned endeavours do not

result in a solution to the problem, the passenger may start legal proceedingsagainsttheairoperatorwithintwoyearsasofthedateofarrivalatthedestination,orasofthedateonwhichtheaircraftwassupposedtohavearrived,orasofthedateonwhichthetransportationterminated.


The obligations of airport administrators are provided underbothnationalandEuropeanlegislation.Hence,atthenationallevel,suchobligationsareregulatedbytheOrderoftheMinistryofTransportationno.161/2016whichapprovedtheRomanianCivil Aviation Regulation with reference to the authorisationofcivilaerodromes,RACR-AD-AADC.Theairportadminis-trator, namely the natural or legal person who runs and manages anairportinpublicorprivateproperty,hasthefollowingmainduties:■ to obtain and maintain proper conditions in terms of

safety, regularity and efficiency of the air operationsperformedontheaerodromeundertheprovisionsofairlegislation;

■ tomaintaintheorganisationalstructure,thefacilitiesandaerodrome equipment, the operational framework andsafetymanagementsystemsattheminimumlevelinitiallydeclared, acknowledged and approved by the RomanianCivilAviationAuthority;and

■ toperformonlytheactivities/serviceswhichhavereceivedauthorisation, and only under the specified conditions,abidingbytherestrictionssetforthintheAnnexattachedtotheauthorisationcertificate.


The relationship between the passenger and the airport oper-ator is governed by (EC) Regulation no. 261/2004 and bycommonlawregardingconsumerprotection,Actno.296/2004on Consumer Protection, Ordinance no. 21/1992 regardingconsumerprotection– incase theydonotcontainprovisionscontrarytotheRegulation.Inthisrespect,pleaseseealsotheanswertoquestion4.12above.


Amadeus,SabreandTravelportoperateinRomania.


TherearenoexpressprovisionsinthenationallegislationwithreferencetoownershiprightspertainingtoGDSs.Nonetheless,we apply the provisions of (EC) Regulation no. 80/2009regardingabehaviourcodeforITsystemstoreserveandabolish(EEC)Regulationno.2298/89oftheCouncil.Wemustempha-sise thefact that thisRegulationsets forthspecificguidelines

252 Romania


RomanianGovernmentinSeptember2016),whichsetsoutthestrategyforinvestmentinairportinfrastructure;namely,whichairportswillbenefitfrompublicfundsforinvestment,andwhatkindsofinvestmentwillbecarriedout.Oneofthemaininvest-mentsinairport infrastructureisanewterminalforBucharest‘Henri Coanda’ International Airport (the largest airport inRomania),withestimatedbuildingcostsof1billionEUR.

navigationservices,aswellas themodality thatsuchretentionrightoperates;andnewrulesfordroneoperationswhichsetoutdifferentdronecategories(dependingonthedroneweight)andspecificoperationrulesinrelationtothesecategories.Additionally,itisworthmentioningthefocusonairportinfra-

structuredevelopment,especiallyforregionalairports,givenintheGeneralTransportMasterPlanofRomania(adoptedbythe

253

Aviation Law 2020

Furtună și Asociații

Mihai Furtună is a detail and solution-oriented professional with 20 years of experience in the rapidly-changing legal environment of Romania. An experienced litigator and seasoned consultant in domestic and international assignments, Mihai is the founder of Furtună și Asociații, coordinating the firm’s aviation practice that covers work ranging from regulatory issues to the procurement of suppliers, to the drafting and negotiating of various commercial agreements, to advising clients on all related aspects of financing, leasing, selling and buying of aircraft, as well as litigation following aircraft accidents. He and the members of the firm’s Aviation practice currently provide counselling to private airports, airport service providers, associations of private aircraft operators, labour unions, as well as private individuals.Mihai Furtună is a sought-after speaker at industry-specific events organised by public authorities, chambers of commerce and professional associations in Romania.In addition, he is responsible for the ongoing professional training of the young lawyers of the firm and participates as a speaker at profes-sional events organised by the top law schools in Romania.He is a member of the Worldwide Airports Lawyers Association (WALA), the European Business Aviation Association (EBAA), as well as the European Air Law Association (EALA). He is a member of the Bucharest Bar and speaks Romanian, English and French.

Furtună și Asociații56 Dionisie Lupu Street, 1st floorBucharest, 010458Romania

Tel: +40 72 255 95 59Fax: +40 31 425 67 49Email: [email protected]: www.furtunalaw.ro

Ioana Anghel started specialising in aviation matters in 2011 along with the internships conducted during her studies. Her experience includes: drafting regulatory input for aviation legislation (e.g. updating the Romanian Air Code); litigation following aircraft accidents; advisory services on buying, selling and registration of aircraft for tax purposes; and legal assistance and consulting for the procurement and building of airport and related facilities, as well as for the organisation of air shows. She is a member of the Bucharest Bar and speaks Romanian, English and Italian.

Furtună și Asociații56 Dionisie Lupu Street, 1st floorBucharest, 010458Romania

Tel: +40 74 502 72 77Fax: +40 31 425 67 49Email: [email protected]: www.furtunalaw.ro

Furtună și Asociații is a dynamic Romanian law firm, founded by trend-setter professionals in Aviation and Airport Infrastructure. The team consists of experienced litigators and consultants united by the desire to creatively tackle complex legal issues, with an emphasis on technical law areas.The Aviation practice is best known for two things: a) the scope of avia-tion projects covered, i.e. investigation of aviation accidents (assistance and representation in civil and criminal proceedings), assistance with the financing, construction and authorisation of international airports, assis-tance with matters related to the manufacturing of aviation equipment, such as flight simulators, advisory services on buying, selling and registration of aircraft, legal clearance for aviation shows, as well as regulatory drafting; and b) the ability of the lead Partner Mihai Furtună to assemble and coordi-nate multidisciplinary teams of lawyers and technical experts (in metallurgy, aviation, physics, etc.) in order to successfully handle highly complex cases in civil and criminal proceedings.

www.furtunalaw.ro


Aviation Law 2020

Chapter 34254

Russia

AEROHELP Law Office Ilona Tsimbal

Oleg Aksamentov

Russia


At the same time, not every operator can apply for the passen-gers’ air carriage licence or for the cargo air carriage licence. There are three types of Operator’s Certificates that are provided by the Russian air legislation: 1) Operator’s Certificate for carriage by air;2) Operator’s Certificate for aerial work; and3) General Aviation Operator Certificate.

Only an operator who has an Operator’s Certificate for carriage by air can apply for the passengers’ air carriage licence or for the cargo air carriage licence.


Flight safety in the Russian Federation is governed by the Rules for the development and use of air safety management systems, as well as the collection and analysis of data on hazards and risks that pose a threat to the safety of civil aircraft in storing and sharing this data, approved by the Government Decree of November 18, 2014 № 1215.

The format of data on hazards and risks is established by the Ministry of Transport of the Russian Federation. The Federal Air Transport Agency collects and analyses data on hazards and risks that threaten the safety of civil aircraft, and stores and exchanges this data in accordance with the international stand-ards of the International Civil Aviation Organization.

Responsibility for compliance with the norms and require-ments of international and Russian legislation lies with the carrier. As noted in the Air Code of the Russian Federation, airlines must maintain their aircraft in good condition and ensure their repair and refuelling, as well as monitor the health of the crew and provide aircraft commanders with meteorolog-ical and aeronautical data.


No separate orders are provided. In all cases, air safety issues are governed by the civil aviation legislation referred to in ques-tion 1.3.


No separate orders are provided. Air charter flights for both commercial and private carriers, as well as cargo or passenger

1 General


In the Russian Federation, the aviation legislation consists of International Treaties adopted by the Russian Federation and a system of the national aviation acts issued by different authorised bodies, among them:(1) Convention for the Unification of Certain Rules for

International Carriage by Air (Montreal, May 28, 1999);(2) Convention on International Civil Aviation (Chicago,

December 7, 1944, entered into force for the USSR on November 14, 1970);

(3) Convention on International Guarantees for Mobile Equipment (Cape Town, November 16, 2001);

(4) Air Code of the Russian Federation;(5) Federal Rules for the Use of the Airspace of the Russian

Federation (approved by the Decree of the Government of the Russian Federation of March 11, 2010 № 138); and

(6) System of Federal Aviation Regulations approved by Acts of the Ministry of Transport of the Russian Federation (with different subjects).

Civil Aviation Authority: the Ministry of Transport of the Russian Federation; the Federal Air Transport Agency; and the Federal Service for the Supervision of Transport.

The Federal Air Transport Agency is a Federal Executive Body responsible for providing State services and managing State prop-erty in the field of air transport (civil aviation), using the airspace of the Russian Federation, air navigation services for users of the airspace of the Russian Federation and aerospace search and rescue, public services in the field of transport security in this area, as well as the State register of radio rights for aircraft and transactions within them.

The Federal Service for the Supervision of Transport is a Federal Executive Body in the field of transport, and a specially author-ised body in the field of civil aviation, performing, among other things, special permit, control and supervisory functions assigned in accordance with the legislation of the Russian Federation.


In accordance with the air legislation of the Russian Federation, only operators who have a valid licence to carry out air carriage of passengers or cargo, issued by the Federal Air Transport Agency, are entitled to carry out commercial carriage.

255AEROHELP Law Office



The regulatory regime that applies to air accidents with civil aircraft is provided by the “Rules for the investigation of avia-tion incidents and incidents with civil aircraft in the Russian Federation”, approved by the Decree of the Government of the Russian Federation dated June 18, 1998 № 609.

There is another regime for the investigation of accidents and incidents involving State aircraft, which is provided by the “Rules for the investigation of accidents and incidents with government aircraft in the Russian Federation”, approved by the Decree of the Government of the Russian Federation dated December 2, 1999 № 1329.


The air legislation of the Russian Federation is constantly being improved and is undergoing changes. Legislative authorities are taking measures to improve the protection of the rights of passengers, airlines and other market participants.

In accordance with Federal Law № 376 of December 5, 2017, the Air Code of the Russian Federation was supplemented by Article 107.1. Amendments to the Air Code allow air carriers to form so-called “Black Lists” – databases of persons whose rights to fly are restricted. Blacklisting means that, for a whole year, violators will not be able to use the services of the airline.

Also, it should be noted that one of the most significant events of recent years, Russia’s accession to the Montreal Convention dated May 28, 1999 (Convention for the Unification of Certain Rules for International Carriage by Air) entered into force for Russia on August 21, 2017, which significantly increased the maximum limits of compensation for flight delay, loss/damage to baggage or cargo, and founded the principle of full compensa-tion for injury or passenger death.

On May 24, 2019 the Federal Government made one more step towards cabotage legalisation by expanding the scope of the Rules for one-time permits issued to foreign air carriers oper-ating flights in the territory of Russia. The Rules were adopted last year, aiming at preparation for the FIFA World Cup 2018. At that time, the Rules were temporary – until June 1, 2019 – and the rights granted to foreign air carriers were quite limited. Now the term of the Rules has become indefinite, and the rights of foreign carriers have become wider; namely, they can now receive permits to operate charter flights, both passenger (without passenger capacity limitation) and cargo, either to or from the Russian territory, or even within it.

In addition, amendments were designed to facilitate possible disputes for airlines, e.g. the responsibility of the carrier for the passenger. Previously, this responsibility would begin from the moment of passing through security control at the airport and would end with the passenger’s departure from the airport. Therefore, if something happened to him outside the plane, from a legal point of view, the airline would have to respond. The amendments exclude the possibility of a double interpretation by limiting the responsibility of the airline for the passenger to the moments of boarding and disembarking from the aircraft.

charters, are regulated by the Civil Code of the Russian Federation, the Air Code of the Russian Federation and the Federal Rules for the Use of Airspace of the Russian Federation.


Foreign air carriers must obtain appropriate licences when carrying out international air carriage within the territory of the Russian Federation and/or performing aviation operations.

With respect to foreign air carriers, a certificate of the oper-ator or an equivalent document must be issued by an authorised body of the foreign country and must comply with the interna-tional standards, as well as the international treaties, recognised in Russia.

Foreign aviation enterprises may open their representative offices on Russian territory in accordance with the legislation of the Russian Federation and/or international treaties of the Russian Federation.

Foreign aviation enterprises, international operating agencies and foreign individual entrepreneurs are not entitled to:■ take passengers, baggage, cargo and mail from the Russian

territory on an air carriage into the territory of a foreign State or vice versa, unless otherwise provided by an inter-national treaty of the Russian Federation or issued in the manner prescribed by the Russian Federation Government, e.g. one-time permits of the Civil Aviation Authority; and

■ accept passengers, baggage, cargo and mail to be flown within the territory of Russia or on the territory of Russia without the permission of the Civil Aviation Authority issued in the manner established by the Government of the Russian Federation.


A complete list of State airports contains a list of airports of federal significance, approved by the Act of the Government of the Russian Federation dated April 20, 2016 № 726-p. Airports not included in the list are private.

However, all existing airports must be registered in the “State Register of Civil Aerodromes and Heliports of the Russian Federation”.


Carriers are governed by the provisions of the Air Code of the Russian Federation, the Federal Aviation Regulations and other acts of the air legislation. However, these acts are established by authorised authorities rather than by the airports themselves, and, as a rule, apply to domestic air carriers, and not to foreign air carriers.

To serve the flights of a foreign carrier, the airport and the operator apply the Standard Ground Handling Agreement. Airport charges and tariffs are set by the Federal Tariff Service of Russia.

256 Russia



Title issues for engines installed on the wing are governed by the Civil Law of the Russian Federation, according to which the engine is considered as an independent thing prior to installa-tion on the wing. After installation, the engine becomes an inte-gral part of the aircraft and follows the legal fate of the aircraft. The owner of the aircraft automatically becomes the owner of all its components. Ownership by the previous owner of the engine is transformed into an obligation law on the owner of the aircraft, until the obligation expires.


When importing an aircraft, the declarant must pay customs duty and VAT. However, there are features in the calculation of customs duties and VAT, which depend on the number of seats on board the aircraft and the mass of the empty aircraft. Thus, the procedure for paying customs duties is determined by the Customs Code of the Eurasian Economic Union, which is adopted by Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia, and the procedure for paying VAT is determined by the Russian Tax Code. According to current Russian legisla-tion, civil passenger aircraft are divided into seven groups, some of which are fully or temporarily exempted from import taxes, while others are subject to customs duty, which can be up to 100,000 rubles (20%) and VAT (18%). For the release of civil aircraft from customs duties and VAT, the aircraft must not be older than 12 years.

However, on 29 September, amendments to the Russian Tax Code were adopted to abolish the imposition of VAT on the import of civil aircraft subject to registration in the Russian Federation, and on the import of aircraft engines and other aircraft components intended for the construction, repair and/or modernisation of civil aircraft in the Russian Federation. The amendments also provide for VAT-zeroing in respect of the following operations: (1) realisation of civil aircraft registered (subject to registration) in the Russian Federation and realisa-tion of works (services) for aircraft construction; (2) realisation of aircraft engines, spare parts and components intended for the construction, repair and/or modernisation of civil aircraft in the Russian Federation; and (3) transfer of civil aircraft registered (subject to registration) in the Russian Federation under lease agreements.

These amendments are aimed at stimulating the registration in Russia of aircraft operated by Russian airlines, as well as the creation of domestic civil aircraft. The amendments will enter into force on 1 January 2020.

Another point which has been addressed relates to deadlines. Now the limitation period begins with the arrival of the aircraft at its destination. Previously, it began the next day after receiving a response to the refusal or partial satisfaction of the claim.



No, there are two public registers under Russian law: the State Register of Civil Aircraft of the Russian Federation; and the State Register of Rights for Aircraft and Transactions Therewith of the Russian Federation.

Under the Civil Code of the Russian Federation, only regis-tered aircraft are considered real estate. And under the Federal Legislative Act “On State Registration of Rights for Aircraft and Transactions Therewith” dated March 14, 2009 № 31-FZ, only an aircraft’s registration in the State Register of Rights for Aircraft of the Russian Federation will constitute proof of ownership.


State registration of ownership and other property rights to an aircraft, restriction of these rights, their emergence, transfer and termination, as well as the establishment of the procedure for State registration and the grounds for refusal of State registra-tion of rights to an aircraft and transactions with it are carried out in accordance with Article 131 of the Civil Code of the Russian Federation (part 9 Article 33 of the Air Code of the Russian Federation).

As mentioned above, Article 131 of the Russian Civil Code insists that aircraft are considered to be real estate. Under the Federal Legislative Act “On State Registration of Rights for Aircraft and Transactions Therewith” dated March 14, 2009 № 31-FZ, the rights to aircraft and deals with them are subject to State registration in the State Register of Rights for Aircraft. The State Register of Rights for Aircraft is a federal information system and is maintained by the Federal Air Transport Agency. The Unified State Register of Rights to Aircraft contains infor-mation on existing and terminated rights to aircraft, data on the said aircraft and information about the owners.

There are no public registries of aircraft charges.


There are no special regulations under the Air Law of the Russian Federation for a lessor or a financier with regard to aircraft oper-ation. At the same time, a lessor or a financier should know that piloted civil aircraft, with the exception of ultra-light manned civil aircraft, are registered in the State Register of Civil Aircraft of the Russian Federation, with issuance of a Certificate of State Registration or in the State Register of Civil Aircraft of a foreign State subject to the conclusion of an agreement on the mainte-nance of airworthiness between the Russian Federation and the State of registration.



The lessor has the right to financial control over the activ-ities of the lessee in the part which relates to the leased asset, the formation of the financial results of the lessee’s activities and the fulfilment by the lessee of obligations under the leasing agreement.

Article 13 of the Federal Legislation Act on Financial Lease regulates the securing rights of the lessor.

If the lessee fails to transfer the lease payments more than twice in a row after the payment period specified by the leasing agreement, they are debited from the account of the lessee in an uncontested manner by sending the lessor to the bank or other credit organisation where the account of the lessee is opened, to withdraw funds from his account within the limits of overdue lease payments. The indisputable withdrawal of funds does not deprive the lessee of the right to appeal to the court.

The lessor has the right to demand the early termination of the lease agreement and the return of the property by the lessee within a reasonable time in cases provided for by the legislation of the Russian Federation and the lease agreement.

In this case, all costs associated with the return of property, including the cost of its dismantling, insurance and transporta-tion, are borne by the lessee.

Among other things, Russia is a party to the Cape Town Convention dated November 16, 2001 (Convention on International Interests in Mobile Equipment) and the Cape Town Protocol on Aircraft Equipment dated November 16, 2001, in accordance with the regime of self-defence rights.

The Cape Town Convention provides specific ways to protect the rights of lessors in the event of insolvency (bankruptcy) of lessees: deregistration of the aircraft; and removal and the phys-ical movement of aircraft from the territory in which they are located. A statement by the Russian Federation as the Member State to the Cape Town Convention on the application of Article XIII “Authorization for deregistration and removal” of the Cape Town Protocol on Aircraft Equipment, along with other (qualification) statements, is the basis for including the State, whose borrowers are entitled to an additional (so-called “Cape Town”) discount of 10% for the purchase of aviation objects in the Cape Town list.


An aircraft registered in the Russian Federation is equal to real estate (Article 130 of the Civil Code of the Russian Federation), i.e. the legal regime applicable to real estate also applies to aircraft. Thus, aviation disputes can be resolved in the courts of general jurisdiction, as well as in arbitration courts.

In the Russian Federation, there is no distinction between courts that consider civil cases and courts that handle criminal cases; courts of general jurisdiction administer justice in such cases.

Criminal liability of entities under Russian Law is not provided. In the case of any criminal offences (fraud, etc.), the persons involved in committing a crime (for example, the management or employees of the relevant legal entity) are brought to crim-inal responsibility.


Russia is a party to the Montreal Convention dated May 28, 1999 (Convention for the Unification of Certain Rules for International Carriage by Air), which was ratified by Russia on June 22, 2016 and entered into force in Russia on August 21, 2017.

Russia is not a party to the Geneva Convention dated June 19, 1948 (Convention on the International Recognition of Rights in Aircraft).

Russia is party to the Cape Town Convention dated November 16, 2001 (Convention on International Interests in Mobile Equipment), which was ratified by Russia on May 25, 2011 and entered into force in Russia on September 1, 2011, as well as the Cape Town Protocol on Aircraft Equipment dated November 16, 2001, which was ratified by Russia on May 25, 2011 and entered into force in Russia on September 1, 2011.


The Russian Constitution provides for direct application of the treaties. The generally recognised principles and norms of inter-national law and international treaties to which Russia is a party, are an integral part of its legal system. If an international treaty to which the Russian Federation is a party establishes other rules than those provided by the Federal Legislative Act, then the rules of the international treaty shall apply.


Russia is a party to bilateral agreements on Double Tax Treaties with different countries. Tax preferences are always granted on the basis of reciprocity. As mentioned above, according to current Russian legislation, civil passenger aircraft are divided into seven groups, some of which are fully or temporarily exempted from import taxes; others are subject to customs duty, which can be up to 100,000 rubles (20%), and VAT (18%).



Aviation entities, airports and tax authorities are entitled to detain any property held by the aircraft operator (including aircraft oper-ated by such operator) in the event that it fails to fulfil its obliga-tions to make the appropriate payments.


The rights of the parties to the lease agreement are regulated by the Civil Code of the Russian Federation and the Federal Legislation Act on Financial Lease dated October 29, 1998 № 164.

258 Russia


of agreements between economic competitors on joint activities is carried out with prior consent of the antimonopoly authority.


There are no authorities in the Russian Federation entitled to determine the “relevant market” for various deals. Control over the implementation of mergers, acquisitions and other types of economic concentration is carried out in a notification-permit procedure, a procedure that starts with an application submitted by companies which are going to make the relevant deal.


The procedure for obtaining permission from the Federal Antimonopoly Service or notifying the Federal Antimonopoly Service of economic concentration (for more details, see the answer to question 4.4) is contained in Article 32 of the Federal Legislation Act dated July 26, 2006 № 135 on Protection of Competition.


Cases of mergers, acquisitions, takeovers and the organisation of joint ventures are regulated, as mentioned above in question 4.1, by the Federal Legislative Act on Protection of Competition and, in accordance with Chapter 7, are united by a common term – “economic concentration”. Deals that are the subject of this chapter are subject to State control. Economic concen-tration requires prior approval or notification of the Federal Antimonopoly Service.

However, some deals, including intragroup transactions of the same group of persons, are not an economic concentration and, therefore, are exempt from the need to obtain prior consent of the Federal Antimonopoly Service or notify it after the fact.


In order to obtain the prior consent of the antimonopoly authority, the following applicants can apply to the appropriate authority – the Federal Antimonopoly Service:1) persons or one of the persons engaged in an economic

concentration;2) persons purchasing shares, property, assets of economic

entities, or rights in relation to economic entities; and3) persons who, in accordance with Article 31 of the Federal

Legislative Act on Protection of Competition, are obliged to notify the antimonopoly authority of deals and other actions.

A petition or notification may be submitted to the antimo-nopoly authority in electronic form, as well as by the applicant’s representative. When making a decision on the implementation of deals, such as other actions subject to State control, the State duty shall be paid in the amount and manner established by the legislation of the Russian Federation on taxes and fees.

Simultaneously, with regard to the petition or notification of deals, and other actions subject to State control, documents are


Requirements for judicial notice in internal disputes are estab-lished by Article 113 of the Civil Procedure Code of the Russian Federation for arbitration proceedings – by Chapter 12 of the Arbitration Procedure Code of the Russian Federation.

Another procedure is established for legal proceedings where the party is a foreign carrier. Article 417.6 of the Civil Procedure Code of the Russian Federation and Article 256.6 of the Arbitration Procedure Code of the Russian Federation contain the rules and procedure for sending and delivering notifications and other procedural documents to a foreign State.


In accordance with Article 91 of the Arbitration Procedure Code of the Russian Federation, interim measures may be:1) the imposition of an arrest on cash (including cash that will

be credited to a bank account) or other property owned by the defendant and held by him or other persons;

2) prohibition on the respondent and other persons from performing certain actions concerning the subject of the dispute;

3) imposing on the defendant the obligation to perform certain actions in order to prevent damage or deterioration of the condition of the disputed property;

4) the transfer of disputed property for storage to the plain-tiff or another person;

5) the suspension of the penalty under the executive or other document disputed by the plaintiff, the penalty for which is carried out in an indisputable (without acceptance) procedure; and

6) suspension of the sale of property in the event of a claim for release of property from arrest.

A decision taken by the relevant court in relation to a decision rendered by the arbitral tribunal shall be considered as the final remedy available to the parties, taking into account the right of the parties to appeal the court/arbitral award.


Civil and arbitration proceedings in the Russian Federation include three stages: first instance; appellate instance; and cassa-tion instance. Thus, the decision rendered by the court of first instance may be appealed to a higher court within the time limits established by law.



There is no special legal regime governing joint ventures between competing airlines. Thus, regulation is carried out on the basis of the Civil Code of the Russian Federation, as well as the Federal Legislative Act dated July 26, 2006 № 135 on Protection of Competition, according to which the creation and reorganisation of commercial organisations, and the conclusion



publishing them in the prescribed manner and opening sales of air carriage at special tariffs; and

c) carrying out air carriage of passengers at a special fare by its own flights, or allowing such carriage to be under-taken, under its commercial code, via flights by air trans-port organisations that are subsidiaries of an air trans-port organisation with which they have entered into an agreement.


The processing of passengers’ personal data from aircraft travel in Russia is carried out on the basis of the following basic legal acts:■ Constitution of the Russian Federation.■ Convention on the Protection of Individuals in Automated

Processing of Personal Data (adopted in Strasbourg, January 28, 1981).

■ Civil Code of the Russian Federation.■ Federal Legislative Act “On Personal Data” dated July 27,

2006 № 152-FZ.■ Article 85.1 of the Air Code of the Russian Federation.■ Article 11 of the Federal Legislative Act “On Transport

Security” dated February 9, 2007 № 16-FZ.■ Decree of the Government of the Russian Federation “On

approval of requirements for the protection of personal data when they are processed in personal data information systems” dated November 1, 2012 № 1119.

■ Decree of the Government of the Russian Federation “On Approval of the Regulation on Peculiarities of Processing Personal Data Performed Without Using Automation Tools” dated September 15, 2008 № 687.

While booking a seat, the passenger’s obligation to provide the necessary information about his personal data arises from the air carriage contract and, in Russia, is enshrined in the Federal Aviation Rules “General Rules for Carriage of Passengers, Baggage, Cargo and Requirements for Servicing Passengers, Consignors, Consignees” dated June 28, 2007 № 82.

The main law governing the processing of personal data in Russia is the Federal Legislative Act on Personal Data, which is based on the Convention on the Protection of Individuals in Automated Processing of Personal Data.

This Federal Legislative Act prohibits personal data opera-tors, and other persons who have access to personal data, from disclosing to third parties and distributing personal data without the consent of the subject of personal data or in the absence of special conditions provided for by federal law.

One of the conditions for the processing of personal data of passengers of an aircraft is the need to achieve the goals stipu-lated by an international treaty to which the Russian Federation is a party, or the law, in order to exercise the functions, powers and duties assigned by the legislation of the Russian Federation to the operator (see clause 2, part 1, Article 6 of the Federal Legislative Act on Personal Data). With the consent of the passenger, the operator’s functions of processing his personal data to a third party are also performed.

From clause 6 of the General Rules for the Air Carriage of Passengers, Baggage, Cargo and Passenger Service Requirements, Consignors, Consignees, approved by the Act of the Ministry of Transport of the Russian Federation dated June 28, 2007 № 82, it follows that the carrier has the right to transfer the obligations or part of them – under the air transportation agreement carried

submitted to the antimonopoly body in accordance with the list given in paragraph 5 of Article 32 of the Federal Legislative Act on Protection of Competition.

Applicants must provide information about the petition to the Federal Antimonopoly Service for their approval and consent to the transaction, and any other action should be posted on the official website of the Federal Antimonopoly Service in the Internet information and telecommunications network. Interested persons are entitled to submit to the antimonopoly body information on the impact on the state of competition of such a deal or other action.


The possibility of granting State or municipal preferences is provided by the Federal Legislative Act on Protection of Competition dated July 26, 2006 № 135. More favourable condi-tions of activity are created for individual economic entities by transferring State or municipal property, other objects of civil rights, or the granting of property benefits. Moreover, prefer-ences can be granted to all small and medium-sized businesses, regardless of their activities.

The State is taking complex measures to help regional aviation. Substantial assistance is provided to ground the infrastructure of airports as part of subsidies to federal State unitary enterprises. In addition, regional airlines that support fleet maintenance are supported.

Also, on the basis of the Federal Legislative Act on Financial Lease (Leasing) dated October 29, 1998 № 164, funding is provided from the Federal Budget and State guarantees are provided for the implementation of leasing projects (Development Fund of the Russian Federation), including the participation of non-resident firms.


In accordance with the Decree of the Government of the Russian Federation dated March 2, 2018 № 215 “On approving the Rules for granting subsidies from the Federal Budget to air transport organizations in order to ensure the availability of carriage by air to the population and on recognizing as invalid some acts of the Government of the Russian Federation”, air transport subsidies are provided for flights to the Far East region of Russia, to the Republic of Crimea (Simferopol), to Kaliningrad and regional routes established by the Government Decree dated December 25, 2013 № 1242 “On subsidies from the federal budget air transport organisations in the implemen-tation of regional air carriage of passengers on the territory of the Russian Federation and the formation of a regional route network of the Russian Federation”.

The right to receive subsidies is granted to the air transport organisation:a) having entered into an agreement on the provision of a

subsidy with the Federal Air Transport Agency in accord-ance with the standard form approved by the Ministry of Finance of the Russian Federation;

b) registering special tariffs for routes and conditions for their use in accordance with clause 16 of these Rules, within seven days from the date of conclusion of the contract,

260 Russia



Termination of the contract for the carriage of passengers by air on the carrier’s initiative for the operation of the contract for the carriage of goods by air is governed by Article 107 of the Air Code of the Russian Federation.

The General Rules for Air Carriage of Passengers, Baggage, Cargo and Passenger Service Requirements, Consignors, Consignees, approved by the Act of the Ministry of Transport of the Russian Federation dated June 28, 2007 № 82, contain rules which concern the denial of boarding rights and/or cancelled flights.


The authorities do not carry out preventive measures regarding late arrivals and departures of flights. Sanctions are established by the Air Code of the Russian Federation, as long as the provi-sions of the Montreal Convention of 1999 and EU Regulation 261/2004 are taken into account.

The Federal Air Transport Agency has retrospective power in the event of a systematic violation of established flight sched-ules. Thus, in established cases, it is responsible for the suspen-sion, restriction of validity and revocation of licences for carriage and operators’ certificates.


The activities of airports, as participants in aviation activities, are governed by the sectoral legislation, as mentioned earlier in question 1.1.

Operation of the airfield of civil aviation, the heliport of civil aviation and their compliance with the requirements of the federal aviation regulations is provided by an operator who is recognised as the person who owns a civil aviation aerodrome or a civil aviation heliport by right of ownership, on lease terms or on any other legal basis and operates such aerodrome or heli-port in order to ensure the take-off, landing, taxiing and parking of civil aircraft.

The requirements for the civil aviation aerodrome operator and the civil aviation heliport are established by the Federal Aviation Regulations, which are approved by the Ministry of Transport of the Russian Federation.

It is worth noting that in the Russian Federation a separate legislative body is dedicated to ensuring transport security. Thus, the airport administration is obliged to ensure compliance with the rules for the protection of airports and their infrastructure.


The contract of passenger air carriage by an airline is a type of contract for the provision of services, therefore legal relations in this area are regulated by the Legislative Act “On Protection for Consumer Rights” dated February 7, 1992 № 2300-1. The contractor is obliged to provide the service in due time, and to ensure that it is of good quality.

out on behalf of the carrier booking, sale and seat registration on shipping documents – and is responsible to the passenger for its actions (inaction).

If the operator transfers the personal data of passengers to a third party for other purposes not specified above in paragraph 6 of the General Rules for the Carriage of Passengers by Air, then the operator must obtain the passenger’s consent to such a transfer.


Airlines are obliged to ensure the protection of personal data. In case of loss of personal data of passengers, the airlines may incur liability under civil law (a claim for damages, including moral damage, may be brought against the company), as well as administrative law or criminal law.


The main ways to protect intellectual property are patent, copy-right and protection of trade secrets.

Ensuring the protection of intellectual property today is possible through the use of the following methods: civil law; administrative law; and criminal law.1. Civil law measures – means of intellectual property protec-

tion, used in case it is necessary to restore the violated or challenged right. Such measures are regulated primarily by the Civil Code of the Russian Federation. Recognition of the right, restoration of the situation before the violation of rights, compensation for damages, compensation for moral harm, confiscation of equipment, devices and mate-rials that can be used in order to violate exclusive rights to the results of intellectual activity, termination or change of legal relationship, publication of the court decision on the violation.

2. Administrative and legal measures. The implementa-tion of these measures is carried out quite simply and in a short time. Administrative protection is necessary, there-fore the Code of Administrative Offenses of the Russian Federation contains an impressive list of violations in the field of intellectual property rights. The main measure of administrative liability is a fine.

3. Measures of criminal liability. The Criminal Code of the Russian Federation protects almost all intellectual prop-erty: copyright and related law (Article 146 of the Criminal Code); inventive and patent law (Article 147 of the Criminal Code); trademarks and service marks, appellation of origin (Article 180 of the Criminal Code); consumer rights to reli-able information (Article 182 of the Criminal Code); and know-how, protected in the mode of commercial secrets (Article 183 of the Criminal Code).

Today, there are organisations that are engaged in the protec-tion of intellectual property, such as the court of intellectual property and arbitration. The obligation of the court for intel-lectual property rights is to consider disputable situations in the field of protection of intellectual rights. At the same time, this body acts as a court of first and cassation instances.




There are no legal restrictions on vertical integration between air operators, and airports do not provide any, under the condi-tion that it does not contradict the antimonopoly legislation.


The certificate of the operator is issued by the Federal Air Transport Agency to applicants who meet the certification requirements established by the Ministry of Transport of Russia, regardless of citizenship.

The Federal Air Transport Agency determines the quota in respect of foreign persons who wish to replace the position of the commander of the aircraft. On the basis of statements by Russian airlines, the Federal Air Transport Agency issues orders on the maximum number of foreign citizens that can be hired to fill the position of the aircraft commander, and on the conditions under which an employment contract can be entered into with specified foreign citizens.

The certificate of a foreign State issued to a person from among the aviation personnel is recognised in the Russian Federation as valid, provided that this certificate complies with international aviation standards recognised by the Russian Federation and federal aviation regulations.

5 In Future


There are many different legislative and regulatory changes planned in the air legislation of the Russian Federation in the coming years. The changes relate to current aviation issues, such as the use of unmanned aircraft, the protection of personal data, and the improvement of the carrier’s liability to passen-gers for injury, health and other issues. Russia is a Member State of the International Civil Aviation Organization, and therefore, the air legislation of the Russian Federation, in order to provide for the interests of Russia, must comply with the requirements of the Standards and Recommended Practice of the Council of the International Civil Aviation Organization (ICAO).

A passenger who is not satisfied with the quality of transpor-tation is entitled to make demands in accordance with Article 29 of the Legislative Act “On Protection for Consumer Rights” and may choose between:■ elimination of deficiencies of the service during the trip;■ reduction of the price of the service after detection of

defects therein or arrival at the destination; and■ reimbursement of expenses incurred in the process of

carriage for the elimination of deficiencies of the service on its own or by third parties.

The passenger also has the right to demand compensation for losses incurred by him as a result of the provision of services of inadequate quality by the carrier. Consumer requirements are stated in the form of a written claim. Features, terms of filing and consideration of claims are governed by Articles 124–127 of the Air Code of the Russian Federation.

In addition to the right to provide carriage services of proper quality, the passenger has the following rights:■ The right to security of the service provided (Article 7 of

the Legislative Act “On Protection for Consumer Rights”). If, during the transportation of a passenger, damage to the life, health or property of the passenger is caused, the contractor will be liable for property (Article 14 of the Legislative Act “On Protection for Consumer Rights”).

■ The right to information about the service provided (Articles 8–10 of the Legislative Act “On Protection for Consumer Rights”).

■ The right to provide services within a specified time (Articles 27 and 28 of the Legislative Act “On Protection for Consumer Rights”).

■ The right to safe transportation of cargo and baggage.In addition, Article 15 of the Legislative Act “On Protection

for Consumer Rights” provides for the obligation to compensate consumers (passengers) for moral harm.


There are four major international global distribution air ticket booking systems (GDSs) available in the Russian market: Amadeus; Sabre; Galileo; and Gabriel SITA; as well as the Russian system, Sirena Travel.


There are no legal requirements for GDS ownership in Russia.

262

Aviation Law 2020

Russia

Oleg Aksamentov graduated from the Law Faculty at St. Petersburg State University (2000), and from the full-time postgraduate school of the Department of Commercial Law at St. Petersburg State University (2003).From September 2000 to December 2014, he was a professor of Air Law at the St. Petersburg State University of Civil Aviation. From December 2014 to the present, he has been a visiting professor of Air Law at the same University.Oleg is a founder and the Director of the Institute of Air and Space Law AEROHELP, and of AEROHELP Law Office.Since 2011, he has been a member of the Russian Association of International Law. Since 2012, he has been a member of the European Air Law Association (EALA). Since 2013, he has been a member of the Coordination Council at the Interstate Aviation Committee (IAC) for the preparation of aviation specialists of the Member States to the Agreement on Civil Aviation and Use of Airspace.He is a permanent Secretary of the Organizing Committee of the annual St. Petersburg Air Law Conference (since 2010).Oleg has participated in working groups for research projects on the drafting of Federal Legislative Acts, Decrees of the Government of the Russian Federation, and Acts of the Transport Ministry of the Russian Federation.

AEROHELP Law Office7-ya liniya V.O., 44, letter ASt. Petersburg, 199004Russia

Tel: +7 812 961 6196Email: [email protected]: www.aerohelp.ru

Ilona Tsimbal graduated from the Law Faculty at the National Research University “Higher School of Economics” (St. Petersburg) in 2017.In 2018, Ilona completed a short-term training programme at the Institute of Air and Space Law AEROHELP, “Passenger rights protection under the International air law and the EU law”. In 2019, she completed the “International regulation of labour migration” and “International aviation financing and leasing law” programmes.From 2017 to February 2018 she was a legal adviser at a law firm, and was then promoted to lawyer at AEROHELP Law Office. Her current practice is corporate law, Russian and International air law, and claims of passengers.

AEROHELP Law Office7-ya liniya V.O., 44, letter ASt. Petersburg, 199004Russia

Tel: +7 812 961 6196Email: [email protected]: www.aerohelp.ru

The main objective of AEROHELP Law Office is the provision of legal services in civil aviation. We work with Russian and foreign airlines and airports, providing legal support to the aviation business, as well as providing legal assistance to aviation personnel. All lawyers and experts of the AEROHELP Law Office have legal degrees, and many of them are also active lecturers at aviation and law schools of different countries.We provide services both in Russia and abroad. AEROHELP Law Office has offices in St. Petersburg and Moscow, as well as in Tallinn, which allows us to provide legal services in the countries of the European Union both directly and through a partner network all over the world. We accompany international projects on the principle of a “one-stop shop”, which means coordinating the work of lawyers on projects in different countries.

www.aerohelp.ru


Aviation Law 2020

Chapter 35 263

South Africa

Christodoulou & Mavrikis Inc. Chris Christodoulou

South Africa



Domestic and international air services are governed by the Air Services Licensing Act No. 115 of 1995 and the International Air Services Act No. 60 of 1993, respectively.1.2.1 International air service licenceAn application to the Council in the prescribed format is required. An applicant who wishes to use an aircraft other than a South African aircraft in providing an international air service must satisfy the Council that an appropriate certifi-cate of airworthiness has been issued in respect of the aircraft concerned in the country in which that aircraft is registered.1.2.2 Domestic air service licenceThe granting of a licence is founded on the applicant’s ability to satisfy the Council that: the air service will be operated in a safe and reliable manner and that the operator is financially capable of operating an air service; if the applicant is not a natural person who is a national of South Africa, at least 75% of the voting rights are held by residents of the Republic; the person referred to will be actively and effectively in control of the air service; and the aircraft is a South African-registered aircraft.


The SACAA has overall safety and security oversight functions, exercised in terms of the Civil Aviation Act, 2009 and the Civil Aviation Security Regulations, 2011.

The Act provides for the establishment of an independent Aviation Safety Investigation Board in compliance with Annexure 13 of the Chicago Convention. (See more at ques-tion 1.9 below.)


No; all modes of air transport (except for defence) are regulated in the same manner.


Yes, passenger charters are classified as a non-scheduled public air transport service (defined as a public air transport service

1 General


1.1.1 Principal legislation■ TheCivilAviationActNo.13of2009andtheRegulations,

2011 provide for the control and regulation of aviation within the Republic.

■ The Carriage by Air ActNo. 17 of 1946 (as amended)gives effect to the Convention for the Unification of Certain Rules for International Carriage by Air, signed in Montreal on 28 May 1999, and for the unification of certain rules relating to international carriage by air.

■ TheAirServicesLicensingActNo.115of1990providesfor the licensing and control of domestic air services; and the International Air Services Act No. 60 of 1993 provides for the licensing and control of international air services.

■ The Convention on the International Recognition ofRights in Aircraft Act No. 59 of 1993 provides for the application of the Convention on the International Recognition of Rights in Aircraft.

■ The Convention on International Interests in MobileEquipment Act No. 4 of 2007 enacts the Conventionon International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the Cape Town Convention).

■ TheMortgageofAircraftRegulations,1997(asamended).■ TheAir Traffic andNavigation ServicesCompanyAct

No. 45 of 1993, and Regulations, 1976, provide for airtraffic navigation services.

1.1.2 Regulatory bodies■ TheSouthAfricanCivilAviationAuthority(SACAA)is

charged with promoting, regulating and enforcing civil aviation safety and security.

■ The Air Service Licensing Council is responsible forregulating domestic air services, and the International Air Services Licensing Council is responsible for regulating international air services.

■ The Air Traffic and Navigation Services CompanyLimited (ATNS) provides air traffic navigation services.

264 South Africa



The SACAA regulates all aspects of aircraft accidents and inves-tigations, and the independent Aviation Safety Investigation Board conducts independent investigations through the Director of Investigations, who has exclusive authority to direct the conduct of investigations on behalf of the Aviation Safety Investigation Board under this Act in relation to aircraft acci-dents and aircraft incidents.

Subject to the provisions of the South African Maritime andAeronauticalSearchandRescueAct,2002(ActNo.44of2002) and the Convention, the South African Police Service have rights of prior access to any scene of an aircraft accident or aircraft incident.


The Airports Company Amendment Bill No. 58 of 2018 was introduced in Parliament in May 2019 to strengthen the current economic regulatory framework of airports; to address the lack of an effective appeal mechanism; and to align the principal Act with the Companies Act, 2008 and the Competition Act, 1998.

Certain amendments to the Civil Aviation Regulations, 2011 were published for comment on 13 September 2019 relating, in particular, to Part 121 (Air Transport Operations for carriage on aeroplanes of more than 19 passengers).



South Africa maintains an operator’s registry. Registration of an aircraft and the issuing of a certificate of registration under the Civil Aviation Regulations do not necessarily confer or imply beneficial ownership over an aircraft. In terms of Section 8 of the Civil Aviation Act, 2009, the registered owner of an aircraft is deemed to be the owner for purposes of liability for damages caused by the aircraft in certain circumstances. Registration of ownershipisobtainedbyfilingthenecessaryform(CAR47A-2)with the SACAA.

The legal effect of registration is to designate aircraft regis-tered on the South African Civil Aircraft Register as being deemed to have South African nationality.

Proof of transfer of ownership is satisfied by either a deed or bill of sale, or an Aircraft Purchase Order or a similar agree-ment, supported by a deregistration certificate issued by the SACAA if the aircraft was previously registered.

The legal effect of registration is to designate aircraft regis-tered on the South African Civil Aircraft Register as being deemed to have South African nationality.


2.2.1 The mortgage register under the Geneva ConventionSection4oftheConventionontheInternationalRecognitionofRights in Aircraft Act No. 59 of 1993 provides for the opening

rather than a scheduled public air transport service) in connec-tion with which a specific flight or a specific series of flights is undertaken.

Domestic air charters are regulated under the Domestic Air Services Regulations, 1991, issued under Section 29 of the Air Services Licensing Act, 1990.


The limitations to be considered are as follows:■ Shareholding – no shareholding restrictions or limita-

tions are imposed on international air carriers operating in South Africa.

■ Slot availability – the Airport Slot CoordinationRegulations, 2012 make provision for the appointment of a Coordinator (the ATNS) who will allocate, monitor and enforce the use of slots at airports and ensure that the capacities of coordinated airports are not exceeded.

■ Airport charges – the Airports Company South AfricaLimited (ACSA) levies airport charges that comprise landing, parking and passenger service charges, which are regulated by the Regulating Committee. There is a differ-entiation in airport charges for flights landing at an ACSA airport where the airport of departure of that aircraft was outside of South Africa, but those charges apply equally to both foreign and locally owned carriers.

■ Air traffic service charges – theATNS levies air trafficservice charges, which are regulated by the Regulating Committee established by Section 11 of the Airports Company Act. Differentiation in charges applies in respect of flights undertaken by an aircraft (regardless of whether the carrier is foreign or locally owned) where either the airport of departure or the airport of arrival of the aircraft is within any State other than South Africa, and the other airport is within South Africa or elsewhere.


Airports are both State and privately owned. ACSA owns and operates nine major domestic and international airports. Lanseria International Airport (HLA) is privately owned, as are a number of other smaller airports.


Airports do not impose requirements save for “conditions of use” agreements.

Foreign aircraft must be operated in terms of:■ the International Air Services Transit Agreement (the

Chicago Convention);■ abilateralairtransportserviceagreement;■ aforeignlicence;or■ aforeignoperator’spermit.

265Christodoulou & Mavrikis Inc.


be registered in the Republic as prescribed in Part 47 of theRegulations, and:(a) the aircraft shall be subject to the airworthiness certifica-

tion, maintenance, and inspection procedures prescribed by the regulations in respect of South African-registered aircraft;

(b) the responsibility or custody of the aircraft and control of all operations shall be vested in the lessee operator;

(c) the responsibility for the airworthiness and maintenance of the aircraft shall be vested in the lessee operator; and

(d) the registration of the aircraft shall be valid only for the duration of the lease agreement, and for as long as the aircraft is operated in accordance with the Regulations, the terms or conditions specified in the lessee operator’s oper-ating certificate, the related operations specifications, and the lessee operator’s operations and maintenance control manuals.

The conditions of approval referred to in sub-regulation (3) must be made a part of the lease agreement.

(As regards the right to retake possession of the aircraft either on breach or at the end of the contract, the comments in ques-tions 3.1 and 3.2 below apply.)


The common law does not allow the automatic transfer of any rights in an asset, including a component thereof, and a court order is required in all cases. See more at question 3.1 below.

It is also not possible for an owner or operator’s rights in a single engine to be separately registered; such rights can only be registered together with an interest in the airframe to which the engine is affixed. A solution may be the registration of a notarial bond over a moveable asset.

In summary, there are no general rules of self-help available.


Generally, there are no taxes or stamp duties applicable to aircraft trades where the aircraft is located in South Africa, or by a domestic party if exported between non-residents.

The VAT implications which are applicable are as follows: ■ On the saleof aircraftbetweenSouthAfrican residents,

VAT is levied at the effective rate of 15% except when the sale is between two non-residents and they were not regis-tered for VAT purposes.

■ Exportedaircraft– a saleof anaircraft that is exportedshould not attract any VAT, and the transaction may be zero-rated for the purposes of VAT. If the zero rating is not accepted by the Revenue Authority, due in part to inad-equate documentation, etc., there is a possibility that the non-resident purchaser may apply to be exempt from regis-tering for VAT.

■ Importedaircraftorengines,other thanona temporarybasis, attract VAT at 15%.

of a mortgage register with the SACAA, which makes it possible for a creditor to register a mortgage over an aircraft or a share therein, or in respect of aircraft over any spare part including engines.2.2.2 Registration procedureRegistration is on application to the SACAA with the filing of the prescribed form (MAR 2.1), and payment of the prescribed fee. The prescribed form identifies the mortgagor and mort-gagee, the cause of indebtedness, and the amount secured. The application is usually accompanied by the instrument giving rise to the debt or finance transaction, together with a company resolution authorising the registration.

If the mortgage is to be registered under a Power of Attorney from a non-resident, the Power will have to be Notarised and Apostilled under the Hague Convention of 1961, and filed with the SACAA.

The certificate of mortgage does not authorise any mortgage to be made in the Republic or by any person not named in the certificate, and contains the prescribed particulars as well as a statement of any registered mortgages or certificates of mort-gage affecting the aircraft or share in respect of which the certif-icate is given.2.2.3 Registration under the Cape Town ConventionIn terms of the Convention on International Interests in Mobile Equipment Act No. 4 of 2007, the SACAA is designated, inaccordance with Article 18 (5) of the Convention, as the entry point through which the information required, or registration, may be transmitted to the International Registry.2.2.3.1 The following fees are payable (in South African

Rand)* when applying for:■ The recording, transfer, transmission of rights, or

discharge of a mortgage in the register of aircraft mortgages:R1,840.

■ Acertificateofmortgage:R1,370.■ Accesstotheregisterofaircraftmortgages:R230.■ Thefurnishingofinformationfromtheregisterof

aircraft mortgages: R 1.60 per page. *correct as at 13 September 2019.


IntermsofPart48oftheCivilAviationRegulations,2011,allaircraft lease agreements involving South African air service operators, South African-registered aircraft and foreign-reg-istered aircraft operated by South African air service oper-ators, or any South African operator who enters into a finan-cial or capital lease agreement as lessee in respect of an aircraft, must provide the Director of the SACAA with a certified copy thereof, and adhere to the provisions of the Convention on the International Recognition of Rights in the Aircraft Act, 1993, where applicable.

Where a dry lease involving a foreign operator is approved by the Director, a copy of the duly completed form must be forwarded to the International Air Services Council or the Domestic Air Services Council, as applicable, for record-keeping purposes. The oversight responsibilities in respect of a dry lease of a foreign-registered aircraft may be fully or partially transferred, in terms of an Article 83bis Agreement, from the appropriate authority of the State of Registry to the appropriate authority of the State of the Operator.

When the conditions contemplated in sub-regulation (3) (d) ofPart48.03.1arenotmet, theaircraft tobedry-leasedmust

266 South Africa


also detain an aircraft when there has been a breach of customs import rules, or for non-payment of VAT.

In addition, the holder of a debtor/creditor or salvage and improvement lien over a debtor’s property is regarded as a secured creditor on insolvency of the debtor.

Other than the form of self-help provisions contained in the Cape Town Convention (see, however, the comments at ques-tion 3.2 below), the creditor will, in the normal course, have to approach the Court for an order to seize and detain the aircraft. Urgent and ex parte (without notice) orders are available to the creditor in regard to the formal proceedings referred to above.

Where a debtor is a peregrinus (foreigner) to a local court, assets belonging to the debtor within the jurisdiction of the local court may be attached by an incola in order to find or confirm jurisdic-tion and to secure the creditor’s claim.


No general remedies of ‘self-help’ are available to financiers or lessors, who have to resort to the courts in the event of default or breach of an agreement by means of formal action or motion proceedings.

South Africa has made the necessary Declaration under the Cape Town Convention to include the availability of nonjudi-cial remedies for a lessor seeking to re-acquire possession of the aircraft, either at the end of the contract or upon the breach thereof, under the Convention; however, practical implementa-tion has yet to be enforced due to the inconsistency between certain provisions of the Convention and local laws. The Airline Working Group is currently hard at work in assisting local authorities to overcome the issues.


Specialised aviation courts are not available in South Africa. The most appropriate courts for hearing aviation disputes are the superior courts for amounts over R 200,000, and which consist of the High Court of South Africa, and Provincial and Local Divisions which have review and appellate jurisdiction in criminal and civil matters.

The apex courts are the Constitutional Court and the Supreme Court of Appeal, which cannot be approached as a court of first instance.

The rules of jurisdiction relating to the value of a claim and geographical area are important considerations in approaching the correct superior or inferior court.


Service of court proceedings is obligatory and is effected by the Sheriff of the Court.

The Court Rules require personal service in matters affecting status or in sequestration proceedings, on a residence or place of business of the Defendant, or on a person who is apparently in charge of the premises at the time of service and is not younger than 16 years of age.

■ Leases–aircraftimportedforthepurposesofaleasewillnormally attract VAT on the value of the aircraft, based on the ‘blue book’ value. If the lessor is a non-resident and the lessee a South African resident, this may result in the lessor having to register for VAT purposes.


South Africa is a signatory to:■ TheGenevaConventionbymeansoftheConventionon

the International Recognition of Rights in Aircraft Act No. 59 of 1993 (date of commencement: 1 January 1998).

■ TheCapeTownConventionbymeansoftheConventiononInternationalInterestsinMobileEquipmentActNo.4of 2007 (effective date: 1 May 2007).

■ TheMontrealConventionbymeansoftheCarriagebyAirAmendment Act No. 15 of 2006 (date of commencement: 19 June 2007).


2.7.1 The Geneva ConventionA mortgage register with the SACAA is open for a creditor to register a mortgage over an aircraft or in respect of aircraft over any spare part, including engines.2.7.2 The Cape Town ConventionThe SACAA is the designated entry point through which the information required for registration may be transmitted to the International Registry.

For the purposes of Article 53 of the Convention, the High Court of South Africa is the court that has jurisdiction, as contemplated in Chapter XII of the Convention.

As aforesaid, practical implementation of the Convention has yet to be achieved due to the inconsistencies in the local laws and regulations, and enforcement of a security interest will, at present, have to be made by way of an application to the High Court of South Africa.


South Africa is a signatory to over a 100 double taxation agree-ments and protocols for the avoidance of double taxation, including with most EU countries, the UK, and the USA.



In terms of the common law, a creditor may seize an aircraft for debts owing to the creditor by the debtor by means of formal proceedings in the High Court, which has a discretion to order the release of the aircraft against the provision of security for the creditor’s claim together with costs and interest. An aircraft can be detained under the Criminal Procedure Act if the aircraft is used in the commission of a crime. The tax authorities can



to the Commission in return for immunity from prosecution and fines. Immunity is only available to the first cartel member to approach the Commission.

If other cartel members wish to come clean on their involve-ment in the same cartel, the Commission will also encourage such cooperation outside the scope of the CLP, which can even-tually result in a reduction in the fine to be paid in a settlement agreement. Any member of a cartel can apply for leniency and must comply with the requirements set out in the CLP.

Parties to intermediate and large mergers are required to notify the Commission in the prescribed format, and the parties to such mergers may not implement them until they have been approved by the Commission.

Parties to a small merger may implement the merger without the approval of the Commission (and, as such, are not obliged to notify the Commission of that merger).

An Advisory Opinion may be requested from the Commission by external parties to provide guidance on the position that the Commission is likely to take in respect of certain transactions, agreements or practices (on payment of a fee of R 2,500). An Advisory Opinion is not binding on the Commission.


Mergers are generally regulated by the Competition Act; however, where an airline is concerned and foreign ownership results, avia-tion legislation rather than the Competition Act comes into play.

If the applicant is not a natural person resident in the Republic, at least 75% of the voting rights of a domestic carrier must be heldbyresidentsoftheRepublic(Section16(4)(c)(ii)oftheAirServices Licensing Act, 1990), and the aircraft which will be used in operating the air service is a South African-registered aircraft (Section16(4)(e)oftheAirServicesLicensingAct,1990).Thevoting rights in respect of a South African-licensed international carrier need to be substantially held by residents of the Republic, and the aircraft which will be used in operating the air service is a South African-registered aircraft (Sections 17(5)(a) and 17(5)(c) of the International Air Services Act, 1993).

Joint ventures will probably be dealt with under the provi-sions of the Competition Act dealing with restrictive prac-tices–horizontalandvertical(Sections4and5)–ratherthanamerger, unless they are constructed in a special purpose vehicle (company), in which case the merger provisions would apply.


4.5.1 ProcedureA notification must be made in a single filing by one of the primary firms, and must include:(i) AMergerNotice inFormCC4(1),whichmustdeclare

the names of the primary acquiring and target firms and whether, in the opinion of the filing firm, the merger is small, intermediate or large.

(ii) For each of the primary acquiring firm and the primary target firm, a Statement of Merger Information in Form CC4(2).

(iii) All the required documents must be provided together with payment of the fees.

4.5.2 TimingThe Competition Act does not prescribe a specific time limit within which a merger must be notified. As the parties to a

Service at a place of employment or at a chosen address (domi-cilium citandi ), or at the registered office, is also permissible as a substituted service, or by edictal citation where the details are unknown, to initiate legal proceedings.


Interim orders interdicting and preventing an aircraft from being removed pending the final determination of a court are available and can be extended to include preservation and control of the aircraft.

Article 13 of the Cape Town Convention makes provision for similar interim orders.

Final orders are made in the normal course of events once a matter has been decided upon by the arbitral tribunal or the Court.


Rights of appeal from the higher courts are to the Supreme Court of Appeal and, in applicable cases, to the Constitutional Court.

A judicial review of a decision of a Court or a tribunal may be brought under the Promotion of Administrative Justice Act, 2000 (PAJA).

Decisions of the Director of Civil Aviation may be appealed to the Civil Aviation Appeal Committee, and thereafter to the High Court.



Joint ventures fall within the ambit of the Competition Act 89 of 1998 (the Competition Act). Competitors are normally regarded as being in a horizontal relationship. In terms of Section 4(1)of the Act, an agreement between, or concerted practice by firms, or a decision by an association of firms, is prohibited if it is between parties in a horizontal relationship and if the joint venture prevents or reduces competition or, alternatively, consti-tutes a merger in a manner contemplated in the Competition Act.


The ‘relevant market’ is determined primarily with a specific focus on the aviation sector, but there is scope for a narrower focus as to the specific type of aviation sector in which the transaction occurs, if distinguishable (e.g. cargo transport). To date, there have not been any cases in terms of which a narrower view of a specific type of sector within the aviation industry was applicable.


The Commission’s Corporate Leniency Policy (CLP) offers a cartel member the possibility to disclose information on a cartel

268 South Africa


such as the EU Data Protection Directive, although the Act has not been fully implemented.

The Constitution of South Africa Act No. 108 of 1996 and the common law continue to provide for the right to privacy, and impose certain restrictions on the processing and disclosure of personal information.


No mandatory breach notification procedure exists. Individuals’ rights are enforced, and damages are claimed through the common law and the Constitution, and enforced by the courts. Normal appeal procedures are available to a carrier against whom damages are granted, as set out in question 3.5 above.


Trademarks and Patents are protected by the Trade Marks Act and the South African Patents Act 57 of 1978 and are registered with the Companies and Intellectual Property Commission. An action for infringement may be brought in the Court of the Commissioner of Patents (an ad hoc court set up under the High Courts of South Africa). Unregistered trademarks may be defended in terms of common law.

South Africa is a signatory to the Paris Convention, and there-fore protection is afforded to trademarks that are well known, even if they are not registered in South Africa. South Africa is also a member of the Patent Co-operation Treaty (PCT). Copyright is protected under the Copyright Act No. 98 of 1978.


The Consumer Protection Act 68 of 2009 (CPA) applies to the promotion and supply of goods and services concluded in the ordinary course of business between suppliers and consumers, and provides some protection to passengers in the event of a denial of boarding under certain circumstances. The Code of Conduct for Consumer Goods and Services is applicable with regard to overselling and overbooking.TheCPAunderSection47providesforthereasonablenesstest

for overselling and overbooking. In terms of this test, a supplier may not accept payment for goods or services where it has no reasonable intention to supply the goods or services.

With regard to damages suffered as a result of a supplier’s inability to supply goods or services due to overbooking or over-selling, the CPA provides for a refund of the amount paid plus interest (usually, this would be the deposit plus interest), as well as any consequential damages that directly resulted from the breach of contract.


There is no applicable legislation or sanction available to authori-ties at this time. It is worth noting that Article 19 of the Warsaw Convention as incorporated in terms of the Carriage by Air Act is applicable to carriers.

merger may not implement the merger until it has been approved by the relevant competition authority, the parties have an incen-tive to notify the merger as soon as possible.

The Commission has an initial 20 business days to investi-gate intermediate and small mergers, and can extend the inves-tigationby40businessdays.Withregardtolargemergers,theCommissionhasan initial40businessdays to investigate, andcan extend by a maximum of 15 days.

Under non-binding, indicative Service Standards issued by the Commission, the timeframes given are:■ Phase1cases(non-complex)–20businessdays.■ Phase2cases(complex)–45businessdays.■ Phase3cases(verycomplex)–60businessdays.4.5.3 FeesA filing fee of R 100,000 is required for the notification of an intermediate merger, and R 350,000 is required for the notifica-tion of a large merger.


No State aid provisions exist in the Competition Act for air oper-ators or airports.

Government domestic air transport policy includes undertak-ings to create a competitive domestic air transport market to level the playing field, and equal treatment of State-owned airlines in a competitive market, as opposed to a market that is reserved for a State-owned and controlled monopoly.

The Domestic and International Air Services Council normally requires a ‘guarantee’ for consumer protection with regard to cash receipts for flights not yet undertaken.


No State subsidies are available at this time. The Airlift Strategy 2006 does, however, create a framework for public service obli-gations and national interest considerations: “Consistent with the spirit of sound commercial operations,

air carriers should have no obligation to provide services below cost to any institutions whether Government or otherwise, unless such intervention is required based on national interest considerations and subject to appropriate financial compensation.”

In terms of the Government’s public service obligations, air transport services on routes that are not economically viable should be invited through a transparent public tender process.


There is currently no dedicated data protection legislation in South Africa, although other legislation does provide some protection, these being the Consumers Protection Act, the National Credit Act, the Promotion of Access to Information Act, the Electronic Communications and Transactions Act, and the Regulation of Interception of Communications and Provision of Communications-Related Information Act.

The Protection of Personal Information Act, 2013 is the closest thing to a dedicated piece of data protection legislation




In terms of Section 5 of the Competition Act, an agreement between parties in a vertical relationship is prohibited if it has the effect of substantially preventing or lessening competition in a market, unless a party to the agreement can prove that any technological, efficiency or other pro-competitive gain resulting from that agreement outweighs that effect.


Operating a domestic air service is subject to Section 16(4)(c)and (d) of the Air Services Licensing Act No. 115 of 1990, in that the applicant for an AOC must be:■ anaturalperson,whoisaresidentoftheRepublic;or■ ifnotanaturalperson,theapplicantmustbeincorporated

in the Republic, with at least 75% of the voting rights in respect of such entity held by residents of the Republic; and

■ activelyandeffectivelyincontroloftheairservice.NB: The Act makes provision for the Domestic Air Services

Licensing Council to exempt an applicant, on the conditions determined by the Minister (of Transport), from the above provisions if the Minister, after considering an application, directs the Council to exempt such applicant; and a resident of the Republic is defined in the Licensing Act as ‘a person who has his or her ordinary residence in the Republic and who is a South African citizen by virtue of the provisions of the South African Citizenship Act, 1995’.

5 In Future


Substantial amendments to the Civil Aviation Regulations, 2011 were published for comment on 13 September 2019, which have a bearing on, amongst other issues: Pilot Licensing (Part 61); Corporate Operations (Part 93); Remotely Piloted Aircraft Systems (Part 101); Air Transport Operations for carriage on aeroplanes of more than 19 passengers (Part 121); Commercial Helicopter Operations (Part 127); and Safety Inspections & Audits(Part145).

The amendments to the Convention on International Interests inMobileEquipmentActNo.4of2007,whichgiveseffecttothe Cape Town Convention, have still not been resolved to over-come the inconsistent civil aviation regulations dealing with the implementation of the Convention.


State airports are governed by the Airports Company Act No. 44of1993,whichimposesleviesandairportchargeswiththepermission of the Regulating Committee and is restricted from having any financial interest, either directly or indirectly, in the provision of any air service and may not unduly discriminate against or among various users, or categories of users, of any company airport.

The Airports Company is obliged to conduct its business in such a manner as to ensure that it: does not engage in any restric-tive practice as defined in Section 1 of the Maintenance and Promotion of Competition Act No. 96 of 1979; does not change the level or modify the structure of any airport charge more than twice within a financial year; publishes any airport charge at least three months prior to the coming into operation of such charge; and ensures that relevant activities are performed subject to any relevant activity service standards, which shall conform to internationally accepted and recommended practices.

The Air Traffic and Navigation Services Company Act No. 45of1993transferredcertainassetsandfunctionsoftheStateto a public company responsible for the provision and control or operation of air navigation infrastructure, air traffic services and air navigation services. The ATNS is entitled to levy air traffic service charges by virtue of a permission issued by the Regulating Committee.

(Refer also to question 1.6 regarding slot allocations and the introduction of the Airport Slot Coordination Regulations, 2012.)


TheCPA,asstatedinquestion4.11above,appliestothepromo-tion and supply of goods and services to consumers within South Africa, and thus generally applies to the relationship between the airport operator and the passenger.

If a passenger were to cancel a flight, he/she would be entitled to a refund of the airport taxes included in the air fare under the provisions of the CPA.


The major global distribution suppliers operating in South Africa are: Travelport Distribution Systems, via its Galileo and Worldspan distribution channels; Amadeus Altéa GDS; and Pegasus. In addition, South African Airways, for example, uses Sabre Airline Solutions.


There are no ownership requirements placed upon GDSs oper-ating in South Africa.

270

Aviation Law 2020

South Africa

Chris Christodoulou, Director, Christodoulou & Mavrikis Inc.Areas of practice: Aviation Law; Corporate & Commercial Law.Qualifications: B.A. LL.B. (Witwatersrand, RSA); LL.M. in Air & Space Law (King’s College, University of London); Solicitor of England & Wales 1997 (non-practising).History: Chris is a dual-qualified Solicitor in England & Wales and a South African Attorney, specialising in aviation and commercial law. He has advised local and international aviation clients including owners and operators, maintenance organisations, lessors and lessees, invest-ment companies and third-party suppliers in all aspects of aviation law, and has rendered Legal Opinions on numerous aircraft acquisition transactions for foreign counsel.Chris served as a Non-Executive Director of a commercial airline and is currently a Member of the South African Civil Aviation Authority Appeal Committee. He is named as one of the world’s leading aviation lawyers by Who’s Who Legal 2019. Publications: the South African Chapters in:■ Lexology: Drone Regulation 2020.■ The Aviation Law Review 2014–2016.■ The Statute of Limitations in International Commercial Claims (Thomson Reuters, 2016).■ International Commercial Debt Collection (Ed. David Franklin; Thomson Carswell, 2007).

Christodoulou & Mavrikis Inc.Suite 3A, 5 Fricker Road, IllovoJohannesburg, 2196South Africa

Tel: +27 11325 4201 / +27 82377 6631Email: [email protected]: www.cm-attorneys.com

Christodoulou & Mavrikis Inc. is a corporate and commercial law firm estab-lished in Johannesburg in 1991, with particular expertise in aviation law and with solid commercial law, litigation and dispute resolution capabilities.The firm provides a full range of aviation law services, including: liability and contentious issues; drafting and negotiating aircraft lease agreements; and advising on most commercial aspects of aviation, including aircraft repos-sessions, acquisitions and registrations.Recent aviation matters include: securing the release of an aircraft attached by judicial means; providing a Legal Opinion Letter on behalf of a US-financed aircraft sale and lease and an Opinion on the local nationality requirements for an aircraft operating certificate; advising on certain aspects of a large-scale helicopter acquisition by a sovereign State; advising on the VAT implica-tions of a private jet sale; and resolving employee- and pilot-related disputes.

The firm also has a presence in Greece, managed by Mr. George Mavrikis, a South African-qualified attorney, together with local attorney Mr. Themis Liakopoulos.

www.cm-attorneys.com


Aviation Law 2020

Chapter 36 271

Spain

Augusta Abogados Sergi Giménez

Spain


■ Theoperatormustalsoobtainavalidairoperatorcertificate(“AOC”)issuedbyAESA,whichinturnrequireshavingatleastoneaircraftatitsdisposalthroughownershiporadrylease agreement – wet lease agreements are not acceptable forthepurposesofobtaininganoperator’slicence.

■ Theprincipalactivityoftheapplicantmustbetheoperationofairservices,althoughancillaryactivitiessuchasrepairormaintenanceofaircraftarealsoadmissible.

■ EUMemberStatesortheirnationalsmustownmorethan50% of the operator and exercise, directly or indirectly,effectivecontrol.

■ Regulation 1008/2008 also stipulates certain financial,insurance and reputational requirements that the applicant mustmeet.


As a member of the EU, Spain is bound by all Regulations,Directives,legalprovisionsandjurisprudenceapprovedbytheEU’s legislativebodiesandcourts. Fromadomesticperspec-tive, themainprovisions are embodied in theAirNavigationAct1960 (Ley de Navegación Aérea, “LNA”) and theAirSafetyAct21/2003(Ley de Seguridad Aérea, “LSA”), although – as with EUlegislation–therearedetailedregulationsonmanyspecificaspectsofaviationoperations.AirsafetyisessentiallyunderthecontrolofAESA,althoughothergovernmentalagencies(suchaspolicebodies)cooperatewithAESAaswell.


TheLSA imposes a number of rules that apply to all partieswhich are in any way involved in aviation: personnel; flightschools;aeroclubs;designers;manufacturers;maintenanceandservice providers; air operators; commercial airlines; aerialworks;airnavigationserviceproviders;handlingagents;airportandaerodromemanagers,etc.–includingpassengers.Inaddi-tion to those general provisions, the LSA then sets out ruleswhichspecificallyapplytospecificparticipantsorcategoriesofparticipants. The International Civil AviationOrganization’s(“ICAO”)definition,wherebygeneralaviationisdeemedtobe“all civil aviation operations other than scheduled air services and non-sched-uled air transport operations for remuneration or hire”, is also appli-cableinSpainandisusedtodistinguishgeneralaviationfromcommercialandpublictransport.

1 General


The main bodies that regulate aviation in Spain are theDirectorate General of Civil Aviation (Dirección General de Aviación Civil, “DGAC”) and the State Agency for AviationSafety (Agencia Estatal de Seguridad Aérea, “AESA”), both ofwhichareundertheumbrellaoftheMinistryforDevelopment(Ministerio de Fomento).TheDGACisgovernedmainlybyRoyalDecree953/2018andisresponsibleforthepreparationofindus-trialandstrategicpoliciesandproposalsfortheaviationsector,representation and coordination with other public administra-tions andwith theEuropeanUnion (“EU”) inmatters of airtransport policy, and the approval of aeronautical circulars.AESA was created following the mandate of Act 28/2006,wherebystateagencieswerecreatedwiththeaimofmodernisingthe Spanish administration, and ismainly regulated by RoyalDecree184/2008;ithasresponsibilityforexercisinginspectionandpenalisationauthorityincivilaviationmatters,andittakestheinitiativetoapproveprovisionsinmattersofaviationsafetyandpassengerprotection,amongothertopics.InadditiontointernationaltreatiestowhichSpainisaparty

andEUlegislation,themainSpanishdomesticprovisionsappli-cabletoaviationare:■ 1954ActonPledgesoverMovableAssetsandMortgage

withoutDisplacement.■ 1960AirNavigationAct.■ Act28/1988onInstalmentSalesofMovableAssets.■ AirSafetyAct21/2003.■ RoyalDecree384/2015–Regulationsforthegrantingof

registrationmarks.


AESA is the competent licensing authority in Spain relating to thegrantingofanoperatinglicence.GivenSpain’smembershipoftheEU,themainrequirementsarethosesetoutinRegulation1008/2008andareidenticaltothoseofotherMemberStates:■ The applicant must decide whether it desires a Type A

or Type B licence, depending on the operations to beundertaken.

■ ToobtainaSpanishlicence,theoperator’sprincipalplaceofbusinessmustbelocatedinSpain.

272 Spain



Most Spanish airports are state-owned although, followinga privatisation process, they are being managed by a privatecompany named “AENA, S.A.”, in which the state has also astake. Additionally,thereisasmallnumberofprivatelyownedairports.


TherearenoparticularrequirementsimposedoncarriersotherthanthosearisingfromEUlegislationrelatingtosecurity,safetyandoperationalrequirements,aswellasslotavailability.


In line with ICAO guidelines and EU legislation (mainlyembodiedinRegulation(EU)996/2010ontheinvestigationandpreventionofaccidentsandincidentsincivilaviation),SpainhascreatedtheCommissionfortheInvestigationofAccidentsandIncidentsinCivilAviation(Comisión de Investigación de Accidentes e Incidentes de Aviación Civil,“CIAIAC”).Domesticlegislationhasdeveloped in some detail the international provisions (mainlylaid out in the Chicago Convention 1944 and EU Regulation376/2014)throughRoyalDecree389/1998,the2003AirSafetyAct,RoyalDecree1334/2005andcertainotherRoyalDecreeswhich periodically publish the State Program of OperationalSafetyforCivilAviation.Inlinewiththelegislativeframework,theCIAIAC’sinvestigationsareexclusivelytechnicalinnature,withtheultimateaimtopreventfutureaccidentsandincidents,andarenotdirectedtowardsallocatinganykindofliability.Pursuant to the 2003 Air Safety Act and Royal Decree

389/1998, “anyperson”whobecomes awareof an accidentorincident in civil aviation must “immediately” report it to theclosestauthorities,whothenmusturgentlycontacttheCIAIAC.Obviously,specialreportingobligationsareimposeduponpilots,operators,aircraftowners,aviationauthorities,airportdirectors,airtrafficcontrollersandallotherrelatedservicesandbodies.The detailed reporting system is set forth in Royal Decree

1334/2005, which applies to all events occurring in SpanishterritoryorwhereSpanish-registeredaircraftorthoseoperatedbySpanishcitizensareinvolved.AllreportsaredirectedtotheDGAC,whothencoordinatesitsactivitieswiththeCIAIACandotherrelevantagencies.


ThemostrelevantdevelopmentinvolvingairoperatorsinSpainisrelatedtoBrexit.TwoofSpain’smostimportantcarriers,IberiaandVueling,belongtotheIAGGroup,whichismajorityowned/controlled byUK citizens. TheUK’s departure from theEUwould entail that these airlines cease to be considered Community carriers,therebylosingtherightsassociatedwiththisstatus.InaccordancewiththeEUCommission’sguidelines,bothcompa-nieshavesubmittedplanstoshowthattheywillcontinuebeingownedandcontrolledbyEUcitizensafterBrexit.


Leaving aside military activities, all aviation issues are regu-lated by AESA. Charter services are regulated in accordancewiththeChicagoConventionandEURegulations,andpresentno special characteristics in respectof those. Weshouldpointout, though, that AESA considers that all airlines which are inter-ested in carrying out a “series of commercial air operations”withinSpanishairspacemustsubmittheirprogrammesforreview(Communitycarriersonlyinrespectoftheirextra-EUflights).Inthis respect,AESAconsiders that charter flightswhichconsti-tuteanevidentsystematicseriesalsofallunderthecategoryofa“seriesofcommercialairoperations”,andthereforethatnon-EUcarriers should obtain the relevant licences before starting thistypeofoperation.Wherecharteroperationsareonlyofan“occa-sional”nature,AESAhascreatedaspecificprocedure.


Like in the rest of the EU Member States, the provisions ofRegulation(EC)1008/2008oncommonrulesfortheoperationofairservices(alongwithallrelatedrulesandregulations)applyinSpain.AlthoughtheprovisionsofthisRegulationaredirectlyapplicable,somefollow-upanddetailedprovisionswereapprovedinSpainthroughtheMinisterialOrderof12March1998.Thus,totheextentthatinterestedpartiescomplywiththerequirementsof Regulation 1008/2008 (as amended), access to the Spanishmarket–andtherebytotheEUmarket–willbegranted.Intra-EUroutesare,ingeneralterms,automaticallyauthorised

pursuanttoRegulation1008/2008,sothatnospecificcommer-cial licencesmustbeobtained. Asanexception,certainrouteswhichareclassifiedasbeingofpublic interest,aswellasoper-ationsbetweentheCanaryIslandsandGibraltar,aresubject tocertainrestrictions.Tooperateextra-EUroutescommercially,Communitycarriers

mustaskAESAtoissuetherelevantairtrafficlicence.Normallythis will require the existence of an air transport agreementbetweenSpainortheEUandthecountryinquestion.Mostofthese agreements demand that the airlines chosen to operate air serviceshavebeenformallydesignatedbytheSpanishaeronau-tical authority. Airlines from third countrieswill also need tobedesignatedby their respective aviationauthority and,beforeperforminganyscheduled flights,becomeaccreditedbyAESAin accordancewith the requirements set forth inRoyalDecree1392/2007.Non-scheduledcommercialoperationsaresubjecttodifferent

rulesundertheChicagoConvention1944.Generallyspeaking,the Spanish authorities allow such operations to be carried outbyair carriersbelonging to signatory statesof theChicagoConventionifthestateconcernedappliesreciprocaltreatmenttoSpanishaircarriers.AESA has published the various procedures and forms of

documents (in Spanish and English) on its website under https://www.seguridadaerea.gob.es/lang_castellano/cias_empresas/companias_aereas/permisos/default.aspx.

273Augusta Abogados


accordancewiththeprovisionsofRegulation(EC)593/2008,of17June2008,ontheLawApplicabletoContractualObligations(theRomeIRegulation),Spanishlawfollowstheprincipleoflex rei sitae(i.e.,placeoflocationofanasset)todeterminewhichlawisapplicabletosecuritiesandguaranteescreatedoverassets,suchasmortgages and pledges. Thus,where the security relates toassetsorrightslocatedinSpainatthetimeofcreatingtheassign-ment,Spanishmateriallegalprovisionsonpledgesoverassetsormortgageswouldbecomeapplicable.Article10.2oftheSpanishCivilCodestatesthatmortgagesoveraircraftaregovernedbythelawofthecountryoftheirregistration.Thus,anon-Spanishlawmortgagecreatedoveranaircraftwhilesuchaircraftisregisteredin theRMAwould not be considered a validmortgage by theSpanishcourts.GiventheformalitiesandcostsinvolvedinsettingupaSpanish

lawaircraftmortgage,thesearecreatedonlyoccasionally.Suchmortgageshavetobesetupinapublicdeedexecutedbeforeanotary public, which has to include certain essential informa-tion (parties, detaileddescriptionof the charged assets, titleofthe mortgagor, secured amount, valuation of the assets, etc.).ThisdocumentmustbeexecutedinSpanish,althoughthereisnoobstacletoattachinganEnglishtranslation.Themortgagemustbe recordedat theRBM. Mortgagesaresubject tostampdutytax,ataratethatvariesbetween1%and1.5%onthevalueofthechargedasset.Further,thefeesofthenotarypublicandoftheRBMshouldalsobetakenintoaccount,sincetheyalsodependonthevalueofthechargedasset.Finally,wherethereisaninter-nationalelementtothetransaction,oftentranslationcostsaretobepaid.


Otherthanthosearisingfromtheprohibitionofself-helpinSpain(seequestion3.2below),therearenospecificregulatoryrequire-ments.Inmostsituations,aircraftarereturnedtotheirownersorlessorsbyexecutingaterminationagreement,apossibilitythatisexpresslycontemplatedundertheAircraftMatriculationRegistryRegulations.Itshouldbeborneinmind,though,thatgiventhedual-registry situation in Spain, the entire process may be more time-consumingthaninotherjurisdictions.


Spanishlawrecognisestheconceptof“accession”(derivedfromRomanlaw),anditisparticularlyrelevantwhenanengineownedbyoneparty is affixed toanairframeownedbyanotherparty.Wearenotawareofanyexistingcaselawthatwouldresolvethisissue,butitiscommonpracticeforthepartiestoenterintorightsrecognitionagreementsinthesesituations.Also,sincetheentryintoforceoftheCapeTownConvention2001in2016,rightsoveraircraftenginescannowberecordedas“internationalinterests”attheInternationalRegistryofMobileAssets,whichprovidesforenhancedprotection.



InSpainthereisadualregistrationsystem.Itsmainfeaturescanbesummarisedasfollows.■ Aircraft Matriculation Registry First,thereisanaircraftregistry,theAircraftMatriculation

Registry(Registro de Matrícula de Aeronaves,“RMA”),whosewebsitecanbefoundathttps://www.segurida-daerea.gob.es/lang_castellano/aeronaves/matric_clasif_regis/default.aspx.TheRMAfallsunderthejurisdictionoftheSpanishStateAgencyforAirSafety(AESA–www.seguridadaerea.es),abodyoftheMinistryofDevelopment.TheRMAisanadministrativeregistryofaircraft,butnotaregistryoftitleorownershipofaircraft. It isoperator-based. Themaineffectof registration is that an aircraft isprovidedwith aSpanish registration number (beginning with the letters EC, followedbyahyphenandacombinationofthreeletters,e.g.EC-XXX)andthusbecomesaSpanishaircraft.

■ Central Movable Assets Registry Second, there is the Central Movable Assets Registry

(Registro de Bienes Muebles, “RBM”), under the jurisdictionof the Directorate General of Registries and Notaries, abodyoftheMinistryofJustice.TheRBMisaregisteroftitle, ownership and encumbrances over movable assets,including aircraft. Themain effectof registration is thatevidenceisprovidedinrespectofthestatusofownershipandliensoverassets.

Historically, the 1960 Air Navigation Act established thatonlySpanish individualsorcompanieswereallowed to registertheirownershiptitleoveraircraft. UponSpain’sentry intotheEuropeanEconomicCommunity(“EEC”)in1986,thisprovisionbegantobeinterpretedsoastoincludeEUcitizens.However,this has not yet been expressly stated in any legal provisionrelatingtotheRBM.Article185ofthe1956CommercialRegistryRegulations(whichisstillinforcepursuanttothe13th Additional Provision of Royal Decree No. 1784/1996) merely states thatforeignlegalentitiesmayrecordtheirownershiptitleoveraircraftattheCommercialRegistry,subjecttointernationaltreaties,theprincipleofreciprocityandlegalprovisions.Forthesepurposes,theCommercialRegistryhassincebeenreplacedbytheRBM.Sofar,noexpress legalprovision, reciprocityplanor internationaltreaty has been enacted or published whereby foreign ownerswouldbe allowed to register theirownership title in aircraft attheRBM.Nevertheless,RoyalDecree384/2015,whichcontainstheRMARegulations, is being interpreted inpractice so as toallow(andactuallyoblige)non-Spanishaircraftowners(includingnon-EUcitizens) to register their ownership title in all aircraftthataretobearSpanishregistrationmarks.Whilethisseemstobe commonly accepted practice, some legal authors question this interpretationof the law and consider that such recordationofaircrafttransactionsattheRBMisnotmandatory.


As indicated above, the RBM is a registry of title and, hence,mortgagesandchargesoveraircraftaretoberecordedthere.In

274 Spain




The main liens and detention rights to be considered are thefollowing:■ Maintenanceprovidershavearightofretentionoverthose

pieces of equipment which are in their possession untilpayment infull for theworksundertaken. Thenatureofthis right is sometimes disputed, but certain regional codes clearly state that it is a right in rem.

■ Expenseswhich arenecessary for the rescue andmainte-nanceofanaircrafthavepriorityoveraregisteredmortgageovertheaircraftundercertaincircumstances.

■ Salary debts towards employees have priority over debtsowed to creditors secured by registered mortgages and pledges.

■ UndertheAirNavigationAct1960,thepreferentialcreditsonanaircraftwouldbe:(i)taxcreditsowedtostates;(ii)lastmonth’swagesowedtothecrew;(iii)creditsofinsurersforthelasttwoyears;(iv)paymentsowedascompensationfordamages;and(v)rescuecosts.

■ In insolvencysituations,holdersofprivilegedcreditsoveranaircrafthaveaseparationrightoftheaircraftfromthe“assetsoftheinsolvency’sestate”(masa activa del concurso)oftherelevantdebtor.

■ Although not expressly contemplated in legal provisions,inpracticeAENAexercisesade facto detention right when airport charges and similar items have not been paid infull. Underapplicable law,AENAisentitledtorequestaseizureof assets to collectpayments arising from“publicservices” (e.g. use of airport runways, aviation meteoro-logical services,etc.) if suchpaymentshavebeenresolvedupon within a “forced recovery procedure” (procedimiento de apremio)initiatedbyAENA.Ifthedebtordoesnotpaywhenrequestedtodoso, itsassetswillbeseizedthroughthe Spanish tax authorities. Spanish law establishes anorderofprecedencetoseizeassets(i.e.,firstlycashandbankaccounts, then marketable securities and instruments, etc).


As a general rule, self-help is not allowed under Spanish lawand is, in fact, considered tobe against Spanishpublic order.Therefore, iftheSpanishoperatorrefusestocooperateduringthetermination/de-registration/repossessionprocess,a lessor/ownerwouldhavetoseekCourtassistancetoenforceitsrights.Thespecificproceduretobefollowedwilldependonthetypeof remedy which the lessor is seeking. Only where self-helpis expresslypermittedbySpanish lawor international treatiescan such remedies be used. When ratifying the Cape TownConvention,Spainexpresslydeclaredthatallremediescontem-plated under the Convention would require leave of Court,with the exception of IrrevocableDe-registration andExportRequestAuthorisations(“IDERAs”).


Although the taxaspectsofaircraft trading transactionsmustbe analysed on a case-by-case basis, in general terms lease payments,loanrepaymentsandtransfersofaircraftareusuallytax-exemptwhentheyrelatetoaircraftthatarechieflyoperatedfor international commercial flights. However, despite beingtax-exempt, the parties are still obliged to submit certain taxfilingswiththeSpanishtaxauthoritiesbeforesuchtransactionscanberecorded. Furthermore,particularattentionshouldbepaidwhenanaircraftistransferredwhilebeinginSpanishterri-tory,becausevalue-addedtaxatarateof21%couldbetriggeredundercertaincircumstances.


TheKingdomofSpainisastatepartytothefollowingairlawtreaties(allofthemineffect),amongothers:■ WarsawConvention1929(assubsequentlyamendedbythe

MontrealandHagueProtocols).■ RomeConvention1933.■ ChicagoConvention1944.■ RomeConvention1952.■ TheHagueConvention1970.■ MontrealConvention1971.■ MontrealConvention1999.■ CapeTownConvention2001.


InaccordancewithArticle94oftheSpanishConstitution,oncean international treaty has been approved by the Parliament,ratifiedbytheKingandpublishedintheStateOfficialGazette,itenjoysahigherhierarchicalstatus thandomestic legislation;consequently,itsprovisionsprevailoveranyconflictinginternalrulesorprovisions.Spanishjudgesregularlyapplyinternationaltreatieswhenthoseareapplicable.


Spain is bound by EU legal provisions concerning taxationrelatingtothetradingandleasingofaircraftand,consequently,there arenoparticular taxbenefits foreseen for this industry.However,SpainhasenteredintoDoubleTaxTreatieswithsome89countries,whichfacilitatesinternationaltrade,includingtheleasing,acquisitionanddisposalofaircraft.

275Augusta Abogados




There is no specific policy in Spain concerning airline accessor competition, since all these matters are to be handled in line withEUpoliciesandrules(essentiallyArticle101TFEU).TheCNMC uses the same criteria as the European competitiondefenceauthorities.However,sincemosttransactionsintheavia-tionindustryhaveanEUdimension,theyarenormallyassessedbytheEuropeanCommissionratherthantheSpanishauthorities.


No domestic sector-specific competition rules have beenpublished, but given Spain’s membership of the EU, Spanishcompetitionauthoritiesareboundbyand follow the legislationandguidelineswhichemanatefromtheEUandparticularlyfromthe European Court of Justice (city pairs, airport substitution,premiumvs.non-premiumpassengers,etc.).Theseareabundantasfarastheaviationindustryisconcernedandfocusmostlyonstatesubsidies,concentrationsofundertakingsandfosteringfreecompetition.Themainbodyinchargeofsupervisingcompetitionrulesin

SpainistheNationalCommissionforMarketsandCompetition(Comisión Nacional de Mercados y Competencia, “CNMC”), whichhas jurisdictionoveralleconomicareas. However, theCNMCis organised internally into various directorates, one of whichisspecifically inchargeof transportationmatters. TheCNMCfollows, in general terms, the definitions,methods and criteriaestablished by the European competition authorities, including theEuropeanCourtofJustice,todefinetherelevantmarket.Itisdifficulttoprovideageneralruleinthisregard,becausethe

criteriadependonthetypeoftransactionunderanalysis.Whenitcomestothereviewofpotentialstatesubsidiesoractionsagainstfreecompetition,thecriteriaarefixedandassessedonacase-by-casebasis,takingintoaccount,ofcourse,existingprecedentsandguidelines.When it comes to concentrations of undertakings, such as

mergers between enterprises and company acquisitions, Spanish domesticcompetitionlegislationprovidesmoredetailedthresh-olds(seequestion4.4).


After the entry into force of European Regulation 1/2003,the notification system was abolished for agreements witha Community dimension. However, the 2007 CompetitionDefenceActcontemplatedasystemofcompulsorypriornotifi-cation of concentrations of undertakings, which includes jointventureagreements.


Economicconcentrationsaregovernedbythe2007CompetitionDefenceActwhen they fall outside the thresholdsof theEU


TheSpanishjudiciaryisbasicallyorganisedintothreebranches:civil; criminal; and contentious-administrative. Broadlyspeaking, and since criminal cases are unusual in the avia-tion industry, most aviation disputes are handled in the civilcourts (when they arisebetweenprivate individuals)or in thecontentious-administrativecourts (whenpublic authorities areinvolved). Thecommercialcourtshavetheauthoritytomakedecisions where the dispute relates to transportation issues (such aspassengerclaimsfordelayedorcancelledflights).


Service requirements in international disputes are governedby either Regulation (EC) 1393/2007 or the 1965 HagueConventionontheserviceofdocumentsabroad.Whenneitherof these instruments is applicable, and in the absence of aspecificbilateraltreaty,thedomesticprovisionsareembodiedintheInternationalLegalCooperationAct2015,whichessentiallyfollowstheprinciplesoftheEuropeanRegulation.Thus,ratherthan making a distinction between domestic and non-domestic parties, itshouldbeanalysedwhether theparties involvedareboundbytheaforementionedinternationalinstruments.


Remediesavailable tothepartiesdependonthenatureof thedispute, andarenumerous. Ingeneral terms, aparty seekinginterimreliefwillhavetoshowaprima facierightforitsrequest( fumus bonum iuris)andariskthat,ifthereliefisnotgranted,itmaybepreventedfromachievinganeffectiveresult ( periculum in mora).Partiesmayaskthecourtsfortheseizureofassetsoftheotherparty(suchasbankaccounts,movableassetsincludingaircraft,realestate,etc.),foranordertobeputinpossessionofcertainassets,injunctionstopreventtheotherpartyfromtakingcertainactions,ororderingcertainactionstobetaken,etc.


A distinction should be made between Court decisions and arbi-tralawards:■ Ingeneral terms, rulingsof theCourtsofFirst Instance

can usually be appealed to the Provincial Audience.Undercertaincircumstances,judgmentsoftheProvincialAudiencescanthenbeelevatedtotheRegionalSuperiorCourtofJusticeortheSpanishSupremeCourt.

■ Ontheotherhand,arbitralawardsaregenerallynotsubjecttoappeal,unlessoneofthefewexceptionalcircumstancesset forth in the 2003 Arbitration Act concurs (such aslackofexistenceofanarbitrationclause,breachofpublicorder,etc.).Insuchcase,theawardwouldbevoided.

276 Spain


thelargenumberofpotential“producers”ofsuchaid(includingregional governments,municipalities, public enterprises, etc.),ex antecontrolisnotforeseen.However,interestedpartieshavethepossibilityofliaisingwiththeCNMCtogatheritsopinionbeforeadoptinganystepsinthisregard.


Like in all other EU countries, the General Data ProtectionRegulation2016/679(“GDPR”)isdirectlyapplicableinSpain.In December 2018, the Spanish Parliament approved theOrganic Act on Protection of Personal Data 3/2018, whichdevelopsandclarifiessomeaspectsoftheGDPR.


TherearenospecificobligationsunderSpanishaviationlegis-lation relating to data losses by air carriers. These types ofincidentarecoveredbytheGDPRandbytheOrganicActonProtectionofPersonalData. Pursuant to the rules setout inthese pieces of legislation, all data controllers are obliged tonotifythedataprotectionauthoritiesandallinterestedpartiesofdata loss incidents, and must demonstrate that all adequate secu-rityandprotectionmeasureshadbeentaken.Failuretocomplywithdataprotectionlawsentailstheimpositionoffineswhich,undertheGDPR,canamountto4%ofthecarrier’sworldwideturnover.


The 1996 Intellectual PropertyAct and the 2015 PatentsActincorporatetheprinciplesofIPprotectionembodied in inter-nationaltreaties.


AspartoftheEU,SpainappliestheentiresetofEuropeanlegis-lation, directives and guidelines relating to the protection ofpassengers,alongwiththeprovisionscontainedininternationaltreatiessuchasthe1999MontrealConventionwhereapplicable.TheprovisionsofRegulation261/2004,establishingcommonrulesoncompensationandassistancetopassengersintheeventofdeniedboardingandofcancellationorlongdelayofflights,arefullyapplicableinSpain,andAESAandtheSpanishcourtsregularlyenforcethisbodyoflaw.


TheSpanishAviationSafetyAgency(Agencia Estatal de Seguridad Aérea,“AESA”)hasbeendesignatedasthenationalenforcementbodypursuanttoRegulation261/2004.Inthatcapacity,AESAhas the power tomake enquiries relating to the protection ofpassengers in all the situations coveredby the saidRegulation,

Merger Control Regulation 139/2004. Mergers are definedbroadly and include the actualmerger of two ormore previ-ously independent companies, the acquisition of control overan undertaking by another, the creation of a joint ventureor the acquisitionof joint control over an undertaking. As a general rule, concentrations of undertakingsmust be notifiedto theCNMC, in order to obtain approvalwhen, as a conse-quenceofthetransaction,ashareof30%ormoreisacquiredinthe“relevantmarket”.Suchmarketcanbeeithertheentireterritory of Spain or a smaller, geographically definedmarket(e.g. a certain region). Thecommunication is alsomandatorywhen the turnover of the participants in Spain exceeds €240millionandatleastoneofthemhasaturnoverofmorethan€60million.However,nonotificationisneedediftheturnoveroftheacquiredcompanyislessthan€10million,unlessamarketshareof50%ormoreisachieved(de minimisexception).


Inmergertransactions,theCNMChasaperiodofonemonthfromreceiptofthenoticetodecidewhetherornotitwishestopursuetheinvestigationsanyfurther(“firstphase”).Ifnodeci-sion is made within this time period, the transaction is deemed tobeapproved.IftheCNMCdecidestodeepentheanalysis,itopens the so-called “second phase” and then has an additional periodoftwomonthstoissueadecision.Thistimingisoftenextendedtotakeintoaccountdelaysarisingfromthereceiptofanyinformationrequestedadditionally.AfinaldecisionisthentakenbytheCouncilofMinisterswithinonemoremonth.


Since its entry into theEEC in 1986, Spainhas attempted tocomply with European legislation on state aid and implemented policiestomakeexistingaidcompliantwiththerules.PresentlySpaincomplieswithEUlegislationasregardsexemptionsandexonerations,suchastheEU’s2014GuidelinesonStateAidtoAirportsandAirlines.Asindicatedabove,nodomesticsector-specificstateaidrules

have been published, but EU legislation is fully applicable inSpain.ThemostrecentpieceoflegislationisRegulation(EU)2019/712,whichisaimedatlevellingtheplayingfieldbetweenEUcarriersandnon-EUcarriersincertainareassuchassubsi-diesandtheprovisionofairservicesintonon-EUcountries.


InaccordancewithArticle16ofRegulation1008/2008,publicservice obligations apply in Spain. Those obligations relatemostlytocertainislandswhichformpartoftheSpanishterri-tory, such as theBalearics and theCanaries, aswell as to theSpanishcitiesinNorthAfrica(CeutaandMelilla).TheSpanishGovernment regularly publishes updates about such routes,includingpricing.Infact,theCNMCactsonlyex post where state aid is concerned,

eitherbylaunchinginvestigationsintospecificpersonsorindus-triesorbypublishingstudiesoncertaintypesofaid.Giventhelargevarietyofpotentialaidthatmaybedeemedunlawfuland

277Augusta Abogados


(alongwithallrelatedrulesandregulations)applyinSpain.Giventhe direct applicability of Regulation 1008/2008 in Spain, therequirementsareidenticaltothoseofotherEUMemberStates.Financialfitness isregulatedunderArticle5oftheRegulation,andbasicallyrequiresthatapplicantsprovideevidencethattheycanmeet their financial obligations for a periodof 24monthsfromthestartofoperationsandtheirfixedandoperationalcostsforaperiodofthreemonthsfromthestartofoperations,withouttakingintoaccountanyincome.Lowerthresholdsapplytooper-atorswithaircraftoflessthan10tonnesMTOWorlessthan20seats. AESA closely analyses andmonitors the business planssubmitted by interested parties to ensure that they are realistic and inlinewiththeEURegulation.AESAhasparticularregardtopastexperienceswherefinancialtroubleshaveledtothedemiseofanumberofSpanishairlines.Shortly afterSpain’s entry into theEuropeanCommunity in

1986,nationality,ownershipandcontrolrequirementswereinter-pretedasreferringtoEuropeancitizensratherthanonlySpanishnationals,despitedomesticlegislationtothecontrary.ThistopicisnowadayscoveredbytheprovisionsofRegulation1008/2008,whoseArticle4statesthat,asageneralrule,onlyMemberStatesand/ornationalsofMemberStatesthatownmorethan50%ofthe airline and effectively control it, whether directly or indi-rectly,canobtainaCommunitycarrierlicence,andthenonlyiftheairline’sprincipalplaceofbusiness is established inside theEU.Theseprovisionshavebecomethesubjectofintensescru-tinywithinthecontextoftheUnitedKingdom’sannouncedexitfromtheEU.InJune2016,AESApublishedcertaininterpreta-tivecriteriarelatingtotheterm“ownershipandcontrol”whichmust, however, be read in connection with the InterpretativeGuidelinespublishedbytheEuropeanCommissioninJune2017andtheNoticetoStakeholdersofJanuary2019.

5 In Future


Currently,themainuncertaintiesarisefromthesituationcreatedbytheUnitedKingdom’sdecisiontoleavetheEUandthediffi-cultiesinreachinganagreementinthisrespect.Certainairlineshave applied for operating licences in other EU countries,including Spain. Furthermore, two of Spain’smost importantairlines (Iberia andVueling) have been given a time period toadjusttheirownershipandcontrolstructureinordertocomplywiththerequirementsofRegulation1008/2008.Inaddition,carriersoperatinginSpainaredevotingagreatdeal

ofattentiontothechallengesarisingfromtheincreasingnumberofpassengerclaimsunderRegulation261/2004and the imple-mentationoftheGDPR.

aswellastogiveopinionsandimposepenaltiesuponairlinesforfailuretocomplywiththeRegulation.AESAhasalsobeendesig-natedasanarbitrationtribunaltosolveclaimsfiledbypassengersunderRegulation261/2004,whoserulingswillbebindingupontheairlines.Thisauthorityhasnotcomeintoforceyet,althoughitisexpectedthatthiswilltakeplacetowardstheendof2019orinthefirstmonthsof2020.


The basic text governing airport authorities is the 1960 AirNavigationAct.AfterthemanagementofmostSpanishairportswasprivatisedtoAENA,anewsystemofeconomicregulationwas set up, and has proved to be controversial. Nevertheless,airport managers must ensure that public airports are open to all interestedpartiesonequalterms(subjecttoslotavailabilityandoperational requirements), and must also ensure that the general legislation relating to health, safety, disability discrimination,employment,etc.iscompliedwith.


Spanish consumer protection laws, embodied mainly in RoyalLegislative Decree 1/2007 on the Protection of ConsumersandUsers, apply toall transactionswhichareconsidered tobe“consumer transactions”. Thus, to the extent that an airportoperatorengagesinthesekindsoftransaction,itwillbecaughtbythislegislation.


ThemainGDSoperatinginSpainisAmadeus,withashareofabout90%.Travelport/GalileoandSabrehavealsomadesomeattemptstoenterthemarket.


TherearenospecificownershiprequirementsforGDSs.


Thereisnoexpressprohibition,althoughthegeneralcompetitionrules would come into play, notably those relating to the potential abuseofadominantposition.


AsintheotherEUMemberStates,theprovisionsofRegulation(EC)1008/2008oncommonrulesfortheoperationofairservices

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Spain

Sergi Giménez is a partner at Augusta Abogados, a mid-sized, full-service Spanish law firm known for its expertise in aviation law, among other practice areas. Sergi boasts a career of more than 30 years in the field of international business law. His professional career has always been closely linked to international law, due to his recurring work with multinational companies with business dealings in Spain and vice versa. In particular, Sergi has spent almost 20 years advising both national and international companies linked to the aviation industry, working on transactions of all kinds. In addition to airlines, his clients include the owners of aircraft and engines, lessors and financial companies. He also has lengthy experience in the tourism industry, providing advice to tour operators, hotel companies, cruise operators and companies of all types in the leisure sector.

Augusta AbogadosVía Augusta 252–260, 4a

08017 BarcelonaSpain

Tel: +34 93 362 1620Email: [email protected]: www.augustaabogados.com

Augusta Abogados is a professional firm created in 2008, with partners that boast ample experience and a solid reputation in their respective areas. We are known for taking a proactive attitude towards the constant changes which affect the profession (those which affect the market, consumers, business practice and models and, above all, legislation). Our work is agile and effective, and achieves the legal solutions necessary in a world of global, digitised, hyper-dynamic business in constant evolution.Our scope of practice consists of all the matters pertaining to business: corporate; mergers and acquisitions; contracts; IP; IT; real estate; tax; employment; litigation; arbitration; insolvency; as well as aviation. Our clients range from large corporations, listed companies, venture capital companies, small and medium-sized companies, family offices, start-ups, top managers and creators of not-for-profit entities.Augusta Abogados has an in-depth knowledge and extensive experience of all aspects of the aviation industry, aircraft and engine leasing and

financing, including operating leases, export credit financings, commercial debt financings and tax-based transactions. We also provide advice on passenger and cargo liability claims and aviation insurance, as well as all other matters affecting aviation clients.As a result of our efforts in this area, our partners Sergi Giménez and Jaime Fernández are recognised to be among the leading lawyers in Spain by prestigious directories such as The Legal 500, Chambers, Best Lawyers, Who’s Who Legal and Airfinance Journal.

www.augustaabogados.com


Aviation Law 2020

Chapter 37 279

Sweden

IUNO Aage Krogh

Sweden



As a member of the EU, air transport safety in Sweden is governed by the implementation of the general provisions of EC Regulation No 2018/1139 on common rules in the field of civil aviation. The Swedish Aviation Act and the Swedish Aviation Ordinance constitute the main Swedish national legislation. Furthermore, the Swedish Transport Agency also issues regulations (TSFS) on the matter.


The Swedish Transport Agency provides detailed safety regulations which apply to non-commercial and non-public transport operations. Holders of relevant documentation (e.g. pilot’s licence, aircraft registration, certificate of airworthiness, etc.) are normally not obliged to retain additional permits to carry out such operations. Certain non-commercial aerial operations do require specific permits, such as for flight training or surveillance purposes, the latter of which should be referred to as aerial work.

For helicopter operations, aerial work has previously been highly regulated in Sweden in a European context. This changed with the introduction of common EU regulations, with the introduction of Part-SPO, which is a part of EU Regulation No 965/2012; these are not only applicable to helicopters.

As for private flights, the regulations also contain Part-NCC and Part-NCO, which will regulate non-commercial flights.

As for commercial flights, including cargo, Part-CAT is appli-cable. The standards for commercial operations are higher than those for private operations.


Charter operators need a specific operating permit. The Swedish Transport Agency has also issued regulation TSFS 2017:70, which is applicable to charter flights.

1 General


The Swedish Transport Agency has authority in areas of transport by air, sea, rail and road. The Civil Aviation and Maritime Department is the part of the Swedish Transport Agency that monitors and regulates civil aviation in Sweden. Within the scope of its assignment, the authority issues regulations pertaining to aviation, examines and issues permits relating to aviation, administers aircraft registrations and supervises aviation rules. The authority also assesses civil aviation, focusing primarily on safety and security.

The Swedish Aviation Act and the Swedish Aviation Ordinance are important pieces of legislation for granting the Swedish Transport Agency authority in civil aviation.

As Sweden is a member of the European Union (EU), the Swedish Transport Agency only has authority to certify aircraft and aircraft materials pertaining to the aircraft listed in Annex I to EC Regulation No 2018/1139 on common rules in the field of civil aviation. The European Aviation Safety Agency (EASA) is otherwise the regulating body whose authority has been established in the EC Regulation, including amendments. The European Aviation Safety Agency also conducts oversight of the Swedish Transport Agency in several aspects pertaining to civil aviation.


The conditions of obtaining an operating licence are stipulated in EC Regulation No 1008/2008, as amended by EU Regulation No 2018/1139, specifically Article 4.

There are two types of operating licence:■ Category A – pertaining to aircraft with a maximum

certificated take-off mass of 10 MTON or more and/or fewer than 20 or more seats.

■ Category B – pertaining to aircraft with a maximumcertificated take-off mass of less than 10 MTON and/or fewer than 20 seats.

The Swedish Transport Agency issues form BSL141242,stipulating all documents needed for the application of an operating licence. Less documentation is needed for a category BlicencecomparedtoacategoryAlicence.

280 Sweden




A registration of ownership can lead to the presumption that the registered owner is the owner of the aircraft but, in some cases, it does not constitute proof of ownership by itself. Ownership will be determined case-by-case and will depend on the specific details regarding the aircraft.

See also question 2.2 below.


The Swedish Transport Agency administers a register over acquisitions, leasing rights and mortgages in which the owners of aircraft may choose to register relevant information about their aircraft, provided that the aircraft is registered in the Swedish Civil Aircraft Register, resulting in a perfected interest which is thereby better protected against other, unregistered corresponding interests of third parties.

International interests are registered in the International Registry of Mobile Assets as according to the Cape Town Convention. The registry is recognised by all ratifying States and priority is determined on a first-to-file basis. Registration of interest serves as a notification and is considered best practice for owners, creditors, debtors, lessors, lessees, agents and others in protecting their financial interest.


An aircraft may be registered in the Swedish Civil Aircraft Register if the owner of the aircraft is an EU or EEA national or entity. Further, aircraft owned by foreigners from outside the EU or EEA, and where the aircraft is operated within or from Sweden, may apply for registration in the Swedish Civil Aircraft Register. The register is administered by the Swedish Transport Agency.


As a main rule, a single engine mounted on an aircraft is part of the aircraft. Since 1 April 2016, the Cape Town Convention has been in force in Sweden through Law 2015:860, making it possible to register rights to aircraft engines.


EC Regulation No 1008/2008 on common rules for the operation of air services in the Community regulates access to the Swedish market. The regulation stipulates that any operator who has been granted an operating licence, which has been issued in any EU or EEA Member State, is granted access to most routes in Sweden and the rest of the EEA. In order to gain access to the market, regarding routes between Sweden and States outside of the EEA, the operator must apply for the Swedish Transport Agency’s permission. The same applies for operators holding operating licences issued in a State outside the EEA.


The Swedish Government indirectly owns 10 major Swedish airports through the corporate group Swedavia. There are several smaller airports which are owned by local/regional municipalities, by local private enterprises or as joint ventures by both public and private interests and investors.


Access to airports in Sweden is primarily governed by the licence that the Swedish Transport Agency has issued for the relevant airport. Other operational limits could apply and there might have to be an allocation of slots. EC Regulation No 1008/2008 stipulates that EU air carriers generally have access to all routes within the Community.


The investigation of most air accidents is conducted by the Swedish Accident Investigation Authority. The result of the investigation is often used by the police and public prosecutor. EU Regulation No 996/2010 stipulates that all involved persons who have knowledge of an accident or serious incident in Sweden must, without undue delay, report the occurrence to the Swedish Transport Agency.


In recent years there has been a large increase in the number of court cases for claims for compensation for flight delays, flight cancellations and denied boarding. These cases are regulated by EC Order No 261/2004. The increase is seemingly caused by a rise in the number of claims agencies in Sweden.

281IUNO


the take-off of the aircraft. Further, aircraft located in Sweden may be detained within the scope of the enforcement procedure for unpaid debts. Such detention requires a court order and the applicant may be ordered to post a bond covering any damages the detention may cause if the application is successfully disputed.

Aircraft may, under certain circumstances, be detained in accordance with Swedish civil law, for instance in the event of unpaid maintenance services.


No; in order to reacquire possessions of the aircraft or enforce any of its rights under the lease/finance agreement, the Swedish laws on enforcement and debt in recovery apply. The Swedish Enforcement Authority is the competent authority.


Any negative decision by the Swedish Transport Agency in respect of traffic licences may be further enforced.

Decisions by The Swedish Transport Agency regarding licences, authorisations or other decisions which are negative to an applicant may be appealed by the applicant to the Swedish administrative court.

Civil and penal cases normally have jurisdiction in the local district court as the court of first instance. It is the same court that handles both civil and penal cases.


Normally, a Swedish court would informally use the same procedure for service abroad as within Sweden and send out court documentation with a request for the receiving party to sign and return an evidence of service. If this does not work, EC Regulation No 1393/2007 can be applied on the service in Member States of judicial and extrajudicial documents in civil or commercial matters.


The two standard remedies that can be used are the following:■ Aphysicalorjudicialpersonmustperformasestablished;

e.g., make a payment. ■ Aphysical or judicial person has something established;

e.g., it has been established that the person has entered into a specific agreement or has had something delivered.

It is possible to apply for interim sequestration whilst awaiting a final verdict. The applicant needs to produce a bond covering the possible damage caused to the other party by the sequestration.


According to the Swedish Value Added Tax Law, the sale of an aircraft which is intended to be used by an air carrier that mainly engages in international air traffic is exempt from VAT. Parts and equipment, plus services related to the parts and equipment, for such aircraft are also exempt from VAT.


Sweden is signatory to, among others, the following Conventions:■ The1999InternationalConventionofMontreal, ratified

on 29 April 2004. ■ The1929WarsawConvention,ratifiedon3July1937.■ TheHague Protocol for the amendment of theWarsaw

Convention 1955, ratified on 3 May 1963. ■ The 1944ChicagoConvention, ratified on 7November

1946. ■ The1948GenevaConvention, ratifiedon16November

1955. ■ TheCapeTownConvention,ratifiedon1April2016.


The Conventions can either be ratified and then implemented into Swedish law or there can be a specific law that directly incorporates a Convention into Swedish law. A Convention is not applicable in Sweden just by its mere ratification.


Swedish Double Tax Treaties are based on the OECD Model Tax Convention. The Convention stipulates that profits from the operation of aircraft in international traffic, i.e. leasing and trading, are taxable only in the contracting state in which the place of effective management of the enterprise is situated.

Some Swedish Double Tax Treaties may have a provision stating that the above-mentioned rule only applies to the Swedish shares of the Nordic airline SAS.



The operator of an airport has a right of detention of an aircraft if the fees for the aircraft’s most recent landing are unpaid. The right of detention allows the operator of the airport to hinder

282 Sweden


indirect and indirect/indirect routes that overlap should be taken into consideration when assessing the competition. Hub-to-hub routes get a higher level of scrutiny.

Several factors are considered; inter alia, restriction of market power, market entry conditions and regulations. The dominance of two or more operators and the possible positive effect of increased efficiency following a merger are also considered.


As for mergers, the decision needs to be made by the Swedish Competition Authority within 25 days. If a party suggests an obligation, the timeframe is extended to 35 days. If the Swedish Competition Authority decides to start a special investigation, the Authority shall bring the case before the Stockholm district court within three months. That timeframe can be extended if any of the parties agree or if there are extraordinary circumstances.


There is no sector-specific competition regulation for aviation in Sweden. Instead, general competition regulations apply. The main regulation is the Swedish Competition Act, which implements EU legislation.


Effective as of March 2014, the European Commission has changed its guidelines on State aid to airports. State aid for investments and operation of an airport is allowed if it is necessary to ensure transportation to and from a region. The possibilities for State aid are better for smaller airports and airports in rural or non-densely populated areas. Aid to air carriers for new routes is allowed provided that the aid is limited in time. Air carriers starting a new route are permitted to receive State aid only if they can show prospects of being profitable within three years or make an irrevocable commitment to operate that route for a period not less than the period for which the State aid is given.


As of 25 May 2018, the EU General Data Protection Regulation (GDPR) is directly applicable under Swedish law. Passengers have numerous rights under the GDPR, namely the data subject’s: right of access; right to rectification; right to be forgotten; right to restriction of processing; right to be informed; right to data portability; right to object; and right to not be subject to a decision based solely on automated processing.

Furthermore, Sweden has transposed Directive (EU) 2016/681 on the use of passenger name record (PNR) data for the prevention, detection, investigation and prosecution of terrorist offences and serious crimes.

In arbitration, unless the parties have agreed otherwise, the arbitrators may, at the request of a party, decide that, during the proceedings, the opposing party must undertake a certain interim measure to secure the claim which is to be adjudicated by the arbitrators.


There are three national instances for courts having jurisdiction of civil and penal cases, and three national instances for administrative courts. There are also special courts, where other rules apply.

A litigant can always appeal a case, but whether the case will be tried in a higher court depends on the individual case and if a leave of appeal is required and granted.



There are several options available to the competition author-ities for remedying concerns, including, inter alia: surrender of slots to a new competitor; pricing constraints; access to a frequent-flyer programme; entering into interline agreements; entering into special prorate agreements with new competitors; entering into intermodal agreements; a frequency freeze; and sale of certain assets.


The competition authorities generally tend to follow the European Commission’s market definitions for the purpose of assessing a merger or an acquisition. The point of origin and the point of destination, in practice a specific route, could specify a relevant market.


For mergers, an application to the Swedish Competition Authority is needed if at least two of the companies individu-ally have an annual turnover in Sweden of at least 200 million SEK and the companies together have an annual turnover in Sweden of at least 1 billion SEK. There could be an obliga-tion to submit such an application even if one of the compa-nies does not have an annual turnover in Sweden of at least 200 million SEK. If competition could affect several EU countries and the companies’ turnover exceeds 5 billion EUR, or in some cases 2.5 billion EUR, an application is to be made to the EU Commission.


The main concern is to determine that a transaction would not substantially lessen competition within the relevant market. For the competition assessment, non-stop/non-stop, non-stop/

283IUNO



The principal aviation-specific passenger protection legislation is provided by the EU. The general principles of the Consumer Sales Act and the Consumer Services Act may also apply.


The main GDSs operating in Sweden are Armadeus, Galileo, Sabre and Worldspan by Travelport.


There are no specific Swedish regulation requirements pertaining to GDS ownership.


In principle, vertical integration between air operators and airports is permitted. Conditions for such integration are adherence to applicable competition laws, and that all regulations and requirements are fulfilled individually by both the airport and the air operator.


To obtain a Swedish AOC, the applicant must submit an application to the CAA. The entity must, among other things, submit documentation evidencing that the company’s principal place of business is located in Sweden. Furthermore, the company will be required to supply a variety of financial information pursuant to EC Order No 1008/2008, Articles 5 and 8.

A third-country operator (i.e. a non-EU and non-EFTA State) that intends to perform commercial air transport operations into an EU Member State or an EFTA State requires a Third Country Operator (TCO) Authorisation, issued by EASA.

5 In Future


As mentioned under question 1.10, there has been a large increase in the number of court cases relating to the application of EC Regulation 261/2004; this increase is expected to continue. Therefore, it is more important than ever that passenger airlines are familiar with the relevant regulation and know their obligations in case of a delay, cancellation or denied boarding.


In the event of a personal data breach, the GDPR requires that the data controller notifies the Swedish Data Protection Authority without undue delay and, where feasible, not later than72hoursafterhavingbecomeawareofthebreach.Beforethe Agency is notified, the data controller is obliged to carry out thorough investigations to ensure that the nature of the breach is known. If the data breach poses a high risk to those individuals whose data have been affected, they should be informed about the breach without undue delay.

If a data loss is caused by any non-compliance with the GDPR, the data controller may be subject to penalties by the Swedish Data Protection Authority and be liable for damages towards the data subjects involved.


The Swedish Patent and Registration Office is an appointed authority for the protection of patents, designs and trademarks. The Office for Harmonisation in the Internal Market registers Community Trade Marks in the European Union.


EC Order No 261/2004 regulates matters relating to compensation and assistance to passengers in the event of delays, cancellations and denied boarding.


The Swedish Consumer Agency supervises airlines’ provision of adequate information about passenger rights in accordance with EC Regulation No 261/2004.


In order to establish and operate a public airport, the permission of, and licence from, the Swedish Government or the Swedish Transport Agency is required. When deciding whether to grant a licence to an airport, an overall assessment is made which includes the public interest in the establishment, as well as considerations regarding air safety, the environment, etc. By implementation of EC Directive 2009/12 on airport

charges, the two major Swedish airports, Stockholm-Arlanda and Gothenburg-Landvetter, are economically regulated by the Swedish Government through the Swedavia group and are bound to set the airport fees in accordance with the principles set forth in ICAO Doc 9082.

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Aage Krogh is head of the transport and aviation team at IUNO. He is a specialist in aviation law and he represents some of the world’s largest and most prominent airlines. Aage is recognised in The Legal 500 as one of Denmark’s leading lawyers within transport law. He is recognised by his clients for his ability to communicate complex matters and for his thorough understanding of how aviation law works in practice. Aage is a certified member of the Danish Association of Board Attorneys, and he frequently speaks to networking groups within aviation law.

IUNO Grev Turegatan 30114 38, StockholmSweden

Tel: +45 5374 2702Email: [email protected]: se.iuno.law

IUNO is an internationally oriented law firm. With the newest technology and a non-traditional approach, we provide highly specialised advice in the most important business law areas to our clientele, consisting mainly of large and medium-sized companies in Denmark and abroad. IUNO can assist air carriers with the many requirements and restrictions that apply to aviation. In case of injuries to passengers or damage to luggage or the aircraft, we are by your side right from the initial claim and, if necessary, all the way until the Supreme Court has handed down a ruling.

se.iuno.law


Aviation Law 2020

Chapter 38 285

Switzerland

VISCHER AG

Switzerland

Dr. Thomas Weibel

Urs Haegi


expiry date of the existing operation licence, respectively), including appendices:a) certificate on the Swiss or the European character of

the company (Form 54.045 including appendices);b) leasing or management agreements for the respective

aircraft;c) aircraft list (registration marks, type of aircraft, seating

capacity);d) evidence of own flight crews;e) tenancy agreement for the office of the operation

department (Post Holder Flight Operations);f ) business plan for two operational years;g) certified balance sheet, income statement, auditor’s

report; andh) opening balance sheet and financial plan (budget).

3. File with FOCA certain corporate documents (articles of association, extract from the commercial register, certi-fied copy of the shareholders’ register, organisational chart with information on Board and management).

4. File with FOCA an extract from the debt collection and bankruptcy register (Betreibungsregisterauszug ) regarding the CEO, the CFO, and the accountable manager.

Carriers with an EU/EFTA operating licence do not need a separate Swiss operating licence in addition (see Form 49.10). Apart from the AOC and the EU/EFTA operating licence, they have to file the following documentation:1. liability insurance for passengers, baggage, and cargo;2. security programme;3. list of aircraft used on routes from and to Switzerland

(Form 49.06; if required by FOCA);4. schedule (Form 49.01);5. information on the constitution of the Board of Directors

and the composition of the share capital;6. contact information (e.g., handling agent in Switzerland);7. contact person within the airline concerning Regulation

(EC) No 261/2004 issues, i.e., compensation and assis-tance to passengers (Form 49.03; for FOCA use only);

8. tariffs for the scheduled flights (Form 49.02);9. declaration of reciprocity for services in the fifth or

seventh freedom to destinations outside the EU/EFTA issued by the competent national Civil Aviation Authority;

10. legal domicile (a declaration that the carrier has set up a legal representation or an establishment in Switzerland (Form E 102)); and

11. request for a Route Licence (Form 49.04).Non-EU/EFTA carriers (see Form 49.07) are subject to

further disclosure duties as set out in Form 49.12 (Operating Permit Questionnaire).

1 General


The Swiss Federal Office of Civil Aviation (FOCA) is the super-vision authority responsible for safety (aircraft, flight operations, and infrastructure) and for aviation policy and strategy issues.

Civil aviation is regulated by two sources: domestic law; and international treaties.Domestic lawThe main enactments are: ■ TheFederalCivilAviationAct(FCAA) The FCAA is the “basic law” concerning civil aviation in

Switzerland. Based on the FCAA, many Ordinances have been enacted by the government, i.e., the Swiss Federal Council, and the Department of the Environment, Transport, Energy and Communication (DETEC).

■ TheFederalActontheAircraftRecordsRegister See question 2.2 below.International lawThere are about 180 bilateral and multilateral treaties. The main sources are:■ TheConventiononInternationalCivilAviation(Chicago

Convention).■ TheAgreement between theEuropeanCommunity and

the Swiss Confederation on Air Transport (“EU-CH Agreement”), which entered into force on 1 June 2002.

Based on the EU-CH Agreement, Switzerland has adopted the relevant civil aviation regulation in the European Union.

Federal legislative texts are freely available in German, French, and Italian onwww.admin.ch (Federal law/Classifiedcompilation).


For an operating licence for a commercial operator to trans-port passengers and/or cargo with an aircraft, air carriers are required to:1. Hold an Air Operator’s Certificate (AOC) from the

competent national Civil Aviation Authority (Regulation (EC) No 1008/2008).

2. File with FOCA the Application Form for an Operating Licence (Form 49.05; at least 30 days prior to the intended launch date of commercial operation and before the

286 Switzerland



TheSwissTransportationSafetyInvestigationBoard(STSB)isthe state authority of the Swiss Confederation having a mandate to investigate accidents and dangerous incidents involving, inter alia, aircraft.

The principal legislation relating to the investigation of air accidents includes:■ Art.26andAnnex13oftheChicagoConvention;■ Regulation(EU)No996/2010oftheEuropeanParliament

and of the Council of 20 October 2010 on the investiga-tion and prevention of accidents and incidents in civil aviation;

■ Regulation(EU)No376/2014oftheEuropeanParliamentand of the Council of 3 April 2014 on the reporting, anal-ysis and follow-up of occurrences in civil aviation;

■ Art.22et seq. of the Federal Civil Aviation Act; and■ OrdinanceonAviationAccidentsandSevereIncidents.

Any accident or severe incident must be reported to the STSB immediately.


Recently, Switzerland has seen several cases of air carriers once again being temporarily or permanently relieved of their oper-ating licence, due to their inability to show sufficient economic viability.In late August 2018, SkyWork Airlines Ltd (SkyWork)

announceditsbankruptcyandceaseditsoperations.Insolvencyproceedings were initiated on 6 September 2018. The liquida-tion proceedings are currently pending. The FOCA had already declaredinOctober2017thattheoperatinglicenceofSkyWorkwould only remain valid until the end of October 2017, as SkyWork had not been able to guarantee the financing for itswinter flight plan for 2017/2018.

The second case concerned the air carrier Darwin Airline Ltd (Darwin) that – after takeover by Slovenian carrier Adria Airways following Etihad’s exit in summer 2017 – operated under the name Adria Airways Switzerland. After Darwin had filed for a moratorium (Nachlassstundung ) on 27 November 2017, the FOCA annulled Darwin’s operating licence on 28 November 2017. As the annulment only concerns the operating licence, Darwin was still permitted to operate flights on behalf of other air carriers (wet-lease). However, on 12 December 2017, Darwin was declared bankrupt. The liquidation proceedings are still pending.

Further, at end of October 2017, Belair Airlines Ltd (Belair) followed its bankrupt parent company, Air Berlin, after the main shareholder, Etihad, had withdrawn financial support. Apparently, insolvency-related legal issues effectively prevented Belair from being sold to an investor. As it ceased operations and was finally put into liquidation, Belair had to return its operating licence to the FOCA.

The Swiss aircraft manufacturer Pilatus has recently been accused of violating certain Swiss export control regulations and military services restrictions in relation to maintenance services provided for its PC-21 military training aircraft exported to Saudi Arabia and the United Arab Emirates. Administrative proceed-ings are currently pending before the Swiss Federal Administrative Court. Moreover, criminal investigations have been initiated by


Switzerland has adopted Regulation (EC) No 216/2008 of the European Parliament and of the Council of 20 February 2008 on common rules in the field of civil aviation and establishing a EuropeanAviationSafetyAgency.ItisthemainsourceofSwissaviation safety legislation. EASA Rules on Air Operations (OPS) andImplementingRules(IR)willbeapplicableinSwitzerland.Furthermore, Switzerland has implemented safety management systemsasprovidedforinICAOAnnexes6,11,14and19.

The FOCA administers air safety in Switzerland.


No, it is not.


No. The Swiss Federal Administrative Court has, however, accepted that the operational regulation of Zurich Airport stip-ulates a departure prohibition after 10 p.m., solely applicable to air charters (DFAC 2011/19).


No. Airport concession holders are obliged to grant access to all national and international airlines entitled to fly to Switzerland (Art. 36a of the Federal Civil Aviation Act). Any restrictions must be detailed in the operational regulation of the airport and must not be discriminatory. The operational regulation is subject to FOCA approval.


Both models exist. Zurich Airport is owned by a publicly traded company (the canton of Zurich is legally bound to hold more than 1/3 of the voting capital), whereas EuroAirport Basel-Mulhouse-Freiburg and Geneva Airport are owned by public corporations.


Yes. The most notable requirement is the payment of airport charges (Art. 39 of the Federal CivilAviationAct). In addi-tion, every airport has its own operational regulation, which can contain certain requirements regarding safety, environmental issues, noise protection, slots, etc.

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liens). However, the lessor may unilaterally allow the registra-tion of a mortgage, unless this is explicitly excluded in the lease agreement.


Pursuant to Art. 22 para. 1 of the Federal Act on the Aircraft Records Register, engines that are specifically designated as such and registered jointly with an aircraft in the Aircraft Record are deemed to be part of such aircraft, regardless of whether they are installed ‘on-wing’ or not. Furthermore, there is the possi-bility of specifically excluding an engine from a registration, which will render its fate independent from that of the aircraft. Consequently, if an engine is registered along with an aircraft in the Aircraft Record, a mortgage on the aircraft will also affect theengine.Ifthisisnotdesired,theenginemustbespecificallyexcluded when registering the aircraft in the Aircraft Record.


The key question with respect to VAT handling of aircraft transac-tions in Switzerland (sale/purchase/lease) is whether the aircraft in question is imported into Switzerland and, if so, whether an exemption based on Art. 23 para. 2 no. 8 and Art. 53 para. 1(e) of theFederalLawonValueAddedTax (VATL)applies. If aSwiss-registered aircraft is imported into Switzerland by a Swiss-domiciled international air-carrier who professionally operates transportation or chartered air traffic, and whose turnover from international flights exceeds that of domestic air traffic, the sale, purchase, or lease as well as a list of other services provided to such air-carrier may be exempt from VAT pursuant to Art. 53 para. 1(e) in connection with Art. 23 para. 2 no. 8 VATL. The Federal Tax Administration maintains a list of carriers domi-ciled in Switzerland who qualify for such exemptions. Foreign air-carriers who are able to demonstrate that they comply with the requirements of Art. 23 para. 2 no. 8 VATL may also, under certain circumstances, apply for VAT exemptions on certain services.Ifanaircraftisimportedbyanyotherperson/companywho is not exempted, VAT is applied to any sale, purchase, or lease transaction involving the aircraft. The same applies for any aircraft imported into Switzerland and sold, purchased, or leased to a party (other than a commercial carrier exempted from VAT pursuant to Art. 23 para. 2 no. 8 VATL), regardless of whether the parties involved in the transaction are foreign parties and the aircraft is situated outside of Switzerland. Aircraft that are not imported into Switzerland (e.g., when staying under customs supervision in connection with maintenance and repair) are generally not subject to Swiss VAT on imports. Due to various multilateral agreements (e.g., GATT or the Free Trade Agreement with the EU and EFTA), similar rules apply to customs duty; accordingly, the import of aircraft or of spare parts is exempted from customs duty if such an agreement is applicable.

the Office of the Attorney General of Switzerland. These cases are expected to continue to be highly controversial, both in the legal sphere and as a matter of public debate.



No. The Swiss Aircraft Register (Luftfahrzeugregister ) relates to the administrative registration of the aircraft (permit to fly, airworthiness certificate, noise-type certificate, nation-ality of ownership, call sign, etc.). Although the owner is regis-tered in the Aircraft Register, the certificate of registration does notconstituteproofofownership.Inaddition,aircraftcanberegistered in the Swiss Aircraft Record (Luftfahrzeugbuch), which registration constitutes proof of ownership.


Yes; ownership and mortgages can be registered in the Aircraft Record (Luftfahrzeugbuch).Inrespectofownership,theregistra-tion is voluntary.

Registration of any right will only be made upon application by the owner and is only permissible for aircraft already regis-tered in the Aircraft Register. Mortgages can only be set up, and will only become effective, upon registration in the Aircraft Record. Any entry will first be published in the Swiss Official Gazette of Commerce (SOGC) and is subject to an objection period of 30 days. This 30-day period has to be borne in mind in any aircraft financing project. The Swiss FOCA, which runs the Aircraft Record, is relatively swift in handling applications. Requests are usually handled within a few days.

Once a right is registered in the Aircraft Record, it can only be altered or deleted by amending the respective registration. In other words, once registered in the Aircraft Record, anytransfer of ownership by necessity requires an amendment of the registration.


MortgagesCertain claims are granted priority over a registered mortgage, although Swiss legislation is more restrictive than foreign law when it comes to accepting preferred security rights (see Art. 47 of the Federal Act on the Aircraft Records Register). There are no maintenance or mechanic’s priority rights.LeasesThe lessee of an aircraft can be registered in the Aircraft Register, assuming that all the other requirements for a regis-tration in the Aircraft Register (apart from legal ownership) are fulfilled.Inthecaseoflong-termleaseagreementsunderwhicha Swiss lessee operates the aircraft, a non-Swiss owner may also be registered in the Aircraft Register. Furthermore, lease agree-ments with a period of validity of more than six months can be registered in the Aircraft Record (Luftfahrzeugbuch). Such regis-tration gives the lessor and the lessee priority over all rights and agreements recorded subsequently (except for statutory

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1. governmental aircraft (which are designated or actually used by public authorities on an exclusive basis);

2. aircraft actually in service on scheduled flights of a public carrier (and its reserve aircraft); and

3. any other passenger or cargo aircraft ready to depart in such transportation, unless the debt for which the seizure is requested was incurred for, or has become due in the course of, that specific leg.


No, this is not admissible under Swiss law (other than under the Cape Town Convention).


There are no special courts (of any type) for aviation disputes.Civil proceedingsCivil claims in relation to aviation disputes must be brought before the ordinary civil courts. Four cantons (Aargau, Bern, St. Gallen, and Zurich) have specialised commercial courts compe-tent if (i) the dispute is to be considered a commercial dispute, and (ii) the value threshold of CHF 30,000 is exceeded, which will, in aviation disputes, almost invariably be the case.Debt enforcementEnforcement of mortgages is carried out by the competent Debt Enforcement and Bankruptcy Office (Betreibungsamt ). The same applies to the enforcement of financial claims if the creditor is in possessionofanenforceabletitle.Ifhedoesnotholdsuchtitle,he may still initiate the enforcement procedure; however, in such cases the debtor may raise an objection against the enforcement, and the creditor will then have to obtain a court order before being able to proceed with the enforcement procedure.Criminal proceedingsCriminal charges are handled by the competent public prosecu-tors and criminal courts, respectively.Administrative proceedingsRulings (Verfügungen) by a federal authority (e.g., FOCA) can be challenged in administrative proceedings before the Swiss Federal Administrative Court.


Service on domestic (Swiss) defendants is made via post (regis-tered mail) or in person by court bailiffs. Defendants in juris-dictions with which Switzerland has concluded a Treaty dealing with the service of documents (in particular, the Hague Conventions) are served according to the standards provided for in the respective Treaty. Defendants in all other jurisdic-tions will be served with documents via consular or diplomatic channels.

However, only the document instituting the proceedings (or its equivalent) must be served upon foreign defendants via these channels (and, thus, usually in a translated version). Foreign


Chicago Convention 1944Switzerland ratified the Convention on 6 February 1947, prior to its effective date of 4 April 1947.Geneva Convention 1948Switzerland ratified the Convention on 3 October 1960, prior to its effective date of 1 January 1961.Montreal Convention 1999Switzerland ratified the Convention on 7 July 2005, prior to its effective date of 5 September 2005.Cape Town Convention 2001The Convention has so far not been ratified by Switzerland.


As Switzerland follows the so-called monistic system, interna-tional treaties are incorporated into the Swiss legal order without further legislation. A treaty can be directly applicable (“self-exe-cuting”) provided that its provisions are litigable, i.e., its content must be sufficiently precise and clear to constitute the basis for a decision in a specific case.


There is no specific benefit available to profits achieved by way of aircraft trading or leasing. Under the current tax legis-lation, however, a company that trades in aircraft abroad, i.e., whose turnover is basically achieved abroad, may qualify for the mixed company privilege; as a result, the profits from aircraft trading will be taxed at less than 10%, depending on the canton of domicile. This tax status will be abolished in the course of the termination of the existing ring-fencing schemes, as part of the Federal Act on Tax Reform and AHV Financing (TRAF) that will enter into force on 1 January 2020. A company that currently benefits from a special tax status will be eligible for a tax-neutral step-up on its assets in the difference between book value and fair market value. Any such hidden reserves will benefit from a preferred tax rate if realised within five years after thenewlawhasenteredintoforce.Whetherornotanaircrafttrading or leasing company will be eligible for such a step-up, i.e., whether or not it has such hidden reserves, will have to be determined in any specific case, based on a state of the art valu-ation report.



Pursuant to Art. 80 et seq. of the Federal Civil Aviation Act, a creditor, a mortgagee, or the owner (e.g., the lessor) of an aircraft can apply for seizure of the aircraft even if the claimant cannot produce an enforceable title. However, the following aircraft shall not be subject to seizure:

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All agreements between undertakings, decisions by associa-tions of undertakings, and concerted practices, including joint ventures, which may affect trade between Switzerland and the EC and which are aimed at, or result in, the prevention, restric-tion or distortion of competition within the territory covered by the Agreement between the European Community and the Swiss Confederation on Air Transport (EU-CH Agreement), are prohibited. Contravening decisions or agreements are null and void. Exemptions are possible under the conditions foreseen by the EU-CH Agreement.

This wording, as provided for in Art. 8 of the EU-CH Agreement, corresponds to the applicable EU competition law (Art. 101 and 102 of the Treaty on the Functioning of the European Union (TFEU)). Switzerland has therefore, in fact, adopted the EU competition law.

On 1 December 2014, the Agreement between the European Union and the Swiss Confederation concerning cooperation on the application of their competition laws came into force. Itfacilitates and strengthens cooperation between European and Swiss authorities.


According to the EU-CH Agreement, the European Union insti-tutions and not the Swiss competition authorities are competent to control concentration between undertakings (the “one-stop-shop principle”). The Swiss authorities only remain competent if the thresholds, as defined in the EC Merger Regulation, are not reached (i.e., generally, a combined aggregate worldwide turnover of EUR 5 billion and an aggregate EU-wide turnover of each of at least two of the undertakings concerned of more than EUR 250 million).

Therefore, in most cases, the relevant market is not to be determined by Swiss authorities but by the EU institutions.IntherarecasesthatremainwithintheSwisscompetence,the

relevant market is determined based upon the “O&D” approach (“point of origin/point of destination”) as applied by the EU Commission. This approach is applied both to charter and scheduled airlines (see LPC 2008/4, p. 677).


Again, in most cases the EC Merger Regulation will apply (see above, question 4.2). However, if Swiss law applies, the answer is yes, the Swiss Cartel Act provides for a notification system.


See above, question 4.1.

defendants are invited, according to Art. 140 of the Civil Procedure Rules, to appoint a Swiss-domiciled recipient – usually a law firm – for all future communications. Defendants who fail to do so are served via publication in newspapers or the SOGC, which often results in default judgments. Communications from courts must therefore invariably be taken seriously.


Interim basisSeizure of aircraft pursuant to Art. 80 et seq. of the Civil Aviation Act (see question 3.1): even if the court is ex officio held to take all the necessary precautions to make sure that the seizure will have effect, it may still be advisable to explicitly request the court to deliver a notice of seizure to the Aircraft Register (FOCA), to Skyguide, to the airport where the aircraft is currently posi-tioned, and to the owner of the aircraft (if the seizure was not directed against him, but, e.g., against a lessee). On the rare occasion that the rules on the seizure of aircraft are not appli-cable, a freezing injunction (“arrest”), as provided for in the Debt Enforcement and Bankruptcy Act, may be obtainable.

Arbitral tribunals: if a dispute is subject to arbitration, the creditor may choose to apply for seizure at the state court or at the arbitral tribunal. The arbitral tribunal is only competent to grant injunctions such as a seizure once it has been constituted; theSwissRulesonInternationalArbitrationthereforeprovidefor the appointment of an Emergency Arbitrator.Final basisA court judgment or arbitral award can order specific perfor-mance of contractual or other duties, award compensation for damages, or can be a declaratory judgment.

3.6 Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal, and, if so, in what circumstances do these rights arise?

Yes, decisions from a court of first instance can be appealed. A brief overview (exceptions are not mentioned):Civil proceedingsDecisions of state courts in civil proceedings can be challenged. The appeal has to be filed with the upper cantonal court, whose decision can then be appealed before the Swiss Federal Supreme Court. However, decisions of commercial courts (see above, question 3.3) are not subject to appeal before an upper cantonal court; they can only be appealed before the Swiss Federal Supreme Court.Criminal proceedingsDecisions of state courts in criminal proceedings can be chal-lenged. The appeal has to be filed with the upper cantonal court, whose decision can then be appealed before the Swiss Federal Supreme Court.Administrative proceedingsDecisions rendered by the Federal Administrative Court can be appealed before the Swiss Federal Supreme Court.Arbitral proceedingsArbitral awards can only be appealed on the basis of very limited grounds, e.g., if certain procedural rights such as the right to equal treatment, the right to be heard, or the Swiss ordre public have been violated.

Switzerland is a Member State of the New York Convention on the Enforcement of Arbitral Awards.

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General rulesThe main regulatory instrument in Switzerland governing the acquisition, retention and use of (passenger and other) data is the Federal Act on Data Protection (FADP). The FADP embodies fundamental rules concerning the processing of personal data by both the public and the private sector. The FADP is currently under revision and shall, to a large extent, be adapted to the level of protection provided by Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (GDPR), which entered into effect on 25 May 2018. The GDPR is not only directly applicable in the EU, but has extra-territorial application to any entity outside the EU that is either established within the EU or that targets data subjects in the EU. Furthermore, as of 1 March 2019, Switzerland has imple-mented the requirements of EU Directive 2016/680 of 27 April 2016, which regulates the specific protection of personal data in the prevention, investigation, detection, and prosecution of criminal offences as well as the enforcement of criminal penal-ties within the Schengen area.

Under these regulations, the data subject generally has the right to access and to correct false, incomplete, or erroneous data. Under certain circumstances, the data subject can also request deletion of his or her personal data. The collection of the data and the purpose for which it is processed must be readily identifiable by the person concerned and the data subject must be actively informed if particularly sensitive personal data is involved. Violations of the FADP and the GDPR can lead to criminal proceedings and high fines. Furthermore, the data subject enjoys all remedies generally available under civil proce-dure rules (i.e., injunctions, right to restitution, or the right to claim damages).Aviation-specific rulesAviation-specific rules are, for one, incorporated in the Federal Act on Foreign Nationals (FNA). According to the Schengen and Dublin Association Agreements, Council Directive 2004/82/EC of 29 April 2004 on the obligation of carriers to communicate passenger data is applicable in Switzerland. The Directive was implemented in the FNA, which was significantly revised in 2014. The State Secretariat for Migration (SEM) determines the flights for which air carriers are required to transmit the personal data of the passengers (see Art. 104 FNA). The affected carriers must transmit the Advance Passenger Information (API) of all passengers to the Swiss authorities.Details on how and where the data is to be delivered can be found under https://www.sem.admin.ch/dam/data/sem/eu/schengen-dublin/api-schnittstellenspezi-e.pdf.

Further, the Federal Customs Administration can oblige the carriers and airport operator to transmit personal data of the passengers for up to six months after the transport was carried out (see Art. 151 of the Customs Ordinance). The affected carriers or airport operators are obliged to transmit the name, first name, address, date of birth, passport number, places of origin, transit and final destination of the passengers as well as the name of the travel agency who booked the flights (if applicable).


Notification of a planned concentration of undertakings must be made to the Swiss Competition Commission (COMCO). The Commission then has to decide within one month whether an examination is to be initiated. During that month, the concen-tration must not be implemented. After expiration of the one-month period, the applicant will receive either a clearance or theinformationthataninvestigationwillbeinitiated.Ifnosuchnotice is given within that time period, the concentration may be implemented without reservation.Intheeventofaninvestigationbeinginitiated,theCompetition

Commission must decide within a four-month period whether the concentration will be cleared.

The legal effect of a concentration that has to be notified is suspended.

For the preliminary investigation of one month, the Secretariat of the COMCO charges a flat fee of CHF 5,000. For the in-depth investigation, filing fees are charged on a time-spent basis. The hourly rates are between CHF 100 and CHF 400, depending on the urgency of the case and the level of seniority of the case-handlers.


Yes. The EU-CH Agreement stipulates an aviation-specific aid scheme (Art. 13). This scheme corresponds almost literally to the regulation in the EU (Art. 107 TFEU).

As a general rule, the EU-CH Agreement prohibits state aid which distorts or threatens to distort competition. Exceptions are provided for in the EU-CH Agreement.

The decision as to whether state aid is permissible under the aforementioned regulations lies with the Swiss authorities, who are obliged to inform the EU authorities on such aid. Although not expressly provided for in the Agreement, the Swiss authori-ties are likely to follow the recent practice of the European Union (see the 2014 Aviation Guidelines of the EU Commission, OJ C 99, 4 April 2014, pp. 3 to 34).


The criteria are set out in Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the Community, which is also applicable in Switzerland.

Subsidies for particular routes may be granted to an under-taking carrier operating a particular route under a public service obligation, as provided for in Art. 16 et seq. of the Regulation. Before deciding on such a public service obligation, the other Member States, the EU Commission, the airports concerned, and other air carriers operating on that particular route must be consulted.

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The passenger rights under Regulation (EC) No 261/2004 must be enforced before the ordinary civil courts.In2012,acivilcourtoffirst instanceruledthatRegulation

(EC) No 261/2004 does not apply to a flight from Zurich to a non-EU country.


ItispossibletofileapassengerreportwiththeFOCA,whichcaninitiate administrative fine proceedings and impose fines of up to CHF 20,000 (Art. 91 para. 4 of the Federal Civil Aviation Act).

The passenger report form is available under www.bazl.admin.ch (Air Passenger Rights).


Airports can only be run based on a concession by the federal government. Such concessions are based on the Federal Civil AviationActandtheOrdinanceontheAviationInfrastructure.The airport operators are licensed either for 50 years in the case of national airports, or 30 years in the case of regional airports.

The concession entails the right to run an airport commer-cially and to raise fees. On the other hand, the airport operator is obliged to open the airport to all aircraft, as provided for in the operational regulation of the airport (see question 1.6 above), and to maintain an infrastructure guaranteeing safe operations.

The operation of the airport must be in line with the Sectoral Aviation Infrastructure Plan (SAIP), and the applicant musthave the management skills, technical knowledge, and funds necessary for the operation of the airport, as provided for in the operational regulation.

All details regarding the operation of the airport are then to be specified in the operational regulation, which is subject to FOCA approval. Typical contents of the operational regulation are the organisation of the airport, operational hours, depar-ture/arrival procedures, ground handling, slots coordination, further commercial and non-commercial use of the airport, environmental issues, an aerodrome design and operational manualaccordingtoInternationalCivilAviationOrganization(ICAO)standards,andaSafetyManagementSystem.


There is no consumer protection legislation specifically governing the relationship between airport operators and passengers.

As regards the general consumer protection legislation (e.g., the Unfair Competition Act), it must be noted that there is typi-cally no contractual relationship between passengers and airport operators.


All the major GDSs operate in Switzerland, e.g., Travelport, Amadeus, Sabre, etc. (not taking into account the many suppliers of “front-end tools”).

Art. 21f FCAA stipulates that passenger data must be made available by carriers to the competent prosecution authorities, upon their request, for up to six months after the transport has been carried out. The personal data concerned encompasses the name, last name, address, date, time and number of the flight, places of origin, transit and final destination of the passengers, data on any accompanying persons, information on the payment method used as well as the name of the travel agency who booked the flight (if applicable).


The FADP (see question 4.8 above) imposes the obligation on any entity which collects data to put in place adequate secu-ritymeasuresagainstdataloss.Ifthelossofdataiscausedbyinsufficient security measures, the carrier may become liable for damages.

Unauthorised access to sensitive data can be prosecuted.


Intellectualpropertyrightsareenforcedbycourtaction.Eachofthe 26 cantons of Switzerland has a single cantonal instance with overall jurisdiction for intellectual property and related disputes. InthecantonsofAargau,Bern,St.Gallen,andZurich,compe-tence lies with the commercial court.

A separate, exclusive jurisdiction has been granted to the Federal Patent Court, as the first instance for patent disputes, including action for infringement and claims concerning the existence or validity of a patent. For other civil actions related to patents, the cantonal courts have concurrent jurisdiction.

An important and effective tool to efficiently prevent acts of infringement under intellectual property law is injunctive relief. Ifcertainconditionscanbedemonstrated,acourtinjunctioncanbe obtained relatively quickly. The claimant must demonstrate a valid cause of action, an infringement, a resulting disadvan-tagethatcannotbereadilyremedied,andurgency.Injunctiverelief must be confirmed in the framework of subsequent ordi-nary court proceedings unless the parties settle.

Furthermore, intellectual property infringements may consti-tute a criminal offence.


Switzerland has adopted Regulation (EC) No 261/2004 regarding passenger rights in the event of denied boarding and of cancellation or long delay of flights.Intheeventofoverbooking,thecarriermayfirstdetermine

whether passengers are willing to offer their seat against an indemnificationtobeagreedupon.Ifnosuchvolunteerscanbe found, the carrier must compensate those passengers denied boarding with a payment of up to EUR 600, depending on the distance of the flight. The Regulation requires airlines to offer the relevant passenger meals, refreshments, and hotel accom-modation as appropriate whilst waiting for a rearranged flight. They must also cover any costs of transport between the hotel and the airport.

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safety and security of drone operations across Europe. The new EU regulations will come into force in June 2020 and will be implemented by Switzerland as well. From that date, users of drones – both professional pilots and those flying drones for leisure – will be obliged to register.In August 2019, The Swiss-EU Joint Aviation Committee

decided that Switzerland would adopt various EU decrees. These include a new framework regulation for flight safety (including drones), and a regulation guaranteeing the continuation of the activities of Swiss aviation operators and manufacturers after Brexit. The new provisions on aviation safety, security, and air traffic management came into force on 1 September 2019.

On 16 August 2017, the Swiss Federal Council approved the signing of an agreement aimed at linking the Swiss and European aviation emission trading scheme (ETS) systems. The agreement was signed on 23 November 2017 and approved by the EU at the beginning of 2018, and by the Swiss Parliament on 22 March 2019.ItmustnowberatifiedbySwitzerlandandtheEUbeforeitcan enter into force on 1 January 2020. Once the agreement has entered into force, and as emissions generated by aviation will be included under the joint ETS system, the linkage will offer Swiss aviation companies which operate flights from Switzerland to the EEA and/or within Switzerland the possibility to trade with the corresponding emissions throughout the European ETS system. The linking of both emissions trading systems further requires adjustments to the Swiss CO2 Ordinance, which falls under the responsibility of the Swiss Federal Council. The public consul-tation of the amended ordinance took place until July 2019. The proposed amendments – containing a “Swiss Finish” – are controversial, since the administrative burden on Swiss aircraft operators is higher than in EU jurisdictions.In September 2019, the FOCA announced that it was

combining the following procedures and continuing them under the designation “Operating Regulations 2017”: ■ theapplicationforapprovaloftheoperatingregulationsof

Zurich Airport (Betriebsreglement 2017); ■ thenewdefinitionofpermissibleaircraftnoiseemissionsat

night; and ■ thereviewofthereportofZurichAirportwhichidentifies

and assesses the operational feasibility, economic viability, and impact on noise exposure of bringing the last start and landing slots forward in the evening.

The FOCA held a public consultation that took place until 8 October 2019.In 2019, France announced that it would levy an environ-

mental tax on airline tickets from the beginning of 2020. According to media reports, the ticket surcharge for European flights for economy flights is estimated at EUR 1.50 and EUR 9 for business class flights. For flights to destinations outside the European Union, the surcharge shall be twice as high. This levy could also affect Basel airport, as this bi-national Euro-Airport is located on French territory – thus, France has tax sovereignty. However, as the Euro-Airport has a French and a Swiss terminal, it remains to be seen if France will also collect the eco-tax for flights operated through the Swiss terminal.In late 2019, in the Swiss Parliament, legislative proposals

were successfully brought forward to introduce a flight ticket levy of between CHF 30 and CHF 120 (depending on booking class and travel distance) for any passenger on a flight starting in Switzerland, whereas a flat rate of CHF 500 shall be levied on privatejetflightsstartinginSwitzerland.ItisexpectedthattheSwiss CO2 Ordinance will be amended accordingly.


No. However, Switzerland has adopted Regulation (EC) No 80/2009 of the European Parliament and of the Council of 14 January 2009 on a Code of Conduct for computerised reserva-tion systems. According to this Regulation, a system vendor shall publicly disclose, unless this is otherwise made public, the existence and extent of a direct or indirect capital holding of an air carrier or rail-transport operator in a system vendor, or of a system vendor in an air carrier or rail-transport operator.


This is not specifically regulated in Switzerland. As long as the competition rules are respected and all the conditions for the approval of the airport operational regulation are fulfilled (espe-cially, in this sphere, non-discrimination), integration between air operators and airports should be permissible.


InorderforittoqualifyasacommercialoperatorunderSwisslaw and to obtain a licence for commercial flights in Switzerland, a carrier must be registered in the Swiss commercial register with the purpose of operating commercial air traffic. Further, it must be controlled and majority-owned by Swiss citizens. Exceptions can be granted to foreigners or foreign companies that are treated as Swiss citizens or Swiss companies based on intergovernmental agreements (see Art. 27 FCAA and Art. 103 FCAO).

5 In Future


As regards all fields of economy in trade in Europe and world-wide, the implications of an upcoming Brexit, if and when it shall occur, remain to be seen, including with respect to civil aviation in Switzerland.

Moreover, Switzerland is, and remains, at the forefront of the development of Unmanned Aerial Vehicles (UAVs), also known as (civil) drones, and as with many other fields, regulations in this field follow the fast-paced and dynamic technological devel-opments of this topic. Regulations in this domain will follow the developments in the European Union, where the European Aviation Safety Agency created a comprehensive drone regu-lation framework for all EASA Member States. On 11 June 2019, the Commission Delegated Regulation (EU) 2019/945 on unmanned aircraft systems and on third-country operators of unmannedaircraftsystems,andtheCommissionImplementingRegulation (EU) 2019/947 on the rules and procedures for the operation of unmanned aircraft, were published to ensure the

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Aviation Law 2020

VISCHER AG

Urs Haegi has been advising business owners and their companies on corporate and contract law, in transactions, business structuring and succession planning, since the beginning of his legal career in 1990. He has extensive experience in establishing businesses in Switzerland and is also an acknowledged expert in the field of work and residency permits. He is a member of various Boards of Directors and Trustee Boards. Urs is president of the Board of AirTrust AG, a subsidiary of Deutsche Lufthansa AG, Germany, holding all shares of the Swiss carriers Swiss International Air Lines Ltd. and Edelweiss Air. Urs is team leader of VISCHER’s Transport/Aviation team. He is a member of the IBA Aviation Law Committee. Urs was Managing Partner of VISCHER from 2006 to 2011 and President of the Zurich Bar Association in 2009 and 2010. From 2017 to 2019, Urs Haegi was President of the Swiss Bar Association.

VISCHER AGSchuetzengasse 1P.O. Box 8021ZurichSwitzerland

Tel: +41 58 211 3445Fax: +41 58 211 3410Email: [email protected]: www.vischer.com

Dr. Thomas Weibel LL.M. advises and represents clients before state courts and arbitral tribunals. His practice focuses on complex national and transnational commercial disputes, recognition and enforcement of foreign judgments, injunctive relief, and white-collar crime. He has extensive experience in aviation-related dispute resolution. Thomas heads VISCHER’s dispute resolution team and is the deputy head of VISCHER’s Transport/Aviation team. He publishes and lectures on a regular basis on national and international civil procedure law as well as Swiss inheritance law. He is Editor-in-Chief for civil procedure law for a periodical on Swiss case law.

VISCHER AGAeschenvorstadt 4P.O. Box 4010BaselSwitzerland

Tel: +41 58 211 3356Fax: +41 58 211 3310Email: [email protected]: www.vischer.com

VISCHER is an influential, innovative Swiss law firm dedicated to providing effective legal solutions to business, tax and regulatory matters. Our attor-neys, tax advisers and public notaries are organised under the direction of experienced partners in practice teams, covering all areas of commercial law. Our breadth of practice ensures we have the right team available for every mandate and client.Our clients demand and deserve impartial, unbiased advice. Our conflict standards set us apart from other firms. The fact that VISCHER is not tied to an association of law firms or attorney network means that our ability to select and instruct counsel in international transactions is not compro-mised. We have spent decades building up networks with attorneys and firms that meet our standards. VISCHER can choose freely from those networks, according to the demands of the matter at hand.VISCHER advises and represents airline companies in their core business and also in associated fields such as catering. We regularly advise on questions at a cantonal and federal level, handle damage and insurance cases of all types, and assist in contract negotiations with travel offices, air-traffic authorities, and airport operators. In addition, we advise on leasing, buying and selling aircraft and also have a wealth of experience in aircraft completion and all types of aviation-related dispute resolution.

VISCHER received the Finance Monthly 2016 award for “Aviation Law Firm of the Year – Switzerland”.In the 2019 edition of Bilanz, VISCHER’s Transport/Aviation team was honoured as one of the five top teams in the field of aviation law in Switzerland.In 2019, VISCHER was again named in the new edition of The Legal 500 as one of the leading Swiss law firms in the field of transport.Various VISCHER Transport/Aviation team members (including Urs Haegi, Thomas Weibel, Christoph Niederer, and Peter Kühn) are regularly named in The Legal 500 and/or Who’s Who Legal Switzerland in the field of transport.Our offices are located in Zurich, Basel, and Geneva, the largest business centres in Switzerland.

www.vischer.com


Aviation Law 2020

Chapter 39294

Thailand

Weerawong, Chinnavat & Partners Ltd. Nattaporn Pengkul

Thailand


Air Operator Certificate (“AOC”)The AOC will be granted to an air carrier which has obtained an AOL. To apply for an AOC, certain documents (e.g. a business plan, financial information and a maintenance plan) are required to be submitted to the CAAT.

When the MOT and the CAAT review an application, the capa-bility of the applicant to operate an airline business and its compli-ance with all the requirements and manuals are the main things considered.

In addition to these two business licences, the Certificate of Registration and the Certificate of Airworthiness of each specific aircraft are required in order for the airline to operate that aircraft.


The principal legislation is the Air Navigation Act and any regu-lation, notification or order issued thereunder. The CAAT is the main authority which administers air safety.


No. However, different levels of requirements apply to each type of carrier, such as the stipulated insurance policy limit.


The CAAT is the administrative body and the Air Navigation Act (along with any regulation, notification or order issued thereunder) governs air carrier businesses, regardless of whether they are commercial, cargo or private operators. However, chartered flight operators are subject to a number of different levels of requirements, such as the stipulated policy limit and the number of aircraft required to be registered in the fleet.


Assuming that both international and domestic air carriers are Thai licensed carriers, they are subject to the same general regulations.

1 General


The principal legislation relating to civil aviation includes (i) the Air Navigation Act B.E. 2497 (1954), as amended (the “Air Navigation Act”), (ii) the Notification of the Revolutionary Council No. 58 B.E. 2515 (1972), and (iii) any regulation, notification or order issued thereunder. The legislation empowers each of the Ministry of Transport (“MOT”), the Civil Aviation Authority of Thailand (“CAAT”) and the Department of Airports (“DOA”) to regulate the aviation sector.

The CAAT holds general and supervisory responsibilities regarding safety and aeronautical matters (other than those under the responsibility of the DOA), which include the registration of aircraft operated by Thai licensed operators. The DOA, which is an organisation under the supervision of the MOT, is in charge of the operation of airports belonging to the government and acts as the operator of such airports.


A Civil Aviation Operating Licence and an Air Operator Certificate are the main licences required to be obtained prior to operating an airline business.Civil Aviation Operating Licence (“AOL”)The following key requirements must be fulfilled by a company applying for an AOL:1. it must be a Thai company (i.e. at least 51% of the shares

are owned by Thai nationals, Thai government agencies or Thai companies) and have its head office situated in Thailand;

2. it must be subject to effective control by Thai nationals (including that 2/3 of its directors and authorised directors must be Thai nationals);

3. the registered capital (which has been fully paid up) must not be less than the minimum requirements (depending on the types of aircraft and licences); and

4. in the case of a regular flight service operation, there must be a plan to acquire at least two aircraft for the fleet.

The air carrier (which meets the requirements above) shall submit an application form along with a corporate authorisation document, an operation plan and an analysis of the feasibility of such operation plan to the MOT through the CAAT.

295Weerawong, Chinnavat & Partners Ltd.



The concepts of aircraft mortgage and charges are not recognised under Thai law. Mortgages and security interests governed by foreign law cannot be registered in Thailand, as Thailand does not have a central registration system of legal interests in respect of aircraft.

It is possible to pledge an aircraft under Thai law. The owner would pledge the aircraft to the lender, as the pledgee, and the owner and the pledgee would agree that the third-party operator of the aircraft shall act as custodian of the aircraft for the pledgee. There is no registration requirement in relation to the pledge.

It should also be noted that, since July 2015, an aircraft could be granted as a security under Thai law by way of a business secu-rity under the Business Security Act B.E. 2558 (2015). The secu-rity receiver must be a Thai financial institution or any other person as prescribed in a ministerial regulation. Currently, foreign banks outside Thailand are not qualified to be a security receiver unless it provides a facility in the form of a syndication with commercial banks in Thailand.


Age of an aircraft that can be leased/financed to Thai airlinesOn the date of application for registering an aircraft in the Thai aircraft registry, an aircraft must not be over 16 years old. However, if an operator will only operate such aircraft for cargo operations, the aircraft must not be over 22 years old. A helicopter, on the date of application, shall not be over five years old.Deregistration of the aircraftIn general, an aircraft can only be deregistered by the person who registered the aircraft. Originally, as a foreign entity cannot register an aircraft in Thailand, only the Thai operator that originally registered the aircraft is able to apply for the voluntary deregistration of the aircraft. However, following the recent implementation of the new rule of the CAAT, an owner may apply for deregistration in its own right as owner of the aircraft in certain circumstances, although it did not register the aircraft in Thailand. Such circumstance is, for example, where the Thai lessee ceased to have the right to possess the aircraft due to a termination of the lease and the owner (as lessor) has submitted an irrevocable deregistration power of attorney with the application to export the aircraft to the CAAT. It should still be noted that the decision to permit deregistration of an aircraft under such rule is still under the discretion of the Director General of CAAT.

Please note that a financier still cannot apply for deregistration of aircraft in its own right.

In practice, a Thai lessee would normally be required to grant at the outset a deregistration power of attorney for unilateral deregistration upon the termination of the lease by the owner or lessor. In reality, the enforcement of such a power of attorney is uncertain, given the revocability of a power of attorney under Thai law and the fact that the CAAT, and other Thai authorities, may still require a Thai lessee’s confirmation or cooperation on such deregistration process.


Airports in Thailand are both state- and privately-owned. While most of the airports outside Bangkok are owned by the

DOA, Airports of Thailand Public Company Limited (which is a state-owned enterprise) owns Suvarnabhumi Airport, Don Mueang Airport, Chiang Mai Airport and Phuket Airport.


Apart from obtaining route permission from the CAAT, airport operators themselves do not impose any restrictions or requirements on flying to and from the airports in Thailand.


The Air Navigation Act is the main legislation that governs air accidents. The Aircraft Accident Investigation Committee is responsible for the investigation of any accident in relation to an aircraft.


In late May 2019, the new Air Navigation Act No.14 B.E. 2562 (A.D. 2019) (the “Amendment Act”) was enacted, with an effective date of 26 May 2019, to amend certain provisions of the Air Navigation Act B.E. 2497 (A.D. 1954). The rationale for the promulgation of the Amendment Act is that certain provisions of the Air Navigation Act need to be revised and updated in order to improve the standards of Thailand’s civil aviation industry to meet international ones. In addition, the Amendment Act requires the CAAT to take into consideration all relevant rules and/or policies of the International Civil Aviation Organization and the Chicago Convention, when implementing subordinate laws or any other necessary measures, in order to ensure consistency with the standards of the International Civil Aviation Organization. However, the implementation of the requirements under the Amendment Act and the practical details remain subject to any subordinate law, public guideline on the Amendment Act or official interpretation by the relevant authority to be issued in the near future.



As Thailand has an operatory registry, the registration of an aircraft which is evidenced by the Certificate of Registration does not constitute an absolute proof of ownership. The ownership over the aircraft can be proven by documents that show the transfer of title of the aircraft to the owner (e.g. a bill of sale).

296 Thailand


3. Each power of attorney (including, but not limited to, the deregistration power of attorney) is subject to stamp duty.

4. Each duplicate and counterpart of any dutiable instrument is also subject to stamp duty.


The Geneva Convention was ratified by Thailand on 10 October 1967, and the Montreal Convention was ratified on 4 August 2017.

However, Thailand is not a party to the Cape Town Convention.


Under Thai law, becoming a party to an international convention does not automatically make such treaty a part of Thai law. To do so, the provisions of the convention must specifically be enacted.

The Montreal Convention has been applied by the International Air Carriage Act B.E. 2558 (2015) (as amended). However, in relation to the Geneva Convention, no such act has yet been enacted and, therefore, registration of rights over aircraft is not available.


Thailand has entered into a number of Double Tax Treaties which help to facilitate cross-border transactions. Tax benefits relating to each transaction need to be ascertained on a case-by-case basis, as the tax benefits under each Double Tax Treaty may not be the same.



Right of retentionA right of retention allows a person who has possession of an aircraft to retain it until any obligation relating to the aircraft (e.g. repairer’s charge) is performed. This right may be exercised until the obligation is wholly performed. Airport chargesIn principle, an aircraft may be seized if there is a violation of the provisions of the Air Navigation Act relating to the aircraft. However, the meaning of the term “provisions ... relating to the aircraft” is not precise.

Following the enactment of the Amendment Act, a competent officer and the Director of CAAT are empowered to detain an aircraft specifically on the grounds of non-payment of charges. The law clearly specifies that a competent officer is entitled to prohibit the aircraft’s owner, the aircraft registrant or the air operator from operating the flight if such person has failed to pay any relevant charges or fees or where there is a reasonable suspicion of non-payment, which shall be in accordance with the rules and procedures prescribed by the Director General of the CAAT. Such fees and charges would include, e.g., take-off


In a situation in which engines or parts of an aircraft are removed and installed on another aircraft which is owned by another person, there is one important principle of law which needs consideration. Where several movables belonging to different persons become joined in such a manner as to become component parts or invisible, then the relevant owners become co-owners in the composite property (in proportion to the value of that person’s component part). However, if one of the component elements would be considered as the “principal” part, the owner of the principal part becomes the sole owner of the entire property, but at the same time becomes liable to pay to the owner(s) of the “subsidiary” parts the value of those parts.

There was a court case decades ago in which it was deemed that the car frame is the “principal” property and that the engine is a subsidiary part thereof. At that time, the court considered that, without an engine, even though the form of the car frame remained the same, it could not by its nature be considered a car, given that it would no longer be capable of propulsion. Nevertheless, there has been no court case in relation to an airframe and aircraft engine regarding this issue, or any recent cases in respect of such principle of law. The issue to be considered is whether, taking into account the business circumstance and engine/parts pooling agreement to date, the engines and parts are deemed to be component parts or invisible parts of the airframe.

Possible ways to protect against that risk could be (i) a written agreement included in the lease agreement that ownership over an engine or any significant parts is vested to the owner at all times, irrespective of installation on another party’s airframe, (ii) requiring the lessee to furnish a letter of recognition of rights, signed by the owner of the other airframe in which an engine or any significant part is installed, and (iii) clearly marking on the engine and any other significant parts that they are subject to the ownership interest of the owner.


An entity which is or is deemed to be resident, domiciled or carrying on any commercial activity or business in Thailand, for Thai tax purposes, is subject to the general tax regime (e.g. income tax and VAT).

In a transaction contemplated by the lease/financing of an aircraft, there is documentary stamp duty levied, as detailed below, if the documents are executed in Thailand or their originals are brought into Thailand.1. A lease of aircraft is not subject to stamp duty. However,

if a lease is categorised as a hire purchase agreement, ad valorem stamp duty applies.

2. An aircraft pledge agreement is subject to ad valorem stamp duty, unless the underlying loan documents secured by the pledge agreement have been duly stamped.




Under Thai law, there are two types of expedited procedure, i.e. (i) procedure for a “petty case”, and (ii) procedure for a civil case. A petty case procedure is expedited more quickly than ordinary civil cases because fewer procedures are required. In a petty case, the court, at its discretion, can order the parties to proceed with a reconciliation and a hearing on the same day.

A case will be considered as a petty case if (i) the relief applied for in such case is an amount not exceeding THB 300,000, or (ii) it is a case involving the eviction of any person from an immovable property with a rental not exceeding THB 30,000 per month. However, we have not yet come across a case where the courts agree to accept lease repossession proceedings as a “simple case”.

Where there are pending procedures in the courts of Thailand, interim proceedings (i.e. protective measures or an injunction) necessary to safeguard an asset until the substantive dispute is finally resolved can be taken.

With respect to arbitration, Thailand is a party to the New York Convention, which allows an arbitral award from internationally recognised arbitration institutions to be enforced (providing they fulfil certain criteria, notably that they must not contradict public order or the good morals of the people of Thailand) through the Thai courts upon registration, thereby avoiding the need for a re-trial. The foreign arbitration venue may be any other appropriate country that is a party to the New York Convention.


Subject to legal restrictions (e.g. value threshold of the dispute), the parties of each dispute can appeal to the Court of Appeal and the Supreme Court, respectively.



A joint venture will not be regulated if it does not result in (i) a foreign entity being allowed to have control over a Thai licensed airline, or (ii) the creation of either a monopoly or a business operator with a dominant position; or may substantially lessen competition.

A code share arrangement is allowed provided that an approval from CAAT is obtained.


The Trade and Competition Commission (the “TCC”) determines the relevant market by considering a number of factors, including demand substitutability, supply substitutability, potential competition, quantitative and qualitative tests and consumer preferences.

and landing fee, freight fee payable by the air operator, airport charges and air navigation service charges, and any fine arising from a violation of a provision of the Air Navigation Act.

The current interpretation of this provision would be that the competent official has the authority to exercise its power over any aircraft of the operator or owner who fails to pay the specified fees and charges, as the monetary claim is against the person and not one specific aircraft. Other mattersAn aircraft may be intercepted (and its use suspended) by a military officer having the authority as specified in the anti-air warfare plan under the Air Navigation Contraventions Law. Furthermore, safety, tax, criminal and public interests are also factors that could see an aircraft inspected or detained by the competent officers.


As there are no “self-help” remedies under Thai law, if a lessee acts contrary to the terms of the lease/financing arrangement, the lessor or the financier may notify the lessee to comply with the agreement. If the lessee still fails to comply, the lessor or the financier may terminate the lease/financing arrangement and demand that the lessee return possession of the aircraft. If the lessee refuses to return possession, a court order will be required for the aircraft to be seized by the court. In order for the lessor or the financier to take possession of an aircraft following a default under the lease/financing agreement, the lessor or the financier must prove to the satisfaction of the Thai court the existence of the lease agreement, the default and that it is the lessor’s or the financier’s right to take possession upon such default. Various documents must be furnished to the court, such as the executed lease agreement.

The lessor’s or the financier’s right to take possession of the aircraft will also be subject to and limited by the provisions of laws of general application, relating to or generally affecting the enforcement of the parties’ rights and remedies, including the provisions of any applicable laws relating to bankruptcy, insolvency, reorganisation or moratorium.


Generally, aviation disputes between an offshore financier/lessor and Thai airlines are under the jurisdiction of the Civil Court and the Central Intellectual Property and International Trade Court. However, the Administrative Court will have jurisdiction over a case where there is a dispute over an order exercised by the MOT, the CAAT and/or the DOA.


As a general rule, a notice of court proceedings must be served to a place where the concerned party is domiciled.

298 Thailand



Please refer to our response to question 4.8 above.


Thailand has a registration system for intellectual property (e.g. trademarks and patents). The Central Intellectual Property and International Trade Court is the competent court for disputes relating thereto.


Yes, there is. If a passenger has checked in within the required time period and does not contravene any safety regulations, denial of boarding by the airline is prohibited. If it occurs, such passenger must be compensated. In a case where the flight is cancelled, the airline is required to either reimburse the amounts paid by the passengers or provide an alternative flight for the passengers. The airline is also required to provide, free of charge, any appropriate assistance to the passengers (i.e. water, food, accommodation, etc.) and pay the passengers’ compensation.


Passengers are protected by the regulation issued by the MOT. An airline has a duty to compensate the passengers in the manner prescribed under the regulation.


Airport authorities are subject to the Air Navigation Act and any regulation, notification, rule or order issued thereunder.


Please refer to our response to questions 4.11 and 4.12 above.


FedEx, UPS and DHL are major GDSs operating from and to Thailand.


If a GDS does not register as a Thai air carrier, no ownership requirement applies. However, an offshore GDS, when operating in Thailand, should take into account the regulations relating to a business conducted by a foreign company.


Merger control is governed by the Trade Competition Act B.E. 2560 (2017) (the “TCA”), which divides regulated mergers into two categories: those which require approval (pre-merger filing) from the TCC; and those which only require notification to the TCC (post-merger notification). Essentially, submission of a pre-merger filing will be required if the merger may result in the creation of either a monopoly or a business operator with a dominant position. On the other hand, the merging entity (or merging entities) must notify the TCC after the completion of the merger if the merger may substantially lessen competition.


Please refer to our response to question 4.3 above. With respect to foreign ownership, not only are foreigners not permitted to own over 49% of shares in a Thai airline, but they shall also not have any effective control over the airline.


For a pre-merger filing, once the parties have submitted the required data and documents to the TCC, the TCC will then have 90 calendar days (plus a possible extension of 15 calendar days) from the date of submission to issue its decision. On the other hand, a post-merger notification is required to be submitted within seven days after the transaction has been completed.


A state bail-out for an airline does not exist under Thai law. However, a certain tax exemption or reduction is granted if the airline obtains a business promotion from the Board of Investment of Thailand.


No state subsidies are available.


The Personal Data Protection Act came into effect on 28 May 2019, with the exception of the provisions relating to the collection, use and disclosure of personal data, which will become effective on 28 May 2020. As a general rule, airlines and airports are prohibited from disclosing passenger data without prior consent from the passengers.



The CAAT has recently issued the regulation concerning the grant of a Civil Aviation Operating Licence, whereby all of the relevant key requirements are consolidated and updated. Practical implementation and further development of this regulation is, however, needed.

There is also an effort to recognise foreign registered aircraft (being operated in Thailand), i.e. the Amendment Act has provided that if (i) an aircraft registered in a country that is a party to the Chicago Convention (the “State of Registry”) is operated in Thailand by a Thai operator, pursuant to a lease or other similar type of agreement, and (ii) Thailand, as a state of operator, has entered into a bilateral agreement with the State of Registry to transfer functions and duties in respect of that aircraft from such State of Registry to Thailand, the aircraft is not required to be re-registered with the CAAT. However, Thailand has not entered into any bilateral agreement with any country and the subordinate law in relation to this new provision has not been issued. Therefore, this is not yet applicable.

Additionally, from our discussion with the CAAT, there is no plan for Thailand to join the Cape Town Convention in the near future.


Vertical integration is possible provided that it does not trigger the conditions set out in our response to questions 4.3 and 4.4 above.


An air operator who applies for the Air Operator Certificate in Thailand must be a Thai national and has obtained the Civil Aviation Operating Licence.

5 In Future


Following the enactment of the Amendment Act, a number of subordinate laws (e.g. regulations, notifications, rules and orders) are required to be updated and/or issued in order to implement certain provisions of the Air Navigation Act (as amended by the Amendment Act).

300

Aviation Law 2020

Thailand

Ms. Nattaporn Pengkul is a partner in the projects and banking practice group at Weerawong, Chinnavat & Partners Ltd. She advises banks, corporations and other clients in domestic and cross-border transactions. Nattaporn has expertise in many industry sectors, including: aviation; banking and financial services; commercial and residential real estate; power and renewable energy; transportation; and infrastructure. Nattaporn was named as one of the ‘top 40 under 40’ lawyers in the region by Asian Legal Business in 2016. She has an LL.B. degree from Chulalongkorn University and an LL.M. degree in commercial law from the University of Cambridge, UK. For further information and recent cases, please see: http://www.weerawongcp.com/people-show.php?id=128.

Weerawong, Chinnavat & Partners Ltd.22nd Floor, Mercury Tower540 Ploenchit RoadLumpini, PathumwanBangkok 10330Thailand

Tel: +66 2 264 8000Fax: +66 2 657 2222Email: [email protected]: www.weerawongcp.com

Weerawong, Chinnavat & Partners Ltd. is one of Thailand’s largest independent law firms, offering a full range of legal services to Thai and international clients. Formerly the Bangkok office of White & Case LLP, which commenced business in Thailand in 1993, Weerawong C&P became an independent Thai law firm in 2009, combining international standards of excellence with local knowledge and expertise. Consistently recognised in the top tiers of The Legal 500, Chambers & Partners, IFLR1000, Asialaw Profiles and ASIAN-MENA Counsel as a leading firm in Thailand, Weerawong C&P received the distinction of National Firm of the Year in 2016–2019 at the Asian Legal Business Awards and in 2014, 2015 and 2017 at the International Financial Law Review Asia Awards. The firm has been recognised for ‘going beyond’ in achieving results for clients by implementing innovative strategies.

www.weerawongcp.com


Aviation Law 2020

Chapter 40 301

Turkey

ESENYEL & PARTNERS LAWYERSAND CONSULTANTS Selcuk Esenyel

Turkey


■ For cargo carriers and 20+-seater passenger air carriers,the business activities of the company must be restricted tosolelyaviation-relatedactivities.

■ Turkishcitizensmustholdthemajorityoftheshares,andvotingandmanagementrights.

■ Requirements regarding the minimum share capital,minimum number of aircraft and aircraft capacity, an organisational chart involving licensed employees, opera-tion and training manuals and insurance are stipulated in theSHY-6A.

ApplicantsmustsubmittotheDGCAproofofconformitytotherequirementsoftheSHY-6AandtheDGCAshallthencarryoutaninvestigationtoapproveorrejectthelicenceapplication.


Asapartytothe1944ChicagoConvention,theregulationsofthe International Civil Aviation Organisation (“ICAO”) are applicableinTurkey.Furthermore,Turkeyhasimplementedthesafety requirements of the European Aviation Safety Agencyunderaspecialprotocol.The DGCA administers air safety in accordance with the

RegulationonSafetyatCivilAirports,PortsandBorderGates,theRegulationonContinuingAirworthinessandMaintenanceLiability (SHY-M) and the DCGA Directive SHT-50, whichregulatesmaximumflighthours.


No. The Regulation on Safety at Civil Airports, Ports andBorderGatesisapplicabletoalltypesofaircraft.


No. TheAirChartersProceduresandPrinciplesInstructionsissuedbytheDirectorate,basedontheAviationCodeandtheGeneralDirectorate ofCivilAviationDutiesCodeNo. 5431,regulateallaircharters.

1 General


The aviation sector is regulatedby theTurkishCivilAviationCode No. 2920 (the “Aviation Code”) and the General DirectorateofCivilAviationDutiesCodeNo.5431.Turkeyisapartytothebelowagreementsinrelationtointer-

national carriage by air:■ 1929WarsawConvention for theUnification ofCertain

Rules relating to International Carriage by Air and theHagueProtocoltoAmendtheWarsawConvention.

■ 1944ChicagoConventiononInternationalCivilAviation.■ 1944InternationalAirServicesTransitAgreement.■ 1944InternationalAirTransportAgreement.■ 1963TokyoConventiononOffences andCertainOther

ActsCommittedOn-boardAircraft.■ 1970HagueConventionfortheSuppressionofUnlawful

SeizureofAircraft.■ 1971MontrealConventionfortheSuppressionofUnlawful

ActsAgainsttheSafetyofCivilAviationandtheMontrealProtocolfortheSuppressionofUnlawfulActsofViolenceatAirportsServingInternationalCivilAviation.

■ 1999MontrealConventionfortheUnificationofCertainRulesrelatingtoInternationalCarriagebyAir.

■ 2001CapeTownConventionandProtocolonInternationalInterestsinMobileEquipment.

The Directorate General of Civil Aviation (the “DGCA”) is themaingovernmentbodyregulatingtheaviation industry.TheDGCAisauthorisedtograntcertificatesofairworthinessand operating licences as well as to regulate, investigate, prose-cuteandauditcivilaviationoperationsundertheapplicablelaw.


According to the Regulations on Commercial Air CarriageEnterprises(the“SHY-6A”), the general conditions for granting an operating licence are as follows:■ Theapplicant’sprincipalplaceofbusinessmustbewithin

theterritoryofTurkey.■ A joint stock companymust be formed for licences for

20+-seateraircraftorforcargocarriagelicences.

302 Turkey




InaccordancewithArticle50oftheAviationCode,theMinistryofTransportmaintainstheAircraftRegistry.Article52oftheCodeprovidesthatregistrationofownershipconstitutesproofofownership.AnychangeofownershipmustberegisteredintheAircraftRegistry,whichmakessuchchangesofownershipbindingonthirdparties.


MortgagesmustberegisteredintheAircraftRegistryinordertobecomebindingonthirdpartiesaccordingtoArticle69oftheAviationCode. Mortgage agreementsmust be inwritingandnotarised.Contingentrightscanalsobesubjecttoamort-gageagreement.Mortgageescanalsoberegisteredinforeigncurrencyshould

themortgageeobtainpermissionfromtheDGCA;suchpermis-sionmustalsoberegisteredintheRegistry.AccordingtoArticle77oftheAviationCode,themortgagee

is entitled to receive an insurance indemnity in the event of loss ordamagetotheaircraft.


Lessors and financiers are entitled to register their rights in theAircraftRegistry.AccordingtoArticles74and119oftheAviationCode,lessorsandfinanciersmustregisterleaseagree-ments in the Aircraft Registry in order for them to becomebinding on third parties. The owner’s liability against thirdpartieswillbesubjectedtoproofofnegligenceshouldtheleaseagreementberegistered.Article119oftheAviationCodeforeseestwokindsoflease

agreements with different regulation. In case of charter bydemise, the competence and approval of the aircraft crew must beconfirmedbythelessor.


Articles619and621of theCivilCodeapply to theaccessoryandcomponentpartsoftheaircraftinaccordancewithArticle68of theTurkishCivilAviationLaw. According to theCivilCode,acomponentpartisdefinedbylocalcustomasanessen-tial element of the main thing, which cannot be separated from itunlessitisdestroyed,damagedoraltered.Theengineofanaircraft is considered to be a component part, and the owner of theaircraftwillalsohavetherightofownershipovertheengine.In the transfer of ownership, accessories may be excluded but componentpartscannotbeexcluded.


InaccordancewithArticle15oftheChicagoConvention,inter-nationalanddomesticcarriersenjoyequalchargesfor theuseofaerodromes.Domestic transportation of passengers,mail and freight by

air for commercial purposeswithin theboundariesofTurkeymayonlybeconductedbyTurkish-registeredaircraft.Also,anycarriers arriving from or departing to a foreign airport must do sofromairportswithcustomsoffices.


Airport constructionandoperation inTurkeywascarriedoutby the government formany years. In 1994, under LawNo.3996, airports were approved for privatisation. Today, mostairportsarecontractedtoprivatecompaniesunderbuild-oper-ate-transfercontracts.


Charges for slots, landing,parking,navigation andbunkeringareimposedbyTurkishairports.SuchchargesareregulatedbyatariffissuedbytheDirectorateGeneralofStateAirportsandEnterprisesforstate-ownedairports.Privateairportoperatorslevy their own charges for the same services with the approval oftheMinistryofTransportandInfrastructure.


If an air accident occurs within the territory of Turkey, theAviation Code applies. Article 10 of the Code provides thatanycivilaircraftaccidentmustbereported to theMinistryofTransportbytheresponsiblepilotor,wherethisisnotpossible,one of the crew members, the operator or the local authorities by themostrapidmeans.Article13oftheCodeindicatesthataninvestigative board, to be selected from persons with renowned expertise in the field of aviation, shall be assigned to investigate thecausesof theaccidentby theMinistryofTransport. TheMinistryshallsendcopiesoftheaccidentinvestigationreporttotherelevantpartiesandtotheICAOstates.


The Directive on Civilian Unmanned Aerial Vehicles to beoperatedorusedinTurkishairspacewasissuedon22February2016. The Instructions for Unmanned Air Vehicle Systems(SHT-UAV) brought provisions regarding the importation ofunmanned aerial vehicle systems, their sale, recordkeeping, registrationandflightavailability.

303ESENYEL & PARTNERS LAWYERS AND CONSULTANTS



Alessororfinanciermustseekaninjunctioninordertorepossessanaircraft.Noself-helpregimeisrecognisedunderTurkishlaw.


Dependingonthenatureoftheclaim,theCivilCourtofFirstInstance,ConsumerCourtorCommercialCourtmaybeappro-priate. Additionally, criminal courts are competent for crim-inalcases.Forinstance,passengerclaimsshallbeheardattheConsumer Court, or the criminal courts in case of death orinjury,whereasadisputebetweenanoperatorandanownershallbeheardbyaCommercialCourt.Therelationshipbetweenthecourtsisadutyrelationshipand

doesnotdependontheclaimedamount.


Upon receiving theclaimpetition, thecourt serves thedocu-ments on thedefendant. Any service to the registeredofficeaddressofaTurkishcompanyisvalid.Turkeyisapartytothe1954 HCCH Convention on Civil Procedures and the 1965HCCH Convention on the Service Abroad of Judicial andExtrajudicial Documents in Civil and Commercial Matters.Therefore, in case of a claim between domestic and non-do-mestic parties, service of court documents is to be made in accordancewithsuchconventions.


The types of interim remedies are: provisional attachment;precautionary measure; court survey; provisional advancepaymentforbodilyinjuriesincludingdeath;andpaymentstobemadeonthebasisofahullinsurancepolicy.Thetypesoffinalremediesare:compensationfordamages;

an injunction to do or not to do something; and change ofownershiporpossession.According to the Aviation Code, the air carrier’s liability

includesmoraldamagesaswell.


DecisionsofCourtsofFirstInstanceinvolvingvaluesofTRY3,000 and higher can be appealed at the Regional Courts ofAppeal. Decisions of Regional Courts of Appeal for valuesinvolvingTRY40,000andhighercanalsobeappealedat theCourtofAppeal.

IntheeventthattheCapeTownConventiononInternationalGuaranteesonMovableEquipmentconflictswiththeTurkishCivilCode,theConventiontakesprecedent.


AircraftandhelicoptersregisteredwiththeGeneralDirectorateofCivilAviationoftheMinistryofTransportationaresubjecttomotorvehicletax.Stamptaxischargedonthepaperslistedintable(1)attachedtotheStampTaxLaw.SpecialConsumptionTaxappliesonimportstoTurkeyasa

one-timetaxduringtheirregistration.Thefactthatthesevehi-cles have been registered or used in the country of origin does notpreventtheapplicationofthetaxatthetimeofimportation.


Turkeyratifiedthe1999MontrealConventionon25January2011andtheconventioncameintoforceon26March2011.TurkeyisalsoasignatorystatetotheWarsaw/HagueConvention.Turkeyisnotasignatorystatetothe1948GenevaConvention

ontheInternationalRecognitionofRightsinAircraft.The2001CapeTownConventionenteredintoforceinTurkey

on1December2011.


International treaties signed under the competence granted bytheConstitutioncomeintoforceafterbeingratifiedbytheParliamentandpublishedintheOfficialGazette.SuchtreatiesprevailoverdomesticTurkishlaw.


Companies that have civil aviation as their main businessactivity are exempt fromVAT on the importation of aircraftthatwillmainlybeusedfortransportationorcharterpurposes.Turkey has signed bilateral Double Tax Treaties with a

numberofcountries.Eachspecificcaseistobereviewedundersuchtreaties’stipulations.



InaccordancewithArticle68/AoftheAviationCode,theCapeTown Convention on International Guarantees on MovableEquipmentprevailsoverTurkishdomesticlawinrelationtotherightofdetentionofthedebtor’sassets.

304 Turkey



Periodic state subsidies are granted to tourism agencies bringing visitorstotouristiccities,especiallyduringthelowseason.


Paragraph(1)ofArticle12ofLawNo.6698ontheProtectionofPersonalData(Law):1. preventsunlawfulprocessingofpersonaldata;2. preventsunlawfulaccesstopersonaldata;and3. protectspersonaldata.

In order to ensure that the appropriate level of security is applied for all kinds of technical and administrative meas-ures,paragraph5of theabovementioned lawprovides that, ifprocessed personal data is obtained by others by illegal means, thedataofficerinquestionmustnotifytheaffectedpersonandthePersonalDataProtectionBoardas soonaspossible. TheBoardmaydeclarethissituationonitswebsiteorbyanyothermethoditdeemsappropriate,ifnecessary.Thepurposeofnoti-fication of data infringement to the Board and the affectedperson is to ensure that measures can be taken to prevent or minimisethenegativeconsequencesofsuchinfringement.TheEuropean General Data Protection Regulation, which abro-gated Directive 46/EC, includes detailed regulations on databreach notifications and ensures that there is no inconsistency betweendecisionstakenbytheBoardandthatstandardisationcanbeachievedinpractice.


Article136of theTurkishPenalCodeprovides that apersonwhounlawfullydistributesorseizesthepersonaldataofanotherpersonwillbesentencedtoimprisonmentfortwotofouryears.


Themechanismavailablefortheprotectionofintellectualprop-ertyrightsisprovidedintheTurkishIntellectualPropertyCode.


Themainregulationondenialofboardingandcancelledflightsis the Regulation on the Rights of Passengers Travelling byAirline(“SHY-YOLCU”),whichisinlinewithEURegulation261/2004. According to theprovisionsof the regulation, therights of the passengers regarding the cancellation of flights, landing and boarding rights are calculated in accordance with thedistanceoftheflight.



Therearenospecificcompetitionrulesfortheaviationsector.All joint ventures between airline competitors aremonitoredbytheTurkishCompetitionBoardinaccordancewithTurkey’santi-trustrules.


Therelevantmarketwouldbeassessedintermsofitsrelevantproducts and geography. In regard to relevant products, thesupplyanddemandchainwouldbetakenintoaccount.


TheTurkishCompetitionBoardacceptsapplicationsforregula-toryclearance/anti-trustimmunityformergersandacquisitions.Regarding the determination of the relevant market and theimpact of suchmerger or acquisition, theCompetitionBoardshouldobtain theopinionof theDirectorateGeneralofCivilAviation(“GDCA”).


Thesameregulationsareapplicabletobothdomesticandinter-nationalinvestors.Inaccordancewiththerulesofcabotage,anyforeign licensedair carrier acquiringaTurkishcompanymustobtainaTurkishlicenceforthetransportofcarriagesbetweenTurkishairports.


The Competition Board reviews the notification and decideseither toapproveor tofurther investigate thetransaction. Incaseofthelatter,theCompetitionBoardshallnotifythepartieswithin30daysofthefiling.Afast-trackprocedurewasintro-ducedbyCommuniquéNo.2010/4toacceleratetheclearanceprocess.ThereisnoapplicablefilingfeeintheTurkishsystem.


Investments into airports and ground operations are listed as first-priorityinvestmentsintheDecisiononStateSubsidiesforInvestments. Companies investing at least TRY 200,000,000can apply for general investment subsidies and companies investingatleastTRY5,000,000canapplyforregionalinvest-mentsubsidies.ThesubsidiesrangefromVATexemptionstoinsurancepremiumaids.

305ESENYEL & PARTNERS LAWYERS AND CONSULTANTS



Vertical integration ispossibleunder theTurkish system. Nospecific conditions have been foreseen for such integration.It shouldbenoted thatmostTurkish airports arebuilt underthe build-operate-transfer system, and therefore any air oper-ator wishing to enter into vertical integration should be a part ofsuchsystem.


Thereisnosuchnationalityrequirement.Incaseofachangeof nationality of the holder of an Air Operator’s Certificate,permissionmustbeobtainedfromtheGDCA.

5 In Future


TheAviationCodeshouldbereviewedandrevised inaccord-ance with the stipulations of the 1999 Montreal Conventionbecause the rules in force were imported from the Warsaw/HagueConvention.Additionally,newlegislationhasstartedtoappear,especiallyonunmannedaerialvehicles.


ThisissueisalsoregulatedbySHY-YOLCU.Theairtransportoperator is responsible for late arrivals and departures of flights, takingintoconsiderationthedurationofthedelay.


Airportauthoritiesaresubjecttotwodifferentregulations:■ TheAirportGroundServicesRegulation(SHY-22)regu-

lates the duties, competence and liability of ground service operators, which organise, in particular, the landing and departure of aircraft, and luggage and cargo handling services.

■ The General Directorate of Civil Aviation Duties CodeNo.5431stipulatestheduties,competenceandliabilitiesofGDCA,whichoversees licensingrequirements, includingallkindsofregistryrequirements.


In case of any claims arising between airport operators and passengers,ConsumerCourtswouldbecompetentandconsumerlegislationisapplicable.


All IATA-recognised global distribution suppliers, such asAmadeus,GalileoandSabre,operateinTurkey.


No,therearenoownershiprequirementspertainingtoGDSsoperatinginourjurisdiction.

306

Aviation Law 2020

Turkey

Selcuk Esenyel is the founding partner of ESENYEL & PARTNERS LAWYERS AND CONSULTANTS and is a qualified lawyer admitted to the Istanbul Bar Association after completing his LL.B. in Turkey and studying for an LL.M. in the United Kingdom. He primarily focuses on maritime, admiralty, dispute resolution, banking and finance, and asset finance and securitisation. He has acted for a wide range of clientele, from P&I Clubs to H&M insurers, to international banks, to ship charterers and owners. He is currently in charge of the Shipping, Finance and Litigation team in ESENYEL & PARTNERS LAWYERS AND CONSULTANTS.

ESENYEL & PARTNERS LAWYERSAND CONSULTANTSiTower, Merkez Mah.Akar Cad. No.3 K.19 D.135Bomonti, SisliIstanbulTurkey

Tel: +90 212 397 1991Email: [email protected]: www.esenyelpartners.com

ESENYEL & PARTNERS LAWYERS AND CONSULTANTS is an expanding Turkish law firm based in Istanbul, with correspondent lawyers/offices world-wide. The highly trained and capable lawyers of the firm take a hands-on approach to the practice of law and provide both legal and technical assis-tance by virtue of their dedication to understanding the clients they repre-sent, and their expertise in the specific sectors in which their clients operate. Our solution-driven approach combines excellence in legal assistance with commercial awareness. ESENYEL & PARTNERS LAWYERS AND CONSULTANTS counsels the world’s leading companies in every area of the law, including international and domestic corporate and financial matters, corporate governance, interna-tional arbitration, technology, intellectual property, business litigation, appel-late matters, white-collar criminal defence, government contracts, FIDIC

contracts, federal and state legislative matters, energy and oil & gas matters, real estate, administrative issues, regulatory matters, shipping and transport, insurance, environmental law and international trade. The firm has an effec-tive commercial practice specialised in commercial disputes, contractual claims and international arbitration.

www.esenyelpartners.com


Aviation Law 2020

Chapter 41 307

United Kingdom

RadcliffesLeBrasseur / K&L Gates LLP Philip Perrotta

Alan D. Meneghetti

United K

ingdom


LegislationAs with its EU neighbours, legislation is a mix of local law, inter-national treaties and EU Regulations and directives. Some of the principal pieces of domestic UK legislation are:■ CivilAviationAct1982(asamended).■ Civil Aviation Authority Regulations 1991 – Statutory

InstrumentNo16721991.■ OperationofAirServicesintheCommunityRegulations

2009–StatutoryInstrumentNo412009.■ AirCarrierLiability(No2)Regulations2004–Statutory

InstrumentNo19742004.■ CommunityAirCarrierLiabilityOrder2004–Statutory

InstrumentNo14182004.■ Civil Aviation (Denied Boarding, Compensation and

Assistance)Regulations 2005– Statutory InstrumentNo9752005.

■ Civil Aviation (Insurance) Regulations 2005 – StatutoryInstrumentNo10892005.

■ CivilAviationAct2006.■ Civil Aviation (Provision of Information to Passengers)

Regulations2006–StatutoryInstrumentNo33032006.■ CivilAviation(AccesstoAirTravelforDisabledPersons

and Persons of Reduced Mobility) Regulations 2007 –StatutoryInstrumentNo18952007.

■ CivilAviation(AllocationofScarceCapacity)Regulations2007–StatutoryInstrumentNo35562007.

Lastly,HerMajesty’s(“HM”)Government,fromtimetotime,appoints commissions to investigate certain aspects of the avia-tion industry, the most recent and highly publicised being the Airports Commission into the expansion of London’s airportcapacity,whichwaschairedbySirHowardDaviesandissueditsfinalreportinJuly2015.TherehasbeenmuchtalkoftheimpactthatBrexitwillhave

and what legislation will continue to apply in the UK once the UKhaslefttheEU.DirectiveswhichhavebeenimplementedintoUKdomestic legislationonthedateofBrexit (atthetimeofwriting,setat31January2020)willcontinuetoapply(untilrepealed)as,bybeingimplementedlocally,theyformpartoftheUK’s domestic legislation, as will Regulations which have already takendirecteffectasofthedateofBrexit.


The CAA is the competent licensing authority in the UK inalmost all matters relating to the granting of operating licences. Therearetwotypesofoperatinglicence:TypeA;andTypeB.TypeBoperatinglicencesareforoperatorsofaircraftwith19

1 General


Regulatory BodiesThereareanumberofbodieswhichhavetheauthoritytoregu-late,administerandcontrolcivilaviation. TheUKbodiesarechiefly:theSecretaryofStateforTransport;andtheCivilAviationAuthority (“CAA”). The European Aviation Safety Agency(“EASA”)hasauthorityinrespectofaviationsafetyregulationwithin European Union (“EU”) Member States pursuant toRegulationshavingdirectapplication(seeRegulation216/2008).The Secretary of State for TransportTheDepartment forTransport (in exercising the authorityoftheSecretaryofStateforTransport)isthegovernmentalbodyresponsible for civil aviation. The Secretary of State has ageneral responsibility for organising, carrying out and encour-aging measures for the development of civil aviation and the related aviation industry, for the promotion of its safety and effi-ciency, for research into questions relating to air navigation, and for the safeguarding of the health of persons on board aircraft.TheSecretaryofStatehasstatutorypowersrelatingtoavia-

tion security (see, for example, the Aviation and MaritimeSecurityAct1990).

Furthermore, the Secretary of State has responsibility for advising on, and where appropriate, implementing Orders ofCouncil(madebytheCrown)toeffectinternationalobligationsand standards in UK domestic legislation.The Civil Aviation Authority (“CAA”)The CAA is an independent body responsible for economic,safety and consumer protection regulation, and airspace policy. In addition, the CAA advises the UKGovernment on avia-tion issues, represents consumer interests, conducts economic andscientificresearchandproducesstatisticaldata.TheCAAacts in the regulation of aviation without detailed supervision by the Government. Under current legislation, policy formation in route and air transport licensing is the responsibility of the CAA,althoughtheSecretaryofStateretainsspecifiedpowersbothofdirectionandofguidance.TheCAAexercisescertainlicensing and other powers under European Regulations, notably in connection with operational safety and airworthi-ness.Incertainrespects,theCAAactsforEASAintheUK.ItalsohasconcurrentpowerswiththeCompetitionandMarketsAuthority(“CMA”)toenforcecompetitionlawinrelationtoairtraffic services and airport operation services.

308 United Kingdom



TheCAAregulatesallaspectsoftheaviationindustry.Whilstthe regulator is the same in all three cases, there are different Regulations and standards which have to be adhered to by oper-ators in these different sectors.


TheCAAregulatesallaviationactivity(apartfrommilitary).


The UK is a party to the Chicago Convention 1944, whichprovides for availability, so far as practicable, of aerodromes in its territory (Article 28) and equality of conditions for use ofaerodromesforinternationalanddomesticaircraft(Article15).Article 15 of theConvention further provides for equality ofcharges for use of aerodromes.UndertheAirNavigationOrder2009,anaircraftregistered

in a state other than the UK must not take on board or discharge any passengers or cargo in the UK for valuable consideration without an operating permit granted by the Secretary of State. Such permit will only be granted if the necessary traffic rights exist (under a bilateral international agreement or otherwise),andisalsosubjecttosatisfyingtheDepartmentforTransportof compliance by the operator with administrative requirements relating to the carrier’s aircraft and its insurance arrangements.


They are privately owned. For example, London Heathrowis owned byHeathrowAirport Holdings Limited; Aberdeen,GlasgowandSouthamptonairportsareownedbyAGSAirports;and Manchester Airport is owned by Manchester Airports Groupplc.TheyarelicensedandregulatedbytheCAA.


Conditions of use are imposed, as well as charges. Users ofairports are subject to airport charges, which are regulated by the CAA under the Civil AviationAct 2012 and theAirportChargesRegulation2011.“Airportcharges”means:(a)chargeslevied on operators of aircraft in connection with the landing, parkingor taking-off of aircraft at the airport (but excludingcharges for air navigation services and certain penalties in connectionwithaircraftnoiseandvibrationcausedbyaircraft);and(b)chargesleviedonaircraftpassengersinconnectionwiththeir arrival at, or departure from, the airport by air.

or fewer seats;TypeAoperating licences are foroperatorsofaircraftwith20ormoreseats.TypeBoperatinglicencesmayalso be granted to operators of larger aircraft with a limited scope of activity.In order for the licence to be granted, the CAA must be

satisfied that the applicant fulfils the conditions set out in the EuropeanRegulation1008/2008,includingthat:■ its principal place of business is located in theMember

State whose competent licensing authority is to grant the operating licence; for an operator having its principalplaceofbusiness in theUK, theCAA is the competentauthority;

■ itholdsavalidairoperatorcertificateissuedbyanationalauthorityofthesameMemberState;

■ ithasoneormoreaircraftatitsdisposalthroughowner-shiporadryleaseagreement;

■ itsmainoccupationistooperateairservicesinisolationorcombined with any other commercial operation of aircraft ortherepairandmaintenanceofaircraft;

■ its company structure allows the competent licensingauthority to implement the relevant provisions of the Regulation;

■ Member States and/or nationals ofMember States ownmorethan50%oftheundertakingandeffectivelycontrolit directly or indirectly through one or more intermediate undertakings, except as provided for in an agreement with a third country towhich theEuropeanCommunity is aparty;

■ itmeetsthefinancialconditionsspecifiedinArticle5oftheRegulation;

■ it complieswith the insurance requirements specified inArticle11oftheRegulationandinEuropeanRegulation785/2004;and

■ itcomplieswiththeprovisionsongoodreputeasspecifiedinArticle7oftheRegulation.

It isworthnotingthat theuncertaintiesaroundBrexithaveled certain airlines headquartered in the UK to apply for oper-ating licences elsewhere in the EU. These are precautionarymeasures to enable them to continue flights to EU countries in the event that there is no specific deal securing their operating licencespost-Brexit.Forexample,Ryanair,withheadquartersinthe Republic of Ireland, applied for and subsequently obtained an operating certificate from theUKCAA to continue theirdomestic flights in the UK.


UKlegislation iscontained in theCivilAviationAct1982andtheAirNavigationOrder2009(asamended).Anotherimpor-tant source of law is European legislation, which has direct appli-cation in the UK concerning safety aspects of aircraft, operators, maintenance and design organisations, and personnel in commer-cial transport. See, for example, the European Regulations: 216/2008 (as amended; “Basic Regulation”); 7/2013 (rules forairworthiness of aircraft and products and certification of design and production organisations); 1321/2014 (continuing airwor-thinessandapprovalof involvedorganisationsandpersonnel);2015/445(aircrew);and859/2009(“EU-OPS”–operatingsafetyrequirementsandstandards).TheCAAisresponsibleforadmin-istering air safety on a day-to-day basis, in its own capacity and for and on behalf of EASA.

309RadcliffesLeBrasseur / K&L Gates LLP


HM Government approved a third runway at Heathrow to expand the UK’s airport capacity. A public consultation on the effects of the expansion of Heathrow followed that decision. In June2018,ParliamentapprovedtheplansforthethirdrunwayatHeathrow.Constructionisanticipatedtobeginin2021,withtherunwaycompletedin2025.Theairport’soverallexpansionisexpectedtobeoperationalin2028.InOctober2018,LondonGatwick,theUK’ssecond-busiest

airport, published proposals to move its standby runway to use it forshort-haulflightsbythemid-2020s.Initsdraftmasterplan,Gatwicksaid thestandbyrunwaywouldhave tobemoved12metres to the north away from the main runway at a cost of about £500million tocomplywith international safetyRegulations,but predicted that using the second runway could raise the airport’scapacityfrom281,000flightsin2017–18to375,000–390,000by2032–33.Passengernumberswouldincreasefrom45.7millionto68–70millionoverthesameperiodiftherunwayprojectwentahead.Thestandbyrunwaywouldnotbelength-ened so it could not be used for long-haul flights, according to the plan. Any plans are subject to public consultation and the airport would have to apply for a development consent order for this proposal to go ahead.



The United Kingdom Register of Civil Aircraft, maintainedbytheUnitedKingdomCAA,isnotaregisteroflegalowner-ship, and therefore registration of ownership does not constitute proof of ownership of a particular aircraft. However, it often provides non-conclusive prima facie evidence.ToregisteraircraftontheUnitedKingdomRegisterofCivil

Aircraft,aFormCA1(seewww.caa.co.uk)issubmittedeitherbytheownerorbytheso-called“chartererbydemise”(byvirtueofarelevantloan,lease,hireorhirepurchase)eligibletoregisterinaccordancewiththeAirNavigationOrder2009[seeEndnote1].Aspartof theapplicationprocedure, theCAAmayrequest

additional information in order to process an application for registration (for example, a certified copy of a bill of saleevidencingtheownershipoftheaircrafttoberegistered).

Further guidance on the requirements for registration of aircraft on the United Kingdom Register of Civil Aircraft isavailable at www.caa.co.uk.


The CAAmaintains the UnitedKingdomAircraftMortgageRegister(pursuanttotheMortgagingofAircraftOrder1972).Therearenorestrictionsastowhocanberegisteredasamort-gagee, and any mortgage charging a UK-registered aircraft by wayofsecuritymayberegistered(andindeed,fromamortga-gee’s perspective, should be, so as to confirm the security priority referredtointhesectionheaded“Priority”below).Leasesandother charges not constituting in rem rights in a ‘G’-registered aircraft(suchasmortgages)cannotberegistered,andthereisnoseparateregistermaintainedbytheCAAfortheregistrationofownership rights in engines or parts.Mortgage RegistrationApplicants for registration of a mortgage must complete and provide to the CAA a Form CA1577 (see www.caa.co.uk),


TheUK is a party to theChicagoConvention 1944. Article26 andAnnex 13 to that conventionmake provisions for theinvestigationofairaccidents.TheUKimplementstherelevantrequirements by way of the legislation discussed below.TheAirAccidentsInvestigationsBranch(“AAIB”)isrespon-

sible for the investigation of civil aircraft accidents and serious incidentsintheUK.TheAAIBisanindependentpartoftheDepartmentforTransport.Theprincipallegislationrelatingtoinvestigationofairacci-

dents includes:■ European RegulationNo 376/2014 on the investigation

and prevention of accidents and incidents in civil aviation.■ UK Civil Aviation (Investigation of Air Accidents and

Incidents)Regulations1996.■ UKCivilAviation(InvestigationofMilitaryAirAccidents

atCivilAerodromes)Regulations2005.TheAAIBhasthepowertorequirethedetentionandpres-

ervation of evidence, and has powers of enquiry. Assistance ofthe localpolice isroutinelyavailabletoAAIBinvestigatorstosecureanaccidentsite.TheAAIBreportstotheCAAandother civil aviation authorities having responsibility for over-sight of any aspect of the accident. Reports of civil air accidents are published.


InJune2014,theCourtofAppealheldthatatechnicalproblemis not considered to be an extraordinary circumstance under Regulation EU 261/2004 and accordingly cannot be used asa basis for an airline to escape from its obligation to compen-satepassengersforlongdelays,cancellations,reroutingand/ordeniedboarding ( Jet2.com v Huzar [2014]EWCACiv791). Ina similar vein, inOctober 2017 theCourt ofAppeal rejectedEmirates’ arguments and held that non-EU airlines are liable underRegulationEU261/2004whereaflightdepartingfromthe UK is delayed by at least three hours at the final destina-tion,asaresultofamissedconnectionoutsideEurope(Gahan/Buckley v Emirates[2017]EWCACiv1530).ThiscasereaffirmstheCAA’sdecisiontotakeenforcementactionsagainstairlinesin relation to passenger compensation.At a “macro” European level, in May 2018 the European

Commission(the“EC”)dismissedacomplaint,broughtagainstLufthansa’s2015introductionofa€16surchargeonseatsbookedthrough the global distribution suppliers, such as Travelport,Travelsky,SabreandAmadeus,whichallegedbreachofCouncilRegulation(EC)2299/89onacodeofconductforcomputer-isedreservationsystems(the“Code”).TheECbasedtheirdeci-siononthefactthattheCode“nolongerreflectsmarketrealityandthat itmayberevisedinthefuture”. Inresponsetothis,theEuropeanTechnology&TravelServicesAssociationfiledaformalcomplaintwiththeEuropeanOmbudsmanagainst theECinJuly2018.Theoutcomewillcontinuetobeofinterestasanumber of other airlines have announced similar introductions to incentivise the use of their own, or new distribution capa-bility, booking systems.

A long-running commission of enquiry, chaired by Sir HowardDavies, gave its recommendation in July 2015 that athirdrunwaybebuiltatLondonHeathrow.InOctober2016,

310 United Kingdom


information regarding relevant payments giving rise to liens, to be provided directly to the mortgagee by the relevant regula-toryauthority.Thisisgenerallyeffectiveinprovidinganearlywarning of any potential detention or retention of a relevant aircraft, and in ensuring the timely termination of the relevant operating agreement before liens are enforced.Priority NoticesA potential mortgagee of a registered aircraft can “pre-reg-ister”amortgagewith theCAAbyenteringaprioritynotice,utilisingCAAFormCA1330 (obtained fromwww.caa.co.uk).The priority notice remains valid for 14 working days fromand including the date of entry, and during this period either the relevant aircraft mortgage must be registered or a further priority notice entered. The relevant aircraftmortgage, onceregisteredwiththeCAA,willthentakeitspriorityfromthedateofregistrationoftheoriginalprioritynotice. Theregistrationfees for such priority notices vary according to the maximum take-off weight of the subject aircraft, and are currently as follows(subjecttorevisionannually):

Maximum Take-off Weight CAA Charge

15,000kgandunder £54.00

Over15,000kg £108.00

TherelevantregistrationfeeisappliedbytheCAAona“peraircraft”basis.Mortgage SearchesA search of the United Kingdom Aircraft Mortgage Register for entries registered against relevant aircraft can be made by submittingaCAAFormCA350(obtainedfromwww.caa.co.uk)totheCAA.Searchfeesarecurrently£31peraircraftandarerevisedonanannualbasis.CertifiedcopiesoftheentriesontheMortgageRegisterareavailableat£31peraircraft.


As regards the lessor of an aircraft registeredwith theCAA,theoretically it is permitted to take enforcement action to repos-sess the aircraft following a default by the lessee concerned on the relevant lease terms, without enforcing through the courts, i.e.asa“self-help”remedy.Tothatend,leasetermsandcondi-tionsconventionallycontainanindemnificationoftheowner/lessorofarelevantaircraftagainstlossesand/orclaimsitincursas a result of a repossession action. Similarly, the mortgagee of anaircraftregisteredwiththeCAAmaytakepeacefulposses-sion of an aircraft following a similar default and it will then, in addition, have the power to sell the relevant aircraft if such power is properly and expressly described in the relevant mort-gage agreement.

Nevertheless, in practice it is generally advisable for the lessor orthemortgageeofarelevantaircraftregisteredwiththeCAAto pursue an application for repossession of the aircraft in court, particularly if there is any question as to whether a default has actuallyoccurredand/ortherelevantmortgagororlesseeoftheaircraft concerned resists or is likely to resist repossession. A court order obtained in this way reduces any risk of liability of thelessororthemortgagee(asthecasemaybe)oftherelevantaircraft to third-party claims for compensation for losses due to arepossession(inthecaseofaircraftinscheduledoperationinparticular,suchlossescanbesubstantial),assistswithensuringthe cooperation of the CAA with their issuing of necessarypermissions for the continued flight of the aircraft affected, and

together with a complete copy of the related aircraft mortgage deed(providedithasbeencertifiedasatruecopybytheappli-cant).TheCAAwillthenconfirm,inwriting,totheapplicantonce an aircraft mortgage registration application is successful.The registration fees for an aircraftmortgage by the CAA

vary according to the maximum take-off weight (“MTOW”)of thesubjectaircraft. Theyarecurrentlyas follows (andaresubjecttorevisionannually):

Maximum Take-off Weight CAA Charge

5,700kgandunder £184.00

5,701kg–15,000kg £365.00

15,001kg–50,000kg £607.00

50,000kg £1,093.00

For aircraft mortgages which attach to a number of aircraft, the CAA registration fee is levied on the heaviest aircraft byMTOW,plus£184foreachadditionalaircraftattached.PriorityAn aircraft mortgage registered on the United Kingdom Aircraft Mortgage Register will take priority over all other non-registered or subsequently registered mortgages. It consti-tutes notice of the relevant mortgage being given to all relevant third parties, and all persons are thereby deemed to have express notice of all of the details appearing in the United Kingdom Aircraft Mortgage Register.

If the relevant mortgagor is a company registered in England andWales,inordertoobtainalltheprotectionsconventionallyafforded to a mortgagee, it will be necessary to also register the relevantmortgageatCompaniesHousepursuanttotheprovi-sionsoftheCompaniesAct2006,asitwillbecomevoidagainstan appointed insolvency agent of themortgagor (whether anadministrator,aliquidatororasecuredcreditor).

It should be noted, however, that this priority position of an aircraft mortgage is nevertheless subject to certain other in remrights(“liens”)ofthirdpartiestoretainordetaintherele-vantaircraftuntilaclaimforpayment(e.g.inrespectofmain-tenance or repair of the aircraft or in respect of an unpaid purchasepricefortheaircraft)hasbeensatisfied.Theseliensare created both by statute and under common law, and they are also capable of creation by contract between parties. In addi-tion, certain specific rights are created by statute for relevant regulatory authorities to detain the aircraft (e.g. theCAA forunpaid airport and air navigation charges, the UK Environment Agency for unpaid penalties under the European Emissions Trading Scheme, andHMRevenue & Customs in respect ofunpaidtaxes).Incertaincircumstances,theserightsofdeten-tion will also include a power of sale of the relevant aircraft, or attach to the rest of the operating fleet of which the aircraft is a part despite different ownership.ThelimitedcaselawinEnglishlaw,whichappliesasprece-

dent to the matter of the priority of aircraft liens and statutory detention rights, suggests strongly that an aircraft lien or statu-tory detention right will take priority over a registered aircraft mortgage.

Liens are not registrable. However, in dealing with the concerns of mortgagees, it is possible to seek to manage the risks of detention and sale of a registered aircraft by way of contrac-tual obligations of owners and operators limiting the creation of liens to “permitted liens”. These obligations are generallycomplemented by contractual monitoring rights, established in the relevant loan or lease agreements, which include require-ments to provide “statement of account” letters, authorising




In relation to a), the supply, charter or hire of “qualifyingaircraft” are zero-rated forVATpurposes. The definition of“qualifyingaircraft”wasnarrowedinJanuary2011tobringtheUnited Kingdom more in line with the rest of Europe. Since then,aqualifyingaircraftmustbe:i)usedbyanairlineoperatingforrewardchieflyoninternationalroutes;orii)usedbyaStateinstitutionandofaweightofnotlessthan8,000kgandneitherdesigned nor adapted for use for recreation or pleasure.ThisisbroadlythepositionalsoinrelationtoVATapplicable

to the importation of aircraft into the United Kingdom, except where the aircraft has been imported previously into a Member StateoftheEUandisclassifiedtobein“freecirculation”forcustoms purposes.Inrelationtob),therearenodocumentarytaxes(e.g.stamp

duty)applicabletothebuyingandselling(i.e.trading)ofaircraftinEnglandandWales.


Chicago Convention 1944TheUnitedKingdomwasasignatorytotheChicagoConventionin1944anditwasratifiedon1March1947priortoitseffectivedateof4April1947.Geneva Convention 1948TheUnitedKingdomwasasignatorytotheGenevaConventionin1948,buthasnotratifiedit.Montreal Convention 1999The Montreal Convention has legal effect in the UnitedKingdom through the Carriage by Air Acts (ImplementationoftheMontrealConvention1999)Order2002/263.ThelimitsofliabilityforaircarrierspursuanttotheMontrealConventionhavebeensubsequentlyamendedbywayoftheCarriagebyAir(RevisionofLimitsofLiabilityundertheMontrealConvention)Order2009.Cape Town Convention (“CTC”)TheCTCenteredintoforceintheUnitedKingdomandtherebybecameeffectiveasUnitedKingdomnationallawon1November2015followingitsratificationon27July2015,asimplementedbythe International Interests inAircraftEquipment (CapeTownConvention)Regulations2015andseveraldeclarations.


The Chicago Convention is integrated into English law andapplicable in the jurisdiction as a matter of international law. Any dispute as to its implementation by the United Kingdom wouldbeheardthroughtheInternationalCourtofJustice.Asapracticalmatter,theprinciplesoftheChicagoConventionareimplemented at the national level in the United Kingdom by theCAA.

is also presentable to any prospective third-party purchaser of the aircraft as proof of the right of the mortgagee, or indeed the owner, to sell the aircraft with good title, free of any trailing interestsoftherelevantmortgagororlessee(subjecttoanyotherthird-partyrightsovertherelevantaircraft).

In addition, and by way of further potential protections, if it can be demonstrated to the court that a risk exists or that the relevant aircraft is treated in a way which frustrates the rights ofamortgageeor lessor(forexample,removalbyanoperatorof the aircraft from the jurisdiction or by a clear and mate-rial degradation of the condition of the aircraft in the circum-stances), it is possible to apply to the court, on an expeditedbasis, for an interim injunction ordering detention of the aircraft bythemortgagor/lesseeuntiljudgmentregardingrepossessionoftheaircrafthasbeengivenbythecourt.Thistypeofapplica-tion may be made without notice to the operator of the relevant aircraftifthemortgageeorthelessor(asthecasemaybe)candemonstrate the urgency of the matter to the court in accord-ancewiththeapplicableCivilProcedureRules.Inthesecircum-stances,themortgageeorthelessor(asthecasemaybe)willberequired to provide a cross-indemnity for any third-party claims arisingfromasuddendetentionoftheaircraft(not,however,infavour of the relevant mortgagor, lessee or operator of the rele-vant aircraft, on the basis that it is assumed that an appropriate indemnity from such party has already been given in respect of, among other things, losses arising from the repossession of the relevantaircraftfollowingadefault).

It should nevertheless be noted that a right to repossess the relevant aircraft would always be subject to any liens and otherstatutorydetentionorretentionrightsofthirdparties(asdescribedmorefullyin“Priority”underquestion2.2above).


English law as a rule recognises the concept of accession, which is similar to the nature of an annexation of title, for example by the owner of an aircraft to which an engine owned by another party is affixed. Nevertheless, limited case law on the subject is exclusivelyrelatedtorealestate(thatis,immovableassets)andthere is perceived to be little or no risk as a matter of English law to loss of or prejudice to title when aircraft engines are installed on a different airframe.Nevertheless,itiscommonmarketpractice(alsoinorderto

manage certain risks arising due to conflicts of law and legal systems as they apply to thesemostmobile assets) for engineownersandfinancierstorequireentryintoacontractual“recog-nitionof rights” agreementgovernedbyEnglish lawbetweenthe relevant parties as a condition to installing an engine on a different airframe. In addition, while aircraft engines are not capableofbeingregistered(andtherebyprovidingconstructivenoticeofownership to thirdparties) in theUnitedKingdom,ratification of theCapeTownConvention affords the oppor-tunityforengineownersandfinancierstoregisteran“interna-tional interest” in the assetwith the InternationalRegistryofMobile Assets.

312 United Kingdom


In common law, under specific conditions, a possessory lien arises in favour of a person who has expended labour and skills ontheimprovementofachattel.Therequirementfor“improve-ment” is now uncertain under English law. Liens in favourof maintenance organisations are widely considered to arise incommon law;however, in themajorityofcases the rightoflien is expressed contractually and there is no requirement for “improvement”.Under theCivilAviationAct1982, thepersonmanagingor

owning an aerodrome may detain an aircraft where its oper-ator has not paid the applicable airport charges in respect of that aircraft, or of any other aircraft, which that operator operates. Customsandexciseauthoritiesmaydetainanaircrafttoenforcetheir charges against an operator.The Transport Act 2000 provides that an aircraft may be

detained and sold where its operator has not paid charges relating toairnavigationservicesprovidedbytheCAA,theSecretaryofState or Eurocontrol.Oflessfrequentapplication,acreditormayobtainafreezing

injunction, restraining an aircraft pending judgment and execu-tionofthejudgmentdebt.Thecreditorwillhavetodemonstrate,inter alia,thatthereisarealriskof“dissipation”ofthedebtor’sassets other than in the usual course of the debtor’s business, and that the value of the debt is commensurate with that of the aircraft.Theremedyisequitableanddiscretionary;acourtwillexercise considerable caution before granting it.Thereisnodomestic legislationprohibitingthedetentionof

commercial transport aircraft.


Subject to the limited exceptions mentioned below, there is no statutory regime of “self-help” rights as a matter of Englishlaw.Itdoesallowtheexerciseof“extant”(orexisting)rightstorepossess chattels such as aircraft and aviation assets without the needforaCourtorder,howeverthereareconditionstothatanda person seeking to exercise rights on this basis can only do so peaceablyandlawfully.Therearenocollateralrightsofenforce-mentasamatteroflawwithoutaCourtorder,andaccordinglythe exercise of such rights on a self-help basis usually requires the person in possession or control of the aircraft (or avia-tion asset) to co-operate with that exercise. The rightsmustbeextant(undertherelevantsecuritydocumentsorlease)andclearly demonstrable to third parties if required.Themoreusualcourseofactionfromapracticalpointofview

is therefore toobtain aCourtordernotwithstanding the rest.Forthesakeofcompleteness,itshouldbenotedthattheBillsofSaleActs1878and1882allowseizureofanaircraft(oraviationasset)ontheoccurrenceofcertaineventsofdefault (asspeci-fiedintheActs)relatingtoasecuritybillofsale.ThoseActsdonothoweverapplytoaregisteredmortgageofanaircraft(oraviationasset).


Civil disputes concerning personal injury or property damagemay be pursued in the Queen’s Bench Division of the HighCourt or in the County Court in accordancewith the criteria

Asdetailedabove,theMontrealConventionbecameeffectivein theUnitedKingdompursuant to theCarriagebyAirActs(ImplementationoftheMontrealConvention1999)Order2009and it can be applied in the UK courts, without particular limi-tation, on that basis.The CTC is effective in the UnitedKingdom but will not

be applied retrospectively, i.e. any rights and interests existing priortoratificationoftheCTCwillretaintheirprioritywithouttheneedforregistration.Thisavoidsadditionaladministrativehurdles resulting from the ratificationof theCTC,but at thesame time means that it is not possible to register such pre-ex-isting interests.

It is worth noting that, although it does not change any rele-vant provisions of English law as regards the creation of in rem security interests generally, that law will not apply to deter-minewhetheraninternationalinterestundertheCTCisvalidlycreated.ThiswilldependentirelyontheCTCanditsrequire-ments in the case of an aircraft, debtor location or aircraft regis-trationina“CTCcountry”(andcompliancewiththeformali-tiessetoutinArticle7oftheCTC),andanaircraftmortgageemay be able to rely on the rights and remedies available under theCTCforsuchinternationalinterestintherelevantaircraft.

It is also worth noting that by adopting the Alternative A insolvencyregime(witha60-daywaitingperiodfortheassettobereturnedtothecreditor),theUKhasfurthermoredecidedtogrant additional protection to financiers and lessors in a debtor insolvency scenario.


Now that the nature and the timing of the exit from the United Kingdom from the EU is becoming clearer, it will be necessary to focus more closely on long-term planning and reliance on rele-vant taxation rules and Regulations as they become potentially subject to more regular change and variation. Nevertheless, for the time being the United Kingdom is signatory to a number ofDoubleTaxTreatieswithothernations,theeffectofwhichvaries but which typically reduces the rate of withholding taxes payable in various jurisdictions of tax residency on outbound operating lease and finance lease rentals, as well as loan repay-ment interest, connected with the financing of aircraft assets. As regards favourable tax treatment on the disposal of aircraft, no particular tax rules or Regulations apply at present, although the effects of such taxation can be optimised by thoughtful tax planning strategies.



An unpaid seller in possession of the aircraft may retain posses-sionoftheaircraftuntilpaymentisreceived(SaleofGoodsAct1979).TheCivilAviationAct1982providesforasalvagelienonan

aircraftwhere“anyservicesarerenderedinassisting,orinsavinglife from, or in saving the cargo or apparel of, an aircraft in or over the sea or any tidal water, or on or over the shores or any tidalwaters”,accordingtothenationalandinternationalregula-tory framework of the law of maritime salvage.




Remedies vary depending on the nature of the dispute. In general terms,thereareboth(forhistoricalreasons)legaland“equitable”remedies and the following may be available:■ Onaninterimbasis:

■ an injunction order to prevent the other party fromdoingsomethinguntilfinaljudgmentisreached;and

■ damages.■ Onafinalbasis:

■ damages;■ injunctionstopreventtheothersidefromdoingsome-

thingorrequiringtheotherpartytodosomething;■ possession orders to take control of an aircraft and

otheraviationassets;and■ ordersforthesaleofanaircraft.


From a Court DecisionApartyrequirespermissiontoappealfromaCountyCourtorHighCourtdecision.Arequest forpermission toappealcan (and if appeal is tobesought, should) bemade to the lower court at the hearing atwhichthedecisiontobeappealedismade.Thereafter,permis-sion may be sought directly from the appeal court.

Permission to appeal will only be given where the court considers that the appeal would have a real prospect of success or there is some other compelling reason why the appeal should be heard. In most instances, the trial judge will be considered best placed to judge the facts of the case. An appeal from factual findingsisusuallydifficulttopursue.Thecategoryandlevelofcourt to which an appeal is to be made depends on the level of thecourtmakingthedecisionwhichisbeingappealed.Thereis no automatic stay of execution of a judgment or order while appeal is pursued.ArouteofappealliesfromtheCourtofAppealtotheSupreme

Court.Again,permissiontoappealisrequired.From an Arbitral TribunalAs a general rule, an arbitrator has the same powers as any court, andanarbitraltribunal’sdecisionisbinding.Thereisnorightofappealtothecourtsonaquestionoffact.Therearenarrowexceptions to this general rule.

A party may challenge an arbitral award for lack of jurisdic-tion(section67oftheArbitrationAct1996).Itisalsopossibleto challenge the arbitrator’s award on the basis of a serious irreg-ularity(section67oftheArbitrationAct1996).Thedefinitionof a “serious irregularity” includes exceeding the arbitrator’spowers, failure to comply with the general duties imposed on the arbitrator or failure to deal with all the issues.ApartymayappealtotheHighCourtonaquestionoflaw

arising out of the arbitral award. The court will only inter-veneifthearbitrator’sdecisionisobviouslywrongor“theques-tion is one of general public importance and the decision of the tribunal is at least opentoseriousdoubt”.

summarisedbelow.“Commercialclaims”(seebelow)shouldbepursuedintheCommercialCourtoftheQueen’sBenchDivisionoftheHighCourt,orintheCountyCourt.Civilproceedingsfordamagesoraspecifiedsummaynotbe

startedintheHighCourtunlessthevalueoftheclaimexceeds£100,000; if not, proceedings should be started in theCountyCourt.Civilproceedingswhichincludeaclaimfordamagesinrespect

ofpersonalinjuriesmustnotbestartedintheHighCourtunlessthevalueoftheclaimis£50,000ormore.Subjecttotheabove,pursuitofaclaimintheHighCourtis

appropriate where:■ there is a degree of complexity of the facts, legal issues,

remediesorproceduresinvolved;and/or■ theoutcomeoftheclaimisofimportancetothepublicin

general.AcasemaybestartedintheCommercialCourtonlyifitfulfils

the characteristics of a “commercial claim”; namely any claimarising out of the transaction of trade and commerce, including any claim relating to a business document or contract, the export or import of goods or the carriage of goods by land, sea, air or pipeline.

Although there is no rigid financial limit, a claim for less than £200,000islikelytobetransferredoutoftheCommercialCourtunless it involves a point of special commercial interest. Themajority of cases arising out of the finance or lease of aircraft willbeheardbytheCommercialCourt.Themajorityofcasesconcerning death, serious injury or serious property damage claimsarisingoutofairaccidentswillbeheardbyaCourtoftheQueen’sBenchDivisionoftheHighCourt.Civilandcriminalcaseswillbeheardinseparatecourts.


Pursuant toPart6 (Service of Documents)of theCivilProcedureRules, where the claim form is being served in the “jurisdic-tion”(definedasEnglandandWalesandanypartoftheterri-torial waters of the United Kingdom adjoining England and Wales),aclaimmaybeservedbyanumberofmethodsincluding(without limitation)bypersonal service, first classpost,orbyservice on the defendant’s solicitors, fax or other means of elec-tronic communication.Thecourtwillservetheclaimform(subjecttocertainexcep-

tions, for example, where the claimant has notified the court thattheclaimantwishestoserveit).

In the event that the defendant is established out of the juris-diction, the court may permit a claim form to be served on the defendant’s agent provided that an agent for service of process has been appointed and that agent’s authority has not been terminated.

It may be necessary for the claimant to obtain the court’s permission in certain circumstances, e.g., where no agent for service of process is appointed, to serve a claim form on a defendantlocatedoutsidethecourt’sjurisdiction.Theclaimantmust file at court a notice with the claim form, containing a statement of the grounds on which it is entitled to serve the claim form out of the jurisdiction.

314 United Kingdom


In relation to codeshare agreements, neither national nor Europeancompetitionlawsprovidespecificrules;thelegaltestappliedbeingbasedon theexemptioncriteriaofArticle101(3)TFEUand/orthecorrespondingprovisionsofthecompetitionlaws of the EU Member States.ThecurrentEUcase law is limited. In theSAS/Maersk Air

case, in which the parties notified a codeshare agreement to the ECforclearance,withanunderlyingcartelagreementintheformof a broad market-sharing agreement between the parties, the ECconcludedthatthisagreementwasaseriousinfringementofcompetitionandfinedthepartiesatotalof€52.5million,whichwasconfirmedbytheEUCourtofFirstInstance(seeCOMP/37.444–SAS/Maersk AirandCOMP/37.386–SUN Air/SAS and Maersk Air, 18 July 2001 (2001/716 EG) confirmed by CFI decisionT-241/01,18 July2005). At thenational level, codesharecaseswereinvestigatedbytheItalianNationalCompetitionAuthority(seetheAlitalia/Volare case and the Alitalia/Meridianacase).IntheAlitalia/Volarecase,theItalianCompetitionAuthorityconsideredthe codeshare agreement restrictive but the decision was reversed bythecourt(bothfirstinstanceandsecondinstance),andintheAlitalia/Minerva case, the Authority considered the codeshare agreement not to be restrictive.In addition, on 27October 2016 theCommission closed an

investigationithadopenedinFebruary11onfree-flowparallelhub-to-hub codeshare arrangements between Lufthansa and TurkishAirlines,findingthatLufthansaandTurkishAirlinesdidnothavefullmarketingrightstoeachother’sseatinventory;thattheyapplieddifferingpricingstrategies;and that thecodeshareaccounted for only a marginal share of the parties’ sales on the relevantroutes.InFebruary2011theECalsoopenedaninves-tigationonthecodesharearrangementbetweenBrusselsAirlinesandTAPAirPortugalwhichisstillongoing.With regard to non-overlapping block space and interlining

agreements, these are viewed by EU regulators as pro-competi-tiveandhavebeenacceptedsubjecttocommitmentsbytheECin several merger clearance decisions pursuant to Regulation 139/2004 (please see:Air France/KLM, case COMP/M. 3280,paragraph158(j);Lufthansa/SNAirholdings,CaseCOMP/M.5335,paragraph441;andLufthansa/Swiss,CaseCOMP/M.3770,para-graph196).


TheUKcompetition authoritieswill follow an analysis similartothatoftheCourtofJusticeoftheEuropeanUnion(“CJEU”)andtheEC.Thesehavedefinedtherelevantmarketindecisionsregarding the aviation sectors as follows:Origin and Destination (“O&D”) City PairsThis evaluation considers a demand-side perspective, wherebycustomers consider all possible alternatives of travelling from a cityoforigintoacityofdestination,i.e.anO&Dcitypair(whichgenerallyareconsiderednon-substitutablebyadifferentcitypair).Premium and Non-Premium PassengersThedifferentservicesappealtodifferentpassengergroupswithvarying travel needs andprice sensitivities. First andBusinessClass ticket passengers are less price-sensitive than Economyticket users. The EC considers that Business and First Classtickets on one hand, and Economy on the other, are two different product markets.Non-Stop and One-Stop FlightsEU regulators consider that the degree of competitive constraint imposed by one-stop services varies according to the route and



UK competition law reproduces in virtually identical form EU competitionlaw,sections2and9oftheUKCompetitionAct1998(“CA1998”)settingoutprovisionssimilar totheprohibitionofanticompetitive agreements and the exemption criteria (Articles101(1)and101(3)oftheTreatyontheFunctioningoftheEuropeanUnion(“TFEU”)). A jointventurebetweenairlinecompetitorswould, therefore, have to satisfy the four exemption criteria of section9CA1998and/orArticle101(3)TFEU.Insummary:(a) the agreement should generate efficiency gains for the

parties or promote economic progress (e.g. costs savingsthroughjointoperationsorimprovedservices);

(b) consumersshouldreceiveafairshareofthosebenefits(e.g.includingthepassingonofsavingsthroughlowerprices);

(c) the agreement should not impose on the undertakingsconcerned restrictions which are not indispensable to the attainment of these objectives. Restrictions should be proportionate;and

(d) theagreementshouldnoteliminateeffectivecompetition.Thisisamarketpowertest,requiringthatthereshouldbeeffective competition outside of the joint venture.

TheECand theEuropeanNationalCompetitionauthorities(“EUregulators”)havenotyetblockedairline alliances, which are usually considered to produce substantial efficiencies and consumer benefits, but have, often following lengthy investiga-tions and negotiations with the parties, required commitments from the parties, to be satisfied that the alliance qualifies for exemption and, in particular, that competition is not significantly affected or eliminated.

In relation to highly integrated airline alliances, the so-called “metal neutral alliances”, theECclosed an investiga-tionon14July2010intotheBritishAirways,AmericanAirlinesand Iberia (members of the Oneworld alliance) highly inte-grated transatlantic alliance, covering all routes between North AmericaandEurope(seecaseNo39596BA/AA/IB).Thisalli-ance involved revenue-sharing and joint management of sched-ules,pricingandcapacity.TheECcloseditsinvestigationafterthe parties offered extensive commitments to make landing and take-off slots available at London Heathrow, which were consid-ered essential to facilitate the entry or expansion of competitors onroutesbetweenLondonandNewYork,Boston,DallasandMiami(London-NewYork:21slotsweekly(threedaily);London-Boston:14slotsweekly (twodaily);London-Miami: sevenslotsweekly(onedaily);London-Dallas:sevenslotsweekly(onedaily)).Thepartiesalsoofferedtoconcludewithcompetitorsfarecombi-nability and special pro rata agreements, as well as to provide access to the parties’ frequent-flyer programmes.InMay2013, theECclearedarevenue-sharing jointventure

focusing on transatlantic passenger routes (in particular,Frankfurt-New York), accepting binding commitments fromStar Alliance members Air Canada, United and Lufthansa(COMP/39595Continental/United/Lufthansa/Air Canada).Similarly,inMay2015,theECacceptedbindingcommitments

offeredbyAirFrance/KLM,Alitalia andDelta– allmembersoftheSkyTeamairlinealliance–toaddressconcernsovertheirtransatlantic joint ventures with respect to capacity, schedules, pricing and revenue management and sharing of profit and losses, which has the object and effect of restricting competition on three routes,namely:(i)Amsterdam-NewYork;(ii)Rome-NewYork;and(iii)Paris-NewYork(COMP/39964AF-KL/DL/AZ ).



■ ineachofatleastthreeoftheseMemberStates,theaggre-gate turnover of each of at least two of the undertakings concernedismorethan€25million;and

■ unless each of the companies concerned achieves morethan two-thirds of its aggregate Community-wide turn-overwithinoneandthesameMemberState(Article1(3),MergerRegulation).

The relevant legislation applicable to EUmerger control isCouncilRegulation(EC)No139/2004of20January2004onthecontrolofconcentrationsbetweenundertakings(OJL24,29January2004).UK Merger Control“Relevant Merger Situation”A relevant merger situation under the UK merger rules arises where:■ twoormoreenterprises“ceasetobedistinct”–inessence,

the transfer from one party to another of an “enter-prise”,whichisbroadlydefinedtoincludebusinessactiv-itiesofanykind;andeither:asaresultofthemerger,thecombinedenterpriseswillsupplyoracquire25%ormoreof any goods or services in the UK or a substantial part of theUK;oranexistingshareofsupplyof25%ormorewillbeenlarged(section23,EnterpriseAct2002)(itshouldbenotedthatthe“shareofsupply”testisnotamarketsharetest but, rather, focuses on the share of supply of the most narrowreasonabledescriptionofgoodsorservices);or

■ wherethevalueoftheturnoverintheUKoftheenterprisebeingtakenoverexceeds£70million.

Obligation to NotifyWiththeexceptionofspecialcasesofmergersinvolvingnews-papers, broadcasters or water companies, there is no obliga-tion to notify proposed or completed mergers. However, it is possible,andwillinmanycasesbeadvisable,tonotifytheCMA,sinceifamergermayresultina“substantiallesseningofcompe-tition”intheUKmarket,failuretoobtainpriorclearancerisksa reference to a more in-depth investigation and analysis by the CMA(knownasa“Phase2 investigation”),with thepossibleconsequences described below, which may include a require-ment that the purchaser divests.


UK Merger Control Timing and FeesThe CMA has an administrative (non-binding) timetable, towhich it usually adheres, to take a decision on a notified merger within 40 working days of receiving a complete notification.ThewaitingtimeforadecisionwillbegreateriftheCMAhasserious concerns or if undertakings by the parties to address competition difficulties have to be explored.AfeeispayabletotheCMAinrespectofrelevantmergersitu-

ations.Thefeespayableare,sinceAugust2012:■ £40,000,wheretheUKturnoverislessthan£20million;■ £80,000,wheretheUKturnoverisbetween£20million

and£70million;■ £120,000,wheretheUKturnoverisbetween£70million

and£120million;and■ £160,000,wheretheUKturnoverisover£120million.

A merger fee is not payable if the merger involves the acquisi-tion of an interest that is less than a controlling interest and the CMAhasinvestigatedtheacquisitiononitsowninitiative.Thisexception does not apply if the merger parties notified the acqui-sition by submitting a merger notice.

Furthermore, a person or corporate body acquiring an interest is exempt from paying a merger fee if, in its most recent

assesses the precise impact of competing one-stop flights on the parties’ joint venture on a route-by-route basis.Airport SubstitutionWheremorethanoneairport inacityatoneendof therouteoffers passenger air transport services, this must be assessed for marketdefinitionpurposes.Themarketdefinitionforairportsis based on a catchment area of airports considered substitutable bypassengers. Therelevantmarketmayvaryaccordingtothetypeofpassengers:premiumandnon-premiumpassengers; ortime-sensitive and non-time-sensitive passengers.


No. The notification system was abolished by Regulation1/2003, which entered into force on 1 May 2004, and sincethen it has no longer been possible to notify agreements to the CMA(orindeedtheEC)forclearance.Partiesnowalsoneedto ensure that their agreement satisfies the exemption criteria of section 9CA1998 and/orArticle 101(3)TFEU, onwhichsection9iscloselybased.


Thelegislation applicable to UK merger control is the Enterprise Act 2002 (the “Act”). Mergers (including, acquisitions andfull-function joint ventures) are not subject to a system ofmandatory notification in the UK. However, where a merger fallsoutsidetheturnoverthresholdsoftheEUMergerControlRegulation139/2004,butfallswithinthedefinitionof“relevantmergersituation”withintheAct(seebelow),theCMAwillhavejurisdiction to investigate it within four months of completion or thedateitwasmadepublic,whicheverislater(discussedbelow).EU Merger ControlA merger will have an EU dimension and will have to be notified totheECifeither:■ the combined aggregate worldwide turnover of all the

companiesconcernedismorethan€5billion(thisthresholdis intended to exclude mergers between small and medi-um-sizedcompanies);and

■ theaggregateCommunity-wideturnoverofeachofatleasttwoofthecompaniesconcernedismorethan€250million(thisthresholdisintendedtoexcluderelativelyminoracqui-sitions by large companies or acquisitions with only a minor Europeandimension);or

■ unless each of the companies concerned achieves morethantwo-thirdsofitsaggregateCommunity-wideturnoverwithinoneandthesameMemberState(thisthreshold–theso-called“two-thirdsrule”– is intendedtoexcludecaseswhere the effects of the merger are felt primarily in a single Member State, when it is more appropriate for the national competitionauthoritiestodealwithit)(Article1(2),MergerRegulation).

Alternatively:■ thecombinedaggregateworldwideturnoverofallunder-

takingsconcernedismorethan€2.5billion(insteadof€5billion);

■ the aggregate Community-wide turnover of each of atleasttwooftheundertakingsconcernedismorethan€100million(insteadof€250million);

■ the combined aggregate turnover of all undertakingsconcerned ismore than €100million in each of at leastthreeMemberStates;

316 United Kingdom


remote areas are only likely to be considered compatible with the internalmarket induly substantiated (and indeedexceptional)cases. Linking an airport with more than five million passen-gers per annum not located in remote regions, however, cannot be considered compatible with the internal market.


Yes. There are specific EU state aid rules as regards publicservice compensation granted to undertakings entrusted with theoperationofservicesofgeneraleconomicinterest(“SGEI”),which also cover the aviation sector. These rules are set outin ECDecision of 28 November 2005 on the application ofArticle86(2)oftheECTreatytostateaidintheformofpublicservice compensation granted to certain undertakings entrusted withtheoperationofservicesofgeneraleconomicinterest(OJNoL312/67, 29November 2005). TheEC’s decision coverscompensation for SGEI generally, but contains the following provisions specifically relating to air transport:■ public service compensation for air links to islands on

which average annual traffic during the two financial years preceding that in which the SGEI was assigned does not exceed300,000passengers,willbeconsideredcompatiblewiththecommonmarketandnotrequiringnotification;and

■ thesameruleapplies topublicservicecompensationforairports, if average annual traffic during the two financial years preceding that in which the SGEI was assigned does notexceed1millionpassengers.


TheGeneralDataProtectionRegulation(Regulation2016/679)(the “GDPR”) and the UKData Protection Act 2018 (“DPA2018”)governthecollectionanduseofpersonaldataintheUK.TheGDPRcame into force in eachMemberStateon25May2018.AsaRegulation,ithasdirecteffectineachEUMemberState as well as the Member States of the European Economic Area(“EEA”).AmongthechangestodataprotectionlegislationimplementedviatheGDPR,somekeypointsinclude:i)requiringfreely given, specific, informed and unambiguous consent from adatasubjectwhichmustbeaseasytowithdrawasitistogive;ii)theprovisionofclearandunambiguousinformationregardingwhat the data is to be used for, how long it is to be used for and the requirement to set out exactly what the data subject’s rights are inrelationtothepersonaldatatheyprovide; iii)maximumfines forbreachof theGDPRare thehigherof4%of annualglobalturnoveror€20million;iv)requiringorganisationswhichengagein“regularandsystematicmonitoring”ofdatasubjects“on a large scale” to appoint a data protection officer (alsoknownasa“DPO”);andv)therequirementforthoseprocessingpersonal data to be accountable and provide adequate technical and organisational measures to protect any personal data held.TheDPA2018repealedtheUKDataProtectionAct1998(the

“DPA1998”).Broadly,theDPA2018appliestotheprocessing(such as obtaining, recording, holding, using, disclosing orerasing)ofpersonaldata.TheobligationsundertheDPA2018areonthe“datacontroller”,whoisthepersonthatdetermineshowpersonalinformationcanbeprocessed.A“dataprocessor”is a person who processes data on behalf of the data controller.

financial year before the time the fee would become payable, itmeets the criteria for smallormedium-sized enterprises, asdefined by reference to certain provisions in the CompaniesAct2006.Forfinancialyearsbeginningonorafter1January2016and, if thedirectorsoftheacquirersodecided,financialyearsbeginningonorafter1January2015,theacquirerquali-fiesassmallormedium-sizedifit,orthegroupofwhichitisamember(asdefinedinsection474oftheCompaniesAct2006),has satisfied certain criteria laid downby theCMA (which ismore fully detailed in the relevant section of the government website:www.gov.uk).If the CMA believes that amerger has resulted ormay be

expected to result in a substantial lessening of competition, and satisfactory undertakings cannot be agreed with the parties, the CMAwill evaluate the competitive effects of themerger andmay, where it believes the merger has or may result in a substan-tial lessening of competition in the UK market, refer the merger foranin-depth“Phase2investigation”.TheCMAhasawiderange of powers, including to prevent the merger proceeding or divestment if the proceeding has already taken place.


AtUKlevel,no.AtEUlevel,yes.Thespecificrulesonstateaidfor the aviation sector are set out in the Guidelines on State Aid toAirportsandAirlines(CommunicationfromtheEC,2014/C99/03).TheGuidelinescoverthepresenceofstateaidwithinthemeaningofArticle107(1)ofTFEU,investmentaid,publicservice compensation for airlines and airports and so forth.Public Funding of AirportsIn order to assess whether an undertaking has benefited from an economic advantage, the Guidelines set out that the Market EconomyOperator(“MEO”)testwillbeapplied.Thetestwillbe based on available information and foreseeable developments atthetimeatwhichthepublicfundingwasgranted.Whenanairportbenefitsfrompublicfunding,theECwillassesswhethersuch funding constitutes aid by considering whether, in similar circumstances, a private-sector funder would have granted the same funding. Should such funding have been regarded as beinggrantedincircumstanceswhichcorrespondto“normal”market conditions, then it is not regarded as state aid.Start-up Aid for AirlinesTheGuidelines acknowledge that state aid granted to airlinesfor the launching of a new route with the aim of increasing the connectivity of a region will be considered compatible with the internalmarket pursuant toArticle 107(3)(c) of TFEU, ifthecumulativeconditionsintheGuidelinesaresatisfied.Theconditions thatwill be considered (in relation to start-ups) ascontributing to the achievement of an objective of common interestare: (i) if theairline increases themobilityofEUciti-zensandconnectivityaswellastheconnectivityoftheregionsbyopeningnewroutes;or(ii)iftheairlinefacilitatesthedevel-opment of remote regions.TheGuidelinesalsoacknowledgethatairlinesarenotalways

prepared to run the risk of opening new routes from unknown and untested airports, and may not have appropriate incen-tivestodoso.Consequently,start-upaidwillonlybeconsid-ered compatible for routes linking an airport with less than three million passengers per annum to another EU airport. Additionally, start-up aid for routes linking an airport with more than three million passengers per annum and less than five million passengers per annum and which are not located in



The Passenger Name Record Data and MiscellaneousAmendmentsRegulations 2018,which came into force on 25May2018,implementedthePNRDirectiveintheUK.

It is also worth noting that EU countries have bilateral PNR agreements with third countries in the wake of terrorist attacks across the EU and in the USA. Each of the agreements sets out the use of PNR data collected by airlines for law enforcement purposes.


TheGDPRhas enhancednotificationprovisions arounddatalosses and breaches, as well as allowing the relevant data protec-tion regulators the authority to levy significantly increased fines for non-compliance with the provisions of the Regulation.UndertheGDPRthereisnowamandatoryobligationforan

airlinetonotifytheInformationCommissioner’sOffice(“ICO”– the regulatorybody inchargeof theDPA)ofadatabreachunderArticle33.Thedatacontrollermustnotifytherelevantauthority without undue delay and, where feasible, not later than 72hoursafterhavingbecomeawareofit.Where an individual has suffered material or non-material

damageduetoadatacontroller’sbreachoftheGDPR,thatindi-vidual is entitled to claim compensation from the data controller or processor.The ICOhas the power to fine data controllers up to£20

million or 4% of annual worldwide turnover (whichever ishigher) for breaches of theGDPR. The data controllermayappeal the imposition of a fine to the Information Rights Tribunal.TheICOutilisedthispowertofulleffectinJuly2019whenitannouncedarecord£183millionfineoverapersonaldatabreachbyBritishAirwaysthatinvolvedthetheftofaround500,000passengers’data(seealsoquestion5.1below).TheDPA 2018 creates several criminal offences, including

(amongst others) unlawfully obtaining personal data, sellingpersonal data obtained unlawfully, altering personal data to prevent disclosure to the data subject, failing to comply with an enforcement notice and making a false statement in response to an information notice.TheICO’sothercoercivepowersincludeissuinginformation

notices requiring organisations to provide it with information and issuing binding undertakings to organisations with which they must comply.


The UK has an Intellectual Property Office (“IPO”).Trademarks,patentsanddesignsareregistrablewiththeIPO.Copyrightprotectionappliestooriginalworksuponcreation

ofthework,withouttheneedforregistration(copyrightisnotregistrableintheUK).TheUKhasarelativelylowthresholdoforiginality for a work to be considered an original work which isprotectedbycopyright.Databasesmaybeprotectedbycopy-rightand/ordatabaserights.

A patent may be filed online or in hard copy. A patent appli-cation should include a full description (including drawings)of the invention, the claims defining the invention, an abstract summarising the invention’s technical features and the relevant IPOforms.

Some intellectual property disputes may be heard initially by theIPO.TheIntellectualPropertyEnterpriseCourt(“IPEC”)

Thedatacontrollerremainslegallyresponsiblefortheprocessingofpersonaldatabythedataprocessor.TheDPA2018furthersetsoutderogationsandexemptionstotheGDPRthatwillapplyin the UK.TheDPA2018’sjurisdictionalscopeincludespersonswho:

(a) areincorporatedintheUK;(b) haveanoffice,branchoragencyintheUK;or(c) havearegularpracticeintheUK.Datacontrollersmustensurethatdataisprocessedinaccord-

ancewithsixdataprotectionprinciplesintheDPA2018;namelythat personal data is:(a) fairlyandlawfullyprocessed;(b) obtained only for specified, explicit and legitimate

purposes;(c) adequate,relevantandnotexcessiveforthepurposes;(d) accurateanduptodate;(e) notkeptforlongerthanisnecessary;and(f) protected by ensuring that appropriate technical and

organisational measures are taken against the unauthor-ised or unlawful processing of the personal data, as well as against accidental loss or destruction of, or damage to, personal data.

Whilstthereisnolongeraprincipleforindividuals’rightsintheDPA2018,thisisdealtwithseparatelyinChapterIIIoftheGDPRandstatesthatpersonaldatamustbeprocessedinaccord-ance with the rights of data subjects. Similarly, the principle for international transfers of personal data previously contained in theDPA1998isnowdealtwithseparatelyinChapterVoftheGDPR.

Furthermore, there is a new accountability principle in the GDPRwhichspecificallyrequiresyoutotakeresponsibilityforcomplying with the principles and to have appropriate processes and records in place to demonstrate that you comply.Datasubjects,suchasindividualpassengers,nowhavefurther

rightsundertheGDPR,includingtherightto:(a) accessacopyoftheinformationcomprisingtheirpersonal

data;(b) objecttoprocessingthatislikelytocausethemdamageor

distress;(c) preventprocessingfordirectmarketing;(d) objecttodecisionsbeingtakenbyautomatedmeans;(e) have inaccuratepersonaldatarectified,blocked,released

ordestroyed;(f ) havepersonaldatadeletedwherecontinuedprocessingis

unnecessary(the“righttobeforgotten”);(g) requestthatcertaindata,whichisprocessedbyautomated

means,istransferredtoadifferentcontroller;and(h) claimcompensationfordamagecausedbyabreachofthe

DPA2018.Thereisnominimumperiodforwhichcontrollersmusthold

personalinformation;rather,theymustsecurelydeletepersonaldata when that personal data is no longer necessary for the purposes forwhich itwascollected. On2December2015,aprovisional deal was reached by the European Parliament and Council on an EUDirective regulating the use of PassengerName Record (“PNR”) data for the prevention, detection,investigation and prosecution of terrorist offences and serious crime, and was endorsed by the Civil Liberties, Justice andHomeAffairsCommitteeon10December2015.TheDirectivewasapprovedbyParliamentasawholeon14April2016andbytheCounciloftheEUon21April2016.The PNRDirective obliges airlines to hand EU countries

their passengers’ data in order to help the authorities fight terrorism and serious crime. It requires more systematic collec-tion, use and retention of PNR data on air passengers, and there-fore has an impact on the rights to privacy and data protection.

318 United Kingdom


TheTransportAct 2000 requires airport operators to keeprecords of aircraft movements in order to facilitate the assess-mentandcalculationofcharges.TheCivilAviation(ChargeableAir Services) (Records) Regulations 2001 govern the formatand content of the aircraft movement log, which must be kept atanyairportpursuanttosection88oftheCivilAviationAct1982. Pursuant to theAirNavigationOrder 2009, the aero-drome licence-holder must ensure that the messages and signals between an aircraft and the air traffic control unit at the aero-drome are recorded, complete and preserved.The airport operator is responsible for ensuring that the

landing ground and runway remain clear of unmarked and unlit obstructions pursuant to the Air Navigation (Consolidation)Order1923.Thereisalsoastatutorydutyforanairportoperatortotake

care, in all reasonable circumstances, to see that a visitor shall be safe in using the premises for the purposes for which he is invited, or permitted, by the operator, to be there. Failure to install, maintain and use the proper equipment to enable aircraft to take off and land safely will attract liability, and there may be liability to passengers of aircraft which crash if there is a failure to have or to use adequate rescue equipment.

Airport operators have also been held liable where there was a knownhazardandnoeffectivesystemtodiscoveranddispersebirds, leading to bird strikes.Drone-relateddisruptionhasbeenaconsistentthemeatUK

airports in the last two years, with delays and cancellations reported atGatwick,Heathrow,Leeds andBradford airports.Themost notable example occurred atGatwick inDecember2018whendronesightingscausedthecancellationordiversionofaround1,000flightsinthespaceof36hours,affectingover140,000passengers. In thewakeof recentdrone incidents atairports, the UK government has published amendments to the UKAirNavigationOrder2016(ANO)sothat:(1) Anydroneweighingover250gmustberegisteredwiththe

CivilAviationAuthorityandlabelledwithanoperatorID.Individuals wishing to fly drones must also pass an online test once every three years. Drone pilots have until 30November2019tocomplywiththeserequirements,orriskfacing a fine.

(2) The‘runwayprotectionzone’(inwhichnodronesmaybeflown) has been extended around aerodromes towithin5kmofrunwayends,anduptoaheightof2,000ft.

Drone-related offences are punishable by up to five years’imprisonment.


TheConsumerProtectionAct1987andtheConsumerRightsAct2015applytoaviation-relatedmatters,providingacauseofaction toapassengeragainstamanufacturer. TheEnterpriseAct2002isalsoapplicabletoaviation:itgivestheCMApowersof enforcement in relation to consumer legislation.


AllthemajorGDSsoperateintheUK,e.g.Travelport,Amadeus,Sabre, etc.

is a specialist court that deals with lower-value or lower-com-plexityintellectualpropertydisputes.Thereisa£500,000capontheamountofdamages thatcanbeclaimed(althoughthiscanbewaivedifagreedbytheparties).Thereisasmallclaimstrackwithin theIPECwhich isappropriate if theclaimhasavalueof£10,000orless.MorecomplexorvaluablecaseswillbeheardintheChanceryDivisionoftheHighCourt.


European Regulation 261/2004 (“Regulation 261”) providesrules concerning compensation for denied boarding and/orcancelled or delayed flights. Airlines must ensure that a clearly legible and visible notice containing prescribed wording is displayed to passengers at check-in, and must provide passen-gers affected by denied boarding with a notice setting out the rules for compensation. Proposals to amend Regulation 261have been under consideration for several years but remain to be finalised. In recognition of the need for more immediate action, inJune2016theECpublishedInterpretativeGuidelinesontheRegulation, to clarify the understanding of passenger rights in this area.Under theCivilAviation (DeniedBoarding,Compensation

andAssistance)Regulations2005, theCAA is responsible forenforcementoftheoperators’compliancewiththeserules;theAirTransportUsersCouncilisthebodytoreceivecomplaints.It is an offence, subject to a defence of due diligence, for an oper-ating air carrier to fail to comply with the obligations imposed under the above.


Regulation261establishescommonrulesoncompensationandassistance to be given to passengers in the event of cancellation or longdelay. Pursuant to theUKdomestic legislation– theCivilAviation(DeniedBoarding,CompensationandAssistance)Regulations2005–theCAAisempoweredtopursueenforce-ment proceedings against an airline for non-compliance with the European rules. If proved, an airline will be liable to a fine notexceeding£5,000foreachoffence.


TheCivilAviationAct1982andtheAirNavigationOrder2009stipulate that where an aerodrome is open for public use, the aerodrome must be available to all, on equal terms, whether they areforeignordomesticcarriers.Therearenumerousotherobli-gations imposed upon an airport operator by law of application not limited to aviation; for example, concerning employment,health and safety and disability discrimination.The Civil Aviation Act 2012 has introduced a new system

ofeconomic regulationofairportoperators. Certainairportswillrequirealicencetolevyairportcharges,andtheCAAcanimpose such conditions on that licence as it deems necessary topromotecompetition(e.g.cappingthepercentagebywhichcharges at a particular airport may be increased, by a certain percentage or by reference to a particular index (such as theRetailPriceIndex)).



TheICOissued the firstUKenforcementnoticeunder theGDPRinJuly2018onaCanadiandatacompany.Thenumberofenforcementnoticesandpenalties issuedbytheICOundertheGDPR is expected to rise, especially in the aftermath ofthe ICO’s investigation concerning the data breach at BritishAirways inAugust2018 that resulted in theaccountnumbersandpersonalinformationfromaround500,000customersbeingstolen.TheICOenforcedathenunprecedented£183millionfineonBAasaresultofthebreach.ThePackageTravelDirective(2015/2302/EU),whichentered

intoforceon31December2015,becameeffectiveon1July2018.Thishasanimpactoncarriers,asithasascopewhichextendsbeyond the traditional holiday package booked through a tour operator,andcoversmanyotherformsofcombinedtravel(forexample, fly-driveholidays and flight-hotel bookings). Theseforms of combined travel are protected as a package under the Directive;inparticular,wherethetravelservicesarebookedatthe same time and as part of the same booking process or where theyareofferedforaninclusiveprice.ThePackageTravelandLinkedTravelArrangementsRegulations2018implementedthePackageTravelDirectiveintheUKon1July2018.Consumerrightslegislationwillcontinuetostrengtheninthe

UKasaresultoftheConsumerRightsAct2015andtheever-present bolstering of Regulation 261/2004, primarily by theCJEU’sinterpretationoftheRegulation,asnowclarifiedtoanextentbythe2016InterpretativeGuidelines,butalsoinrelationtoarevisiontotheRegulation(whichremainstobeagreed).Inaddition, as much of the aviation law in the UK stems from the EU, it will be important to keep a close eye on the development ofplansforBrexitandanyagreedtransitionperiod.The“with-drawal”dateof31January2020isfastapproaching;however,asat the time of writing, the terms of the UK’s withdrawal from theEUhavenotbeenagreed.Thereis,therefore,stilluncer-taintyaroundwhatBrexitwillmeanforthefutureofaviationlaw, including important areas such as the ownership share-holding of airlines, rights to land in and fly over different coun-tries in the EU and, more generally, the impact that changes afterBrexittoexistinglegislationwillhaveontheUKandEUaviation industry.

It is also worth being mindful of the role that Artificial Intelligence(AI)mayplayinthefutureoftheaviationindustry.Given the pace at which AI technology is developing, it is feasible that it may begin to be implemented by airlines and airport oper-ators commercially within the next few years to streamline parts of the ‘passenger experience’; for instance, scanning passen-gers through departures to their designated seats. AI may also have a use in the future management of security in airports. In September2019,theHighCourtruledthatSouthWalesPolicewerejustifiedintheiruseofautomatedfacialrecognition(AFR)technology(aformofAI)tosearchforindividualsona‘watchlist’ that included suspects, missing persons and persons of interest.TheuseofthetechnologywasjustifiedbecauseSouthWales Police complied with the relevant equality legislation,were processing personal data in a manner consistent with the applicable legislation and had implemented sufficient safeguards to ensure appropriate and non-arbitrary use of AFR. Subject to airport security implementing sufficiently rigorous safe-guards and complying with relevant standards, it is not outside the realms of possibility that this technology could be used in a similar fashion within commercial airports and by commercial operators in the near future.


No, there are no ownership requirements specific to GDSsoperating in the UK, beyond the general UK company law applicable to all companies. Foreign-domiciled companies may operate in the UK without registering a UK company or branch. UK-registered companies are not required to have a local share-holderordirector;theyjustneedtohavearegisteredaddressinthe UK.


Thereisnoprohibitionofverticalintegrationbetweenairoper-ators and airports. In such a case, however, competition rules particularlyprohibitingabuseofadominantposition(section18CA1998and/orArticle102TFEU)willprohibitanydiscrimi-natory charges for access to airport infrastructure, or denial of access where this affects trade and is not objectively justified.


Atthistime,EURegulationNo.1008/2008applies,whichsetsoutatArticle4 (Conditionsforgrantinganoperating licence)that an undertaking shall be granted an operating licence by the competent licensing authority of a Member State provided that “(if ) Member States and/or nationals of Member Statesownmorethan50%oftheundertakingandeffectivelycontrolit, whether directly or indirectly through one or more interme-diate undertakings, except as provided for in an agreement with athirdcountrytowhichthecommunityisaparty”.

5 In Future


It is clear that developments in the data protection space involving the collection, retention, processing and use of personal–specifically,PNRdata–willcontinuetofeatureasamajor area of concern and focus for airlines and airports in the future, letalonethenexttwoyears. WiththeimplementationoftheGDPR,theDPA2018andthePNRDirective(andthenationalvariations),operatorsneed tocontinue to reviewandmonitor their mechanisms, processes and procedures in place to ensure compliance with new legislative requirements around the collection and provision of data and the secure handling, reten-tion and use of it.

320 United Kingdom


(c) nationalsofanyEEAstate;(d) Britishprotectedpersons;(e) bodiesincorporatedinsomepartoftheCommonwealth

and having their principal place of business in any part oftheCommonwealth;

(f) undertakingsformedinaccordancewiththelawofanEEA state which have their registered office, central administration or principal place of business within the EEA;or

(g) firmscarryingonbusinessinScotland;inthissub-para-graph“firm”hasthesamemeaningasinthePartnershipAct1890(c39).

Under Part 1 Article 5(4) of the Air Navigation Order2009,ifanaircraftischarteredbydemisetoapersonqual-ifiedunderparagraph(1),theCAAmay,whetherornotanunqualified person is entitled as owner to a legal or benefi-cial interest in the aircraft, register the aircraft in the United Kingdom in the name of the charterer by demise if it is satisfied that the aircraft may otherwise be properly regis-tered.ThereisalsoadiscretionfortheCAAtoregisteranaircraft which is owned by a person not qualified under Part 1Article5(1)wheretheownerresidesorhasaplaceofbusi-ness in the United Kingdom, but such aircraft must not be used for commercial air transport, public transport or aerial work(Part1Articles5(2)and(3)).

Endnote1. UnderPart1Article4(3)oftheAirNavigationOrder2009,

an aircraft must not be registered or continue to be regis-teredintheUnitedKingdomifitappearstotheCAAthat:(a) theaircraft isregisteredoutsidetheUnitedKingdom

and that such registration does not cease by opera-tion of law when the aircraft is registered in the United Kingdom;

(b) an unqualified person holds any legal or beneficialinterest by way of ownership in the aircraft or any share intheaircraft;

(c) theaircraftcouldmoresuitablyberegisteredinsomeotherpartoftheCommonwealth;or

(d) itwouldnot be in thepublic interest for the aircraftto be, or to continue to be, registered in the United Kingdom.

PursuanttoPart1Article5(1),onlythefollowingpersonsare qualified to hold a legal or beneficial interest by way of ownership in an aircraft registered in the United Kingdom or a share in such an aircraft:(a) theCrowninrightofHMGovernmentintheUnited

Kingdom and the Crown in right of the ScottishAdministration;

(b) Commonwealthcitizens;

321

Aviation Law 2020

RadcliffesLeBrasseur / K&L Gates LLP

Alan D. Meneghetti is a partner in the Corporate department at RadcliffesLeBrasseur. He undertakes a full range of privacy, commercial and regulatory work in the general commercial, aviation and manufacturing sectors. His practice ranges from handling regulatory issues to the procurement of suppliers and responses to tenders, to data protection and privacy, information technology, intellectual property, and the drafting and negotiating of various commercial agreements, such as outsourcing, supply, service, and research and development. He has worked extensively on matters in Africa, the Americas, Europe and the United Kingdom.Alan is a regular contributor to publications and speaker at conferences in these sectors, and his articles and book reviews have been widely published.


Tel: +44 20 7770 5232Fax: +44 20 7776 7621Email: [email protected] URL: www.rlb-law.com

Philip Perrotta is a senior partner in the Firm’s London office, where he is responsible for the Aviation Finance team and is a member of its Banking & Asset Finance group. The nature of his practice is truly international and he frequently works globally with clients across Europe and South Asia, including out of Milan and Singapore as part of the service to clients in this practice area. He is an aviation and aviation finance specialist and recognised as a “leading expert”, regularly receiving both commendations for his ability, focus and commerciality as well as accolades in the legal directories, for example for being “very strong” and “dealing with all the big points without ever over-lawyering them”. He is noted as “experienced and skilled” and for providing “an excellent and accessible service” to clients (The Legal 500).Philip acts for a broad range of significant aviation businesses across the world and he has an impressive track record of successful transac-tions, some being landmark deals in the industry. He has successfully concluded literally hundreds of transactions involving commercial and business aircraft, aero-engines and other aviation assets in jurisdictions in every continent. Philip is a regular contributor at industry events, and is often sought after to comment on developments in a variety of segments of the aviation sector and the aviation finance market, where his insight as a commentator is highly valued.

K&L Gates LLPOne New ChangeLondon EC4M 9AFUnited Kingdom

Tel: +44 20 7648 9000Fax: +44 20 7648 9001Email: [email protected] URL: www.klgates.com

RadcliffesLeBrasseur is a leading UK-based law firm providing business, regulatory, not-for-profit and private legal advice.RadcliffesLeBrasseur is listed as a leading firm in the Legal 500 and Chambers and Partners directories, and named in The Times Best Law Firms 2020. The firm provides legal services nationally from offices in London, Leeds and Cardiff.The services offered by the firm in the aviation sector include:■ Financing of new and used aircraft, engines and equipment.■ Aviation business structuring.■ Acting before the Federal Aviation Administration and the Department of

Transportation.■ Commercial litigation and international disputes.■ Environmental regulatory and legislative matters.■ An interdisciplinary approach, including commercial, corporate, employ-

ment, immigration, property, dispute resolution and regulatory advice.RadcliffesLeBrasseur’s clients in the aviation industry include lessors, manufacturers, financial institutions, repair facilities, parts distributors and insurers.

www.rlb-law.com

K&L Gates LLP is a fully integrated global law firm with lawyers located across five continents. Our broad global platform allows us to guide clients through the legal challenges inherent in the ever-changing international land-scape. The deep latticework of relationships across our offices and practices enables our clients to respond to diverse legal issues and risks, through the services of one law firm with a single point of communication. K&L Gates LLP represents leading global corporations in every major industry, capital market participants, and ambitious middle-market and emerging growth companies. Our lawyers also serve public sector entities, educational insti-tutions, philanthropic organisations and individuals. We are leaders in legal issues related to industries critical to the economies of both the developed and developing worlds – technology, manufacturing, financial services, health care and energy, among many others.

www.klgates.com


Aviation Law 2020

Chapter 42322

USA

Fox Rothschild LLP Rebecca Tingey

Diane Westwood Wilson

USA


US air carrier applications are analysed for: (1) US citizenship (49 USC § 40102(a)(15)); (2) managerial competence; (3) finan-cial fitness; and (4) legal compliance.

Foreign air carrier applications are analysed for: (1) foreign citizenship; (2) operational and financial fitness; and (3) whether the carrier is covered by a bilateral agreement (14 CFR Parts 211 and 302). Foreign carriers must hold a valid permit issued by the DOT pursuant to 49 USC § 41301 or a valid exemption. The DOT’s final decision to grant or deny the application of a foreign carrier is subject to review by the President of the United States.

Applications are published for public comment. Carriers may seek an exemption permitting them to begin operations prior to the DOT’s decision.Safety authorityUS carriers are required to hold an Air Carrier Certificate and Operations Specifications (“OpSpecs”) (14 CFR Parts 121 and 135). Foreign carriers are required to hold only OpSpecs (14 CFR Part 129). The FAA evaluates whether the carrier meets certain safety regulations and standards.

There are five phases in the certification process for US carriers: (1) pre-application; (2) formal application; (3) docu-ment compliance; (4) demonstration and inspection; and (5) certification.

Responsibility for issuance of foreign air carrier OpSpecs has been delegated to four international FAA field offices located in Dallas/Ft. Worth, Los Angeles, Miami, and New York.


The FAA, established by the Federal Aviation Act of 1958, codi-fied under 49 USC Subtitle VII, administers air safety and has four business areas:■ Airports–responsibleforoptimisingthesafety,capacity,

and condition of the national airport system (14 CFR Part 139).

■ AirTrafficOrganization–responsibleforairtrafficsafety(14 CFR Parts 71 and 77).

■ Aviation Safety – responsible for ensuring the certifi-cation, approval and airworthiness of aircraft, as well as certification of all pilots, mechanics, and other air safe-ty-related professionals (14 CFR Parts 21, 25, 33, 61, 91, 121, 125, and 135).

■ OfficeofCommercialSpaceTransportation–responsiblefor protecting the public, property, and interests of the US during launch or re-entry of commercial spacecraft.

1 General


Aviation is principally regulated by the following:■ US Department of Transportation (“DOT”), a federal

Cabinet department of the US government established in 1966.

■ FederalAviationAuthority (“FAA”), anational agencyofthe DOT, with power to regulate all aspects of US civil avia-tion, including commercial space transportation.

■ NationalTransportationSafetyBoard(“NTSB”),aninde-pendent US government agency responsible for investi-gating civil aviation accidents.

■ US Department of Homeland Security’s (“DHS”)Transportation Security Administration (“TSA”) and Customs and Border Protection (“CBP”). The TSA isresponsible for airport security and works in conjunction withCBP,thelargestfederallawenforcementagencyoftheDHS,toscreenairlinepassengersandemployeesatairports.

■ Title 14 of the Code of Federal Regulations (“CFR”),“Aeronautics and Space”, issued by the FAA.

■ Title49oftheCFR,“Transportation”,issuedbytheDHSand the DOT.

■ Title49oftheUnitedStatesCode(“USC”),“Transporta-tion”, enacted by the US Congress.


Air carriers must obtain two separate authorisations: (1) economic authority issued by the DOT; and (2) safety authority issued by the FAA.Economic authorityPursuant to 49 USC § 41101, economic authorisation is given in the form of a certificate for interstate or foreign passenger and/or cargo authority. Economic authority for US carriers may be in the form of a certificate for interstate or foreign passen-gers and/or cargo and mail authority, a certificate for interstate or foreign all-cargo authority, or authorisation as a commuter air carrier. All carriers must file an application on the public docket at: http://www.regulations.gov. Separate applications are required to obtain interstate authority and foreign authority.

323Fox Rothschild LLP


forward in the privatisation process. If privatised, St. Louis would be the second major US airport to be privately operated – the first being San Juan’s LuisMuñozMarín InternationalAirportinPuertoRico–andtheonlymajorprivatelyoperatedairport in the continental US.


Like all commercial enterprises, airports generally seek to maximise profitability when allocating leasehold space, gate assignments, and times of operation, while working closely with the airlines to support shared handling arrangements. The FAA Airport Safety Program addresses general aviation airport safety, runway safety, and safety management systems. The FAA Passenger Facility Charge (“PFC”) Program permits the collection of PFC fees of up to $4.50 for every eligible passenger at commercial airports controlled by public agencies. PFCs are capped at $4.50 per flight segment, with a maximum of two PFCs charged on a one-way trip or four PFCs on a round trip, for a maximum of $18 total.


TheNTSB has primary authority to investigate all civil avia-tion accidents to determine probable cause and issue safety recommendations.Uponrequest,theNTSBfrequentlyassistsforeign governments with accident investigation. For general aviationaccidents,theresponsibleNTSBfieldofficeoftendele-gates the investigation to the FAA pursuant to Section 304(a)(1)oftheIndependentSafetyBoardActof1974.Whenthereis an indication that an accident may have been the result of criminalconduct,localpoliceauthorities,theFederalBureauofInvestigationand/ortheDepartmentofJustice(“DOJ”)willgetinvolvedandmaydelaycertainaspectsoftheNTSB’saccidentinvestigation.

After a civil aviation accident, the airline must immediately notifythelocalfieldofficeoftheNTSB(49CFR§830.5)andfamily members of passengers (49 CFR § 1136). The airline must preserve aircraft wreckage, cargo, and data recorders until the NTSBtakescustody(49CFR§830.10(a)).Theairlinemustalsoretain all records, reports, internal documents and memoranda dealing with the accident, and permit the inspection of pertinent recordsbytheNTSB(49CFR§830.9(a)and830.10(d)).After completing its investigation, the NTSB prepares a

public final report (49 CFR Parts 831 and 45). Pursuant to the Aviation Disaster Family Assistance Act of 1996 and Foreign Air Carrier Family Support Act of 1997, both US and foreign carriers are required to have in place a Family Assistance Plan, which identifies how the carrier will address the needs of fami-lies and passengers involved in any accident resulting in a major loss of life.


Animals on airplanes continued to be a hot issue in 2019, with the DOT issuing a Final Statement of Enforcement Priorities Regarding Service Animals, which provides clarifying guid-ance to airlines regarding how to handle service animals and


Yes and no. Aviation regulations are generally dictated by aircraft size, as measured by the number of passenger seats and payload capacity, and whether the operation involves common carriage of passengers and/or cargo. 14 CFR Part 121 applies to oper-ators involved in scheduled common carriage, such as airlines and cargo carriers; 14 CFR Part 125 applies to operators of larger aircraft not involved in common carriage; and 14 CFR Part 135 applies to commuter or on-demand operations of air carriers, commercial operators, or operators of large aircraft. These Parts set forth varying operational requirements relating to equipment, maintenance, pilot qualifications and training, and other matters. Operating standards governing foreign air carriers operating in the US are contained in 14 CFR Parts 91 and 129.


Regulation of an air charter operator depends upon its size and type. The governing regulations are set forth in: 14 CFR Parts 135 and 298 (on-demand for both passenger and cargo, with smaller aircraft); 212 (large aircraft); and 380 (public charters for both small and large aircraft). It is important that an oper-ator obtain authority and operate under, and comply with, the appropriate CFR Part.


Generally, foreign air carriers are treated similarly to US air carriers through bilateral air transport or service agreements. Under the International Aviation Safety Assessment Program (49 CFR Part 1546), foreign air carriers must meet additional safety requirements. In deciding whether to grant a foreign air carrier an operating licence, the FAA considers the existence of an effective aviation security agreement between the US and the foreign air carrier applicant’s homeland.


Almost all of the major US airports servicing commercial oper-ators are owned by public entities, including local, regional, or state (and bi-state) authorities. For example, Los Angeles World Airports, an agency of the government of Los Angeles, owns Los Angeles International Airport and the Maryland Aviation Administration is the owner and operator of Baltimore/Washington International Thurgood Marshall Airport. Actual operation of the airports is often handled by specially created public entities. For example, the Port Authority of New York andNewJersey,aninterstatecompact,operatesseveralairportsinNewYorkandNewJersey.AfewUSairportshavelong-termagreements with private firms to design, build, and manage new terminals.

Efforts to privatise St. Louis Lambert International Airport in St. Louis, Missouri, which began in 2018, are still underway. In October 2019, the city of St. Louis issued a request for quali-fications from firms interested in leasing the airport, a key step

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other security interests are set forth in 14 CFR Part 49. All regis-tration documents must include the manufacturer, model, serial number, and registration number, and original signatures must be submitted. An aircraft is eligible for US Registration if it is not registered in another country and is owned by: (1) a US citizen; (2) a partnership each of whose partners is a US citizen; (3) a US corporation of which the president and at least two-thirds of the board of directors are US citizens and at least 75% of the voting interest is owned or controlled by US citizens; (4) a citizen of a foreign country lawfully admitted for permanent residence in the US; (5) a US governmental unit or subdivision; or (6) a non-US citizen corporation organised and doing business under the law of the US or one of its states as long as the aircraft is based and primarily used in the US (60% of all flight hours being from flights starting and ending in the US).

The FAA Aircraft Registry also serves as the entry point for registering ownership and security interests pursuant to the Cape Town Convention and related Protocol on Aircraft Equipment.


The FAA and the DOT regulate aircraft operations, and a lessor or financier should require its lessee/operator to maintain compliance with all applicable FAA and DOT regulatory require-ments. The lessee/operator will need to meet certain require-ments (including licensure, depending on the type of operation) regarding who may operate the aircraft and the type of opera-tions that can be conducted. The lease agreement should state clearly that the lessee maintains operational control. Lease agree-ments that contemplate operations by an uncertificated operator (e.g., Part 91) contain a truth-in-leasing clause which satisfies the requirements set forth in 14 CFR Part 91, which is then filed with the FAA for truth-in-leasing purposes only.


The US is a signatory to the Cape Town Convention, which provides at Article XIV(3) of the Aircraft Equipment Protocol, that “ownership of or another right or interest in an aircraft engine shall not be affected by its installation on or removal from an aircraft”.


Aircraft transactions in the US or with US persons can be subjected to either or both state or federal tax on sale, use, and leasing, which treatment can be favourable or otherwise depending on numerous variables, such as the jurisdiction of the persons involved in the transaction, the situs of closing, the intended use of the aircraft subsequent to closing, and others.

emotional support animals on US-based flights. Of particular note, airlines can require a passenger to provide medical docu-mentation of their need for the animal. Airlines cannot ban a specific breed or species of support animal, but they can deny specific animals if they believe the animal could pose a threat. Airlines cannot require advance notice by passengers travelling with service animals, cannot restrict passengers from travelling with more than one emotional support animal, and cannot limit the total number of animals of any flight. Airlines can prohibit animals that are too large or too heavy from being in the cabin and animals younger than four months.

With the rise of animals on airplanes, not surprisingly, there has been an increase in related litigation. See, e.g., Jackson v. Delta Air Lines, Inc. 19 EV 002878 Fulton County, Georgia (passenger sued airline and dog’s owner after in-flight attack by an emotional support dog); Diveroli v. American Airlines, et al.,1:19-cv-23251-BB(SD Florida 2019) (passenger who suffers anxiety sued airline after flight attendant locked emotional support animal in bath-room); Gonzalez v. Alaska Airlines, et al., 19CV08567 Circuit Court, Oregon (five-year-old bitten by emotional support dog in Portland International Airport).

2019 saw a significant increase in airport construction projects in the US and some of the busiest airports are undergoing major construction. For example, Los Angeles International Airport is undergoing a $14 billion Capital Improvement Program, which has been described as the largest public works program in the city’s history. The new airport will have 18 new aircraft gates, including many for Group V and VI aircraft like the Airbus A380 and the Boeing 747-8. At Atlanta’s Hartsfield-Jacksonairport, the world’s second busiest airport, they are constructing five new concourse gates. Denver International Airport is in the middle of a $650 million construction project.

Efforts to modernise US airports have also included US CustomsandBorderProtectionworkingwithairlinestoimple-ment biometric face scanners. Facial recognition boarding has been implemented in Atlanta, Detroit, Minneapolis, and Salt Lake City.



No. Pursuant to 49 USC § 44103, a Certificate of Registration is “not evidence of ownership of an aircraft in a proceeding in which ownership may be in issue”. Thus, while the FAA Aircraft Registry identifies an “owner” of each registered aircraft and evidence of ownership is required to record such registration with the FAA, the Certificate of Registration does not, standing alone, constitute proof of ownership. The best evidence of ownership for an FAA-registered aircraft is an orig-inal bill of sale from the manufacturer/seller to the current owner. Where the aircraft has had more than one previous owner, the best practice is for the current owner to obtain the bills of sale for all previous title transfers such that the full chain of title is documented.


The FAA Aircraft Registry is a publicly searchable database where mortgages and other security interests can be recorded against an aircraft. The requirements for recordation of mortgages and



such as the Montreal Convention). Although the Montreal Convention, and its predecessor the Warsaw Convention, are the subject of frequent litigation, there is limited case law inter-preting the Geneva and Cape Town Conventions.


The US has an extensive network of income tax treaties for the minimisation of double taxation, the application of which will dependontheparticularsofeachtransaction.Becausetherearenumerous restrictions on so-called “treaty-shopping”, sophis-ticated analysis is often required to obtain taxation benefits. There is no blueprint to follow to maximise tax benefits.



Creditors’ rights are governed by state law and vary depending on the type of debt, priority of any lien, and whether the lien has been perfected, i.e., properly recorded/registered. In general, however, if the aircraft owner or operator has unpaid debts and is not under bankruptcy court protection, a creditor may obtain a court judgment enforceable in accordance with the relevant state laws and procedures. In addition, if a creditor is able to meet certain criteria, it may be able to obtain a pre-judgment restraining order or injunction preventing the debtor from moving the aircraft.


The Uniform Commercial Code, which has been adopted in some form by all 50 states, permits a lessor to repossess leased equip-ment or render the equipment unusable, if it can do so without causing a breach of the peace. Upon seizure, the lessor may then retain, sell, lease, or otherwise dispose of the aircraft and apply the proceeds to satisfy the debt. The rights of the lessor may be limited by the applicable lease and/or financing agreements.

In addition, the Cape Town Convention and its Aircraft Equipment Protocol may affect default remedies available in the US, depending on the type of aircraft, its place of registration, the location of the debtor, and whether the transaction docu-ments create an “international interest”. The US Declaration to Cape Town makes clear that the US respects applicable local laws with respect to non-consensual liens.


In civil cases, an individual or the government may bring a claim and the available remedies are generally limited to mone-tary and/or injunctive relief. Criminal cases, which can only

While there is no VAT in the US, each state has its own tax laws, and, within a state, there may be county or city tax laws. Most states collect sales tax on transactions involving tangible personalproperty.Onlyfivestates–Alaska,Delaware,Montana,NewHampshire, andOregon – do not have a state sales tax.Therefore, if delivery of the aircraft is made in one of these states, there will be no state sales tax assessment. Other states, such as Massachusetts, New York, Maine, Connecticut and Rhode Island, exempt aircraft from sales tax, while others cap the sales tax on aircraftsalesandleases(SouthCarolina–$500;NorthCarolina–$2,500;Alabama–2%).Somestates,suchasArizona,Arkansas,California, Colorado, Florida, Georgia, Illinois, Michigan, and Texas, have a “fly-away” exemption, meaning that the transac-tion will be exempt from sales tax if it is flown out of the state within a specified period of time after the transaction closes.

In addition, with respect to any aircraft transaction in the US with a US entity (sale or lease) the US (federal) tax code should be consulted for the applicable tax implications. For example, the TaxCutsandJobsActof2017 (“TCJA”)eliminates thedefer-ment of gains and losses for the like-kind exchange of aircraft, effective1January2018,butexpandstheuseofbonusdepreci-ation of all qualifying equipment (both new and pre-owned) to 100%, which allows taxpayers to immediately write off the cost of aircraft acquired and placed in service after 17 September 2017 andbefore1January2023.

The interplay of federal and state laws and applicable treaties can be unique to each transaction. Thus, the tax implications of a particular transaction must be considered by counsel well in advance of closing.


All of the main multilateral aviation treaties – internationalConventions–haveenteredintoforceintheUS:■ ConventiononInternationalCivilAviation(the“Chicago

Convention”).■ ConventionontheInternationalRecognitionofRightsin

Aircraft.■ Convention for theUnificationofCertainRules relating

to the International Carriage by Air (the “Warsaw Convention”).

■ Convention on Offenses and Certain Other ActsCommittedonBoardAircraft(the“TokyoConvention”).

■ MontrealProtocolNo.4toamendtheWarsawConventionasAmendedbythe1955HagueProtocol.

■ Convention for the Unification of Certain Rules forInternational Carriage by Air (the “Montreal Convention”).

■ ConventiononInternationalInterestsinMobileEquipment(the “Cape Town Convention”) and Aircraft Equipment Protocol.


In the United States, both state and federal courts have juris-diction over issues of treaty interpretation. A court should look to whether a treaty’s provisions are preemptive of local, i.e., federal regulations and state laws, including statutory law. The Montreal Convention has been the subject of enforcement by the US Supreme Court. See EL AL Israel Airlines v. Tseng, 525 U.S. 155 (1999) (a seminal international aviation case upholding the preemptive effect on local law of treaties of the United States,

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or (4) the arbitrators exceeded their powers, or so imperfectly executed their powers that they failed to render a mutual, final, and definite award.


In state court, the rights of appeal vary from state to state, with potentially no right of appeal until there is a final judgment. Some states permit interlocutory appeals either as of right or by permission, which can dramatically affect the cost, length, and outcome of the proceedings.

In federal court, interim appellate review of district court rulings is available only in limited circumstances; for example, pursuant to Federal Rule of Civil Procedure 23(f) (discretionary appeal of order granting or denying class action certification), 28 USC § 1292 (interlocutory decisions), and a writ of mandamus (a request that the circuit court of appeal mandate the district court to award the relief denied).

In arbitral proceedings, obtaining interim court review is extremely difficult, and, as noted above, the Federal Arbitration Act severely curtails judicial review of arbitration awards.



The DOT primarily regulates joint ventures that result in the sharing of services and/or revenue in the following ways:■ Corporate Service Agreements, Code-Sharing : Joint ventures

between major air carriers are regulated by the DOT under 49 USC § 41720. The DOT does not approve or disap-prove the agreement; rather, it reviews the agreement to ensure that it is not anticompetitive and would not harm the public. The DOT can take action under 49 USC § 41712, the statute prohibiting unfair or deceptive practices and unfair methods of competition.

■ Global Airline Alliances :Pursuantto49USC§41308–41309,major US and foreign air carriers may request a grant of immunity from US antitrust laws to operate alliances. In evaluating applications, the DOT employs a two-step anal-ysis. First, the DOT determines whether a proposed alli-ance “substantially reduces or eliminates competition”. If it does, then the DOT must disapprove the application unless the DOT finds that the alliance “is necessary to meet a serious transportation need or to achieve impor-tant public benefits” and there is not a less anticompeti-tive alternative. An alliance that has received immunity is required to comply with the operating constraints and reporting requirements specified in a final DOT order.


The “relevant market” is determined by an analysis of the rele-vant product (goods and services) and geographic markets to assess whether the desired merger or acquisition will or may substantially lessen competition, and whether consumers in the relevant market can find a suitable alternative in a reasonable time at similar cost and quality.

be brought by the government, can result in monetary award, injunctive relief, and/or incarceration. Civil and criminal cases are brought in both state and federal courts. State courts have broad jurisdiction and can hear almost any civil or criminal case, as long as it is not preempted by federal law. Which is the correct state court generally depends on the amount in controversy and whether the claims are civil or criminal. Civil claims may only be filed, but are not required to be filed, in federal court: (1) when the claim involves a federal question (i.e., arises under or implicates a federal treaty, law, or regulation, e.g., the Montreal Convention (federal question jurisdiction)); or (2) if the claim is between citizens of different states and the amount in contro-versy exceeds $75,000 (diversity jurisdiction). Even if a plain-tiff files in state court, a defendant may be able to remove the case to federal court; therefore, some plaintiffs purposely assert damages just under the jurisdictional amount. See, e.g., Haines v. Southwest Airlines Company, 1846-CC00042 (Circuit Court Taney County Forsyth, Missouri) (plaintiff seeks $74,999.99 after airline landed at wrong airport).


Each state has its own procedural rules that govern service of process. In the federal courts, service of process is governed by the Federal Rules of Civil Procedure and may vary depending on the type of defendant. Typically, a summons and complaint must be personally served on a defendant or an agent of the defendant.However,inthisdigitalage,ifaplaintiffcannotwithdue diligence effectuate personal service, courts are increas-ingly permitting alternative forms of service, such as by email or social media platforms. See, e.g., Schwartz v. Sensei, LLC, 17-CV-04124(S.D.N.Y.)(11March2019–ordergrantingplaintiffleaveto serve defendant “through every known internet account, including but not limited to: e-mail, text message, iMessage, WhatsApp, and Twitter”).


Courts and arbitral tribunals both have broad authority to award interim and final relief. A Temporary Restraining Order and Preliminary Injunction, two types of interim relief, are gener-ally limited to situations where the party seeking such relief can demonstrate that it will be irreparably harmed if interim relief is not granted. Irreparable harm generally means that the threat-ened harm cannot be corrected through monetary compensation or conditions cannot be imposed to otherwise remedy the harm.

In a court proceeding, a final judgment follows a decision on themerits–bymotionor, ifnecessary, after trial. In arbitra-tion, after the issuance of a final award, the successful party may bring a court proceeding to confirm the award and convert it into a judgment. Conversely, the aggrieved party can seek to vacate the award in whole or in part; however, reviewing courts accord great deference to arbitral decisions and the standards of review under the Federal Arbitration Act are extremely narrow. There are only four bases for vacating an arbitral award, which have been described as “grudgingly narrow”: (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption by the arbitrators; (3) there was arbitral misconduct, such as refusal to hear material evidence;



the corporate structure, the DOT has approved foreign owner-ship of up to 49.99% of the total equity in an air carrier, as long as non-US citizens hold no more than 24.99% of the voting interest. Further, there can be no indicia of foreign control, or even the ability of a non-US citizen to exert control or influence on the day-to-day management decisions of the air carrier, e.g., interlocking operational and management relationships or other contractual arrangements vesting control in non-US citizens.


TheHSRAct requires notification to theFTC andDOJ andthe submission of a filing fee (ranging between US$45,000 to US$280,000 based on the size of the transaction) and detailed information about each party’s business, including the rationale and plans for the transaction. After filing, the filing parties must observe a statutory waiting period during which they cannot consummate the transaction (15 days for reportable acquisitions by means of a cash tender offer and 30 days for all other types of reportable transactions). The agencies will determine whether additional information is needed or whether they want to chal-lenge the transaction or allow the transaction to close (16 CFR Parts 801, 802, and 802). A request for additional information and/or documentary material may extend the waiting period.

Parties seeking approval of a joint venture within the meaning of 49 USC § 41720, or a cooperative agreement, and/or antitrust immunity for a proposed alliance, must submit an application to the DOT. The DOT shall grant approval and/or request for an exemption where: (1) it is not in violation of the laws of 49 USC § 413; (2) it is not adverse to the public interest; and (3) it does not substantially reduce or eliminate competition, unless it is neces-sary to meet a serious transportation need or to achieve impor-tant public benefits.

The DOT must provide notice to the Attorney General and the Secretary of State and an opportunity to comment, and a hearing if required. The DOT must make a final decision within six months of receipt if there is no hearing, or 12 months if there is a hearing.


The US government does not provide direct financial support to US airlines, with the exception of the programs set forth in question 4.7 below. Under the Airline Deregulation Act, the government may not enforce a law, regulation, or other provi-sion related to a price, route, or service of an air carrier providing transportation.

The federal and state governments do, however, provide finan-cial support to airports, sourced primarily through the Airport Improvement Program (“AIP”), which provides funding through FAA grants, for airport capital improvements related to enhancing airport safety, capacity, security, and environmental concerns through grants from the FAA. For large and medi-um-sized primary hub airports, the grant covers 75% of eligible costs, and for small primary, reliever, and general aviation airports, thegrantcoversarangeof90–95%ofeligiblecosts.To be eligible for a grant, an airport must be included in the National Plan of Integrated Airport Systems, which is prepared and published every two years and identifies public-use airports that are important to public transportation and contribute to

The relevant product market is typically defined by the line of commerce being offered, such as scheduled passenger or cargo flights from Point A to Point B, or control or ownership oflanding rights or slots. The relevant geographic market is typi-cally defined by where the companies involved compete, often based on routes or city-pairs.TheDOJ and the Federal Trade Commission (“FTC”) are

typically concerned with transactions that significantly raise concentrationlevelsincity-pairmarkets.TheDOJwillanalysethe effect in all city-pair markets served by both of the carriers involved in terms of: (1) non-stop service; and (2) non-stop and connectingservice.TheDOJrecognisesthatnon-stopservicebetween cities is important because business travellers are less likely to regard connective service as a reasonable alternative. Cities served by more than one commercial airport, such as Los Angeles, San Francisco, New York, Chicago, and Washington, D.C., may be considered an airport pair.


Yes. US carriers seeking to merge or acquire another carrier mustprovidenoticetotheDOJandFTCpursuanttoSection7aof theHart-Scott-RodinoAntitrust ImprovementsAct (“HSRAct”) (15 USC § 18a) and wait a specific period of time while the enforcement agencies review the proposed transaction. The initialHSRAct filingmust containbasic information suchasthe parties involved, the structure of the transaction, and finan-cialdata,whichtheDOJwillusetodeterminewhetheramoreextensive review is appropriate.

As described in question 4.1, parties seeking to form a coop-erative agreement, or joint venture within the meaning of 49 USC § 41720, or to obtain an exemption from antitrust laws for a proposed alliance, must submit an application for the DOT for clearance(49USC§§41308–41309).


Depending on the size of the parties involved and the value of the proposed merger or joint venture agreement, parties seeking tomergeor acquire another carriermustnotify theDOJ andFTC prior to closing. Seequestion4.3.ByagreementwiththeFTC,theDOJreviewsmergers,acquisitions,andjointventuresundertheHSRActtodeterminewhetherthetransactionwillormay lessen competition and to determine whether the transac-tion should be approved, modified, or rejected. The DOT may submititsfindingstotheDOJforreviewanduseinthedeci-sion-making process.

Additionally, if a US air carrier is formed as a result of the merger, acquisition, or full-function joint venture, the owner must be a citizen of the US as defined under 49 USC § 40102, i.e., the entity must: (1) be organised under the laws of the US or a state; (2) have a corporate president that is a US citizen; (3) have two-thirds of its board of directors and other managing officers comprised of US citizens; (4) be under the actual control of US citizens; and (5) be 75% (or greater) owned (with a voting equity interest) by US citizens. The first three criteria require that the day-to-day operations be vested in US citizens. The fourth and fifth criteria require an analysis of the actual ownership struc-ture of the company. The DOT determines “actual control” on a case-by-case basis, and requires an analysis of both contrac-tual agreements and the corporate structure. With respect to

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The DOT protects the privacy of consumers under 49 USC § 41712, which prohibits unfair or deceptive trade practices. The DOT has determined that an airline or ticket agent may violate an airline passenger’s privacy by: (1) violating the terms of the airline’s privacy policy; (2) gathering or disclosing private infor-mation in a way that violates public policy, is immoral, or causes substantial consumer injury not offset by countervailing bene-fits; (3) violating a rule issued by the DOT identifying specific privacy practices to be unfair or deceptive; or (4) violating the Children’s Online Privacy Protection Act (“COPPA”) or FTC rules implementing COPPA. Individuals may file privacy-re-lated complaints with the DOT’s Aviation Consumer Protection website.

Airports generally do not collect data that identifies a passen-ger’s personal information, although their facilities may be utilised by the government for that purpose. Airports, however, have begun to track passenger traffic for purposes of maxim-ising their concession revenue. For example, purchasing habits may form the basis for sending targeted coupons to passengers’ smartphones.


There is no US federal law specifically regulating the loss of private consumer data or a data breach in the aviation industry. As set forth in question 4.8, under the DOT’s unfair and deceptive practice statute, a passenger may file a privacy-related complaint, and an airline could be fined up to $27,500 per violation.

Air carriers are governed by their own privacy policies and state privacy laws. State privacy laws often require, among other things, reasonable security procedures, data disposal proce-dures, and notification of a security breach. States also typically allow for private rights of action by individuals, and enforcement actions by state Attorneys General, for civil penalties, damages, and/or injunctive relief, in the event of a data loss or breach.

Notably, on 23 October 2019, New York’s new data security lawcalledtheSHIELDActwentintoeffect.TheNewYorklawimposes data breach notification requirements on any business that owns or licenses certain private information of New York residents, regardless of whether it conducts business in New York. A second part of the Act goes into effect on 21 March 2020, requiring businesses to develop, implement and maintain a data security program to protect private information.

EU citizens may seek recourse through the EU-US PNR Agreement. The Agreement confirms that administrative, civil, and criminal enforcement measures are available under US law for privacy incidents.


While federal law does not require federal registration of trade-marks, registration does enhance an airline’s rights because it provides a legal presumption of the exclusive right to use the trademark throughout the US or in connection with the goods and services identified with the registration. The Lanham Act establishes a procedure for federal registration of trademarks with the US Patent and Trademark Office (15 USC § 1501, et seq.). Copyrights are registered with the US Copyright Office.

the needs of civil aviation, national defence, and the Postal Service. Airports that accept federal funding, such as through the AIP, accept obligations as part of the grant assurances to operate and maintain the airport in a safe and serviceable condi-tion, not grant exclusive rights, mitigate hazards to airspace, and use airport revenue properly. Operators must also comply with securityrequirementsimposedbytheTSAandCBP.


The Essential Air Service (“EAS”) Program permits the US government to subsidise air carriers to serve small, rural commu-nities to maintain a minimal level of scheduled air service to those communities. Generally, the DOT will subsidise between two round trips per day with a 30- to 50-seat aircraft between an EAS community and a major hub airport. In selecting a carrier, the DOT considers: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; and (4) communityviews(49USC§§41731–41732).

The Alternative Essential Air Service Program designates funds directly to the municipality or airport authority instead of to the carrier, which allows the community to recruit air service that would not otherwise meet EAS guidelines.

The Small Community Air Service Development Program (“SCASDP”) is a grant program to provide financial assistance to small communities that address air service and airfare issues (49 USC § 41743). SCASDP’s eligibility criteria are broader than EAS and provide a grant applicant the opportunity to self-identify its air service deficiencies and propose an appro-priate solution. To be eligible, the airport serving the commu-nity cannot be larger than a small hub airport and the commu-nity must demonstrate that it has insufficient air carrier service, or unreasonably high airfares. The DOT may provide assis-tance to an air carrier to subsidise service to and from an under-served airport for a period of up to three years, or it may provide assistance to an underserved airport. SCASDP can involve, for example, revenue guarantees, financial assistance for marketing programs, start-up costs and studies. Grant sizes have ranged from $20,000 to nearly $1.6 million.


Pursuant to the Intelligence Reform and Terrorism Prevention Act of 2004 (49 USC § 114) and the TSA’s Secure Flight Program (49 CFR Parts 1540 and 1560), for purposes of security screening, airlines that operate flights to and from the US must collect passenger name records (“PNR data”), which includes the passenger’s full name, date of birth, and gender. Records of passengers who are not potential or confirmed matches on the No Fly List are deleted within seven days of travel. Under the Privacy Act of 1974, passengers may request a copy of or make corrections to their PNR data. In addition, air carriers typically have their own privacy policy and are subject to state privacy laws. EU citizens are covered by the EU-US PNR Agreement, which makes possible the transfer of certain passenger data to CBPinordertofacilitatesafeandefficienttravel.



scheduled passenger-carrying operations using aircraft originally designed with more than nine passenger seats, or an unsched-uled passenger-carrying operation using an aircraft originally designed with more than 30 passenger seats. To satisfy the Part 139 standards, an airport must maintain an FAA-approved Airport Certification Manual, which ensures that safety and maintenance requirements are met.

In the event of an excessive tarmac delay, federal law requires airport authorities to provide for the deplanement of passengers, to the extent practicable (49 USC § 42301).


Airports must be accessible to passengers with disabili-ties through compliance with the applicable sections of the Americans with Disabilities Act of 1990 (49 USC §§ 12101–12213), Section 405 of the Rehabilitation Act of 1973 (29 USC § 794), and the Air Carrier Access Act of 1986 (40 USC § 41705, 14 CFR Part 382). Airlines are also required to provide: assis-tance to passengers with disabilities, such as wheelchair or other guided assistance to board, deplane, or connect to another flight; seating accommodation assistance that meets passengers’ disa-bility-related needs; and assistance with the loading and stowing of assistive devices.

In addition, when airport owners and operators accept federal grants, such as through the AIP, the Federal Aid to Airports Program, or the Airport Development Air Program, they agree to operate their facilities in a safe and efficient manner and to comply with certain conditions and assurances. These assur-ances include that the airport will be available for public use on fair and reasonable terms without unjust discrimination.


Amadeus, Sabre and Travelport are the GDSs that operate in the USA.


No.However,theDOTcanmonitortheactionsofGDSsunderits unfair and deceptive practice statute, 49 USC § 41712.


There are patterns of vertical integration in the US, especially with multiple major operators contracting with smaller opera-tors at regional airports. Generally, however, operators enter into lease agreements with airports and there is federal over-sight because of competition concerns given that airports are natural monopolies. “Local” competition in the New York area (withJFK,Newark,andLaGuardiaairportsbeingincompeti-tionwitheachotherandJFK’smultipleterminalsbeingoper-ated individually by multiple different carriers and non-carriers) may be viewed as an exception.


Under 14 CFR Part 250, the DOT permits airlines to oversell tickets for a flight; however, Part 250 mandates compensation and other protections for passengers who hold “confirmed reserved space” on a flight, have complied with the carrier’s contract of carriage, have met the carrier’s requirements regarding check-in time and appearance at the gate, and have been involuntarily deniedboardingbecausetheflightwasoversold.Beforedenyingboarding to passengers, an airline must solicit volunteers to relin-quish their seats in exchange for compensation. If there are not enough volunteers, a carrier may deny boarding against a passen-ger’s will, provided that the carrier pays the passenger immedi-atelywithDeniedBoardCompensation,whichvariesdependingupon the planned arrival time of the substitute transporta-tion, if available, and whether the flight is domestic or interna-tional. The carrier must notify the DOT of all passengers invol-untarily denied boarding, on a quarterly basis. The DOT may seek enforcement action against air carriers that improperly deny passengers boarding under Part 20 as well as 49 USC § 41712.

For domestic flights, airlines are not required to compensate passengers whose flights are cancelled. For international flights, passengers may be entitled to reimbursement under Article 19 of the Montreal Convention for expenses incurred from a cancelled flight, by filing a claim with the airline.

Following the 2017 incident in which a passenger was violently removed from a United flight, the DOT created an Aviation Consumer Protection Division website, which contains informa-tion regarding: (1) how to file a complaint; (2) bumping and over-sales; (3) lost, delayed or damaged baggage; (4) tarmac delays; (5) flight delays and cancellations; (6) disability; (7) discrimination; (8) refunds; and (9) reservations, fares, ticketing, and fees.


The DOT can bring an enforcement action with civil penal-ties against an air carrier for unrealistic scheduling of flights, including by deeming a chronically delayed flight to be an unfair and deceptive practice in violation of 49 USC § 41712. A chron-ically delayed flight is defined as any domestic flight operated at least 10 times a month which arrives more than 30 minutes late (including cancelled flights) more than 50% of the time.

DOT regulations require carriers to notify passengers of known delays, cancellations, and diversions (14 CFR 259.8). DOT regulations also provide that US and foreign air carriers cannot permit an aircraft to remain on the tarmac for more than three hours for domestic flights and four hours for inter-national flights, with exceptions for certain safety, security, and air traffic control concerns (14 CFR 259.4). Carriers have been fined substantial amounts for failure to comply with the tarmac delay rule, pursuant to 49 USC §§ 42301, 41712, and 46301. For example, in 2019, American Airlines was fined $1 million, Delta Air Lines was fined $750,000 and Japan Airlines was fined$300,000, for tarmac delays.


The FAA, pursuant to 14 CFR Part 139 and 49 USC § 44706, issues Airport Operating Certificates to airports that serve

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Avco obtained from the FAA a type certificate for an aircraft engine. The type certificate included approval of a certain type of carburetor, which was manufactured by a different company. A pilot operating a plane containing an engine with that type of carburetor died in a crash, and his wife brought state law claims against Avco, among others, alleging that the crash was due to the carburetor’s faulty design. The District Court granted partial summary judgment to Avco on the ground that the FAA’s issuance of a type certificate for the engine meant that the federal standard of care had been satisfied. On appeal, the Third Circuit reversed, holding that: (1) the Federal Aviation Act does not preempt the entire field of aviation safety, but only the narrower field of in-air operations, which does not include aircraft design; and (2) the impossibility preemption defence was unavailable to Avco because clear evidence was not presented that the FAA would not have allowed a change to the engine’s design if Avco had made the request.

The Supreme Court has invited the Solicitor General to file a brief in the case expressing the views of the United States. Absent review and reversal by the Supreme Court, the aviation manufacturing industry should expect to see more state law design-defect claims over FAA-approved designs.

AcknowledgmentMs. Wilson and Ms. Tingey thank Caroline Morgan, an associate in Fox’s New York office, for her assistance in the preparation of this USA chapter. Ms. Morgan represents clients in the insur-ance, aviation and other industries, including defending airline liability claims governed by the Montreal Convention. Prior to private practice, Ms. Morgan was a senior claims manager at a large global reinsurance company, where she resolved multimil-lion-dollar launch and in-orbit space claims; and was a secondee in the Aviation Claims Department of a large insurer, where she managed airline hull and liability claims.


Yes. Under the FAA’s enabling statute, a US air carrier must be deemed a US citizen by the DOT in order to receive the appro-priate operating authority from the DOT and the FAA. The “citizen” qualifications are set forth above in question 4.4.

5 In Future


The US Supreme Court is currently evaluating whether to take on the issue of whether the Federal Aviation Act preempts state law design-defect claims. Currently, there is a split amongst Circuit Courts of Appeal, with the Second Circuit holding that the Federal Aviation Act preempts the entire “field of air safety”, while the Third Circuit has held that the Federal Aviation Act does not preempt state-law based tort claims in a product liability lawsuit against an aircraft engine manufacturer. See, e.g., Tweed-New Haven Airport Authority v. Tong, 930 F.3d 65 (2d Cir. 2019); Sikkilee v. Avco Corporation, 907 F.3d 701 (3d Cir. 2018).

Avco has petitioned the US Supreme Court for review of the Third Circuit’s Sikkilee decision holding that strict liability and negligence claims were not barred by field preemption or impos-sibility preemption. Field preemption occurs when Congress, without expressly declaring that state laws are preempted, never-theless legislates in a way that is so comprehensive as to occupy the entire field of an issue. Impossibility preemption occurs when Congress has not passed any law preempting state law, but compliance with both federal and state law regulations is a phys-ical impossibility for one engaged in interstate commerce.

331

Aviation Law 2020

Fox Rothschild LLP

Diane Westwood Wilson, a Partner and Co-Chair of Fox Rothchild’s Aviation Practice Group, has 35 years of multijurisdictional experience representing clients in the aerospace, aviation and insurance industries in high-stakes commercial and mass disaster litigation throughout the United States, in ICC and AAA arbitrations, and courts around the world. Ms. Wilson provides strategic counselling to a wide variety of airlines, airports, and manufacturers on long-term business decisions. She has been recognised as a leading aviation lawyer by Euromoney and Chambers USA, among others. Ms. Wilson has been involved in many of the aviation industry’s most significant cases; the most notable being EL AL Israel Airlines v. Tseng, a landmark multilateral treaty case that she argued before the U.S. Supreme Court on behalf of EL AL Israel Airlines. Likely the most widely cited international air transportation case, Tseng established the Montreal Convention as the exclusive cause of action governing international air transportation, barring recovery under alternative theories of liability. The transcript and audio of Ms. Wilson’s argument before the Supreme Court is available at: https://www.oyez.org/cases/1998/97-475.

Fox Rothschild LLP101 Park Avenue, 17th FloorNew York, NY 10178USA

Tel: +1 212 878 1431Fax: +1 212 692 0940Email: [email protected] URL: www.foxrothschild.com

Rebecca Tingey, a Partner in Fox Rothschild’s Aviation Practice Group, advises domestic and international clients in the aviation, insur-ance, manufacturing, and finance industries, in complex commercial litigation and arbitration matters. She counsels and defends airlines, airport operators and developers, and component part manufacturers before state and federal courts. Ms. Tingey’s experience includes representing an MRO against a $6.5 million claim asserted by one of the largest commercial airline leasing companies. Ms. Tingey has also represented corporate entities and individuals in disputes involving business torts, breach of contract, employment disputes, shareholder disputes, and securities fraud and consumer fraud class actions.

Fox Rothschild LLP101 Park Avenue, 17th FloorNew York, NY 10178USA

Tel: +1 212 878 7963Fax: +1 212 692 0940Email: [email protected]: www.foxrothschild.com

Fox Rothschild’s experienced, internationally respected aviation law team delivers practical business solutions and innovative legal strategies to clients throughout the industry. Our team represents the full range of aviation industry clients including commercial airlines, aviation product manufacturers, aviation service providers, airport operators and devel-opers, drone and UAS operators and manufacturers, owners and operators of private aircraft entities, lessors, financiers and insurers. Fox represents aviation entities in international transactions and business dealings, regu-latory and administrative matters and litigation across the United States and the world. Our attorneys are seasoned counsel with a deep under-standing of industry standards and aviation sector challenges based on lifelong interaction and familiarity with the business. Part of a national firm

with 950 attorneys and more than 70 practice areas, our team provides comprehensive services in collaboration with colleagues in areas such as labour and employment, finance, insurance, intellectual property, litigation, corporate law and government contracts.

www.foxrothschild.com


332 NOTES


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