This article has been written by Vidhur Sanjeev Malhotra, pursuing the Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.
Arbitration is a dispute resolution mechanism is experiencing an exponential gain in modern times. In every global industry, there are various contracts, commercial deals, and other such agreements which take place between two or more parties; in such circumstances disputes become inevitable. For smooth administration of these disputes in a faster and efficient way, arbitration plays a crucial role. Arbitration helps parties resolve their disputes in a way wherein the parties to the disputed resort to one or more odd number of arbitrators who give a binding decision on the dispute. Arbitration is a dispute resolution mechanism is used in every industry not only between private parties but also between companies and even between governments of foreign countries to help resolve cross-border disputes.
With the rise of modernization and liberalization, there has been an increase in the role of private players in the civil aviation industry and hence, several disputes have emanated from such players. This in turn leads to parties resorting to arbitration for resolving disputes relating to civil aviation. With modernization and globalization aviation industry has also brought the world together by increasing communication and trade between nations.
Indian civil-aviation market is the third-largest in the world as of January 2018. Further in this article, I would be talking about the laws governing the aviation industry, bilateral air transport agreements, various forums for aviation dispute resolution and certain benefits and drawbacks of choosing arbitration in air transport agreements.
Laws Governing Aviation Industry
To regulate the growing aviation industry there is a certain set of national and international legislation and rules governing the same.
National Laws Governing Civil Aviation
The Aircraft Act, 1934 and the Aircraft Rules, 1937
These legislations were enacted in order to control the manufacturing, possession, use, operation, sale, and the import and export of aircrafts. They stipulate parameters for determining airworthiness, maintenance of aircraft, general conditions for flying and safety, registration of aircrafts and conduct of investigations.
In recent times, the Aircraft (Amendment) Act, 2020 received its presidential consent to be notified as a law on 19th September 2020. This amendment brings the Aircraft Act at par with the international standards of civil aviation by recognizing international procedures and practices and empowers the aviation regulatory authorities like the Directorate General of Civil Aviation (DGCA), BCAS etc. to work more efficiently and independently as statutory bodies.
The Carriage by Air Act, 1972
This act’s objective is to ensure that there exists uniformity in law with respect to international carriage by air, regulation of contracts concerning such carriage. It serves as a common law to adjudicate disputes between parties so that there is no conflict of laws. The act also purports to implement and give statutory status to the Warsaw Convention, 1929. This act basically governs the rights and liabilities of both national as well as international carriers.
The Civil Aviation Requirements
This is a set of technical rules or requirements provided by the Directorate General of Civil Aviation (DGCA). The Civil Aviation Requirements (CARs) are those procedures which help meet the airport and aircraft standards and their licensing. Various sections of the CAR lays down the guidelines for the flight crew training and their licensing, about the operations of the aircraft and guidelines about air safety.
The Airports Authority of India Act, 1994
This act was brought in force to give a legal backing for privatisation of Airports, proper management of airports and for communication between aeronautical communication stations. This act brought into picture the establishment of Airport Authority of India (AAI) an authority under the Ministry of Civil Aviation which functions to control the development, privatization and modernization of operational facilities at airports. AAI also provides a service for air traffic and air transport at any airport and civil enclave.
Airports Economic Regulatory Authority of India Act, 2008 (AERA)
AERA Act was passed in the year 2008, which established an independent aeronautical regulatory authority. In order to regulate and monitor the standards relating to quality, continuity and reliability of service specified by the central government. The AERA protects the interest of airports, airlines and passengers and also performs functions relating to tariffs, other aeronautical charges, and looks after the performing standards of airports.
International Laws Governing Civil Aviation
The convention on International Civil Aviation of 1944 also called the “Chicago Convention” is known as the greatest charter on international civil aviation. This convention was signed on 7th December 1944 by 54 different countries including India. It was one of the first conventions that codified civil aviation practices and it further gave rise to the establishment of International Civil Aviation Organization (ICAO) which helped in the regulation and development of international civil aviation and international air transport. The convention in its articles also gave authority to its signatories regarding the use of airspace of other jurisdictions and also stated various practices for its signatories to follow.
The Tokyo Convention Act, 1975
This act was established in order to give ratification to the Tokyo convention to offences and acts which are committed onboard aircraft. When an act or omission is committed on an Indian-registered aircraft the Tokyo Convention Act applies the penal law of India whether it is done over India or elsewhere.
Bilateral Air Transport Agreements
Post the signing of aviation conventions between different countries there was a huge boost in the International civil aviation sector. For countries to operate internationally in the aviation sector, it was important to be done with the knowledge and the permission of the other country. Further, to provide any air service to another country, the ICAO created certain rights/freedom of air to be granted to countries, which gave rise to a number of Bilateral Air Transport agreements being negotiated between countries which basically granted Freedom of Air to another country to use their air space without any impediment. The first-ever Bilateral Air Transport Agreement was signed in 1946 between the United States of America and the United Kingdom. An air transport agreement between India and the United States of America was entered on 3rd February, 1956 which is also available on the Indian Government’s Ministry of External Affairs and can be accessed here.
In the above link under Article 13, shows an Arbitration Clause appearing in a bilateral aviation agreement between India and America. Such kinds of Arbitration Clause generally appears in various Bilateral Air Transport Agreements.
Forums for Aviation Dispute Resolution
International Civil Aviation Organization (ICAO)
The ICAO is an international organization that gains its dispute settlement powers from the Chicago Convention 1944. The ICAO is an organization formed under the United Nations. This organization can resolve disputes relating to the Chicago Convention. It has different councils which relate to International Civil Aviation, Air Navigation, Air Transport, Infrastructure, prevention of unlawful interference, border-crossing procedures for international civil aviation and Air Navigation services. The ICAO has occurred as a dispute settlement organization is various disputes first of which was in the year 1952 between India and Pakistan with respect to the application of the Chicago convention and later it went on to settle various other disputes like the Jordan and Syria incident and Israel’s Complaint under Article 54(j) of the convention.
International Court of Justice (ICJ)
The ICJ acts as a permanent international court established under the United Nations (UN) to resolve disputes submitted to it by various states of the world. The ICJ adjudicates legal disputes between states by applying international law. The ICJ acts as a principal organ of the United Nations and has its headquarters at The Hague.
This international court of justice comprises 15 judges which are appointed by the United Nations Security Council and the United Nations General Assembly. English and French are the official languages of the ICJ.
Shanghai International Aviation Court of Arbitration (SIACA)
The SIACA is a recently inaugurated forum in the year 2014 which is an arbitrary institution that deals with civil aviation. This institution deals with various disputes in the field of aviation like aircraft manufacturing, aircraft sales, aviation insurance, general aviation and other ground services.
SIACA being an international arbitration forum to resolve disputes has an expert panel of Arbitrators comprising 71 domestic and international experts having knowledge in the field of Aviation. This panel of arbitrators provides a great level of experience and knowledge in deciding disputes between parties. This forum plays a huge role in the increasing role of arbitration in dispute settlement and especially in the field of international aviation.
American Arbitration Association (AAA)
The American Arbitration Association is an Arbitration Institution that provides efficient, fair and effective dispute resolution methods to its parties. Founded in the year 1926, AAA has an international division called the International Centre for Dispute Resolution (ICDR) which provides dispute resolution services to parties outside America and in other cross-border transactions.
The ICDR also has a panel of Arbitrators and mediators who have vast experience and expertise in the field of aviation, aerospace and other fields. This experienced panel helps parties to resolve their complex aviation-related disputes in a fair and an effective way.
Benefits and Drawbacks of Choosing Arbitration in Air Service Agreements
The disputes that occur in the aviation industry arise out of various different subject matters. From disputes relating to air transport agreements between states to the intellectual property of the products/equipment in an aircraft and airlines.
The benefits and drawbacks of choosing arbitration in resolving disputes of Air Service Agreements may vary for everyone. From a broad perspective, the benefits of choosing Arbitration in such disputes is that it helps the parties involved in the dispute to resolve the matter in a much faster way. In certain aviation disputes, the confidentiality of the parties is key as the reputation of the company plays a role in it; in such a situation’s arbitration plays a huge role in maintaining the confidentiality of the subject matter of the dispute as well as the parties. There is also a lot of efficiency in the dispute resolution process as it provides experts in the particular field of the dispute. Arbitration also benefits because the procedure of the dispute resolution is decided by the parties i.e., it is a party-centric process.
When we talk about the drawbacks of choosing arbitration in such disputes it is the enforceability of the award which is the biggest drawback. Even after the arbitral award is in the favour of a particular party, it becomes difficult for them to enforce such awards as the other party finds loopholes to not enforce the award and resort to making appeals at state courts. Since most civil aviation disputes are cross-border and between two different states, the recognition and enforcement of foreign seated awards vary among different laws of the respective countries. This delays the dispute resolution and in turn, fails to achieve the purpose of Arbitration.
The Indian Aviation Industry and the aviation industry throughout the world have seen tremendous growth in modern times with the potential to grab more and more foreign investments. This requires concrete guidelines along with effective dispute resolution mechanisms throughout the world for parties to resolve their disputes. Arbitration in the as a dispute resolution process immensely helps parties to resolve their aviation as well as other disputes effectively.
In my opinion, as the aviation industry becomes more and more complex, there is a need for universally accepted legislation and establishment of arbitral institutions especially to settle aviation disputes. I also feel that it is essential for countries to make legislation that recognizes and accept the enforcement of foreign arbitral awards.
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