Aviation Law 2018 6Th Edition

ICLG The International Comparative Legal Guide to: Aviation Law 2018 6th Edition

A practical cross-border insight into aviation law

Published by Global Legal Group, with contributions from:

AKD Benelux Lawyers Kubes Passeyrer Attorneys at Law ARNECKE SIBETH DABELSTEIN Lakshmikumaran & Sridharan Arte Law Firm LeClairRyan ASBZ Advogados Maples and Calder Azmi & Associates Mori Hamada & Matsumoto Bird & Bird ONV LAW Cervantes Sainz, S.C. PRIMUS attorneys at law Clyde & Co Sayenko Kharenko Dentons Canada LLP STA Law Firm Dingli & Dingli Law Firm Studio Pierallini Excello Law Ventura Garcés & López-Ibor Abogados Gongora Reina & Associates VISCHER AG Gross, Orad, Schlimoff & Co. (GOS) Weerawong, Chinnavat & Partners Ltd. K&L Gates LLP Katten Muchin Rosenman UK LLP Kreindler & Kreindler LLP The International Comparative Legal Guide to: Aviation Law 2018

General Chapters:

1 On a Wing and a Prayer? Cyber Security in the Commercial Aviation Sector – Alan D. Meneghetti & Sarah Simpson, Katten Muchin Rosenman UK LLP 1

2 Alitalia – the Mirage and the Madness – Philip Perrotta, K&L Gates LLP 5

Contributing Editors 3 Nothing Comes Easy in International Air Crash Litigation – Marc S. Moller & Justin T. Green, Alan D. Meneghetti, Katten Kreindler & Kreindler LLP 10 Muchin Rosenman UK LLP and Philip Perrotta, K&L 4 WALA: 10 Years of Growth in the Airport Sector – Alan D. Meneghetti & Michael Siebold, Gates LLP Worldwide Airports Lawyers Association (WALA) 15 Sales Director Florjan Osmani Country Question and Answer Chapters: Account Director Oliver Smith 5 Austria Kubes Passeyrer Attorneys at Law: Dr. David Kubes 17

Sales Support Manager 6 Brazil ASBZ Advogados: Guilherme Amaral & Luiza Rossingnoli 23 Toni Hayward Editor 7 Canada Dentons Canada LLP: Robert Quon & Stacy Shields 28 Nicholas Catlin 8 Colombia Gongora Reina & Associates: Jorge Góngora 36 Senior Editors Suzie Levy 9 Denmark Bird & Bird: Julie Bak-Larsen 42 Caroline Collingwood Chief Operating Officer 10 France Clyde & Co: Maylis Casati-Ollier & Benjamin Potier 49 Dror Levy 11 Germany ARNECKE SIBETH DABELSTEIN: Holger Buerskens & Ulrich Steppler 58 Group Consulting Editor Alan Falach 12 India Lakshmikumaran & Sridharan: Neeraj Dubey & Rohit Subramanian 67

Publisher 13 Ireland Maples and Calder: Donna Ager & Mary Dunne 75 Rory Smith Published by 14 Israel Gross, Orad, Schlimoff & Co. (GOS): Omer Shalev 85 Global Legal Group Ltd. 59 Tanner Street 15 Italy Studio Pierallini: Laura Pierallini & Francesco Grassetti 93 London SE1 3PL, UK 16 Japan Mori Hamada & Matsumoto: Hiromi Hayashi 102 Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 17 Kyrgyzstan Arte Law Firm: Aisulu Chubarova & Liliia Kim 111 Email: [email protected] URL: www.glgroup.co.uk 18 Lithuania PRIMUS attorneys at law: Paulius Docka 117 GLG Cover Design F&F Studio Design 19 Malaysia Azmi & Associates: Norhisham Abd Bahrin & Rosinah Mohd Salleh 124 GLG Cover Image Source 20 Malta Dingli & Dingli Law Firm: Dr. Tonio Grech 132 iStockphoto 21 Mexico Cervantes Sainz, S.C.: Luis A. Cervantes Muñiz & Printed by Ashford Colour Press Ltd Alejandro Zendejas Vásquez 139 January 2018 22 Netherlands AKD Benelux Lawyers: Guido de Vos & Maaike Lustenhouwer 145 Copyright © 2018 Global Legal Group Ltd. 23 Romania ONV LAW: Mihai Furtună & Ioana Anghel 152 All rights reserved No photocopying 24 Spain Ventura Garcés & López-Ibor Abogados: Alfonso López-Ibor Aliño & Pablo Stöger Pérez 160 ISBN 978-1-911367-90-1 ISSN 2050-9839 25 Sweden Excello Law: Stephan Eriksson 169 Strategic Partners 26 Switzerland VISCHER AG: Urs Haegi & Dr. Thomas Weibel 176

27 Thailand Weerawong, Chinnavat & Partners Ltd.: Nattaporn Pengkul & Panuwat Chaistaporn 184

28 Ukraine Sayenko Kharenko: Andrei Liakhov 190

29 United Arab Emirates STA Law Firm: Rini Agrawal & Smriti Ganotra 198

30 United Kingdom Katten Muchin Rosenman UK LLP: Alan D. Meneghetti & K&L Gates LLP: Philip Perrotta 205

31 USA LeClairRyan: Diane Westwood Wilson & Rebecca Tingey 218

Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive 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.

WWW.ICLG.COM Dear Industry Colleagues, On behalf of the International Air Transport Association, I would like to thank Global Legal Group for their efforts in publishing the 6th edition of The International Comparative Legal Guide to: Aviation Law. They have brought together preeminent aviation law firms from across the globe, providing a worldwide legal update in a single volume. IATA hopes that you find this edition enlightening and useful. 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 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 airlines. Our vision is to be the force for value creation and innovation, driving a safe, secure and profitable air transport industry that sustainably connects and enriches our world. This publication is wholly aligned with that vision. Our next global event is the IATA Legal Symposium, the world’s premier annual aviation law conference, which will take place in Bangkok, Thailand from 27 February to 1 March 2018. For further information please visit our website at http:// www.iata.org/events/Pages/legal-symposium.aspx. We hope you can join us. Sincerely,

Jeffrey N. Shane General Counsel Chapter 1

On a Wing and a Prayer?

Cyber Security in the Alan D. Meneghetti Commercial Aviation Sector

Katten Muchin Rosenman UK LLP Sarah Simpson

■ nearly half of British businesses had discovered at least one Introduction cyber security breach or attack in the past year; Several high-profile organisations have endured damaging publicity ■ businesses increasingly see cyber security as an important issue; for cyber security failings, including eBay, Home Depot, Target, JP Morgan Chase, UPS, Apple, TalkTalk and, most recently, the ■ businesses still feel the need to seek information, advice or guidance on cyber security risks and how to protect record-breaking Equifax incident. The cost of this latter incident themselves from them; remains unknown at the time of writing as the extent of the breach is still being assessed, but what is certain is that the company will ■ a staggering 72% of reported attacks begin where a member of staff receives a fraudulent email, with 33% caused by face an untold amount of fines, lost profits and a significant amount viruses, spyware and malware; of negative publicity as a result of the data incident. In the UK, the TalkTalk breach resulted in the largest (at the time) fine by the ■ typically, businesses only experience a handful of breaches per year, but some suffer considerably more; UK’s regulator, the Information Commissioner. Tellingly, an in- depth investigation conducted by the Information Commissioner’s ■ the average cost of a breach for large businesses is around Office found that an attack on the telecoms giant could have been £19,600; and prevented if TalkTalk had taken basic steps to protect its customers’ ■ only 26% of businesses report a breach to an external agency. information. In light of these statistics, it is clear that cyber security should be Hackers include organised criminals, employees, rogue states, a fundamental consideration for airlines. If airlines can prevent competitors, terrorists and ‘hacktivists’. As a starting point, it is breaches through robust processes and procedures, they will avoid important for airlines to acknowledge that cyber security is not just what can be disastrous consequences. Unfortunately, however, the an IT issue; it is also a people and processes issue, requiring airlines inevitable sometimes happens, so to be prepared with a disaster to embrace education and an awareness of cyber security across their recovery plan is equally as important. workforce and supply chains. It is also, unfortunately, inevitable. Key Questions for Airlines What is a Cyber Attack? In our experience, some of the key questions for airlines to consider In a nutshell, a cyber attack is an assault by a third party via a and address are: computer, against another computer or computer system. The ■ Do we have a sound understanding of our cyber risks and the attack often aims to compromise the integrity, availability and likely impact on operations and brands if an incident occurs? confidentiality of that computer or computer system. By wayof ■ Have we put in place governance, policy and operational example, attacks can include: frameworks that are of accepted industry and professional ■ a remote attack on an airline’s IT system or website; or standards for cyber security and related matters, such as those within the ISO 27000 series? ■ an attack on information held in third-party systems, for example an attack on the airline’s bank account or global ■ Are our frameworks for cyber security, and those of our distribution supplier. suppliers, subject to monitoring, scanning, auditing or penetration testing, for quality assurance purposes, and are The motivations of the hackers behind cyber security incidents are the results acted upon? diverse, as are the means used to profit from them. These can range ■ Are our incident response frameworks and those of our from selling personal data including email addresses and credit card suppliers tested, and are there clear rules for the reporting of numbers, to transferring money out of bank accounts, to blackmail incidents to the board, regulators, contracting partners, law through the use of ransomware or threatening to divulge sensitive or enforcement agencies and people affected? otherwise confidential information.

Building a Defensive Shield Why is this Important? Airlines that track regulatory guidance, regulatory enforcement Following a government review of cyber security issues amongst actions and court cases relevant to cyber security should be able to businesses in the UK, it became clear that: use this knowledge to construct a strong defensive shield against

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any regulatory investigations and litigation arising from security and the situation is under control. Reputational damage can likely breaches. The key components within such a defensive shield are: lead to a reduction in profits and the erosion of an airline’s customer 1. undertaking a discovery exercise to identify relevant data, base. networks, systems and assets that need to be secure; Not forgetting penalties, the airline can be fined a significant 2. taking the results of the discovery exercise to perform amount if personal data is lost or compromised due to a cyber risk assessments, to support a risk-based approach to the attack. Data protection laws require businesses to implement prioritisation of actions; appropriate technological and organisational security measures 3. creating a security plan, which records the decisions made against unauthorised or unlawful processing, accidental loss and and the actions to be taken as a result of the risk assessments destruction or damage of personal data. If this is not done, in the (the actions will include the security controls); European Union under the General Data Protection Regulation 4. creating a governance framework, to put security on the (which commences on 25 May, 2018), an airline can face fines of board agenda and to create a managerial chain so that the up to 4% of its global annual turnover or €20,000,000, whichever rules can flow down and news of incidents can flow up; is greater. 5. creating a written system of policies, procedures and contracts, which show how particular security controls are to be embedded into operations; Planning for a Potential Cyber Attack 6. implementing the actual security controls that have been decided upon; Knowledge banks 7. embedding awareness and understanding within staff and contractors of the security plan, the governance framework, the written systems and the actual controls (including for Where cyber attacks are concerned, it is always a good idea to share incident response) through education and training throughout knowledge amongst industry leaders. This may help an airline the business; and determine whether it will become the victim of a cyber attack. It may 8. monitoring performance of the systems and the controls. therefore be worth airlines contacting suppliers, major customers and competitors to find out whether they have been the victim of a cyber attack and, where possible, gain information on how the Understanding the Risks Faced by Airlines attack happened, what the targets did to overcome the attack and what particular systems they now have in place to prevent attacks of a similar nature happening again. Identify the risks

The risks to airlines should be assessed with the same robustness Security controls as legal, regulatory, financial or operational risk. The board should embed a risk management regime across the airline, supported It is also worth considering instructing a third-party IT security by senior managers. The risk management policy should be consultant to determine whether the airline’s existing security communicated across the organisation to ensure that employees, processes provide sufficiently robust protection. Aside from being contractors and suppliers are aware of the airline’s risk limits. a fresh pair of eyes on the airline’s IT infrastructure and security arrangements, a specialist consultant will have experience of how When dealing with an issue as all-encompassing as a cyber threat to other similar businesses are responding to the threat of a cyber the business, it is essential to prioritise. To this end, airlines should attack, and an awareness of what current best practices look like. identify their key assets – that is, the ones that most need to be protected from a potential cyber attack; for example: ■ customer databases; Contractual commitments ■ financial information; Analyse the airline’s existing contractual commitments and ■ IT services, such as the ability to take customer payments for flights via the airline’s website and check passengers and requirements. A cyber attack can cause severe disruption to an their baggage in; and airline and it is important to understand the impact the attack may have on its contracts as, under most legal systems, contractual ■ data, such as customer personal data that is given to the airline by the passenger when booking a flight or browsing obligations cannot easily be avoided. the airline’s website. Educating employees Consider the impact of a potential cyber attack on the airline An airline should have a cyber security policy in place detailing This can be anything from financial loss, to reputational damage, to how employees should use its systems in the most secure manner. regulatory sanctions, all of which can have devastating consequences Employees should also be given appropriate internal training (both for an airline that is subject to an attack. for new joiners and with regular refreshers for existing employees) so that everyone understands their role in keeping the business Financial loss can come from theft of information, bank details secure. Airlines should also put reporting processes in place to or money; disruption to trading (especially since airlines often enable employees to raise concerns about other members of staff undertake a lot of online transactions); and/or costs associated with that they think are failing to comply with the policy. The best cleaning up affected systems and getting them functioning again. training programmes are those which involve and include everyone; Reputational damage is a huge issue for any business concerned in other words, from the C-Suite down. when a cyber attack has taken place. A business that has been the victim of a cyber attack will want to convince its customers, owners, employees and the general public that the incident was a one-off

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Home and mobile working. Home and mobile working by Business continuity planning employees increases any business’s cyber risk profile. Airlines should therefore draft and implement a home and mobile working It is imperative to produce a plan, in advance of any attack occurring, policy and train employees to adhere to it, especially if the airline detailing who to contact for support if the airline is attacked or its allows employees to use personal mobile devices, for example, online services are disrupted. The plan should set out the airline’s laptops or tablets for business use. Mobile users should be trained recovery procedures and explain how it would continue operating, on the secure use of their mobile devices for locations they will be particularly online. Important records, such as sales information, working from. The secure system policies should be applied to all should be backed up regularly and archived in a secure, off-site types of mobile device used. Data-at-rest should be protected using location that can be easily accessed after a cyber attack. It is also encryption, and data-in-transit protected using an appropriately important to keep hard copies of staff, supplier and passenger configured Virtual Private Network (VPN). contact lists. Airlines should ensure that copies are retained off site and kept secure, for use in the event of an attack. Removable media. Restrict the use of removable media, such as USB drives. Make sure any data stored on removable media is protected to avoid the data being lost and to help prevent malware Implementing measures to protect airlines from a cyber attack from being installed on the airline’s IT networks. Introduce policies that control the use of removable media, both in software and Airlines can take multiple steps to improve their security controls, hardware format, for the import and export of information. Where including malware protection, network security, secure configuration, the use of removable media is unavoidable, limit the types of media managing user privileges, home and mobile working and removable that can be used together with the users, systems, and types of media. All of these are explained in further detail below. information that can be transferred. Scan all media for malware Malware protection. Install anti-virus solutions on all systems using a standalone media scanner before any data is imported into and keep software and browsers up to date. Consider restricting the airline’s system. access to inappropriate websites to reduce the risk of being exposed to malware (malicious software). Policies that directly address the business processes, such as email, web browsing, removable media Ongoing Security Management Issues and personally owned devices that are vulnerable to malware, should be drafted and implemented. Regular scans for malware should be Ensure that all IT systems and networks are continuously monitored undertaken across the organisation and all host and machines should against attack. Test, monitor and improve security controls on a be protected with antivirus software. All information supplied to or regular basis. Remove any software or equipment that is no longer from an organisation should be scanned for malicious content. used, ensuring that any sensitive information stored on it is deleted Network security. Increase the protection of the airline’s networks before it is disposed of. Review and manage any change in user (including wireless networks) against external attacks through the access, such as the creation of e-mail accounts when new employees use of firewalls, proxies and other measures. Connecting to untrusted arrive and the deletion of accounts when they leave. Airlines should networks, including the internet, can expose an organisation to cyber establish a monitoring strategy and develop supporting policies, attacks. Recognised network design principles should be followed taking into account previous security incidents and attacks, and when configuring perimeter and internal network segments, and all the organisation’s incident management policies. Inbound and network devices are configured to the secure systems. All activity outbound network traffic should be continuously monitored to should be filtered at the network perimeter so that only activity identify unusual activity or trends that could indicate attacks and required to support the business is allowed. Such traffic should be the compromise of data. IT systems should be monitored using monitored for unusual or malicious incoming and outgoing activity Network and Host Intrusion Detection Systems (NIDS or HIDS) that could indicate a cyber attack. and Prevention Systems (NIPS or HIPS). Secure configuration. Maintain an inventory of all IT equipment and software. Identify a secure standard configuration for all existing User Education and Awareness and future equipment used by the airline. Airlines should introduce corporate policies and processes to develop secure systems, and User security policies that describe acceptable and secure use of an manage the configuration and use of such systems. This includes airline’s IT systems should be created. These should be formally the removal of unnecessary functionality from ICT systems, such acknowledged in employment terms and conditions. All users as USB ports and the ability to access external email accounts, and should receive regular training on the cyber risks they face as keep them patched against known vulnerabilities. A failure to do employees and individuals. Security-related roles, such as system this may well expose the business to threats and vulnerabilities, administrators, incident management team members and forensic and increase risk to the confidentiality, integrity and availability of systems and information. investigators, must have specialist training. Managing user privileges. Restrict employee and third-party access to IT equipment, systems and information to the minimum Incident Management required. Excessive user privileges, with too many employees having access to confidential information or systems that do not help Airlines should establish an incident response and disaster recovery them perform their job, should be avoided. All users of IT systems capability that addresses the full range of incidents that can occur. should only be permitted access with user privileges that they need Incident management plans, including disaster recovery and to do their job. The number of privileged accounts for roles such business continuity, should be regularly tested. An incident response as system or database administrators should be controlled, and team may need specialist training across a range of technical and this type of account must not be used for high-risk or day-to-day non-technical areas. Online crimes must be reported to the relevant user activities. User activity, particularly all access to sensitive law enforcement agency, normally the National Crime Agency, to information and privileged account actions, should be monitored, help the UK build a clear view of the national threat and deliver an including creating new user accounts, changes to user passwords, appropriate response. and deletion of accounts and audit logs.

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existence of sensitive internal or customer information Responding to a Cyber Attack held by the airline if it were to be lost or stolen; and Airlines should consider taking the following actions after an attack: b. the impact, financial and otherwise, on the airline if our online services were disrupted for a short or sustained ■ addressing gaps in the airline’s security that have been period. identified due to the attack; 4. We receive regular intelligence from the Chief Information ■ identifying and removing any ongoing threats, for example, Officer or Head of Security on who may be targeting our malware; airline, their methods and their motivations. ■ reporting the incident to the police via the Action Fraud 5. Our technical staff are properly trained and encouraged to enter website; into information-sharing exchanges with other companies in ■ notifying the regulator; and our sector and across the economy to benchmark, learn from ■ notifying customers and suppliers if their data has been lost others and help identify emerging threats. or compromised. 6. The cyber security risk impacts share value, mergers, pricing, reputation, culture, staff, information, process control, brand, technology, and finance, and is consequently a priority for the Conclusion board. 7. We are confident that: Having adopted the above steps, CEOs and boards should be able to make the following statements: a. we have identified our key information assets and thoroughly assessed their vulnerability to attack; and 1. We are confident that our airline’s most important information is being properly managed and is safe from cyber threats. b. responsibility for the cyber risk has been allocated appropriately and is placed on the risk register. 2. We are clear that both the airline as a whole and the board are likely to be a key target of cyber threats. 8. We have a written information security policy in place, which is championed by us and supported through regular staff 3. We have an accurate picture of: training, and are confident the entire workforce understands a. the impact on our airline’s reputation, share price or and follows it.

Alan D. Meneghetti Sarah Simpson Katten Muchin Rosenman UK LLP Katten Muchin Rosenman UK LLP Paternoster House Paternoster House 65 St Paul’s Churchyard 65 St Paul’s Churchyard London EC4M 8AB London EC4M 8AB United Kingdom United Kingdom

Tel: +44 20 7770 5232 Tel: +44 20 7770 5238 Email: [email protected] Email: [email protected] URL: www.kattenlaw.co.uk URL: www.kattenlaw.co.uk

Alan D. Meneghetti is a partner in the Corporate and Commercial group Sarah Simpson is an associate at Katten Muchin Rosenman UK at Katten Muchin Rosenman UK LLP. He undertakes a full range of LLP. Sarah practises commercial and intellectual property law, with a commercial and regulatory work in the general commercial, aviation particular focus on EU and UK trademarks, brand protection, copyright, and aerospace sectors. His practice ranges from handling regulatory design rights, data protection, commercial contracts, regulatory and issues to the procurement of suppliers and responses to tenders, general commercial matters. She has experience of advising clients to data protection and privacy, information technology, intellectual in the fashion, fashion-technology, luxury brands, retail, consumer property, and the drafting and negotiating of various commercial goods, financial technology and education sectors. Sarah advises agreements, such as outsourcing, supply, service, and research both local and international clients. and development. He has worked extensively on matters in Africa, Prior to joining Katten, Sarah was a member of the commercial Europe, the USA and the United Kingdom. Alan is a regular contributor technology practice at an international technology firm. to publications and speaker at conferences in these sectors, and his articles and book reviews have been widely published.

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Alitalia – the Mirage and the Madness

K&L Gates LLP Philip Perrotta

proposed by the airline’s management, which had been presented Introduction as the only workable solution to make the airline profitable but which would inevitably have seen the company overhaul its legacy In previous editions of The ICLG to: Aviation Law, this co- benefits and staff numbers. editor’s general chapter has focused on highlighting certain relevant trends and patterns, all with a view to providing some As such, the development seemed to say as much about Etihad’s balance and perspective to a permanently dynamic and necessarily strategy and management process as the long-maligned Alitalia, complex industry. This included what transpired to be effectively a and there is no doubt that this has doubled the impact of this latest comparative analysis of the respective growth strategies employed ‘extraordinary administration’ (Alitalia went through a similar process by what are generally accepted to be the two major success stories in 2008 before being divided up and the valuable components of the as regards airlines and the Gulf; namely, of course, Emirates and airline sold to the group known as ‘CAI’ (Compagnia Aerea Italiana), Etihad. which was effectively comprised of Prime Minister Berlusconi’s cohorts and three institutions thinly disguising the government in To summarise, Emirates’ massive new wide-body fleet and Italy, namely the banks Intesa SanPaolo and UniCredit as well as the destination expansion plan had pushed Dubai to become a major Italian state postal service, Poste Italiane. traffic hub as well as a business and leisure destination in its own right. Etihad’s counter to that, and the task of profiling itself in So why did Etihad’s vision for Alitalia fail so quickly and so a similar vein, had been to embark on an acquisition strategy as abjectly, and where does this all leave things with Etihad and with regards stakes in strategic airline operations which were ripe for Alitalia? Subsequent business failures at Air Berlin and Darwin route restructuring and ultimately feeding passenger volume into Airlines suggest that Abu Dhabi has many things to answer and Abu Dhabi; this has become known as their ‘Equity Alliance address in terms of its own operating models and strategies, but Programme’. more interesting is Alitalia and what tempted Etihad to believe it could provide the solution, and what now will become of it. Etihad’s strategy has been pursued rigorously, and has given them a wide range of controlling positions in airlines as diverse as Jet Airways of India, Air Seychelles, Air Serbia, Air Berlin, Darwin The Mirage Airlines in Switzerland, and Virgin Australia. It is probably worth considering the broader context of the industry And, in June 2014, Alitalia... at the time Etihad decided to add Alitalia to its Equity Alliance Programme, as well as the characteristics of the target itself. There were other examples of long-established flag carriers going through As noted in last year’s chapter, many observers were surprised at painful measures, none more so than Malaysian Airlines which had the decision by Etihad to acquire 49% of a long-standing legacy become the subject of new legislation in its home country designed flag-carrier airline notorious for its inability to change or respond to create an opportunity to save a profitable business from its history to market conditions, as well as its immense thirst for capital in and two of the most tragic and bizarre events to affect an airline in order to continue operating (estimated to have totalled around recent times, namely the shooting down of a B777-200 ER, Flight 17, 4.9 billion euros since 1998 alone). Alitalia was quite a different over eastern Ukraine, and the permanent disappearance of a similar animal to Etihad’s other acquisition targets to date, and when 2015’s aircraft, Flight 370, shortly after take-off from Kuala Lumpur. financial results showed something of an uptick under thenew management structure which had been implemented by Abu Dhabi, Against that backdrop, the trials and tribulations being experienced and which seemed to be attributable to more than just ‘new owner by Alitalia may have seemed manageable and that fact – combined bounce’, there was much positive comment about the processes with the enduring potential of Alitalia as a brand, Italy as an airborne and procedures which Etihad applied to the operating models of its population, both in terms of its extensive domestic market where strategic equity alliance partners. carriers Easyjet and Ryanair had effectively dominated with a low- cost service model, and a long-haul market desperate for connectivity The author, along with other seasoned Alitalia observers, was not and a better quality product – no doubt persuaded Etihad to take alone, however, in striking a note of extreme caution that Alitalia the plunge. Perhaps the temptation to release undoubted potential may turn out to be Abu Dhabi’s toughest challenge yet, although existing in the business of the airline by making what, on the face of when the company filed for insolvency and the ‘extraordinary things, were relatively minor adjustments rather than deep structural administration’ process on 2 May 2017, the speed of that demise changes, was too much. was a genuine shock. Unions failed to approve a restructuring plan

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The Alitalia brand is definitely under-utilised, and despite the chaotic implications. In particular, there is much conjecture in the market nature of its evolution in recent years (including the ‘extraordinary about the precise status of Alitalia in terms of its current obligations administration’ of 2008), it has been able to utilise hubs at Milan- and what comes next. In an article for The ICLG to: Aviation Law, Malpensa and Rome-Fiumicino, an extensive fleet of relevant it makes sense to dwell on that, for the sake of clarity, and to explain aircraft types, a vibrant frequent-flyer programme (‘Mille Miglia’) precisely the ‘extraordinary administration procedure’ under Italian generating robust levels of passenger loyalty especially within Italy, law. It also sets the agenda for what any future outcome for Alitalia, and a unique geography to generate a reasonably consistent level of or any part of it, might involve. what the airline analysts sometimes refer to as ‘privileged sources The Italian extraordinary administration procedure is an insolvency of revenue’. proceeding available to large companies, defined as companies Combine all of that potential for increased revenue and positive exceeding certain dimensional thresholds set down in the relevant profiling with a certain element of arrogance from Abu Dhabi based legislation. This procedure, which is quite different from the on Etihad’s own steep growth curve and decent record with its ordinary bankruptcy liquidation procedure in Italy, is aimed at equity alliance partners to date, and the decision-making process protecting the relevant company as a going concern, along with its around the addition of Alitalia as an Equity Alliance Partner in assets and employees, in each case by means of the prosecution, order to demonstrate to the industry the power of the Etihad growth reactivation or conversion of its business activities. strategy as able to take on and defeat what had frustrated so many Under Italian law, there are two different extraordinary admin- management teams and analysts previously, becomes somewhat istration procedures, applicable depending on the size of the clearer to decipher. company involved, as follows: The picture of the future looked somewhat rosy for an Alitalia re- a) the so-called ‘Prodi-bis procedure’ applies to smaller insolvent launched under Etihad’s innovative and effective management companies with more than 200 employees and debts exceeding and leadership, and it also reflected a period of harmonisation and an amount which is ⅔ of assets and turnover combined increased collaboration at a political level between the two countries, (Legislative Decree no. 270/1999); and including a marked growth in trade between the two, which built on b) the so-called ‘Marzano procedure’ applies to larger insolvent existing connections such as the hugely successful Ferrari World companies with more than 500 employees and debts exceeding theme park in Abu Dhabi. 300 million euros (Law Decree no. 347/2003). But it wasn’t to be, and the shimmering vision of a future for Given the size of its undertaking, the Marzano procedure has been Alitalia as a revamped, constructively restructured premium flag- invoked as regards Alitalia and the insolvency declared by the Court carrier as possibly the gold-standard part of Etihad’s future plans, of Civitavecchia on 11 May 2017. with McKinsey’s ‘strong organisational health’ and an associated The main aspects of the Marzano procedure are as follows: modernised outlook on costs giving it a an advantage to peers, proved for Etihad to be just that – a shimmering vision. Indeed, no doubt with some benefit of hindsight (although not entirely, given 1 The Extraordinary Commissioner(s) the massed ranks of sceptics involved in the Alitalia story), it rather represented one of those mirages which come about, in the deserts After the company files the relevant request with both the Italian which surround Dubai and Abu Dhabi, with an insufficient water Ministry for Economic Development and the Bankruptcy Court (the supply and a flair for misadventure. competent court for declaration of the insolvency of the company), the Ministry orders that the economic situation is addressed by application The reasons are complex and inter-related, and generally go further of the Marzano procedure and appoints one or three extraordinary than the received wisdom that Etihad’s due diligence on the nature of commissioner(s) to manage the company in insolvency, and the Alitalia and its commitments, in particular in the labour arena, were company’s directors terminate their office automatically. At the point, somehow defective. The inherent structure of the industry is no any company act can only be executed by the commissioner(s). doubt unhelpful in terms of getting to grips quickly and efficiently with a bloated legacy carrier which seemingly continued to work in many respects against itself as it tried to effect a meaningful 2 Immediate effects of the Marzano procedure restructuring as time went on, while haemorrhaging vast amounts of cash, equating in the months leading up to the insolvency The Ministry decree granting the application of the Marzano declaration an average of 68,500 euros per hour. Extremely long procedure automatically triggers certain effects in accordance with lead times for new fleet capacity and the associated perception of the Italian law, as follows: travelling public, perishable inventory, significant supplier power a) Creditors’ legal actions against the debtor’s assets across the board (whether the topic is aircraft, engines, airports or Creditors may no longer start or continue enforcement other procurement items), together with a regulatory framework proceedings and/or foreclosure actions against the assets of globally as well as locally that sometimes seems to be designed to a company subject to the Marzano procedure (the so-called punish carriers whenever possible, will all have taken a toll on the automatic stay). attempts of Etihad to prove most of the industry wrong as regards b) Company’s assets Alitalia. However, fail they did, and the implications for both are The insolvent company loses control of its assets, which are clearly significant. now managed by the extraordinary commissioner(s). c) Pending contracts ‘Extraordinary Administration’ The contracts of the company, which have not yet been performed in whole or in part by either party, remain in full With the profile of this particular topic in the industry and also the force and effect, until the extraordinary commissioner(s) dramatic nature of developments which surrounded the news that elect to continue or terminate each of them. In this respect, Alitalia had once again filed for bankruptcy notwithstanding that the extraordinary commissioner(s) are entitled to terminate such agreements at their sole discretion, and at any time it had been under the stewardship of Etihad, there has been much during the Marzano procedure. comment on the nature of the bankruptcy procedure involved and its

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After the approval of the rescue plan developed by the extraordinary e) the email address of the relevant creditor, to which all the commissioner(s) (see point 3 below), the contracting party may communication concerning the proceedings will be sent. request the extraordinary commissioner(s) to take a decision – within In addition, evidence of the debt or of the property right asserted a time limit of 30 days – as to whether to continue or to terminate needs to be attached to the claim. the agreement. If the reply is not received within this period, the The claim has to be submitted by way of a certified electronic mail contract is deemed completed. This termination does not occur with system to the extraordinary commissioner(s)’ certified electronic respect to employment agreements and lease agreements regarding mail address, with all evidence attached (bills of exchange and real estate property where the debtor is the lessor. cheques also have to be filed with the Court in original form with If the extraordinary commissioner(s) elect to perform the relevant the Court on or before the day of the hearing). contract, receivables relating to that contract will have a first priority position as to the order of payments to creditors generally. 5 Distribution of the Company’s Assets

3 The Rescue Plan After examination of all the proofs of claims of the various creditors of the company in insolvency, the Bankruptcy Court, by way of decree, The core of the Marzano procedure is the rescue plan of the grants, rejects or declares inadmissible (as the case may be) the filed company, which the extraordinary commissioner has to prepare proofs of claim, and subsequently prepares a list of creditors that are within 180 days of the granting of the decree opening the procedure, entitled to participate in the distribution of the company’s assets. and submit to the Ministry for approval. If approval is not granted, In this respect, a fundamental principle of such distribution, pursuant the procedure converts from the Marzano procedure to an ordinary to the Italian Bankruptcy Law, is the equal treatment of all creditors bankruptcy liquidation. The plan may be aimed at either (i) getting (‘par condicio creditorum’), according to which, absent statutory the company out of the economic and financial crisis, or (ii) selling priorities, no creditor may be paid a higher percentage of its overall the company’s assets, the latter being applicable to the current claim than other creditors. Alitalia crisis. In either case, the objective is to maintain staff Notwithstanding the above, two groups of creditors do still enjoy employment. The plans have to be structured in order to achieve the preferential treatment (‘creditori privilegiati’), namely: relevant objectives, within one and two years respectively. ■ creditors who hold a security interest (‘creditori ipotecari o The goal of this procedure is to keep the company’s ability to continue pignoratizi’); and as a going concern. In this regard, only where the restructuring phase is ■ creditors who have preference under law (‘creditori not approved by the Ministry, then the extraordinary commissioner(s) privilegiati in senso stretto’). may propose a plan for the sale of the company’s assets. Therefore, the equality principle only applies to those creditors who The rescue plan may incorporate the satisfaction of creditors’ claims have an unsecured and non-preferred claim (‘creditori chirografari’). through a settlement agreement, which may provide: Those creditors will be paid, on a pro rata basis, only after the ■ the division of creditors into classes, according to their legal satisfaction of secured and preferred creditors from the distribution position and economic interests, and different treatment of of the company’s assets. creditors belonging to such different classes; By way of a summary of the position, the Italian Bankruptcy Law ■ the restructuring of debts and satisfaction of creditors’ provides the order of payments to creditors, as follows: claims through any technical or legal means, including the assumption of debts, mergers and other transactions, such a) Administrative-priority Creditors as the allocation to creditors (or classes of creditors) of Certain creditors are regarded as ‘creditors towards the stock, quotas or bonds, including convertible bonds, or other administration of the procedure’ (‘creditori della procedura, financial instruments; and prededuzione’). In this case, their debt is placed first in priority ■ the transfer of the assets to a third party. as to the order of payment, and has priority over secured and unsecured claims. In general, these debts arise in connection Such a settlement agreement has to be approved by creditors with the relevant procedure (e.g. all the extraordinary representing the majority of creditors in terms of debt value owed commissioner(s)’ fees), or arise from the extraordinary by the company or, if different classes of creditors exist, by a vote of commissioner(s)’ activities (e.g. when they elect to continue creditors representing the majority of each such class. performing a contract) or costs of the procedure. b) Secured Creditors 4 Proofs of Claim Secured creditors, i.e. creditors with a mortgage, pledge or statutory priority claims (such as employees, tax and social security authorities), are entitled to be paid back as a priority The petition to file proofs of debts or claims against the insolvent only out of the proceeds from the sale of the assets of the company, or to claim or request the restitution of tangible or company. intangible assets owned or possessed by the insolvent company, Article 2745 of the Italian Civil Code contains very detailed must be filed with the Bankruptcy Court prior to the deadline fixed rules regulating priority conflicts between secured and by the Court for such purpose in the declaration of insolvency. preferred creditors. Each claim to be filed has to contain: c) Unsecured Creditors a) general details of the claimant and the indication of the Unsecured creditors have no preference or security and will proceeding’s reference number; consequently be paid, on a pro rata basis, only if and to the b) the amount (principal and interest) of the debt to be paid or extent that there are assets left from the distribution of the the description of the property/goods to be returned; company’s assets. c) a brief description of the facts and the legal basis of the claim; d) Subordinated Creditors d) if there is one, an indication of the right of pre-emption, as Finally, subordinated creditors are entitled to be paid only well as a description of the goods in respect of which the right after all the other above-mentioned creditors have been paid of pre-emption is exercised – if it has a special nature; and in full.

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The ranking of creditors cannot be modified by agreement between commissioners were, at this point, motivated to conclude the sale the parties involved. However, a single creditor can, if it chooses to of the business of Alitalia as a whole or in part, as a going concern, do so, waive its right of preference. prior to the end of 2017, is unfortunately unlikely to manifest Of course, it remains to be seen just how many of these payments itself given that, at the time of writing (December 2017), no such will be made as the extraordinary commissioner(s) continue to definitive binding offer had been announced as acceptable tothe execute their rescue plan for Alitalia and attempt to identify an extraordinary commissioners. appropriate buyer of the company’s assets. However, negotiations with a very limited number of shortlisted interested parties who have previously provided the extraordinary commissioners with binding offers, are informally confirmed as The Madness ongoing. This seems to indicate that at least one more party seems prepared to look at Alitalia and overlook decades of mismanagement, As a practical matter, it should be noted at this time that all the political ambiguity and a fiendishly difficult labour environment, procedural steps outlined above remain subject to change. The and be persuaded they can do better. Italian government has openly admitted to the need for a new bankruptcy regime in Italy and, if you thought the Alitalia situation could not get more complicated then you should reconsider, since Prognosis it could be that any such changes affect the Marzano procedure. However, on any current analysis, Alitalia is effectively in a It is often said that insanity is defined as doing the same thing over strictly controlled sale process once again, as can be seen from the and over again and expecting different results. While it would explanation of the ‘extraordinary administration’ procedure above. of course be foolish to suggest that the current authors of such Given the history of its business, its failures, the two ‘extraordinary binding offer(s) as may be in the hands of Alitalia’s extraordinary administrators’, question marks about its underlying viability and the commissioners met such a description, it will be fascinating to see unwillingness of a workforce to embrace new realities in the market the nature of any disposal which may be agreed at the conclusion of and the industry, the fact that there is even a sale process continuing the process (for which the appetite of the unions, and presumably must be viewed as literally ‘extraordinary’ in the eyes of many. therefore of the government in Rome, seemed limited in and around Nevertheless, we have seen that the core of the procedure is the the time of the events of May 2017). rescue plan of the company that the extraordinary commissioner(s) Certainly, the legal gymnastics continually performed in order to are supposed to prepare upon their appointment by the Court. When maintain financial support for Alitalia in extraordinary administration the Court of Civitavecchia declared the bankruptcy of Alitalia in continue apparently unabated, particularly in relation to the relevant May 2017, it appointed three extraordinary commissioner(s) to lead provisions under EU law relating to state aid, where Italy immediately the company through the extraordinary administration procedure set committed, at the time of the extraordinary administration declaration, out above and, in particular, to execute a plan of recovery developed to a guarantee of 600 million euros for six months, to support Alitalia by the extraordinary commissioner(s). through the bankruptcy process. Indeed, some commentators have Following their appointment, the extraordinary commissioners have, described Alitalia as ‘too Italian to fail’, which is not meant as a to date, made a series of announcements to the market as regards complimentary description, although it does hint at a certain amount their plans and their intentions. Initially, there was the publication of grudging respect for the nation’s supreme ability to navigate of a call for expressions of interest from prospective bidders who obstacles with whatever means are available. fulfilled EU nationality ownership criteria, as well as a kind of ‘fit When extraordinary administration of the airline was granted at its and proper person’ test under Italian law. request for the second time in a decade, the board of Alitalia talked This call generated a process whereby selected interested parties about its serious financial plight, the unwillingness of its investors were subsequently granted access to a data room established for the to refinance the company, and the impossibility of finding a quick purpose of allowing a potential acquisition analysis of Alitalia to alternative. Etihad’s explanation, following some rather bombastic take place. The quality of this procedure has admittedly been called predictions about Alitalia’s future less than three years earlier, into question given that, as reported, the data room did not contain was to emphasise that it needed ‘fundamental and far-reaching any sensitive or confidential information which might be helpful to restructuring’ to survive and grow in the future; maintaining that it competitors. was not prepared to continue to invest without all stakeholders (for Following this step, the commissioners made a further call for non- that, read – the unions) supporting that restructuring. binding offers for either parts of the business or assets of Alitalia Now that one of the highest-profile, most successfully run and best- or for the entire business, making it clear that a strong preference supported modern carriers has taken its ball home from the game, will be given to consideration of non-binding offers for the entire the ‘who, what and how’ of Alitalia’s ushering into the next phase of business. The original deadline for such non-binding offers was 15 its history are eagerly awaited. One thing seems certain – Alitalia is September 2017 and, among other things, the announcement also not disappearing any time soon, even if it is something of a mirage contained the stipulation that a final phase of negotiation and/or wrapped up in a madness. enhancing binding offers which were received would be concluded by 5 November 2017. This clear indication that the extraordinary

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Philip Perrotta K&L Gates LLP One New Change London EC4M 9AF United Kingdom

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

Philip Perrotta is a partner in the firm’s London office, where he is responsible for the Aviation Finance group and is a member of the Banking & Asset Finance practice group. The nature of his practice is truly international and he frequently works with clients across Europe and South East Asia, specifically in Milan and Singapore, as part of the service provided to clients in this practice area. He is an aviation finance and aviation specialist, recognised asa “leading expert”, regularly receiving commendations in the legal directories, for example for being “very strong” and “dealing with all the big points without ever over-lawyering them”. He is “experienced” and ensures “an excellent and accessible service” to clients (The Legal 500). Philip acts for a broad range of significant aircraft lenders, lessors and operators globally, and has successfully concluded literally hundreds of transactions involving commercial and business aircraft, aero engines and other aviation assets in jurisdictions across all the continents. He is a regular contributor at industry events, and is often requested to comment on relevant developments in a variety of segments of the aviation finance market.

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 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 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.

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Nothing Comes

Easy in International Marc S. Moller Air Crash Litigation

Kreindler & Kreindler LLP Justin T. Green

Introduction The 1999 Montreal Convention and Jurisdiction In the aftermath of an air crash, especially one that involves a commercial airline in the course of international transportation, The 1999 Montreal Convention (MC99) was intended to modernise victims and their families demand accountability. They want to the rules governing international aviation crash cases. It was know why the plane crashed, who is responsible and from whom progress, to be sure, but it did not make the process of securing they will recover full and fair damages for their loss. Our experience compensation for victims any easier for the lawyers who represent in representing families who suffered the loss of a loved one in an them. The road travelled from the Warsaw Convention of 1929, air disaster has made it clear that accountability and the need for through the 1955 Hague Protocol, to the Montreal Agreement in answers can weigh more heavily on families than the urgency of their 1966, to the Montreal Convention of 1999, was not an easy one. claim for money damages. When a plane crashes, someone or some Building consensus among the airlines and countries took decades entity is always at fault. Airplane crashes don’t just happen; they are of work and persuasion. Therefore, any examination of the rights always the product of some human or mechanical error. It may be of airline crash victims today may start with MC99, but it hardly pilot error, poor training or vetting, poor maintenance, an air traffic ends there. MC99 only applies to air carriers and to accidents and control error, or a manufacturing defect in the equipment that caused injury in the course of international transportation. It does not apply the crash. It may even be that poor security permitted a terrorist to manufacturers and others. With respect to passenger death and or criminal act to take down the airplane. With that as a given, the injury claims, MC99 made air carriers absolutely liable for provable families assume and insist that full and fair damages will be paid. damages up to 100,000 SDRs (Art. 17.1, Art. 21.1) (now 113,100 Some may insist that punitive damages be claimed and may assume SDRs) and gave an express treaty endorsement that carriers’ that large damages are easily attainable. That assumption, fed by liability was unlimited unless the carrier could prove that the death information (or perhaps misinformation) readily available through or injury was “solely due to the negligence or other wrongful act an internet search, prevails until they are confronted with the realities of a third party” (Art. 21.2(b)). Without question, the practical and complexities of the law and the various legal systems and the effect has been that in today’s world, carriers are almost always liability and damage standards by which their claims will potentially liable for provable compensatory damages without limit after an be measured. Initially, they may believe that simply because a accident. Also, after decades of controversy about the 1929 Warsaw relative was killed in a plane crash that they will achieve a multi- Convention jurisdiction constraints, MC99 Art. 33.2 added the long- million-dollar settlement. Lawyers know that the laws by which awaited “Fifth” jurisdiction to the four enumerated in Art. 33.1 (the damages for victims are calculated are not the same from country to domicile of the carrier, its principal place of business, where the country, and that the amount of settlements and verdicts that can be ticket was purchased, and the place of destination) as a forum in obtained for victims or their families, especially in wrongful death which passengers or their surviving relatives could file a lawsuit, cases, are fraught with unpredictability. The families do not. namely where “the passenger has his or her principal and permanent A detailed comparison of national laws governing recoverable residence and to or from the carrier operates” either itself or damages in death cases is beyond the scope of this article, but suffice through a “commercial agreement” with another carrier. The Fifth it to say that the recoverable damages standards for the passengers jurisdiction criteria are often subjects of dispute. A “commercial injured or killed on the same plane crash will be different and agreement” must be more than an “agency agreement”; it must be an heavily impacted by their nationality, where they reside, and where agreement that involves actual transportation. (Art. 33.3(a)). Being they are able by law to file their claims. A typical international flight part of an airline “alliance”, or a partner or code-share, will suffice will include citizens from many different countries, and their legal as a “commercial agreement”. rights may vary greatly. A U.S. citizen may have the right to sue in Notwithstanding the addition of the Fifth jurisdiction, there is no the U.S. and recover U.S. damages. Some non-U.S. citizens may question that jurisdiction options remain limited, either as a matter be forced to sue in a jurisdiction that provides little in the way of of fact or law, and – as will be pointed out below – demand the compensation. Compounding the frustration families experience exercise of judicial discretion. Equally certain is that, because the waiting for results of a post-crash investigation, are their grief and choice of forum has a major impact, even a controlling influence on the uncertainties that attend their claims resolution process, as well the damages which passengers or their heirs can expect to recover, as their bewilderment about the functioning of the legal system through which the value of their claims will be determined. Those where a plaintiff is able to file his or her case is a critically important factors create the background in which lawyers representing the decision and is often contested. plaintiffs and the defendants must operate.

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The addition of the Fifth jurisdiction was promoted most heavily The U.S. has two parallel court systems: state and federal. by the United States government, which felt that American citizens Sovereigns, including state-owned airlines even if they may be could not recover damages consistent with U.S. economic realities subject to jurisdiction in the U.S., can only be sued in a U.S. federal and verdict expectations if their claims were subject to the damage court and, when a trial is necessary to resolve issues, the trier of fact standards of many foreign countries. It is, therefore, useful to begin is a judge without a jury. A case against a sovereign started in a state the analysis of the choice of forum options and the consequences court may be “removed” from state court to federal court on motion from the U.S. perspective. That perspective is equally important for by the sovereign. The distinction, therefore, between state-owned non-U.S. citizens and non-residents because, when they are killed and non-state-owned carriers is very important. or injured in an air crash in the course of international transportation There is another wrinkle to the federal vs. state court equation. In outside the United States, there is almost always an effort to find a an air crash case involving the deaths of more than 75 victims, any sufficient factual basis for claiming a U.S. connection upon which defendant, including domestic and foreign manufacturers, may to predicate U.S. jurisdiction in the hope that U.S. law will provide remove the case from state to federal court if certain conditions are a compensation standard that will lead to a higher recovery than if satisfied under the U.S. Federal Rules of Civil Procedure. See, 28 foreign standards control. U.S.C. 1369(a). The analysis of the availability of a U.S. forum must begin by When a lawsuit is properly filed in the U.S. against a sovereign- determining whether any of the Art. 33 jurisdictions provide a owned airline and includes a manufacturer or other third party as basis for jurisdiction. It is safe to say that, notwithstanding Art. 33, a defendant, the anomalous situation arises in which the claims recent U.S. court decisions have demonstrated a reluctance among against the sovereign-owned airline may only be tried by a judge, U.S. judges to allow foreign accident cases involving non-U.S. while the case against the manufacturer and other defendants can be passengers, and foreign air carriers and manufacturers that do not resolved in a “jury” trial. That is the case notwithstanding that all include a U.S. point of departure or arrival, to be litigated in the the claims are combined in a single lawsuit or one in which all the United States. Several bases are offered for dismissal of those cases, claims are consolidated. but the reasoning falls into two basic categories: lack of subject- Even when jurisdiction is entirely proper in a U.S. court, federal matter jurisdiction; and forum non conveniens. court judges may rely upon the doctrine of forum non conveniens If a case is filed in the U.S. and clearly seems to fit within one of (FNC) grounds to dismiss foreign air crash cases unless the claims the MC99 Art. 33 fora, one would think it would end the matter. have some significant nexus to the U.S. Courts may use FNC to Keep in mind, however, that even U.S. permanent residents who decline to exercise jurisdiction over cases arising from foreign air predicate their claim to U.S. jurisdiction based upon their permanent crashes involving U.S. manufacturers in which product-liability residence status under the “Fifth” jurisdiction must still prove that issues are raised. FNC is more often employed in the U.S. than the carrier, either on its own or through a “commercial agreement”, it is in most other nations. In making the FNC assessment, U.S. is doing business in the U.S. Furthermore, since many air carriers courts consider “public” and “private” factors, but in the end, as are wholly or partially owned by sovereign entities, a preliminary the name of the doctrine suggests, if a judge concludes, based determination must be made to determine whether the carrier is in fact upon a consideration of all of the relevant factors, that it is more a government-owned airline or a non-government carrier. Foreign “convenient” or appropriate for the matter to be resolved in a foreign state-owned carriers may seek to take advantage of immunity from court, more closely tied to the matter in dispute, the case may be suit under the U.S. Foreign Sovereign Immunity Act (FSIA) which dismissed. The dismissal is considered “discretionary” and will not preserves a sovereign’s immunity recognised under international law; be reversed on appeal unless the lower court’s action is deemed to though that immunity is lost if the damage is caused in the course of be an “abuse of discretion”. a “commercial activity”. (28 U.S.C. §1605(a)(2)), the FSIA requires By way of example, on March 27, 2017 a federal judge in Arizona that commercial activity must be one that has a “substantial contact dismissed an action on FNC grounds brought by the families of with the United States”. (28 U.S.C. §1603(d), (e)). Arguably, Art. passengers killed in the pilot-suicide crash in France while traveling 33 and FSIA may be in conflict. A court may have subject-matter from Barcelona to Dusseldorf on Germanwings Flight 9525, a jurisdiction under the Montreal Convention, for example, based on Lufthansa subsidiary. The Arizona lawsuit was against Lufthansa’s the sale of the ticket in the U.S., but a foreign government owned U.S. flight school training subsidiary. The defendant’s effort airline may argue that the court does not have subject-matter to secure an FNC dismissal came as no surprise. The plaintiffs jurisdiction under the FSIA’s commercial activity exception because vigorously opposed dismissal and argued that virtually all of the the accident did not arise out of the sale of the ticket – the commercial evidence of potential flight school liability was in Arizona. activity – but rather the alleged negligence of the flight crew that took place outside the U.S. The courts have not yet ruled on this potential While an FNC dismissal may be anticipated, there still may be a conflict between the Montreal Convention and the FSIA. benefit to starting the case in the U.S. When subject-matter and personal jurisdiction requirements in a U.S. court are satisfied, the While Art. 33 makes jurisdiction claims against foreign airlines easier dismissals are customarily conditioned upon the carrier and all to support, that may not be the case against foreign manufacturers the other defendants agreeing to submit to the jurisdiction of the not affected by MC99 and whose products may have contributed to non-American court specified in the dismissal order, waiving any an air crash outside the United States. The U.S. Supreme Court has statute of limitations defence, and agreeing to provide evidence that recently narrowed the bases for personal jurisdiction over foreign would be available in the U.S. proceeding, including witnesses. entities by essentially holding that, to gain personal jurisdiction The court may even require that the defendant provide U.S.-type over a foreign entity, a claim must arise out of conduct in the U.S. discovery, including the production of documents and witnesses; unless the foreign defendant is essentially “at home” in the U.S. If evidence that may not be obtainable in other legal systems. The fact not, the claim against a foreign defendant must be linked and have a that an FNC dismissal will be subject to these kinds of conditions, connection to the defendant’s conduct in the U.S. that gives rise to the makes bringing the lawsuit valuable because plaintiffs may gain claim. See, Goodyear Dunlop Tires Operation S.A. v. Brown, 131 S. access to information, when they refile their cases in the foreign Ct. 2846 (2011); Daimler v. Bauman, 134 S. Ct. 746 (2014). Even if country, that they might otherwise not be able to obtain. This may those hurdles are overcome, that still does not end the U.S. jurisdiction provide answers to what caused the crash, and may lead to increased issue conundrum.

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compensation offers. The U.S. court conditioned the dismissal of The MAS370 flight was heading to Beijing from Kuala Lumpur and the Germanwings Flight 9525 case on terms that may help plaintiffs the passengers were, but for a few, residents of Malaysia or China. in litigation in Germany in their search for answers. There were passengers from the U.S., France, Canada, India, the Netherlands, Russia, Taiwan, New Zealand, Australia and Iran on the plane. The relatives of the Malaysian passengers with round-trip Choice of Law Kuala Lumpur–Beijing–Kuala Lumpur tickets could only pursue their claims in Malaysia, while the Chinese passengers had the Art. The mere fact that jurisdiction may be established in the U.S. courts 33 option of suing in Malaysia or China. Art. 33 gave others the does not necessarily mean that U.S. damages law will apply. In right to sue in the country of their permanent residence because most states in the U.S., the application of their choice of law rules MAS operated flights to those countries. With that knowledge, it could result in the application of foreign law to the issue of damages was understood that, if lawsuits were commenced, the permissible in foreign residents’ claims. As a general rule, when U.S. courts are level of compensation a court was likely to award was reasonably faced with a choice of law issue involving non-American plaintiffs predictable. Malaysian and Chinese law both allow a recovery for regarding damages, the judges will try to determine which country economic loss, but an extremely modest amount for non-economic has the greatest interest in the application of its law to the damages loss. As a practical matter, compensation for non-economic loss issue. To make that assessment, the judges will consider the – under the law – was inconsequential, though anecdotally, judges residence of the passenger and the passenger’s relatives who bring have some flexibility in rendering awards for that element of loss. suit, the passenger’s contacts with the United States, whether the The compensation analysis, therefore, had to focus on the Chinese defendant is a domestic or foreign corporation, and the U.S. interest and Malaysian methodologies for the calculation of loss, and the in the application of its law to the damage issue. methods were markedly different. Some choice of law examples may be illustrative. Malaysian law provides that survivors are entitled to recover their On July 6, 2013 Asiana Airlines Flight 214, operating a Boeing 777, loss of support derived from a decedent’s earnings as a result of their at the end of an uneventful flight from Beijing to San Francisco, loved one’s death. The basic calculation is made by multiplying crashed while attempting to land at the San Francisco International the number of years from the decedent’s age at death to age 55, Airport. All but three of the passengers miraculously survived the reducing the sum derived from that calculation by a third for crash. The complement of passengers on the flight included some assumed personal consumption and then, inexplicably, dividing Americans coming home from an overseas trip, but most of the that number by two (2). That formula applies to decedents 30 passengers were Chinese residents who purchased Beijing–San years or older until they reach age 55. By that formula, a person Francisco–Beijing round trip tickets. For other Chinese passengers, killed with modest earnings produces a minimal recovery unless San Francisco was their final ticketed destination. Virtually all the their earnings were truly substantial and they were young, i.e., in passengers and the flight crew filed suit in the United States claiming their early to mid-30s. Malaysian law allows no economic damage either MC99 jurisdiction against the airline, if that was available to calculation beyond a decedent’s age 55. No recovery of economic them, and/or standard subject-matter jurisdiction against Boeing. loss is, therefore, allowed for decedents older than 55 no matter how After a torturous procedural history, all of the passengers’ lawsuits much they earned or how they died. China law, on the other hand, in the United States ended up in federal court in Oakland, California. usually calculates economic loss by taking the number of years from For most of the Chinese passengers, even though the crash occurred the decedent’s age at death to the decedent’s presumed retirement, in the United States – one might say in the backyard of the courthouse about 65, and multiplies that number by the average annual income – MC99 Art. 33 made the U.S. an unavailable forum within which in the community in which he or she lived. The average annual to file their claims against the airline. The airline’s principal place income in Shanghai is reportedly around 10,000 USD per year, and of business and domicile was South Korea, their tickets were that is China’s highest. Rich or poor, that is the law. A reduction purchased in China for transportation which was ticketed to end in for the decedent’s presumed personal consumption is also made. China, and their permanent residence was in China. Chinese law Negotiations in those kinds of cases are complicated. necessarily framed the damages calculus in those cases. Because In Europe, while most countries still adhere to the lex fora principle, the claims against the manufacturer were, properly, initially filed in all countries allow recovery for economic loss, but not all countries Illinois in state court, removed to the Illinois federal court (under an allow recovery for non-economic loss. Spain, Italy and France, “admiralty” theory because Boeing argued that the crash sequence under the label of moral damages (dommage moral), allow recovery began over water) and then transferred to the California federal for non-economic damages; others do not. Germany, by virtue of court, the settlement negotiations, even assuming a case could be a recent change in the law, now allows a limited recovery for non- proved against Boeing, had to take into consideration the strong pecuniary loss. The Netherlands still allows no recovery for non- possibility that the Court could apply Chinese law to assess the economic loss. damages in those cases. The choice of law issue overrode all other Knowing what damage law will apply to a case brought in an EU considerations in the settlement negotiations that ensued for those country is further complicated by two Regulations commonly passengers. Even for cases against the airline by Chinese or South known as Rome I and Rome II. Rome I, which became applicable Korean residents that could be maintained in the U.S., one had to in 2008, sets forth choice of law principles specific to contracts of account for the risk of the application of Chinese or South Korean carriage (Art. 5), and Rome II (2007) to “tort/derelict” generally law. That weighed heavily on the case valuations. (Art. 4). Those regulations are supposed to supersede the national The disappearance of Malaysia Airlines Flight 370 (MAS370) choice of law rules of EU Member States. Only Denmark opted provides another example. Though the MAS370 Boeing 777 out. Unless the parties have chosen a law to apply to claims – a has yet to be located in the presumed ocean depths somewhere highly unlikely matter when all passengers do is buy a plane ticket near Australia, MC99 makes the airline’s liability uncontestable. for travel – the applicable law shall be “the law of the country of the Without the plane, a claim against the manufacturer, if any, rests on habitual residence of the carrier”. (Rome I., Art. 5.1). Ironically, assumptions and speculation. Therefore, it is essential to understand Rome II, which became a law in 2007 before Rome I in 2008, the factors to be considered in evaluating the individual damage provides that the law of the place of the tort/derelict, generally, is claims arising from that event. controlling; however, if the tortfeasor and the victim have the same

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“habitual residence”, the law of that jurisdiction will control. Under Nevertheless, the best way to achieve successful resolution of a case rare circumstances, the law of some other country may apply. The is to prepare it for trial. Once fully prepared, lawyers can make potential conflicts between the two regulations in point are obvious. reasoned assessments of the risks and the most likely outcome, and It is no surprise, therefore, that victims’ families search for the most share their educated opinions with their clients. favourable law that can be applied to resolve their claims. What is the most effective way to resolve a domestic or foreign One can argue that the values of cases should reflect the economic aviation accident claim through negotiations or trial? It may seem realities of where the victims or decedents normally reside, but obvious, but: there should be some mechanisms to create a level of uniformity 1. The victims’ families’ lawyers must be fully prepared. They and fundamental fairness in the formulas as applied, and some way must be tenacious in developing the facts and be realistic in to ensure adequate compensation for economic loss that actually analysing the facts and, when necessary, obtain the assistance comports with families’ true losses and needs. The arbitrariness of reliable and experienced liability and forensic damage experts. of some countries’ laws is unconscionable and totally incompatible with the concept that compensation should fairly reflect losses when 2. Lawyers for all parties must understand the law that will injury or death is caused by negligence, gross negligence or deliberate govern jurisdiction and selection of forum, and how the law will apply to the fact pattern of a given case. act of a tortfeasor. Likewise, the most egregious element of loss – the loss of care, comfort and companionship which magnify grief 3. The clients, whatever their nationality or location, must be provided with a realistic assessment of what can be achieved, when a loved one dies – requires compensation. Many countries do including the risks, opportunities and costs involved in not recognise non-pecuniary losses as compensable. Poor people trial preparation and trial. Creating false or exaggerated and those with modest means are just as important to their families expectations will usually backfire. as wealthy people. Often more so. The value of their lives cannot 4. Plaintiffs’ lawyers must appreciate the dilemma their clients be measured with the aid of a calculator. face. They may know the law, and the clients may have to adjust their expectations. Ultimately, for passengers’ families, it is they who must make hard decisions while they Mediation and Settlement grieve. Lawyers must expect a degree of tension to arise between themselves and their clients when sometimes they It should be taken as a compliment that the plaintiffs and defence have to deliver hard truths to clients about their cases. lawyers, insurers and their lawyers who practice in this field are 5. Lawyers representing the parties should make reasonable talented and sophisticated. They know the law even though they demands and offers consistent with the facts and law, and not may reach different conclusions about how the law should be applied take positions simply to test the willingness of their adversary to the facts of a given case. They may also disagree on how laws to litigate or “go to trial”. For aviation litigation specialists, it should be interpreted and what conclusions and inferences should is a waste of time and money. The sooner claims are resolved be drawn from facts. Certainly, when aviation accident litigators for full and fair value, the better it is for the families, the appear in United States courts, they are usually not meeting for insured, the airline and manufacturers. the first time, and bring with them a measure of experience from 6. If all that doesn’t produce a fair result, go to trial. prior cases in which they have been involved. Judges know this, and, within reason, allow them to present plans that will chart a pragmatic course by which to resolve the differences and the claims Conclusion of their clients. When there is a stalemate or an issue that can only be resolved by judicial intervention, that will happen. Surely that Nothing comes easy in resolving international aviation accident is the practice worldwide. Jurisdiction issues and choice of forum claims. The laws, intended to be clear, may be easy to read, but or forum non conveniens issues are the most daunting and the most they are complex and difficult to apply. The uncertainties explain common to require resolution by a court. the tension between plaintiffs and defendants, victims and survivors and airlines and insurers when they have to have to put pen and It is now virtually a general rule that, when it comes to resolving pencil to paper and/or type opinions into computers to analyse the damages aspect of claims U.S. courts as well as the courts of and value claims. The challenge for every client is to find that other countries, they routinely require some form of mediation. The point of equilibrium between the plaintiffs’ rights and arguments parties may agree on who the mediator should be or the court may and those of the defendants, at which claims can be resolved. For appoint a mediator. The fact that very few commercial air crash victims’ families, putting a signature on a release agreement is often cases actually go to trial means that mediation and direct negotiations traumatic. They may feel as though they are letting the victim down between the parties works. The urgency of reaching a settlement by giving up the fight for justice. In the end, victims and their or mediated solution is clear. Preparing for trial is expensive families have only one opportunity to achieve fair compensation. and time-consuming and most often does not necessarily achieve Airlines, manufacturers and insurers remain in business. better results than can be obtained through negotiated settlements.

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Marc S. Moller Justin T. Green Kreindler & Kreindler LLP Kreindler & Kreindler LLP 750 Third Avenue 750 Third Avenue New York, NY 10017 New York, NY 10017 USA USA

Tel: +1 212 687 8181 Tel: +1 212 687 8181 Email: [email protected] Email: [email protected] URL: www.kreindler.com URL: www.kreindler.com

Marc S. Moller is a trial and appellate lawyer who has been a partner at Justin Green joined Kreindler & Kreindler LLP in 1997 and became Kreindler & Kreindler LLP for more than 35 years. He has specialised a firm partner in January 2003. He focuses his practice on helping in representing plaintiffs in commercial and general aviation accident, families of aviation disaster victims, but also represents victims of mass disaster and other wrongful death and personal injury cases. other transportation accidents and mass torts. The results in some cases set records for recoveries in the jurisdictions As an aviation lawyer, Justin has successfully represented families in in which the actions were filed. major aviation cases. These include major airline disasters, corporate Mr. Moller’s trial record has earned him the distinction of being airplane and helicopter accidents, civil airplane and helicopter elected Fellow of the American College of Trial Lawyers. He has accidents and aviation accidents that have taken the lives of our been appointed Lead Counsel or Chairman of Plaintiffs’ Steering servicemen and women. He has authored numerous articles on Committees in several mass disaster cases and served as Special aviation, product liability and wrongful death law. Trial Counsel in matters involving virtually every type of commercial Justin is the immediate Past President of the International Air & and general aviation aircraft, corporate jet and charter aircraft, Transportation Safety Bar Association, and a member of the American helicopters and military aircraft in operation today. This breadth of Association for Justice, where he is a Past Chair of the aviation section. experience has made him a valuable consultant in litigation outside of the United States when the United States jurisdiction requirements He graduated from Union College in Schenectady, New York, and cannot be satisfied. earned his law degree from Fordham Law School in New York City.

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, settlements 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 defeatingforum 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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WALA: 10 Years of

Growth in the Airport Alan D. Meneghetti Sector

Worldwide Airports Lawyers Association (WALA) Michael Siebold

70 countries across five continents, have already attended WALA About WALA conferences, and this number is set to grow in the coming years as WALA formalises its structure and membership. Now incorporated The Worldwide Airports Lawyers Association (WALA) was as a not-for-profit corporation, based in Montréal, Canada, WALA established in Prague, Czech Republic, in September 2007 at a has created a community of like-minded individuals, regularly seminar held at Prague Airport, as a response to a growing need to reaching more than 5,000 industry delegates in 90 countries through develop airport law as an independent area of aviation, transportation its database. and logistics law. Lawyers of airport operators from many countries in Europe (Belgium, Croatia, Cyprus, Lithuania, Malta, Poland and More than 150 topics with extreme relevance to the industry have Russia) and Latin America (Argentina and Uruguay) attending the been covered by more than 125 high-profile speakers. seminar were all in agreement that air/aeronautical law in each of It is fair to say that the high number of professional attendees, their countries was outdated and ill-equipped to face the new reality combined with a multitude of business and networking opportunities, of airport service, which required specialised legal knowledge. have made the WALA conference currently the most important Consequently, the attendees agreed to create and promote a airport law event in the industry’s calendar. worldwide platform and meeting place where airport lawyers (as well as other interested parties) could develop, share and debate relevant issues in the field of air law (and particularly in the law WALA 2018 relating to the functioning and operation of airports). The 2018 Worldwide Airports Lawyers Association conference will be hosted by and held at London’s Gatwick Airport from 15–17 The Conferences October 2018, and follows 2017’s successful conference in Bologna. We expect a full house of over 120 delegates from around the world, Seven months later, in 2008, the aim of the founders became a reality. made up of both in-house airport lawyers as well as consultants and In Spain, at the ‘airport’ of Ciudad Real, the first Worldwide Airport lawyers in private practice. Law Conference took place. The following annual conferences took Some of the relevant issues to be covered will include: place in: ■ Competition between airports. ■ 2009 Ciudad Real, Spain, hosted by Aeropuerto de Ciudad ■ The relationship between airports, innovation and Real. governments. ■ 2010 Lisbon, Portugal, hosted by ANA Aeroportos de ■ The role of the legal counsel to an airport. Portugal S.A. ■ Responding appropriately and adequately to unforeseen and ■ 2011 Dallas, USA, hosted by Dallas Fort Worth International unexpected events. Airport. ■ Airports and the increasing security requirements placed ■ 2012 Amsterdam, The Netherlands, hosted by the Schiphol upon them. Group. ■ Mobility rights. ■ 2013 Montréal, Québec, Canada, hosted by Aéroports de Montréal. ■ A look at the past and future of airport law and airport privatisation. ■ 2014 Buenos Aires, Argentina, hosted by AA2000. ■ Airport risk management and insurance. ■ 2015 Athens, Greece, hosted by Athens International Airport. ■ Transatlantic low-cost flights and the challenges faced by the ■ 2017 Bologna, Italy, hosted by Aeroporto di Bologna in limitations of the EU-US Open Skies Agreement. conjunction with Abiax. Since the 2017 conference, WALA’s Board has continued to look at ways to expand further the scope of WALA and its involvement WALA and the Industry in the industry. The Board has a clear mandate to continue to grow WALA and to expand the conference in the future, and continues WALA Board Members and industry delegates gather regularly with its work of formalising WALA and providing more facilities – generally once a year at the AGM and annual conference, this and services to members (such as a regular newsletter, discounted being the main event in WALA’s calendar. Some 1,350 delegates, academic courses and so on). representing more than 400 different organisations from more than

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a. On site at the request of an airport operator, aviation WALA 2018: Growing WALA authority, or similar organisation. In response to increasing demand, WALA’s Board has initiated b. Scheduled annual training seminars. the following activities which will continue to be developed in 3) Designate an entity to operate as WALA’s executive arm 2018. WALA’s aim is, in short, to become more involved and more to assist WALA’s Board in the development of the above initiatives. embedded in the airport sector, and it believes that, by implementing the measures below, it will go a significant way towards achieving this aim: Acknowledgment 1) Introduce membership (with different membership categories) for individuals and institutions wishing to have a more The authors would like thank Diego Gonzalez and Brian Day interactive role in WALA. for their contribution to this chapter. Diego is President of the Worldwide Airports Lawyers Association; Brian is a Member of 2) Provide training seminars based on the extensive and unique expertise of WALA’s members, particularly those of its WALA’s Executive Board, alongside Alan and Michael. Board, in two formats:

Alan D. Meneghetti Michael Siebold Katten Muchin Rosenman UK LLP ARNECKE SIBETH DABELSTEIN Paternoster House Hamburger Allee 4 (WestendGate) 65 St Paul’s Churchyard 60486 Frankfurt am Main London, EC4M 8AB Germany United Kingdom Tel: +49 69 9798 85 - 0 Tel: +44 20 7770 5232 Email: [email protected] Fax: +44 20 7776 7621 URL: www.arneckesibeth.com Email: [email protected] URL: www.kattenlaw.co.uk

Alan D. Meneghetti is a partner in the Corporate and Commercial group Michael Siebold is Vice Chair and Executive Board Member of the at Katten Muchin Rosenman UK LLP. He undertakes a full range of Worldwide Airports Lawyers Association (WALA). His practice has commercial and regulatory work in the general commercial, aviation always been set on an international footing. Michael earned his and aerospace sectors. His practice ranges from handling regulatory primary civil law degree in Germany and his secondary common law issues to the procurement of suppliers and responses to tenders, degree in Canada. He is the founding partner of ARNECKE SIEBOLD to data protection and privacy, information technology, intellectual – as of 1 September 2015, following a merger, ARNECKE SIBETH property, and the drafting and negotiating of various commercial (www.arneckesibeth.com), and as of 2018, ARNECKE SIBETH agreements, such as outsourcing, supply, service, and research DABELSTEIN – a leading German law firm with more than 150 fee and development. He has worked extensively on matters in Africa, earners in six offices across Germany. Europe, the USA and the United Kingdom. Alan is a regular contributor Being strongly linked to North America’s business community for to publications and speaker at conferences in these sectors, and his many years, Michael is in charge of many national and especially articles and book reviews have been widely published. international projects in all sectors, in particular the logistics sector and the sports industry, the innovative building of arenas, and the international real property market. Furthermore, he specialises in 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), member of the board and 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.

The Worldwide Airports Lawyers Association is a non-profit partnership with the goal of promoting cooperation among airport legal affairs departments and legal advisors for airports worldwide, as well as other public and private sectors related to the aeronautical industry. Worldwide Airports Lawyers Association 2800 Park Place 666 Burrard Street Vancouver, BC Canada www.wala.aero www.abiaxair.com/wala

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Austria

Kubes Passeyrer Attorneys at Law Dr. David Kubes

1 General 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety? 1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction. Air safety is administered by the Ministry of Transport. Based on the Austrian Aviation Act, several regulations govern specific matters, such as the Air Operator Certificate Regulation (AOCV), the Rules Under Austrian Law, aviation is a federal matter governed by of the Air (LVR), the Civil Aviation Personnel Licensing Regulation the Ministry of Transport, Innovation and Technology (Bundes- (ZLPV), the Civil Aircraft and Aeronautical Equipment Regulation ministerium für Verkehr, Innovation und Technologie – BMVIT). (ZZLLV), and the Ordinance on Civil Airport Operations (ZFBO). The general Austrian act for aviation is the Austrian Aviation Act All these matters are handled by Austro Control GmbH. Austro (Luftfahrtgesetz). Control GmbH maintains a very well educated and trained team Any and all issues in relation to the operation of aircraft are handled of specialists who are involved constantly in air operation matters, by Austro Control GmbH, an entity owned by the Republic of technical check-ups and licensing processes. Austria (www.austrocontrol.at). Any matters in relation to air operator certificates are directly 1.4 Is air safety regulated separately for commercial, handled by the Ministry of Transport, Innovation and Technology cargo and private carriers? (www.bmvit.gv.at/en/index.html). In relation to passenger rights, airline liability and consumer The Austrian air safety system is the same for commercial, cargo matters, Austria is a party to the Montreal Convention and, as an and private carriers. EU Member State, is also bound to EU Regulation No. 261/2004 on airline passenger rights. 1.5 Are air charters regulated separately for commercial, cargo and private carriers? 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? No; however, different regulations apply for third-country operations pursuant to the Austrian Federal Act on International Air Services. In order to obtain an operating licence, an air carrier needs to comply with EU Regulation No. 1008/2008. 1.6 As regards international air carriers operating in your 1. Ownership requirement: in general, an operating licence jurisdiction, are there any particular limitations to be will only be granted if the company is controlled and held aware of, in particular when compared with ‘domestic’ by more than 50% of EU citizens; in addition, no managing or local operators? By way of example only, director may have a criminal record. restrictions and taxes which apply to international but 2. Financial background: proof of sufficient funds of the not domestic carriers. company is required. A business plan, including a liquidity plan for the first two years and a cash deposit in order to cover There are neither particular limitations for international operators nor a three-month period of operation and all expenses of the any other additional tax or duty imposed on non-domestic carriers. company, must be submitted. The only difference between international and domestic routes 3. Insurance: the company must obtain insurance according to concerns sale of tickets: domestic services are subject to VAT at 20%. EU Regulation No. 785/2004. 4. Air Operator Certificate: the company must provide an AOC issued by Austro Control GmbH according to the five-step 1.7 Are airports state or privately owned? plan of EU Regulation No. 965/2012; this includes the certification of a flight operation manual for the intended In Austria, both state-owned and privately owned airports exist. aircraft operation and the appointment of the required post- There is no legal requirement for the state to hold a minimum stake holders. in airports. Vienna International Airport (VIE) is owned by a stock 5. Aircraft: lastly, all required technical and operational documents company listed on the Vienna Stock Exchange. Most regional and certificates of the aircraft being operated must be submitted. airports are owned by the province or city in which they are located.

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1.8 Do the airports impose requirements on carriers 2 Aircraft Trading, Finance and Leasing flying to and from the airports in your jurisdiction?

2.1 Does registration of ownership in the aircraft register In general, airports do not impose specific requirements on carriers. constitute proof of ownership? Requirements for specific Austrian airports are imposed by federal law and concern the impact of noise emissions on the environment. No, the Austrian aircraft register is only a federal register and does In addition, some airports, such as Innsbruck (INN) in Tyrol, require not constitute proof of ownership. special crew training of the pilots due to the location of the airport in the Alps and a difficult landing procedure. Austria Airports mostly grant a reduction of their fares and handling 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the tariffs to new operators commencing operations at the airport. operation of this register? Such “welcome packages” depend on the type of aircraft and the frequency of the intended new service. An aircraft mortgage register does not exist under Austrian law. The aircraft register is only a federal register where the operator and 1.9 What legislative and/or regulatory regime applies to all relevant operational issues are registered. It is not possible to air accidents? For example, are there any particular register mortgages, unpaid charges or other legal interest in respect rules, regulations, systems and procedures in place of aircraft. which need to be adhered to?

Austria has established the Federal Accident Investigation Agency, 2.3 Are there any particular regulatory requirements an agency reporting to the Ministry of Transport. Air accidents which a lessor or a financier needs to be aware of as regards aircraft operation? are handled pursuant to the Austrian Accident Investigation Act (Unfalluntersuchungsgesetz – UUG) and EU Regulations No. 56/9 Lessors and financiers need to be aware that no mortgage register and No. 996/2010. The duty of the Federal Accident Investigation exists in Austria and that neither the lessor nor the owner or financier Agency is to find out the cause of the accident and to publish such of an aircraft can be registered in the aircraft register. cause in its final investigation report. Such report shall be published no later than one year after the accident. In addition, an accident causing personal damage or the death of 2.4 As a matter of local law, is there any concept of title a person will always be investigated by the Austrian prosecution annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer department in accordance with the Austrian Criminal Act. or other prejudice when installed ‘on-wing’ on an aircraft owned by another party? If so, what are the 1.10 Have there been any recent cases of note or other conditions to such title annexation and can owners notable developments in your jurisdiction involving and financiers of engines take pre-emptive steps to air operators and/or airports? mitigate the risks?

Yes, there have been two decisions by the Austrian High Court Under Austrian law, an “automatic” annexation of a moveable recently that will have an impact on air operators. property due to “installation” on another item can only occur if such item cannot be detached or removed anymore without destroying 1. Compensation for delays: an Austrian court was the initiator of the decision of the European Court of Justice (04.09.2014 it. An engine can easily be attached and detached without being – C-452/13) regarding the decisive moment of a delayed damaged or destroyed. Therefore, the installation does not lead to flight in respect of the time of a delay. According tothe a title annexation. court, a flight does not end on its “touch-down” or “block- on” time; the time when the doors are opened for de-boarding 2.5 What (if any) are the tax implications in your is the relevant moment. This decision will now bring quite jurisdiction for aircraft trading as regards a) value- a lot of confusion to airlines in respect of EC Regulation added tax (VAT) and/or goods and services tax (GST), No. 261/2004, and in respect of compensation payments: and b) documentary taxes such as stamp duty; and pursuant the EC Regulation, passengers are entitled to cash (to the extent applicable) do exemptions exist as compensation in the amount of €250.00 to €600.00 if a flight regards non-domestic purchasers and sellers of is delayed by more than two or three hours. This delay aircraft and/or particular aircraft types or operations? has always been based on the published “block-off” and “block-on” times; if the “block-on” time is 1:58 hours after “block-off”, the determination of the time when the doors In Austria, all traded goods and services are subject to VAT at 20%. were opened will decide on the payment of compensation to Aircraft bought by or imported by airlines are exempt from VAT. passengers, but will be difficult to evidence. Therefore, a purchase of an aircraft by an airline which provides 2. Sale of round-trip tickets: in February 2013, the Austrian international air transport is not subject to VAT. According to Supreme Court decided that both legs of a round-trip ticket section 9 of the Austrian Value Added Tax Act (UStG), not only can be used without any additional payments, even if one leg the purchase but also the reconstruction, repairs, maintenance, was not used. All round-trip tickets include the rule that the chartering and lease of an aircraft which is used by such airline are legs must be flown as shown and that the return leg will be exempt from VAT. cancelled if the outbound flight was not used. This clause was declared null and void by the Austrian Supreme Court. In the case of a non-airline purchasing an aircraft, the VAT can be This will now have an impact on standard air carriers selling refunded if the purchaser is a VAT registered business. It is normally special round-trip fares much more cheaply than one-way refunded within three months or made VAT-free in the case of an tickets. intra-European sale if the seller has a valid VAT registration number within the European Community.

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The purchase of an aircraft is not subject to stamp duty; only aircraft and that any contractual lien which was created prior to such court lease agreements are. The stamp duty amounts to 1% of the total of order will rank ahead. Since a leased aircraft is not owned by the three years’ accumulated rent (if the lease is unlimited), or to 1% of airline, it cannot be subjected to such liens deriving out of unpaid the total accumulated rent if the lease has a limited term. airport or air traffic charges. In any event, it is not possible to detain an aircraft for unpaid air navigation charges. The laws of Austria do not provide for any liability of the aircraft for the crew’s wages 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and or for salvage. Cape Town)? 3.2 Is there a regime of self-help available to a lessor

The Montreal Convention was ratified by Austria in 2004. Austria or a financier of an aircraft if it needs to reacquire Austria has also ratified the Geneva Conventions. Austria has not yet ratified possession of the aircraft or enforce any of its rights the Cape Town Convention or the Rome Convention. under the lease/finance agreement?

Under Austrian law, the owner of an aircraft can obtain access to his 2.7 How are the Conventions applied in your jurisdiction? property in case of a default under the mutual agreements entered into. The Montreal Convention is directly applied without any additional Austro Control GmbH does not require the consent of the operator national act. It has the same status as an Austrian act and priority in order to deregister an aircraft from the aircraft register. Therefore, over the Austrian Aviation Act. a deregistration is possible upon the owner’s request, without the operator’s consent. 3 Litigation and Dispute Resolution In the case of the realisation of a pledge granted over an aircraft, the standard court proceedings need to be observed; it is possible to agree on a free sale in the pledge agreement under certain circumstances 3.1 What rights of detention are available in relation to and provisions. aircraft and unpaid debts? In the case of insolvency, special rules apply pursuant to which an Rights of detention in an aircraft may exist with respect to claims airline being bankrupt may be granted a 90-day period in order to for compensation arising out of work carried out on, expenses made determine whether to return a leased aircraft or continue the lease. with respect to, or damages caused by, an aircraft (section 471 of During these 90 days, return of the aircraft is blocked. the Civil Code (ABGB) or section 369 of the Commercial Code (UGB)). Such a right of detention only exists between the creditor 3.3 Which courts are appropriate for aviation disputes? and the debtor; however, generally not between the creditor and Does this depend on the value of the dispute? For third parties. With respect to the aircraft, this means the following: example, is there a distinction in your jurisdiction The aircraft is owned by the owner but operated by the airline. regarding the courts in which civil and criminal cases are brought? Therefore, the creditor will not acquire a right of detention against the owner or the lessor or a security agent, if the debt is incurred by the airline. In general, only the operator is party to the maintenance In Austria, civil matters and criminal matters are handled by different contract. However, the Austrian Supreme Court had stated in a courts. For civil matters, the competent court for disputes depends decision in 1996 that a creditor may acquire a right of detention on (i) the value of the claim, (ii) whether the content of the claim is against the owner of a leased asset if he has agreed and the lessee “private” or “commercial”, and (iii) the principal place of business has undertaken to carry out the respective repair work in the lease of the defendant. In general, an aviation dispute is a commercial contract. The Supreme Court stated that the lessee’s responsibility dispute and therefore the following courts would be competent: to carry out the maintenance could be deemed as an authorisation to ■ In 2015: a district court for claims of a value up to a total conclude such contracts on his behalf and that, therefore, the owner amount of €20,000.00; or the competent regional court for would become liable to pay the costs. The Austrian Supreme Court claims of a higher value. further stated that by repairing the aircraft, the owner is also released ■ In 2016: a district court for claims of a value up to a total from a duty and the value of the aircraft increases. Therefore, such amount of €25,000.00; or the competent regional court for claim against the owners may be justified. However, such claim claims of a higher value. is only possible if the main contract partner of the maintenance agreement is in default under the maintenance contract. A direct 3.4 What service requirements apply for the service of claim against the owner of an aircraft is not possible, since court proceedings, and do these differ for domestic contractual agreements have priority. airlines/parties and non-domestic airlines/parties? In respect of fees in connection with the operation of the aircraft Essentially, the party liable to pay all relevant operational charges is Interim remedies: under Austrian law, the instrument of injunction the operator of the aircraft, i.e. the airline. Only in the event where exists for interim remedies. When filing an injunction, an immediate the identity of the aircraft’s operator is unknown and the owner fails direct damage, and the fact that standard court procedures would fail to prove that another party is the operator of the aircraft will the to avoid such damage or its enforcement, must be proven in order to owner of the aircraft be deemed to be the operator and liable to pay be successful. Injunctions are released for a specific period of time these charges. In the case of non-payment, Austro Control or the and must be followed by a standard claim where the entire matter Austrian airports would have to file an action against the operator will be looked at in detail. Injunctions have very short terms, both with the competent courts. A judgment could be enforced against for the court to react and for the defendant to submit a reply (in all properties of the operator and a lien will be attached to all assets. general, 14 days). Injunctions do not comprise a detailed procedure Please note that such lien may only be created with respect to assets of proof; this is based on the attestation of a possible damage that owned by the debtor against whom the judgment has been rendered, requires immediate action.

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Standard legal proceedings require the filing of a claim, and the ■ the type of aircraft used; and payment of an initial court fee which will depend on the value of ■ the frequency with which such routes are flown. the claim and will amount to around 1.5% of the claim. Before In addition, the geographical radius of the departure and landing starting legal proceedings, the written claim is sent to the defendant, airport is taken into consideration: for regional airports the radius who is given a four-week period to file a statement of reply. After is about 100 kilometres; for international airports, 300 kilometres. having received such statement, the court arranges a first hearing. In general, such first hearing takes place three to four months after the filing of the claim. The average time taken within legal proceedings 4.3 Does your jurisdiction have a notification system to obtain the first judgment is 15 months. whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from

Austria Furthermore, the parties in a lawsuit are entitled to reimbursement regulatory agencies? of their legal fees by the defeated party. The legal fees that must be reimbursed are limited by the official tariffs of the Austrian Act on Pursuant to the antitrust regulations under Austrian law, the parties Lawyers’ Fees (RATG), and also depend on the value of the claim. to an agreement have to determine whether its content is subject For arbitral proceedings, Austrian law also provides for special to approval by the antitrust authorities. A specific system pursuant interim remedies in order to secure the enforcement of a claim. to which an agency decides or declares whether an agreement is subject to approval or not, does not exist. 3.5 What types of remedy are available from the courts However, the Austrian antitrust authorities offer to discuss merger or arbitral tribunals in your jurisdiction, both on i) an projects prior to their implementation in order to share the view of interim basis, and ii) a final basis? the authority with the parties.

Under Austrian law, an appeal can be filed against any kind of 4.4 How does your jurisdiction approach mergers, judgment. For “small claims” (of a value lower than €2,700.00), acquisition mergers and full-function joint ventures? certain restrictions apply. The respective court of appeal will render its decision based on the Under Austrian law, mergers, acquisition mergers and full function facts determined by the court of first instance. Under Austrian law, joint ventures are subject to Austrian antitrust law, specifically the the submission of additional evidence is prohibited. Cartel Act 2013. A further appeal to the Austrian Supreme Court can be filed against In general, an acquisition of more than 25% of a competitor, or the the decision of the court of appeal, if the matter has not yet been takeover of its control, is subject to the merger control provisions decided by the Austrian Supreme Court or if the matter decided may if the involved parties have more than a 10% market control of the have general legal consequences and contains legal matters going relevant market. This means that the intended merger or acquisition beyond the specific case being decided. must be registered with the Antitrust Agency. In addition, certain key turnover figures must be met in order to fall 3.6 Are there any rights of appeal to the courts from the under the Austrian antitrust regulations: decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? 1. The worldwide turnover of all involved parties is higher than €300 million. A standard appeal against arbitral awards is not possible under 2. The combined Austrian turnover of all involved parties is higher than €30 million. Austrian law. The only exceptions are if the matter decided was a matter which was not arbitrable, or if the arbitral award is against 3. The worldwide turnover of at least two involved parties is ordre public. higher than €5 million each.

4.5 Please provide details of the procedure, including 4 Commercial and Regulatory time frames for clearance and any costs of notifications.

4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? The intended merger must be registered with the Antitrust Agency. Within four weeks of the date of registration, the Antitrust Agency itself or the federal antitrust prosecutor has the right to request a In Austria, joint ventures between airline competitors are subject detailed audit of the merger. If no audit is requested, a clearance to the general principles and regulations in respect of unfair notification is rendered. This four-week period may be shortened if competition and merger control. Such joint ventures will therefore both the Antitrust Agency and the federal antitrust prosecutor waive be qualified according to EU Regulation No. 411/2004 and the their right to request an audit. Austrian Act Against Unfair Competition (UWG). If an audit is requested, the merger will be published and every Applications must be filed with the Austrian Independent Federal competitor may submit its concerns regarding the intended merger. Competition Agency (Bundeswettbewerbsbehörde – “Antitrust Agency”). The Antitrust Agency must render a decision within five months of the date of registration. The decision of the Antitrust Agency can be appealed. The decision of the court of appeal is final. 4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the For the filing of a merger registration, a lump sum in the amount of purposes of mergers and acquisitions? €1,500.00 must be paid. In case of an audit, the Antitrust Agency may impose a fee of up to €34,000.00 depending on the complexity In respect of air carriers, the “relevant market” is determined by: and expenditure of each case. ■ the relevant routes flown;

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The costs for the registration of a trademark in Austria are between 4.6 Are there any sector-specific rules which govern the €250.00 and €5,000.00 depending on the term of the requested aviation sector in relation to financial support for air protection. operators and airports, including (without limitation) state aid? 4.11 Is there any legislation governing the denial of Under Austrian law, no sector-specific rules for the aviation sector boarding rights? exist. Financial support by the state is, in general, not allowed and is subject to approval by the European Community. In Austria, EU Regulation No. 261/2004 establishing common rules In respect of start-up carriers and regional airports, specific on compensation and assistance to passengers in the event of denied

boarding and of cancellation or long delay of flights, is the relevant Austria exemptions apply. legislation for denial of boarding. If boarding is denied to passengers against their will, the operating 4.7 Are state subsidies available in respect of particular air carrier must compensate them as follows: routes? What criteria apply to obtaining these subsidies? (a) €250.00 for all flights of 1,500 kilometres or less; (b) €400.00 for all intra-Community flights of more than 1,500 In Austria, no specific route is under state subsidy. State subsidies kilometres, and for all other flights of between 1,500 and would only be available if such route has a certain need for a public 3,500 kilometres; and service obligation to be performed by the air service due to its (c) €600.00 for all flights not falling under (a) or (b). geographical exposure. In addition, they are entitled to assistance and reimbursement of any and all expenses caused by the denied boarding, in accordance with Articles 8 and 9 of EU Regulation No. 261/2004. 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 4.12 What powers do the relevant authorities have in their data which is held by airlines? relation to the late arrival and departure of flights?

Under Austrian law, any and all passenger data is protected by the In general, an authority has no direct power in relation to the late Austrian Data Privacy Act of 2000. In addition, certain bilateral or arrival and departure of flights. Austria is obligated to ensure EU agreements with the United States or Canada provide for the general compliance with all applicable laws on the part of their disclosure of certain information on the passengers and for such air carriers, and this includes EU Regulation No. 261/2004 and information to be kept by the airline. the payment of the compensation referred to therein. Austria has Pursuant to the Austrian Data Privacy Act, an airline must not therefore established an independent arbitration court at the Ministry disclose any of the passenger’s information or the fact of whether a of Transport in order to assist passengers claiming compensation passenger is on board a flight or not, to third parties. under EU Regulation No. 261/2004. The passengers themselves may request any information from the If an air carrier constantly fails to comply with its obligation, a kept data at any time. penalty pursuant to § 169 of the Austrian Aviation Act could be imposed. Such penalty could reach a maximum of €22,000.00.

4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the 4.13 Are the airport authorities governed by particular data and are there any applicable sanctions? legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? The Austrian Data Privacy Act does not provide for a particular sanction in case of data loss by an air carrier. The general Austrian Based on the Austrian Aviation Act, every airport is obliged to principles on indemnification of damages caused apply. Such publish general conditions of use to guarantee that an operation is in damages could be the re-booking fees and hotel costs if, due to loss line with all applicable laws, including airport charges according to of data, the immigration authorities delay the immigration, resulting EU Regulation No. 2009/12. Such general conditions of use must in the loss of a connecting flight. be approved by the Ministry of Transport. Punitive damages in general, and in particular those imposed on air For ground handling services, the Austrian Airport Ground Handling carriers for losing data, do not exist under Austrian law. Act is applicable. This was implemented to ensure the liberalisation of ground handling services in Austria, and guarantees free access to this market for private ground handling companies. 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? 4.14 To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger? Trademarks can be registered in the Austrian trademark register. The competent authority is the Austrian Patent Agency, which is The Austrian Consumer Protection Act does not deal directly with also competent for the registration of patents and designs. The the relationship between the airport operator and the passenger. registration can be filed online using a smartcard from the European In general, the only contractual relationships protected are those Patent Office (www.epo.org). An Austrian registration can be between passengers and their direct contracting partners, namely: used as the date for international intellectual property rights to be registered with the World Intellectual Property Organization 1. the airline; (WIPO) (www.wipo.int). 2. the travel agency; or 3. the agency where the respective service was bought.

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Any claim based on a damage caused by the airport operator (loss five years but has never been established. We do not expect any of baggage, delays of flight due to lack of ground handling staff, changes in the immediate future. etc.) must therefore be claimed with the passenger’s contracting party and they, if applicable, may take recourse internally. Acknowledgment

4.15 What global distribution suppliers (GDSs) operate in The author would like to thank Mag. Marko Marjanovic for his your jurisdiction? contribution to the preparation of this chapter. Mag. Marjanovic focuses on real estate and business law. He also advises clients on The three key players are Amadeus, Galileo and Sabre. civil law and represents them in court trials. Austria

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

No, there are no specific ownership requirements pertaining to Dr. David Kubes GDSs in Austria. Kubes Passeyrer Attorneys at Law Gutenberggasse 1/10 1070 Vienna Austria 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? Tel: +43 1 526 5000 Fax: +43 1 526 5000 50 Email: [email protected] Vertical integration is permitted and subject to the general rules URL: www.kpnet.at and regulations of any business that requires the disclosure of such structure. Dr. David Kubes started specialising in aviation matters in 1995, directly after graduating from high school. During his university years, he was able to get to know the airline business from the ground up, 5 In Future establishing his passion for the field in his thesis on the Montreal Convention in 2001. The following years were dedicated to aircraft financing projects, major claim management for aviation insurance 5.1 In your opinion, which pending legislative or companies and leasing contracts for local airlines, lenders, financiers regulatory changes (if any), or potential developments and banks. To date, the variety of clients has been as broad as the affecting the aviation industry more generally in aviation business itself. In 2010, Dr. David Kubes was the leading your jurisdiction, are likely to feature or be worthy of lawyer in Austria’s first Shari’ah-compliant financing project, advising attention in the next two years or so? an investor from the Middle East on establishing a private ad hoc charter airline with an A340-300 aircraft. Currently, Dr. Kubes is working for global acting leasing companies on aircraft and engines, Currently, there are no pending legislative or regulatory changes as well as equipment leasing structures. in Austria. A pledge register is discussed once every four to

Kubes Passeyrer Attorneys at Law focuses on aviation law and real estate transactions, as well as international tax law. Legal consultancy is offered in English, French, Spanish and Portuguese. Due to this specialisation and more than 10 years of experience, we can guarantee the highest level of quality and relevance. Today’s economy is changing faster than ever and therefore being up to date and specialised in certain special areas is our basis for meeting our clients’ needs and expectations. Our ongoing national and international legal training and worldwide cooperation with experts in the same fields of specialisation are part of our philosophy. Our aim is to establish long-term client relationships and provide personal and individual solutions to our clients.

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Brazil Guilherme Amaral

ASBZ Advogados Luiza Rossingnoli

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

1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ ANAC and DECEA regulations are applicable to all carriers. or regulate aviation in your jurisdiction. However, each operation may have different regulatory requirements, in accordance with the peculiarities of the operation. The principal legislation for aviation in Brazil is the Brazilian There are specific safety rules for cargo operations, as well as for Aeronautical Code (Law 7,565/86) which is outdated and very passenger operations. likely to be replaced by a new version, currently being discussed in the Congress. Several other pieces of law such as the Federal 1.5 Are air charters regulated separately for commercial, Constitution, the Civil Code, the Consumer Protection Code, cargo and private carriers? National Civil Aviation Agency regulations and international treaties are also relevant for the industry in Brazil. Air charters are regulated originally under one same system but The main regulatory body for aviation in Brazil is the National Civil there are specific provisions for commercial, cargo and private Aviation Agency (ANAC), responsible for, among other things: operations. ■ licensing and supervising airlines’ activities; ■ monitoring and regulating air safety; 1.6 As regards international air carriers operating in your ■ enhancing competition between airlines; and jurisdiction, are there any particular limitations to be ■ improving air transportation service levels. aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, restrictions and taxes which apply to international but 1.2 What are the steps which air carriers need to take in not domestic carriers. order to obtain an operating licence? Brazil has a limitation for international carriers operating domestic There are three main steps brought by the Brazilian Aeronautical routes (cabotage) and, like several other jurisdictions around the Code that should be followed by international carriers: (i) globe, that right is reserved for national carriers. designation by the country where the company is established; (ii) issuance by ANAC of an authorisation to function in Brazil after being formally established in the country; and (iii) issuance by 1.7 Are airports state or privately owned? ANAC of an authorisation to operate in Brazil. Brazilian airports were historically state-owned, but recently a big To be formally established in Brazil there are several documents to group of them, including some of the most relevant, were included be presented before the local Board of Trade, the tax authorities and in auctions for concessions for periods of up to 30 years. At this other governmental bodies before the company obtains its Taxpayer point we have airports administered by Infraero, a state-owned ID number. company; airports administered by private companies; and also airports administered by groups including Infraero and private 1.3 What are the principal pieces of legislation in companies. your jurisdiction which govern air safety, and who administers air safety? 1.8 Do the airports impose requirements on carriers The National Civil Aviation Agency (ANAC) administers air safety, flying to and from the airports in your jurisdiction? being responsible for guaranteeing operational air safety, aiming to prevent accidents and improving aviation service levels. The There is no such thing as a regulation issued by the airport itself, principal pieces of legislation related to air safety are the Brazilian as most requirements are imposed by regulation from the National Aeronautical Code, ANAC and DECEA (Air Space Control Civil Aviation Agency. Airports usually impose commercial Department) regulations, mainly regarding operational issues and conditions for the use of space by the carriers. air traffic control.

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1.9 What legislative and/or regulatory regime applies to 2.5 What (if any) are the tax implications in your air accidents? For example, are there any particular jurisdiction for aircraft trading as regards a) value- rules, regulations, systems and procedures in place added tax (VAT) and/or goods and services tax (GST), which need to be adhered to? and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as Investigations of air accidents are conducted by the Aeronautical regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? Accidents Investigation and Prevention Centre (CENIPA), the investigations being conducted in accordance with Annex 13 of the Chicago Convention. In Brazil, the tax implications of aircraft trading depend on diverse

Brazil aspects (whether the trade is local or overseas; the type (tariff code classification) and finality/usage of the aircraft; if the owner is 1.10 Have there been any recent cases of note or other located in Brazil or abroad; if there is leasing or not, etc.). notable developments in your jurisdiction involving air operators and/or airports? 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 The main recent development is the concession of airports for to make the transaction more efficient from a tax perspective. private groups, leading to relevant investments and modernisation of the main terminals in the country. Please note that, in Brazil, 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 2 Aircraft Trading, Finance and Leasing 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 2.1 Does registration of ownership in the aircraft register constitute proof of ownership? charged.

In Brazil, the proof of ownership, including the effect for third 2.6 Is your jurisdiction a signatory to the main parties, comes from the Brazilian Aeronautical Registry (RAB), international Conventions (Montreal, Geneva and managed by the National Civil Aviation Agency (ANAC). Cape Town)?

Yes, among several other international Conventions regulating 2.2 Is there a register of aircraft mortgages and charges? multiple aspects of aviation, Brazil is a signatory to the main ones Broadly speaking, what are the rules around the operation of this register? such as Montreal, Geneva and Cape Town.

Every change in aircraft ownership, including any register of 2.7 How are the Conventions applied in your jurisdiction? mortgages and charges, must be made through the Brazilian Aeronautical Registry and must be reported to the National Civil In Brazil the international conventions must be ratified by the Aviation Agency (ANAC) for purposes of article 72 of the Brazilian Brazilian Parliament and through the publication of a decree they Aeronautical Code. become part of the local legal system, applicable in the country.

2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as 3 Litigation and Dispute Resolution regards aircraft operation? 3.1 What rights of detention are available in relation to For operations based on dry lease or wet lease contracts, a copy aircraft and unpaid debts? of the contract must be presented to the National Civil Aviation Agency (ANAC) for an evaluation of the conditions of the contract According to the Brazilian Aeronautical Code, a creditor may seize and its parties to carry out the operation of the aircraft. the aircraft in compliance with a judicial order in case of contractual default. Thereby, the seizure of an aircraft can be sought before 2.4 As a matter of local law, is there any concept of title Court on the basis of documents evidencing the debt. 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 3.2 Is there a regime of self-help available to a lessor aircraft owned by another party? If so, what are the or a financier of an aircraft if it needs to reacquire conditions to such title annexation and can owners possession of the aircraft or enforce any of its rights and financiers of engines take pre-emptive steps to under the lease/finance agreement? mitigate the risks? Apart from the regular judicial procedures that could lead to Every modification of the aircraft, such as the exchange of engines repossession, Brazil is also a signatory to the Cape Town Convention and other parts, must be registered with ANAC, under the terms of which provides that in case of a breach of an agreement, a lessor local regulation. or financier is entitled to request withdrawal of registration of the aircraft and promote its due exportation. The document that supports the installation of the engine on such aircraft must be registered with ANAC and in such condition 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 Brazilian Aeronautical Registry.

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3.3 Which courts are appropriate for aviation disputes? 4 Commercial and Regulatory 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 4.1 How does your jurisdiction approach and regulate are brought? joint ventures between airline competitors?

In Brazil there is no court specialising in aviation disputes. The joint ventures between airline competitors in Brazil are subject Generally, aviation cases would be filed before Civil Courts, but to approval by ANAC, the National Civil Aviation Agency, and the value of the dispute will influence the exact Civil Court. If CADE, the antitrust agency. the amount claimed does not exceed 40 (forty) times the Brazilian Brazil minimum wage, the lawsuit can be filed before the Small Claims 4.2 How do the competition authorities in your Court. However, if the value of the case exceeds that amount, the jurisdiction determine the ‘relevant market’ for the claim must be filed before a Civil Court. purposes of mergers and acquisitions? There is a distinction regarding the courts in which civil and criminal cases are brought. Thereby, there will be distinction of There are two main aspects for the definition of the relevant market court according to civil or criminal liability. in Brazil for the purposes of mergers and acquisitions: the product and the geography. 3.4 What service requirements apply for the service of ■ The first one is the evaluation of which product canbe court proceedings, and do these differ for domestic considered a competitor or a substitute (non-stop flights or airlines/parties and non-domestic airlines/parties? adding connecting flights in case of intercontinental flights, for instance). To file a lawsuit in Brazil, some requirements must be met such as ■ The geographical aspect is the evaluation of where the complete information on the parties: mainly address and taxpayer’s market power can be relevant (which routes are affected, for instance). ID; the factual and legal grounds of the claim; the 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 4.3 Does your jurisdiction have a notification system mandatory. whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from These rules apply to all airlines, regardless of whether they are regulatory agencies? domestic or foreign carriers. In accordance with Federal Law 12,529/2011 (Brazilian Competition 3.5 What types of remedy are available from the courts Law), in any transaction, for both Brazilian and foreign investors, an or arbitral tribunals in your jurisdiction, both on i) an approval by Brazil’s Administrative Council for Economic Defense interim basis, and ii) a final basis? (CADE) is necessary prior to the closing of the transaction if certain thresholds are met. In such cases, CADE will grant regulatory In Brazil, a jurisdiction known for a gigantic volume of litigation and clearance before closing. for long-lasting judicial proceedings, there are provisional remedies, basically to protect the effects of the final decision to be granted in 4.4 How does your jurisdiction approach mergers, the longer term. Urgency, likelihood of a positive outcome based acquisition mergers and full-function joint ventures? on the evidence presented, and the possibility to reverse the effects of the provisional remedy are among the points to be evaluated to Any concentration act submitted to CADE and to ANAC will be grant such decision, which may include payments, orders to do or evaluated considering the definition of the relevant market, but not to do something, and to anticipate the production of evidence considering the competition effects. The approach for mergers, that could be at risk if left for future stages of litigation. acquisitions and full-function joint ventures is really similar. The same diversity of decisions is possible on the final stages of Historically, Brazil is a friendly jurisdiction for mergers and litigation, before courts or arbitral tribunals. acquisitions in the airline business, but joint ventures, even though there is no relevant regulatory limitation, are not a very common 3.6 Are there any rights of appeal to the courts from the business model. decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? 4.5 Please provide details of the procedure, including time frames for clearance and any costs of The decision of a first-level court may be subject to appeal, even notifications. if the appeal is based exclusively on the disagreement of one of the parties with the contents of the decision. Even intermediate The concentration acts to be presented to CADE in Brazil that are decisions are subject to interlocutory appeals. From second degree subject to the ordinary procedure should be decided within 240 decisions, the right to appeal to superior courts is more limited. days, but that deadline may be extended for another 90 days through In arbitration, the arbitral decision is not subject to appeal to the a justified decision. Arbitral Tribunal and a review depends on the existence of material Other acts, that are considered less complex and are qualified for error, obscurity, doubt, contradiction or omission. Furthermore, an summary approval, will be analysed within 30 days. arbitration decision can only be reviewed by the Judiciary in very In both cases, the companies must provide detailed information specific cases. 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.

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resolution No. 400 brings the general terms and conditions of air 4.6 Are there any sector-specific rules which govern the transportation contracts that apply to flight delays, cancellations and aviation sector in relation to financial support for air denied boarding (Chapter II, Section II of the Resolution). operators and airports, including (without limitation) state aid? The usual protection includes, in case of a denied boarding, the payment of an immediate fine directly to the passenger, reallocation There are no relevant provisions on financial support for private air for the next flight, and assistance including communications, food and lodging when applicable due to the period of time between the operators or airports, and Brazil has a significant track record on original and the new flight. bankruptcy of airlines. The regulation also encourages the airline to seek to avoid such

Brazil sanctions voluntarily. 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these subsidies? 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? Since 2015, the Brazilian Government has worked on measures to stimulate regional aviation, and some forms of subsidy on prices ANAC, the National Civil Aviation Agency, is the agency that for fares on such routes, as well as exemption from airport taxes at can penalise and impose fines on the air carriers. Such fines are specific airports, are currently in place. mentioned in article 302, from the Brazilian Aeronautical Code, and The main criteria for obtaining such subsidies is the operation of also in ANAC Resolution No. 400. routes in the regional market. Apart from such regulations, the volume of delays and cancellations is currently a relevant criterion for slot allocation. 4.8 What are the main regulatory instruments governing Passengers are also used to seeking indemnifications for such events the acquisition, retention and use of passenger data, from the Courts. and what rights do passengers have in respect of their data which is held by airlines? 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, In Brazil, the protection of personal data of consumers, including are imposed on the airport authorities? passengers, is partly based on the Federal Constitution and partly on the Consumer Protection Code. There is a specific piece of legislation governing the airport There are many discussions about the importance of a new general authorities (Federal Decree No. 7,554/2011), and most obligations statute regarding the protection of personal data of consumers. are connected to monitoring performance, participating in the However, until now, there are only projects being discussed and no development of new plans for the airports, and administering approved legislation. compliance by the airports with all proper regulation.

4.9 In the event of a data loss by a carrier, what 4.14 To what extent does general consumer protection obligations are there on the airline which has lost the legislation apply to the relationship between the data and are there any applicable sanctions? airport operator and the passenger?

Since there is no specific regulation on the protection of personal In Brazil, the Consumer Protection Code (Federal Law 8,078/1990) data of consumers, there is no sanction applicable to data loss. regulates any consumer relationship, whether regarding passenger/ Based on the provision that consumer data is confidential, in case air carrier or passenger/airport operator. of data loss, sanctions may be applied based on provisions of the Additionally, in accordance with this code, liability for service Consumer Protection Code, and carriers could be liable on a case- failure, whether caused by the carrier or by the airport operator, will by-case basis for damages caused to each particular passenger. be strict, and that does not eliminate the right of recourse one could use against the other. 4.10 What are the mechanisms available for the protection Airports used to be administered by the government through Infraero, of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? 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 operators, that is The regulatory agency responsible for the regulation and supervision of changing and lawsuits against airports are becoming more common. 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 4.15 What global distribution suppliers (GDSs) operate in formal request for the new trademark registration. your jurisdiction? After the approval, the trademark is registered with INPI, and the protection is effective before third parties. The main GDSs that operate in Brazil are Amadeus, Sabre, TravelSpan, CMNet and Mysky.

4.11 Is there any legislation governing the denial of boarding rights? 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? Yes. Between articles 730 and 756 of the Civil Code are presented general aspects about the transportation contract. Lately, ANAC There are no specific requirements regarding GDS operation.

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4.17 Is vertical integration permitted between air operators 5 In Future and airports (and, if so, under what conditions)?

5.1 In your opinion, which pending legislative or There is no piece of law regulating such vertical integration but, regulatory changes (if any), or potential developments since the concession of airports is recent in Brazil, until now there affecting the aviation industry more generally in was no case to be evaluated. Up to this point it would be hard to your jurisdiction, are likely to feature or be worthy of imagine such integration, due to the conditions on the auction of attention in the next two years or so? 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 The new Aeronautical Code is, for sure, the main change likely to Brazil airport concession. happen in the next few months that may have a significant impact on operations for the entire industry. The foreign ownership limitation is a topic that is very close to a significant change, and should be part of the new code or could be addressed separately. A relevant discussion on the taxation of fuel is also in place and the final vote on that matter is expected in the next few months as well. This could change the cost structure of the airlines in Brazil and could be part of a group of changes that enable new business models in the country.

Guilherme Amaral Luiza Rossingnoli ASBZ Advogados ASBZ Advogados Av. Brig. Faria Lima, 4285, 4th floor Av. Brig. Faria Lima, 4285, 4th floor São Paulo/SP São Paulo/SP Brazil Brazil

Tel: +55 11 3145 6000 Tel: +55 11 3145 6000 Fax: +55 11 3145 6050 Fax: +55 11 3145 6050 Email: [email protected] Email: [email protected] URL: www.asbz.com.br URL: www.asbz.com.br

Guilherme is the head of the firm’s aviation practice and is recognised Luiza has more than three years of experience in civil litigation and by Chambers Latin America and The Legal 500 Latin America. He is consumer law matters. She handles a heavy caseload and has also recognised as a distinguished lawyer in the aviation sector by the developed, throughout the years, a good relationship with legal Brazilian legal publication Anuário Análise Advocacia 500. He actively departments of large companies. She focuses on the aviation participates in discussions regarding this sector in governmental and industry, assisting domestic and international airline companies with private forums in Brazil and abroad. He graduated with a Bachelor of civil and administrative matters. Laws from Pontifícia Universidade Católica de São Paulo (PUC-SP) and has been assisting Brazilian and international clients on regulatory and litigation matters for more than 15 years.

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 flexible. 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 opinions: 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.

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Canada Robert Quon

Dentons Canada LLP Stacy Shields

that is incorporated or formed under the laws of Canada 1 General or a province, that is controlled in fact by Canadians and of which at least 75%, or such lesser percentage as the Governor in Council may by regulation specify, of the 1.1 Please list and briefly describe the principal voting interests are owned and controlled by Canadians”; legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction. ■ holds a Canadian aviation document in respect of the service to be provided under the licence; The Federal Minister of Transport (the “Minister”) is responsible ■ has the prescribed liability insurance depending on which for all matters pertaining to aviation in Canada. There are two service the carrier is providing; and principal pieces of legislation through which the Minister governs ■ meets the prescribed financial requirements. aviation: the Aeronautics Act; and the Canada Transportation Act Non-Canadian carriers may be eligible to hold a domestic licence if, (the “CTA”). The Aeronautics Act and its associated regulations, in the opinion of the Minister, it is in the public interest to permit the Canadian Aviation Regulations (the “CARs”) and the them to hold a licence. For scheduled or non-scheduled international Canadian Aviation Security Regulation, 2012 (the “Canadian licences, a non-Canadian carrier may be eligible to hold a licence if it: Aviation Security Regulation”) govern all civil aviation. The ■ for scheduled international services, has been designated by a CARs regulate areas such as the certification of air carriers and foreign government to operate an air service under the terms airports with respect to operational standards, the accreditation and of a bilateral agreement; licensing of aviation personnel, and the application in Canada of the Convention on International Civil Aviation. The Canadian Aviation ■ holds, in respect of the air service to be provided, a document Security Regulation regulates the screening of passengers and safety issued by a foreign government that is equivalent to a scheduled or non-scheduled international service licence; requirements for airports and aircraft. ■ holds a Canadian Foreign Air Operator Certificate; and The Minister is responsible for overseeing the Canadian Transportation Agency (the “Agency”), which is the regulator of ■ has the prescribed liability insurance. federally-regulated modes of transportation (air, rail, and marine), an aeronautical authority and a quasi-judicial tribunal with the 1.3 What are the principal pieces of legislation in powers of a superior court. The Agency is responsible for: your jurisdiction which govern air safety, and who developing rules to regulate transportation service providers and administers air safety? users and facilitate accessible transportation, resolving disputes by facilitation, mediation, arbitration and adjudication, and providing The Minister is responsible under the Aeronautics Act to administer information on the transportation system. air safety through Transport Canada (“TC”) and the CARs. The Canadian Transportation Accident Investigation and Safety Board 1.2 What are the steps which air carriers need to take in Act (the “CTAISB”) establishes the Canadian Transportation order to obtain an operating licence? Accident Investigation and Safety Board (the “CTSB”). The CTSB is independent of TC and is responsible for conducting investigations, Section 57 of the CTA requires, inter alia, that no person shall identifying safety deficiencies, and making recommendations to TC operate an air service unless, in respect of that service, the person designed to eliminate or reduce safety deficiencies. The CTSB does holds a licence. Section 59 of the CTA prohibits any person from not have the authority to implement safety measures. marketing or selling in Canada an air service without a licence. The There are also several offences in the Canadian Criminal Code Agency issues operating licences in Canada for domestic, scheduled prohibiting the unsafe operation of an aircraft. Depending on the and non-scheduled international service. legislation, air safety offences could lead to fines and possibly In order to obtain a domestic, scheduled or non-scheduled imprisonment. international service operating licence, a carrier is required to submit an application and establish that it: 1.4 Is air safety regulated separately for commercial, ■ is a Canadian, which is defined in section 55 of the CTA as: cargo and private carriers? ■ “a Canadian citizen or a permanent resident within the meaning of subsection 2(1) of the Immigration and No. Air safety is not regulated separately for commercial, cargo and Refugee Protection Act, a government in Canada or an private carriers in Canada. agent of such a government or a corporation or other entity

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■ execution of agreements, leases and/or licences for the use of 1.5 Are air charters regulated separately for commercial, airport facilities. cargo and private carriers? As an incentive, carriers introducing a new service/destination may qualify for a reduction on the tariff of fees and charges from the Yes. A carrier that is offering international charter services must obtain airport authority. a licence from the Agency for non-scheduled international service. All carriers must obtain a permit from the Agency to operate a charter. The Air Transportation Regulations (the “ATR”) of the CTA regulate the 1.9 What legislative and/or regulatory regime applies to terms and conditions of charter contracts for both international (Non- air accidents? For example, are there any particular US) charters and charters between Canada and the US (Transborder). rules, regulations, systems and procedures in place

which need to be adhered to? Canada

1.6 As regards international air carriers operating in your The governing legislation for air accidents in Canada is the CTAISB. jurisdiction, are there any particular limitations to be CTAISB regulations require a carrier to report as soon as possible all aware of, in particular when compared with ‘domestic’ accidents in which: or local operators? By way of example only, restrictions and taxes which apply to international but ■ a person sustains injury or death as a result of being on not domestic carriers. the aircraft, coming into direct contact with any part of the aircraft, being directly exposed to a jet blast, rotor down wash or propeller wash; or The transportation of goods and passengers between two points within Canada is generally reserved for domestic carriers. Certain ■ where the aircraft sustains significant damage or is missing or bilateral agreements and Canada-US Open Skies permit international inaccessible. carriers to serve points in third countries with fifth freedom rights and Section 705.07(2)(l) of the CARs also requires every carrier to have the carriage of own stopover traffic (passengers) between points in an air operator emergency response plan that includes, inter alia, the territory of the other party. Canada-US Open Skies permits cargo information on: services to be operated between any point in either Canada or the US. ■ air operator mobilisation and agencies notification; Generally, international carriers deriving income from the operation of ■ passenger and crew welfare; aircraft in international traffic on agreed services will not be subject to ■ accident investigation on behalf of the air operator; Canadian income tax on that income provided the home jurisdiction of ■ air operator team’s response to the accident site; that carrier grants substantially similar relief to Canadian carriers. Such reciprocity can also apply to customs duties, taxes, and inspection fees ■ preservation of evidence; for (i) baggage cargo and mail, (ii) aircraft, its regular equipment, spare ■ claims and insurance procedures; and parts (including engines), fuels, oil, and lubricants, (iii) aircraft stores ■ emergency response training. on board such aircraft if such equipment and items remain on board the aircraft, are carried into Canada and intended to be used on part of the journey performed over Canada, and (iv) spare parts (including 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving engines) introduced into Canada for maintenance or repair. air operators and/or airports?

1.7 Are airports state or privately owned? Bill C-49, the Transportation Modernization Act, proposes to amend several sections of the CTA. Bill C-49 will introduce a new Airports in Canada were originally owned and operated by the passenger bill of rights, which will require the Agency to make Government of Canada prior to 1994. The National Airport Policy regulations requiring air carriers to compensate passengers for flight was introduced to privatise the operation of Canada’s airports. After delays, cancellations and boarding denials. Bill C-49 also allows for 1994, all airports in national, provincial, territorial capitals and more foreign investment by amending the definition of “Canadian” those with more than 200,000 passengers a year were deemed to be in the CTA by lowering the requirement of voting interests required National Airport System (“NAS”) airports. By 2003, the operation to be owned and controlled by Canadians from 75% to 51%, to of nearly all NAS airports was transferred to local authorities under allow foreign ownership to increase from 25% to 49%. However, lease from TC. Non-NAS airports are owned and operated by a single non-Canadian cannot own more than 25% of the voting locally based airport authorities, local municipalities or provincial interests. In August 2017, the Commissioner of Competition and territorial governments. announced the completion of investigations relating to air passenger and cargo services in Northern Canada under the Competition Act. The investigations involved a merger between First Air and 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? Calm Air relating to air passengers and cargo services in central Nunavut, a codeshare agreement between First Air and Canadian North relating to air passenger and cargo services on Northern The requirements imposed on carriers flying to and from airports routes, and allegations of predatory pricing against First Air and in Canada will vary according to the airport; however, the general Canadian North on the Iqualit-Ottawa route, to prevent GoSarvaq, a requirements include: new provider of air transportation services, from operating flights on ■ payment of landing and parking fees (such tariff of fees and this route. The Competition Bureau, when analysing the competitive charges will vary with the airport authority); effects of the merger considered, among other things, the absence of ■ payment of pre-security fees; competing schedule service providers and the challenge of operating ■ provision of financial security through a security deposit, in the North, and concluded that the merger’s efficiency gains were letter of credit, or pre-payment for aeronautical charges; likely to significantly outweigh its anti-competitive effects. First ■ execution of an airport improvement fee agreement that Air terminated the codeshare and the Bureau closed its investigation requires carrier to collect from passengers and remit the fee; into the potential anti-competitive effects of that codeshare. In and consideration of whether First Air and Canadian North had engaged

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in predatory pricing, the Bureau’s view was that the pricing promotions by First Air and Canadian North likely had an impact on 2.4 As a matter of local law, is there any concept of title GoSarvaq’s entry plans on the Iqualit-Ottawa route, but the Bureau annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer did not find sufficient evidence to conclude that the promotions were or other prejudice when installed ‘on-wing’ on an anti-competitive acts contrary to the Competition Act. aircraft owned by another party? If so, what are the Beginning December 2017, employees in Canada are now entitled conditions to such title annexation and can owners to “stretch” their employment insurance parental leave benefits up to and financiers of engines take pre-emptive steps to 18 months, from the previous maximum of 12 months. For federally mitigate the risks? regulated employers, which include carriers and airport authorities, the federal government has amended the Canada Labour Code to Personal property security legislation is generally uniform Canada protect the jobs of federally regulated employees while they are across Canada, but some differences exist across provinces and receiving the extended parental leave. territories with respect to the rules on validity and enforcement of secured transactions. In addition, each province and territory has its own conflict of laws regime. References in this question 2.4 2 Aircraft Trading, Finance and Leasing to the “PPSA” are to the Personal Property Security Act (British Columbia).

2.1 Does registration of ownership in the aircraft register An aircraft engine installed on the wing of an aircraft would be an constitute proof of ownership? “accession” under the PPSA. A person with a security interest in an engine, arising before or after the engine is so installed, may in Registration of ownership in the Canadian Civil Aircraft Registry certain circumstances maintain the priority of its security interest of TC does not constitute proof of ownership. Section 202.13(2) in the engine after it has become an accession. There is a risk that and 202.35 of the CARs requires that every individual or entity that the security interest will be subordinated to the interest, security or has legal custody and control of an aircraft be registered in Canada. otherwise, of a person in the aircraft as a whole (each an “Other However, the Canadian Civil Aircraft Register only constitutes proof Party”), including a purchaser for value without notice. of legal custody and control of the aircraft; it does not constitute Because of the detailed provisions of the PPSA relating to accessions, proof of legal ownership. there are several ways in which this risk can materialise. However, the risk can generally be mitigated by ensuring that a security interest in the engine has been attached prior to the engine being 2.2 Is there a register of aircraft mortgages and charges? installed on the aircraft, and in any event is perfected concurrently Broadly speaking, what are the rules around the operation of this register? with attachment (note that a financing statement may be filed in advance of a security agreement being signed). In addition, there are other prudent steps that can be taken to notify Other Parties of There is no national registry for recording security interests in aircraft the security interest in the engine owned by a party other than the or aircraft components. For the registration of security interests in aircraft owner. personal property, nine provinces and three territories have enacted a Personal Property Security Act (“PPSA”) and Quebec has its Register of Personal and Movable Real Rights under the Civil Code 2.5 What (if any) are the tax implications in your of Quebec. It is important to note that a security interest registered jurisdiction for aircraft trading as regards a) value- in one province will not necessarily supersede a security interest added tax (VAT) and/or goods and services tax (GST), registered later in another province. It is therefore important to and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as register a security interest in the relevant provinces/territories, regards non-domestic purchasers and sellers of especially if the aircraft will be operated interprovincially. aircraft and/or particular aircraft types or operations? Canada is a “Contracting State” for purposes of the Cape Town Convention and Protocol and has enacted the International Interests The tax consequences associated with the acquisition or disposition in Mobile Equipment (Aircraft Equipment) Act, as amended by the of an aircraft will vary depending on the intended use for the aircraft Jobs and Growth Act, 2012, in order to implement the Cape Town at the time it is acquired and whether the aircraft owner is an Convention and Protocol, in conjunction with legislation adopted individual or corporation. in all Canadian provinces and territories. All security interests Generally, where an aircraft is acquired for the purpose of resale that qualify as international interests (as defined by the Cape Town (e.g. purchased by a dealer) it will be characterised as inventory and Convention) should also be registered at the International Registry. any profit or loss realised on a subsequent sale will be treated as ordinary business income or loss and subject to income taxes at the 2.3 Are there any particular regulatory requirements dealer’s tax rate. The tax rate will vary depending on whether the which a lessor or a financier needs to be aware of as taxpayer is a corporation or an individual. regards aircraft operation? If the aircraft is purchased with the intent of using it in business activities carried on by the person acquiring it (e.g. purchased by a Without a national registry in Canada, it is important to register a business that flies its employees to remote locations), then it will be security interest in an aircraft in each of the relevant provinces and considered to be a capital asset used in a business and the business territories. Generally, to register in each, the make, model, year owner may deduct a portion of the purchase price as capital cost and serial number of the aircraft’s airframe, engines, propellers and allowance (“CCA”) (depreciation for tax purposes) each year along other major components will be required. with the costs of operating the aircraft. A subsequent sale of the aircraft will produce either a loss or a gain depending on the selling price and the undepreciated capital cost (“UCC”) of the aircraft. In most cases, a loss will be treated as an ordinary business loss deductible for tax purposes in determining the profit or loss from a

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business. The portion of the selling price above the UCC that does not exceed the original purchase price of the aircraft, is considered 3.2 Is there a regime of self-help available to a lessor to be recaptured CCA which is treated as ordinary business income. or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights If the selling price exceeds the original purchase price of the aircraft, under the lease/finance agreement? then the difference between the original purchase price and the selling price is calculated as a capital gain. Half of the capital gain There is a regime of self-help available to a lessor or financier of an is included in the business owner’s income as a taxable capital gain, aircraft; however, this regime will vary by province and territory. and in addition to any recaptured CCA, will be subject to taxation at Most provincial regimes provide for a lessor who has a “true lease”, the vendor’s tax rates. that is, a lease not subject to a PPSA, to retain the services of a If a non-resident is selling the aircraft, there may be significant bailiff to seize the aircraft in accordance with the terms of the lease. Canada withholding taxes payable. These withholding taxes can be reduced If the lease is not a “true lease” and falls under the PPSA, the ability or avoided entirely in certain circumstances. of the lessor to enforce its rights under the lease agreement will Goods and services tax (“GST”), harmonised sales tax (“HST”), depend on its priority position relative to other secured creditors. Quebec sales tax (“QST”) and provincial sales taxes (“PST”) must also be considered. In general, on acquisition of the aircraft, either 3.3 Which courts are appropriate for aviation disputes? GST and PST, HST, QST or GST only will be charged by a vendor Does this depend on the value of the dispute? For (if registered for GST/HST or QST purposes) to the purchaser example, is there a distinction in your jurisdiction depending on the province or territory the aircraft is supplied in regarding the courts in which civil and criminal cases (subject to certain narrow exceptions such as when the aircraft is are brought? sold to a non-resident of Canada or supplied as part of a business and the parties file a joint election). A business owner may be There is no designated court for aviation disputes in Canada. able to recover the GST/HST or QST paid as an input tax credit Each province has a provincial court and a superior court. Each (and input tax refund, in Quebec) if the purchaser is registered for provincial court has a monetary limit on the claims that can be GST/HST or QST purposes with the Canada Revenue Agency (or brought in a provincial court. Superior courts have no monetary “Revenu Québec”). limit on claims. Claims should be brought in the province that has a real and substantial connection to the dispute. Federal Courts of 2.6 Is your jurisdiction a signatory to the main Canada decide legal disputes arising in the federal domain. international Conventions (Montreal, Geneva and Cape Town)? 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic Canada has ratified both theConvention Unification of Certain Rules airlines/parties and non-domestic airlines/parties? Relating to International Carriage by Air (Montreal Convention 1999) and the Cape Town Convention. Canada is not a signatory to There are different service requirements for each province and level the Convention on International Recognition of Rights in Aircraft of court. In most of the common law provinces, a court order is not (Geneva Convention). required to serve a party who resides outside of the jurisdiction (ex juris). Parties to a dispute must follow the rules of court applicable 2.7 How are the Conventions applied in your jurisdiction? to the level of court in the jurisdiction in which they commence their dispute. The Montreal Convention 1999 is implemented in Canada by the Carriage by Air Act. The Cape Town Convention is implemented 3.5 What types of remedy are available from the courts by the International Interests in Mobile Equipment (Aircraft or arbitral tribunals in your jurisdiction, both on i) an Equipment) Act, as amended by the Jobs and Growth Act, 2012, interim basis, and ii) a final basis? which sets out the necessary regulatory and policy changes needed to facilitate Canada’s participation in the Cape Town Convention. All Courts in Canada can award a variety of monetary remedies against of the provinces have similarly adopted corresponding legislation. a defendant, including damages and costs. An award of costs allows a successful party to recover some of their expenses in bringing the The Convention on International Recognition of Rights in Aircraft lawsuit, including full reimbursement for reasonable disbursements, has no application in Canada. which includes expert fees. Legal fees are subject to a tariff which usually works out to only a fraction of actual legal fees incurred. 3 Litigation and Dispute Resolution Most superior courts also have the ability to order remedies on an interim basis including injunctions, which compel a party to do or refrain from specific acts, and interim judgments such as orders to 3.1 What rights of detention are available in relation to freeze assets that are the subject matter of the proceeding. aircraft and unpaid debts? Most commercial agreements contain terms requiring that the parties proceed to arbitration to resolve any disputes that may arise In addition to the normal remedies available to creditors under under the agreement. Generally, parties will incorporate provincial Canadian law, airport authorities and Nav Canada have the statutory legislation into their agreement in order to establish a forum for the right to apply to the superior court of the province in which the arbitration and to give the arbitrator quasi-judicial powers so that he aircraft is owned or operated to obtain an order of the court or she can make final and binding decisions. Arbitrators can grant authorising seizure and detention of the aircraft under section 9(1) interim relief if justified. However, in Canada, the law is unclear on of the Airport Transfer (Miscellaneous Matters) Act and section whether arbitrators can award injunctive relief at all. 56(1) of the Civil Air Navigation Services Commercialization Act.

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satisfied that there are no significant competition law issues. An 3.6 Are there any rights of appeal to the courts from the ARC will provide a one-year window for the parties to complete the decision of a court or arbitral tribunal and, if so, in proposed transaction on substantially the same terms on which the what circumstances do these rights arise? ARC was issued without the Commissioner of Competition seeking review by the Competition Tribunal. In the common law provinces, there are rights of appeal to the courts The Commissioner of Competition may, on request, issue a binding from the decision of a lower court or arbitral tribunal. In general, an written opinion on the applicability of one or more provisions of ordinary trial judgment does not require leave to appeal. In the case the Competition Act or regulations to a proposed action. These of an arbitral tribunal, an appeal may arise with the parties’ consent, opinions are binding if all the material facts submitted that informed absent any agreement to the contrary. Canada is a signatory of the the opinion remain unchanged. Canada Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). The Supreme Court of Canada (“SCC”) is the country’s final court of 4.4 How does your jurisdiction approach mergers, appeal. The SCC will typically hear matters of national importance acquisition mergers and full-function joint ventures? or matters of legal uncertainty. Leave must be granted by the SCC. All merger transactions in Canada are subject to review by the Commissioner of Competition under the Competition Act. 4 Commercial and Regulatory Generally, the Commissioner of Competition will assess whether the merger transaction has, or is likely to have, the effect of preventing or lessening substantially competition in a definable market. 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? Certain transactions, however, require pre-notification to the Commissioner of Competition. These include transactions of a Joint ventures, alliance agreements, and any form of coordination specified monetary amount. As of 2017, transactions will require agreements between carriers are subject to review by the Commissioner pre-notification: (1) when the target’s assets in Canada, or revenues of Competition if it amounts to anti-competitive practice and is contrary from sales in or from Canada generated from those assets, exceed to the Competition Act. There is proposed legislation, however, that $88 million; and (2) when the combined Canadian assets or revenues will allow for joint ventures between two or more airlines to coordinate of the parties and their respective affiliates in, from, or into Canada items such as scheduling and pricing on certain routes. The airlines exceed $400 million. will be required, under proposed legislation, to provide notice to The pre-notification provisions in the Competition Act also prompt the Minister of Transport and Commissioner of Competition of the pre-notification requirements for the airline industry under the proposed joint venture, in accordance with yet to be drafted guidelines. CTA. The Agency has authority to review to determine whether This legislation is expected to come into force in 2018. the proposed transaction raises issues of public interest as it relates Should the Commissioner of Competition determine that a joint to national transportation. In particular, the investment by an venture is anti-competitive it may refer the matter to the Competition international airline in a Canadian airline may be blocked if there Tribunal for civil prosecution. The consequences of violating is a loss of Canadian control – that is, Canadian equity participation the criminal or civil provisions of the Competition Act can be drops below 75%. The federal government has proposed new laws severe. Criminal infractions can result in fines, imprisonment, and that would alter this threshold to 51%. prohibition orders. Civil infractions can result in orders to stop conduct, administrative monetary penalties, and orders to compensate 4.5 Please provide details of the procedure, including consumers. It should be noted that joint ventures involving foreign time frames for clearance and any costs of entities may also trigger review and compliance with the Investment notifications. Canada Act. Parties to a transaction that requires pre-notification under the 4.2 How do the competition authorities in your Competition Act and the CTA must provide notice and await the jurisdiction determine the ‘relevant market’ for the expiration of the statutory waiting period before the transaction is purposes of mergers and acquisitions? completed. Under the Competition Act, the waiting period is 30 days unless the Commissioner of Competition provides a supplementary Generally, the relevant market will be determined by the Competition information request. Under the CTA, the waiting period is 150 days. Bureau with a view as to whether the carriers involved in a merger The fee for pre-notification under the Competition Act is $50,000 and acquisition can be said to prevent or lessen competition plus applicable administrative costs. An ARC issued under the substantially within the industry or among sources or outlets of the Competition Act will similarly cost $50,000 plus applicable taxes. industry. The relevant market as it relates to the airline industry may An ARC and pre-notification may be submitted in relation to the differ depending on the merger and acquisition event. In certain same transaction at the same time and require payment of just one circumstances it may be as narrow as a route-by-route basis or cargo fee. Written opinions from the Commissioner of Competition will transport, or in other circumstances as broad as the aviation sector cost $5,000 plus applicable taxes. depending on the market power exercised. 4.6 Are there any sector-specific rules which govern the 4.3 Does your jurisdiction have a notification system aviation sector in relation to financial support for air whereby parties to an agreement can obtain operators and airports, including (without limitation) regulatory clearance/anti-trust immunity from state aid? regulatory agencies? Government funding in Canada exists for airports and for related The Competition Act provides for the issuance of an advance ruling infrastructure projects through the Airports Capital Assistance certificate (“ARC”) where the Commissioner of Competition is Program. Government assistance is generally not available to

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airlines. However, governments have in the past provided loans and “griping sites”. The Copyright Act generally protects original other funding to companies in the aerospace sector. works of authorship including literary, dramatic, and musical works. Copyright may protect airline advertising campaigns.

4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these 4.11 Is there any legislation governing the denial of subsidies? boarding rights?

Federal government subsidies are generally not available in respect There is currently no denial of boarding rights legislation in Canada. of particular routes in Canada. Provincial governments and With that said, airlines are required to include in their tariffs the

municipalities may subsidise particular routes through discounted airline’s policy with respect to compensation for denial of boarding Canada local fees and charges. as a result of overbooking. The Agency will receive air travel complaints including those related to overbooking. Complaints may 4.8 What are the main regulatory instruments governing be submitted online through the Agency website. the acquisition, retention and use of passenger data, and what rights do passengers have in respect of 4.12 What powers do the relevant authorities have in their data which is held by airlines? relation to the late arrival and departure of flights?

The Personal Information Protection and Electronic Documents Act There is currently no legislation relating to the late arrival and the late (“PIPEDA”) governs the collection, use, and disclosure of personal departure of flights. Airlines are required to include in their tariffs information, and applies to the airline industry. Under PIPEDA, the airline’s policy with respect to the failure to operate the service individuals generally have a right to the information collected or failure to operate on schedule, as well as refunds for service that by the airline and an airline may only use such information for an air carrier is unable to provide. The federal government has also the purpose which it was collected. PIPEDA applies not only to developed a voluntary code related to passenger rights called Flight Canadian airlines, but may in some circumstances apply to foreign Rights Canada. Although not law, the country’s largest carriers have airlines with operations in Canada. PIPEDA allows for the filing all adopted the code. Flight Rights Canada stipulates that passengers of complaints with the Privacy Commissioner, which subsequently may result in an investigation and report with respect to the airlines’ have a right to information on flight times and schedule changes, compliance with Canadian privacy requirements. Generally, a and that airlines must make reasonable efforts to inform passengers report of the Privacy Commission will include recommendations as of delays and schedule changes, and, to the extent possible, the to how the airline can come into compliance with PIPEDA. reason for the delay or change. The Agency will receive air travel complaints including those related to delayed flights. The Aeronautics Act allows for the provision of information on airline passengers in the interests of transportation security. 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, 4.9 In the event of a data loss by a carrier, what are imposed on the airport authorities? obligations are there on the airline which has lost the data and are there any applicable sanctions? In Canada, airports are governed by the Aeronautics Act and associated regulation. This legislation governs the building and A carrier will be required to provide notice to individuals and to the operation of airports. The legislation is buttressed by the National Office of the Privacy Commissioner of Canada about data breaches in Airports Policy, which defines the federal government’s role with certain circumstances. Generally, these situations include instances airports as divided into two levels – nationally significant airports where it is reasonable to believe that the breach creates a real risk that form the National Airports System (“NAS”) and regional/local of significant harm to the individual. Notice must be provided as airports. Generally, all NAS airports are operated on land leased soon as feasible and include sufficient information so as to allow from the federal government. These airports are, in turn, run by the individual to understand the significance of the breach and take airport authorities, which are not-for-profit corporations headed by steps to reduce the harm. If notice is provided to an individual, the carrier will be obligated to provide notice to any other organisation a board of directors composed of members nominated by different or government organisation the carrier believes may help reduce or levels of government and other participating organisations such as mitigate the risk of harm. Failure to provide such notice could result boards of trade and labour organisations. Board members cannot in an offence punishable by a fine up to $100,000. be elected politicians or government authorities. Airport authorities in Canada must be self-sustaining and must devote their entire revenues to the operation and development of the airports under 4.10 What are the mechanisms available for the protection their management. of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? 4.14 To what extent does general consumer protection Intellectual property, such as patents, trade-marks, or copyright, may legislation apply to the relationship between the airport operator and the passenger? be protected under any one of the following pieces of legislation: ■ Patent Act; Consumer protection is generally a matter of provincial jurisdiction ■ Trade-marks Act; in Canada. Each province and territory has its own consumer ■ Copyright Act; and protection regime that covers deceptive or unconscionable acts or ■ Industrial Design Act. practices. Consumer protection legislation is generally broad and In the airline industry, the Patent Act may protect such new and there is no carve out for airport operators. useful inventions to improve the in-flight experience. The Trade- marks Act may protect against the use of airline logos on so-called

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4.15 What global distribution suppliers (GDSs) operate in 5 In Future your jurisdiction?

5.1 In your opinion, which pending legislative or GDS operators in Canada are required to provide comprehensive regulatory changes (if any), or potential developments and neutral information in a non-discriminatory manner in affecting the aviation industry more generally in accordance with the Canadian Computer Reservation Systems your jurisdiction, are likely to feature or be worthy of (CRS) Regulations. Most, if not all, major GDS systems operate in attention in the next two years or so? Canada including Amadeus, Sabre, and Travelport. In July 2017, TC revealed proposed amendments to regulations Canada relating to UAVs (commonly known as drones), with significant 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? changes for operators to address three key issues facing the industry in Canada: public safety; the lack of “regulatory predictability”; and the administrative burden caused by the volume of special There are no ownership requirements pertaining to GDSs operating flight operating certificate (“SFOC”) applications with TC. The in Canada. However, a GDS system vendor must allow any carrier UAV Regulations will change the method of regulating the potential the opportunity to use its system, subject to technical constraints risk associated with a given operation (from regulating on weight outside the control of that vendor. of drone and purpose of flight). Currently, any drone operated for commercial or a research purpose requires a SFOC. Under new 4.17 Is vertical integration permitted between air operators proposed amendments, the drone’s weight and physical operating and airports (and, if so, under what conditions)? environment will dictate the applicable operation requirements, with five new categories of drones, and without distinguishing between Absent a violation of the Competition Act, vertical integration is recreational operators and commercial operators. permitted between air operators and airports. This is most often The introduction of new legislation designed to attract foreign manifest through designated terminals for airlines at certain airports investment into the aviation sector will be interesting to track once in Canada. Vertical integration is most common in the Canadian it comes into force in 2018. The ambition of the federal government airline industry between airlines and tour operators. is not to dilute Canadian control of existing airlines, but to allow for new market entrants to access greater pools of risk capital. Many Canadian passengers have marvelled at the airline offerings and low costs of air travel in the United States, Europe, and Asia. The federal government hopes that this change will increase competition in the sector and lead to greater choice and lower prices for Canadians.

Acknowledgment The authors would like to thank Keisha O’ Hagan and Sam Chapman for their assistance in preparing this chapter. Keisha and Sam are Articling Students at Dentons’ Vancouver office.

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Robert Quon Stacy Shields Dentons Canada LLP Dentons Canada LLP 20th Floor, 250 Howe Street 20th Floor, 250 Howe Street Vancouver, BC, V6C 3R8 Vancouver, BC, V6C 3R8 Canada Canada

Tel: +1 604 622 5151 Tel: +1 604 648 6546 Fax: +1 604 683 5214 Fax: +1 604 683 5214 Email: [email protected] Email: [email protected] URL: www.dentons.com URL: www.dentons.com Canada Robert Quon is a partner in the Corporate group and the lead Stacy Shields is an associate in the Vancouver office of Dentons partner in the Aviation and Aerospace sector in Dentons’ Vancouver Canada LLP. Stacy advises clients on a broad range of corporate office. Robert offers clients a broad range of experience in corporate and commercial matters, including business entity formation and and commercial transactions, with an emphasis on mergers and structuring, mergers and acquisitions and corporate governance. acquisitions, corporate reorganisations and business investments. Stacy provides legal advice to airlines relating to Transport Canada Robert regularly acts for national and international clients, particularly and the Canadian Transportation Agency. In addition, she advises in aviation and aerospace. clients on all aspects of leasing, selling and buying aircraft. Robert provides legal advice and guidance to airlines relating to: ■■ Transport Canada and the Canadian Transportation Agency. The work includes advising on air transport agreements with Canada, air operator certificates, licensing, exemption orders, tariff terms, code-sharing, and leasing. ■■ Security arrangements with Transport Canada, Canada Border Services and Canada. ■■ Air Transport Security Authority, under Canadian Aviation Security Regulations and Secure Air Travel Regulations. ■■ Operational issues, including price advertising, website accessibility, business and contracting issues with airport authorities, ground handlers and other third parties. ■■ Leasing, buying, and selling of aircraft.

With nearly 70 aviation lawyers and professionals based in 65-plus countries spanning Canada, Australia, Africa, Asia Pacific, Central Asia, Europe, the Middle East, Russia and the CIS, Singapore, the UK and the US, Dentons possesses in-depth aviation experience and capabilities on a global scale. Dentons is the first polycentric global law firm. Since 2014, more than 1,000 leading purchasers of global legal services have ranked Dentons among the top 20 in the Acritas Global Elite Brand Survey. Dentons ranks number 2 among 295 law firms servicing Fortune 1000 companies by BTI Client Service A-Team. Regardless of the scale and scope of your business needs, you get the individual attention you need and deserve. Whether the matter is big or small, if it is important to you, then it is important to us.

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Colombia

Gongora Reina & Associates Jorge Góngora

1.1.10 Reglamentos Aeronáuticos de Colombia (“RAC”) 1 General (Colombian Aeronautical Regulations), last updated by Resolution 3597 of 2015 of AEROCIVIL. 1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ 1.2 What are the steps which air carriers need to take in or regulate aviation in your jurisdiction. order to obtain an operating licence?

Aviation in Colombia is primarily regulated by: In order to obtain an operating licence, an air carrier needs to obtain ■ Unidad Administrativa Especial de Aeronáutica Civil two authorisations: safety authorisation; and economic authorisation. (“UAEAC” or “AEROCIVIL”). AEROCIVIL: regulates Any person wishing to operate a civil aircraft must obtain a safety authority approval and consumer protection; negotiates authorisation from AEROCIVIL and have the following (RAC 4): and implements international transportation agreements; regulates aviation safety and security, including but not 1.2.1.1 A valid certificate of airworthiness. limited to minimum standards for operating and maintaining 1.2.1.2 A valid registry certification. aircraft, air traffic control, and certification and registration 1.2.1.3 An annual renewal certification. of aircraft and their parts; manages airports controlled 1.2.1.4 A log book. and operated by the State; and investigates civil aviation accidents and incidents, and accidents involving other modes All carriers who wish to perform scheduled or non-scheduled flight of transportation within Colombia. services must be previously certified by AEROCIVIL, submitting ■ The Ministry of Transport, which regulates economic the following information (RAC 4): authority approval and general laws regarding transportation. 1.2.2.1 Proposal of economic feasibility. ■ The Superintendence of Ports and Transport, which inspects 1.2.2.2 Compliance with RAC regulations, in terms of operation and controls airport concessions in terms of infrastructure. and safety requirements. ■ The Customs National Police, which assists AEROCIVIL 1.2.2.3 A viable and sound administrative, operational, training with aviation safety by screening airline passengers, baggage and maintenance plan. and cargo, and with the control of narcotics and money Foreign air carrier applications are also analysed by AEROCIVIL laundering in Colombian airports. and the prospective air carrier must meet certain requirements, The primary aviation laws are: including, but not limited to: 1.1.1 Decree Law 410 of 1971: Commercial Code – Title V – Part ■ A designation or permit granted by the signatory State of the 2 – Aeronautics. bilateral agreement. 1.1.2 Law 105 of 1993. Title IV of which dictates basic provisions ■ A detailed description of requested routes, frequencies, fares on Air Transport, and sets the planning basis of the Air and liberties. Transport Industry. ■ A detailed description of equipment. 1.1.3 Law 336 of 1996 – the National Statute for Transportation. ■ Insurance policies. 1.1.4 Law 12 of 1947, by which the Chicago Convention of 7 ■ A description of net capacity. December 1944 was ratified by Colombia. ■ Incorporation of the company in the country. 1.1.5 Law 19 of 1992, by which the Amendment to Article 83b of the Chicago Convention was ratified by Colombia. ■ Securities. 1.1.6 Decree 260 of 2004, which modifies the structure of Unidad Administrativa Especial de Aeronáutica Civil (AEROCIVIL). 1.3 What are the principal pieces of legislation in 1.1.7 Decree 823 of 2017, which modifies and updates the structure your jurisdiction which govern air safety, and who of AEROCIVIL. administers air safety? 1.1.8 Decree 1078 of 2015, which unifies the regulation on Information Technologies and Communications. The safety of air transport is exclusively regulated by AEROCIVIL. 1.1.9 Decree 1079 of 2015, which unifies regulation on AEROCIVIL, applying RAC 4, sets minimum standards and other Transportation Industry, including Airport Decentralization, requirements for aircraft operation, aircraft maintenance and repair, regulations of reports of narcotics in Maritime and Air and the possession of certification for airports owned and controlled Transport, and the Regulations on Crew. by the State.

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AEROCIVIL also investigates aviation accidents to determine the ■ A designation or permit granted by the signatory State of the probable cause of the accident and issue safety recommendations bilateral agreement. in order to prevent similar accidents from occurring in the future ■ A detailed description of requested routes, frequencies, fares (RAC 8). and liberties. Finally, in accordance with RAC 98, AEROCIVIL is in charge of all ■ A detailed description of equipment. Search and Rescue (“SAR”) operations. ■ Insurance policies. ■ A description of net capacity. 1.4 Is air safety regulated separately for commercial, ■ Incorporation of the company in the country. cargo and private carriers? ■ Securities. Colombia Aviation safety rules are contained in RAC 3 and RAC 4. 1.7 Are airports state or privately owned? RAC 3 divides commercial civil aerial activities as follows: A. Scheduled common carriers There are 476 airports in Colombia, of which 75 are owned by the 1. Domestic common carriers. State, 313 are private, and 88 are owned by local governments. a) Trunk. Eighteen of the airports owned by the State are granted in concession b) Secondary. to private airport operators such as OPAIN in Bogotá, and Aeropuertos c) Cargo. de Oriente in Medellín. 2. International common carriers. There are 13 international airports in the country. a) National air carriers. i) Passengers. 1.8 Do the airports impose requirements on carriers ii) Cargo. flying to and from the airports in your jurisdiction? b) Foreign air carriers. Most airports maintain minimum standards of safety and efficiency. i) Passengers. Enforcement of these standards is undertaken by AEROCIVIL. ii) Cargo. Accordingly, airports are allowed to manage their operations B. Private carriers as long as they provide access to all authorised carriers without 1. State civil aviation. discrimination. a) State civil aviation. Airports may enter into lease agreements with all air carriers, b) General aviation. granting access to gates and facilities in exchange for regulated i) Business. charges. Airports often establish their own rules and regulations, including hours of operation, noise restrictions, baggage handling ii) Sports. requirements, ground transportation and fuelling requirements. iii) Aeroclubs.

1.9 What legislative and/or regulatory regime applies to 1.5 Are air charters regulated separately for commercial, air accidents? For example, are there any particular cargo and private carriers? rules, regulations, systems and procedures in place which need to be adhered to? Aviation safety rules for non-scheduled flights are contained in RAC 3 and RAC 4. AEROCIVIL conducts independent investigations as State authority RAC 3 divides non-scheduled aerial activities as follows: into all transportation accidents and major incidents within 1. Domestic Colombian territory. Investigations involving criminal conduct are coordinated with Fiscalía General de la Nación, the public entity in a) Air Taxi Services. charge of criminal investigations. b) Charter. The purpose of an AEROCIVIL investigation is to gather, collect 2. International and record all available information regarding the accident or a) Air Taxi Services. incident, to publish recommendations on air safety, to determine b) Charter. the probable cause of the accident/incident, whenever possible, and complete a final report. 1.6 As regards international air carriers operating in your According to Article 1948 of the Commercial Code, AEROCIVIL’s jurisdiction, are there any particular limitations to be investigation is independent from any judicial or administrative aware of, in particular when compared with ‘domestic’ aimed at determining liability. or local operators? By way of example only, restrictions and taxes which apply to international but The main stages of the investigation are: notification and setting up; not domestic carriers. on-the-ground investigation; documentary evidence; analysis of lab evidence; and submission of the final report. Bilateral aviation agreements prevent Colombia from discriminating against foreign air carriers seeking to operate in the country. As 1.10 Have there been any recent cases of note or other a result, foreign air carriers are treated the same as domestic air notable developments in your jurisdiction involving carriers and are subject to similar regulations. air operators and/or airports? To ensure safety, foreign air carriers must meet the requirements set out in 3.6.3.3.2.2 of RAC 3, including, but not limited to: On 25 September 2017, a minority union of pilots of AVIANCA went on strike for 51 days before returning to work without any

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negotiations concluded. AVIANCA sued the union, and the Superior Tribunal of Bogota, in a decision upheld by the Supreme 2.5 What (if any) are the tax implications in your Court of Justice on 30 November 2017, declared the strike as illegal. jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), The Supreme Court stated that air transport, although regularly and b) documentary taxes such as stamp duty; and performed by private common carriers, is an essential public service, (to the extent applicable) do exemptions exist as and may not be interrupted under any circumstances whatsoever. regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?

2 Aircraft Trading, Finance and Leasing Pursuant to the Colombian Tax Code and its regulations, international operational leases are subject to a GST of 1%, as long

Colombia 2.1 Does registration of ownership in the aircraft register as they incorporate in the contract of lease a buy option. constitute proof of ownership? For any other types of leases, they are subject to a VAT of 19%, and a GST of 25%. Yes. According to Article 1792 of the Commercial Code, the There are no documentary taxes such as stamp duty. National Aeronautical Registry is administrated by AEROCIVIL, and its main objectives are: ■ To serve as means of proof of ownership and transfer of 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and domain of aircraft. Cape Town)? ■ To give publicity over contracts regarding aircraft trading and leasing. Yes. The Republic of Colombia is a signatory to the main ■ To provide warranties of authenticity and security into titles, international Conventions. The Conventions entered into force in acts or documents subject to registry. Colombia on the following dates: ■ To perfect any act, contract or caution regarding an aircraft. ■ The Geneva Convention – 10 July 2003. ■ The Montreal Convention – 21 November 2001. 2.2 Is there a register of aircraft mortgages and charges? ■ The Cape Town Convention – 13 July 2005. Broadly speaking, what are the rules around the operation of this register? 2.7 How are the Conventions applied in your jurisdiction? Yes. The National Aeronautical Registry is a public registry for recording conveyances that affect title to, or interest in, an aircraft. The Conventions are applied in Colombia pursuant to the procedures The rules of the Registry are set forth in Chapter VII of RAC 20. that govern the implementation of international treaties, requiring A notarised public deed referring to the mortgage or charge must ratification and, in some cases, regulatory implementation. With include: the exception of the Cape Town Convention (implemented by ■ Names of contracting parties. RAC 20 of AEROCIVIL), aviation international conventions have been self-executing and therefore have not required legislative or ■ Aircraft identification, including the make, model, serial number and registration number. administrative implementation. ■ The kind of mortgage or charge incorporated. ■ An indication of registry data regarding title to, or interest in, 3 Litigation and Dispute Resolution an aircraft.

3.1 What rights of detention are available in relation to 2.3 Are there any particular regulatory requirements aircraft and unpaid debts? which a lessor or a financier needs to be aware of as regards aircraft operation? Rights of detention are primarily governed by Articles 590-604 of CGP. Generally, when an aircraft owner or operator has unpaid Aircraft operations are regulated by AEROCIVIL in RAC 20. debts, a creditor may seek to obtain an enforceable court judgment Accordingly, the lease or other agreement must be registered in and foreclose upon a lien. Such court judgment shall be registered in the National Aeronautical Registry, including contracts concluded the National Aeronautical Registry administrated by AEROCIVIL, abroad, with effect in Colombia. 20.7.3 RAC. according to 20.7.3 of RAC 20. However, Article 1908 of the Commercial Code establishes that the 2.4 As a matter of local law, is there any concept of title actual seizure of the aircraft cannot be enforced until a final decision annexation, whereby ownership or security interests from the court is rendered. 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 3.2 Is there a regime of self-help available to a lessor conditions to such title annexation and can owners or a financier of an aircraft if it needs to reacquire and financiers of engines take pre-emptive steps to possession of the aircraft or enforce any of its rights mitigate the risks? under the lease/finance agreement?

No, there is no concept of title annexation in Colombia. Although Colombia is a signatory of the Cape Town Convention, as it was 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.

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3.3 Which courts are appropriate for aviation disputes? 3.5 What types of remedy are available from the courts Does this depend on the value of the dispute? For or arbitral tribunals in your jurisdiction, both on i) an example, is there a distinction in your jurisdiction interim basis, and ii) a final basis? regarding the courts in which civil and criminal cases are brought? Depending on the circumstances surrounding the case, civil courts, at the plaintiff’s request, may order equitable remedies (specific 3.3.1 All civil claims, including civil aviation disputes, can be performance of injunctive relief, such as embargoes, seizures, heard before the civil jurisdiction. repossession, freezing of accounts, etc.) on an interim basis. The Civil Municipal Courts hear cases in which the amount in controversy does not exceed the equivalent in COP of In administrative matters, administrative courts, at the plaintiff’s

US$36,000. request, may order the provisional suspension of decisions issued Colombia by, or fines or penalties imposed by, public entities. The Civil Circuit Courts hear cases in which the amount in controversy exceeds the equivalent in COP of US$36,000, and the second instance (appeal) of cases is decided by the 3.6 Are there any rights of appeal to the courts from the Civil Municipal Courts. decision of a court or arbitral tribunal and, if so, in The Superior Tribunals hear the second instance (appeal) of what circumstances do these rights arise? cases decided by the Civil Circuit Courts. The Supreme Court of Justice hears an extraordinary The judicial system in Colombia is fundamentally based on the resource (recurso de casación) in cases decided in the second principle of double instance. instance by the Superior Tribunals, in which the amount in 3.6.1 In civil matters, except for cases decided by Municipal Civil controversy exceeds the equivalent of COP of US$245,000, Courts in which the amount of the controversy does not and under very special and restricted circumstances. exceed the equivalent in COP of US$36,000, once a case is 3.3.2 Cases in which a public entity is involved, including aviation decided by a trial court, a party may appeal as a matter of claims, can be heard before the administrative jurisdiction. right to the next level appellate court for review, as described The Administrative Circuit Courts hear cases in which the in question 3.3, point 3.3.1 above. amount in controversy does not exceed the equivalent in COP 3.6.2 In administrative matters, except for cases decided by of US$120,000. Administrative Courts in which the amount of the controversy The Administrative Tribunals hear cases in which the amount cannot be determined, once a case is decided by a trial court, in controversy exceeds the equivalent in COP of US$120,000, a party may appeal as a matter of right to the next level and the second instance (appeal) of cases decided by the appellate court for review, as described in question 3.3, point Administrative Circuit Courts. 3.3.2 above. If the decision is against a public entity acting as defendant, and it is not appealed in due course, it will The Council of State hears the second instance (appeal) of automatically be consulted by the next level appellate court cases decided by the Administrative Tribunals. for review, as described in question 3.3, point 3.3.2 above. If the contracting parties agree, they can settle their disputes 3.6.3 In arbitration parties, once a case is decided by an Arbitration through arbitration, which is regulated by Law 1563 of 2012. Tribunal, a party is entitled to request the annulment as a The decision of the Tribunal is subject to annulment, decided matter of right to the Superior Tribunal. by the Tribunal of the incumbent District.

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effects that this kind of operations may cause in the market. financial support to SATENA, allowing it to provide services on Additionally, aspects such as the capacity of supply substitution and routes not operated by common carriers. the execution of free trade agreements shall be taken into account in the above-referred analysis. Article 9 of Law 1340 of 2009. 4.8 What are the main regulatory instruments governing In aviation matters, AEROCIVIL is in charge of the above- the acquisition, retention and use of passenger data, mentioned analysis. and what rights do passengers have in respect of their data which is held by airlines?

4.3 Does your jurisdiction have a notification system 3.10.1.4 of RAC 3 establishes that passengers’ personal data shall whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from only be used for the purposes of managing the reservation and Colombia regulatory agencies? ensuring the performance of the contract of carriage by air. Air carriers must protect personal data in order to avoid unlawful No. There is no such system of regulatory clearance/antitrust use, and data may not be commercialised in any case. immunity in Colombia’s jurisdiction. According to Article 9 of Law 1340 of 2009, companies shall always notify or request prior 4.9 In the event of a data loss by a carrier, what authorisation from the antitrust authorities. obligations are there on the airline which has lost the data and are there any applicable sanctions? 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? 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 Depending upon the amount of operational income or the amount consumer data within the aviation industry. of total assets, individually or combined, in the previous fiscal year, parties seeking to merge or acquire another company, or to form a 4.10 What are the mechanisms available for the protection cooperative agreement or joint venture, must request authorisation of intellectual property (e.g. trademarks) and other from the Superintendence of Industry and Commerce, and from assets and data of a proprietary nature? AEROCIVIL in the aviation market, prior to closing. If the two parties combined do not reach 20% of the relevant market, Protection of intellectual property in Member States of the only a notification is needed. Article 9 of Law 1340 of 2009. Andean Community is primarily regulated in Colombia by the Superintendence of Industry and Commerce, as per Decision 486 4.5 Please provide details of the procedure, including of 2000 of the Andean Community. To protect intellectual property time frames for clearance and any costs of and other assets of a proprietary nature, an individual or company notifications. may file a patent, register a trademark or register a copyright with the Patent and Trademark Office of the Superintendence of Industry Parties seeking approval of mergers, acquisition mergers and joint and Commerce. ventures must file an application to the Superintendence of Industry and Commerce, or to AEROCIVIL for aviation matters, containing a 4.11 Is there any legislation governing the denial of pre-evaluation request and a brief report of the operation, according boarding rights? to the instructions set forth by the Superintendence’s regulations. The Superintendence shall publish details of the application in a 3.10.2.13.2 of RAC 3 governs the denial of boarding rights in cases national newspaper, in order to allow third parties to provide useful of delay, cancellations and overbooking. elements for the analysis of the projected operation. In cases of delay, the carrier must provide the passenger with Within three months, authorities must reach a final decision. Article refreshments, a phone call and a meal, whenever the delay is less 10 of Law 1340 of 2009. than five hours. If the delay exceeds five hours, the carrier must compensate the passenger with at least 30% of the price of the ticket.

4.6 Are there any sector-specific rules which govern the In cases of cancellation, the carrier shall be exonerated of any aviation sector in relation to financial support for air liability if it reimburses the passenger with the total price of the operators and airports, including (without limitation) ticket. state aid? In cases of overbooking, the carrier must embark the passenger on the next available flight. Decree 2344 of 1971 and Decree Law 2180 of 2014 created and organised air services into National Territories, under the umbrella of a State air carrier, SATENA. The Central Government provides 4.12 What powers do the relevant authorities have in some kind of direct financial support to this air carrier, in order to relation to the late arrival and departure of flights? provide services to communities in remote areas or on non-profit routes. AEROCIVIL is in charge of enforcing the regulations established 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. 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these Air carriers must establish a Customer Service System, with subsidies? counters in every airport in which to perform operations, with the purpose of assisting passengers’ complaints or requests regarding There are no State subsidies available in respect of particular routes. delays, cancellations and diversions. However, as stated in question 4.6 above, the Government provides

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long-term use and lease agreements. The air operator agrees to 4.13 Are the airport authorities governed by particular terms of use and other regulatory responsibilities in terms of gates, legislation? If so, what obligations, broadly speaking, ticket counters and terminals. are imposed on the airport authorities?

Airport operators are primarily governed by AEROCIVIL, pursuant 5 In Future 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 operating certificate. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments RAC 14 also requires airport operators to obtain an airport affecting the aviation industry more generally in

operating certificate, whether they are public or private. They must your jurisdiction, are likely to feature or be worthy of Colombia comply with specific conditions regarding safety, maintenance and attention in the next two years or so? operational conditions. For public airports, the certificate does not expire. For private AEROCIVIL has been working on concluding the process of the airports, the certificate expires after three years. harmonisation of RAC with the Latin American Aeronautical Regulations (“LAC”). This process may be concluded in the next two years. 4.14 To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger? Jorge Góngora According to RAC 3, the proper authority to enforce provisions of Gongora Reina & Associates the National Statute of the Consumer in aviation matters (Law 1480 Carrera 4 # 18-50 of 2011) is AEROCIVIL. This applies to the relationship between Office 1606 Bogotá D.C. the airport operator and the passenger. Colombia

Tel: +57 1286 8788 / +57 3102 8170 73 4.15 What global distribution suppliers (GDSs) operate in Email: [email protected] your jurisdiction? URL: www.gongoralaw.com

Amadeus, Travelport and Sabre operate in Colombia. Jorge Góngora is a principal of the firm Gongora Reina & Associates in Bogotá, which also has offices in Cali, Colombia, South America. He graduated as a lawyer from the University of Los Andes in 4.16 Are there any ownership requirements pertaining to Bogotá, 1985. He has an LL.M. in Insurance Law from Xaveriana GDSs operating in your jurisdiction? University in Bogotá, 1985. He has an LL.M. in Commercial Law from University of Los Andes, 1991, and an LL.M. in Air & Space Law, McGill University, Montreal, 1995. He was the Director of the No. There are no ownership requirements pertaining to GDSs Insurance Division of the Colombian Financial Superintendence, the operating in Colombia. 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 & 4.17 Is vertical integration permitted between air operators Associates. His areas of specialty involve litigation and consulting in and airports (and, if so, under what conditions)? 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 There is no specific prohibition on the subject of vertical integration. Insurance at Externado de Colombia University. Air operators do not own equity in airports, but they may enter into

Gongora Reina & Associates is a second-generation boutique law firm based in Colombia, with offices in Bogotá D.C. 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 relationships and to provide professional expertise.

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Denmark

Bird & Bird Julie Bak-Larsen

■ The Danish Competition Council. 1 General ■ The Danish Consumer and Competition Authority.

1.1 Please list and briefly describe the principal 1.2 What are the steps which air carriers need to take in legislation and regulatory bodies which apply to and/ order to obtain an operating licence? or regulate aviation in your jurisdiction.

Operating licences are granted by the CAA pursuant to relevant Danish legislation provisions of the Air Navigation Act and EC Order no. 1008/2008. The main framework legislation governing Danish aviation law is An application for an operating licence from the CAA must include Act no. 1149 of 2017 (the “Air Navigation Act”). documentation stating that: Other relevant legislation: ■ the company’s principal place of business is located in ■ Act no. 1035 of 2013 (the “Aircraft Registration Act”); and Denmark; ■ Act no. 462 of 2007 (the “Registration Tax Act”). ■ the company’s main activity is i) solely to operate air services, Furthermore, the Danish Transport Agency issues binding executive ii) to operate air services combined with any other commercial orders, so-called “BLs”, which constitute the more detailed Danish operation of aircraft, or iii) the repair and maintenance of aviation law regulations. aircraft; ■ EU or EEC nationals own more than 50% of the company and European Union Orders (“EC Orders”) effectively control it, either directly or by way of majority; Denmark is also subject to the vast quantity of EC Orders concerning ■ the company is not in liquidation or bankruptcy; aviation law, which are directly applicable under Danish law. ■ neither the company, owner, majority shareholder nor the International conventions general manager have outstanding debts to the Danish State Denmark has ratified: of more than DKK 50,000; ■ The 1933 Rome Convention (Convention for the Unification ■ neither the owner, majority shareholder nor the general of Certain Rules Relating to the Precautionary Arrest of manager of the company have been subject to any penalties Aircraft, signed in Rome on 29 May 1933). under the Danish Criminal Code or the Air Navigation Act; and ■ The 1944 Chicago Convention (Convention on International Civil Aviation, signed in Chicago on 7 December 1944). ■ the aircraft to be operated, which is registered according to the Air Navigation Act, is completely controlled by the owner. ■ The 1948 Geneva Convention (Convention on the international recognition of rights in aircraft, signed in Geneva on 19 June Furthermore, the company will be required to supply a variety of 1948). financial information pursuant to EC Order no. 1008/2008, articles ■ The 1999 Montreal Convention (Convention for the 5 and 8. Unification of Certain Rules for International Carriage by In addition to the operating licence, the company must hold an Air Air). Operation Certificate (“AOC”) issued by the CAA. The company ■ The 2001 Cape Town Convention (Convention on International will usually apply for the AOC at the same time as applying for the Interests in Mobile Equipment). operating licence, using the same application form. The Cape Town Implementation Act (Act no. 573 of 4 May 2015) The CAA may revoke or suspend the operating licence at any time, entered into force on 1 February 2016 in Denmark. The Cape Town if the company no longer complies with the above-mentioned Convention only applies to rights established after 1 February 2016. regulatory requirements. 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, whereas ownership and 1.3 What are the principal pieces of legislation in mortgage rights over aircraft also cover attached components, and it your jurisdiction which govern air safety, and who is not possible to register specific rights over components. administers air safety? Regulatory bodies The Air Navigation Act is the main legislation governing air safety The main regulatory bodies are: in Denmark supplied by the relevant BLs and the EC Orders ■ The Danish Transport Agency (the “CAA”). regulating the area.

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Some of the main EC Orders concerning safety aspects in the by the Danish Customs and Tax Administration will be subject to aviation industry are: customs search and control. ■ EC Order no. 748/2012 on initial airworthiness. There are no taxes applied exclusively to international air carriers ■ EC Order no. 1342/2014 on continuing airworthiness. (inside or outside the EU) and none to domestic air carriers. ■ EC Order no. 1178/2011 on requirements and administrative procedures relating to civil aviation aircrew. 1.7 Are airports state or privately owned? ■ EC Order no. 965/2012 on requirements and administrative procedures relating to air operations. Larger airports in Denmark are, in the majority, owned by the state ■ EC Order no. 300/2008 on common rules in the field of civil or local municipalities. aviation security. Copenhagen Airport, CPH (Københavns Lufthavne A/S) is a Denmark Air safety within Danish aviation law is furthermore dependent on public limited company listed on the Danish Stock Exchange a vast quantity of guidelines from the European Aviation Safety (NASDAQ OMX Copenhagen). There are two major shareholders Agency (“EASA”). in Københavns Lufthavne A/S, those being Copenhagen Airports As a signatory to the Chicago Convention, Denmark must also Denmark ApS (57.7%) and the Danish Ministry of Finance (39.2%). ensure that air navigation equipment and operations comply with The remaining 3.1% is owned by various private and institutional standards from the International Civil Aviation Organisation investors. (Copenhagen Airports Denmark ApS is jointly controlled (“ICAO”). by the Ontario Teachers’ Pension Plan and the Macquarie European The CAA administers and supervises air safety in Denmark and Infrastructure Fund III.) The Danish pension fund, ATP, has is responsible for enforcing Danish law as well as international purchased 26.9% of Macquarie European Infrastructure Fund regulations and standards applicable to air safety in Denmark. III’s shares in Copenhagen Airports Denmark ApS; however, the sale is currently awaiting approval from the Danish Competition Authorities. 1.4 Is air safety regulated separately for commercial, cargo and private carriers? Aarhus Airport, AAR (Aarhus Lufthavn A/S) is an unlisted public limited company jointly owned by the municipalities of Aarhus (90.02%), Norddjurs (4.99%) and Syddjurs (4.99%). In general, safety regulations for commercial, cargo and private carriers are the same. Billund Airport, BLL (Billund Lufthavn A/S) is an unlisted public limited company jointly owned by the municipalities of Vejle The most noticeable difference in air safety regulation between (34%), Kolding (25%), Billund (15%), Horsens (10%), Hedensted commercial, cargo and private carriers is within the area of (6%), Fredericia (6%) and Ikast-Brande (1%). Continuous Airworthiness Management Organisation (“CAMO”), subject to EC Order no. 2042/2003. All commercial and cargo Aalborg Airport, AAL (Aalborg Lufthavn a.m.b.a) is a limited carriers and private carriers operating aircraft above 5.7 MTON liability cooperative society owned jointly by the municipalities must either have their own CAMO or contract with a third-party of Aalborg, Jammerbugt, Rebild, Brønderslev, Frederikshavn CAMO, whereas private carriers operating aircraft of less than 5.7 and Vesthimmerland (their respective ownership interests are not MTON have less strict CAMO requirements. available to the public). Midtjyllands Airport, KRP (Midtjyllands Lufthavn a.m.b.a) is a limited liability cooperative society owned jointly by the 1.5 Are air charters regulated separately for commercial, cargo and private carriers? municipalities of Herning, Holstebro, Ikast-Brande, Lemvig, Ringkøbing-Skjern and Viborg (their respective ownership interests No separate regulation applies to EU carriers operating air charters are not available to the public). in Denmark. There are also numerous privately owned airports dedicated to Air charters by non-EU carriers are separately regulated by the activities other than commercial aviation. CAA’s executive order BL 10-1. Subject to BL 10-1, such non-EU carriers shall submit an application to the CAA 48 hours in advance 1.8 Do the airports impose requirements on carriers of the intended landing in Denmark, and 30 days in advance of flying to and from the airports in your jurisdiction? the intended landing, if the intention is to carry out more than four chartered flights within two months in Danish air space. Carriers will enter into an agreement with the relevant airport about Also, non-EU charters may be denied entry into Danish air space the terms of use of the airport. Such agreement will include, in for lack of reciprocity with the country concerned, e.g. regarding addition to provisions under general contract law, some of the unacceptable effects on scheduled traffic, flight safety, or provisions on airport regulation imposed by the CAA. international circumstances. 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 are subject 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be to prior authorisation by the CAA. According to EU Directive aware of, in particular when compared with ‘domestic’ 2009/12/EC on airport charges, as implemented by the CAA in BL or local operators? By way of example only, 9-15, the level of charges is to be settled by negotiations between restrictions and taxes which apply to international but each airport and its permanent users, i.e. the carriers. If the parties not domestic carriers. cannot reach an agreement, the CAA will determine the maximum charges the airport can levy for a specified period. International carriers from outside the EU are subject to more The current airport charges in force for Copenhagen Airport are restrictions than EU carriers, as aircraft arriving from or departing to applicable until 31 March 2019. airports outside the EU VAT area which have not been pre-approved

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1.9 What legislative and/or regulatory regime applies to 2.3 Are there any particular regulatory requirements air accidents? For example, are there any particular which a lessor or a financier needs to be aware of as rules, regulations, systems and procedures in place regards aircraft operation? which need to be adhered to? Denmark has implemented the Cape Town Convention; however, Air accidents and investigative procedures related thereto are the Cape Town Convention only applies to rights established after regulated in the Air Navigation Act (mainly chapters 10 and 11) and 1 February 2016. That means that registrations made before 1 by EC Order no. 996/2010. February 2016 are subject to the previous regime under the Danish In case of an air accident within the territory of Denmark, the air Aircraft Registration Act, i.e. the Geneva Convention set-up, whereas ownership and mortgage rights over aircraft also cover

Denmark carrier must inform the Danish Accident Investigation Board of the accident, supplying all information on the aircraft and flight in attached components, and that it is not possible to register specific question, as soon as possible. rights over components. Consequently, a lessor or financier needs to be aware of whether they have an interest in an aircraft or an engine According to the Air Navigation Act, Section 127, the owner of an in a fleet which is subject to a component pooling arrangement, and aircraft has strict liability for any personal injury or property damage. which includes aircraft registered in Denmark before 1 February 2016. If this is the case, the related component is in risk of 1.10 Have there been any recent cases of note or other transferring mortgage and ownership rights to the aircraft, to which notable developments in your jurisdiction involving it is more than temporarily attached. air operators and/or airports? Accordingly, even though Denmark has ratified the Cape Town Convention, it is still advisable for a lessor and financier to consider There have been no recent cases of air accidents in Denmark. how the matter of component exchanges or component pooling is handled in the specific aircraft operation, and whether that will 2 Aircraft Trading, Finance and Leasing be subject to the Section 22 regulation of the Danish Aircraft Registration Act, or whether it is wholly regulated by the Cape Town Convention. 2.1 Does registration of ownership in the aircraft register constitute proof of ownership? 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests Yes. In order to be registered, the owner of an aircraft must fill in a single engine are at risk of automatic transfer out a standard form and submit the completed form, along with or other prejudice when installed ‘on-wing’ on an documentation of ownership and value of the aircraft, to the CAA. aircraft owned by another party? If so, what are the The registration form can be found on the CAA’s website (www. conditions to such title annexation and can owners trafikstyrelsen.dk). and financiers of engines take pre-emptive steps to mitigate the risks? Registration in the Danish Nationality Register is subject to a small handling fee depending on the nature of the registration and a See our answer above to question 2.3. registration tax of 0.1% of the aircraft value.

2.5 What (if any) are the tax implications in your 2.2 Is there a register of aircraft mortgages and charges? jurisdiction for aircraft trading as regards a) value- Broadly speaking, what are the rules around the added tax (VAT) and/or goods and services tax (GST), operation of this register? and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as Yes. The register is referred to as the Danish Register of Rights regards non-domestic purchasers and sellers of over Aircraft and is administered by the CAA. It is a prerequisite aircraft and/or particular aircraft types or operations? for registration of rights over an aircraft in the Danish Register of Rights over Aircraft that the said aircraft is registered in the Danish Aircraft sale in Denmark is subject to VAT of 25%. Sale of aircraft Nationality Register. to carriers, where the aircraft is mainly meant for operation outside The register is updated with new entries daily and registered of Denmark, is VAT-exempt. information is most reliable. The processing time is required by An aircraft sale with purchasers from the EU is subject to payment law to not exceed 10 days from the entry. Entries are given priority of VAT in their own EU country. An aircraft sale with purchasers based on the date of the entry. Entries made on the same day will outside of the EU is not subject to payment of VAT in Denmark. be given equal priority. It is not possible to access the register online, but a certified copy 2.6 Is your jurisdiction a signatory to the main of a specific aircraft’s page in the register can be required against a international Conventions (Montreal, Geneva and handling fee of DKK 645 (2017). Cape Town)? Both security interests by agreement and by judicial order can be and are perfected by registration in the register. Security interests Yes, see our answer to question 1.1. by agreement are constituted by a letter of indemnity issued by the owner of the pledged aircraft. Security interests established by judicial order are registered on request of the creditor by submission 2.7 How are the Conventions applied in your jurisdiction? of the original court order to the register. Registrations of agreed security interests over aircraft are subject to See our answer to question 1.1. a handling fee of DKK 3,435 (2017) and a registration tax of 0.1% of the secured amount.

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3 Litigation and Dispute Resolution 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? 3.1 What rights of detention are available in relation to aircraft and unpaid debts? Except for claims of less than DKK 20,000 (2017), all decisions by Danish courts can be appealed once (i.e. from the city courts to Under the Danish Administration of Justice Act, it is possible to levy the high courts or from the high courts to the Supreme Court). In execution against a debtor’s assets through the Bailiff’s court for cases of general principal importance, a third instance appeal can be the purpose of having the asset sold on public auction, the proceeds granted by a special appeal board. 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 Except with respect to specific matters regarding formality, which can Denmark judgment of a civil court (or arbitration tribunal). be tried by the ordinary courts, arbitral awards cannot be appealed. If execution cannot be levied, it will be possible to have the Bailiff’s Denmark has ratified and implemented the 1972 New York court levy an attachment on the aircraft, provided that the creditor’s Convention on the Recognition and Enforcement of Foreign Arbitral possibility of collecting the debt would be severely impaired without Awards. the attachment. In the case of aircraft, however, no attachment can be made if the aircraft is (a) used exclusively for public purposes, 4 Commercial and Regulatory (b) used on regular routes in public air traffic, or (c) is 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 4.1 How does your jurisdiction approach and regulate was not established in connection with the contemplated carriage or joint ventures between airline competitors? during the carriage. In order to maintain an attachment once levied, the creditor must Joint ventures between competing airlines are subject to the general initiate confirmatory action with the civil courts no later than one competition rules as applied by the Danish Competition Council and week after the attachment is levied by the Bailiff’s court. the Danish Competition and Consumer Authority. In addition to the above, it is possible on a non-statutory basis for The Danish Competition Council is the principal enforcer of a creditor to exercise a right of retention in an asset if the asset is competition law in Denmark. The Danish Competition and in the creditor’s possession and the debt is related to it (much like a Consumer Authority, which is the secretariat of the Danish garage keeper’s lien). Competition Council, is in charge of the day-to-day administration of Act no. 869 of 8 July 2015 (the “Competition Act”) and prepares The Air Navigation Act further provides for a specific right for the decisions of the Council. Furthermore, the Danish Competition airport operators to retain an aircraft for unpaid take-off or landing and Consumer Authority has the competence to adopt certain charges, provided the due take-off or landing charges in question decisions itself. concern a recent take-off or landing in the relevant airport. The Competition Act provides the overall regulatory framework. According to the preparatory works of the Competition Act, its 3.2 Is there a regime of self-help available to a lessor provisions must be interpreted in accordance with EU competition or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights rules. The Competition Act is complemented by a considerable under the lease/finance agreement? amount of secondary legislation, including executive orders and guidelines. No. All repossessions of aircraft or collection of debt require the assistance of a competent court; see our answer above in question 4.2 How do the competition authorities in your 3.1. jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions?

3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For The competition authorities generally tend to follow the European example, is there a distinction in your jurisdiction Commission’s market definitions for the purpose of assessing a regarding the courts in which civil and criminal cases merger or an acquisition. In case practice, this has resulted in the are brought? definition of relevant markets for scheduled flights on the basis of Danish city pairs. The civil courts are competent in all civil as well as criminal cases. 4.3 Does your jurisdiction have a notification system 3.4 What service requirements apply for the service of whereby parties to an agreement can obtain court proceedings, and do these differ for domestic regulatory clearance/anti-trust immunity from airlines/parties and non-domestic airlines/parties? regulatory agencies?

No service requirements are provided. 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 3.5 What types of remedy are available from the courts exemption. The competition authorities may, however, refrain from or arbitral tribunals in your jurisdiction, both on i) an considering a notification, if the agreement may appreciably affect interim basis, and ii) a final basis? trade between the EU Member States. As a result, the notification system is rarely applied. Please refer to our answer to question 3.1 above.

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4.4 How does your jurisdiction approach mergers, 4.7 Are state subsidies available in respect of particular acquisition mergers and full-function joint ventures? routes? What criteria apply to obtaining these subsidies? Mergers, acquisition mergers and full-function joint ventures are subject to mandatory notification if one of the two sets of turnover Subsidies in respect of particular routes are given by the local thresholds in Section 12(1) of the Competition Act is exceeded: airports or local authorities. The Danish State does not offer state ■ the combined aggregate turnover in Denmark of all the subsidies to routes directly, but offers financial support to certain undertakings concerned is more than DKK 900 million and airports instead. the aggregate turnover in Denmark of each of at least two of The criteria for obtaining these subsidies are determined by the the undertakings concerned is more than DKK 100 million; or Denmark bodies granting the subsidies, but they have to comply with ■ the aggregate turnover in Denmark of at least one of the applicable State aid rules. 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. 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 4.5 Please provide details of the procedure, including their data which is held by airlines? time frames for clearance and any costs of notifications. Passenger data is regulated as personal data under the Danish Act on Processing of Personal Data (the “Data Protection Act”), A concentration that is notifiable in Denmark must not be put into implementing EU Directive 95/46 on the protection of personal effect before it has been approved by the Danish Competition data. The passenger data will by 25 May 2018 be subject to the Council or the Council’s time limits have expired. General Data Protection Regulation (“GDPR”) and the Danish This creates waiting periods of 25 working days (Phase I) after a legislation implemented in accordance with the GDPR. complete notification has been received, or additionally 90 working Passengers have numerous rights under general personal data days (Phase II) after the expiry of the first waiting period. The protection law, including the right to consent to or refuse any data Danish Competition and Consumer Authority must declare whether processing, to obtain information on the personal data processed of a notification is complete within 10 working days upon receipt of the them, to correct processed personal data, to have processed personal notification. In practice, the Authority may have several additional data deleted, etc. questions and sometimes even begins negotiations with the parties Denmark intends to transpose Directive (EU) 2016/681 on the use of on possible commitments before the Phase I period is triggered. passenger name record (“PNR”) data for the prevention, detection, The filing fee amounts to DKK 50,000 for simplified notifications investigation and prosecution of terrorist offences and serious crime and 0.015% of the parties’ turnover for non-simplified notifications. (the “PNR Directive”); however, the directive has not yet been The filing fee is capped at a maximum of DKK 1.5 million. transposed in Denmark.

4.6 Are there any sector-specific rules which govern the 4.9 In the event of a data loss by a carrier, what aviation sector in relation to financial support for air obligations are there on the airline which has lost the operators and airports, including (without limitation) data and are there any applicable sanctions? state aid? If the personal data loss has entailed a leak of personal data to There are no sector-specific Danish rules which govern financial unauthorised recipients, the Danish Data Protection Agency has support for air operators and airports. stated that the Danish Data Protection Act’s general provision on The relevant regulatory framework for such support consists of the good data processing practices entails that a data controller should Danish and EU State aid rules. assess on a case-by-case basis whether to inform the relevant data According to Section 11a of the Competition Act, the Danish subject of the loss of data. Competition Council may order the termination or repayment of aid Furthermore, the Danish Data Protection Agency provides that that distorts competition and that is not granted lawfully according the general provision on good data processing practices entails to public regulation. The decision of whether granted aid is lawful that the data controller must eliminate the error or security breach according to public regulation is to be made by the relevant minister causing the loss of data and mitigate the damage caused. Also, any or the relevant municipal supervisory authority unless otherwise illegal publication of personal data on the internet shall be removed provided by other legislation. In practice, the Danish State aid rules immediately, including search history on search engines. mainly target municipal aid, which can be of interest with regard to A data controller, such as a carrier, must ensure that appropriate municipality-owned airports. technical and organisational security measures are taken to protect When a State aid measure affects trade between EU Member States, data against accidental or unlawful destruction, loss or alteration the Danish Competition Council may refrain from dealing with and against unauthorised disclosure, abuse or other processing in an aid case and the EU State aid rules will generally apply. Of violation of the provisions laid down in the Danish Data Protection particular importance are the Commission’s guidelines on State aid Act. If a data loss is caused by any non-compliance with such to airports and airlines (OJ 2014/C 099/03), which were adopted in requirement, the data controller may be subject to penalties by the 2014 and replaced the previous guidelines from 2005. Danish Data Protection Agency and be liable in damages towards the data subjects involved. The above requirements will be further tightened under the upcoming GDPR after 25 May 2018.

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The CAA has prepared a BL collection (no. 3) on the various 4.10 What are the mechanisms available for the protection regulations on airport operation in Denmark. of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? 4.14 To what extent does general consumer protection The main Danish regulation on intellectual property rights is the legislation apply to the relationship between the airport operator and the passenger? regulation on the protection of copyrights, trademarks, patents and design rights. General Danish consumer protection legislation is fully applicable Customer and other passenger data is subject to data protection in the relationship between the airport operator and the passenger. regulation and marketing practices regulation, especially regarding The main consumer legislation is: the requirement of obtaining the data subject’s permission and Denmark consent prior to any processing. ■ the Consumer Contract Act; The ordinary courts are competent to handle intellectual property ■ the Sale of Goods Act; cases. Nevertheless, intellectual property cases will often begin in ■ the Marketing Practices Act; the Commercial and Maritime Court. ■ the e-Commerce Act; and ■ the Data Protection Act. 4.11 Is there any legislation governing the denial of boarding rights? 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? The main legislation governing the denial of boarding rights is: ■ EC Order no. 261/2004 on compensation and assistance to To our knowledge, the main GDS systems provided in Denmark are passengers in the event of denied boarding and of cancellation Amadeus, Galileo, Travelport, Sabre and Worldticket. or long delay of flights; and ■ the Air Navigation Act, as a result of the ratification of the 1999 Montreal Convention (Convention for the Unification 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? of Certain Rules for International Carriage by Air). The Air Navigation Act regulates the carrier’s liability for There are no specific Danish regulation requirements pertaining to delays, cancellations, denied boarding, and damages to cargo and GDS ownership. passengers, whereas EC Order no. 261/2004 only regulates matters relating to compensation and assistance to passengers in the event of delays, cancellations, and denied boarding. The two main regulatory 4.17 Is vertical integration permitted between air operators frameworks are to be understood in combination. and airports (and, if so, under what conditions)? Recent Danish case law exemplifies the above legislation: Vertical integration between air operators and airports is not The Danish Supreme Court ruled on 2 June 2017 that the passengers prohibited as such in Denmark. Any such constellation would have of a SAS flight was not entitled to compensation for a 3hr 43min to comply with applicable competition law rules and the specific delay due to a diversion to Philadelphia caused by bad weather in regulatory requirements for both businesses. Washington, D.C. SAS was acquitted of the compensation claim based on Art. 5(3) of EC Order no. 261/2004, because the delay was “caused by extraordinary circumstances which could not have been 5 In Future avoided even if all reasonable measures had been taken”.

5.1 In your opinion, which pending legislative or 4.12 What powers do the relevant authorities have in regulatory changes (if any), or potential developments relation to the late arrival and departure of flights? affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of Passengers who have been subject to late arrivals or departures can attention in the next two years or so? complain to the CAA or directly to the Danish courts. The CAA will, however, not handle complaints regarding cargo (baggage) The upcoming GDPR is relevant to the aviation industry’s delays, damage to cargo (baggage) or passengers, or a carrier’s processing of personal data. The NIS directive on information liability towards the passenger under contract made between the security will also be relevant for the aviation industry to implement. carrier and the passenger. Claims regarding the latter are to be made Finally, the consequences of Brexit and their relation to European directly to the Danish Courts. Open Skies and any EU ownership requirements are material to take The CAA supervises the carrier’s compliance with EC Order no. into consideration for carriers operating in the EU. 261/2004 and the relevant regulation under the Air Navigation Act, cf. our answer above in question 4.11.

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

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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Julie Bak-Larsen Bird & Bird Sundkrogsgade 21 2100 Copenhagen O Denmark

Tel: +45 72 24 12 12 Email: [email protected] URL: www.twobirds.com/da

Denmark Julie Bak-Larsen works on technology, telecommunication, space and aviation law. She previously worked for a year with the SAS Scandinavian Airline as an in-house lawyer, and has worked on aviation law as an attorney for 10 years. She works in all aspects of aviation law, including regulatory matters, aviation finance, operational matters, and operational contractual set-up such as leasing agreements. Her clients are airlines, financers and lessors.

Bird & Bird is a leading international law firm which advises clients in sectors being transformed by technology and the digital world. Aviation is undoubtedly one of these, and we act for many leading businesses, including: airlines; lessors; financiers; aircraft manufacturers; ground handlers; maintenance, repair and operations companies; freight forwarders; insurers; airports; tour operators; and industry associations. We help our clients to reach commercial, workable solutions across a wide range of transactions and ventures, at the cutting edge of business and legal developments. We advise on just about every agreement, transaction, regulatory issue or type of dispute that the industry presents. What unites our Aviation team across the firm’s 28 offices worldwide is a genuine passion and enthusiasm for the industry and our unique knowledge of all regulatory, business and risk issues across the sector. A large percentage of our lawyers are recruited from the sector and we have a rare understanding of the practical realities of life in the aviation industry.

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France Maylis Casati-Ollier

Clyde & Co Benjamin Potier

■ the company has one or more aircraft at its disposal through 1 General ownership or a dry lease agreement; ■ the main occupation of the company is to operate air services 1.1 Please list and briefly describe the principal in isolation or combined with any other commercial operation legislation and regulatory bodies which apply to and/ of aircraft or the repair and maintenance of aircraft; or regulate aviation in your jurisdiction. ■ the company’s structure allows the competent licensing authority to implement the provisions mentioned in this Regulatory bodies chapter; Aviation is regulated by the Ministry of Transport, which is the ■ Member States and/or nationals of Member States own more competent administrative body in the field of aviation and, as such, than 50% of the undertaking and effectively control it, whether directly or indirectly through one or more intermediate can issue regulations and measures in the field of aviation. undertakings, except as provided for in an agreement with a The Civil Aviation Authority, known as the DGAC (Direction third country to which the Community is a party; Générale de l’Aviation Civile), advises the Ministry of Transport on ■ the company submits a business plan for at least the first two aviation matters and makes administrative decisions regarding all years from the start of operations and in compliance with the aspects of aviation. financial requirements provided by Article 5 of Regulation The European Aviation Safety Agency (EASA) has authority in (EC) 1008/2008; respect of aviation safety regulation within EU Member States. ■ the company complies with insurance requirements; and Legislation ■ the persons who will continually and effectively manage the operations of the company are of good reputation and As in other Member States of the European Union, aviation in have never been bankrupt as specified in Article 7 of the France is increasingly regulated by EU legislation, most of which is Regulation. of direct application in France. The Direction de la Régulation Economique (DRE), located at the Until 2010, the aviation sector was regulated by the French Code of DGAC in Paris, should issue the licence within three months; for Civil Aviation. It is now regulated by the sixth section of the Code small operators (non-scheduled services with aircraft of fewer than of Transport, which covers all means of transport. It should be noted 20 seats and turnover not exceeding EUR 3 million per year), the that certain provisions of the Code of Aviation remain applicable licence will be delivered directly by the local DAC (i.e. the same pending decrees to incorporate them into the new Code of Transport. department that delivered the AOC). Finally, France is also a party to the 1999 Montreal Convention 1999 These authorities can withdraw the licence if it appears that the for the Unification of Certain Rules for International Carriage by conditions are no longer met. Air, which sets out the liability regime of air carriers in the case of an accident; European regulation has extended this liability regime to domestic accidents. 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety? 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? Firstly, air safety is regulated by the International Civil Aviation Organisation (ICAO), as France is a signatory to the Chicago Article 4 of the Regulation (EC) 1008/2008 of 24 September 2008 Convention 1944 and must therefore ensure that air navigation sets out the conditions for granting an operating licence, which are equipment and operations comply with ICAO standards. that: Air safety is also regulated by the European Aviation Safety Agency ■ its principal place of business is located in France; (EASA) and European legislation, for example: ■ the company holds a valid Air Operator’s Certificate (AOC), ■ Regulation (EC) 1315/2007 of 8 November 2007, which issued by the local department of the civil aviation authority establishes oversight of safety in air navigation services, air where the company will be established (Direction de traffic flow management and airspace management. l’Aviation Civile – DAC), which is responsible for granting, ■ Regulation (EC) 300/2008 of 11 March 2008 on common refusing, revoking or suspending the operating licence of the rules in the field of civil aviation security and repealing Community air carrier; Regulation (EC) No 2320/2002.

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■ Regulation (EU) 340/2015 of 28 April 2015, which substitutes they are carrying out intra-community air services or extra- Regulation 805/2011 of 10 August 2011, which lays down community air services. Such authorisation will be granted detailed rules for air traffic controllers’ licences and certain only if the necessary traffic rights exist. certificates. This Regulation applies as of 30 June 2015. By way of derogation from paragraph 1, Member States had the opportunity to decide not to apply Annexes I to IV, in whole 1.7 Are airports state or privately owned? or in part, before 31 December 2016 (Article 11). In order to make use of this possibility, Member States needed to All French airports are directly owned by the State or public bodies, notify the Commission and the Agency by 1 July 2015 at the latest. except for Paris-Charles de Gaulle, Paris-Orly, Paris-Le Bourget and other aerodromes in the Paris region (région Ile de France). In France, different DGAC departments are responsible for enforcing France air safety regulation, whether French or European; in particular, These are privately owned by the Aéroports de Paris company; the OSAC (Organisation for Civil Aviation Security) and the DCS however, the French State must own more than 50% (currently 52%) (Safety Oversight Directorate). The Minister for Transport also has of the company’s shares (Article L6323-1 of the Code of Transport). powers in respect of safety inspections of aircraft, equipment and organisations and their employees. French safety rules are contained 1.8 Do the airports impose requirements on carriers in Article L6341 and the subsequent Articles of the Code of Transport. flying to and from the airports in your jurisdiction? Any aircraft, whether French or foreign, at a French airport, and any premises and facilities at which controlled activities are carried out, Conditions of use are imposed, as well as charges. In particular, may be inspected to ensure compliance with French and European there are regulations on noise and curfews in some airports, civil aviation regulations. In case of any breach of these regulations, especially in Roissy-Charles de Gaulle. the minister may prescribe any measure to correct and restrict operations, including the grounding of an aircraft. 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 1.4 Is air safety regulated separately for commercial, which need to be adhered to? cargo and private carriers?

The regulatory bodies are the same for commercial, cargo and France is a party to the Chicago Convention 1944. Article 26 and private carriers; however, the rules and standards vary. Annex 13 of that Convention contain provisions for the investigation of air accidents. In particular, Article L6343 and the subsequent Articles of the French Code of Transport contain provisions for the security control Regulation (EU) 996/2010 also regulates the investigation and of cargo and air mail carriage. Similarly, Regulation (EU) 859/2011 prevention of accidents and incidents in civil aviation (amended by (amending Regulation (EU) 85/2010) provides for specific security Regulation (EU) 376/2014). measures on air cargo and mail coming from non-EU countries. The French Code of Transport (Article L62231) (Article L6223- 1) obliges any regulated actor to report to the aviation authorities any event which has or is likely to have affected the safety of air 1.5 Are air charters regulated separately for commercial, operations. cargo and private carriers? The failure to report such events may result in penalties of one The rules and regulatory bodies are the same for these three cases. year’s imprisonment and a fine of EUR 15,000 (Article 6232-10 of the French Code of Transport). The Bureau d’Enquêtes et d’Analyses (BEA) is responsible for 1.6 As regards international air carriers operating in your the investigation of civil aircraft accidents and serious incidents in jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ France. or local operators? By way of example only, In addition to civil investigation, investigations into serious injuries restrictions and taxes which apply to international but or deaths are usually carried out by the French Gendarmerie, in not domestic carriers. addition to penal investigations which are undertaken by a judge of the local criminal court. There are no limitations, as France is a party to the 1944 Chicago An airline’s liability is generally governed by the Montreal Convention, which provides for availability, so far as practicable, Convention 1999, which provides a strict liability regime with the of aerodromes in its territory and equality of conditions of use of possibility to exclude liability for damages above 113,100 Special aerodromes for international and domestic aircraft. Article 15 of the Drawing Rights (SDR) (approximately EUR 115,000) when such Chicago Convention further provides for equality for charges for the damage was not due to the negligence or other wrongful act of the use of aerodromes. carrier or its servants or agents and when the accident is a result As to authorisations, a distinction is to be made between community solely of a third party’s fault (Article 21). and extra-community carriers: ■ Community carriers who have a valid licence can operate intra-community services in France without a permit or 1.10 Have there been any recent cases of note or other authorisation. A community carrier must only notify the notable developments in your jurisdiction involving air operators and/or airports? DGAC of the intended operation in France (Article R330-8 of the Civil Aviation Code). Extra-community services are still subject to authorisation by the DGAC (Article R330-8 of In 2015, the French Supreme Court (Cour de cassation) decided that the Civil Aviation Code). a third-party action by an aircraft manufacturer against an airline ■ As to non-community air carriers, they must seek authorisation arising from the death of passengers in an air accident was not from the DGAC to operate into or out of France, whether governed by the Warsaw Convention.

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In this matter, the victims’ families sued the manufacturer for The request for deregistration of a mortgage must be filed by alleged design defects on the aircraft. The families claimed the mortgagee. No deregistration of the aircraft from the French compensation for damages arising from the death of the passengers. registry may be done unless the mortgage has been released or the The manufacturer brought a third-party action against the airline mortgagee has agreed. for indemnity. The airline raised a jurisdiction exception based on An aircraft mortgage does not give a right to possession, but only the applicable Warsaw Convention (the Montreal Convention was to cause the sale, and priority over the proceeds of sale. Several not applicable as it had not been ratified by one of the countries mortgages may be taken on a single aircraft and the mortgages involved). The Court of Appeal granted the jurisdiction exception. registered first will have priority over the subsequent ones. The Cour de cassation quashed the Court of Appeal decision on the Consistent with the rules of the Geneva Convention, some rights grounds that the Convention only governs actions brought against have priority over the mortgagee’s: (i) legal costs of public auction France an airline directly by the passengers and not by the manufacturer. sale; (ii) costs incurred for salvage; (iii) costs that are indispensable This decision is a breach of the principle of exclusivity of the for preserving the aircraft; and (iv) mechanics’ liens if registered Convention (now the Montreal Convention). prior to the mortgage. The registered mortgagee is entitled to receive insurance proceeds up to the secured amount in case of loss or damage to the aircraft, 2 Aircraft Trading, Finance and Leasing subject to alternative provisions agreed between the parties.

2.1 Does registration of ownership in the aircraft register 2.3 Are there any particular regulatory requirements constitute proof of ownership? which a lessor or a financier needs to be aware of as regards aircraft operation? France is a party to the Geneva Convention of 19 June 1948 and rights in relation to the ownership of aircraft are consistent with the Leases (i.e. dry lease) are not required to be registered. However, rules set out therein. they may be registered on the French aircraft registry. When a lease Registration of ownership constitutes proof of ownership and is is recorded, the owner’s liability to third parties is subject to proof binding on third parties (Article L6121-1 of the French Code of of negligence of the owner. The registry only records the existence Transport). No transfer of title is binding on third parties until the of the lease to the operator, and its duration. owner is registered as the owner on the register which is kept by Public transport aircraft may only be arrested in France in a very limited the DGAC. For the purpose of registering an aircraft or a change number of circumstances; for example, in the event of sums due by of ownership, the DGAC will require an original bill of sale and the owner for acquiring the aircraft, or for training or maintenance other such documentation necessary to verify the authenticity of the (Article 6123-1 of the French Code of Transport), and also for airport transfer. or traffic dues and fines for curfew and similar violations.

2.2 Is there a register of aircraft mortgages and charges? 2.4 As a matter of local law, is there any concept of title Broadly speaking, what are the rules around the annexation, whereby ownership or security interests operation of this register? 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 Mortgages on aircraft registered in France must be registered on to such title annexation and can owners and financiers the French aircraft register in order to be binding on third parties of engines take pre-emptive steps to mitigate the risks? (Article L6122-8 of the French Code of Transport). Mortgages may only be taken on an entire aircraft (for example, one may not take a Engines installed on an aircraft are deemed to belong to the aircraft mortgage on an engine only). and so to the owner of the aircraft. An engine plate showing Mortgages must be an instrument in writing signed by both different ownership can mitigate risk with limited success as there parties (the owner as mortgagor, and the creditor of the owner as is no engine registry. mortgagee). The amount secured must be indicated; the mortgage may secure the principal plus three years of past due interest, in 2.5 What (if any) are the tax implications in your addition to the interest accrued during the year of enforcement. The jurisdiction for aircraft trading as regards a) value- security consists of the aircraft, engines and all other parts; it may added tax (VAT) and/or goods and services tax (GST), also be extended to spare parts provided that a list identifying each and b) documentary taxes such as stamp duty; and of them is included in the mortgage agreement. Mortgages may be (to the extent applicable) do exemptions exist as obtained by contract only and not by Court Order. regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? A single mortgage may cover several aircraft or even an entire fleet (if the entire fleet is registered in France) as long as all aircraft included in the security are identified. Engine sales are subject to a 20% VAT. However, there is an exemption for carriers which operate more than 80% abroad (Article An original of the mortgage agreement must be sent to the DGAC 262 II 4 of the French Tax Code). for the purpose of filing a mortgage. In the same manner as for registration of ownership, the DGAC will require a number of documents in order to verify the authenticity of the mortgage; the 2.6 Is your jurisdiction a signatory to the main international mortgage agreement does not need to be notarised. The registration Conventions (Montreal, Geneva and Cape Town)? of the mortgage is valid for 10 years; if the mortgage agreement provides that the mortgage is granted for a period in excess of 10 France is a signatory of and has ratified most international aviation years, a re-filing/re-recordation is required upon the expiry of the conventions, including, inter alia: 10-year period. ■ The 1929 Warsaw Convention, as amended by the Hague Protocol of 28 September 1955.

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■ The 1944 Chicago Convention. Commercial courts will have jurisdiction on all commercial claims ■ The 1963 Tokyo Convention on offences and certain acts or other disputes related to trade, finance and commerce. As such, committed on board aircraft. commercial courts will have jurisdiction for claims between a lessor ■ The 1952 Rome Convention on damage caused by foreign and a lessee, or between an airline and a repair company, etc. aircraft to third parties on the surface. Criminal cases are heard by criminal courts. Prosecutions for ■ The 1968 Geneva Convention on the international recognition manslaughter will be heard by the Tribunal correctionnel, which of rights in aircraft. can also make decisions on a civil victim’s compensation for harm ■ The 1999 Montreal Convention. arising from manslaughter. The Cape Town Convention on international interests in mobile Civil matters are heard by civil courts; mainly the Tribunal de France equipment has been signed by France; however, to date it has not Grande Instance for claims above EUR 10,000 (including claims been ratified. arising from death or injury), and the Tribunal d’instance and Juge de proximité for small claims below EUR 10,000 (including baggage claims, claims for delayed flights, etc.). 2.7 How are the Conventions applied in your jurisdiction? Disputes with the French administration (for example, airport taxes and navigation service taxes) are heard by the Tribunal administratif. Ratified conventions are recognised and enforced by the court and prevail over French domestic law. 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic 3 Litigation and Dispute Resolution airlines/parties and non-domestic airlines/parties?

The usual way to start litigation in France is to serve a Writ in 3.1 What rights of detention are available in relation to Summons on the Defendant. The service is done by a bailiff. Then aircraft and unpaid debts? the original of the Writ in Summons is filed with the relevant court which has jurisdiction over the matter. Any person who has possession of an aircraft can retain it until payment of charges, fees or costs, which arose from the subject Service on parties residing abroad varies according to whether the possession, such as repair and maintenance costs, hangar fees, etc., Defendant’s state is a member of the European Union or has signed have been satisfied. a bilateral or multilateral convention with France. Aircraft that are dedicated to public transportation or to state As to non-EU Member States, service is usually done via the services are protected, in the sense that they can be subject to diplomatic channel. The French court has no obligation to wait for freezing injunctions only for debts related to the sale or maintenance evidence that: the service on the foreign Defendant was actually of the aircraft or training (Article L6123-1 of the French Code of completed; service is deemed completed; and it is sufficient to Transport) and for unpaid airport or air service charges (Article give evidence to the court that the Summons was sent to the public L6123-2 of the French Code of Transport). prosecutor who will take care of service abroad. If it transpires that service was not done, resulting in a Judgment by Default, this would In other circumstances, freezing injunctions can be sought pursuant be a specific cause for an appeal. to the common rules provided by the Law of 9 July 1991, before the Juge de l’Exécution. The conditions are: ■ The debt must appear certain. 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an ■ Under certain circumstances, the creditor can assume that he interim basis, and ii) a final basis? will have difficulty in getting paid.

A freezing injunction is not necessary when the creditor already has Remedies vary depending on the nature of the dispute. a judgment which is not yet enforceable, or a similar document such On an interim basis, the Claimant can start a procédure de référé for as an unpaid cheque or a notarised agreement; in such circumstances, urgent cases in order to obtain an ordonnance de référé for: the freezing of an aircraft can be pursued directly by a bailiff. ■ a provisional Injunction Order to prevent the other party from doing something that clearly violates the law; or 3.2 Is there a regime of self-help available to a lessor ■ a provisional payment for damages. or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights On a final basis, the Claimant can start aprocédure au fonds in order under the lease/finance agreement? to obtain a decision on the merits of his claim. For example: ■ damages; There is no such self-help regime under French law. A lessor or a ■ an injunction to do or not to do something; financier has no choice other than to seek an injunction to repossess ■ a decision on the ownership and repossession order; or an aircraft. ■ other. It should be noted that there is no definitive list of what a French 3.3 Which courts are appropriate for aviation disputes? court may order. Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction Regarding the arbitral award, it has the authority of res judicata regarding the courts in which civil and criminal cases or can be declared provisionally enforceable in accordance with are brought? Article 1484 of the French Code of Civil Procedure.

The French judicial system is not based on sector/industry, but on the nature and value of the dispute.

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depending on the turnover of the undertakings involved. 3.6 Are there any rights of appeal to the courts from the Concentrations which have very little impact on the market given decision of a court or arbitral tribunal and, if so, in the size of the undertakings, are not subject to any control (4.1.2.3). what circumstances do these rights arise? 4.1.2.1 European competence Except for small cases below EUR 4,000, there is a right of appeal Regulation (EC) 139/2004 sets thresholds to define the Community to a Court of Appeal (Cour d’appel). The Court of Appeal has the dimension of the concentration, and therefore the competence of the power to make a new decision on all aspects of the matter, both on European Commission. questions of fact and questions of law. A concentration has a Community dimension where: After a Court of Appeal decision, or if the appeal was not open, ■ the combined aggregate worldwide turnover of all the France there is also an appeal before the French Supreme Court (Cour undertakings concerned is more than EUR 5,000 million; and de cassation for civil matters or Conseil d’Etat for administrative ■ the aggregate Community-wide turnover of each of at least matters). The Supreme Court only rules on matters of law: it merely two of the undertakings concerned is more than EUR 250 ensures that the lower court has correctly applied the law to the million, facts, without contradicting the Court of Appeal as to what the facts unless each of the undertakings concerned achieves more than two- are (with the exception of a clear misrepresentation or distortion of thirds of its aggregate Community-wide turnover within one and the the facts). same Member State. Arbitral decisions cannot be subject to an appeal, except in very Alternatively, a concentration that does not meet the thresholds laid limited circumstances. down previously has a Community dimension where: ■ the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2,500 million; 4 Commercial and Regulatory ■ in each of at least three Member States, the combined aggregate turnover of all the undertakings concerned is more 4.1 How does your jurisdiction approach and regulate than EUR 100 million; joint ventures between airline competitors? ■ in each of at least three Member States included for the purpose of the above point, the aggregate turnover of each of There are no sector-specific competition law rules that apply to the at least two of the undertakings concerned is more than EUR aviation sector. 25 million; and ■ the aggregate Community-wide turnover of each of at least Joint ventures such as alliances or code shares can be considered to two of the undertakings concerned is more than EUR 100 be agreements which are incompatible with the market (see point million, 4.1.1 below) or as a concentration (see point 4.1.2). unless each of the undertakings concerned achieves more than two- 4.1.1 Agreement incompatible with the market thirds of its aggregate Community-wide turnover within one and the Article 101§1 of the Treaty on the Functioning of the European same Member State. Union (TFEU) prohibits all agreements between undertakings, 4.1.2.2 French competence decisions by associations of undertakings, and concerted practices which may affect trade between Member States and which have If the above-mentioned thresholds are not met, the French Authority as their object or effect the prevention, restriction or distortion of in charge of competition will have jurisdiction. competition within the internal market (i.e. the European Single 4.1.2.3 Absence of control Market). Concentrations which will not have a substantial impact on the The European Commission will have jurisdiction if it finds that an market are not controlled. agreement falls within the scope of this Article. This is the case when the following thresholds are not met (Article The European Commission may declare that Article 101§1 of the L430-2 of Code of Commerce): TFEU shall not apply to certain categories of agreements, decisions ■ the combined aggregate worldwide turnover of all the of associations, and concerted practices, in the air transport sector undertakings concerned is more than EUR 150 million; and (see question 4.3). ■ the French aggregate turnover of each of at least two of the In France, Article L420-1 of the Code of Commerce forbids joint undertakings concerned is more than EUR 50 million, actions, agreements, explicit or implicit collusions or alliances or alternatively, if at least two of the undertakings concerned operate which have as their object, or can have as their effect, the prevention, one or several retail store(s), or at least one undertaking operates restriction or distortion of competition within a market, directly or all or any part of its activity in one or several French overseas even indirectly through a foreign holding company. departments or in the French overseas collectivities of Mayotte, If the scope of such an agreement affects only the French market, Saint-Pierre-et-Miquelon, Saint-Martin and Saint-Barthélemy, and: the French Authority in charge of competition (Autorité de la ■ the combined aggregate worldwide turnover of all the Concurrence) will have jurisdiction (Articles L420-1 and L420-2 of undertakings concerned is more than EUR 75 million; and the Code of Commerce). ■ the French aggregate turnover of each of at least two of the 4.1.2 Concentrations undertakings concerned is more than EUR 15 million. European Union law (Article 2 of Regulation (EC) 139/2004) and French law (Article L430-6 of the Code of Commerce) 4.2 How do the competition authorities in your forbid concentrations which would significantly impede effective jurisdiction determine the ‘relevant market’ for the competition in the common market or in a substantial part of it. purposes of mergers and acquisitions? The European Commission (see point 4.1.2.1) or the French The “relevant market” comprises all the goods and services which authorities (4.1.2.2) will have jurisdiction over the concentration can be regarded as substitutable.

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They are determined by analysing the relevant product market and Regulation, declare that Article 101§3 TFEU shall not apply to the relevant geographic market. As regards the relevant product certain categories of agreements and concerted practices in the air market, both supply and demand will be taken into account, which transport sector. implies looking closely at the goods or services provided by competitors. 4.4 How does your jurisdiction approach mergers, The French Authority defines the relevant market by reference to acquisition mergers and full-function joint ventures? European case law, as the Minister of Economy did in a decision of 27 April 2000 concerning the merger between Air France and There is no control of foreign ownership. Brit Air. Jurisdiction is distributed between French and European authorities France The European Commission later defined several relevant markets depending on the combined aggregate turnover of all the between airline competitors in a decision of 27 February 2013 undertakings (see question 4.1). concerning the merger of Ryanair and Aer Lingus. Here, relevant Under Articles L430-1 and subsequent of the Code of Commerce, markets included routes, types of flights, types of passengers and concentrations shall be notified, and cannot be implemented before types of services. The European Commission considers that an they are authorised (see question 4.5 for further details). Origin and Destination are not substitutable by another, but two Under French law, joint ventures can only be considered airports serving the same city can be. The substitutability between concentrations if they “will be performing on a lasting basis all the direct and non-direct flights depends on the length of the flight. functions of an autonomous economic entity” (Article L430-1 II of Different categories of passenger can constitute different relevant the Code of Commerce). markets. The market packaging of the flight also has an influence on the definition of the relevant market because of the different services that can be linked to the flight. 4.5 Please provide details of the procedure, including time frames for clearance and any costs of notifications. 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain 4.5.1 In French law regulatory clearance/anti-trust immunity from regulatory agencies? Concentrations shall be notified to the French Competition Authority prior to their implementation. The Authority must then respond 4.3.1 In French law within 25 working days. Yes. The parties to a concentration can notify the project to the It can then find that the agreement does not fall within the scope of Authority in charge of competition (Autorité de la Concurrence), Articles L430-1 and L430-2 of the Code of Commerce. It can also with commitments which aim to make the concentration compatible authorise the agreement, or order a further in-depth examination. with the market. Under Article L430-5 II of the Code of Commerce, Within five working days from the day he/she is informed of the the Authority can then authorise the concentration, provided that the Authority’s decision, the Minister of Economy can call for a further undertakings comply with their commitments. indepth examination of the agreement according to Article L430- 7-1. In the absence of such a call, the agreement will be deemed Parties to an anticompetitive agreement may also obtain regulatory authorised by the Authority. clearance. Under Article L420-4 of the Code of Commerce, they must prove that said agreement contributes to promoting economic 4.5.2 In European Union law progress, while allowing consumers a fair share of the resulting Concentrations in the scope of the European Regulation (EC) benefit, and does not afford the parties the possibility of eliminating 139/2004 (see question 4.1) have to be notified to the European competition in respect of a substantial part of the products in Commission prior to their implementation. question. Proceedings before the European Commission are set out in Articles 4.3.2 In European Union law 4 et seq. of Regulation (EC) 139/2004. Its decision shall be made Similar provisions apply in European Union law when the European within 25 working days starting from the receipt of the reasoned submission by the Commission. Commission has jurisdiction (see question 4.1): the agreement must be notified to the relevant European authority. It can then find that the agreement does not fall within the scope of the Regulation. It can also decide not to oppose the concentration, Under Articles 6 and 8 of Regulation (EC) 139/2004, if the European or declare the concentration incompatible with the common market. Commission finds that the concentration raises serious doubts as to its compatibility with the common market, undertakings can offer commitments to make the concentration compatible with the 4.6 Are there any sector-specific rules which govern the common market. The European Commission will authorise it if it aviation sector in relation to financial support for air finds that the concentration, following the commitments, no longer operators and airports, including (without limitation) raises serious doubts. state aid? By a decision of 14 July 2010, the European Commission authorised This is a European Union law matter. Under Articles 107 to 109 an alliance between British Airways, American Airlines and Iberia, of the TFEU, state aid that distorts or could distort competition is which was first seen as incompatible with the common market. basically incompatible with the common market, although some aid But the undertakings committed to make landing and take-off slots might be exempted in consideration of its purpose. available at London Heathrow, which were considered essential to Under Articles 87 and 88 of the EC Treaty and Article 61 of the EEA facilitate the entry or expansion of competitors on routes between Agreement, the European Commission has set guidelines regarding London and several airports. It was an important step because slots State Aid in the Aviation Sector (94/ C 350/07 OJ C 950/1994; OJ are seen as market barriers. C 312/2005). Regarding incompatible agreements with the market, under Those guidelines concern the financing of airports and start-up aid Regulation (EC) 487/2009, the European Commission may, by for airlines.

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The aim of the airport financing guidelines is to allow an airport forthwith the CNIL (if not, it may be fined EUR 300,000), pursuant under public ownership to behave as a private firm. Consequently, to Article 226-17 of the French Penal Code. a reduction in airport fees is free of aid if the airport is guided by The airline shall notify the consumer if either of the following long-term profitability. In France, there are many examples of applies: small airports conceding reductions in fees to Ryanair, which have ■ the violation is likely to breach personal data security or the allowed them to develop significantly. privacy of a subscriber or any other individual; or Start-up aid for airlines has the main objective of maintaining ■ the CNIL is convinced of the severity of the breach. certain routes (see question 4.7). In France, there are no sector-specific provisions that regulate direct 4.10 What are the mechanisms available for the protection or indirect financial support to companies or airports. of intellectual property (e.g. trademarks) and other France assets and data of a proprietary nature? 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these In French law, there are no specific provisions relating to intellectual subsidies? property rights in relation to aircraft. All the mechanisms available are provided by the French Code of Intellectual Property. French law has not made available any specific national aid for As regards jurisdiction, special courts are established to deal with airlines since 2005. Assistance must be sought at a European level. intellectual property issues. Article 86 of the EC Treaty rules that state aid in the form of public Furthermore, the European Union joined the Cape Town Treaty in service compensation may be granted to undertakings entrusted 2009. The accession covers those matters in respect of which legal with the operation of services of general economic interest. Within competence has been transferred to the EU from the Member States. this Article, Regulation (EEC) 2408/92 and a Decision from the Ratification is therefore required by each Member State in order for European Commission of 28 November 2005 set the rules that the benefits to be realised. Member States have to apply to provide public service compensation to airlines. The main goal followed by the regulation is to maintain routes considered vital for the economic development of certain 4.11 Is there any legislation governing the denial of boarding rights? regions.

Regulation (EC) 261/2004, directly applicable in France, provides 4.8 What are the main regulatory instruments governing for the rights of the passengers in case of denial of boarding the acquisition, retention and use of passenger data, (passengers may receive compensation up to EUR 600). In case and what rights do passengers have in respect of of a dispute on the application of the Regulation’s provisions, civil their data which is held by airlines? state courts will have jurisdiction. The “Informatique et Libertés” Statute of 1978 created the CNIL Regarding Regulation (EC) 261/2004, the European Commission (the French National Agency for Data Protection), which regulates proposed the modification of the existing air passenger rights the creation and use of consumer databases. This Statute was regulations, to address the court’s decisions. The Parliament amended in 2004 by the implementation of the 95/46/EC Directive adopted its first-reading position on the proposal in February 2014. into French law. But the revised Regulation has not yet come into force: although the Council has made some progress on the file, it has not yet agreed on The data subject may, on compelling legitimate grounds relating to a general approach for negotiations with the Parliament. the consumer’s particular situation, object to the processing of data relating to him. In case of a dispute that is not covered by Regulation (EC) 261/2004, French law applies (no specific regulation). The consumer may also enquire with the data controller as to whether or not data relating to him is being processed, to what end, and what category of data is concerned. He may obtain communication, 4.12 What powers do the relevant authorities have in in an intelligible form, of the data undergoing processing and of relation to the late arrival and departure of flights? any available information as to its source. Finally, he may obtain communication about whether or not data is or will be transferred to Regulation (EC) 261/2004 also provides for the rights applicable in another Member State of the EU. case of delay. In 2015, a new law was implemented in order to prevent terrorist According to Article R160-1 of the French Civil Aviation Code, the attacks and serious cross-border crime, which allows API (Advance French Commission administrative de l’aviation civile may impose Passenger Information, which refers to a passenger’s identity) and a penalty of up to EUR 7,500 for non-compliance with Regulation PNR (Passenger Name Records, containing booking information) (EC) 261/2004 (including late arrival of flights). data collection for flights entering or leaving France. According to In order to contest such a penalty, an action may be brought before this regulation, passengers’ data must be transmitted to the intelligence the Administrative Court (Article R160-14 of the French Civil services (Article L232-7 CSI of the Code of Homeland Security). Aviation Code).

4.9 In the event of a data loss by a carrier, what 4.13 Are the airport authorities governed by particular obligations are there on the airline which has lost the legislation? If so, what obligations, broadly speaking, data and are there any applicable sanctions? are imposed on the airport authorities?

Under Article 34 of the 1978 Statute, the data controller must protect Airports, and subsequently airport authorities, are governed by the personal data against loss, alteration and unauthorised disclosure Transport Code, Section 6, Book III, which provides for the legal or access. In the event of such a breach, the airline shall notify status applicable to airports, for safety rules and for noise regulations.

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In addition, airports are governed by European Regulations, such as (EC) 216/2008, implementing common rules in the field of civil 4.17 Is vertical integration permitted between air operators aviation, and (EU) 219/2014, which deals with airport certification. and airports (and, if so, under what conditions)?

Since most French airports are controlled by the State, such 4.14 To what extent does general consumer protection integration would presuppose political will. legislation apply to the relationship between the airport operator and the passenger? In any case, there are no legal impediments to vertical integration between air operators and airports. Most of the disputes that arise between airports and passengers

France relate to bodily injury. In case of such disputes, administrative 5 In Future liability applies. The general consumer protection legislation in France mainly stems from EU legislation and is focused on safety, the protection 5.1 In your opinion, which pending legislative or of financial interests and the duty of information. Most of these regulatory changes (if any), or potential developments general Regulations deal with the consumer’s protection within the affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of context of sale or use of goods, and are therefore not relevant to the attention in the next two years or so? relationship between the airport operator and its passengers. However, the general consumer protection legislation applies to The most likely change in regulation is the amendment of Regulation the relationship between the airport operator and passengers using (EC) 261/2004, which provides for the rights of passengers in the airport parking. case of denial of boarding and cancelled flights. There has been a lot of criticism against the EU and French courts’ interpretation of the 4.15 What global distribution suppliers (GDSs) operate in Regulation, extending the right to compensation to delayed flights your jurisdiction? and dramatically restraining the possibilities for the airlines to avoid financial compensation (extraordinary circumstances). The burden Amadeus, Sabre and Galileo are the most common GDSs used in of financial compensation paid by the airlines to the passengers is France. significant. An amendment has been sought for years but has not yet been achieved. Clarification as to whether the EU Commission will accept the courts’ interpretation by implementing their decisions 4.16 Are there any ownership requirements pertaining to within the revised version of Regulation (EC) 261/2004, or counter GDSs operating in your jurisdiction? the said interpretations, is expected.

No, there are not.

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Maylis Casati-Ollier Benjamin Potier Clyde & Co Clyde & Co 134 Boulevard Haussmann 134 Boulevard Haussmann 75008 Paris 75008 Paris France France

Tel: +33 1 44 43 88 88 Tel: +33 1 44 43 89 96 Fax: +33 1 44 43 88 77 Fax: +33 1 44 43 88 77 Email: [email protected] Email: [email protected] URL: www.clydeco.com URL: www.clydeco.com France Maylis’ expertise covers counselling (aircraft financing, purchase, Benjamin advises his clients mainly in the field of aviation. He practises charter and lease agreements) as well as litigation and arbitration litigation before civil, commercial, administrative and criminal courts. for airline companies and their insurers in all aspects of aviation law His expertise in transport is recognised by Who’s Who Legal – France. and aviation and aeronautical activities, including: major accidents; He also holds a private pilot’s licence. 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.

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.

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Germany Holger Buerskens

ARNECKE SIBETH DABELSTEIN Ulrich Steppler

■ Member States and/or nationals of Member States own more 1 General than 50% of the undertaking and effectively control it, whether directly or indirectly through one or more intermediate undertakings, except as provided for in an agreement with a 1.1 Please list and briefly describe the principal third country to which the Community is a party; legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction. ■ it meets the financial conditions specified in Art. 5of Regulation (EC) No. 1008/2008; Aviation legislation in Germany is, to a high degree, characterised ■ it complies with the insurance requirements specified in Art. by international treaties and by European law. On a national 11 of Regulation (EC) No. 1008/2008; and level, aviation law is primarily based on the German Air ■ it complies with the provisions on good repute as specified in Traffic Act (Luftverkehrsgesetz) of 1922, the Air Traffic Order Art. 7 of Regulation (EC) No. 1008/2008. (Luftverkehrs-Ordnung) of 1963 and the Aviation Security Act Additional relevant information: (Luftsicherheitsgesetz) of 2005. ■ The LBA is entitled to revoke or suspend an operating licence The Federal Aviation Office (Luftfahrt-Bundesamt or “LBA”) was at any time if the above-mentioned requirements are not (all) established in 1954 in Braunschweig as the supreme authority in civil met. aviation and, as such, is directly subordinated to the Federal Ministry ■ Air carriers from Member States of the European Economic of Transport, Building and Urban Development (Bundesministerium Area (“EEA”) are allowed to operate intra-Community für Verkehr, Bau und Stadtentwicklung). Amongst other tasks, the scheduled air services in the EEA. A separate application LBA is responsible for the supervision of the aviation industry and or notification is no longer necessary. Air carriers from EEA for the German Aircraft Register (Luftfahrzeugrolle). Member States must, however, apply for entry permissions with regard to commercial flights for other purposes (e.g. aerial work, flights with balloons or local flights). 1.2 What are the steps which air carriers need to take in ■ Air carriers from non-EEA Member States shall apply for order to obtain an operating licence? operating permission prior to commencing scheduled air services to and from Germany. Prior to commencing charter The provisions of Regulation (EC) No. 1008/2008 of the European flights to and from Germany, air carriers from non-EEA Parliament and of the Council of 24 September 2008 on common Member States, as well as air carriers from EEA Member rules for the operation of air services in the Community (“Regulation States wanting to conduct flights to third countries, have to (EC) No. 1008/2008”), which were transposed into German law by apply for an entry permit. Companies from non-EEA Member sec. 20 para. 4 German Air Traffic Act (see question 1.1), set out States shall apply for entry permits with regard to commercial the conditions for granting an operating licence. The Regulation flights for other purposes (e.g. aerial work, flights with consolidates and updates the set of liberalisation measures known balloons or local flights). as the ‘Third Package’, adopted by the European Commission in 1992. According to Art. 3 para. 1 Regulation (EC) No. 1008/2008, 1.3 What are the principal pieces of legislation in no undertaking established in the Community shall be permitted to your jurisdiction which govern air safety, and who carry air passengers, mail and/or cargo for remuneration and/or hire administers air safety? unless it has been granted the appropriate operating licence. An undertaking shall be granted an operating licence by the Federal With the adoption of Regulation (EC) No. 1592/2002 of the Aviation Office Luftfahrt-Bundesamt( or “LBA”) provided that: European Parliament and of the Council of 15 July 2002 on common ■ its principal place of business is located in Germany; rules in the field of civil aviation, the establishment of a European ■ it holds a valid Air Operator Certificate; Aviation Safety Agency (“Regulation (EC) No. 1592/2002”) and the subsequent establishment of the European Aviation Safety ■ it has one or more aircraft at its disposal through ownership Agency (“EASA”), a European Agency and Europe-wide regulatory or a dry lease agreement; authority was created. In this regard EASA absorbed most tasks ■ its main occupation is to operate air services in isolation or from the Joint Aviation Authorities (“JAA”), as well as acquiring combined with any other commercial operation of aircraft or the repair and maintenance of aircraft; new responsibilities. Initially, EASA was responsible for: safety and environmental type certification of all aeronautical products; ■ its company structure allows for the implementation of the approval of organisations involved in the design of aeronautical provisions outlined in this chapter;

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products, as well as foreign production, maintenance and training organisations; and coordination of the European Union programme, 1.5 Are air charters regulated separately for commercial, Safety Assessment of Foreign Aircraft (“SAFA”). cargo and private carriers? Regulation (EC) No. 216/2008 of the European Parliament and of the Council of 20 February 2008 on common rules in the field of In commercial air traffic, which does not qualify as scheduled civil aviation, establishing a European Aviation Safety Agency, transport operations (Gelegenheitsverkehr or “non-scheduled and repealing Council Directive 91/670/EEC, Regulation (EC) services”), the licensing authority can determine conditions and No. 1592/2002 and Directive 2004/36/EC (“Regulation (EC) No. requirements or prohibit transportation, if such air traffic has a 216/2008” or the so-called “Basic Regulation”), entered into force negative impact on the public interest. For special requirements on 8 April 2008 and extended the competencies of EASA to air relating to licensing of non-scheduled services, refer to question 1.2.

operations, pilot licensing and authorisation of third-country operators Germany (first extension). On 7 September 2009, the Council further extended 1.6 As regards international air carriers operating in your EASA’s competencies in order to cover the safety of aerodromes, air jurisdiction, are there any particular limitations to be traffic management and air navigation services (second extension). aware of, in particular when compared with ‘domestic’ EASA works closely with the Federal Aviation Office (Luftfahrt- or local operators? By way of example only, Bundesamt or “LBA”), but has taken over many of the LBA’s restrictions and taxes which apply to international but not domestic carriers. functions in the interest of aviation standardisation across the European Union (“EU”). Yes. Concerning the German Air Travel Tax (Luftverkehrsteuer) for By performing ramp inspections on third-country aircraft landing instance, carriers with a registered office outside Germany have to at Community airports, the EU tries to meet the need for effective nominate a so-called licensed tax or fiscal representative, which can enforcement of international safety standards. In this regard, be considered discriminative at least under the European aviation Directive 2004/36/EC of the European Parliament and of the law regimes if not also under the Chicago Convention. Council of 21 April 2004 on the safety of third-country aircraft using Community airports (the so-called “SAFA Directive”), which Pursuant to sec. 3 of the German Air Traffic Act (Luftverkehrsgesetz), came into effect on 30 April 2004, provides a legal obligation for aircraft can, inter alia, only be registered in the German Aircraft EU Member States to perform ramp inspections upon third-country Register (Luftfahrzeugrolle) if they are exclusively owned by aircraft landing at their airports. German nationals or nationals of an EU Member State. On 6 May 2014, Commission Regulation (EU) No. 452/2014, laying An undertaking shall only be granted an operating licence by the down technical requirements and administrative procedures related German Federal Aviation Office (Luftfahrt-Bundesamt) according to air operations of third-country operators pursuant to Regulation to Art. 4 lit. f of Regulation (EC) No. 1008/2008 of the European (EC) No. 216/2008 of the European Parliament and of the Council, Parliament and of the Council of 24 September 2008 on common was published in the Official Journal of the European Union. rules for the operation of air services in the Community, if Member As from 26 May 2014, EASA will issue safety authorisations to States and/or nationals of Member States own more than 50% of the commercial air carriers from outside the EU upon earlier request, undertaking and effectively control it, whether directly or indirectly if all authorisation requirements are met. Third-country operators through one or more intermediate undertakings, except as provided (“TCOs”) flying to any of the 28 EU Member States and/or to the for in an agreement with a third country to which the Community is EFTA States (Iceland, Norway, Liechtenstein, Switzerland) must a party. See also question 1.2. apply to EASA for a so-called TCO authorisation. Furthermore, air carriers may be refused landing within the EU 1.7 Are airports state or privately owned? for safety reasons on the basis of Regulation (EC) No. 2111/2005 of the Parliament and of the Council of 14 December 2005 on the establishment of a Community list of air carriers subject to an German airports are mainly state-owned through operating companies operating ban within the Community and on informing air transport organised under private law, i.e. there is no airport authority in the passengers of the identity of the operating air carrier, and repealing sense of a government agency that operates an airport. Shareholders Art. 9 of Directive 2004/36/EC. The lists, which distinguish are mostly the Federal Republic of Germany (“FRG”) and the federal between an operational ban and operation restrictions, are prepared state and/or city/county in which the airport is situated. Some by EASA and updated every four months. operating companies also include private shareholders. The German Air Traffic Control (Deutsche Flugsicherung GmbH) Out of the licensed German airports, of which there are currently is responsible for air traffic control in Germany. It is a company 39, the five biggest (by passengers per year) are owned as follows: organised under private law and 100% owned by the Federal FRA – state of Hesse, Deutsche Lufthansa AG and two other private Republic of Germany. Under certain circumstances, flights might investors as well as free float;MUC – FRG, state of Bavaria, city of remain under the control of EUROCONTROL. Munich; DUS – city of Dusseldorf, private investor; TXL – FRG, states of Berlin and Brandenburg; HAM – city of Hamburg, private investor; and CGN – FRG, cities of Cologne and Bonn, state of 1.4 Is air safety regulated separately for commercial, cargo and private carriers? North Rhine-Westphalia, two counties.

Not entirely. An operating licence is required for non-commercial 1.8 Do the airports impose requirements on carriers air transport operations of passengers, mail or cargo if those flying to and from the airports in your jurisdiction? operations are conducted for remuneration, pursuant to sec. 20 para. 1 German Air Traffic Act (Luftverkehrsgesetz). An exception Yes. The most notable requirement is the payment of airport charges is made whenever an operation is conducted with an aircraft with as laid down in the Airport Charges Regulation (Entgeltordnung) no more than four passenger seats. An operating licence is also drawn up by each airport and subject to prior authorisation by not necessary for flights that are exclusively carried out to drop the supervising authority (sec. 19 lit. b German Air Traffic Act parachutists or which entail aerial sport devices. (Luftverkehrsgesetz or “LuftVG”)), i.e. the Ministry of Transport of

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the federal state where the airport is located. Operational limitations for carriers result, e.g., from varying charges for aircraft in categories 1.10 Have there been any recent cases of note or other like noise and pollutant emissions, as well as maximum take-off notable developments in your jurisdiction involving air operators and/or airports? weight (“MTOW”) or time of operation. Sec. 19 lit. b LuftVG contains a non-discrimination clause, therefore in general there is no distinction e.g. between domestic and foreign carriers whereas On 6 July 2017, the European Court of Justice (“ECJ”) ruled on the the law expressly states that differentiations by noise categories or interpretation of Arts 22 and 23 of EU Regulation No. 1008/2008 other material reasons are justified. in relation to: ■ the extent to which air carriers can publish air fares without Technical requirements, such as specific approach or take-off specifying the amount of additional fees (e.g., taxes and procedures or specifications of aircraft allowed to use the airport, airport charges) included in the final price; and Germany are frequently not imposed on carriers and other users by the airport ■ whether Art. 22 precludes national legislation that invalidates itself; instead the competent authorities such as the Ministries of the general terms and conditions under which additional flat- Transport or the Federal Aviation Agency act in these matters. rate charges for no-show passengers are implemented. Further requirements may also stem from the licence under which the airport in question operates, e.g. curfew hours, etc. Regarding the first question, the ECJ held that when publishing air fares, “air carriers must specify separately the amounts payable by customers in respect of taxes, airport charges and other charges… 1.9 What legislative and/or regulatory regime applies to and may not, as a consequence, include those items, even partially, air accidents? For example, are there any particular in the air fare”. Regarding the second question, the ECJ determined rules, regulations, systems and procedures in place that EU Regulation No. 1008/2008 does not preclude the application which need to be adhered to? of any consumer protection rule implemented by an EU Member State. The regulation, being “the culmination of progressive The German Federal Bureau of Aircraft Accident Investigation elimination of price controls by Member States”, is not intended (Bundesstelle für Flugunfalluntersuchung or “BFU”) is subordinated to limit the applicability of consumer rights under national law to the Federal Ministry of Transport and is responsible for the implementing EU legislation. The decision maintains the court’s investigation of civil aircraft accidents and serious incidents in consumer-friendly interpretation of EU legislation on the rights of Germany. The purpose of the BFU is to improve aviation safety passengers through the entire process – from booking a flight to by determining the causes of accidents and serious incidents and arriving at a destination. making safety recommendations in order to prevent recurrence. The The new EU Payment Services Directive (PSD II 2015/2366/EC) BFU is not, however, responsible for determining liability. came into force on 13 January 2016. It is an update and dissolution Regulation (EC) No. 996/2010 of the European Parliament and the of the Payment Services Directive (2007/64/EC) and is aimed at Council of 20 October 2010 on the investigation and prevention ensuring consumer protection, as well as creating a level playing of accidents and incidents in civil aviation and repealing Directive field for all market participants. All EU Member States, including 94/56/EC (“Regulation (EC) No. 996/2010”) came into force on 2 Germany, must incorporate the directive into their respective December 2010. According to this regulation, each Member State national laws by 13 January 2018. German Parliament passed has to set up a national safety investigation authority and information the Act on the Implementation of Directive 2015/2366/EC of the on safety investigation should be exchanged between Member European Parliament on 1 June 2017. All requirements concerning States. Regulation (EC) No. 996/2010 supplements the provisions civil law are mainly implemented within the Civil Code. As the contained in Annex 13 to the Convention on International Civil European legislature intends for a full harmonisation throughout Aviation (“ICAO Convention”) dated 7 December 1944. the European Union, the PSD II is almost incorporated word for Germany ratified the ICAO Convention in 1956. Annex 13of word. The Federal Council must still approve the act for it to be the ICAO Convention contains information regarding the process promulgated. However, in view of full harmonisation, the Federal of investigation and analysis of aviation accidents and incidents Council is unlikely to object. Hence, airlines will not be entitled to regarding civil aviation, and stipulates the rights and responsibilities charge consumers for booking flights via credit card online once the of signatory states in relation to their collaboration. Pursuant to Art. act is in force. 37 and 38 of the ICAO Convention, signatory states are obliged to implement the rules and regulations and processes provided by the International Civil Aviation Organisation (“ICAO”), preferably 2 Aircraft Trading, Finance and Leasing unmodified. On a national level, there is also the Law Relating to the Investigation 2.1 Does registration of ownership in the aircraft register into Accidents and Incidents Associated with the Operation of constitute proof of ownership? Civil Aircraft (Gesetz über die Untersuchung von Unfällen und Störungen bei dem Betrieb ziviler Luftfahrzeuge), which is in line No. The registration in the Aircraft Register (Luftfahrzeugrolle) is with Regulation (EC) No. 996/2010 and the ICAO Convention, and only a declaratory one. It does not have any constitutive effect on which came into force on 1 September 1998. This law replaced the ownership of the aircraft under German law. Ownership can be existing general administrative regulations regarding the specialist proven by an effective transfer of ownership according to sec. 929 et investigation of aviation accidents in relation to the operation of seqq. of the German Civil Code (Bürgerliches Gesetzbuch) through aircraft. In the course of the new regulation, sec. 5 of the German mutual consent and delivery to the buyer on the basis of an effective Air Traffic Regulations (Luftverkehrsordnung) regarding the contractual agreement under the law of obligations, e.g. a purchase notification of aviation accidents and incidents was also adapted. and sale agreement. Good faith (bona fide) regarding the ownership

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of the registered party is not protected. This is a consequence of It can now be considered a prevailing view for the time being the fact that the German Aircraft Register mainly aims at securing under German law that aircraft engines do not form an integral registered data for purposes under public law, i.e. airworthiness and part (wesentlicher Bestandteil) of an aircraft, and engines are identification of the owner, nationality of the same, etc. Regardless therefore capable of being subject to independent rights. It is still of the public law nature and character of the Register, it is common controversial whether engines do qualify as accessories (Zubehör). practice to make use of the Aircraft Register for transactions under Consequently, extra liens separate from the aircraft could rest on the civil law. engines without being registered in the Register of Mortgages on Aircraft. In Germany a separate register of mortgages on aircraft 2.2 Is there a register of aircraft mortgages and charges? engines does not exist. However, so far the German Federal Court Broadly speaking, what are the rules around the (Bundesgerichtshof) has not ruled on this qualification and therefore

operation of this register? the questions have not been clarified yet. With respect to the second Germany part of the question, see the explanations to questions 3.1 and 3.2. Yes. Aircraft mortgages can be registered in the separate Register of Mortgages on Aircraft (Pfandrechtsregister für Luftfahrzeuge) in 2.5 What (if any) are the tax implications in your accordance with the 1948 Geneva Convention on the International jurisdiction for aircraft trading as regards a) value- Recognition of Rights in Aircraft. The conditions are set out added tax (VAT) and/or goods and services tax (GST), in the German Aircraft Mortgage Act (Gesetz über Rechte an and b) documentary taxes such as stamp duty; and Luftfahrzeugen). The public register is maintained by the Local (to the extent applicable) do exemptions exist as Court in Braunschweig. Upon request, a certified excerpt from the regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? register may be issued. A key precondition for the registration in the Register of Mortgages The sale of an aircraft in Germany constitutes a supply (turnover on Aircraft is that the aircraft is registered in the Aircraft Register. An transaction) pursuant to the Value Added Tax Act. Turnover effective mortgage requires mutual consent between the owner and transactions in aviation are in principle exempt from German VAT, in the creditor and needs to be recorded in the Register of Mortgages particular deliveries, modifications, repair, maintenance, chartering on Aircraft. The declarations of the parties have to be certified and renting out of aircraft designed for the use of entrepreneurs before a notary public or the Register Court. As a consequence, carrying out commercial air traffic in terms of predominant cross- recordings in the Register of Mortgages on Aircraft are not only border transportation, or transportation exclusively on distances declaratory but constitutive for the creation of the mortgage. abroad, and are not carrying out tax-exempt transport of sick persons (rescue and emergency medical transport services), as well 2.3 Are there any particular regulatory requirements as certain supplementary supplies and services. which a lessor or a financier needs to be aware of as The Federal Ministry of Finance annually publishes a decree of regards aircraft operation? airlines that fulfil these requirements. If the abovementioned prerequisites for tax-exempt supplies and The lessor/financier needs to be aware that the tax debtor in relation services are not fulfilled, the sale/supplies and the respective other to the German Air Travel Tax (Luftverkehrsteuer or “ATT”) is services are subject to the regular tax rate of 19%. generally the carrier or the so-called licensed or fiscal representative, which carriers with a registered office outside Germany have to The export of aircraft in foreign countries (non-EC) is regularly tax- nominate. However, if an international carrier does not nominate exempt, but the seller must obtain proof of such export; however, the a licensed or fiscal representative, then the owner (lessor) or keeper transaction may be subject to sales taxes or VAT in the jurisdiction in (operator) of the aircraft will be liable for ATT. which the aircraft is situated at the point of sale. Regarding the restrictions of the lessor/financier on their right to The import of civil aircraft is not burdened with customs; however, retake possession of the aircraft, see question 3.2. German importation VAT may be levied at the regular VAT rate (applied on the customs value) of 19%.

2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests 2.6 Is your jurisdiction a signatory to the main in a single engine are at risk of automatic transfer international Conventions (Montreal, Geneva and or other prejudice when installed ‘on-wing’ on an Cape Town)? aircraft owned by another party? If so, what are the conditions to such title annexation and can owners Germany is a signatory to the International Conventions of Montreal and financiers of engines take pre-emptive steps to 1999 (effective date 28 June 2004), Warsaw 1929 (effective date mitigate the risks? 29 December 1933), the Hague Protocol for the amendment of the Warsaw Convention 1955 (effective date 1 August 1963), the As laid out above upon its registration (Eintragung), the mortgage Chicago Convention (effective date 8 June 1956), as well as the is a valid, enforceable and perfected security interest in the form Geneva Convention on the International Recognition of Rights of a first-ranking aircraft mortgage over the aircraft. The German in Aircraft (effective date 5 October 1959). The Cape Town aircraft mortgage generally also covers the engines, provided such Convention has not been ratified by Germany. engines are installed at the airframe; title to the engines is and remains with the mortgagor as owner of the aircraft and they do not qualify as third-party accessories (Zubehör) of the airframe. 2.7 How are the Conventions applied in your jurisdiction? Due to the flexible use of aircraft engines, it was in dispute in jurisprudence and amongst legal scholars in Germany in the past The ratification process renders the International Conventions whether the ownership right of the aircraft owner and the rights of into directly applicable national and EU law. The application is a mortgagee over the aircraft extend to the respective engine(s). performed by the relevant German courts.

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If the lessor/financier has a claim for the return of the aircraft against 3 Litigation and Dispute Resolution the debtor which is not fulfilled, then the lessor/financier has to obtain an enforceable title (recognised under German law) for this 3.1 What rights of detention are available in relation to claim from the relevant German civil court. The title has to contain aircraft and unpaid debts? the necessary enforcement clause and needs to be duly served on the debtor. The creditor can then apply for the enforcement of If a creditor has a claim regarding an outstanding debt against the the enforceable title with a bailiff, who will procure the creditor owner of an aircraft, and if this creditor does not have a registered possession of the aircraft. This process can be rather lengthy. mortgage in relation to the relevant outstanding debt, then the creditor The parties can, however, agree in the lease/credit agreement/surety has to obtain an enforceable title (as recognised under German law) agreement that the lessee/borrower submits to subjecting the aircraft

Germany for the outstanding debt against the owner of the aircraft (e.g. by to immediate enforcement proceedings. In such cases the lessor/ way of an enforceable court judgment or enforcement order) from financier does not need to go through the first step of obtaining an the German civil courts. The enforceable title also needs to be enforceable title from the German civil courts. Instead, the creditor issued with an enforcement clause by the competent German civil can (if all the requirements are fulfilled) apply for the enforcement court and must be duly served on the debtor. of the enforceable title with a bailiff directly, who will procure the If the aircraft in question is registered in the German Aircraft creditor possession of the aircraft. Register, then the creditor needs to apply to the Local Court in If ownership of the aircraft has not been transferred to the financier Braunschweig (where the Register of Mortgages on Aircraft is kept) as a security and the financier only has a registered mortgage, then for the entry of a registered mortgage on the aircraft. the financier cannot claim the return of the aircraft, but has to apply The enforcement of the mortgage is carried out by way of enforcement for the compulsory auction of the aircraft according to the relevant proceedings. In order to enforce the mortgage, the creditor has to rules (see question 3.1). apply to the relevant German civil court for compulsory auction of In order to secure the enforcement proceedings of the claim for the the aircraft. return of the aircraft, the owner can apply for an injunction with If the outstanding debt is already secured by way of a registered the relevant German civil court. The enforcement of an injunction mortgage and if the debtor has agreed to be subjected to immediate in relation to an aircraft which is registered in the German Aircraft enforcement proceedings (which is common), then the creditor can Register or the German Register of Mortgages on Aircraft, is (if all the necessary requirements are fulfilled) apply for compulsory executed by the bailiff entering a registered mortgage for the claim auction of the aircraft with the relevant German civil court straight and (if permissible) taking the aircraft into safe custody. In relation away. to foreign aircraft, the bailiff will enforce the injunction by way of Aircraft of foreign origin are not registered in the German Aircraft seizure of the aircraft instead of entering a registered mortgage. Register and no registered mortgage can be entered against such aircraft. Once the creditor has received an enforceable title with the 3.3 Which courts are appropriate for aviation disputes? relevant enforcement clause and has served this title on the debtor, Does this depend on the value of the dispute? For the creditor will need to apply to the relevant bailiff to enforce title example, is there a distinction in your jurisdiction by way of seizure. regarding the courts in which civil and criminal cases An aircraft can be released from a registered mortgage by are brought? cancellation of the registered mortgage by way of a transaction between the owner of the aircraft and the owner of the registered There are no special courts (of any type) for aviation disputes. mortgage. Further, if the outstanding debt ceases to exist (e.g. by Civil claims in relation to aviation disputes have to be brought way of settlement) then the registered mortgage ceases to exist. before the German civil courts. For a more detailed description of Similarly, the registered mortgage ceases to exist if outstanding debt the civil court system and the remedies available, see questions 3.4 is settled as a result of enforcement proceedings. and 3.5. If a foreign aircraft is seized, seizure can be released by way of Administrative proceedings regarding aviation disputes have to be a transaction between the owner of the aircraft and the creditor. brought before the relevant German administrative courts. Further, seizure can be released by way of settlement of the outstanding debt or return of the aircraft to the owner. Criminal proceedings in relation to aviation disputes have to be brought before the relevant German criminal courts. In order to secure the enforcement proceedings, the creditor can apply for an arrest of the aircraft with the relevant German civil court. The enforcement of the arrest regarding an aircraft, which is 3.4 What service requirements apply for the service of registered in the German Aircraft Register or the German Register court proceedings, and do these differ for domestic of Mortgages on Aircraft, is executed by the bailiff entering a airlines/parties and non-domestic airlines/parties? registered mortgage against the aircraft and (if permissible) taking the aircraft into safe custody. In relation to aircraft of foreign origin, Service of documents in court proceedings is effected according the bailiff will seize the aircraft instead of entering a registered to the German rules of civil procedure. Generally speaking, and mortgage. unless the recipient has appointed legal representation, the service is effected to the legal representative or the respective party. In this regard there is no differentiation between domestic and foreign 3.2 Is there a regime of self-help available to a lessor parties. However, service of documents to foreign parties may often or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights require service to be performed in foreign countries. Depending under the lease/finance agreement? on applicable international conventions, the respective service can either be performed via mail or formal diplomatic service. No, the lessor/financier has to proceed in accordance with the It should further be noted that foreign carriers from non-Member German laws of enforcement and debt recovery in order to repossess States of the EU need to legitimate an officially authorised recipient the aircraft or enforce its rights under the lease/finance agreement. (according to the law on service in administrative procedure and the

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law on administrative procedure) for the entire correspondence with German administrative authorities and the law courts in the Federal 4.2 How do the competition authorities in your Republic of Germany. The respective person has to be named before jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? the German aviation authorities (Luftfahrt-Bundesamt – “LBA”).

The essential authority with regard to mergers and acquisitions is 3.5 What types of remedy are available from the courts the Federal Cartel Office (Bundeskartellamt). Its decision can be or arbitral tribunals in your jurisdiction, both on i) an appealed before the Dusseldorf Higher Regional Court. As regards interim basis, and ii) a final basis? the determination of the relevant market, the specific type of aviation sector has to be considered. While in the context of passenger flights Entering into legal proceedings before a court of law is the standard further distinction is made between the direct destinations served by Germany remedy to be taken in Germany in order to enforce one’s rights. the airlines at hand, cargo flights require a broader market definition. Summary proceedings are available for monetary claims and can be initiated by filing a standard form with the local court. Lawsuits require the filing of a detailed statement of claim, in particular 4.3 Does your jurisdiction have a notification system including proper documentation of all facts presented to the court. whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from Depending on the content and volume of the claim, the case will regulatory agencies? be heard on different levels of the German court system, typically comprising first instance, appellate level and – under certain Yes, parties can obtain regulatory clearance for mergers from the conditions – a further appeal on questions of law at the federal level Federal Cartel Office (Bundeskartellamt) under the terms of sec. 35 and/or the European level. The likely time involved to obtain a et seqq. of the Act against Restraints of Competition (Gesetz gegen court order is two to three months (summary proceedings), six to Wettbewerbsbeschränkungen). There is no system of clearances for 18 months (judgment at first instance) or several years (appeal up to cartels. federal level). Obviously, exceptions may apply. Injunctive relief offers interim rulings in urgent matters to be obtained within days if not hours. Appeals are possible. Injunctive proceedings are often 4.4 How does your jurisdiction approach mergers, followed by regular court proceedings in which the subject matter of acquisition mergers and full-function joint ventures? the injunctive proceedings will be reviewed in greater detail. The parties are free to submit to arbitration proceedings rather than According to sec. 37 of the Act against Restraints in Competition regular court proceedings. Arbitration proceedings can be rather (Gesetz gegen Wettbewerbsbeschränkungen), mergers are defined time-consuming but are decided in one instance, usually without the as a) acquisition of assets, b) acquisition of joint or sole control, c) right to appeal. Only in rare cases is an appeal to the public courts of acquisition of shares (at least 25%), or d) exercise of competitively law possible. Arbitration proceedings take between several months significant influence (also in case of shares below 20%). However, and up to several years, depending on the complexity of the subject no distinction is made between various forms of joint ventures. matter, the experience of the arbitrators, etc. Depending on the arbitration rules established between the parties, the arbitral tribunal 4.5 Please provide details of the procedure, including may also render injunctions for an interim solution. time frames for clearance and any costs of notifications.

3.6 Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in A notification procedure before the Federal Cartel Office what circumstances do these rights arise? (Bundeskartellamt) begins with Phase I investigations, which take up to four weeks (no reaction = clearance). If the case at hand is In court cases, an appeal to the respective higher instance is possible rather complicated, Phase II investigations will be initiated (in few if either party faces negative effects with a value of more than EUR cases). Their duration is limited to another three months. Normally, 600.00. A further appeal on a question of law requires an explicit costs for Phase I proceedings range between EUR 2,000.00 and admission, to be granted, inter alia, if the case involves legal 8,000.00, while Phase II proceedings are much more expensive. questions of fundamental importance. An appeal against an arbitration award is only possible in case of a 4.6 Are there any sector-specific rules which govern the grave violation of procedural principles. In order to be enforceable, aviation sector in relation to financial support for air arbitration rulings have to be declared enforceable by a court of operators and airports, including (without limitation) state aid? law. Germany is a signatory to the New York Convention on the enforcement of arbitral awards. There are no sector-specific rules, but there are various forms of support (tax relief regarding kerosene and VAT, state aid for airlines, 4 Commercial and Regulatory flight control and infrastructure).

4.1 How does your jurisdiction approach and regulate 4.7 Are state subsidies available in respect of particular joint ventures between airline competitors? routes? What criteria apply to obtaining these subsidies? Joint ventures on the basis of a joint venture company are subject to German merger control if the turnover thresholds are met. Joint Yes, state subsidies may be granted in the context of so-called “public ventures based solely on a cooperation agreement may be subject service obligations” according to Art. 16 et seqq. of Regulation (EC) to the rules on the prohibition of cartels, which are similar to EU No. 1008/2008 of the European Parliament and of the Council of 24 antitrust law. September 2008 on common rules for the operation of air services in

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the Community (“Regulation (EC) No. 1008/2008”). The individual Any breach of the obligation to notify the supervisory authority or to criteria are determined in the corresponding public tender procedure communicate the loss to the data subjects is subject to administrative (cf. Art. 16 para. 10 and 17 Regulation (EC) No. 1008/2008). fines up to EUR 10,000,000.00, or in the case of an undertaking, up to 2% of the total worldwide annual turnover of the preceding financial year, whichever is higher. 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 4.10 What are the mechanisms available for the protection their data which is held by airlines? of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? The main regulatory instrument in Germany governing the Germany acquisition, retention and use of passenger data is the Federal Data In the Federal Republic of Germany (“FRG”), intellectual property Protection Act (Bundesdatenschutzgesetz or “BDSG”), in which is protected by industrial property rights (“IPR”), which prevent the Directive 95/46/EC of the European Parliament and of the Council IPR from being copied or imitated. IPR include patents (protection of 24 October 1995 on the protection of individuals with regard to of technical inventions), utility models (protection of technical the processing of personal data and on the free movement of such innovations), designs (protection of designs and models) and data, was incorporated. According to the BDSG, the acquisition, trademarks. These IPR must be registered to obtain the respective retention and use of personal data is only lawful if permitted by the protection. The administrative body dealing with industrial property BDSG or other law or if the passenger has provided consent. rights is the German Patent and Trademark Office (Deutsches According to the BDSG, passengers have a right of information Patent- und Markenamt). on recorded data relating to them, the recipients or categories of With regard to patents and utility models, the Employee Invention recipients to which the data are transferred and the purpose of the data Act (Gesetz über Arbeitnehmererfindungen or “ArbNErfG”) needs recording. If data is collected without the passenger’s knowledge, to be considered. The employee is entitled to any invention made the passenger has to be notified of such collection. Furthermore, in the course of employment if the employee makes use of the passengers have the right to request rectification of recorded personal invention in accordance with the specifications of German law. The data relating to them if such personal data is inaccurate. In addition, employee shall receive the statutory compensation. The ArbNErfG passengers may claim damages in case of unlawful acquisition, sets out how employee inventions and proposals for technical retention or use of personal data relating to them. improvement should be dealt with. As regards copyrights, in the FRG, copyright protection comes into 4.9 In the event of a data loss by a carrier, what effect when a work is created; official registration is not necessary. obligations are there on the airline which has lost the The German Copyright Act (Urheberrechtsgesetz) applies to works data and are there any applicable sanctions? of literature, art and signs. In relation to patents, utility models and trademarks, like in other If until 24 May 2018 an airline determines that in case: European countries, protection at a European level with effect also ■ special categories of personal data (any information on racial in the FRG can be sought at the European Patent Office and/or the or ethnic origin, political opinions, religious or philosophical Office for Harmonization in the Internal Market. New designs are beliefs, trade union membership, health or sex life); even protected without registration. The term of copyright expires, ■ personal data subject to professional secrecy; however, after three years. ■ personal data referring to criminal or administrative offences; An infringement of an IPR can be pursued in court proceedings or or via interim injunctions, the latter of which may be obtained within ■ personal data concerning bank or credit card accounts, hours. There are specialised civil divisions at the various German which it has recorded have been unlawfully transferred or otherwise regional courts that deal with such cases. unlawfully disclosed to third parties, threatening serious harm to The basic claims connected with any IPR proceeding are the cease the rights and legitimate interests of passengers, the airline has and desist claim, the information claim, the damage claim, as well to inform the supervisory authority and the passengers, without as the right to have the infringing products destroyed. undue delay, describing the nature of the unlawful disclosure, and recommend measures to minimise possible harm. The notification to the supervisory authority shall, in addition, describe possible 4.11 Is there any legislation governing the denial of boarding rights? harmful consequences and measures taken by the airline as a result.

Any breach of this obligation is deemed to be an administrative Regulation (EC) No. 261/2004 of the European Parliament and of offence and may be punished by a fine of up to EUR 300,000.00, or the Council of 11 February 2004 establishing common rules on more if the benefit derived from such offence is higher. compensation and assistance to passengers in the event of denied Starting in 25 May 2018, the airline must, in case of loss of personal boarding and of cancellation or long delay of flights, and repealing data without undue delay and, where feasible, not later than 72 Regulation (EEC) No. 295/91, grants passengers a right to fixed-rate hours after having become aware of it, notify such to the competent compensation, a right to reimbursement or re-routing, as well as a supervisory authority, unless the personal data breach is unlikely to right to care in case of denied boarding and cancellation. Passengers result in a risk to the rights and freedoms of natural persons. Where may also have contractual claims for damages under the contract the notification to the supervisory authority is not made within 72 of carriage pursuant to sec. 631 et seqq. of the German Civil Code hours, it shall be accompanied by reasons for the delay. (Bürgerliches Gesetzbuch or “BGB”). Passengers travelling on Furthermore when the data breach is likely to result in a high risk a package holiday may have claims for damages against the tour to the rights and freedoms of natural persons, the airline shall operator under sec. 651a et seqq. BGB. Furthermore, a conciliation communicate the loss to the data subject without undue delay. body for air passenger rights was established in Germany as of 1 November 2013.

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4.12 What powers do the relevant authorities have in 4.14 To what extent does general consumer protection relation to the late arrival and departure of flights? legislation apply to the relationship between the airport operator and the passenger? According to Regulation (EC) No. 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing German consumer protection law is characterised by a rather high common rules on compensation and assistance to passengers in the standard, but there is no specific and consolidated codified law in event of denied boarding and of cancellation or long delay of flights, Germany. Instead, respective norms are placed in a number of and repealing Regulation (EEC) No. 295/91 (“Regulation (EC) No. codes. Based on these norms, prior to a purchase or the signing 261/2004”), Member States should ensure and supervise general of a contract, consumers in Germany must be able to recognise the benefits and consequences of their decision. Transparency and compliance by their air carriers with this Regulation and designate Germany an appropriate body to carry out such enforcement tasks. information are important for the German market, including with In Germany, the Federal Aviation Office (Luftfahrt-Bundesamt or regard to the airline industry. The Federal Office of Consumer “LBA”) is the National Enforcement Body (“NEB”) and, as such, is Protection and Food Safety (“BVL”) and other authorities are the competent authority for the implementation of Regulation (EC) responsible for the enforcement of consumer protection in Germany. No. 261/2004. According to sec. 13 German Civil Code and related norms, As a first step, the LBA investigates passenger complaints. If the German consumers are better protected than non-consumers. The LBA finds potential infringements based on a passenger’s complaint, general German consumer protection legislation consists of norms it will initiate administrative fine proceedings. The air carrier has in the German Civil Code and, inter alia, insolvency law, unfair the right to be heard and can submit a written statement regarding competition law, law against unfair terms and conditions and many the accusations directed at it. norms related to protection of consumer health. There have also been activities in German legislation against telephone marketing As a second step, the LBA may end the proceedings based on and other means of distribution practice. the air carrier’s statement or may issue an administrative order imposing a fine. In this respect, the LBA can impose fines of up However, there is typically no contractual relationship between to EUR 25,000.00. The air carrier can file objections against this passengers and airport operators, because passengers enter administrative order. into air carriage agreements with airlines or travel companies whereas airlines enter into agreements with airport operators Finally, the LBA may end the proceedings or may dismiss the in order to provide services for passengers. Thus many norms objection to the administrative order. In the latter case, the air regarding contracts with consumers are not directly applicable carrier may file an application for a decision by a court of law, which concerning the relationship between the airport operator and the then has to decide on the matter. passenger. Airport charges to be paid by passengers are a special The LBA procedure is a purely administrative procedure. The LBA scenario and transparency is important in this regard, because of is not in a position to enforce possible civil claims for passengers general consumer protection law. Also, many general public law legally. Passengers can only assert their claims according to the regulations relating to safety and security exist in Germany in order procedures provided for in German civil law. to protect consumers in airports. Furthermore, Regulation (EC) No. 1107/2006 is a specific consumer protection law which provides 4.13 Are the airport authorities governed by particular that passengers with a disability must be properly assisted by airport legislation? If so, what obligations, broadly speaking, operators. are imposed on the airport authorities? 4.15 What global distribution suppliers (GDSs) operate in Airport operators (see question 1.7) are subject to German and EU your jurisdiction? legislation, as well as international agreements to which Germany is a signatory. Specific rules on the construction and operation The key players are AMADEUS, Sabre, Galileo and Worldspan of airports are contained in sec. 6 et seqq. German Air Traffic (Travelport). Act (Luftverkehrsgesetz) and sec. 38 et seqq. German Air Traffic Licensing Regulation (Luftverkehrszulassungsordnung), stipulating a general licensing requirement and compliance, e.g., with zoning, 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? construction and environmental compatibility laws. Also relevant are the German Aviation Security Act (Luftsicherheitsgesetz), imposing various obligations, e.g. to secure and control the airport No. However, it should be noted that a system vendor, pursuant to premises, and the German Ground Handling Services Regulation Regulation (EC) No. 80/2009 of the European Parliament and of the (Bodenabfertigungsdienstverordnung), the latter implementing Council of 14 January 2009 on a Code of Conduct for computerised Council Directive 96/67/EC of 15 October 1996 on access to the reservation systems and repealing Council Regulation (EEC) No. ground handling market at Community airports. Furthermore, all 2299/89 (“Regulation (EC) No. 80/2009”), shall publicly disclose, relevant EU legislation, such as Regulation (EC) No. 300/2008 of unless this is otherwise made public, the existence and extent of a the European Parliament and of the Council of 11 March 2008 on direct or indirect capital holding of an air carrier or rail-transport common rules in the field of civil aviation security and repealing operator in a system vendor, or of a system vendor in an air carrier Regulation (EC) No. 2320/2002, applies, as well as related or rail transport operator. A system vendor within the meaning of Regulations (EC) No. 272/2009, No. 18/2010 and No. 185/2010 and Regulation (EC) No. 80/2009 means any entity and its affiliates specific international treaty law such as Annex 14 (airports) of the which is or are responsible for the operation or marketing of a Chicago Convention. computerised reservation system.

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4.17 Is vertical integration permitted between air operators 5 In Future and airports (and, if so, under what conditions)?

5.1 In your opinion, which pending legislative or Yes. Although the shares in – especially the major – airports in regulatory changes (if any), or potential developments Germany are usually not owned by private investors (see question affecting the aviation industry more generally in 1.7), there is no general prohibition on air operators acquiring such your jurisdiction, are likely to feature or be worthy of shares, as illustrated by the fact that Deutsche Lufthansa AG owns attention in the next two years or so? 8.44% of Frankfurt airport operator Fraport AG (as of September 2017). Potential restrictions may arise under applicable national The use of drones is developing at a fast pace on a global scale.

Germany and/or EU competition law but would, depending on the case, not This poses a challenge to the various legislators on a national, exist with the aim of preventing vertical integration. international and European level. The European Aviation Safety Agency (“EASA”) seems to be at the forefront of such developments for the harmonisation of regulations for drones not only in Europe but worldwide. The industry has high hopes that the regulatory framework will make a good step forward during 2018. It is expected that the next legislative level will be reached in the not-too-distant future, and that stakeholder consultation will emerge into a concrete regulatory proposal. Hence, on 18 January 2017 the government introduced a draft regulation to create sufficient regulations to deal with these risks by amending the existing fragmented provisions and establishing rules to liberalise the commercial use of drones.

Holger Buerskens Ulrich Steppler ARNECKE SIBETH DABELSTEIN ARNECKE SIBETH DABELSTEIN Hamburger Allee 4 Hamburger Allee 4 60486 Frankfurt am Main 60486 Frankfurt am Main Germany Germany

Tel: +49 69 979 885 220 Tel: +49 69 978 885 356 Email: [email protected] Fax: +49 69 978 85 85 URL: www.arneckesibeth.com Email: [email protected] URL: www.arneckesibeth.com

Holger Buerskens, LL.M. (McGill) heads the Transportation, Aviation Ulrich Steppler, LL.M. is the joint head of the Transportation, Aviation and Logistics (“TAL”) group at ARNECKE SIBETH DABELSTEIN. and Logistics (“TAL”) group at ARNECKE SIBETH DABELSTEIN. He He has practised in the field of transportation, aviation and logistics specialises in aviation matters, focusing in particular on passenger for more than 25 years and is the author of numerous articles and air transportation. Ulrich Steppler has published numerous articles, books on German transportation and international business law, as case notes and reviews, as well as a book on the International Air well as being a regular speaker at industry events. Holger represents Transport Association (“IATA”) interlining and a collection of regulations international airlines, forwarding agents and logistics providers. He on the inclusion of aviation in the EU Emissions Trading Scheme (“EU has been awarded the title of Specialist Attorney for Transportation ETS”). He is also the winner of the International Law Office (“ILO”) and Forwarding Law, and over the years has been recommended Client Choice Award 2010, 2011, 2014 and 2015 for the category frequently by publications such as The Legal 500 (“Leading “Aviation Law Expert Germany”, as well as other awards, and has been Individual”), European Legal Experts, the Nomos Handbook on Law recognised as a “Leading Individual” by various institutions (e.g. The Firms in Germany and the JUVE Handbook on German Commercial Legal 500, Who’s Who Legal and Legal Experts). Ulrich represents Law Firms. numerous international airlines, industry participants, banks, financiers and organisations in all relevant areas. He has significant experience in the German courts as well as expertise in regulatory and aircraft finance matters. Ulrich is also admitted to represent clients before the Austrian courts and institutions.

ARNECKE SIBETH DABELSTEIN is one of the market leaders in Transport and Aviation Law, with offices in Frankfurt, Berlin, Hamburg, Munich, Dresden and Leer. The firm’s highly specialised Transport, Aviation and Logistics practice group is widely renowned in the market for its expertise and attracts an impressive clientele ranging from major domestic and foreign commercial airlines, cargo airfreight companies, forwarding agents, logistics companies, manufacturers and insurance companies to lenders, banks and financiers of aircraft. ARNECKE SIBETH DABELSTEIN provides legal support on all aspects of business in the airline and aviation industry, including advice in relation to corporate, employment, competition and property law, regulatory matters, litigation and arbitration, aircraft leasing, financing and registration, and accident investigation or claims handling. The firm has repeatedly received numerous awards and recommendations in publications such as The Legal 500 (Top Tier Law Firm 2015, 2016), Legal Experts, Who’s Who Legal, Focus and JUVE.

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India Neeraj Dubey

Lakshmikumaran & Sridharan Rohit Subramanian

1 General Legislation Function (i) Establishes the AAI; and (ii) makes the AAI responsible 1.1 Please list and briefly describe the principal The AAI Act, 1994 for the development, finance, legislation and regulatory bodies which apply to and/ operation and maintenance of or regulate aviation in your jurisdiction. all government airports in India.

The Ministry of Civil Aviation (MCA) is the nodal Ministry CARs are issued by the DGCA under Rule 133A of the AR1937 responsible for the formulation of policy and regulation of The Civil Aviation and provide the standards civil aviation in India. The MCA oversees the planning and Requirements (CARs) expected to be met before a implementation of schemes for the growth and expansion of civil licence, certificate, approval or air transport, airport facilities, air traffic services and carriage permission is granted/accorded. of passengers and goods by air. The following are the principal Governs the rights and regulatory authorities functioning under the authority of the MCA: liabilities of air carriers and is applicable to both domestic and 1. The Directorate General of Civil Aviation (DGCA) enforces The Carriage by Air Act, 1972 international carriage by air, civil air regulations, regulates air transport services, air safety (CAA) and airworthiness standards. The DGCA draws its authority irrespective of the nationality of the aircraft performing the from the Aircraft Act and Rules and performs functions like carriage. issuance of licences, approvals, certificates and permits. 2. The Airports Authority of India (AAI) creates, upgrades, Regulate air carriage of maintains and manages civil aviation infrastructure both on dangerous goods (hazard to ground and air space in India. health, safety, property or environment) and prescribe 3. The Airport Economic Regulatory Authority (AERA) Aircraft (Carriage of Dangerous the training procedure for determines the tariff for aeronautical services and Passenger Goods) Rules, 2003 shippers, operators, ground Service Fees to monitor performance standards relating to handling agencies and/or quality, continuity and reliability of service. freight forwarders involved in the transportation of such 4. The Bureau of Civil Aviation Security (BCAS) ensures dangerous goods. that the aviation security standards follow national and international obligations/treaties on air safety to which The ratification of the Montreal India is a signatory. To meet this end and prevent unlawful Convention brought this interference in aviation, BCAS issues orders, instructions and legislation, which defines guidelines to State/Union Territory Police, Central Industrial The Suppression of Unlawful and punishes offences like Security Force, airport authorities and air carriers. Acts against Safety of Civil committing violence on board Aviation Act, 1982 an aircraft, offences at airports, Based on the field of activity concerned within the aviation sector, causing destruction of or the applicability of regulatory laws may also differ. Some of the damage to navigation facilities, principal regulations are: etc.

Legislation Function 1.2 What are the steps which air carriers need to take in (i) Regulates the manufacture, possession, use, operation, sale, order to obtain an operating licence? and the import and export of aircraft; and (ii) stipulates the The Aircraft Act, 1934 Rules 134 and 134A of the AR1937 permit the operation of the parameters for determining air (AA1934) and the Aircraft following types of air transport services upon fulfilment of minimum worthiness, maintenance of Rules, 1937 (AR1937) aircraft, general conditions for requirements laid down in the relevant CAR (Series C, Section 3, flying and safety, registration Air Transport) issued by the DGCA: of aircraft and the conduct of 1. Scheduled Air Transport Service (Passenger). investigations. 2. Scheduled Air Transport Service (Cargo).

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3. Non-Scheduled Air Transport Service (Passenger). formulation of a safety manual approved by appropriate trained 4. Non-Scheduled Air Transport Service (Cargo). personnel; and obtaining an insurance policy for crew, passengers and property to be transported by air. The DGCA administers the The aforesaid permit is equivalent to the Air Operator’s Certificate state safety programme and issues a certificate of airworthiness prior that is required to be issued by an ICAO Member State. Besides to the flying of aircraft; confirming that they conform to the design other requirements, the issuance of a permit shall depend on the standards, are safe for operation, and meet minimum requirements applicant demonstrating adequate organisation, method of control with respect to engineering, inspection and maintenance. and supervision of flight operations, training programme and maintenance arrangements consistent with the nature and extent of the operations specified. The CAP 3100 Air Operators Certification 1.4 Is air safety regulated separately for commercial, India Manual provides guidance to an applicant seeking an air operator’s cargo and private carriers? permit on the systematic procedures to be followed during a certification process. The entire certification process has been No, this is not regulated separately. classified and divided into different phases as listed below:

1. Pre-application phase – Wherein the applicant is required to 1.5 Are air charters regulated separately for commercial, submit a letter of intent to the DGCA outlining the proposal. cargo and private carriers? 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 Yes. No air transport service, other than a scheduled air transport issue a No-objection Certificate. service, can be operated by any undertaking except with the special permission of the central government or under a non-scheduled 2. Formal application – The applicant is required to submit a complete application in the prescribed form to the DGCA, operator’s permit granted by the central government. A foreign- along with prescribed fees and relevant supporting documents; registered aircraft shall be required to obtain non-scheduled flight upon completing the assessment of the applicant’s proposal, clearances as stipulated by the relevant CAR issued under Section 3, the DGCA may invite the applicant for a formal meeting to Air Transport (Series F, Part I). The DGCA also regulates the operation discuss further details relating to the certification process. of tourist charter flights to and from India as part of anInclusive Tour 3. Document evaluation – During this phase, the DGCA shall Package under AIC #12 dated October 6, 2008. Besides the safety conduct a series of discussions to assess the applicant’s requirements stipulated by the DGCA, general safety guidelines capability to conduct aircraft transport operations by verifying applicable to non-scheduled air transport, as prescribed under Rule the documents submitted by the applicant. The documents 140 of the AR1937, must be complied with by air charter operators. 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 understanding between the DGCA and 1.6 As regards international air carriers operating in your the operator regarding future functioning of the operator. jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ 4. Demonstration and inspection – The applicant is then or local operators? By way of example only, required to demonstrate to the DGCA its capability of restrictions and taxes which apply to international but conducting the proposed operations in accordance with the not domestic carriers. procedures detailed in the documents/manuals reviewed during the previous phase. All the details provided by the applicant shall be scrutinised in detail, including inspection The DGCA is also responsible for the regulatory oversight of foreign of facilities and sufficiency of resources. In the event the aircraft operating in India. As per the bilateral air services agreements DGCA is satisfied with the authenticity of the documents and entered into between India and other foreign countries, every such the inspection process, approved flight(s) will be conducted party/foreign country is required to designate airline(s) for operating to destinations of intended operations, as determined by the the agreed services on the specified routes and to withdraw or alter DGCA. In the event the DGCA requires the applicant to such designations. AIC #8 dated December 1, 2010 recognises this make operational changes, the same shall be carried out by obligation and imposes conditions on ownership, control and the the applicant prior to moving on to the next phase. qualifications of the air carrier. Besides, the international carrier is 5. Certification – Upon completion of the procedure stated in required to comply with minimum requirements laid down under the previous phases and the fulfilment of criteria(s) stipulated Rules 134 & 134A, safety requirements under Rule 140 of the by the DGCA in this regard to the DGCA’s satisfaction, an AR1937, and CARs. 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 1.7 Are airports state or privately owned? with the initial conditions of certification and applicable legislative requirements and the DGCA’s requirements promulgated from time Airports can be owned by state entities as well as private parties. to time. In line with the government’s open-sky policy, the AAI has collaborated with private entities for the operation, management and development of Delhi and Mumbai Airports, as well as the 1.3 What are the principal pieces of legislation in construction of a greenfield airport in Bangalore. your jurisdiction which govern air safety, and who administers air safety? 1.8 Do the airports impose requirements on carriers India follows the ICAO guidelines on safety. The DGCA flying to and from the airports in your jurisdiction? administers safety requirements to be observed by aircraft including foreign aircraft operating in India. General safety conditions for The AR1937 restrict and qualify access to airports in India, and operators, crews, airworthiness, flights, etc. are prescribed under AIC #8 dated December 1, 2010 on the “Requirements for grant Part III of the AR1937. The mandatory safety pre-requirements of Operating Authorisation to Foreign Airlines under Bilateral Air prior to the grant of an operation permit by the DGCA include: the Services Agreements” imposes certain requirements.

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1.9 What legislative and/or regulatory regime applies to 2.2 Is there a register of aircraft mortgages and charges? air accidents? For example, are there any particular Broadly speaking, what are the rules around the rules, regulations, systems and procedures in place operation of this register? which need to be adhered to? No. The DGCA does not maintain a separate register for aircraft The Aircraft Accident Investigation Bureau of India established mortgages and charges but the owner of the aircraft must provide under the Aircraft (Investigation of Accidents and Incidents) Rules, his consent supported by documents evidencing any mortgage. 2012 is responsible for the investigation of accidents or incidents Such mortgage/hypothecation shall be endorsed on the Certificate arising out of, or during, navigation in or over India of any aircraft, of Registration and if the mortgagor is a corporate entity registered India and prescribes a list of powers and functions of the investigation in India, requisite filings should be completed with the Registrar of body, procedure of investigation, reporting of incidents and powers Companies (RoC). of the inquiry officer. CARs on implementing Flight Safety Awareness, and an Accident/Incident Prevention Programme for 2.3 Are there any particular regulatory requirements all operators engaged in scheduled or non-scheduled air transport which a lessor or a financier needs to be aware of as services, have also been issued. regards aircraft operation?

1.10 Have there been any recent cases of note or other It is mandatory to obtain permission from the DGCA, prior to notable developments in your jurisdiction involving leasing an aircraft in India. Once permission has been granted by air operators and/or airports? the DGCA, a formal lease agreement should be executed between the parties. Depending on the type of lease, the registration, As per para. 15 (2) of Schedule XI to AF1937, the Director General airworthiness and safety requirements under the AR1937 and any has the power to suspend/cancel an Air Operator’s Certificate on relevant CARs may vary subject to the applicability of the Article sufficient grounds recorded in writing. In October 2012, the DGCA 83 BIS Agreement with ICAO, the Aircraft Leasing Manual (CAP suspended the debt-ridden Kingfisher Airlines from flying, as the 3200), taxation laws, contract laws and/or foreign exchange laws. operator was unable to revive its financial position. The airline was compelled to lock out and suspend its airline operations because of 2.4 As a matter of local law, is there any concept of title a strike by its employees for unpaid salaries/dues, and even failed annexation, whereby ownership or security interests to renew its permit within the deadline stipulated under clause 7 in a single engine are at risk of automatic transfer or of CAP 3300. Eventually, in November 2016, the Bangalore High other prejudice when installed ‘on-wing’ on an aircraft Court passed an order for the winding-up of the Company. owned by another party? If so, what are the conditions In another matter, a complaint was filed with the Competitive to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks? Commission of India (CCI) against airline operators as Jet Airways, IndiGo Airlines, Spicejet, Air India and Go Airlines on grounds that such airlines were engaged in anti-competitive agreements. It was An aircraft in India is registered wholly with its engines, spare alleged that airlines colluded with each other to introduce a “fuel parts and other components attached to the aircraft. The AR1937 surcharge” which was levied on transportation of cargo. The CCI do not provide for ownership interests with respect to an engine directed its Directorate General (DG) to investigate the complaint or any other part of the aircraft. The DGCA may prescribe a and DG concluded that the alleged collusive actions by the airlines “Type Certificate” separately for an engine/propeller designed or were not sufficient to constitute a cartel. The CCI disagreed with manufactured in India. this finding and levied a penalty of 1% on the turnover ofthe airline companies engaged in such cartel activity. The appellate 2.5 What (if any) are the tax implications in your tribunal, however, reversed this unreasoned order and the matter jurisdiction for aircraft trading as regards a) value- was remanded back to the CCI to give parties an opportunity to file added tax (VAT) and/or goods and services tax (GST), objections. and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of 2 Aircraft Trading, Finance and Leasing aircraft and/or particular aircraft types or operations?

Under Central GST Act, 2017, any transfer of right in goods or 2.1 Does registration of ownership in the aircraft register of undivided share in goods without the transfer of title thereto constitute proof of ownership? or transfer of the right to use any goods for the purpose for cash, deferred payment or other valuable consideration, is considered a No. Rule 5 of the AR1937, as a pre-condition to flying, prescribes supply of services, for which GST is payable. Though the customs mandatory registration and affixation of registration marks. Rule 30 duty for import of aircraft (in lease) is “Nil” except for aircraft, it of the AR1937 provides for the grant of a certificate of registration attracts GST on the basis of its “unladen weight”, which means the by the DGCA. Based on nationality and ownership, an aircraft weight of the machine when in normal flying order, excluding the may be registered and categorised under Category ‘A’ or Category weight of the crew and of fuel and equipment other than permanently ‘B’. The aircraft register is merely a public record maintained by fitted items of equipment. GST in such cases is the inter-state GST the DGCA for administration purposes and will not be sufficient (IGST) of 5% when the unladen weight of the aeroplane and other to establish legal ownership of the aircraft, for which the owner aircraft not for personal usage (i) does not exceed 2,000 kg, (ii) is should be in possession of valid title documents duly stamped and between 2,000 and 15,000 kg, and (iii) exceeds 15,000 kg. Personal registered under applicable law(s). usage of the aeroplane and other aircraft attracts 28% of IGST. In addition to the IGST, a compensation cess of 3% is imposed on the overall consideration.

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Stamp duty varies depending on the transaction/instrument Consumer disputes are taken up by the consumer dispute redressal evidencing the transaction. Schedules to the stamp legislation list forums at district, state and national level under the Consumer the instruments and corresponding rates of duty payable. Protection Act, 1986 (CPA). Compensation-related matters under Section 9B of AA1934 are dealt with as per the existing agreement or by an arbitrator appointed by the central government. The type 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and of court assigned is determined by the value of the dispute. The Cape Town)? type of process followed is determined by whether the case is civil or criminal in nature. India is a signatory to the Montreal Convention (ratified on May 1, India 2009) and the Cape Town Convention (ratified on March 31, 2008). 3.4 What service requirements apply for the service of India has not ratified the Geneva Convention. court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

2.7 How are the Conventions applied in your jurisdiction? The Code of Civil Procedure, 1908 states that a summons signed by the judge and sealed with a court seal may be served to the Under Article 253 of the Constitution of India, the Parliament of defendant in person or his agent or pasted in his office/residence to India can make any law to give effect to an international treaty. appear and answer the claim within 30 days from the institution of The CAA gave effect to the Warsaw Convention (amended by the the suit. For defendants in other jurisdictions, the issuing court may Hague Protocol). The CAA was amended by the Carriage by Air issue summons to the court having jurisdiction in the place where (Amendment) Act, 2009 to incorporate provisions of the Montreal defendant resides. Where the defendant resides outside India, the Convention. The Cape Town Convention caused an amendment in summons is addressed to the place of residence by courier/fax/email. the AR1937 with regard to irrevocable de-registration and export request authorisation by the airline operator. 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an 3 Litigation and Dispute Resolution interim basis, and ii) a final basis?

An interim injunction may be awarded. A final order/award would 3.1 What rights of detention are available in relation to aircraft and unpaid debts? cover the aspects of compensation/damages, repossession or sale of an aircraft, or an injunction. Under Section 46 of the Sale of Goods Act, 1930, an unpaid seller of goods, despite the property having passed to the buyer, has the 3.6 Are there any rights of appeal to the courts from the right to: (a) a lien on the goods for the price while he is in possession decision of a court or arbitral tribunal and, if so, in of them; (b) stop the goods in transit after he has parted with the what circumstances do these rights arise? possession of them in case of the insolvency of the buyer; and (c) re-sale. In the case that the property has not passed to the buyer, Yes, the right to appeal does exist. Arbitral awards can also be the unpaid seller has a right of withholding delivery like, and co- challenged on certain grounds such as: incapacity; void agreement; extensive with, his rights of lien and stoppage in transit where the where enforcement would be contrary to public policy; and fraud property has passed to the buyer. The DGCA can detain an aircraft or corruption. under Section 8 of the AA1934 in case of intended flight, or for unpaid charges, or to ensure compliance under the AA1934/AR1937 and to implement any court order. 4 Commercial and Regulatory

3.2 Is there a regime of self-help available to a lessor 4.1 How does your jurisdiction approach and regulate or a financier of an aircraft if it needs to reacquire joint ventures between airline competitors? possession of the aircraft or enforce any of its rights under the lease/finance agreement? The MCA does not regulate joint ventures or any form of corporate structuring in the civil aviation sector; the open sky There is no specific statutory provision regarding this. The lease policy approach adopted by India has paved the way for numerous agreement should provide specific responsibilities and powers of corporate integrations, despite merger control restrictions under the parties, and liabilities for lack of airworthiness, operational the Competition Act, 2002 (CA2002) and/or foreign investment oversight and control of the aircraft. Contractual rights can be norms imposed under the Foreign Exchange Management Act, 1999 enforced though the courts or by an application to the AAI unless (FEMA). Tata SIA Airlines Limited is one such recent successful done amicably. In case of a dispute regarding termination of an joint venture company formed by Tata Sons and Singapore Airlines, aircraft lease, action can be taken under Section 8(1)(b) of AA1934 operating domestically under the brand Vistara. for detention to implement a court order.

4.2 How do the competition authorities in your 3.3 Which courts are appropriate for aviation disputes? jurisdiction determine the ‘relevant market’ for the Does this depend on the value of the dispute? For purposes of mergers and acquisitions? example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases are brought? Under Indian competition law(s), the “relevant market” is determined based on references drawn from the relevant product market or the The AERA Appellate Tribunal governs disputes between service relevant geographic market or both, at the CCI’s sole discretion. providers or between service providers and consumer groups. Geographically, the relevant market can comprise the area in which

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the conditions of competition for the supply of goods or services or ■ Depending on the nature of the transaction, a combination the demand for goods or services are distinctly homogenous and can notification should be filed within 30 days from the approval be distinguished from the conditions prevailing in the neighbouring of the proposal by the acquiring company’s board or the areas. From a product perspective, the “relevant market” shall be a execution of the document or agreement evidencing the market comprising all those products or services which are regarded transaction. as interchangeable or substitutable by the consumer, based on the ■ Within 30 days from the receipt of the notification, the CCI characteristics of the products/services, prices and/or intended shall be required to form a prima facie opinion as to whether use. The identification of the “relevant market” is essential for the such combination has caused or shall cause an appreciable adverse effect on competition conditions applicable to the assessment of the effect that such combinations may have on the relevant market. competitive conditions governing similar/identical businesses. India ■ The CCI is also empowered to approve, reject and accept the proposed combinations or even require the parties to 4.3 Does your jurisdiction have a notification system file additional information or make modifications to the whereby parties to an agreement can obtain transactions. If the CCI does not reply within 210 days, the regulatory clearance/anti-trust immunity from combination is deemed to be approved. regulatory agencies? ■ In the event modifications are made to the combination scheme, the parties are required to accept the modifications Yes, CA2002 requires parties entering a combination to notify the within 15 days. CCI in the prescribed form and pay its accompanying fees, and ■ In the event the CCI forms a prima facie opinion that the wait for the prescribed time to elapse, or for an order to this effect. combination will cause an appreciable adverse effect on CA2002 should be read with the CCI (Procedure in regard to the competition, the CCI may issue a notice to the parties to show transaction of business relating to combinations) Regulations, 2011 within 30 days the cause as to why an investigation should which prescribe thresholds/exemptions. not be conducted. If such apprehensions persist despite the party’s reply, the CCI may direct its DG to investigate the proposed combination. 4.4 How does your jurisdiction approach mergers, ■ Within seven days from the date of receipt of reply to the acquisition mergers and full-function joint ventures? notice, or of the preparation of a report by its DG, the CCI may direct the parties to publish information on the Besides the CCI, M&As/JVs are regulated by the RoC and the combination. Securities Exchange Board of India (SEBI) under the provisions The CCI is required to pass an order within 210 days of the of the Companies Act, 2013 (CA2013) and the Securities and notification. Based on factors such as combined market share, Exchange Board of India (Substantial Acquisition of Shares and the parties may choose to provide details either in Form I or Form Takeovers) Regulations, 2011 (Takeover Code) respectively. II. Whereas Form I provides minimal details with respect to the Chapter XV of CA2013 contains provisions with regard to transaction, Form II is much more detailed in nature and can be compromises, arrangements and the acquisition of unlisted specifically directed by the CCI to be filed. The responsibility to companies. Any proposal/scheme evidencing the corporate file the notification lies on the acquirer, except in case of merger or restructuring should stand up to the scrutiny of shareholders/ amalgamation, wherein the responsibility shall be jointly shared by creditors/other stakeholders. The National Company Law Tribunal the parties. The fees to file the notification may vary depending on is the adjudicating authority that approves the scheme. SEBI the Form filed by the party. regulates listed entities as well as entities proposed to be listed on stock exchanges in India. The Takeover Code regulates the 4.6 Are there any sector-specific rules which govern the acquisition of shares/voting rights of a listed company and triggers aviation sector in relation to financial support for air open offer requirements in some cases whereby the acquirer of operators and airports, including (without limitation) shares shall be obligated to make an offer to purchase the shares state aid? of the remaining shareholders. Besides, listed entities are required to disclose/notify the stock exchange(s) in which such securities No, the aviation sector is not governed by sector-specific rules that are listed as prescribed under the SEBI (Listing Obligations and prescribe financial support or aid to air operators and airports. The Disclosure Requirements) Regulations, 2015. central government, as it deems fit, may grant such aid or other Exchange control aspects of M&A are regulated by the Reserve financial support and facilities to the aviation sector as a matter of Bank of India (RBI) under the extant FEMA regulations, which state policy, keeping in mind the growth and development of the prescribe strict pricing and reporting requirements. As per the aviation sector. The National Civil Aviation Policy, 2016 (NCAP prevailing foreign direct investment policy, foreign investment of 2016) proposes the implementation of a Regional Connectivity up to 49% of the share capital is allowed without any approval for Scheme (RCS) that, inter alia, seeks to provide various concessions a scheduled air transport service or domestic scheduled passenger and support to air operators, airports and other stakeholders. airline, and exceeding this threshold would necessitate the seeking of approval. 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these 4.5 Please provide details of the procedure, including subsidies? time frames for clearance and any costs of notifications. One of the main objectives of the RCS envisioned under NCAP 2016 is to enhance air connectivity by making it affordable. The revival of CA2002 provides for strict timelines within which combination unserved or under-served airports/routes is another objective that this notifications are to be filed for CCI approval. The chronological scheme seeks to achieve. For this purpose, various support measures, sequence of steps involved in the notification procedure is as including viability gap funding, are proposed to be extended by follows: the central government and/or the state governments. The RCS

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envisages a market-based mechanism for selection of an airline jurisdictions, subject to international commitments, and also the operator to operate on an RCS route or a network. Air operators action that can be taken for alleged or actual infringement. eligible to avail themselves of support shall be assessed and selected by the implementing agency designated by the MCA through a 4.11 Is there any legislation governing the denial of bidding process, and only air operators with valid credentials shall be boarding rights? permitted to participate. One of the eligibility criteria for participation is having a valid air operator permit issued by the DGCA. There is no specific legislation governing denial of boarding rights; however, the DGCA has issued CARs in this regard which are required 4.8 What are the main regulatory instruments governing to be adopted and implemented by airline operators as and when India the acquisition, retention and use of passenger data, applicable. The CARs prescribe a refund and compensation amount and what rights do passengers have in respect of that can be claimed by the aggrieved passenger in case of denial of their data which is held by airlines? boarding and is popularly termed “denied boarding compensation” (DBC). Only a passenger with a confirmed booking who has arrived In India, data privacy and protection are governed by the provisions on or before the scheduled time has the right to claim DBC. of the Information Technology Act, 2000 (IT Act), which provides legal recognition to transactions carried out by means of electronic data interchange. The IT (Reasonable Security Practices and 4.12 What powers do the relevant authorities have in Procedures and Sensitive Personal Data or Information) Rules, 2011 relation to the late arrival and departure of flights? were introduced to protect “sensitive personal data” collected by bodies corporate or persons located in India. Sensitive personal data As per the CARs issued by the DGCA in this respect, in the event includes, inter alia, information relating to: passwords; credit/debit the delay is beyond 24 hours, airlines shall be obligated to provide card information; biometric information; condition of physical, meals and refreshments in relation to the waiting time, as well as physiological and mental health, etc. In the event that such body hotel accommodation if necessary. However, exceptions have been corporate possessing, dealing or handling sensitive personal data provided with respect to the aforesaid requirement, in the event that is negligent in implementing and maintaining reasonable security delay occurs because of extraordinary circumstances. practices and procedures, resulting in wrongful loss or gain to any person, such body corporate shall be liable to pay damages by way of compensation to the person so affected. 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the The nodal authority controlling all airports in India is the AAI, data and are there any applicable sanctions? which was established under the AAI Act, 1994, later amended by the AAI (Amendment) Act, 2003 providing a legal framework The Information Technology (Indian Computer Emergency for airport privatisation. The aforesaid legislation provides the Response Team and Manner of Performing Functions and Duties) functions of the AAI, which includes the efficient management of Rules, 2013 (CERT-in Rules) impose an obligation on all corporate airports, civil enclaves and aeronautical communication stations. entities, which includes airlines, to notify the Indian Computer Further, the legislation states that it is the duty of the AAI to provide Emergency Response Team (CERT-in) in case of a cybersecurity an air traffic service and air transport service at any airport and civil breach. The IT Act does not have a provision requiring data enclave. In the discharge of its functions, the AAI shall have due owners or processors to notify individuals in case of a breach of regard to the development of the air transport service and to the data. However, the company which has lost the data is liable to efficiency, economy and safety of such service. pay compensation to the passengers, and may also be punished with imprisonment for disclosure of information by breach of contract. 4.14 To what extent does general consumer protection legislation apply to the relationship between the 4.10 What are the mechanisms available for the protection airport operator and the passenger? of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? The general consumer protection legislation applicable in India is the CPA, under which aggrieved consumers can approach the India being a signatory to the Agreement on Trade-Related Aspects consumer tribunals at the district, state and national level. However, of Intellectual Property Rights (TRIPS Agreement), numerous liability and compensation for accidents that occur in the airport or pieces of legislation have been enacted and updated over the years in the air, for which the airport operator may be liable, are governed to protect intellectual property rights (IPRs). Specific statutes by the CAA (amended in 2016). exist for the protection of all types of IPRs, such as: trade marks, protected by the Trade Mark Act, 1999; designs, by the Designs Act, 2000; copyright protection laws are prescribed under the Copyright 4.15 What global distribution suppliers (GDSs) operate in Act, 1957, last amended by the Copyright (Amendment) Act, 2012; your jurisdiction? and the latest amendments made in 2005 to the Patents Act, 1970 introduce product patent protection for food, pharmaceutical and Computer Reservation Systems (CRSs) or Global Distribution chemical inventions, among others. Besides this, geographical System (GDSs) are used for hosting airline seat inventory and indications and plant varieties have also been protected under the seat reservation transactions. In India, GDSs are not governed by Geographical Indications of Goods (Registration and Protection) specific legislation. However, the DGCA has issued CARs in this Act, 1999, and the Protection of Plant Varieties and Farmers’ Rights regard to promote fair competition in the airline sector and to ensure Act, 2001 respectively. Each of the said pieces of legislation provides that consumers do not receive inaccurate or misleading information for the mechanisms and procedure for the filing, registration and on airline services. The said CARs prescribe obligations on system protection of the relevant IPR both in domestic as well as foreign vendors, participating carriers, as well as subscribers.

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4.16 Are there any ownership requirements pertaining to 5 In Future GDSs operating in your jurisdiction?

5.1 In your opinion, which pending legislative or With respect to the applicability of CARs, the DGCA has specifically regulatory changes (if any), or potential developments stated that these regulations shall be applicable to all GDSs, as shall affecting the aviation industry more generally in their essential elements operating in India for displaying or selling your jurisdiction, are likely to feature or be worthy of air services irrespective of: (i) the legal status or nationality of the attention in the next two years or so? system vendor; (ii) the source of the information used; or (iii) the

location of the relevant data processing centre, and irrespective of The following developments are of note: India where the air services are provided. (i) The proposal to replace the DGCA with a new regulator – the Civil Aviation Authority – with financial autonomy and power to address issues relating to consumer protection and 4.17 Is vertical integration permitted between air operators environment regulations. and airports (and, if so, under what conditions)? (ii) The government’s proposed construction of 17 highways- cum-airstrips; 18 greenfield airports; reviving 50 unserved As stated previously, the DGCA do not specifically prohibit vertical and under-served airstrips in the next three financial years; integration between air operators and airports. However, as stated starting a new regional connectivity scheme; and reviving an earlier, the provisions of CA2002 shall govern such vertical air services agreement with countries (an agreement already combinations. having been concluded with the Netherlands to operate up to 28 flights each week). (iii) The Executive Development Programme of Rajiv Gandhi National Aviation University in collaboration with the US– India Cooperation Program to promote skills development for the senior leadership and close the gap of increasing demand for trained people in the aviation sector. (iv) The Requirements for the Operation of Civil Remotely Piloted Aircraft Systems, 2017, issued by the DGCA.

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Neeraj Dubey Rohit Subramanian Lakshmikumaran & Sridharan Lakshmikumaran & Sridharan 404–406, 4th Floor, World Trade Centre 404–406, 4th Floor, World Trade Centre South Wing, Brigade Gateway Campus South Wing, Brigade Gateway Campus 26/1, Dr. Rajkumar Road, Malleswaran West 26/1, Dr. Rajkumar Road, Malleswaran West 560055 Bangalore 560055 Bangalore India India

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Mr. Neeraj Dubey is a Joint Partner and heads the Corporate Mr. Rohit Subramanian is a Senior Associate stationed in the Division of the Bangalore office of Lakshmikumaran & Sridharan. Bangalore office of Lakshmikumaran & Sridharan. Rohit advises He is a corporate lawyer with around 13 years of legal experience both domestic and international clients on structuring transactions encompassing the vast gamut of business law, contract management, and drafting and negotiating transaction documents in relation to IP, employment and technology law. He routinely counsels acquisitions, investments, joint ventures and debt-related transactions. manufacturing and service industry companies on a wide range Rohit’s practice also extends to General Corporate Commercial of compliance matters in all elements of commerce and business, and advisory work including legal opinions on a variety of corporate including contracts, corporate governance, competition, labour and and commercial laws. Rohit also advises entrepreneurs and start- employment, health, safety and environment. Neeraj’s industry focus up companies by guiding them through the legal and regulatory spreads across automobile, aviation, banking, chemicals, defence, environment of doing business in India. Rohit’s industry focus spreads energy, food, pharmaceuticals, information technology and waste across aviation, defence, pharmaceuticals, information technology management. and manufacturing. Neeraj regularly contributes to conferences as a speaker and/or moderator, and has spoken at several national as well as international events, including the I-Techlaw Conference and Inter-Pacific Bar Association Conference, and in forums like the Associated Chambers of Commerce of India, Confederation of Indian Industry, Federation of Indian Chambers of Commerce and Industry, Bangalore Chamber of Industry and Commerce, etc. He holds a degree in Law from the Campus Law Centre, Faculty of Law, University of Delhi.

Founded by Mr. V. Lakshmikumaran and Mr. V. Sridharan in 1985, Lakshmikumaran & Sridharan is a full-service law firm having experience and expertise in offering legal services in Taxation, International Trade Laws, Competition Law, Corporate and Commercial Laws, Labour & Employment, Environment, Food Laws, Pharmaceutical Laws, Technology Laws, Aviation & Defence Laws, Energy, Insurance, Banking & Securitisation, Private Equity, Infrastructure & Real Estate, Retail, Litigation & Dispute Resolution and Intellectual Property Rights, spread across 13 offices (11 offices in India at New Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Ahmedabad, Pune, Chandigarh, Gurgaon & Allahabad, and one each in Geneva and London). We were the first Asian law firm to set up an office in Geneva to handle WTO matters. Lakshmikumaran & Sridharan has more than 400 professionals across India. Lakshmikumaran & Sridharan has handled more than 35,000 cases at all levels for clients including several Fortune 500 companies, Indian industry leaders and groups, small and medium-sized enterprises, and entrepreneurs and start-ups.

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Ireland Donna Ager

Maples and Calder Mary Dunne

5. the Air Navigation and Transport (International Conventions) 1 General Act 2004; 6. the International Interests in Mobile Equipment (Cape Town 1.1 Please list and briefly describe the principal Convention) Act 2005; legislation and regulatory bodies which apply to and/ 7. the Aviation Act 2006; or regulate aviation in your jurisdiction. 8. the Air Navigation (Notification and Investigation of Accidents, Serious Incidents and Incidents) Regulations 2009; The Department of Transport, Tourism and Sport (“DOTTS”), is the 9. the State Airports Act 2004; Government department responsible for aviation policy in Ireland. 10. the State Airports (Shannon Group) Act 2014; It has established the following entities to assist it in carrying out 11. EC (Access to the Ground Handling Market at Community its functions: Airports) Regulations 1998 (S.I.505/1998); ■ The Commission for Aviation Regulation (“CAR”). 12. EC (Common Rules for the Operation of Air Services in the ■ The Irish Aviation Authority (“IAA”). Community) Regulations (S.I.426/2008); ■ The Air Accident Investigation Unit (“AAIU”), which is 13. EC (Rights of Disabled Persons and Persons with Reduced responsible for air accidents that take place in Ireland and air Mobility when Travelling by Air) Regulations 2008 accidents that occur outside Ireland involving Irish registered (S.I.299/2008); aircraft. 14. Regulation EC/95/93 on common rules for the allocation of ■ The Environmental Protection Agency (“EPA”), which is slots at community airports; responsible for implementation of the EU emissions trading 15. Regulation EC/261/2004 establishes common rules on scheme. compensation and assistance to passengers in the event of CAR denied boarding and of cancellation or long delay of flights; The key functions performed by CAR are: 16. Regulation EC/1107/2006 concerning the rights of disabled 1. regulation of airport charges at Dublin airport and air traffic persons and persons with reduced mobility when travelling control charges at airports with more than 1 million passengers by air; per year; 17. Regulation EC/1008/2008 on common rules for the operation 2. licensing of air carriers under EU Regulations; of air services in the community; and 3. regulation of tour operators and travel agents; 18. Regulation EU/373/2017 – the Air Traffic Management Common Requirements Implementing Regulation (ATM/IR) 4. approval of ground handlers; – effective 2 January 2020. 5. overseeing slot allocation at Dublin airport; and 6. overseeing application of EU Air Passenger Rights and 1.2 What are the steps which air carriers need to take in Reduced Mobility. order to obtain an operating licence? IAA The key functions performed by the IAA are: An aircraft operator involved in commercial air transport must be the 1. provision of air traffic management and related services in holder of a valid Air Operator Certificate (“AOC”) issued by the IAA Irish controlled airspace and on the North Atlantic; and a valid Air Carrier Operating Licence (“ACOL”) issued by CAR. 2. the safety regulation of the civil aviation industry in Ireland; In order to qualify for an ACOL, an applicant must satisfy all of the 3. the oversight of civil aviation security in Ireland; and conditions for granting an operating licence set out in Article 4 of 4. the registration of aircraft in Ireland. principal regulation EC1008/2008. The principal aviation legislation applicable in Ireland is as follows: ACOLs are divided into two categories related to capacity and maximum take-off weight, being category A and category B licences. 1. the Air Navigation and Transport Acts 1936–1998; Category A licence holders are permitted to carry passengers, 2. the Irish Aviation Authority Act 1993; cargo and/or mail on aircraft with 20 seats or more. Category B 3. the Package Holidays and Travel Trade Act 1995; licence holders are permitted to take passengers, cargo and/or mail 4. the Aviation Regulation Act 2001; on aircraft with fewer than 20 seats and/or less than 10 tonnes of maximum take-off weight.

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with certain third countries on behalf of the EU and its Member 1.3 What are the principal pieces of legislation in States. Under this process, so called “Open Skies” agreements have your jurisdiction which govern air safety, and who been negotiated, removing restrictions on capacity, routing and administers air safety? other limits, creating a free market for services between the parties to that agreement. The IAA is responsible for administering Ireland’s international Most bilateral air transport agreements require that substantial aviation safety obligations and agreements in accordance with ownership and effective control be maintained by nationals of standards set by the International Civil Aviation Organisation each party to the agreement. Within the EU, community airlines (“ICAO”) and the European Aviation Safety Agency (“EASA”). are required to be at least 50% owned by EU nationals. The EU The Safety Regulation Division of the IAA ensures specific

Ireland has indicated its willingness to negotiate these current ownership compliance with safety objectives set down under section 14 of the and control limitations with States prepared to similarly waive the Irish Aviation Authority Act 1993 and the annexes to the Chicago requirement on a reciprocal basis. However, progress on this matter Convention which are implemented through a combination of EU has been slow. and domestic Irish legislation. The IAA’s remit with respect to safety includes: certification and 1.7 Are airports state or privately owned? registration of aircraft airworthiness; licensing personnel and organisations involved in aircraft maintenance; incident reporting and management; the protection, storage and collection of The three main airports, Dublin, Cork and Shannon, are 100% State- information; licensing pilots, air traffic controllers and aerodromes; owned. Dublin and Cork airports are owned by daa plc. Shannon and approving and monitoring air carrier operating standards. Airport is owned by Shannon Airport Authority. There are EU safety regulations relating to initial and continuing The regional airports, the largest of which are Donegal, Knock, aircraft airworthiness that are directly effective in the EU (including Kerry and Waterford, are privately owned. Ireland), for example, Regulation (EU) No. 748/2012 regarding the implementation of essential requirements for environmental 1.8 Do the airports impose requirements on carriers protection, and Regulation (EU) No. 1321/2014 relating to the flying to and from the airports in your jurisdiction? continuing airworthiness of aircraft and aeronautical products, parts and appliances, and on the approval of organisations and personnel Dublin Airport is the only Irish airport currently subject to economic involved in these tasks. regulation of its charges. Economic regulation of charges at Dublin Airport is based on the Aviation Regulation Act 2001 and is implemented by CAR. 1.4 Is air safety regulated separately for commercial, cargo and private carriers? Terminal charges are levied by the IAA at Dublin, Cork and Shannon airports and until 2015 were regulated by CAR. No, the IAA regulates commercial cargo and private carriers. Under the Single European Sky (“SES”) initiative, economic regulation of en route over-flights was introduced by way of performance and charging schemes to drive performance by setting 1.5 Are air charters regulated separately for commercial, binding targets on Member States Regulation 2017/373, which cargo and private carriers? came into force in March 2017 and sets out the requirements for improving air traffic management and air navigation services within No, the IAA regulates air charters. Europe which will apply to Member States from 2020. All airlines must comply with EU legislation on consumer protection 1.6 As regards international air carriers operating in your and reduced mobility. jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, 1.9 What legislative and/or regulatory regime applies to restrictions and taxes which apply to international but air accidents? For example, are there any particular not domestic carriers. rules, regulations, systems and procedures in place which need to be adhered to? The creation of the EU single market for aviation in the 1990s removed all commercial restrictions on airlines flying within the The AAIU is responsible for conducting technical investigations EU. Under the single market, all EU carriers can operate services into air accidents in Ireland, as well as incidents outside Ireland on any intra-EU route. involving Irish-registered aircraft. Outside the EU single market, access to the air transport market is The Air Navigation (notification and investigation of accidents, still heavily regulated under the framework set down in the Chicago serious incidents and incidents) Regulations 2009 (“2009 Convention. Under the Chicago Convention, Ireland has negotiated Regulations”) give effect to the requirements of Annex 13 of the bilaterally with a wide range of States to agree market access Chicago Convention and give the AAIU the powers it needs to carry rights for both passenger and cargo services. A list of States with out full and detailed technical investigations. which Ireland has a bilateral air transport agreement is available EU Regulation 996/2010 on the Investigation and Prevention of on DOTTS’ website: www.dttas.ie. Following the “Open Skies” Accidents and Incidents in Civil Aviation is directly applicable in judgment in the European Court of Justice in 2002, all market access Ireland. rights negotiated by each of the EU Member States in their bilateral Following an investigation, the AAIU will issue safety agreements must be equally available to all EU carriers. recommendations to the appropriate aviation authority. The AAIU Furthermore, under the EU’s external aviation policy, the European does not purport to apportion blame or liability in respect of an Commission has been mandated to negotiate air transport agreements accident.

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Registration and Export Request Authorisation Register (“IDERA”) 1.10 Have there been any recent cases of note or other pursuant to its obligations under the Cape Town Convention as notable developments in your jurisdiction involving enacted by the International Interests in Mobile Equipment (Cape air operators and/or airports? Town Convention) Act 2005 (the “CTC Act 2005”), but this does not serve to notify third parties or perfect any security interest in an Belair Holdings Limited -v- Etole Holdings limited & Anor 2015 aircraft. IEHC 569 – the Irish High Court discharged a non-consensual interest registered on the International Register under the Cape Aircraft mortgages and other “charges” (as defined in the Companies Town Convention. Act 2014 (the “CA2014”) over aircraft granted by Irish companies and Irish registered branches of foreign companies) are registrable DOTTS published a Request for Tenders in November 2016 for a with the Companies Registration Office (the “CRO”) in Ireland Ireland Review of Future Capacity Needs at Ireland’s State Airports. A key within 21 days of the creation of the charge. The register maintained feature of this review will be the timing and financing of a third by the CRO operates as a priority register, with priority based on terminal at Dublin Airport, as well as an analysis of future expansion the time of filing, not the time of the interest being granted. Under requirements at the three airports. the CA2014, priority interests can be filed up to 21 days prior to the DOTTS published a policy statement on airport charges in date on which the charge is actually granted, with a full filing being September 2017 which sets about reforming the prices charged by made upon the charge actually being granted. Parties may elect to Dublin Airport to airlines, with the purpose of ultimately benefitting make a single filing upon the charge actually being entered into. If customers. the charge is not registered within 21 days of the date on which it In an unreported judgment in 2017, the Irish Commercial Court is granted, the charge becomes void against a liquidator and any made an order to discharge a validly created and registered creditor of the party granting the charge. international interest relating to a terminated sub-lease agreement The CTC Act 2005 provides for the registration of certain interests on the International Register under the Cape Town Convention. in airframes and engines with the International Registry of Mobile Assets to ensure priority. Aircraft mortgages are amongst the interests which constitute “International Interests” (as defined in 2 Aircraft Trading, Finance and Leasing 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 2.1 Does registration of ownership in the aircraft register but, due to it being located in Dublin, disputes over registrations are constitute proof of ownership? heard or enforced in the Irish High Court regardless of the country in which the claim originates. 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 2.3 Are there any particular regulatory requirements aircraft and it cannot be regarded as giving notice (whether actual or which a lessor or a financier needs to be aware of as constructive) of a person’s interest in an aircraft. regards aircraft operation? In order to register an aircraft in Ireland, the aircraft must have Strict liability is imposed on owners under section 21 of the Air a connection to Ireland and, save in the rare case where the IAA Navigation and Transport Act 1936 (as amended) where material grants a specific exemption, the applicant must demonstrate that damage or loss is caused by any item falling from an aircraft inflight. the aircraft is either wholly owned by an Irish citizen or EU citizen Lessors and financiers, unless holding an interest akin to an owner, having a place of residence or business in Ireland, or owned by a will be unlikely to be held to be liable under section 21 and, in any company registered in and having its principal place of business event, owners can be indemnified against the risks under section 21 in Ireland or the EU, with not less than two-thirds of the directors by a third party. Section 21(2) of the Air Navigation and Transport also being Irish or EU citizens. Notwithstanding the foregoing, Act 1936 (as amended) also provides that an owner will not be liable an aircraft may also be registered in Ireland if it is ‘chartered by where the aircraft is subject to a charter or lease arrangement for 14 demise, leased or on hire to, or is in the course of being acquired days or more and the pilot and crew are not in the employ of the under a lease-purchase or hire-purchase agreement by, a citizen or owner. company’ where such charter, lease or hire is to an individual or corporate fulfilling the above criteria, but such registration may be Save as set out above, liability for financiers, owners and lessors is subject to such conditions as the IAA may deem fit to impose. based on negligence and a failure on the part of the relevant party to discharge a duty of care. Thus lessors, owners and financiers The IAA has concluded a number of arrangements with foreign civil are unlikely to be held responsible for losses resulting from the aviation authorities which serve to delegate the responsibility for operation of an aircraft, unless they are actually aware of a defect or regulation and safety oversight for Irish registered aircraft from the issue and failed to take reasonable action in respect of such defect or IAA to the operator’s home State. These agreements are entered issue in order to prevent loss. into pursuant to Article 83bis of the Chicago Convention which permits bilateral agreements between two aviation authorities of Chicago Convention contracting States. 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 2.2 Is there a register of aircraft mortgages and charges? or other prejudice when installed ‘on-wing’ on an Broadly speaking, what are the rules around the aircraft owned by another party? If so, what are the operation of this register? conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to The IAA does not operate a register of aircraft mortgages or third mitigate the risks? 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 Under Irish law, there is no concept of title annexation, therefore register or related file. The IAA acknowledges the Irrevocable De- title to an engine remains with the engine owner, even where such

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engine is installed temporarily or otherwise on another aircraft. Title 7. The 1963 Tokyo Convention on Offences and Certain Other to such engine needs to be expressly transferred by the owner. Acts Committed on Board Aircraft – ratified 14 November 1975. 8. The 1970 Hague Convention for the Suppression of Unlawful 2.5 What (if any) are the tax implications in your Seizure of Aircraft – ratified 24 November 1975. jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), 9. The 1999 Montreal Convention for the Unification of Certain and b) documentary taxes such as stamp duty; and Rules for International Carriage by Air – ratified 29 April 2004. (to the extent applicable) do exemptions exist as 10. The 2001 Cape Town Convention on International Interests regards non-domestic purchasers and sellers of in Mobile Equipment – ratified 29 July 2005. aircraft and/or particular aircraft types or operations? 11. The 2001 Protocol to the Convention on International Ireland Interests in Mobile Equipment on matters specific to Aircraft VAT Equipment – ratified 23 August 2005. Ireland is an EU Member State and, as such, EU VAT rules are Ireland has also signed, but has not yet ratified, the 1948 Geneva relevant to the sale/purchase and leasing of aircraft. The VAT Convention on the International Recognition of Rights in Aircraft. treatment of the sale of an aircraft will depend on the location 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 2.7 How are the Conventions applied in your jurisdiction? standard rate (23%) would apply. However, the supply of aircraft can be zero-rated for VAT purposes where either: (i) the aircraft The Cape Town Convention became law in Ireland on 1 March 2006, is used by an airline operating for reward chiefly on international following the passing of the CTC Act 2005. The court system, and in routes; or (ii) the aircraft is used and enjoyed outside the EU. VAT particular the Commercial Court in Ireland, is the appropriate means could arise in another EU jurisdiction if the aircraft was imported of enforcing the Cape Town Convention. The Commercial Court into that jurisdiction by an Irish purchaser. has exclusive jurisdiction to hear any proceedings in connection with any function of the International Registrar under the Cape Where an Irish-based lessor is leasing aircraft to an entity outside Town Convention or the Aircraft Protocol as defined in the 2005 Act Ireland, no Irish VAT should arise on the basis that the place of and the State Airport (Shannon Group) Act 2014. supply under a lease arrangement is the jurisdiction where the lessee The Montreal Convention was implemented in Ireland by the Air is located. VAT may be chargeable in the jurisdiction of the lessee. Navigation and Transport (International Convention) Act 2004. Where the lessee is located in Ireland, the supply may be zero- CAR has a significant consumer protection role. The court system rated for Irish VAT purposes where the lessee is operating chiefly in Ireland is the suitable forum for enforcement of the Montreal on international routes. Where the supply is zero-rated, the lessor Convention. CAR is the national enforcement body tasked with the should be entitled to a credit for any VAT incurred on the acquisition monitoring and regulation of EU legislation covering air passenger of the aircraft and any related costs. rights and the provision of assistance to passengers with reduced Stamp Duty mobility. Irish stamp duty generally applies to the transfer or sale of immovable property, intangible assets and shares in Irish companies. A specific exemption applies for transfers of direct ownership in an aircraft or 3 Litigation and Dispute Resolution part of an aircraft and, on a concessionary basis, transfers of shares in a company which owns aircraft. 3.1 What rights of detention are available in relation to aircraft and unpaid debts? 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Irish law recognises certain liens and rights of detention for unpaid Cape Town)? debts or charges. The rights may arise in law, equity, under contract or statute. Ireland is a signatory to the following conventions (as amended and At common law, the third party liens available are similar to other updated) in relation to international airline operations: common law jurisdictions such as England and Wales. An unpaid 1. The 1929 Warsaw Convention for the Unification of Certain seller may seek to exercise a seller’s lien, although typical aircraft Rules Relating to International Carriage by Air, as amended finance structures mean that aircraft manufacturers are not ina by the Hague Protocol of 28 September 1955 – ratified 20 position (and in most instances, do not need) to exercise such rights. September 1935 and 12 October 1959. A possessory lien may be exercised, for example where aircraft are 2. The 1944 Chicago Convention on International Civil Aviation subject to a claim for unpaid repairs. In order to exercise such a – ratified 31 October 1946. lien, the aircraft must be, and remain, in the possession of the party 3. The 1956 Geneva Agreements on the Joint Financing of who carried out the repairs, and the specific aircraft over which the Certain Air Navigation Services in Greenland/Iceland – lien is sought to be exercised, must have been improved through the ratified 3 June 1960. labour of that party, with the knowledge and authorisation of the 4. The 1962 Rome Protocol Relating to an Amendment to the owner (note maintenance is probably insufficient) resulting in an Convention on International Civil Aviation – ratified 14 unpaid debt. Such a lien would only extend to the cost of unpaid February 1963. repairs to the specific aircraft in question, and would not allow for a 5. The 1971 New York Protocol Relating to an Amendment to right of sale without court intervention. Contractual liens can also the Convention on International Civil Aviation – ratified 15 be created, and if provided for in the agreement between the airport June 1971. user and the owner or operator of an airport, aircraft can be detained, 6. The 1971 Vienna Protocol relating to an Amendment to the and sold, for non-payment of certain airport charges. Convention on International Civil Aviation – ratified 11 July The Air Navigation and Transport (Amendment) Act 1998 (section 1972. 40) affords certain airports operated by specified Airport Authorities

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the right to detain and, if necessary, to sell aircraft in respect of with proceedings in connection with any function of the Registrar certain unpaid airport charges. This power to detain extends beyond under the Cape Town Convention or the Aircraft Protocol. the particular aircraft in respect of which the charges were incurred to any other aircraft of the operator or registered owner. This can 3.4 What service requirements apply for the service of cause problems for new operators assuming liability for pre-existing court proceedings, and do these differ for domestic debts. If the owner or operator disputes the charges and offers airlines/parties and non-domestic airlines/parties? sufficient security pending determination of the dispute, the power to detain is limited. As regards the power of sale, it can only be As most disputes will invoke the High Court jurisdiction, the Rules exercised with leave of the Irish High Court. of the Superior Courts prescribe the relevant methods of service.

Parties in possession of judgments may also be entitled to exercise Personal service on individuals may be effected in the State. Service Ireland certain rights against an aircraft or shares in an aircraft holding on a company in the State must be effected in accordance with company, provided appropriate judgment enforcement procedures section 51 of the Companies Act 2014, by leaving the proceedings have been followed, but an Irish court will have regard to prior and at, or sending it by prepaid post to, the registered office of the superior interests in granting any such reliefs. Company. Where the company has not notified the Registrar of Companies of its registered office, the documents may be served on the Registrar. 3.2 Is there a regime of self-help available to a lessor or a financier of aircraft if it needs to reacquire possession For parties located outside the State but within the EU, Council of the aircraft or enforce any of its rights under the Regulations (EC) 1215/2012 on jurisdiction and 1348/2000 on lease/finance agreement? effecting service may apply. For parties outside the EU, leave of the Irish Court to issue and serve proceedings may be required, with Ireland is generally seen as a creditor-friendly jurisdiction, allowing service thereafter effected pursuant to the Hague Service Convention. self-help repossession and interim relief and other self-help remedies provided the contractual arrangements between the parties provide 3.5 What types of remedy are available from the courts for same. Standard default remedies under leasing and security or arbitral tribunals in your jurisdiction, both on i) an agreements often include powers to take possession or control of interim basis, and ii) a final basis? 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 In general, the Irish courts have jurisdiction to order and direct the the aircraft; and/or procure the deregistration, export and physical full range of common law and equitable remedies to include making transfer of the aircraft from the territory in which it is located. In orders providing for interim and interlocutory relief, together with Ireland, provided the requirements of the Convention are met, it is final orders including declaratory orders, injunctions and associated not necessary to make an application to the High Court for leave to damages and costs awards. exercise that remedy unless the terms agreed between the parties The Arbitration Act 2010, which adopted the UNCITRAL Model expressly require the creditor to make such an application. Law, as amended in 2006 (the “Model Law”), with some minimal While self-help remedies may be available, there are risks for amendments, applies to all arbitrations, both domestic and the lessor associated with non-consensual repossession without international, commenced in Ireland after 8 June 2010. Unlike ancillary judicial relief, such as a lessee claiming breach of lease England and Wales, Ireland deliberately avoided wholesale terms for quiet enjoyment and use of the aircraft. It is often amendments and additions to the Model Law. Therefore, Articles 9 considered prudent for the lessor to institute recovery proceedings and 17 in respect of interim measures apply. where the lessee is considered uncooperative, or where a liquidator or examiner has been appointed to the lessee. 3.6 Are there any rights of appeal to the courts from the As a member of the EU, the relevant Declaration pursuant to Article decision of a court or arbitral tribunal, and, if so, in 55 of the Convention and the application of Council Regulation what circumstances do these rights arise? (EC) No. 1215/2012 on jurisdiction and enforcement of judgments applies to interim relief under the Convention. Appeals of High Court decisions as the court of first instance may Ireland is a signatory of and has ratified the Cape Town Convention be made to the Court of Appeal, and thereafter, on certain limited and has given effect to the Aircraft Protocol. In May 2017, the Irish grounds, to the Irish Supreme Court. Government made an order giving immediate effect to Article XI Ireland ratified the New York Convention in 1981 and no reservations (Alternative A) of the Aircraft Protocol, which further enhances have been entered. The relevant legislation is now the Arbitration Ireland’s position as a leading jurisdiction for aircraft finance as it Act 2010, which does not provide for a right of appeal against an allows creditors to gain access to their aircraft assets after a 60-day arbitral award. waiting period in the event of insolvency of a debtor. The grounds for challenging an arbitral award before the High Court under the 2010 Act are limited to those expressly enumerated under 3.3 Which courts are appropriate for aviation disputes? Article 34(2) of the Model Law (which mirrors the grounds on Does this depend on the value of the dispute? For which recognition and enforcement might be refused under the New example, is there a distinction in your jurisdiction York Convention as per Article 36 of the Model Law). Challenges regarding the courts in which civil and criminal cases must be brought within three months from the date of receipt of are brought? the award. Section 12 of the 2010 Act, however, requires that any challenge on the basis of public policy must be brought within 56 Aviation disputes in Ireland will typically be dealt with in the civil days of the date from which the circumstances giving rise to the courts, in particular the Commercial Court division of the High application became known or ought reasonably to have become Court which deals with commercial disputes where, amongst other known. The jurisprudence suggests Irish courts will construe the things, the quantum of the claim exceeds €1m, and enjoys enhanced ground of public policy as extending only to breaches of the most case management procedures. This court also deals exclusively fundamental notions of morality and justice.

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clearance or to determine that the issues are sufficiently complex to 4 Commercial and Regulatory require a Phase II clearance, for which the CCPC has 120 working days. These timelines can be extended by the CCPC by requesting 4.1 How does your jurisdiction approach and regulate further information. If it does this, the clock stops ticking until such joint ventures between airline competitors? time as the CCPC has received satisfactory replies to all questions, at which point time starts to run from the start again, i.e. it has 30 Joint ventures between airlines are subject to Irish competition law, working days. which implements and is fully compliant with EU competition law. In general, however, the CCPC deals with the majority of cases Therefore, joint ventures are subject to Sections 4 and 5 of the Irish in Phase I without extending the timeline, so the system works Competition Act 2002 (as amended) which implement Articles efficiently. The CCPC will try to agree conditions or changes with Ireland 101 (anti-competitive agreements) and 102 (abuse of a dominant the proposed parties to the merger rather than refuse to clear it. position) of the Treaty on the Functioning of the European Union. The fee charged by the CCPC for a Merger Notification is €8,000.00. Mergers and acquisitions are subject to a merger notification regime to the Irish Consumer and Competition Protection Commission (“CCPC”). 4.6 Are there any sector-specific rules which govern the aviation sector in relation to financial support for air There are no particular Irish rules on highly integrated airline operators and airports, including (without limitation) alliances, codeshare agreements or similar arrangements. The state aid? CCPC follows EU precedent in relation to such alliances and will not block them unless in the specific instance it will lead to a Ireland applies EU law on State Aid. substantial lessening of competition in Ireland. In the aviation sector in particular, it applies the EU Commission Guidelines on State Aid to airports and airlines (2014/C 99/03). 4.2 How do the competition authorities in your These Aviation Guidelines set out the conditions under which jurisdiction determine the “relevant market” for the Member States can grant State Aid to airports and airlines. purposes of mergers and acquisitions? Key features are: ■ State Aid for investment in airport infrastructure is The relevant body is CCPC (www.ccpc.ie). allowed if there is a genuine transport need and the public There is no statutory definition of “relevant market” and the market support is necessary to ensure the accessibility of a region. may be defined broadly or narrowly in the context of the particular The guidelines define maximum permissible aid intensities case. depending on the size of an airport, in order to ensure the right mix between public and private investment. The possibilities Market sectors used in EU case law such as origin and destination to grant aid are therefore greater for smaller airports than for city pairs, premium and non-premium passengers, non-stop and larger ones. one-stop flights and airport substitution, will be equally considered ■ Operating aid to regional airports (with fewer than three by the CCPC in Ireland. million passengers a year) will be allowed a transitional period of 10 years under certain conditions, in order to give 4.3 Does your jurisdiction have a notification system airports time to adjust their business model. To receive whereby parties to an agreement can obtain operating aid, airports need to work out a business plan, regulatory clearance/anti-trust immunity from paving the way towards full coverage of operating costs at the regulatory agencies? 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 All mergers and acquisitions of legal entities, including airlines, that cost coverage during the transitional period; the guidelines fall within the remit of the Competition Act 2002 (as amended) and include a special regime for those airports, with higher aid satisfy certain financial thresholds, require mandatory pre-clearance intensities and a reassessment of the situation after five years. by submitting a notification to the CCPC. ■ Start-up aid to airlines to launch a new air route is permitted provided it remains limited in time. The compatibility 4.4 How does your jurisdiction approach mergers, conditions for start-up aid to airlines have been streamlined acquisition mergers and full-function joint ventures? and adapted to recent market developments. The Irish Government supports Ireland’s regional airports (Donegal, Ireland’s competition policy is closely aligned with EU principles Ireland West Airport Knock (“IWAK”), Kerry and Waterford) of competition law. The test is whether, for consumers in Ireland, through the Regional Airports Programme 2015–2019. That the merger, acquisition or joint venture will substantially lessen financial support is administered by DOTTS through three separate competition in the market. schemes: The CCPC is responsible for enforcing Irish and European ■ A Regional Airports Capital Expenditure Grant (“CAPEX”) competition law in Ireland. They can enforce by way of criminal or Scheme. civil proceedings, with heavy fines and prison sentences available. ■ A Core Airport Management Operational Expenditure However, the CCPC applies these sparingly. Subvention (“OPEX”) Scheme. ■ A Public Service Obligation (“PSO”) Air Services Scheme.

4.5 Details of the procedure, including time frames for All funding of regional airports by the State must comply with the clearance and any costs of notifications. Aviation Guidelines on State Aid to airports and airlines referred to above. A notification is lodged by the parties involved in the relevant Support under the CAPEX Scheme is only paid to the regional transaction to the CCPC in relation to the merger, acquisition or airports for essential safety and security work with an associated joint venture. The CCPC then has 30 working days to give a Phase I economic activity.

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OPEX subvention is paid to compensate the regional airports for the subject of challenges originating in Ireland. The Digital Rights costs incurred in providing core airport services, insofar as these Association has brought a case to the European Court of First costs cannot be fully met by prudent commercial management and Instance challenging the adequacy of the Privacy Shield (the from any surpluses generated by non-core activities such as car arrangement agreed between the EU and the US Department of parking and catering. Commerce) (Case Number T. 670/16). Two services operate from regional airports under the PSO Air Following on from the Schrems case (which successfully challenged Services Scheme – Kerry/Dublin and Donegal/Dublin. Safe Harbor, the predecessor to Privacy Shield), the Irish High Court has recently referred a legal challenge to the validity of the EU Standard Contractual Clauses (“SCCs”) to the Court of 4.7 Are state subsidies available in respect of particular

routes? What criteria apply to obtaining these Justice of the European Union (“CJEU”) to determine a number of Ireland subsidies? questions regarding the use of SCCs and their validity under EU law. The outcome of that case may have significant implications for As set out at question 4.6 above, two PSO services from two data transfers beyond the EU. airports in Ireland are supported by the Irish Government on the basis that these services are considered necessary for the economic 4.9 In the event of a data loss by a carrier, what development of their regions and that they would not be provided obligations are there on the airline which has lost the on a commercial basis. Current contracts, which commenced on 1 data and are there any applicable sanctions? February 2015, are in place for air services between Dublin and the regional airports in Kerry and Donegal. Irish data protection law includes obligations to notify affected data These contracts will run for two years initially up to 31 January subjects in the event of a data breach, and a requirement to report 2018 and, subject to a satisfactory review after 18 months, may be breaches to the Data Protection Commissioner. The notification and extended by a maximum of one year. reporting requirements vary based upon the specific circumstances of the data loss/breach. The Irish Data Protection Commissioner has approved a personal data security breach Code of Practice as a 4.8 What are the main regulatory instruments governing guide to organisations dealing with breaches of security involving the acquisition, retention and use of passenger data, customer or employee personal information. The timeframes and what rights do passengers have in respect of their data which is held by airlines? 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 regulatory sanction. Irish law also includes The Data Protection Acts (1988 and 2003) are currently the a requirement to notify the Irish police where the data breach primary pieces of legislation giving effect to EU Directive 95/46/ potentially involves the commission of a crime, i.e. a cybersecurity EC in Irish law. In keeping with the relevant EU principles, data attack or fraud. 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 4.10 What are the mechanisms available for the protection purposes; processing such data only in ways compatible with the of intellectual property (e.g. trademarks) and other purpose for which it was given; as well as keeping the data safe and assets and data of a proprietary nature? secure; and ensuring that it is kept accurate and up to date. The EU General Data Protection Regulation (2016/679) (“GDPR”), Registration of intellectual property in Ireland is carried out at the which significantly increases privacy obligations for both controllers Irish Patents Office. and processors, will have direct effect from May 2018 and will Registration of trademarks is governed by the Trade Marks Act replace Directive 95/46/EC and the Irish Data Protection Acts. 1996 (as amended). A trademark is usually registered for an initial GDPR has far-reaching extra-territoriality; non-EU carriers will 10-year period but can be renewed indefinitely. Unregistered be subject to the GDPR, if their marketing is targeted at travellers trademarks may also be protected by the common law tort of within the EU or where they engage in monitoring the behaviour passing-off. of data subjects in the EU. Data processors will also be directly Applications for an EU-wide trademark can be made through caught by specific obligations under GDPR. SI 336/2011 European the EU Intellectual Property Office (EUIPO). Applications for Communities (Electronic Communications Networks and Services) international trademarks can be made under the Madrid Protocol (Privacy and Electronic Communications) Regulations 2011, giving and are administered by WIPO. effect to Directive 2002/58 (the E-Privacy Directive), also apply Patent registration is governed by the Patents Act 1992 (as to the airline industry, and in particular, the collection and use of amended). Irish patents are protected for a maximum of 20 years. passenger data in electronic marketing. Short-term, 10-year patents can also be obtained. Protection can It is intended to be replaced some time in 2018 by a new E-Privacy be sought for other countries in Europe by an application for a Regulation which will bring more GDPR-type privacy obligations European Patent through the European Patent Office which includes (e.g. similar fines) to this area of regulation. 40 countries, or throughout the world under the Patent Cooperation Under EU rules, the EU PNR Directive (2016/681) must be Treaty administered by WIPO which covers 145 countries. transposed into Irish legislation by 25 May 2018 (the same date as Registration of designs is governed by the Industrial Designs Act GDPR becomes effective). That Directive provides for the collection 2001 (as amended). Protection is granted initially for five years, by air carriers of PNR data for all extra-EU flights entering or which can be renewed four times, giving a maximum protection of departing from the EU, as well as the transfer of such data to EU 25 years. Protection throughout the EU can be obtained by applying Member States and sharing mechanisms across borders. Note under for a Community Design through EUIPO. Protection in additional Article 2, it can be extended in the future to intra-EU flights. countries can be obtained under the Hague Convention operated by It should be noted that in respect of the transfer of personal data to WIPO. Protection is also available for unregistered designs for up the US, two of the mechanisms approved by the EU are currently to a maximum of three years.

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Copyright protection in Ireland is governed by the Copyright and Related Rights Act 2000 (as amended). There is no system 4.12 What powers do the relevant authorities have in of registration. Copyright protection for literary works lasts for relation to the late arrival and departure of flights? 70 years after the death of the author. Copyright protection for computer-generated works lasts for 70 years after the date they are Ireland complies with Regulation (EC) No. 261/2004 in relation to first made available to the public. late arrival and departure of flights. Other non-registerable Intellectual Property such as confidential Whether a delay comes within the terms of Regulation 261/2004 information, trade secrets, knowhow and the like are normally depends upon the distance of the route involved, and the delay itself protected by non-disclosure agreements or other forms of contract. 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 Ireland or less; 4.11 Is there any legislation governing the denial of boarding rights? (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 Ireland complies with Regulation (EC) No. 261/2004 in relation to (c) delays of four hours or more in the case of all other flights. denied boarding rights. The operating air carrier must provide care and assistance in the Where a flight is overbooked and an air carrier reasonably expects event of such delays. This must consist of the following: to deny boarding, it shall first call for volunteers in exchange for benefits to be agreed. If there is an insufficient number of volunteers, ■ Information: the air carrier shall provide a written notice the airline may deny boarding to passengers against their will but setting out the rules for assistance in line with the Regulation. In addition, a sign must be displayed at the check-in area must compensate them and offer the following assistance: referring to air passenger rights under the Regulation. ■ Information: the air carrier shall provide a written notice ■ Meals and refreshments shall be offered free of charge and in setting out the rules for assistance in line with Regulation reasonable relation to the waiting time. 261/2004. In addition, a sign must be displayed at the check- in area referring to air passenger rights under Regulation ■ Hotel accommodation shall be provided where a stay of 261/2004. one or more nights becomes necessary, as well as transport between the hotel and the place of accommodation. ■ Passengers shall be offered the choice between reimbursement of the cost of their ticket if they decide not to travel; and ■ Communications: passengers shall be offered free of charge rerouting to their final destination at the earliest opportunity. two telephone calls, telex or fax messages, or emails. Passengers may choose to travel at a later date at their ■ Reimbursement: where the flight delay is at least five hours, convenience, subject to the availability of seats. passengers shall be offered reimbursement within seven ■ Meals and refreshments shall be offered free of charge and in days of the full cost of the ticket at the price at which it was reasonable relation to the waiting time. bought for the part or parts of the journey not completed. If, however, the purpose of the journey is no longer attainable, ■ Hotel accommodation shall be provided where a stay of then reimbursement must be offered for the part of the one or more nights becomes necessary, as well as transport journey already made, e.g. a flight from Cork to Dublin will between the hotel and the place of accommodation. be reimbursed if the purpose of the flight was to travel on a ■ Two free telephone calls, telex or fax messages, or emails connecting flight to London for a function at which attendance shall be offered. is no longer possible due to the delay. In addition, there is ■ Compensation as set out in the table (below). The amount a right to a return flight to the original point of departure of compensation payable may be reduced by 50% if the where relevant. The right to reimbursement applies where rerouting offered allows the passenger to arrive at his/her the passenger decides not to travel as a result of the delay – it final destination close to the original planned arrival time. is not possible to travel and also claim reimbursement under the Regulation. Compensation amounts related to denied boarding If the airline is unable to provide the above provisions free of charge, ■ For flights with a distance of 1,500km or less and where the the airline should reimburse passengers for expenses incurred. delay is less than two hours past the original planned arrival time: €125. Compensation ■ For flights with a distance of 1,500km or less and where the Although the Regulation itself does not expressly state that delay is more than two hours past the original planned arrival compensation is payable in cases of delay, the ruling delivered by time: €250. the European Court of Justice in the cases of Sturgeon -v- Condor ■ For intra-Community flights of more than 1,500km and all Flugdienst GmbH and Bock and Others -v- Air France SA maintains other flights between 1,500km and 3,500km where the delay that compensation may be payable to passengers who arrive at their is less than three hours past the original planned arrival time: destinations three hours or more after the scheduled arrival time. €200. The amount of compensation which may be payable in the ■ For intra-Community flights of more than 1,500km and all aforementioned circumstances depends on the distance of the flight, other flights between 1,500km and 3,500km where the delay the reason for the delay and, in the case of point (c) above, it may be is more than three hours past the original planned arrival reduced by 50% where the delay on arrival was less than four hours. time: €400. If an airline can prove that the delay was caused by an extraordinary ■ For all other flights not falling within the categories circumstance which could not have been avoided even if all mentioned above and where the delay is less than four hours reasonable measures were taken, no compensation will be payable. past the original planned arrival time: €300. The amount of compensation payable depends on the distance of the ■ For all other flights not falling within the categories mentioned above and where the delay is more than four hours flight. If the flight is classed as: past the original planned arrival time: €600. ■ short haul, the amount payable is €250 per person; ■ medium haul, the amount payable is €400 per person; and ■ long haul, the amount payable is €600 per person.

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CAR is the designated enforcement body in Ireland. Section 45 of the Aviation Act 2001 (as amended) gives CAR the right to issue a 5 In Future direction to any airline in breach of Regulation 261/2004 requiring compliance. If the airline fails to comply, it is guilty of an offence. 5.1 In your opinion, which pending legislative or Whilst an airline can make representations to CAR during the regulatory changes (if any), or potential developments process, it can only challenge its decision by way of judicial review affecting the aviation industry more generally in in the High Court. your jurisdiction, are likely to feature or be worthy of attention in the next two years or so?

4.13 Are the airport authorities governed by particular 1. The Irish Government’s expressed and continued support

legislation? If so, what obligations, broadly speaking, for the wider aviation industry contained in ‘A National Ireland are imposed on the airport authorities? Aviation Policy for Ireland’ policy document will ensure that, when enacting new legislation in Ireland, aviation and The airport authority for Dublin and Cork Airports is the daa plc. the significance of the industry to the Irish economy will be The airport authority for Shannon Airport is the Shannon Airport at the forefront of the legislators’ considerations, whilst the implementation of the “Alternative A” insolvency regime in Authority Limited. Ireland, further strengthens the country’s appeal as a hub for The relevant legislation is the State Airports Act 2004 and the State owning, leasing and financing aircraft, as well as its position Airports (Shannon Group) Act 2014. as a global centre for aviation. This legislation dictates that the airports are owned by the State and 2. The ongoing OECD/G20 Base Erosion and Profit Shifting the policy position is that this will not change in the foreseeable Project (“BEPS”) is likely to result in changes to international future. Governance and structure of the airport authorities is set tax treatment of certain tax practices. On 7 June 2017, Ireland out in the legislation as well as detailed provision on operation of and over 70 countries signed up to a multilateral convention (the “MLI”) that is intended to implement a number of the airports. BEPS related measures swiftly. The effect of the MLI is that Airport operators are subject to law such as consumer law, health countries (including Ireland) will transpose certain provisions and safety, employment, etc. 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 4.14 To what extent does general consumer protection measures to update Ireland’s existing network of bilateral tax legislation apply to the relationship between the treaties, with the intention of reducing opportunities for tax airport operator and the passenger? avoidance by multinational enterprises. However, the impact on the Irish aviation industry is expected to be minimal due Ireland implements EU consumer law. The general legislation to the robust legislative framework already in place in Ireland applicable in Ireland is the Sale of Goods and Supply of Services and the tax treatment of the aviation industry in Ireland. In Act 1980 (as amended). This applies to aviation-related matters fact, the OECD’s recommendation may well serve to enhance also. the appeal of Ireland as an attractive jurisdiction for the owning, financing and leasing of aircraft as compared to The CCPC is responsible for the enforcement of consumer competing jurisdictions. protection laws. Ireland will also be required to adopt certain measures The Package Holidays and Travel Trade Act 1995 also regulates the introduced by the Anti-Tax Avoidance Directive (Directive travel contract between travel operator and consumer. (EU) 2016/1164) in relation to limitation of interest deductibility and Council Directive (EU) 2017/952 which amended Directive (EU) 2016/1164 as regards hybrid 4.15 What global distribution suppliers (GDSs) operate in mismatches. These changes are unlikely to have a significant your jurisdiction? impact on the aviation industry in Ireland. 3. On 15 November 2016, Ireland formerly enacted the Many of the major GDSs operate in Ireland, including Amadeus, European Union (Anti-Money Laundering Beneficial Sabre, Travelport, etc. Ownership of Corporate Entities) Regulations 2016 by the introduction of SI/560/2016. The statutory instrument 4.16 Are there any ownership requirements pertaining to provides for every Irish-incorporated entity (other than those GDSs operating in your jurisdiction? 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 No, there are no ownership requirements specific to GDSs operating terms of aviation, this may cause an issue where a company in Ireland. 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 requirement 4.17 Is vertical integration permitted between air operators and to simply list the company directors and executive officer and airports (and, if so, under what conditions)? in lieu of the beneficiaries such that these structures can continue to be used. There is no particular prohibition on vertical integration between 4. DOTTS is carrying out a review of the role of CAR and IAA air operators and airports, though competition law will be relevant. in light of SES regulation, which may change the role of these two bodies and necessitate legislation.

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Acknowledgment arbitration. Brian joined Maples and Calder in 2009. (Tel: +353 1 619 2042 / Email: [email protected].) The authors are grateful to Brian Clarke for his invaluable contribution to this chapter. Brian is a partner in the Maples and The authors are also grateful to Lynn Cramer for her contribution to Calder litigation and dispute resolution group. He advises both this chapter from a tax law perspective. Lynn is an associate in the domestic and international clients on domestic and multinational Maples and Calder tax department and advises both domestic and commercial disputes and enforcement proceedings. He is international clients on Irish tax matters. (Tel: +353 1 619 2066 / experienced in acting in both ad hoc and institutional forms of Email: [email protected].) Ireland

Donna Ager Mary Dunne Maples and Calder Maples and Calder 11th Floor, 200 Aldersgate Street 75 St. Stephen’s Green London EC1A 4HD Dublin 2 United Kingdom Ireland

Tel: +44 20 7466 1712 Tel: +353 1 619 2021 Email: [email protected] Email: [email protected] URL: www.maplesandcalder.com URL: www.maplesandcalder.com

Donna is Head of the European Aviation practice in Maples and Calder, Mary is Head of the Projects, Construction and Procurement Group in advising on tax-efficient leasing and financing structures, in addition to Maples and Calder and advises on EU and Irish regulatory law. She platform establishments and transportation business acquisitions and specialises in competition, procurement, aviation, waste, water and disposals, all from an Irish law perspective. energy regulation. Having worked on the acquisition, finance, leasing and disposal of Mary acts as an expert to the OECD and World Bank on public transportation assets for more than 17 years, Donna has extensive procurement and project finance, and has drafted laws and procedures industry and structuring knowledge, notably in the aviation sector where for many governments seeking to do business with the EU, such as she specialises. Regarded by her clients as practical and commercial, Armenia, Croatia, Macedonia, Morocco, Jamaica and Ukraine. Donna’s expertise extends across all transportation assets and her Mary joined Maples and Calder in 2012. Before joining the firm, Mary London city training provides for a unique and refreshing approach to previously worked as Head of Legal at the National Development the role of Irish counsel. Finance Agency and also worked for a leading Irish law firm, during Donna joined Maples and Calder in 2015, following time spent as a which time she was seconded to the Strategic Investment Board in partner in the asset finance team of Simmons and Simmons, London. Belfast. Prior to that, Donna worked for nine years at Clifford Chance, London, Mary is highly regarded in independent legal directories such as having started her career with Freshfields and moving to Airbus S.A.S. Chambers & Partners and The Legal 500. in Toulouse, France where she gained valuable, sought-after 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 byIFLR .

Maples and Calder is a leading international law firm advising financial, institutional, business and private clients around the world, on the laws of Ireland, the Cayman Islands and the British Virgin Islands. The firm’s affiliated organisation, MaplesFS, provides specialised fiduciary, corporate formation and administrative services to corporate, finance and investment funds entities. The Maples group comprises over 1,500 staff in 15 offices. Since establishing in Ireland in 2006, the Dublin office has grown to over 350 people and has advised on many high-profile and complex transactions in Ireland.

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Israel

Gross, Orad, Schlimoff & Co. (GOS) Omer Shalev

■ The Israel Airport Authority (IAA): 1 General ■ holds, manages and operates Israel’s airports; and ■ acts as necessary to maintain the security of the airports, 1.1 Please list and briefly describe the principal passengers and aircraft within airport premises. legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction. 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? The principal legislation in Israel which regulates aviation is as follows: An Israeli air carrier needs to obtain a commercial operating ■ The Aviation Law – 2011, which is the primary legislation for licence from the Ministry of Transportation. the aviation industry in Israel. The Aviation Law is relatively new and is therefore modern and up to date, providing the An Israeli carrier must be a natural person who is a permanent legal framework for aviation operation in Israel. resident in Israel or an Israeli citizen who has major place of business ■ The Air Transport Law – 1980, which adopts the Montreal in Israel, or a corporation which was established in Israel, has no Convention (MC99) into Israeli law. The Air Transport Law other main business place outside of Israel and the control of such provides that the liability of a carrier, its employees and corporation is within the hands of an Israeli citizen or permanent agents for any damage, including the death of a passenger, resident in Israel. “Control” shall mean at least 50% of the control shall be determined solely pursuant to the provisions of this measures – equity or voting rights. law and there will be no claim for compensation according to any other cause of action. The Air Transport Law also refers The Minister of Transportation may determine conditions for an to a limitation period, as stated in the relevant treaties (i.e. operating licence, which may include, inter alia: two years). ■ Anything related to operation of aircraft and services required ■ The Aviation Services Law (Compensation and Assistance for such operation. due to Cancellation of a Flight) – 2012, which states the ■ Services which are offered by the aircraft. rights of passengers to compensation and assistance due to ■ Approved destinations to which the carrier is allowed to the cancellation of a flight or a change in its conditions. The operate. Law is a local version of European Regulation 261/2004, but ■ Fares, tariffs, transportation costs and other relevant fees. it contains specific provisions regarding Israel. ■ The ways and means by which the licensee will ensure the The Law determines the conditions for entitlement to benefits, payment of compensation for damages, including damage to types of benefits, entitlement in case of cancellation of flight, a third party, caused by the operation of the aircraft. delay in flight or early flight. ■ Conditions to maintain reciprocity with other countries. The Law establishes a special limitation period of four years. An Israeli carrier or a foreign carrier will not operate any aircraft The principal regulatory bodies in Israel for aviation matters are: for commercial purposes unless they have an operational permit ■ The Ministry of Transportation: granted by the General Manager of the ICAA. The operational ■ regulates the aviation industry; and permit will be limited to a certain time for each permitted destination ■ has the authority to initiate new laws and enact regulations. (a permit may include conditions). ■ The Israel Civil Aviation Authority (ICAA): The ICAA manager may also establish conditions for: ■ establishes and maintains procedures and regulations for ■ Aircraft which the carrier is allowed to operate. domestic and international aviation; ■ Services which are offered by aircraft. ■ grants licences and permits in accordance with the ■ Number of passengers or cargo which the carrier is allowed Aviation Law (including for aircraft, air personnel, to take, capacity of seats, frequencies of operation. airports and aircraft manufacturers); ■ Any other condition that the ICAA manager determines. ■ supervises aviation operations regarding transport safety and efficiency; and A foreign carrier will not be granted any operational permit unless ■ implements international agreements and treaties. the carrier has appointed a local representative in Israel, which will be authorised to act on behalf of the carrier in all matters relating to the relevant aviation laws.

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1.3 What are the principal pieces of legislation in 1.7 Are airports state or privately owned? your jurisdiction which govern air safety, and who administers air safety? The airports in Israel are state-owned. The IAA is the governmental company which is in charge of operation of the airports. The principal legislation in Israel which governs air safety is the Aviation Law – 2011. 1.8 Do the airports impose requirements on carriers Israel has adopted the Chicago Convention to ensure that air flying to and from the airports in your jurisdiction? navigation equipment and operations comply with the standards of

Israel International Civil Aviation Organization (ICAO). Yes – there are requirements in respect of the hours of operation of The ICAA supervises aviation operations regarding safety. the airports, i.e. the closure of Ben Gurion International Airport to The air carrier must prove its maintenance and technical ability and take-offs for several hours during the night (“night curfew”). provide an operational and technical manual for the approval of the ICAA. The carrier must also have an approved safety management 1.9 What legislative and/or regulatory regime applies to system. air accidents? For example, are there any particular The ICAA issues and renews airworthiness certificates and air rules, regulations, systems and procedures in place operator certificates, approves the maintenance programmes and which need to be adhered to? carries out inspections of aircraft operated within Israel. The relevant legislation which applies to air accidents is as follows: The air carrier must prove its professional and technical ability, appoint relevant officers (including the safety officer), provide an ■ Aviation Law – 2011. operational and technical manual for the approval of the ICAA and ■ Air Transportation Law – 1980 (Montreal Convention – 1999). provide a safety management system. ■ Aviation Regulations (Aircraft Accident and Incident Specific regulations apply to maintenance facilities, which also Investigation) – 1984. require relevant licences. ■ Chicago Convention – 1944. ■ Civil Aviation Authority Law. 1.4 Is air safety regulated separately for commercial, According to the Aviation Law, the Minister of Transportation will cargo and private carriers? appoint the Chief Investigator within the Ministry of Transportation to investigate. No. The ICAA regulates all aspects of the aviation industry. The Chief Investigator is responsible for: Though the same regulator is in charge for commercial, cargo and ■ collection, documentation and analysis of all relevant private carriers, there are different regulations and standards which information regarding safety incidents or accidents; have to be adhered to. ■ determining the reasons for an incident or accident; ■ preparation of the final accident report with recommendations; 1.5 Are air charters regulated separately for commercial, and cargo and private carriers? ■ follow-up on the fulfilment of recommendations and drawing conclusions. No. The ICAA regulates all aviation activity. The Aviation Law and the Aviation Regulations (Aircraft Accident and Incident Investigation) set out the following main subjects: 1.6 As regards international air carriers operating in your ■ Procedures in case of an accident. jurisdiction, are there any particular limitations to be ■ The Chief Investigator’s authority, which includes his right to aware of, in particular when compared with ‘domestic’ visit any relevant place and act in any manner to preserve the or local operators? By way of example only, site of the accident for the completion of the investigation. restrictions and taxes which apply to international but not domestic carriers. ■ The possibility of the ICAA manager to suspend the licence of a person involved in an accident until the investigation is finalised, for reasons of flight safety. In principle, there are no particular limitations for international air carriers operating in Israel in comparison to local carriers. As Israel has adopted many international aviation agreements, 1.10 Have there been any recent cases of note or other including the EU-Israel Open Skies Agreement, the US-Israel Open notable developments in your jurisdiction involving air operators and/or airports? Skies Agreement and various bilateral agreements, most of the above agreements are based on the principle of reciprocity. The Aviation Law, which was enacted in 2011 after many years An example of a requirement from a foreign carrier is the Aviation of drafting and discussion, sets out a new and modern regulatory Services Licensing Law – 1963, which states that for the purpose regime for aviation services in Israel. of obtaining an operating permit, the foreign operator must appoint a representative in Israel who is authorised to act on his behalf in The Open Skies Agreement signed between Israel and the European proceedings under this law and under the Aviation Law. The ICAA Union influenced Israel’s aviation sector by strengthening competition publishes on its website the details of representatives of foreign and prompting many new airlines to begin operation in Israel. operators.

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ownership of their own engine and thereby mutually waive their 2 Aircraft Trading, Finance and Leasing rights to claim any title for other engines installed on another aircraft (“pool agreement”). 2.1 Does registration of ownership in the aircraft register constitute proof of ownership? 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- The Register of Aircraft, maintained by the ICAA, is not a register added tax (VAT) and/or goods and services tax (GST), of legal ownership, and therefore registration of ownership in and b) documentary taxes such as stamp duty; and the register does not constitute proof of ownership of a particular (to the extent applicable) do exemptions exist as aircraft. regards non-domestic purchasers and sellers of Israel aircraft and/or particular aircraft types or operations? The register may provide non-binding evidence of ownership, as the conditions established by the ICAA for the registry of aircraft There is no tax liability in Israel for aircraft sale to a merchant whose include relevant documentation. practice is scheduled aviation service for passengers or cargo, or for In order to register the aircraft in the Israeli aircraft register, an the import of aircraft by such merchant. application should be filed along with the bill of sale and purchase The above-zero value-added tax also applies to service provided in agreement, and fees should be paid. connection with the entry or exit of aircraft to/from Israel or for Further information in respect of the requirements for registration transportation of goods. of aircraft in the Israeli Register of Aircraft is available at It should be mentioned that other fees may apply, mostly for the www.caa.gov.il. use of airport facilities, and in addition, air operators are entitled to establish certain surcharges on ticket fares. 2.2 Is there a register of aircraft mortgages and charges? No stamp duty is applicable. Broadly speaking, what are the rules around the operation of this register? 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and The procedure for registration of aircraft mortgages, encumbrances Cape Town)? and other interests is in accordance with the Aviation Regulations (Aircraft Registration and Marking) – 1973. Israel has signed the main international Conventions – the Montreal Any mortgages on the aircraft shall be registered under the Aircraft Convention and the Geneva Convention. The Montreal Convention Register of Israel, administered by the ICAA. was ratified in Israel in March 2011. Deeds and actions pertaining to any imposed restraints or Israel has not signed the Cape Town Convention. encumbrances on the ownership title of the aircraft shall be reported to the ICAA. 2.7 How are the Conventions applied in your jurisdiction? The register is open to the public and information on mortgages and charges shall be provided to any interested person upon request. In general, the local law should ratify the Conventions and apply Any change or amendment to the registration of the aircraft shall be them to local legislation. For example, the Air Transport Law made only with the consent of the person for whom the mortgage adopted the Montreal Convention (and before that, the Warsaw was registered. Convention) into the local legislation.

2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as 3 Litigation and Dispute Resolution regards aircraft operation? 3.1 What rights of detention are available in relation to There are no specific regulatory requirements which a lessor or a aircraft and unpaid debts? financier needs to be aware of as regards aircraft operation in Israel. Israeli law acknowledges detention as a legal right of possession in 2.4 As a matter of local law, is there any concept of title goods until payment of debt. The right of detention will be provided annexation, whereby ownership or security interests only in specific matters which are stated in the law or agreed upon in a single engine are at risk of automatic transfer by the parties. or other prejudice when installed ‘on-wing’ on an In theory, detention is a self-remedy without the requirement to aircraft owned by another party? If so, what are the conditions to such title annexation and can owners approach legal instances, and carries with it the exemption from tort and financiers of engines take pre-emptive steps to liability for damages incurred by the operation of a detention. mitigate the risks? Israeli law does not state when such right is applicable, but requires a few conditions for its exercise. Such conditions include, inter According to Israeli law, there is no concept of title annexation alia: that the debt should be from a specific transaction, on which whereby ownership or security interests in a single engine are at risk date payment arrived; and that the exercise of detention should be of automatic transfer or other prejudice when installed “on-wing” on made bona fide. an aircraft owned by another party. Although a creditor may seize the aircraft according to the said legal The engines may be registered along with the aircraft at the Registry, right, the practical exercise of such right may be difficult due to but not independently. The practical solution for such risk may be several reasons (such as the fact that the aircraft is located in a place through contractual liability of the relevant parties, i.e. it is often that the owner of the detention right cannot independently reach). In agreed by all relevant lessors and financiers to recognise their sole such case, the creditor will have to apply to court.

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Generally, a single Judge presides in trials; however, a panel of 3.2 Is there a regime of self-help available to a lessor three Judges is established when the court hears an appeal of a or a financier of an aircraft if it needs to reacquire Magistrates Court’s judgment, when the accused is charged with an possession of the aircraft or enforce any of its rights offence punishable by imprisonment of 10 or more years, or when under the lease/finance agreement? the President or Deputy President of the District Court so directs. There are six District Courts in Israel – in Jerusalem, Tel Aviv, A regime of self-help may be available to a lessor or a financier of Haifa, Lod (Central District), Beersheba and Nazareth. an aircraft in case it needs to reacquire possession of the aircraft or The Supreme Court enforce its rights under the lease agreement. In practice, the lessor or financier will ask for a De-Registration Power of Attorney which The Supreme Court has jurisdiction to hear criminal and civil appeals Israel will provide them with the option for self-remedy. from judgments of the District Courts. Cases that begin in the District Court are appealable, as of right, to the Supreme Court. Other In the case that the self-remedy may not be exercised and an matters may be appealed only with the Supreme Court’s permission. application to court has to be made, it is a relatively fast procedure, as a declarative injunction will usually suffice for the lessor or The Supreme Court is also the High Court of Justice (“BAGATZ”) financier, and this does not require a long procedure. for special motions against the State of Israel and government bodies. The Supreme Court also has special jurisdiction for various other matters such as the elections to the Parliament (Knesset), civil 3.3 Which courts are appropriate for aviation disputes? rights matters and others. Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction The Supreme Court serves as an appellate court for rulings of the regarding the courts in which civil and criminal cases District Court. are brought? The Supreme Court is based in Jerusalem.

Israel is a unitary state with a single system of general law courts. 3.4 What service requirements apply for the service of In general, the Judiciary system in Israel establishes three levels court proceedings, and do these differ for domestic of courts: the Magistrates Court (first instance); the District Court airlines/parties and non-domestic airlines/parties? (second instance); and the Supreme Court (third instance). All of these courts are appropriate for aviation disputes and Pursuant to the Regulations of Civil Procedures, service of therefore the matter will be handled at the relevant court, based on documents within the jurisdiction of Israel may be processed by the distinctions specified hereunder. various methods including personal service, postal delivery, service The Magistrates Court is a trial court; the District Court serves as to the defendant’s lawyer (if known), by facsimile or other electronic a trial court as well as an appellate court; and the Supreme Court is communication. essentially an appellate court, which also operates as the High Court According to the above Regulations, the address for service shall of Justice. be the place of residence or place of business of a person who was There are no juries in Israel and the courts are served by professional nominated to accept service of court proceedings. Judges. Service of documents to a defendant which is an entity shall be done Magistrates Courts to the company’s formal office address. The Magistrates Court is the basic trial court of the Israeli system. The court may approve service of court proceedings outside the These courts have jurisdiction in criminal matters where the accused jurisdiction of Israel in several cases, and for these matters the is charged with an offence that carries with it a potential punishment claimant must file a request for court. of up to seven years’ imprisonment. In civil matters, these courts have jurisdiction in matters up to NIS 2.5 million. These courts 3.5 What types of remedy are available from the courts also have jurisdiction over the use and possession of real property. or arbitral tribunals in your jurisdiction, both on i) an Magistrates Courts also act as traffic courts, municipal courts, interim basis, and ii) a final basis? family courts and small claims courts. Generally, a single Judge presides in each case unless the President There are various remedies which depend on the nature of the of the Magistrates Court directs that the case will be heard by a dispute. In general terms, there are both (for historical reasons) panel of three judges. There are 29 Magistrates Courts in Israel. legal and ‘equitable’ remedies, and the following may be available: The jurisdiction of a Magistrates Court extends to the locality in ■ On an interim basis, the remedies may be an injunction order which it sits and the district where it is situated. to prevent the other party from an action until final judgment District Courts is given and also damages may be applied. ■ On a final basis, the remedies may be damages, an injunction District Courts are the middle-level courts of the Israeli judiciary preventing a certain action or stating that the other party system. The District Courts have jurisdiction in any matter that should undertake a certain action. The final judgment may is not within the sole jurisdiction of another court. In criminal also include orders (based on the original requests) for sale, matters, District Courts have jurisdiction for cases where the register or possession of an asset. potential punishment is more than seven years’ imprisonment. In civil cases, District Courts have jurisdiction in matters where the amount of claim exceeds NIS 2.5 million. District Courts also have 3.6 Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in unique jurisdiction over several issues – the economic division of what circumstances do these rights arise? the District Court in Tel Aviv, which was established in 2010, is a good example of special jurisdiction for financial and capital market There are rights to appeal to the courts from the decision of a “lower” matters. The District Courts also handle appeals against judgments court. Therefore, the Supreme Court is essentially an appellate of the Magistrates Courts. court for the District Courts for criminal and civil appeals from

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judgments of the District Courts. Other matters may be appealed The Authority will look specifically at the aviation sector and even only with the Supreme Court’s permission. The Supreme Court has more narrowly, at the specific type of aviation sector in which the special jurisdiction to hear appeals in matters of Knesset elections, transaction occurred (passenger or cargo transportation). rulings of the Civil Service Commission, and disciplinary rulings of In recent aviation cases (mostly for code-sharing agreements), the the Israel Bar Association. Authority has defined the relevant market regarding the aviation District Courts hear appeals of judgments of the Magistrates Courts. sectors as Origin and Destination (“O&D”) City Pairs. If an appeal was heard by the District Court (on a Magistrates Court This evaluation considers a demand-side perspective, whereby judgment), there is an option to file a request for another appeal customers consider all possible alternatives of travelling from a city to the Supreme Court, which will be heard only after the Supreme of origin to a city of destination, for business and leisure passengers Court’s special approval (such method is also relevant for appeals (time-sensitive and price-sensitive). The above also considers direct Israel for small claims courts which may be filed to the District Courts). (non-stop) flights and one-stop flights (subject to a certain period of In respect of arbitration, in general, there should be no appeal connection time). against an arbitrator’s ruling. However, the Arbitration Law notes The relevant tribunal for competition matters is the special Antitrust that there are several causes for annulment of an arbitrator’s ruling, Court which is part of the District Court in Jerusalem. Hearings are and also enables an appeal before an arbitrator if such condition was held in front of a tribunal of three persons – a Judge (of the District agreed within the arbitration agreement. Court) and two representatives of the public. Appeals against the judgments of this court are made to the Supreme Court. 4 Commercial and Regulatory 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain 4.1 How does your jurisdiction approach and regulate regulatory clearance/anti-trust immunity from joint ventures between airline competitors? regulatory agencies?

Joint ventures between airline competitors are subject to the According to the Israeli Antitrust Law, agreements which may Antitrust Commissioner’s approval. include restrictive arrangements are required to be approved, in advance, by the Israeli Antitrust Authority. There are several The Israel Antitrust Authority is the authority which is responsible exceptions, which are usually governed by a specific exemption or for promoting competition in Israel and for preserving existing “type exemption”, where no pre-approval is required (there might competition in the economy. be reporting and notification duties after signing the agreement). The Antitrust Authority is authorised to enforce different rules, which it does in accordance with the policies that it has formulated over the years and with the guidelines that it publishes. 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? The Antitrust Authority uses criminal enforcement tools to investigate and prosecute cartel crimes and tender coordination. All mergers and acquisitions of legal entities, including airlines, The Antitrust Authority was also granted the authority to impose that fall within the conditions of the Israeli Antitrust Law and monetary sanctions, which it uses in accordance with its manifesto that emphasises how violation of the law interferes with competition. satisfy certain financial thresholds, require mandatory pre-approval In addition to these tools, the Authority may issue declarative by submitting a “Notification of a Merger” to the Israeli Antitrust orders, including to the monopoly owner, as well as to define terms Authority. for mergers and exemptions. The financial thresholds may include the joint share of the parties For joint ventures, each case will be decided in accordance with the after the merger, a minimum amount of the annual turnover of the Israeli competition rules, which will take into account, inter alia, the companies, and whether one of the entities is a monopoly. market share and the turnover of the parties. The specific legislation for joint ventures between air carriers in 4.5 Please provide details of the procedure, including Israel is the Antitrust Rules for Agreements between Air Carriers time frames for clearance and any costs of – 2008, which set out the types of arrangements that are exempted notifications. from the prior approval of the Antitrust Commissioner and therefore shall not be regarded as restrictive arrangements. According to the Israeli Antitrust Law, companies may not merge unless a pre-merger notification has first been filed and the consent In general, code-sharing agreements and air carrier joint ventures are of the Antitrust Commissioner to the merger has been obtained and subject to the prior approval of the Antitrust Commissioner, although – if such consent is conditional – in accordance with the conditions some code-sharing agreements may not require the Commissioner’s stipulated. approval and may be approved after self-assessment of the parties and notification to the Commissioner, as specified in the Antitrust Each of the companies intending to merge shall give the notice Rules for Arrangements Regarding Marketing Flights between Air thereof, providing all details as shall be determined by the Carriers in Destinations Governed by Open Skies Agreements – Regulations. The Commissioner may request further information if 2012. he deems it necessary for the examination of the application. Within 30 days of the date on which he receives a pre-merger 4.2 How do the competition authorities in your notification from all of the companies seeking to merge, the jurisdiction determine the ‘relevant market’ for the Commissioner shall notify the companies as to whether he consents purposes of mergers and acquisitions? or objects to the merger, or stipulate conditions for it, as shall be provided in such notification; failure to give such notification within The Israeli Antitrust Authority will define the relevant market for the the 30 days provided shall be deemed to constitute a notice of purposes of mergers and acquisitions based on the specific matter. consent, unless the period is extended.

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Submitting a pre-merger notification to the Commissioner is conditioned upon the payment of a fee, as determined in the 4.8 What are the main regulatory instruments governing Regulations. the acquisition, retention and use of passenger data, and what rights do passengers have in respect of The Commissioner shall object to a merger of companies or stipulate their data which is held by airlines? conditions for it if, in his opinion, there is a reasonable risk that, as a result of the merger as proposed, the competition in that sector The Protection of Privacy Law includes rules for the safety of would be significantly harmed or the public would be harmed in one personal data, which are also relevant in respect of passenger data. of the following regards: The Privacy Protection Authority is the Israeli regulatory and (1) The price level of an asset or a service.

Israel enforcing authority for personal digital information, in accordance (2) The low quality of an asset or of a service. with the Privacy Protection Law. The authority is responsible for (3) The quantity of the asset or the scope of the service supplied, the protection of all personal information held in digital databases. or the constancy and conditions of such supply. According to the Privacy Protection Law, the duties of the data The Commissioner shall publish a notice of his decision to consent holder are: to a merger of companies, to object to it or to stipulate conditions for ■ Prohibition from using data other than for the purpose for it, in the Official Gazette and in two daily newspapers. which the information is intended. The Law further prohibits Should the Commissioner object to a merger of companies or the use of information about a person’s private affairs for stipulate conditions for it, each of the companies seeking to merge purposes other than the purpose for which the information may appeal to the Tribunal (Antitrust Court, which is part of the was provided. District Court in Jerusalem) within 30 days of the date on which the ■ Duty of information safety – the database owner, database Commissioner’s decision is received. holder and database administrator are obligated to ensure the security of the data contained in the database. Should the Commissioner consent to a merger of companies, ■ Duty of secrecy – the owner of the database and whoever whether conditionally or unconditionally, any person who is holds it must preserve the confidentiality of the information liable to be harmed by the merger, any trade association and any to which they are exposed while performing their work. consumers’ association, may appeal to the Tribunal against the ■ Obligation to give notice – notice must be given to the subject Commissioner’s decision, within 30 days of the date on which of the information (the person to whom the information notice of the Commissioner’s decision was published in two daily pertains). Such notice will include whether the information newspapers. owner has a legal duty to provide the information, the The Tribunal may affirm the Commissioner’s decision, revoke it or purpose for which the information is requested, to whom the amend it. information will be provided, and for what purposes. The Law further requires a database owner to register the database 4.6 Are there any sector-specific rules which govern the before it is used. The registration requirements apply to databases aviation sector in relation to financial support for air meeting the following criteria: operators and airports, including (without limitation) ■ The number of subjects of information which is found in the state aid? database exceeds 10,000. ■ The database contains sensitive information. In Israel, there are no sector-specific rules which govern the aviation ■ The database includes information that was not provided by sector in relation to financial support for air operators and airports. the subjects of the information. The only matter which may be considered state aid is the Israeli ■ The database is owned by a public body. Government’s decision to participate in a specific portion of the ■ The database is used for direct mail services. security expenses of the Israeli carriers, which was notified in accordance with the signing of the Israel–EU Open Skies Agreement. 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the 4.7 Are state subsidies available in respect of particular data and are there any applicable sanctions? routes? What criteria apply to obtaining these subsidies? Generally, air carriers in Israel, similar to other entities which collect data, are required by law to protect the data. The relevant law is the In general, there are no state subsidies available for particular routes. Privacy Protection Law – 1981. However, the Israel Ministry of Tourism issued a directive detailing The Privacy Protection Authority is the Israeli regulatory and the criteria for its participation in the costs of operating direct flights enforcing authority for personal digital information, in accordance to the city of Eilat (in south Israel), as it wishes to encourage direct with the Privacy Protection Law. The authority is responsible for flights between different countries and Eilat, in order to increase the the protection of all personal information held in digital databases. number of foreign tourists arriving in the city. The legislation includes administrative and criminal enforcement, Among the criteria are an undertaking by the flight operator to and applies to all entities in Israel – private, business and public – comply with all of the ICAA’s directives for operating flights to that hold or process personal digital information. Israel, to operate direct flights from a destination outside of Israel to Ovda airport (near Eilat) and that the flights are operated in a series of at least 16 rotations (round trips) from each destination. 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other The directive is for a limited period and subject to the approval of assets and data of a proprietary nature? the Ministry of Tourism. In Israel, intellectual property rights are protected under several laws which apply to patents, trademarks and other IP rights.

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The Israel Patent Office (ILPO) is the authority in Israel which under the Aviation Services Law on any flight which is operated by provides legal protection of industrial intellectual property, through the applicant. the registration of Patents, Designs and Trademarks. The office is part of the Ministry of Justice. 4.13 Are the airport authorities governed by particular The granting of a right is subject to the examination of an application, legislation? If so, what obligations, broadly speaking, which ensures that the exclusivity of the protection will not harm the are imposed on the airport authorities? legal rights of the general public. The ILPO provides free bilingual databases, both in Hebrew and in Yes. The Israel Airport Authority Law – 1977 is a specific law which English, regarding patents, trademarks and designs: applies to the operation of airports in Israel. According to this Law, Israel ■ The Patents Department handles the examination of national the obligations imposed on the airport authorities are that the IAA: and international patent applications, using E-filing capabilities. ■ holds, manages and operates Israel’s airports; and The ILPO receives international patent applications according ■ acts as necessary to maintain the security of the airports, to the Patent Cooperation Treaty (PCT). passengers, equipment, buildings and aircraft within airport ■ The Trademarks Department handles national and premises. international trademark registration applications under its The Law further clarifies that while fulfilling its duties, the IAA will capacity as a Receiving Office and an Office of Origin in be governed by the principles of development of air transportation, accordance with the Madrid Protocol, using E-filing capabilities. efficiency of operation of the airports, as well as providing and ■ The Designs Department handles the registration of national maintaining the proper level of flight safety. design applications following a formal and substantive examination. It should be noted that the IAA has the authority to cease the operation of an airport for a period to be determined in advance or until the The courts which deal with these matters are the ordinary courts conditions and dates to be determined by IAA are fulfilled, all of in Israel; there are no special courts established to deal with these which is subject to the approval of the Minister of Transportation. issues.

4.14 To what extent does general consumer protection 4.11 Is there any legislation governing the denial of legislation apply to the relationship between the boarding rights? airport operator and the passenger?

The Aviation Services Law – 2012 is the legislation governing the The Consumer Protection Law – 1981 also applies to aviation- denial of boarding rights. The law offers assistance, reimbursement related matters. The Consumer Protection Law sets out the duties of and compensation for flight delays and cancellations, as well as a merchant, mainly in respect of prohibition of deception, prohibition denial of boarding for flights to and from Israel. of acting using unfair influence, disclosure duties, and more. The Law is based on EU Regulation 261/2004, with adaptations The Consumer Protection Law states the duties in case of made specifically for Israel. cancellation of a transaction (distinguishing between the different The law provides passengers with remedies for delays of more than types of transactions). two hours, flight cancellations and denied boarding. The Consumer Protection Law provides the Consumer Protection In case of overbooking or any other case of denial of boarding, and Fair Trade Authority with powers of enforcement in relation to passengers are entitled to the following benefits: consumer legislation, which include, inter alia, financial sanctions ■ Assistance services without payment, which include meals and criminal sanctions in various matters. and refreshments in reasonable relation to the waiting time; hotel accommodation if an overnight stay (or longer) is required; transportation between the airport and the hotel; 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? and two telephone calls and the sending of a fax or email, at the election of the passenger. ■ Reimbursement of the cost of the flight ticket if the passenger All the major GDSs operate in Israel. decides not to travel, or a replacement flight ticket to the final destination. 4.16 Are there any ownership requirements pertaining to ■ Compensation as detailed in the schedule to the Law. GDSs operating in your jurisdiction? The Law further authorises the court to award exemplary damages in an amount that shall not exceed NIS 10,000 in several cases, No, there are no ownership requirements specific to GDSs operating including where the operator has not given the required benefits to in Israel. a passenger. The regular rules and requirements relating to non-Israeli companies which operate in Israel shall apply to GDSs, i.e. the requirement to 4.12 What powers do the relevant authorities have in have a registered address (office or local representative) in Israel. relation to the late arrival and departure of flights? No specific requirement for a percentage of local shareholders is required for such operation. The Aviation Services Law states the rules for compensation and assistance to be given to passengers in case of late arrival or departure 4.17 Is vertical integration permitted between air operators of flights. Under the said Law, the Minister of Transportation is and airports (and, if so, under what conditions)? responsible for the execution of the Law. In addition, the Aviation Services Licensing Law enables the ICAA As airports in Israel are owned by the State of Israel, the above not to grant an operating licence unless the applicant has undertaken question of vertical integration between air operators and airports to appoint a representative to assist passengers to realise their rights is not relevant.

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Legally, there is no prohibition on vertical integration between air The antitrust rules relating to exemption for code-sharing (including operators and airports; however, the relevant competition rules shall for destinations under Open Skies Agreements) are due for renewal, apply, including prohibition on the abuse of a dominant position and and we may see that this opportunity enables the Antitrust Authority the monopoly rules (if such party may be considered a monopoly). to align with the competition regime in other countries, as part of the Antitrust Authority’s intention to reduce the bureaucratic and regulatory burden. 5 In Future

5.1 In your opinion, which pending legislative or Omer Shalev Israel regulatory changes (if any), or potential developments Gross, Orad, Schlimoff & Co. (GOS) affecting the aviation industry more generally in 7 Menachem Begin Rd. your jurisdiction, are likely to feature or be worthy of Ramat Gan 5268102 attention in the next two years or so? Israel Tel: +972 3 612 2233 In the near future, there is expected to be a focus on amendments to Email: [email protected] current regulations, following lessons learned by the industry. URL: www.goslaw.co.il We expect an amendment to the Aviation Services Law (Compensation and Assistance due to Cancellation of a Flight) to Omer Shalev is the Managing Partner of Gross Orad Schlimoff & Co. enter into force, as there is a pending proposal for changes in the (GOS). above law in front of the relevant committee of Parliament. Mr. Shalev joined GOS as a Senior Partner in 2016 after a 10-year In addition, the developments in data protection for general matters term as V.P., General Counsel & Corporate Secretary of EL AL Israel may affect the specific issues relating to passengers’ personal data. Airlines, and five years in a similar position with Arkia Israeli Airlines. Having practised law for 23 years and served for 17 years in the As shown in recent years, consumer rights legislation will continue aviation industry, Mr. Shalev is highly specialised in aviation law. to be a part of many proposals for new laws and regulations, including the consumer programmes, duties of call centres for With his deep in-house experience of Israel’s largest airlines, and a broad perspective on how airlines work from the inside, Mr. Shalev prompt reply, and possible changes to consumer rights in case of brings a unique insight and legal perspective on the challenging airline cancellation of a transaction. sector in Israel. Recently, the Israeli Antitrust Authority published a draft amendment Mr. Shalev also specialises in directors and officers’ liability (D&O) to the Restrictive Trade Practices Law – 1988 for public comments. insurance claims and various corporate and commercial matters. The amendment includes granting the Authority more enforcement Mr. Shalev served as a member of the Legal Committee of the abilities (higher financial penalties), as well as a major changes to International Air Transport Association (IATA) for several years, and the law principally regarding restrictive arrangements, mergers and also served as Vice Chairman of the Legal Committee, and thus has in-depth experience in international aviation and the ability to monopolies. 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 solid reputation in representing foreign companies doing business 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 Insurances), 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.

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Italy Laura Pierallini

Studio Pierallini Francesco Grassetti

Other bodies are Assoclearance and the Ente Nazionale per 1 General l’Assistenza al Volo (ENAV), which are entities with delegated authority in the fields of slot allocation and air traffic control, 1.1 Please list and briefly describe the principal respectively. legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction. 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? Italy is a signatory of, and has ratified, the main international conventions and treaties concerning air transport (the 1933 Rome Operating licences are granted by ENAC (namely, by its dedicated Convention; the 1944 Chicago Convention; the 1948 Geneva Department, called Direzione Licenze) pursuant to relevant Convention; and the 1999 Montreal Convention). Italy has also provisions under the Italian Navigation Code, EC Regulation no. signed, but not yet ratified, the 2001 Cape Town Convention. 1008/2008 and ENAC Circular EAL-016. The main set of internal rules governing the aviation sector is the In order to obtain an operating licence, air carriers must file an Italian Navigation Code, approved by Royal Decree no. 327 dated application with ENAC. Such application must include: 30 March 1942, as subsequently amended by Legislative Decree ■ a certificate of registration with the Registry of Companies; no. 96 dated 9 May 2005 and Legislative Decree no. 151 dated 15 March 2006. ■ a statement pursuant to article 46 of Presidential Decree no. 445/2000, under which the company declares itself not The primary Italian laws in the aviation sector are: to be subject to liquidation or any insolvency or bankruptcy ■ Legislative Decree no. 250/1997, which established the procedure; Italian Civil Aviation Authority (Ente Nazionale per ■ a certified copy of the articles of association; l’Aviazione Civile – ENAC); ■ a certified copy of the by-laws; ■ Legislative Decree no. 185/2005, implementing Directive no. 2000/79/EC concerning the European Agreement on the ■ an extract of the register of the shareholders; and Organisation of Working Time of Mobile Workers in Civil ■ a certificate of citizenship, residence and criminal records Aviation; of the legal representative and any members of the board of ■ Legislative Decree no. 69/2006, implementing fines for directors. breach of EC Regulation no. 261/2004 on compensation The applicant air carrier must also submit a business plan relating to and assistance to passengers in the event of denied boarding, the initial three years of the prospective activity. flight cancellations, or long delays of flights; Pursuant to article 778 of the Italian Navigation Code, operating ■ Legislative Decree no. 197/2007, implementing fines licences are granted by ENAC to companies: for breach of EC Regulation no. 785/2004 on insurance ■ established in Italy and whose effective control is owned requirements for air carriers and aircraft operators; directly, or through majority ownership by Member States or ■ Ministerial Decree dated 10 December 2008, providing citizens of Member States; guidelines in the matter of fares of airport services rendered ■ having, as their main objective, air transport alone or on an exclusive basis; and combined with any other commercial activity involving the ■ Legislative Decree no. 24/2009, implementing fines for operation of aircraft or repair and maintenance of aircraft; breach of EC Regulation no. 1107/2006 on the rights of ■ owning a valid certificate of airworthiness issued by ENAC disabled persons and persons with reduced mobility when and holding one or more aircraft in property or leased (dry travelling by air. lease), as provided by article 2.2 of Circular EAL-16 issued Further essential rules are regulations and circulars issued by ENAC, by ENAC on 27 February 2008; and which is the main body regulating aviation in Italy, as established ■ providing satisfactory evidence of administrative, financial under the above-mentioned Legislative Decree no. 250/1997 and insurance requirements, as provided by EU Regulation and article 687 of the Italian Navigation Code. The Ministry of no. 1008/2008 and EU Regulation no. 785/2004. Infrastructure and Transport, acting through its specific Department Moreover, the air carrier must hold a valid Air Operator Certificate, (Dipartimento per i Trasporti, la Navigazione, gli Affari Generali issued by ENAC as well, which certifies that the air carrier has the ed il Personale), is the body which has general competence in the professional capabilities and necessary standard of organisation to aviation sector, and which holds supervising authority over ENAC. ensure the operation of its aircraft under safety conditions.

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1.3 What are the principal pieces of legislation in 1.5 Are air charters regulated separately for commercial, your jurisdiction which govern air safety, and who cargo and private carriers? administers air safety? No. Charter services (including: non-scheduled services; taxi flights; Safety regulation falls within the institutional duties of ENAC. own use charters; inclusive tour charters; advance booking charters; ENAC issues and renews airworthiness certificates and air operator special event charters; student charters; affinity charters; migrant certificates, and it also approves maintenance programmes. worker charters; and cargo charters) were formerly governed by the Furthermore, ENAC carries out inspections and controls on aircraft, Decree of the Ministry of Transport dated 18 June 1981 (regulation

Italy either operated for private or commercial flights. Air traffic control of non-scheduled services). Most of those rules, especially the ones is entrusted to ENAV. concerning charter flights within the EU, have been superseded by Italy applies the international rules issued by the International EU regulations, international conventions and treaties, as well as Civil Aviation Organization (ICAO), the European Aviation Safety national laws (see below). Agency (EASA), EU-OPS as provided by article 2 of EC Regulation In particular, with regard to air charters within the EU, the same are no. 1899/2006 amending Council EC Regulation no. 3922/1991 on operated in the “open skies” regime (i.e. relevant authorisation is the harmonisation of technical requirements and administrative granted to EU air carriers subject to slot availability). procedures in the field of civil aviation, as well as all the European According to article 787 of the Italian Navigation Code (headed regulations. “Non-scheduled air services ungoverned by international ENAC issues its own circulars and regulations to implement and agreements”), extra-EU non-scheduled air services are authorised further clarify the international rules mentioned above. ENAC is by ENAC, on a reciprocal basis, to carriers holding an EU air also responsible for the regulation of crew skills assessments. transport licence and to carriers of the country to/from which the Italy has implemented all the EU rules related to air safety (in flight operations are performed. Then the last paragraph ofthe particular, EC Regulation no. 216/2008, EU Regulation no. subject article defers to ENAC the ruling of these air services, which 965/2012, EU Regulation no. 748/2012, EU Regulation no. are indeed governed by the ENAC Regulation named “Discipline 1321/2014, EU Regulation no. 800/2013 and EU Regulation no. of extra-EU non-scheduled air services” of 24 April 2007. Article 1199/2016). 3 thereof specifies that “non-scheduled” flights include: ITC (i.e. inclusive tour charter flights); those related to special events; private use; transport of mail or freight; transport of dangerous goods; taxi 1.4 Is air safety regulated separately for commercial, services; and emergency and humanitarian aid. cargo and private carriers? A right of objection for charter flights operated in the so-called “fifth In general, safety requirements governing commercial and private freedom regime” is granted to Italian air carriers. flights are the same. They cover the technical requirements of aircraft, air traffic control and public safety requirements. The 1.6 As regards international air carriers operating in your differences relate to administrative, organisational and financial jurisdiction, are there any particular limitations to be regulations. aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, On 31 October 2011, ENAC issued Circular Nav. 70-C on the restrictions and taxes which apply to international but continuing airworthiness management organisation approval not domestic carriers. certificate (CAMO) for commercial air transport operations. With respect to private operations, ENAC Circular Nav. 71-B provided No restrictions are provided for EU air carriers to operate to that operators which do not perform commercial air transport must and from Italy, provided that they submit an application to the obtain the continuing CAMO when the aircraft have a weight of more local coordinator in charge of the allocation of slots according to than 5,700 kg or meet certain other specifications. Subsequently international rules provided by IATA conferences (clearance), EEC ENAC has cancelled the said Circulars as the relevant contents are Regulation no. 95/93, as amended by EC Regulation no. 793/04, as now covered by EU Regulation no. 965/2012 and EU Regulation well as Circular EAL-18 issued by ENAC on 24 August 2009. no. 1321/2014. Furthermore, domestic cabotage is allowed to EU carriers subject The criteria to determine whether the operations constitute to slot availability and compliance with the requirements set out commercial operations rather than private operations are outlined by EC Regulation no. 1008/2008 (Air Operator Certificate and Air by the ENAC Regulation dated 21 October 2003 (and following Transport Licence), as well as with article 38 of Law Decree no. amendments) and ENAC Regulation dated 30 June 2003. Such 179/2012 (converted into law by Law no. 221/2012). Licensed EU regulations provide, in relation to aircraft use, a general distinction carriers are entitled to apply to ENAC for the designation on extra- between: EU routes to/from Italy provided that they hold a stable organisation ■ commercial air transport operations, which include scheduled, within the Italian territory pursuant to article 7 of ENAC Circular charter and taxi flights, both passenger and cargo; EAL-14B (see question 1.10 below). ■ aerial work operations, which include, among others, aerial Extra-EU air carriers wishing to operate flights to and from Italy photography, advertisement, surveillance, fire prevention and according to traffic rights set out in either bilateral or multilateral air emergency services; and services agreements, have to be designated by the state holding the ■ general aviation operations, which include private aircraft traffic rights. If no air services agreement is in force, the schedule use and activities carried out by, among others, flying clubs can be authorised only upon prior request submitted by the Civil and flying schools. Aviation Authority of the country of origin of the extra-EU air The private use of aircraft must correspond to the statement rendered carrier. by the aircraft’s captain to ENAC on landing. Such statement is International air carriers are authorised to operate to/from Italy subject to control by ENAC. The private use of aircraft must be – on a reciprocal basis – under certain “open skies” air transport free of charge.

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agreements in place between the relevant countries, such as the to immediately provide relevant rescue and assistance, whilst also agreements signed by the European Union with the United States requesting the cooperation of other authorities, if appropriate. (2007), Morocco (2006), Israel (effective from 2018) and Ukraine ENAC has also issued Circular APT-18A, regulating the airport (effective from 2015). emergency plan in case of air accidents. Any change to existing authorisations (including but not limited ENAC is also responsible for verifying that any air carriers – either to any change to the Air Operator Certificate) has to be notified to EU or extra-EU and providing either commercial or private services ENAC for assessment and consequent actions pursuant to ENAC – operating to and from Italy comply with the EC Regulation no. rules (Circular EAL-15A dated 5 December 2016). 785/2004 on insurance requirements for air carriers and aircraft There are no taxes applied exclusively to international air carriers operators. Italy but not to domestic air carriers.

1.10 Have there been any recent cases of note or other 1.7 Are airports state or privately owned? notable developments in your jurisdiction involving air operators and/or airports? Most of the Italian commercial airports are state-owned and managed under concessions granted by the state to private On 16 July 2015, ENAC issued a new Regulation on remotely piloted companies, according to article 2 of Ministerial Decree no. 521 aerial vehicles (RPAVs, also called “drones”), which supersedes the dated 12 November 1997. previous Regulation of 2013 on the same matter. Such airport managing companies can be public entities, such as The preliminary distinction made by ENAC is between “remotely regional, provincial, municipal or other local public entities (e.g. the piloted aircraft systems” (RPAS, highly regulated and subject to the chamber of commerce). A notable exception is Aeroporti di Roma applicable provisions of the Italian Navigation Code) and “model S.p.A., the managing company of Rome Airports (FCO and CIA), aircraft” (so-called aeromodelli, exclusively used for recreational which is entirely owned by private shareholders. There are many and sport purposes and exempted from the Code provisions). private airports devoted to activities such as general aviation, flying RPAS are classified on the basis of the maximum take-off weight schools, parachuting, etc. (MTOW less than 25 kg / MTOW equal to, or more than 25 kg) and can be used for special operations or research and development activities. 1.8 Do the airports impose requirements on carriers Furthermore, flight operations are distinguished in VLOS (“visual flying to and from the airports in your jurisdiction? line of sight”, i.e. operations within vertical and horizontal distances which allow the remote pilot to keep a continuing view of the RPAS, Air carriers, either EU or extra-EU, must comply with the specific without the assistance of visual instruments) and BLOS (“beyond rules (the so-called Regolamento di Scalo) provided by the airports line of sight”, i.e. operations beyond certain distances which do not to and from where they decide to operate. The airports set out such allow a continuing view of the RPAS by the remote pilot). All RPAS rules in accordance with the general guidelines provided by ENAC must have a flight manual (or equivalent) and their pilots must be under Circular APT-19. certified by ENAC. The Regulation also establishes a mandatory third-party insurance for any kind of flight operations performed Moreover, air carriers must fulfil airport duties, as well as landing with RPAS (in compliance with EC Regulation no. 785/2004) and and take-off charges imposed by the relevant airport under ENAC subordinates the treatment of personal data collected by means of surveillance. In that respect, according to article 802 of the Italian RPAS to the Italian Data Protection Code (Legislative Decree no. Navigation Code, ENAC is entitled, upon the request of the airport 196/2003). Particular provisions are also established on the basis authorities and/or ENAV, to deny authorisation to aircraft taking off of the MTOW. from Italian airports as long as airport taxes and duties, as well as air navigation charges, are outstanding. 2 Aircraft Trading, Finance and Leasing 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 2.1 Does registration of ownership in the aircraft register which need to be adhered to? constitute proof of ownership?

Air accidents are regulated by articles 826 to 832 of the Italian Yes, registration of ownership in the National Aircraft Registry Navigation Code. The airport manager and public security authorities constitutes proof of aircraft ownership. have to immediately inform the judicial authority and the National Pursuant to the first paragraph of article 756 of the Italian Navigation Flight Safety Agency (Agenzia Nazionale per la Sicurezza del Code, aircraft can be registered in the National Aircraft Registry Volo – ANSV) of any accidents (Legislative Decree no. 66 dated in the name of the owner (when the EU nationality requirements 25 February 1999, which implemented Directive no. 94/56/EC pursuant to EC Regulation no. 1008/2008 are met), or, as per the containing the basic principles governing the investigations of civil second paragraph of article 756, in the name of the operator (holding aviation accidents and incidents). Directive no. 94/56/EC has been an air operating licence and providing ENAC with a relevant title to superseded by EU Regulation no. 996/2010 on the investigation and operate the registered aircraft). prevention of accidents and incidents in civil aviation. Pursuant to article 826 of the Italian Navigation Code, the technical 2.2 Is there a register of aircraft mortgages and charges? investigations of air accidents, if any, are conducted or supervised Broadly speaking, what are the rules around the by the aforementioned ANSV, in cooperation with the judicial operation of this register? authorities responsible for the investigation of the events. Pursuant to article 727 of the Italian Navigation Code, as soon as Mortgages are registered in the National Aircraft Registry. ENAC is informed of aircraft in danger or air accidents, it is entrusted Registration is made by filing the notarised mortgage deed with

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ENAC. The mortgage is then recorded by ENAC on both the case-by-case basis, for instance: the transaction is VAT-exempt if National Aircraft Registry and the Certificate of Registration of the an aircraft is exported from the Italian territory within 90 days after relevant aircraft. the transfer of title has occurred; and the importation of an aircraft is There are no public registries of aircraft charges; neither are these VAT-exempt if the same is made by an airline operating chiefly for recorded with the Italian Aircraft Registry. rewards on international routes.

2.3 Are there any particular regulatory requirements 2.6 Is your jurisdiction a signatory to the main which a lessor or a financier needs to be aware of as international Conventions (Montreal, Geneva and regards aircraft operation? Cape Town)? Italy

Aircraft operation in Italy is subject to the surveillance of ENAC, Italy is party to the Montreal Convention dated 28 May 1999 regardless of where relevant aircraft are registered and whether or (Convention for the Unification of Certain Rules for International not they are owned by the operator. If an aircraft operated in Italy Carriage by Air), which has been ratified by Italian Law no. 12 dated th is registered with a foreign registry, the Civil Aviation Authority of January 2004 and entered into force on the 60 day (28 June 2004) th the state of registration shall delegate surveillance of the aircraft to after the 30 ratification. ENAC. Italy is also party to the Geneva Convention of 19 June 1948 on In compliance with article 83-bis of the ICAO Convention, ENAC the International Recognition of Rights in Aircraft and has signed, grants Italian carriers authorisation to operate aircraft registered in but not yet ratified, the Cape Town Convention on International a foreign registry, subject to the existence of an agreement between Interests in Mobile Equipment together with the relevant Aircraft Italy and the state of registration, regulating the delegation of Equipment Protocol. functions and duties of surveillance over the operations, crews and Due to the fact that the Cape Town Convention has not yet been continuing airworthiness of such foreign aircraft. To date, ENAC ratified in Italy, the interests on aircraft are regulated by the Italian has executed such agreements with the following states: Austria; Civil Code, the Italian Navigation Code and the Geneva Convention. Denmark; Germany; Ireland; Lithuania; Luxembourg; Malta; Poland; Portugal; Slovenia; Spain; Sweden; and Switzerland. In the 2.7 How are the Conventions applied in your jurisdiction? absence of an agreement, the authorisation can be granted on a case- by-case basis. Conventions are applicable in Italy subject to ratification by way Please refer to question 3.1 below with regard to rights of detention of a national law. Upon ratification, conventions are applied under available under the Italian system in relation to aircraft. Italian jurisdiction equally to national laws.

2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests 3 Litigation and Dispute Resolution 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 3.1 What rights of detention are available in relation to conditions to such title annexation and can owners aircraft and unpaid debts? and financiers of engines take pre-emptive steps to mitigate the risks? The Italian courts may order the detention of any Italian or foreign aircraft for unpaid charges provided under article 6 of Law no. 324 Under Italian law, if an engine is installed ‘on-wing’ on an aircraft dated 5 May 1976, which states that the owner of the aircraft and that is owned by a different entity, the engine does not cease to be its operator are jointly liable for the payment of rights, taxes and the property of the titleholder and the latter maintains the right to interests to airports. require the separation of the engine from the aircraft. The title in the An aircraft can also be detained pursuant to article 1023 of the engine can be enforced against third parties (including the owner of Italian Navigation Code, which provides certain statutory preferred the host aircraft) only when they result from a formal legal document liens on aircraft by cause of their operation. (e.g. purchase agreement or lease agreement) bearing data certa (i.e. Moreover, according to article 802 of the Italian Navigation Code, undisputable date – an Italian legal concept – which can be obtained, ENAC is entitled, upon request of airport authorities and/or ENAV, for example, through a notarisation or a post seal on the document) to deny authorisation to aircraft taking off from Italian airports as or from the registration certificate of the aircraft. long as airport taxes and duties, as well as air navigation charges, are outstanding. 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), 3.2 Is there a regime of self-help available to a lessor or a and b) documentary taxes such as stamp duty; and financier of aircraft if it needs to reacquire possession (to the extent applicable) do exemptions exist as of the aircraft or enforce any of its rights under the regards non-domestic purchasers and sellers of lease/finance agreement? aircraft and/or particular aircraft types or operations? Under the Italian system, self-help remedies are not enforceable Generally speaking the transfer of an aircraft title may attract Italian to the extent that they would entitle the enforcing party to take taxes if: (i) the seller and/or the buyer are tax resident in Italy; enforcement measures with respect to the aircraft directly without and/or (ii) the relevant aircraft is registered in the Italian Aircraft seeking remedies through the judicial system, it being understood Registry; and/or (iii) the aircraft is located in Italy at the time of that any such self-help remedies would only be possible if taken the transfer. Having said so, specific exemptions may apply on a with the express consent of the lessee given at the time when the relevant measures have to be taken.

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In case of a lessee’s non-cooperation, a judicial order of the certified email, as long as the defendant also holds a certified email competent court is necessary to take possession of the aircraft. The address. Companies, public administrations and professionals are owner/lessor cannot enforce the lease agreement by taking physical required to have a certified email address and to make the email possession of the aircraft. Therefore, the interested party may either address public through specific registers. act before the Italian competent court, or enforce a foreign judgment The mechanism for serving court proceedings outside of Italy is in the Republic of Italy (to the extent such judgment is recognised ruled by bilateral or international conventions ratified by Italy. Our under the Italian system). Under the laws of Italy (article 633 of country has entered into certain bilateral conventions (e.g. with San the Italian Civil Procedure Code), the owner/lessor can apply to the Marino, Argentina and Australia) which specifically regulate the court for an injunction to return the aircraft, which can be granted instruments for servicing civil acts. In respect of Member States inaudita altera parte and be either immediately enforceable or of the European Union, the service rules are established by Council Italy subject to a waiting period of 40 days for the possible opposition Regulation no. 1393/2007 (on “the service in the Member States of the lessee. The achievement of an immediately enforceable of judicial and extrajudicial documents in civil or commercial order much depends on the actual event of default claimed and the matters”). For other countries (i.e. extra-EU and with which Italy evidence that the owner/lessor is able to provide information to has not executed any bilateral convention) the service is governed the court about its right to repossess. In detail, the insolvency of under The Hague Convention of 1 March 1954 and 15 November the lessee and the absence of disputes about the lessee’s default or 1965, provided that such countries are parties thereto. Otherwise, the like would expedite the proceedings, while – on the contrary – the service can be effected by the competent diplomatic office based disputes about amounts to be paid, and/or the owner/lessor’s right to in the country where the service has to be made. repossess and/or the existence of any default under the lease, would slow the proceedings. 3.5 What types of remedy are available from the courts Under article 1057 of the Italian Navigation Code, aircraft cannot or arbitral tribunals in your jurisdiction, both on i) an be seized, confiscated, attached or be the target of precautionary interim basis, and ii) a final basis? measures to the extent that: (i) they are state-owned aircraft; (ii) they are operated for the transport of passengers and/or goods for profit Articles 669 to 705 of the Italian Civil Procedure Code provide and they are either ready to take off or are flying; or (iii) they are for interim measures intended to protect the rights of the claimant operated for scheduled services in Italy, unless the prior authorisation outside proceedings, or to decide on the claim during proceedings. of the Italian Ministry of Infrastructure and Transport is obtained. These are granted considering the preliminary evidence submitted by Please note that, recently, certain Italian Courts have granted the claimant and the damage that might be suffered by the claimant’s precautionary attachments of aircraft operated for scheduled rights if a precautionary measure is not applied at short notice. In services without requiring the prior authorisation of the Ministry of certain cases, such as restraining orders or urgent measures granted Infrastructure and Transport. under article 700 of the Italian Civil Procedure Code, the interim measure is not necessarily followed by an ordinary action. In other cases, such as seizures, attachments, etc., after interim measures are 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For granted, the parties have 60 days within which ordinary proceedings example, is there a distinction in your jurisdiction must be commenced. regarding the courts in which civil and criminal cases Remedies available from the courts on a final basis are the so- are brought? called sentenze, being the ordinary decisions issued by the judges to resolve a judicial dispute between the parties. Such decisions can Italian ordinary courts are competent for aviation disputes and (either alternatively or jointly): (1) order the losing party to (i) pay a yes, there are distinctions regarding the courts in which civil and certain amount of money, (ii) comply with a certain duty, and/or (iii) criminal cases are brought. In detail, civil aviation disputes of a refrain from continuing a certain activity (the so-called sentenza di value up to EUR 5,000 fall into the competence of the Justices of condanna); (2) recognise a specific right of either party or otherwise the Peace. Civil aviation disputes of a value exceeding EUR 5,000 deny such recognition (the so-called sentenza dichiarativa); and/or are instead brought before the Civil Courts. (3) establish/modify/revoke a specific right of either party (the so- With respect to criminal cases, the Criminal Justices of the Peace called sentenza costitutiva). have jurisdiction over minor offences (e.g. negative and offensive remarks; threat; or omission to rescue) and the authority to apply 3.6 Are there any rights of appeal to the courts from the money penalties to the guilty party. Any other offences are subject decision of a court or arbitral tribunal, and, if so, in to the jurisdiction of the Criminal Courts, except for the most serious what circumstances do these rights arise? crimes (e.g. criminal conspiracy; trade in human beings; and other crimes whose penalty is imprisonment for life), which are brought Generally speaking, the decisions of a first instance court can be before the so-called Corte d’Assise. appealed to a higher court, to the Court of Appeal (second instance) and finally to the Supreme Court of Cassation (third and final instance). 3.4 What service requirements apply for the service of The three levels of jurisdiction are: court proceedings, and do these differ for domestic First Instance airlines/parties and non-domestic airlines/parties? Justice of the Peace, who is competent for civil disputes of a value The standard procedure for informing a defendant that he is being below EUR 5,000, and Tribunale, where the deciding body is a sued consists of serving the writ of summons to him by means single professional judge. of the court clerks. The service is carried out by the court clerks Appeal to the defendant’s registered office (for entities) or residence Court of Appeal, where the deciding body is a panel of three judges: (for individuals). Ministerial Decree no. 55 of 3 April 2013 also the Court of Appeal reviews the first instance decision by reference provided the facility for lawyers to serve writs of summons by to points of fact and law.

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Supreme Court The notification must be filed with the Italian Competition Authority The Corte Suprema di Cassazione is based in Rome, with jurisdiction before the transaction takes place (that is, before the acquiring entity over the whole territory. This is the highest court of the judicial system can substantially influence the target entity’s behaviour). and ensures the precise application and uniform interpretation of the The notification must be submitted after the parties to the transaction law. It decides conflicts of competence between the lower courts, and have reached an agreement on the essential aspects of the transaction. conflicts of jurisdiction. It also has the power to re-examine decisions For acquisitions of control of an undertaking, the requirement to on appeal from the lower courts, but only on points of law. It is a file before the transaction takes place is considered fulfilled if the collegial body and decides with a college of five judges. It has three implementation of the agreement is made conditionally on the civil divisions and hears cases of particular importance in joint session. Italian Competition Authority’s approval. Italy Under the Italian system a dispute can also be deferred by the relevant parties to an arbitration procedure (unless the arbitration 4.4 How does your jurisdiction approach mergers, is expressly excluded by law for the specific topic of the dispute), acquisition mergers and full function joint ventures? governed by articles 806 to 840 of the Italian Civil Procedure Code. The parties can either choose arbitration by a written agreement Mergers, acquisition mergers and full-function joint ventures are once the event giving rise to the dispute has already occurred (so- subject to compulsory notification if the turnover thresholds – called compromesso) or, alternatively, provide a general arbitration established by Law no. 287/1990 and subject to yearly indexation clause under any agreement they enter into. – are met. Generally speaking, a concentration that does not have a Pursuant to article 818 of the Code, arbitrators cannot grant interim Community dimension under article 1 of the EU Merger Regulation and precautionary measures (e.g. seizures), which stay with the must be filed with the Italian Competition Authority when the competence of the ordinary courts. following turnover thresholds are met: (i) the aggregate Italian Final awards can be appealed before the ordinary judge (Court of turnover of all the involved undertakings exceeds EUR 492 million; Appeal), except when it is expressly excluded by the agreement and (ii) the Italian turnover of one of the involved undertakings between the parties. exceeds EUR 30 million (such thresholds are amended on a yearly basis by resolution of the Italian Competition Authority). Upon such filing, the Italian Competition Authority is called to grant 4 Commercial and Regulatory clearance of the specific operation assessing whether or not it may cause potential detriment or a decrease in competition within the relevant business field. 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? 4.5 Details of the procedure, including time frames for Joint ventures between airline competitors are subject to the general clearance and any costs of notifications. competition rules applied by the regular competition authority, namely the Autorità Garante della Concorrenza e del Mercato. The procedure which the Italian Competition Authority follows for The regulatory framework is provided for by Italian Law no. 287 of evaluating concentrations consists of two separate phases. 10 October 1990 (the Italian Competition Act), which is the main First phase: under article 16(4) of the Italian Competition Act, reference since it establishes the Italian Competition Authority. The within 30 days of receiving the notification (or of being informed of Italian Competition Act specifies that its substantive provisions the concentration by any other means where the parties have failed must be interpreted in accordance with the principles of the EU. 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) commence a second-phase 4.2 How do the competition authorities in your jurisdiction determine the “relevant market” for the investigation, if the transaction raises competition concerns. purposes of mergers and acquisitions? The 30-day time limit is reduced to 15 days in the case of public takeover bids. If the information provided in the notification is In the aviation sector, the Italian Competition Authority has inaccurate, incomplete or untrue, the Italian Competition Authority distinguished between the charter and scheduled flight markets. can request clarification of the information provided and suspend For charter flights, the geographical market is divided into long- the 30-day time limit until the parties respond to that request. haul routes and medium- or short-haul routes that are then divided Second phase: under articles 16(8) and 18 of the Italian between European countries and the Mediterranean Sea. The Competition Act, if the Italian Competition Authority decides to relevant market for scheduled flights is defined on the basis of the open an investigation, it must notify the undertakings concerned, single routes operated point-to-point or city-pair by air carriers within 45 days of commencing that investigation, whether involved in a competition assessment. it has decided to: (i) prohibit the concentration; (ii) clear the concentration unconditionally; (iii) clear the concentration subject 4.3 Does your jurisdiction have a notification system to commitments offered by the undertakings which remove any whereby parties to an agreement can obtain aspects of the concentration that were initially deemed likely regulatory clearance/anti-trust immunity from to distort competition; or (iv) clear the concentration subject to regulatory agencies? measures prescribed by the Italian Competition Authority to prevent the creation or strengthening of a dominant position. Article 16 of the Italian Competition Act provides for a mandatory The 45-day period can be extended during the course of the pre-merger notification of concentrations meeting the turnover investigation, for a further period of no more than 30 days, in cases thresholds (see question 4.4 below). where the undertakings concerned fail to provide information and data in their possession upon request.

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As far as costs of notification are concerned, the amount of the personal data; update and amend their personal data held by airlines notification depends on the total value of the transaction, which (as well as other providers); and deny the processing of their personal is adjusted to take into account the ratio between the Italian and data. the worldwide turnover of the target. At present, the notification fee has been set by the Italian Competition Authority at 1.2% of 4.9 In the event of a data loss by a carrier, what the transaction value, with a minimum limit of EUR 3,000 and a obligations are there on the airline which has lost the maximum of EUR 60,000. data and are there any applicable sanctions?

4.6 Are there any sector-specific rules which govern the Article 15 of the Data Protection Code – combined with article 2050 Italy aviation sector in relation to financial support for air of the Italian Civil Code – provides a strict liability, and relevant operators and airports, including (without limitation) indemnity obligation, for anyone (including air carriers) causing state aid? damages through the treatment of personal data (including the event of data loss), except if satisfactory evidence is given that all suitable General state aid rules provided by the EC Treaty apply to the measures to avoid such damages have been taken. aviation sector in Italy. No sector-specific provisions regulating direct or indirect financial support to individual companies by the 4.10 What are the mechanisms available for the protection government or government-controlled agencies or companies exist. of intellectual property (e.g. trademarks) and other The main principles of the state aid rules are contained in article 107 assets and data of a proprietary nature? of the Treaty on the Functioning of the European Union (TFEU). Pursuant to article 107, any aid granted by the state or through state Intellectual property rights are protected under the Italian Intellectual resources in any form whatsoever is incompatible with the common Property Code (Legislative Decree no. 30/2005). The Public Body market when it distorts or threatens to distort competition by with authority over intellectual property rights is the Italian Patents favouring certain undertakings or the production of certain goods. and Trademarks Office (Ufficio Italiano Brevetti e Marchi), which Most of Italy’s local airports are controlled by public entities and, holds public registries for – inter alia – trademarks, patents and therefore, their management and financing is subject to EU state aid utility models. rules as outlined under: (i) Communication 2005/C 312/01 of the As far as the judicial protection of intellectual property rights is Community (guidelines on financing of airports and start-up aid to concerned, a specialised division of the Tribunal (the so-called airlines departing from regional airports) and subsequent European Sezione Specializzata Proprietà Industriale ed Intellettuale) Commission Communication 2014/C 99/03; and (ii) the guidelines has been established by Legislative Decree no. 168/2003, as published by the Italian Ministry of Transport on 2 October 2014 subsequently amended and updated. in respect of support for air carriers in starting up and developing air routes. 4.11 Is there any legislation governing the denial of boarding rights? 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these The provisions set forth by EC Regulation no. 261/2004 are directly subsidies? applicable and enforceable in the Italian jurisdiction. The Italian Parliament has issued Legislative Decree no. 69/2006, According to article 782 of Italian Navigation Code, the Italian implementing fines for breach of the mentioned EC Regulation no. government may impose public service obligations to guarantee the 261/2004. 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 4.12 What powers do the relevant authorities have in developing region or on a thin route to any regional airport, when relation to the late arrival and departure of flights? such route is considered vital for the economic development of the region in which the airport is located. Such rules imposed Italian Legislative Decree no. 69/2006 of 27 January 2006 empowers by the Italian government are consistent with the European legal ENAC to issue fines towards national and European air carriers framework established by articles 16, 17 and 18 of EC Regulation which are in breach of rules under EC Regulation no. 261/2004 no. 1008/2008 for public service obligations, the related public rules relating to assistance to passengers in case of – inter alia – late tender procedures and the examination by the authorities on how arrival and departure of flights. such obligations are performed by the awarded carriers.

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Italy of any Italian airport must issue an updated list of the services ENAC is working on the Italian implementation process of the (so-called carta dei servizi) provided within the respective airport new European rules on airports, which is due to be completed by facilities, which sets out the mandatory quality standards to be 31 December 2017. This activity involves the provisions of EC complied with in rendering those services. Regulation no. 2016/2008 (the so-called “Basic Regulation”), EC Regulation no. 1108/2009 (enlarging the EASA’s competences 4.15 What global distribution suppliers (GDSs) operate in to include aerodromes, air traffic management and air navigation your jurisdiction? services within the EU safety system) and EU Regulation no. 139/2014 (laying down requirements and administrative procedures The following global distribution suppliers (GDSs) operate in Italy: related to aerodromes), as well as the acceptable means of Abacus; Amadeus; Galileo; KIU; Patheo; Sabre; and Worldspan by compliance (AMC), certification specifications (CS) and guidance Travelport. material (GM) in the context of airport facilities issued by the EASA. The road map prepared by ENAC for the said purpose identifies 4.16 Are there any ownership requirements pertaining to four macro-areas of intervention: regulatory and management; GDSs operating in your jurisdiction? certifications and conversion of previous certifications; communication; and training/education. There are 43 airports The operations of GDSs in Italy are governed by the provisions set throughout the Italian territory which are concerned by the required forth in EC Regulation no. 80/2009. coordination actions. In particular, ENAC: (i) added a new section on its website entirely focused on EU Regulation no. 139/2014; (ii) 4.17 Is vertical integration permitted between air operators prepared draft framework agreements between airport managing and airports (and, if so, under what conditions)? companies and the infrastructure safety and security entities to improve the coordination of surveillance and prevention services; Generally speaking, vertical integration between air operators and (iii) issued guidelines with instructions and practical information for airports is permitted under the Italian system, always provided that, airport managing companies on how to handle the alternative means when the airport is state-owned, the relevant purchase transaction of compliance (AltMoC), which are used to prove the achievement shall be carried out via a public tender procedure (regulated by of the targets identified by EU Regulation no. 139/2014 (as an Legislative Decree no. 50/2016, which implemented European alternative to the AMC published by the EASA); and (iv) will Directives no. 2014/24/UE and no. 2014/25/UE). publish a regulation to develop risk management plans for the areas located near airports, in respect of prospective dangers and obstacles to air operations.

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Laura Pierallini Francesco Grassetti Studio Pierallini Studio Pierallini Viale Liegi 28 Viale Liegi 28 Rome 00198 Rome 00198 Italy Italy

Tel: +39 06 88 41 713 Tel: +39 06 88 41 713 Email: [email protected] Email: [email protected] URL: www.studiopierallini.it URL: www.studiopierallini.it Italy

Laura Pierallini, founder and named partner of the Firm, spent Francesco Grassetti is a senior lawyer in the aviation team and he several years in the legal and tax department of the Arthur Andersen has a significant experience in the whole range of regulatory and Worldwide Organisation and, from 2001 to 2005, was the managing legal advice. Francesco is enrolled at the Bar Association of Rome partner of the international law firm Coudert Brothers in Rome. and, before joining Studio Pierallini in 2011, he worked for reputable She is a professor of Commercial Law and Air Law at the LUISS commercial law firms in the US and Italy. University of Rome. He assists clients in connection with purchase, sale, leasing and Ms. Pierallini has practised aviation law since 1988, providing expert financing transactions of commercial aircraft and helicopters, including advice to clients across the whole of the international aviation sector, single aircraft and multi-aircraft portfolios. He also focuses his practice including aircraft finance and leasing, litigation and dispute resolution, on the business and private jet market, providing a full range of employment and corporate issues. Her clientele include Italian and assistance to the industry (mainly to banks, lessors, owners, operators foreign airlines, manufacturers, lessors, financiers, airports, handlers and manufacturers), such as structuring and finalising cross-border and travel agents. She also assists her clients in regulatory matters, deals, perfection of securities over aircraft objects, filings with civil including advisory services and representation before governmental aviation authorities and the international registry under the Cape Town agencies, having continuous contact with the Civil Aviation Authorities, Convention, aircraft operation and management, enforcement issues mainly in Italy and the European Union, but also abroad. and local taxes. Ms. Pierallini also advises airlines and airport handlers in restructuring In addition, Francesco provides airlines, business operators and other and insolvency procedures. She has advised on IPOs of Italian players of the aviation sector with a variety of support services, dealing airlines at the Milan stock exchange and M&A of domestic airlines on a regular basis with the negotiation and finalisation of sector by foreign airlines. She is an adviser to the Italian Association of Air contracts (transport, charter, dry-lease and wet-lease, management, Carriers and has succeeded in challenging a resolution of the Italian maintenance, ground handling, supply, licensing, consulting) and CAA related to airports’ charges before the Administrative Supreme regulatory advice in respect of the Italian jurisdiction and the European Court (Consiglio di Stato). Union (authorisations and licences, traffic rights, slots, competition, Ms. Pierallini regularly attends and organises conferences on aviation, data privacy, consumer protection). presenting speeches and moderating panels at various Italian and Furthermore, Mr. Grassetti advises clients in all aspects of corporate international symposia (in particular organised by the International and commercial law, including relations with customers, suppliers Air Transport Association (IATA), the European Air Law Association and business partners, legal compliance, corporate governance, (EALA), the European Aviation Club (EAC), the International Bar intellectual property protection, preparation of all types of commercial Association (IBA) and Assaereo). Ms. Pierallini is also a committee agreements, acquisition and management of assets, production and member of the European Air Law Association (EALA), and a member distribution issues. of the International Aviation Women’s Association (IAWA) and the European Aviation Club (EAC). He is a regular attendee at aviation conferences worldwide and contributes to international publications on aviation law. She is named as a leading lawyer by several guides, including: Expert Guides – Aviation Lawyers; Expert Guides – Women in Business Law; Who’s Who Legal – Transport (Aviation Finance; Aviation Regulatory; Aviation Contentious); and The Legal 500 EMEA. Ms. Pierallini was shortlisted as “Best Aviation Lawyer” for the Europe Women in Business Law Awards in 2015, 2016 and 2017.

Studio Pierallini is a multidisciplinary law firm based in Rome and Milan. The Firm has acquired a global and recognised reputation in aviation for over 20 years, 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. 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 include Italian and foreign airlines, manufacturers, lessors, financiers, airports, handlers and travel agents. In the context of the most important transactions involving airlines ever carried out in the Italian market, the Firm has 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 structuring 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 litigation issues; setting up the structure of companies; pre- and post-merger notification with the Italian Antitrust Authority; and all other legal and regulatory 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).

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Japan

Mori Hamada & Matsumoto Hiromi Hayashi

and do not include airport terminals and car parks. A unique 1 General 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 1.1 Please list and briefly describe the principal owned by a local government and private entities. This is legislation and regulatory bodies which apply to and/ one reason for the enactment of the Airport Concession Act. or regulate aviation in your jurisdiction. Please also see question 1.10. The airport operator (kuukou kanrisha) under the Airport Act The principal regulator of aviation is the Ministry of Land, is essentially the national government or local government Infrastructure, Transport and Tourism (the “MLIT”). Separate which owns and manages airports. It must submit to MLIT bureaus regulate specific areas relating to transportation, such the MLIT prior notification of the landing fees and other as by air, road, railway, and water. The MLIT bureau regulating fees to use the runways or relevant facilities. If the MLIT aviation is the civil aviation bureau (koukuu kyoku). determines that such fees are (i) discriminatory, or (ii) The principal laws regulating aviation in Japan are described below. extremely inappropriate, and the use of the airport is likely to be extremely limited, the MLIT may issue an order to the A. The Civil Aeronautics Act (Koukuu Hou) airport manager to change the fees (Airport Act, Article 13). The purpose of the Civil Aeronautics Act is to ensure the C. The Aircraft Mortgage Act (Koukuki Tetitou Hou) safety of aircraft and develop aviation by establishing order in the aviation business. This law is based on the Convention Under the Aircraft Mortgage Act, certain aircraft registered on International Civil Aviation (Chicago Convention) and its pursuant to the Civil Aeronautics Act can be subject to Annexes. security interests. Please see question 2.2. The Civil Aeronautics Act comprises 11 chapters. Chapters D. The Aircraft Manufacturing Industry Act (Koukuki 1 to 6 and 9 to 11 apply to both commercial aviation and Seizou Jigyou Hou) general aviation. Their provisions include: aircraft registration The Aircraft Manufacturing Industry Act provides that (Chapter 2); aviation safety such as airworthiness (Chapter 3); the manufacture and repair of certain aircraft and aircraft qualifications of airmen (Chapter 4); designation, permission apparatuses requires a permit for each factory from the and management of airways and establishment of airports and Ministry of Economy, Trade and Industry (“METI”), and air navigation facilities (Chapter 5); requirements for operating must be carried out by methods approved by the METI. aircraft (Chapter 6); requirements for operating unmanned E. Others aircraft vehicles (Chapter 9); and penalties for violations of this The Act for the Establishment of the Japan Transport Safety law (Chapter 11). Chapter 7 regulates commercial aviation Board (Unyu Anzen Iinkai Secchi Hou) established the said such as the aviation transport business and businesses using board to investigate aircraft accidents, including their causes. aircraft (please see question 1.2 below). Chapter 8 regulates The board also implements measures necessary to prevent aircraft registered outside Japan and businesses conducted by such accidents. Please see question 1.9. foreign entities. The Act on the Prevention of Damage caused by Aircraft Certain provisions of the Civil Aeronautics Act do not apply Noise in Areas around Public Airports regulates noise to aircraft used by, airmen employed by, and airports and air problems caused by aircraft. 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 1.2 What are the steps which air carriers need to take in Japan (Agreement Under Article VI of the Treaty for Mutual order to obtain an operating licence? Cooperation and Security between Japan and the United States of America, regarding Facilities and Areas and the A. Aviation Transport Business (Koukuu Unsou Jigyo) Status of United States Armed Forces in Japan). The aviation transport business is the business of transporting B. The Airport Act (Kukouu Hou) persons or cargo by aircraft for a fee (Civil Aeronautics Act, Under the Airport Act, the MLIT is in charge of policy- Article 2, Item 18). making for establishing and managing airports in Japan. With A permit from the MLIT is required to start an aviation transport a few exceptions, airports in Japan were built and are owned business (Id., Article 100, Paragraph 1). The application for a and managed directly by either the national government or permit must state the applicant’s name and address, the name the local governments. Airports mean basic aeronautical of its representative director, items to be transported by aircraft, facilities such as runways, aprons and navigation facilities, maintenance, and the total amount and details of funding and

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financing (Id., Article 100, Paragraph 2). The MLIT will pass the MLIT’s inspections on facilities to ensure the examine whether the business plan is suitable to ensure safety of aircraft operation, including facilities to manage, transport safety, whether the applicant is competent to conduct operate, and maintain aircraft (Id., Articles 102 and 124). the aviation transport business, and whether the applicant is Any domestic air carrier must have a manual regarding the disqualified on grounds listed in the Civil Aeronautics Act operation and maintenance of its aircraft, which manual (Id., Article 101, Paragraph 1). This business is closed to must stipulate the matters specified by applicable MLIT foreign entities and persons. Please see question 1.6. ordinances and be approved by the MLIT (Id., Article 104). The application fee is JPY 150,000 and the standard iii. Enforcements processing period is two to four months after the MLIT has The MLIT may: (i) request persons engaging in the received all necessary documents. manufacture or maintenance of aircraft, airmen, domestic Japan The holder of an aviation transport business permit is referred air carriers and operators of businesses using aircraft, to as a domestic air carrier (honpou koukuu unsou jigyosha). It to submit reports; and (ii) enter aircraft, airports, places is subject to mandatory inspection by the MLIT in connection where aircraft are located, and business offices when with its facilities to control, operate and maintain its aircraft it deems it necessary for the enforcement of the Civil and air transport business, and cannot operate or maintain the Aeronautics Act (Id., Article 134). aircraft if it fails the inspection (Id., Article 102, Paragraph 1). Violation of the Civil Aeronautics Act is subject to criminal As regards international carriers, please see question 1.6 below. penalties. A person engaging in an aviation transport B. Business to Use Aircraft (Koukuuki Shiyou Jigyo) business without the MLIT’s permission may be imprisoned for up to three years or fined up to JPY 3,000,000, or both. A “business to use aircraft to provide services other than transporting persons or cargo by aircraft for a fee, is also Other than the Civil Aeronautics Act, there are other regulated (Id., Article 2, Item 21). An example of this business laws such as: (i) the Act on the Punishment of Acts that is enabling the taking of photographs by using an aircraft. Cause Danger in the Air, which penalises any person who damages airports or air navigation facilities, destroys A permit from the MLIT is necessary to start a business using aircraft or causes aircraft to crash; and (ii) the Act on the aircraft (Id., Article 123, Paragraph 1). The application for the Punishment of an Unlawful Seizure of Aircraft, which permit must state the applicant’s name and address, the name penalises any person who hijacks or plans to hijack any of its representative director, and the total amount and details aircraft while in operation. of funding and financing (Id., Article 123, Paragraph 2). The MLIT will examine whether the business plan is suitable to B. Administrator ensure safety, whether the applicant is competent to conduct The civil aviation bureau of the MLIT administers air safety. the business, and whether the applicant is disqualified on It established an aviation safety programme which became grounds set forth in the Civil Aeronautics Act (Id., Article effective on April 1, 2014 pursuant to ICAO’s policy to 123, Paragraph 2). introduce State Safety Programmes. The programme applies The application fee is JPY 90,000 and the standard to general aviation and commercial aviation by a person or a processing period is two months after the MLIT has received company. It has also started to operate VOICES (Voluntary all necessary documents. Information Contributory to the Enhancement of Safety), through which any person may voluntarily report any incident The business operator is subject to inspection by the MLIT in which could have caused accidents by an aircraft, in order to connection with its facilities to control, operate and maintain prevent the occurrence of actual accidents. its aircraft, and operate or maintain the aircraft if it fails the inspection (Id., Article 124). 1.4 Is air safety regulated separately for commercial, cargo and private carriers? 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety? Air safety is regulated by the Civil Aeronautics Act, which regulates aviation generally; however, Chapter 7 regulates only commercial A. Legislation aviation such as the aviation transport business and businesses using The principal legislation governing air safety is the Civil aircraft. Please see question 1.1. Aeronautics Act, which is primarily based on the Chicago Convention. 1.5 Are air charters regulated separately for commercial, i. Requirements regarding aircraft and the operation of aircraft cargo and private carriers? The law imposes requirements to ensure the safety of aircraft and their operation. These include verification Yes, as discussed in question 1.2 on aviation transport businesses. of airworthiness before an aircraft may be used, and Regulations on aviation transport businesses do not distinguish restricting the use of aircraft to the purpose and scope stated between cargo and persons. in the verification of airworthiness. The task of verifying the airworthiness of aircraft registered in Japan falls on the MLIT (Civil Aeronautics Act, Articles 10 and 11). The 1.6 As regards international air carriers operating in your MLIT also issues certificates of competency which are jurisdiction, are there any particular limitations to be required by anyone to fly an aircraft. Only persons with aware of, in particular when compared with ‘domestic’ such a certificate can operate an aircraft, and must do so or local operators? By way of example only, within the scope of the certificate (Id., Articles 22, 28, 65 restrictions and taxes which apply to international but and 67). Other requirements under the law cover restricted not domestic carriers. fly zones, minimum safety altitudes and speed limits. ii. Requirements regarding the aviation business A foreign entity or person cannot be a domestic air carrier (honpou In addition to permits to start an aviation transport business koukuu unsou jigyosha) (please see question 1.2). However, it may or a business using aircraft, the conduct of an aviation obtain the MLIT’s permission to conduct an international aviation business is subject to requirements. Any domestic air transport business (Civil Aeronautics Act, Articles 129 and 126). carrier and any operator of a business using aircraft must

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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 1.10 Have there been any recent cases of note or other entity which wants to invest in the business of manufacturing notable developments in your jurisdiction involving air operators and/or airports? 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 There are two notable developments in connection with regulations (i.e. the METI or the MLIT). The foreign entity must wait for 30 on flights by unmanned aircraft vehicles (“UAVs”) and the days before making the investments; however, the period may privatisation of airports in Japan. generally be shortened to two weeks. A. Regulations on flights by UAVs – Amendment of the Civil Aeronautics Act Japan The Japanese public and government turned their attention to 1.7 Are airports state or privately owned? drones after a drone landed on the roof of the Prime Minister’s office on April 22, 2015. The Civil Aeronautics Act was As described in question 1.1, with a few exceptions, airports in amended to introduce safety rules for unmanned aircraft Japan were constructed and are owned and managed directly by vehicles, and the amended Act took effect on December 10, either the national government or local governments. As of April 2015. 1, 2016, airports in Japan are classified as: (i) national airports The amended Act introduces restrictions on (i) areas for established and managed by the national government (19 airports); flight, and (ii) operation. Violations will be penalised with a (ii) special regional airports established by the national government fine of up to JPY 500,000. but managed by local governments (five airports); (iii) incorporated (i) Prohibited airspaces for flight airports established and managed by corporations under special The amended Civil Aeronautics Act requires a person laws (Narita, Kansai, Itami, and Chubu airports) (four airports); (iv) who intends to operate a UAV in the following airspaces regional airports established and managed by local governments (54 to obtain the MLIT’s permission: airports); (v) airports for joint use managed by either the Japan Self (a) airspace which is likely to affect the safe operation of Defence Forces or the US forces stationed in Japan jointly with the aircraft; and national government (eight airports); and (vi) other minor airports. (b) airspace which is above densely populated areas. Among those airports, Sendai Airport, Kansai International Airport An “airspace which is likely to affect the safe operation of and the Osaka (Itami) International Airport are currently being aircraft” refers to airspaces above airports and their vicinity, operated by private companies through the concession. Please see and airspaces 150 metres above ground level or water surface question 1.10. 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 1.8 Do the airports impose requirements on carriers principle, an area with a population density of 5,000 people flying to and from the airports in your jurisdiction? or more per square kilometre. (ii) Operational limitations An airport operator must establish rules for the operation of the airport and publish them through the internet or other appropriate The amended Civil Aeronautics Act lists the following operational conditions. methods (Airport Act, Article 12). The rules must cover the airport’s operating hours, other services it is providing, landing and parking Unless approved by the MLIT, an operator of UAVs must: fees, and requirements for airport users, among other things. (a) operate UAVs only in the daytime; (b) operate UAVs within the visual line of sight of the operator; 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular (c) maintain a certain operating distance (30 metres) rules, regulations, systems and procedures in place between UAVs and persons or properties on the which need to be adhered to? ground or water surface; (d) not operate UAVs over event sites where many people The Act for the Establishment of the Japan Transport Safety Board gather; created the Japan Transport Safety Board (Unyu Anzen Iinkai). The (e) not transport hazardous materials specified in the Board is one of the MLIT’s administrative organs, although the Ordinance by UAVs; and National Government Organization Act gave it some independence (f) not drop any object from UAVs except for the goods from the MLIT. specified in the Ordinance. The Board is responsible for investigating: accidents involving With the MLIT’s permission or approval, it is possible to aircraft, railroads and vessels; any situation which is likely to cause operate UAVs in prohibited airspaces or without meeting those accidents; the causes and extent of damage surrounding operational conditions. An operator must submit the those accidents; and for requesting the MLIT or relevant parties to application for permission or approval, in general, 10 business days before the flight of a UAV. implement necessary measures in response. This law is based on Annex 19 of the Chicago Convention. The Board’s investigative UAV technology continues to advance rapidly. Hence, powers must meet the standards, methods and procedures set by the although the new regulations were created as an urgent response to the landing of a drone on the roof of the Prime Chicago Convention and Annex 19 (Act for the Establishment of the Minister’s office, government regulations will continue to Japan Transport Safety Board, Article 18, Paragraph 1). evolve to ensure the sound development of the UAV business in Japan, as affirmed in a supplemental provision of the amended Civil Aeronautics Act.

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B. Introduction of concessions for operating airports Aircraft Register is a very important piece of evidence to prove The Act for the Operation of Government Controlled Airports ownership, but it does not protect a third party who relies on a false by Private Sector Entities (the “Airport Concession Act”), registration. which took effect on July 25, 2013, allows the private sector As for other types of aircraft such as gliders or airships, even if to operate airports through concessions under the Act on they are registered, the mere delivery of the aircraft to the buyer or the Promotion of Private Finance Initiative (the “PFI Act transferee enables the said buyer or transferee to assert ownership. Concession”). The need to reform airport management efficiently led to the PFI Act Concession. Under the current system, income from 2.2 Is there a register of aircraft mortgages and charges? airport charges such as landing fees at all national airports Broadly speaking, what are the rules around the Japan is managed within a single national pool (i.e., the airport operation of this register? development sub-account under the social infrastructure development special account). In principle, airport charges There is a register of aircraft mortgages under the Aircraft Mortgage are the same in all national airports in Japan, and each Act (Koukuuki Teitou Hou). airport cannot set its own airport charges. Under the Airport Concession Act, however, the airport concessionaire of a Aircraft mortgages shall be made in the Aircraft Register in which specific airport may set its own airport charges and collect the ownership is registered (please see question 2.1). To register them as income. an aircraft mortgage, the mortgagee and the mortgagor must jointly Further, the separation between aeronautical and non- apply for registration and submit the document verifying the aeronautical operations in terms of ownership and management existence of the mortgage, such as the mortgage agreement, and has also been criticised as being inefficient. As mentioned other necessary documents. The aircraft mortgage registration fee above, in many airports in Japan, the government owns is JPY 0.003 multiplied by the loan amount. It is customary to make and operates basic aeronautical facilities, such as runways, a provisional registration of the mortgage and pay only JPY 2,000 aprons and navigation facilities, while private or third sector as registration fee. As for the enforcement of the mortgage, please entities own and operate non-aeronautical facilities such as see question 3.1. airport terminals and car parking facilities. Accordingly, the government cannot offer lower airport charges to airlines by generating income from non-aeronautical operations. By 2.3 Are there any particular regulatory requirements introducing the Airport Concession Act, the government which a lessor or a financier needs to be aware of as aims to have one concessionaire manage both aeronautical regards aircraft operation? and non-aeronautical operations under its concession. A concession under the Airport Concession Act covers: (i) Please see question 2.4. 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 2.4 As a matter of local law, is there any concept of title 2014, the government started the bid process to select the annexation, whereby ownership or security interests concessionaire who will operate Sendai Airport, one of in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an Japan’s national airports. The operation of Sendai Airport aircraft owned by another party? If so, what are the by private companies through the concession started in July conditions to such title annexation and can owners 2016. and financiers of engines take pre-emptive steps to Incorporated airports are not subject to the Airport Concession mitigate the risks? Act. However, the government has enacted another special law for the concession to operate Kansai International Airport The Civil Act has a concept similar to title annexation. Under this and Osaka (Itami) International Airport. The operation of both concept, if a property (whether real property or moveable property) airports by private companies, which include Vinci Airports and Orix Corporation, through the concession, started in April is attached to another property such that it is impossible to separate 2016. 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 2 Aircraft Trading, Finance and Leasing property. However, because an engine can be generally separated from the aircraft without damaging either the engine or the aircraft, then the ownership or security interests on the engine would not be 2.1 Does registration of ownership in the aircraft register at risk of annexation. In addition, in a precedent case regarding the constitute proof of ownership? annexation of buildings, the court decided that security interests on the annexed buildings continue to exist on each annexed building At the owner’s application, the MLIT will register its ownership of pro rata based on the value of each building. 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. 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- Any third party may request to see or have a copy of the Aircraft added tax (VAT) and/or goods and services tax (GST), Register. Hence, the buyer of an aircraft can check whether the and b) documentary taxes such as stamp duty; and seller is registered as the aircraft’s owner. Further, as for a registered (to the extent applicable) do exemptions exist as aeroplane (hikouki) or rotorcraft (kaitenyoku koukuuki), the buyer or regards non-domestic purchasers and sellers of transferee of that aircraft may assert its ownership by registering the aircraft and/or particular aircraft types or operations? 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 If a business provider transfers or lends any property or provides Register, the buyer cannot acquire ownership. In this sense, the services to a third party for consideration within Japan, a consumption

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tax will be basically levied on the transaction. The current rate of homebase (teichijyo), before starting the compulsory execution consumption tax is 8%. If the transaction is considered an export procedures to request a court order for the delivery of the registration under the Consumption Tax Law (Shouhizei Hou) and the business certification. If there are pressing circumstances, a party mayfile provider has an export permit, the transaction may be exempt from the application with the district court with jurisdiction over where consumption tax. In the case of an aircraft which delivers people or the aircraft is located (Civil Execution Law, Article 115, and Civil cargoes outside Japan, the transfer of that aircraft may be exempted Execution Rules, Article 84). Even if the certification of registration if certain requirements under the Consumption Tax Law are met. is delivered, the possession of the aircraft is not deemed delivered to The Stamp Tax Law (Inshizei Hou) requires that stamps be affixed the party or the court. The party may file an application to appoint a to certain documents, including an agreement to sell and purchase custodian to maintain the aircraft until the compulsory execution starts

Japan an aircraft. The amount of the stamp depends on the purchase price. (Civil Execution Law, Article 116). 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 3.2 Is there a regime of self-help available to a lessor more than JPY 5,000,000,000, the amount is JPY 600,000. 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? 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)? A lessor or a financier of aircraft is basically required to doa compulsory execution, which needs to be filed with the court, Japan is a signatory to (i) the Hague Convention, and (ii) the to reacquire the possession of the aircraft or enforce any of its Montreal Convention, but is not a signatory to the ICAO Geneva rights under the lease/finance agreement. If a lessor or financier Convention or the Convention on International Interest in Mobile has security interests on the aircraft or lease receivables, and the Equipment, Cape Town, 2001. 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 2.7 How are the Conventions applied in your jurisdiction? terminated upon the filing of bankruptcy.

Japan essentially applied the Hague Convention through the Law 3.3 Which courts are appropriate for aviation disputes? on the Punishment of the Unlawful Seizure of an Aircraft. Japan Does this depend on the value of the dispute? For essentially applied the Montreal Convention through the Law on the example, is there a distinction in your jurisdiction Punishment of Acts that Endanger Aviation. regarding the courts in which civil and criminal cases are brought?

3 Litigation and Dispute Resolution A. Civil Cases Applications for compulsory execution and the execution of 3.1 What rights of detention are available in relation to provisional seizure of aircraft must be filed with the district aircraft and unpaid debts? 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 Under the Civil Aeronautics Act, the compulsory execution and the necessarily the same as the district court with jurisdiction execution of provisional seizure of registered aircraft are governed over the aircraft’s homebase. by rules issued by the Supreme Court (Civil Aeronautics Act, Article A contractually agreed court to settle disputes between an 8–4, Paragraph 2), and the Civil Execution Rules (Minji Shikkou aircraft financier and the borrower is valid (Civil Procedure Kisoku) and Civil Provisional Remedies Rules (Minji Hozen Kisoku) Law, Article 11) and the court will be determined pursuant apply to the compulsory execution, and the execution of provisional to such provision. If no jurisdiction has been agreed, the seizure, of registered aircraft (Civil Execution Rules, Article 84 and competent court will be determined pursuant to the Civil Civil Provisional Remedies Rules, Article 34). Procedure Law. Depending on the kind of lawsuit, the If a court starts the procedures for a compulsory execution, it must competent court may be one with jurisdiction over the defendant’s address, where the defendant should perform its order a public auction of the aircraft, get the documents which are obligation, or where the aircraft exists (Id., Articles 4 and 5). necessary to fly the aircraft, including verification of the aircraft’s B. Criminal Cases nationality, and prohibit the aircraft’s departure (Civil Execution Law, Article 114, and Civil Execution Rules, Article 84). The jurisdiction over criminal cases is where the crime was committed or where the criminal resides (Criminal Procedure The execution of a provisional seizure is done by (i) making an Law, Article 2, Paragraph 1). However, if the crime was entry of the provisional seizure in the registration, or (ii) getting committed in an aircraft registered in Japan at a time when what is necessary to fly the aircraft, including the verification of the it was outside Japan, the jurisdiction, in addition to the place aircraft’s nationality (Civil Provisional Remedies Law, Article 48, where the crime was committed and the criminal’s residence, and Civil Provisional Remedies Rules, Article 34). could be the place where the aircraft lands (including on Because aircraft without any registration certification cannot be water) after the crime (Id., Paragraph 3). used for aviation, they will be detained through the procedures for C. Summary Court compulsory execution and execution of provisional seizure. If (i) a plaintiff seeks damages of up to JPY 1,400,000 and (ii) the crime is punishable by fines or lighter penalties, If it is likely that a compulsory execution will become significantly the lawsuit can be filed with the Summary Court (Kani unfeasible unless the aircraft is in detention, a party may file an Saibansho) (Court Law, Article 33, Paragraph 1). application with the district court with jurisdiction over the aircraft’s

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3.4 What service requirements apply for the service of 4 Commercial and Regulatory court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties? 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? A. Civil Cases Generally, the service of court proceedings should be made at The Civil Aeronautics Act grants Antitrust Immunity (“ATI”) if a the address or business office of the person being served. If a foreign company has a representative to do business in Japan domestic aviation carrier obtains the MLIT’s approval of the following or a branch in Japan, the service of court proceedings to a items (Articles 110 and 111): foreign company can be made at the representative’s address (i) a joint management agreement between a domestic air carrier Japan or the branch’s address (Civil Procedure Law, Article 103, and another air carrier, in case two or more domestic air carriers Paragraph 1). operate air transport services to ensure passenger transport that If the service needs to be made outside Japan, the presiding is necessary for local residents’ life, in a route inside Japan judge will delegate the service of court proceedings to the where continuing the service is expected to be difficult due to a competent governmental agency of the foreign jurisdiction, or decreased demand for air transport service; and the ambassador, minister or council of Japan in such jurisdiction (ii) an agreement between a domestic air carrier and another air (Id., Article 108). Japan is a signatory to the Convention carrier on joint carriage, a fare agreement and other agreements Regarding Civil Procedures and the Convention on the Service relating to transportation to promote public convenience in a Abroad of Judicial and Extrajudicial Documents in Civil or route between a point in Japan and a point in a foreign country Commercial Matters. or foreign countries. B. Criminal Cases The MLIT will not grant the approval unless the subject agreement Service should be made in the way described in Article 108 of conforms to the following standards: the Civil Procedure Law (Criminal Procedure Law, Article 54). (i) it does not unfairly impair the interests of users; (ii) it is not discriminatory; 3.5 What types of remedy are available from the courts (iii) it does not unfairly restrict participation and withdrawal; and or arbitral tribunals in your jurisdiction, both on i) an (iv) the contents of the agreement are kept to the minimum necessary interim basis, and ii) a final basis? for the purpose of the agreement. Before granting any approval, the MLIT will first discuss this with the If an obligor does not perform its obligation, the obligee may file a Japan Fair Trade Commission (“JFTC”). lawsuit for performance. The obligee may also seek payments to force the obligor to perform the obligation, or may use a third party Since 2010, the signing or amendment of a joint venture agreement to perform the obligation and make the obligor pay the relevant costs. needs the approval of the MLIT. As of July 2013, ATIs have been If the obligee obtains the court’s final and binding decision, and that granted to four joint venture agreements between Japanese air carriers. decision is given with a declaration of provisional execution, or an arbitration award to which the competent court has issued an execution 4.2 How do the competition authorities in your order, it can start the compulsory execution against the obligor’s jurisdiction determine the ‘relevant market’ for the properties (Civil Execution Law, Article 22). purposes of mergers and acquisitions? The court can issue an interim decision with respect to specific or separate issues (Civil Procedure Law, Article 245), but the obligee Under the Act on the Prohibition on Private Monopolization and on cannot start the compulsory execution based on an interim decision. 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 3.6 Are there any rights of appeal to the courts from the particular field of trade, or (ii) the consolidations involve unfair decision of a court or arbitral tribunal and, if so, in what trade practices (Articles 14 to 17). circumstances do these rights arise? In 2004, the JFTC issued a guideline on how it assesses potential A party who does not agree with the final decision of the district court restrictions on competition, and this guideline has been continually at the first instance can appeal to the high court (Civil Procedure Law, amended. The guideline provides that a particular field of trade Article 281, Paragraph 1). A party who does not agree with the final (ittei no torihiki bunya) is determined from the perspective of decision of the high court at the second or first instance can appeal whether users have alternative goods or services to the subject of to the Supreme Court. Further, a party who does not agree with the the trade in terms of geographical area where such goods or services final decision of the district court at the second instance can appeal are traded. If necessary, the perspective of whether suppliers have to the high court. An appeal to the Supreme Court requires specific an alternative is taken into account. The scope of goods or services grounds under the Civil Procedure Law; for example, if the high is generally determined by examining whether goods or services, court’s decision violates the Constitution or other laws (Id., Articles similar to those subject to the anti-competition assessment, are 311 and 312). available to users. In evaluating similarity, the JFTC will consider, among other things, the uses and the cost of the goods or services. As to the arbitration procedure, the award is binding on the parties and an appeal is basically unavailable. 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

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themselves of goods or services based on accessibility to users, distribution network, ability of suppliers to satisfy demand, whether 4.6 Are there any sector-specific rules which govern the the goods or services are easily deliverable, and delivery fees or costs. aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid? 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain A. Air Operators regulatory clearance/anti-trust immunity from Air transportation to and from small local airports and regulatory agencies? isolated islands generally faces financial difficulties, but it is necessary to enable residents to have an ordinary life. Japan A party planning a business consolidation can have a prior official To keep such air transportation, air operators providing consultation with the JFTC by providing the JFTC with concrete such transportation services are subsidised in relation to the details of the proposed consolidation, the relevant parties consenting purchase price of aircraft and equipment and landing charges, to the disclosure of the details of the consultation, and the JFTC’s and may avail themselves of tax reductions in terms of fuel response. aviation tax and property tax. The standard period for the JFTC to deal with any application for B. Airports consultation is 30 days starting from the day after the JFTC has Income from airport charges such as landing fees at all received the required documents. This period may be shortened national airports is managed within a single national pool pursuant to the acquirer’s request and if the JFTC does not see any (i.e., the airport development sub-account under the social infrastructure development special account) (please see issue under the Antitrust Law. question 1.10). The pool provides airports with financial It is customary to have an unofficial consultation with the JFTC, support for maintenance and operation. 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. 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these subsidies? 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? Please see question 4.6.

Please see questions 4.1 and 4.2. 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, 4.5 Please provide details of the procedure, including time and what rights do passengers have in respect of frames for clearance and any costs of notifications. their data which is held by airlines?

If a party plans a business consolidation which exceeds certain criteria, The following laws and regulations are the basic legislation in Japan it must obtain the JFTC’s clearance, which may take 30 days (which for the protection of personal information: may be shortened) from the filing of the application for clearance and (i) Act on the Protection of Personal Information (Act No. 57 of before any consolidation can proceed (please see question 4.3). The May 30, 2003 as amended – the “APPI”); criteria depend on the type of acquisition. For example, in a share (ii) Act on the Protection of Personal Information Held by purchase, if: (i) the sales of the acquirer’s group in Japan exceed JPY Administrative Organs (Act No. 95 of 1988 of May 30, 2003 20 billion; (ii) the sales of the target company and its subsidiaries in as amended); Japan exceed JPY 5 billion; and (iii) the resulting voting rights of the (iii) Act on the Protection of Personal Information Held by acquirer will exceed 20% or 50% after the acquisition, the acquirer Independent Administrative Agencies; and must file for JFTC clearance and submit the acquisition agreement or (iv) local regulations (jyourei) legislated by local governments. its draft, the balance sheet, profit and loss statement and business report The APPI is the principal data protection legislation which regulates of the acquirer, a shareholders’ resolution to approve the transaction (if the use of personal information by private businesses and sets forth any is required), and the financial condition of the acquirer’s group. the obligations of business operators handling personal information, It is customary to have an unofficial consultation prior to the which apply to all business operators using a personal information application. The length of consultation depends on the transaction database for their businesses. Under the APPI, a passenger may but, if necessary information such as sales and market shares of the request an airline to correct, add or delete his retained personal data consolidated businesses is submitted properly, the JFTC will receive and the airline must comply. The MLIT also issued a guideline the application for consultation promptly. regarding data protection to business operators conducting a If the JFTC finds any material problem under the Antitrust Law, business under the jurisdiction of the MLIT, including airlines. the examination process will start. The JFTC will consider whether a cease-and-desist order should be issued to solve the problem 4.9 In the event of a data loss by a carrier, what until the later of either the lapse of 120 days after the receipt of the obligations are there on the airline which has lost the application or the lapse of 90 days after the receipt of the documents data and are there any applicable sanctions? that the JFTC additionally requested from the acquirer. Please see question 4.8.

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4.10 What are the mechanisms available for the protection 4.13 Are the airport authorities governed by particular of intellectual property (e.g. trademarks) and other legislation? If so, what obligations, broadly speaking, assets and data of a proprietary nature? are imposed on the airport authorities?

The Basic Act on Intellectual Property provides the framework for Please see questions 1.1 and 1.10. promoting measures for the creation, protection and exploitation of intellectual property. This Act defines intellectual property as a 4.14 To what extent does general consumer protection patent right, a utility model right, a plant breeder’s right, a design legislation apply to the relationship between the right, a copyright, a trademark right, a right that is stipulated by laws

airport operator and the passenger? Japan 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) The Consumer Contract Act provides for the protection of consumers a utility model right, (iii) a plant breeder’s right, (iv) a design right, who enter into contracts with business operators. For example, any (v) a copyright, and (vi) a trademark right, is protected under (i) the contractual provision which requires a consumer to pay a cancellation Patent Act, (ii) the Utility Model Act, (iii) the Plant Variety Protection fee at an amount which exceeds the average amount of damages that and Seed Act, (iv) the Design Act, (v) the Copyright Act, and (vi) a business operator would suffer in connection with the cancellation, the Trademark Act. Each law has its own mechanism to protect is null and void (Consumer Contract Act, Article 9). 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 4.15 What global distribution suppliers (GDSs) operate in is effective for 10 years and is renewable. A trademark holder your jurisdiction? basically has an exclusive right to use the registered trademark in connection with the designated goods or services. Japanese companies and foreign companies such as Fedex, DHL and UPS operate in Japan as global forwarders. Further, Japan has The unfair acquisition or use of know-how or trade secrets, and an association which includes international freight forwarders as the unfair creation or use of trademarks or trade names which are members (Japan International Freight Forwarders Association Inc.). similar or identical to others that are well-known by consumers, is prohibited by the Unfair Competition Prevention Act. 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? 4.11 Is there any legislation governing the denial of boarding rights? As a general rule, a foreign person, a foreign entity (whether private or governmental), or an entity of which one-third or more The MLIT issued a guideline on the necessary measures to prevent acts of the directors are foreigners or one-third or more of the voting which may make passengers uncomfortable, embarrassed or unsafe, rights are held by foreign persons or entities, is prohibited from and in 2002 requested air operators to comply with the guideline. engaging in the freight forwarding business in Japan (Consigned Under the guideline, air operators must not allow passengers who are Freight Forwarding Business Act, Articles 6 and 22), unless they are very drunk to board. registered with or permitted by the MLIT (Id., Articles 35 and 45). 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 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? 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 The JFTC will consider whether the vertical integration is an laws and requests from administrative bodies, to deal with any act issue with regard to fair trade in the aviation business pursuant to which is making other passengers uncomfortable, embarrassed or the Antitrust Law. There is no precedent regarding such vertical unsafe, or to deal with any mental or physical conditions. integration. The government has set certain standards for airport concessionaires, such as the disqualification of an aviation transport Further, a pilot of the aircraft may, during taxiing, order a passenger to business operator, and any of its parent companies, subsidiaries and disembark if he has reasonable grounds to believe that the passenger other affiliates, from being an airport concessionaire. 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 5 In Future the aircraft (Civil Aeronautics Act, Article 73–4, Paragraph 1).

5.1 In your opinion, which pending legislative or 4.12 What powers do the relevant authorities have in regulatory changes (if any), or potential developments relation to the late arrival and departure of flights? affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of The Civil Aeronautics Act does not explicitly impose sanctions attention in the next two years or so? directly due to the late arrival and departure of flights. However, the MLIT gathers and publishes information on the frequency of late Attention should be given to three possible changes or developments: arrivals and flight cancellations. Further, the MLIT may issue an A. Development of a Business Using UAVs order to improve the operation of aircraft or the business of air carriers According to the roadmap published in April 2016 at a if, for example, the technical ability of airmen or pilots does not meet conference on UAV business attended by governmental the standards of the Civil Aeronautics Act (Articles 20, 29 and 72). authorities and private companies, the goal is to be able to deliver goods to scarcely populated areas (e.g., mountainous

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regions and isolated islands) around 2018, and to urban areas Acknowledgment in the 2020s. To achieve this goal, discussions on better regulations, such as certification of UAVs and licences to The author would like to thank Koji Toshima and Atsushi Okada operate UAVs, are going on. In September 2017, the MLIT and for their assistance in preparing this chapter. Koji and Atsushi are the METI jointly established the Study Group on the Flying of partners at Mori Hamada & Matsumoto, where their main field of Unmanned Aircraft (Drones) Beyond Visual Line of Sight and practice is aviation law. Over Third Parties. It is this Study Group’s goal to finalise the Email: [email protected] / Tel: +81 3 5223 7789. guidelines for the use of UAVs for the delivery business by the end of March 2018. Email: [email protected] / Tel: +81 3 5220 1821. B. Possible Expansion of Concession of Airports Japan In the wake of the privatisation of Sendai, Kansai and Itami airports, the privatisations of other airports through concessions are proceeding. On October 1, 2017, the concession agreement Hiromi Hayashi for Takamatsu Airport was executed between the MLIT and Mori Hamada & Matsumoto the special purpose vehicle jointly established by private Marunouchi Park Building companies. Further, the process for the selection of private 2-6-1 Marunouchi Chiyoda-ku companies in the privatisation of Fukuoka Airport is going on Tokyo 100-8222 and the concession agreement is expected to be signed in the Japan summer of 2018. Further, one national airport (Hiroshima) and Tel: +81 3 5220 1811 six regional airports are being considered for privatisation using Email: [email protected] the concession scheme. URL: www.mhmjapan.com C. Increase of Flights to and from Haneda The desirability of increasing flights to and from Haneda, Hiromi Hayashi is a partner at Mori Hamada & Matsumoto, which she which is closer to Tokyo than Narita, is under discussion. joined in 2001. Her areas of practice are international and domestic According to the MLIT’s website, if the flights are increased transactions, corporate restructuring and regulatory matters. She is a member of the Logistics Subcommittee of the Study Group on the as planned, the number of international flights will increase Flying of Unmanned Aircraft (Drones) Beyond Visual Line of Sight from 60,000 per year (2015) to 99,000 per year (2020). The and Over Third Parties established jointly by the Ministry of Land, increase will be accompanied by changes in flight routes. Infrastructure, Transport and Tourism and the Ministry of Economy, In any case, the MLIT plans to continue discussions with Trade and Industry (2017). Hiromi was admitted to the Bar in 2001 residents near Haneda airport and the flight routes, and other in Japan and in 2007 in New York. She worked at Mizuho Corporate concerned people. It plans to implement suitable methods to Bank from 1989 to 1994, and at Davis Polk & Wardwell in New York properly deal with effects that the increase may have on the from 2006 to 2007. environment.

Mori Hamada & Matsumoto is a full-service international law firm based in Tokyo, with offices in Fukuoka, Nagoya, Osaka, Bangkok, Beijing, Shanghai, Singapore and Yangon. The firm has over 450 attorneys and a support staff of approximately 450, including legal assistants, translators and secretaries. The firm is one of the largest law firms in Japan and is particularly well-known in the areas of mergers and acquisitions, finance, litigation, insolvency, intellectual property and regulatory matters, 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.

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Kyrgyzstan Aisulu Chubarova

Arte Law Firm Liliia Kim

■ a permit for a radio facility; 1 General ■ an aircraft lease agreement (if any); ■ insurance policies issued on the aircraft, crew, passengers, 1.1 Please list and briefly describe the principal baggage, cargo, and third parties; and legislation and regulatory bodies which apply to and/ ■ a document confirming payment of a licence fee (a one-time or regulate aviation in your jurisdiction. licence fee amounting to KGS 300 – approximately USD 4 as of the date of this publication). The Air Code of the Kyrgyz Republic dated August 6, 2015 (“Air All of these documents must be filed with the CAA, which shall Code”) and the Aviation Rules of the Kyrgyz Republic (“Aviation either issue or refuse to issue the operating licence within 30 Rules”) developed pursuant to Standards and Recommended calendar days following the documents’ submission date. The Practices of the International Civil Aviation Organization (“ICAO”), operating licence is issued for a limited period of time (typically, comprise the principal legislation applicable to and/or regulating not less than two years) and can be renewed. aviation in Kyrgyzstan. International treaties and bilateral air traffic agreements are also part of the aviation legislation in Kyrgyzstan. State regulation in the area of civil aviation is executed by the 1.3 What are the principal pieces of legislation in your country which govern air safety, and who administers Civil Aviation Authority (“CAA”) subordinated to the Ministry air safety? of Transport and Roads of the Kyrgyz Republic (the “Ministry of Transport”). The CAA’s functions include, amongst others: the Air safety in Kyrgyzstan is administered by the CAA, which regulation of civil aviation activity; drafting aviation rules and develops, amends, and implements the State Air Safety Programme. other legal acts in the area of aviation; the certification of aviation personnel, air operators, aircraft and aerodromes; the issuance of Legislation governing air safety consists of the Air Code and operating licences, air operator certificates, and permits for foreign the Aviation Rules; in particular: Aviation Rule 17 “Air Safety” carriers to operate flights into Kyrgyzstan; administration of the civil establishes the CAA’s powers with respect to air safety, the aircraft register; and representation of the Kyrgyz Republic in the obligations of airport authorities and air operators’ obligations with ICAO. The Ministry of Transport is generally responsible for the respect to compliance with the State Air Safety Programme, as well development of unified state transport policy, ensuring statutory as various procedures aimed at ensuring air safety at airports and compliance, etc. on board an aircraft; Aviation Rule 8 “Airworthiness of Aircraft” sets airworthiness requirements to ensure safety compliance in the design, construction and operation of aircraft; and Aviation Rule 1.2 What are the steps which air carriers need to take in 6 “Operation of Aircraft” establishes safety requirements to be order to obtain an operating licence? complied with by air operators. In addition, there are separate rules and procedures that regulate air safety issues in airports. Kyrgyz licensing laws set out requirements that air carriers need to comply with in order to obtain an operating licence in Kyrgyzstan. 1.4 Is air safety regulated separately for commercial, The requirements for operating an aircraft in commercial air transport cargo and private carriers? are: (i) an operating licence; (ii) an air operator certificate (“AOC”); and (iii) the appropriate traffic rights in the case of foreign carriers. Air safety requirements for commercial, cargo and private carriers In addition to a formal application, copies of the following are generally regulated by the Aviation Rules. documents must be filed in order to obtain an operating licence: ■ a certificate of registration of a legal entity; 1.5 Are air charters regulated separately for commercial, ■ an AOC; cargo and private carriers? ■ a certificate of registration of an aircraft; ■ an airworthiness certificate; No, operators of air charters are subject to the same type of regulation ■ a noise certificate; as other carriers operating under an AOC.

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1.6 As regards international air carriers operating in your 2 Aircraft Trading, Finance and Leasing jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, 2.1 Does registration of ownership in the aircraft register restrictions and taxes which apply to international but constitute proof of ownership? not domestic carriers. Aircraft ownership is specified in the aircraft register based on the International air carriers may only operate commercial air transport relevant title documents provided by an applicant; however, if the services within the territory of Kyrgyzstan upon receipt of the ownership is found to be invalid pursuant to the court’s ruling, permit issued by the CAA. Typically, foreign air carriers may another party may claim the ownership of the aircraft. Documents required for registration of ownership in the aircraft are provided in Kyrgyzstan operate in Kyrgyzstan on the basis of bilateral air traffic agreements. In addition, the international carriers shall provide the CAA with Aviation Rule 7 “Registration of Civil Aircraft”. relevant third-party liability insurance policies. 2.2 Is there a register of aircraft mortgages and charges? 1.7 Are airports state or privately owned? Broadly speaking, what are the rules around the operation of this register? There are 11 airports in Kyrgyzstan, of which five are international and six regional. All airports are considered to be strategic objects Mortgages are registered in the Unified State Registry of Movable and belong to Manas International Airport open joint-stock company, Property Pledges (the “Mortgage Registry”) maintained by where 79.1% of shares belong to the Government of the Kyrgyz the Central Pledge Registration Office under the Ministry of Republic, 8.5% to the Social Fund of the Kyrgyz Republic, and the Justice of the Kyrgyz Republic (the “CPRO”). Any party to the remaining shares are owned by individuals and legal entities. mortgage agreement, or authorised representative thereof, may file an application for mortgage registration with the CPRO (the “application”). The application is completed pursuant to the 1.8 Do the airports impose requirements on carriers form established by Kyrgyz laws and must be accompanied by a flying to and from the airports in your jurisdiction? mortgage agreement that must specify: the name and location of the parties; a description of the pledged obligation; a description of Yes, airports may impose certain requirements on carriers. Typically, the mortgage in sufficient detail for identification thereof; and the such requirements are associated with environmental protection and ownership right of the pledger to the mortgage. The application technical issues, such as take-off weight and noise limitations. must be accompanied by the power of attorney issued in the name of a person authorised by either of the parties, should registration of the 1.9 What legislative and/or regulatory regime applies to mortgage be carried out through such representative. Confirmation air accidents? For example, are there any particular of payment of the fee for registration of the mortgage is also filed rules, regulations, systems and procedures in place with the CPRO. which need to be adhered to? Registration of the mortgage takes up to three business days upon filing of the aforementioned documents with the CPRO. Subsequent Air accidents in Kyrgyzstan are mainly regulated by the Air Code, mortgage registration is allowed under Kyrgyz law. Ranking of any Aviation Rule 13 “Aircraft Accident and Incident Investigation”, subsequent mortgages is established in a priority order depending Aviation Rule 12 “Search and Rescue”, and the State Air Safety on the date when the first ranking mortgage has been registered with Programme. the CPRO. Aviation Rule 13 is based on Annex 13 to the Convention on A document confirming registration of mortgage is issued by the International Civil Aviation (“Chicago Convention”), which was CPRO in the form of mortgage notification. Any person may ratified by Kyrgyzstan in 1992. receive information from the Mortgage Registry upon the filing of a In case of air accidents, the Government of the Kyrgyz Republic request and the payment of a fee. appoints an investigation commission that is independent and has Kyrgyz aviation laws do not stipulate an expressly formulated unlimited powers in carrying out investigations. Members of the provision requiring air operators to notify the CAA of an aircraft investigation commission include representatives of the CAA, mortgage. However, in practice, air operators notify the CAA about Ministry of Transport, Ministry of Defence, Ministry of Internal the mortgage by filing a copy of the aircraft mortgage agreement. Affairs, State National Security Service, Ministry of Emergencies, Transport Prosecution Office, etc. 2.3 Are there any particular regulatory requirements Aviation Rule 13 “Aircraft Accident and Incident Investigation” which a lessor or a financier needs to be aware of as sets notification requirements that have to be followed in case of air regards aircraft operation? accidents or incidents. There are no particular regulatory requirements for a lessor or a 1.10 Have there been any recent cases of note or other financier with respect to aircraft operation. However, the lessor notable developments in your jurisdiction involving or the financier should keep in mind that an aircraft deregistration air operators and/or airports? proxy issued in the name of an owner of an aircraft may not, under Kyrgyz law, be irrevocable, and is limited to a three-year period. It No, there have been no cases of note recently. may well be reasonable for a lessor or financier to sign an aircraft deregistration agreement, which would fall under a civil law contract category and may serve as an additional protection tool for lessors or financiers.

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2.4 As a matter of local law, is there any concept of title 3.2 Is there a regime of self-help available to a lessor or a annexation, whereby ownership or security interests financier of aircraft if it needs to reacquire possession in a single engine are at risk of automatic transfer of the aircraft or enforce any of its rights under the or other prejudice when installed ‘on-wing’ on an lease/finance agreement? aircraft owned by another party? If so, what are the conditions to such title annexation and can owners Kyrgyz civil law provides for a regime of self-help available to a and financiers of engines take pre-emptive steps to lessor, provided all of the following three conditions are met: (a) mitigate the risks? violation of the right or threat of the right’s violation; (b) necessity to prevent the violation; and (c) application of measures that are There is no concept of title annexation in Kyrgyz law. commensurate with the nature of the violation.

The lessor may reacquire possession of the aircraft on the basis Kyrgyzstan 2.5 What (if any) are the tax implications in your of aircraft deregistration powers (power of attorney and aircraft jurisdiction for aircraft trading as regards a) value- deregistration agreement; please refer to the response to question added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and 2.3), provided that the lessor has free access and physical means to (to the extent applicable) do exemptions exist as reacquire the aircraft. Should the lessor have no such access to the regards non-domestic purchasers and sellers of aircraft, repossession of the latter shall take place on the basis of a aircraft and/or particular aircraft types or operations? court order. Financiers may, however, only acquire repossession of the aircraft In the event an aircraft is sold to a non-domestic purchaser, the VAT through foreclosure against the aircraft under a pledge agreement. will be applied at a 0% rate. In the event an aircraft is purchased from a non-domestic seller, such transaction will not entail any Kyrgyz tax implications for the seller. Sales tax is 0% if payments 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For under transactions are made by wire transfer. No stamp duty or example, is there a distinction in your jurisdiction other forms of documentary tax exist under Kyrgyz law. regarding the courts in which civil and criminal cases are brought? 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Inter-district courts for economic disputes are appropriate first- Cape Town)? instance courts for aviation disputes regardless of the value of the dispute. Kyrgyzstan is a signatory to the Convention on the International Alternatively, the parties may refer to an arbitration tribunal should Recognition of Rights in Aircraft (Geneva Convention), having an arbitration clause be provided in an agreement between the ratified it on July 21, 1999. parties. Criminal cases (with elements of crimes stipulated by criminal 2.7 How are the Conventions applied in your jurisdiction? laws) are considered by general jurisdiction courts.

International conventions which have been ratified by Kyrgyzstan 3.4 What service requirements apply for the service of are part of the legal system of the country. In case of a conflict court proceedings, and do these differ for domestic between national laws and international conventions, the latter shall airlines/parties and non-domestic airlines/parties? prevail. There is no special body set up to administer and apply the Kyrgyz law does not stipulate service requirements for the service conventions in Kyrgyzstan. The international conventions are of court proceedings. applied in the ordinary course either through courts or arbitration tribunals. 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? 3 Litigation and Dispute Resolution The types of remedies are stipulated by Kyrgyz civil procedure laws 3.1 What rights of detention are available in relation to and include, inter alia: the attachment of property or monies, owned aircraft and unpaid debts? by a defendant within the value of the dispute; the prohibition of specific acts from being undertaken by the defendant; andthe Pursuant to Kyrgyz civil law, in case of failure to perform payment prohibition of third parties from transferring the property. A court obligations in due time, a creditor has the right of detention to an may, at its own discretion, impose any other remedies at any stage of aircraft if the latter is in the creditor’s possession. In this case, court proceedings provided that the absence of such remedies may the creditor should follow the foreclosure procedure applicable to make it difficult or impossible to execute the rulings of a court. A mortgages. It should be noted that, pursuant to Kyrgyz civil law, court may impose several types of remedy concurrently. foreclosure against the aircraft may take place on the basis of a court Currently there is only one international arbitration court operating order or through a non-judicial foreclosure procedure. If the creditor in Kyrgyzstan, namely the International Arbitration Court under does not possess the aircraft, the creditor may seek injunctive relief the Chamber of Commerce of the Kyrgyz Republic (“ICA”). The (arrest, prohibition on disposal of the aircraft, suspension of sale of ICA may also impose remedies in certain cases and pursuant to the the aircraft if the latter is offered for sale, etc.) through the court. procedure applicable to remedies issued by Kyrgyz courts.

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3.6 Are there any rights of appeal to the courts from the 4.3 Does your jurisdiction have a notification system decision of a court or arbitral tribunal, and, if so, in whereby parties to an agreement can obtain what circumstances do these rights arise? regulatory clearance/anti-trust immunity from regulatory agencies? A three-tier court system functions in Kyrgyzstan. A case adjudicated by the first instance court may be appealed to a court If the merger or acquisition of economic entities results in the of second instance and further to the Supreme Court of the Kyrgyz establishment of a dominant economic entity, the merging Republic. or acquiring economic entities must file a request with the Antimonopoly Agency for consent thereof to such merger or An arbitration award by the ICA is final and enforceable in acquisition. Please also refer to the response to question 4.4 below. Kyrgyzstan and may not be appealed to a state court. Kyrgyzstan Kyrgyzstan acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1995. Kyrgyzstan 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? is also a party to the Agreement on the Procedure of the Mutual Enforcement of Awards Made by Arbitration and Economic Courts in the Territories of the CIS Countries since 2003. Mergers and acquisitions in the aviation sector are generally regulated by Kyrgyz civil laws. However, it should be noted that, pursuant to the Air Code, foreign ownership in a domestic air 4 Commercial and Regulatory company must not exceed 49% of shares in such company.

4.1 How does your jurisdiction approach and regulate 4.5 Please provide details of the procedure, including time joint ventures between airline competitors? frames for clearance and any costs of notifications.

Joint ventures are subject to Kyrgyz competition laws. The authorised The Antimonopoly Agency issues consent in the case of a merger anti-monopoly body, the State Agency of Antimonopoly Regulation or acquisition of economic entities resulting in the establishment under the Government of the Kyrgyz Republic (“Antimonopoly of a dominant economic entity within 10 calendar days. No fee is Agency”) carries out state control over mergers and acquisitions charged by the Antimonopoly Agency for issuance of such consent. of economic entities or associations thereof if such mergers and acquisitions result in the establishment of a dominant economic entity. 4.6 Are there any sector-specific rules which govern the A joint venture may be deemed as dominant if it: occupies shares aviation sector in relation to financial support for air operators and airports, including (without limitation) of 35% or over in the market; holds aggregate domination in the state aid? market of more than three economic entities, provided the share of each entity exceeds the share of other entities in the market and in There are no sector-specific rules that govern state financial support aggregate exceeds 50%; or holds an aggregate share of not more in aviation. than five economic entities if the share of each exceeds the share of other economic entities in the market, etc. Pursuant to Kyrgyz competition laws, if a joint venture occupies a 4.7 Are state subsidies available in respect of particular dominant position in the air transportation market, the Antimonopoly routes? What criteria apply to obtaining these subsidies? Agency will include it in the list of permissible monopolies. Activities of permissible monopoly are subject to control by the Antimonopoly Agency which include, inter alia, price control, No state subsidies are provided for any routes in Kyrgyzstan. setting the break-even ceiling, and control over specific transactions of the permissible monopoly. 4.8 What are the main regulatory instruments governing As of the date of this publication, none of the Kyrgyz airlines are the acquisition, retention and use of passenger data, and what rights do passengers have in respect of members of any joint venture in the aviation sector. Code-share their data which is held by airlines? agreements are used in the aviation sector; however, as the aviation and competition laws are in the stage of development, these types Personal data protection issues are regulated mainly by the Law of of agreements (whether overlapping or non-overlapping) are not the Kyrgyz Republic on “Information of a Personal Character” dated subject to antimonopoly regulation. April 14, 2008 (the “Personal Data Law”) that sets requirements on collection, retention and use of personal data. Any use of the 4.2 How do the competition authorities in your country personal data requires the preliminary consent of a person. Pursuant determine the “relevant market” for the purposes of to the said law, a person may: voluntarily grant or refuse the granting mergers and acquisitions? of his/her personal data; enjoy free access to his/her personal data; require personal data holders to amend or block his/her personal Kyrgyz competition laws stipulate a broad definition of “market”, data; appeal against any unlawful actions; and claim compensation which is an area of circulation of goods and services. The market for damages (including moral damage) suffered, etc. is classified as regional (local) and national (in the territory of the Kyrgyz Republic). In the aviation sector, the Antimonopoly 4.9 In the event of a data loss by a carrier, what Agency typically determines the relevant market according to routes obligations are there on the airline which has lost the (destination point) and by type of aviation sector (passengers and data and are there any applicable sanctions? cargo). When analysing and assessing the competitive environment in the relevant market, the Antimonopoly Agency may also consider The Personal Data Law sets requirements with which personal data the overall transportation market (including road and railway). holders need to comply. Infringement of the said requirements (loss

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of data) invokes civil liability on air carriers established by the Civil Code. Any person whose data was lost may claim compensation for 4.14 To what extent does general consumer protection the damages (including moral damage) which he/she suffered by legislation apply to the relationship between the airport operator and the passenger? applying to court.

The Civil Code and the Consumer Protection Law are the general 4.10 What are the mechanisms available for the protection legal acts that apply to consumer protection relations between of intellectual property (e.g. trademarks) and other passengers and airports. assets and data of a proprietary nature?

The State Service of Intellectual Property and Innovation under 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? the Government of the Kyrgyz Republic (“Patent Office”) is the Kyrgyzstan authority in the area of intellectual property (“IP”) in the Kyrgyz Republic. Protection of IP rights is governed by the Civil Code The airlines and travel agents use the following GDSs in Kyrgyzstan: of the Kyrgyz Republic (“Civil Code”), Copyright Law, Patent Amadeus; Sirena-Travel 2000; Sirena-2.3; Sirena-2000; and Law, Trademarks Law, etc., which are in compliance with the UniTerm ETS. international treaties and conventions in the IP area and set certain procedures for IP rights protection. 4.16 Are there any ownership requirements pertaining to No special courts dealing with IP disputes exist in Kyrgyzstan; all GDSs operating in your jurisdiction? such disputes are heard before the courts of general jurisdiction. Infringement of IP rights invokes civil, administrative and criminal There are no particular ownership requirements applicable to GDSs liability. in Kyrgyzstan.

4.11 Is there any legislation governing the denial of 4.17 Is vertical integration permitted between air operators boarding rights? and airports (and, if so, under what conditions)?

The Civil Code, the Air Code and Aviation Rule 20 “Rules of Pursuant to Kyrgyz laws, vertical agreements are allowed in the Carriage” are the principal enactments that directly govern the form of commercial concession or if the market share of each party denial of boarding rights. The air carrier may deny boarding rights of a vertical agreement does not exceed 20%. No cases of vertical for safety reasons in case of force majeure and/or breach of the integration between air operators and airports have taken place in carriage rules by a passenger. In case of any necessity to cancel Kyrgyzstan so far. a flight, the air carrier shall promptly inform the passengers and return such passengers the air fare paid, without any deductions. No 5 In Future compensation is provided to a passenger who was denied boarding due to a breach of the carriage rules. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments 4.12 What powers do the relevant authorities have in affecting the aviation industry more generally in relation to the late arrival and departure of flights? your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? Late arrivals and departures are regulated by the Civil Code, the Air Code, the Aviation Rule 20 “Rules of Carriage” and the Convention As of August 2015, the Kyrgyz Republic joined the Eurasian for the Unification of certain rules relating to international carriage Economic Union (“EAEU”) alongside Russia, Kazakhstan, Belarus by air (the “Warsaw Convention”), which establish the liability and Armenia. At present, the activities underway are aimed at the of air operators in case of late arrival and departure. As a state formation of a common EAEU market of air transport services. In authority responsible for regulation in civil aviation, the CAA has particular, on August 14, 2017 major areas and implementation powers to consider any inquiries, including passenger claims related stages of the coordinated (agreed) transport policy in terms of to late arrival and departure, falling within the CAA’s competence. air transportation for 2018–2020 (the so called “Air Transport In addition, passengers may file their claims with the Antimonopoly Roadmap”) were approved by the EAEU Inter-Governmental Agency within the Law of the Kyrgyz Republic “On Protection of Council as the first step towards the development of the EAEU air Consumers’ Rights” dated December 10, 1997 (as last amended on transport services market. The Air Transport Roadmap provides August 3, 2013) (“Consumer Protection Law”). for stage-by-stage activities covering: the harmonisation of laws of EAEU Member States in civil aviation areas; ensuring fair 4.13 Are the airport authorities governed by particular competition; the creation of conditions for upgrade of aircraft legislation? If so, what obligations, broadly speaking, fleet; modernisation and development of air navigation; and airport are imposed on the airport authorities? ground infrastructure facilities compliant with ICAO Recommended Practice and aviation safety, to name a few. Airport authorities are governed by the Air Code as well as separate rules and regulations, and are supervised by the CAA. The main obligations of the airport authorities are concentrated on air safety issues: organisation of access and security controls; carrying out security checks; and implementation of air safety measures, etc.

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Aisulu Chubarova Liliia Kim Arte Law Firm Arte Law Firm 13 Turusbekov Street 13 Turusbekov Street Bishkek Bishkek Kyrgyz Republic Kyrgyz Republic

Tel: +996 312 455 005 Tel: +996 312 455 005 Email: [email protected] Email: [email protected] URL: www.arte.kg URL: www.arte.kg

Aisulu Chubarova is one of the founding partners of Arte Law Firm, Liliia Kim joined Arte Law Firm in 2013 and, since that time, she has Kyrgyzstan specialising in various areas of commercial law, including corporate been advising clients on aviation, corporate and taxation issues. governance, project finance, mergers & acquisitions and investment Within aviation, Liliia focuses on various operational and contractual projects in the aviation, mining and infrastructure sectors. In aviation, matters concerning airlines. Liliia has been involved in drafting aircraft Aisulu advises clients on aircraft acquisition and finance issues, aircraft sale and purchase and lease agreements, and in representing clients repossession, competition, and airline operations. She advised one of in Kyrgyz courts on various aviation-related issues. She provides the leading low-cost airlines on entry into the Kyrgyz air transportation ongoing legal support to the first Kyrgyz low-cost airline on various market, with respect to acquisition, debt and equity financing issues. aspects of its operation including, but not limited to, passenger/ baggage claims, ground handling, arrangements with GSAs, etc. Aisulu holds an LL.M. degree from the National University of Singapore (2005) and Central European University (Budapest, Hungary) (1998). Liliia holds an LL.B. degree from the American University of Central Asia (2010).

Arte Law Firm is a full-cycle law firm focusing on all aspects of commercial law and working in such sectors as aviation, banking &finance, infrastructure, the hotel business, mining, pharmaceuticals, technology and media. Arte Law Firm has solid experience in all types of aviation-related work, whether in the context of corporate transactions, commercial contracts, dispute resolution or aviation infrastructure. Arte lawyers efficiently address aviation-specific transactional, regulatory, corporate governance, tax, litigation and public law and policy issues as they arise. The core clientele of Arte’s aviation law practice are airlines. The Arte team advises airlines on all aspects of their business. Arte lawyers represent corporate and individual clients in commercial aviation finance, including acquisition, sale, and finance and leasing of aircraft; advising on all types of airline contracts, including commercial procurement and outsourcing, IT contracts, contracts with travel agents, aircraft maintenance, fuel supply, and other operational aviation agreements.

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Lithuania

PRIMUS attorneys at law Paulius Docka

Lithuania implements regulations issued by the European Aviation 1 General Safety Agency (EASA), whose role has been substantially increased by Regulation No. 216/2008 dated 20 February 2008, as amended 1.1 Please list and briefly describe the principal by Regulation No. 690/2009 and Regulation No. 1108/2009. legislation and regulatory bodies which apply to and/ Regulation No. 1315/2007, establishing the safety oversight function or regulate aviation in your jurisdiction. concerning air navigation services, air traffic flow management and air space management, is also applicable in Lithuania. The Aviation The Ministry of Transport and Communications of the Republic Security Division within the CAA is the main body administering of Lithuania (hereinafter – Ministry of Transport) and the Civil air safety. Aviation Administration (hereinafter – CAA) are the main bodies Resolution No. 1613-7 of 10 November 2010 of the Government regulating aviation matters in Lithuania. of the Republic of Lithuania on verification of the national civil Specific regulatory functions are vested in other regulatory bodies, aviation security programmes and Order No. 4R-179 of 31 e.g. the state enterprise “Air Navigation”, and the state-owned December 2014 of the Director of the CAA on establishment of the company Lithuanian Airports. material aviation security quality programme, are the main national The Law on Aviation of the Republic of Lithuania is the principal legal acts establishing requirements ensuring the quality of aviation national legislation governing aviation matters. The said law sets the security. regulatory framework and the secondary legislation such as relevant decrees of the Government, Orders of the Minister of Transport and 1.4 Is air safety regulated separately for commercial, Orders of the Director of the CAA, while the Instructions of the cargo and private carriers? Director General of the state enterprise “Air Navigation” set the whole regulatory environment. There are no separate regulations in force in Lithuania in respect European Union (EU) legal acts and international treaties also of air safety matters concerning commercial, cargo and private air constitute an integral part of the Lithuanian legal system. carriers. However, pursuant to the relevant EASA instructions, commercial air carriers shall also comply with and operate in 1.2 What are the steps which air carriers need to take in accordance with Air Operations Regulation (EU) No. 965/2012 and order to obtain an operating licence? the requirements specified therein.

The CAA is the authority which issues Lithuanian air operator 1.5 Are air charters regulated separately for commercial, certificates (AOCs). This process is regulated by the Rules of cargo and private carriers? Issuance of Air Operator Certificates, adopted by the CAA. Only entities which are registered within the Register of Legal Entities There are no significant differences in regulating commercial, cargo of the Republic of Lithuania, and whose main business place is or private carriers. All carriers shall have a valid air operator’s Lithuania, may be granted an AOC. certificate and an operating licence in order to be eligible to conduct Moreover, air carriers aiming to obtain a Lithuanian AOC shall their activities. comply with the rules established by EU Regulation No. 965/2012 and 216/2008. This means that the CAA shall evaluate technical 1.6 As regards international air carriers operating in your and safety requirements and shall check certificates of airworthiness jurisdiction, are there any particular limitations to be of the fleet, etc. aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, restrictions and taxes which apply to international but 1.3 What are the principal pieces of legislation in not domestic carriers. your jurisdiction which govern air safety, and who administers air safety? There are no significant distinctions between operations of domestic and international carriers. EU-based carriers operate in Lithuania Lithuania is a signatory to the Chicago Convention. Therefore, air according to the rules of the internal market. Moreover, local and navigation equipment and operations must comply with International EU-based carriers are subject to EU open skies agreements. The Civil Aviation Organisation (ICAO) standards.

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major difference is that the domestic carriers are supervised and the CAA. Deeds and actions pertaining to any imposed restraints/ controlled by the CAA. encumbrances on the ownership title of the aircraft shall be reported to the CAA by the Central Mortgage Office of Lithuania. The register is open to the public and information on restraints/ 1.7 Are airports state or privately owned? encumbrances shall be provided to any interested person upon request. Moreover, it should be noted that aircraft transactions, The airports of Vilnius (VNO), Kaunas (KUN) and Palanga (PLQ) under Lithuanian law, shall be in a notarised form, and the same is are operated by the state enterprise “Lithuanian Airports”. Siauliai to be said about mortgage deeds. Therefore, the register requires airport is operated by the municipal company “Siauliu Oro Uostas”. transaction documents to be endorsed by a public notary.

Lithuania 1.8 Do the airports impose requirements on carriers 2.3 Are there any particular regulatory requirements flying to and from the airports in your jurisdiction? which a lessor or a financier needs to be aware of as regards aircraft operation? Airport authorities deal with carriers on a contractual basis and impose contractual service rates for the use of the airport Lithuanian law does not provide for any specific requirements for infrastructure, which must be equal and non-discriminatory to all the operation of leased aircraft and the general aircraft operation carriers, regardless of whether they are local or international. In rules shall apply. The lessor should be aware that, according to accordance with Order No. 3-96/D1-171 of 23 March 2007 of the Lithuanian law, an aircraft is treated as real estate. Therefore, all Minister of Transport and the Minister of Environment, aircraft may transactions concerning the transfer of ownership and/or possession arrive or leave the airports of the Republic of Lithuania provided that rights shall be endorsed by a notary public. they conform with the environmental requirements and standards established in the Convention on International Civil Aviation. 2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests 1.9 What legislative and/or regulatory regime applies to in a single engine are at risk of automatic transfer air accidents? For example, are there any particular or other prejudice when installed ‘on-wing’ on an rules, regulations, systems and procedures in place aircraft owned by another party? If so, what are the which need to be adhered to? conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to The principal rules and procedures are established under Order mitigate the risks? No. 3-25 of 15 January 2002 of the Minister of Transport on establishment of the regulation concerning the classification, There is no developed concept of title annexation in Lithuanian law. investigation and notification of accidents and incidents involving Additionally, there is no case law or legal act which establishes a aircraft. This Order has been amended in 2016 and now fully clear rule that title annexation is not possible. Moreover, Lithuanian implements requirements established by Directive No. 996/2010 legislation does not grant full clarity on whether the parts of the and Regulation No. 376/2014. aircraft, e.g. airframe and engines, are legally separate objects. However, market players are used to the concept that the engine and airframe are two separate items. Legal problems related to 1.10 Have there been any recent cases of note or other “on-wing” engines may stipulate a temporary restriction regarding notable developments in your jurisdiction involving operation of the whole aircraft. If any court or arbitration tribunal air operators and/or airports? rules on an injunction measure, for example a prohibition on transporting the engine from Lithuania or a prohibition on using the On 2 June 2016, the Parliament of the Republic of Lithuania engine, such ruling might negatively affect the aircraft which has the adopted the Law on the concession of the three international airports said engine “on-wing”. The same situation might happen in reverse (Vilnius, Kaunas and Palanga). However, since this regulatory if the airframe is under an injunction, as it might be complicated to change, no steps have been taken to look for a private operator. remove the engine. However, such injunctive measures are not equal to title annexation. The owner and financiers of engines/airframes should be as precise as possible while concluding lease agreements. 2 Aircraft Trading, Finance and Leasing First of all, until there is more clarity under Lithuanian law, the best choice would be to sign separate engine lease agreements. Secondly, 2.1 Does registration of ownership in the aircraft register engine lessors should insist on receiving irrevocable permission constitute proof of ownership? from airframe owners and lessees in order to access the aircraft and dismantle the engine in a typical situation. The registration of ownership of an aircraft does not constitute proof of ownership. The role of the public register is to disclose already 2.5 What (if any) are the tax implications in your existing rights. The rights are created by civil agreements and other jurisdiction for aircraft trading as regards a) value- legal grounds established under the law. A bill of sale and sale- added tax (VAT) and/or goods and services tax (GST), purchase agreement are considered proof of ownership. and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of 2.2 Is there a register of aircraft mortgages and charges? aircraft and/or particular aircraft types or operations? Broadly speaking, what are the rules around the operation of this register? Aircraft are considered real estate under Lithuanian law. Therefore, transactions are required to be in a notarised form, and notary fees Any mortgages on the aircraft shall be registered under the Civil are applicable to aircraft transactions. Additional fees shall be Aircraft Register of the Republic of Lithuania, administered by applicable at the moment of registration of the aircraft at the CAA.

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Generally speaking, aircraft transactions, if they are concluded agreement with the defaulting party. If the agreement establishes when the aircraft is grounded, are subject to VAT. However, there the lessor’s rights on repossession of the aircraft without court is an exception, which derives from a clarification by local tax interference, the lessor may rely on these rights. Therefore, it is administrators, which says that if an aircraft transaction is performed highly recommended to discuss remedies within a lease contract as during a flight above neutral waters, such transaction might be much as possible. For example, if the lessor considers taking over exempted from Lithuanian VAT. Moreover, aircraft transactions are possession of an aircraft and deregistering it, such lessor should subject to profit tax, if it is applicable. consider obtaining consents or even power of attorney.

2.6 Is your jurisdiction a signatory to the main 3.3 Which courts are appropriate for aviation disputes? international Conventions (Montreal, Geneva and Does this depend on the value of the dispute? For

Cape Town)? example, is there a distinction in your jurisdiction Lithuania regarding the courts in which civil and criminal cases The Montreal Convention was ratified by Lithuania on 19 October are brought? 2004. With the exception of administrative disputes with state authorities, The Cape Town Convention on International Interests in Mobile including the CAA, all disputes fall under the competence of the Equipment was ratified by the EU on 28 April 2009 and is binding on general courts. If the value of the dispute exceeds €40,000, the the EU in its respective fields of exclusive competence. Considering respective county court shall have jurisdiction over the case; that the said convention’s subject matter falls almost entirely under otherwise the district court shall be in charge of the case. the exclusive competence of the EU, Lithuania has not ratified this convention. In the event that the parties have agreed to settle their disputes in arbitration, the respective arbitration shall be entitled to examine The Geneva Convention on the International Recognition of Rights the case. It should be noted that the Lithuanian Supreme Court has in Aircraft has not been ratified by Lithuania. developed an arbitration-friendly environment and the Vilnius Court of Commercial Arbitration has modern rules, good administration 2.7 How are the Conventions applied in your jurisdiction? capacity and a decent pool of arbitrators from various jurisdictions.

Under Article 138 of the Constitution of the Republic of Lithuania, 3.4 What service requirements apply for the service of international treaties ratified by Parliament are a constituent part of court proceedings, and do these differ for domestic the legal system of the Republic of Lithuania. airlines/parties and non-domestic airlines/parties? Under Article 11 of the Law on International Treaties, if a ratified treaty establishes regulations other than those established by the Articles 117, 118, 119 and 120 of the Code of Civil Procedure provide law, the provisions of the treaty of the Republic of Lithuania shall a significant variety of service methods, e.g. personal summons via prevail. Moreover, provisions of international instruments are, in registered mail or courier, service to the representative, exchange of one way or another, usually transposed into national legal acts. documents between lawyers, and public announcement. The court, ex officio or upon the request of the party, chooses the most effective service method. It should be noted that public announcement, as a 3 Litigation and Dispute Resolution service method, is not applicable to foreign entities. Parties which are EU residents shall be served according to the rules prescribed by Regulation No. 1393/2007. Lithuania is also a party to a number 3.1 What rights of detention are available in relation to aircraft and unpaid debts? of international instruments, e.g. the Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, and a number of Article 4.229 of the Civil Code establishes general grounds for the bilateral agreements with non-EU countries (Russian Federation, detention of objects on the grounds of unpaid debts. It is stipulated Republic of Kazakhstan, etc.). This enables Lithuanian courts to that a lawful possessor, who has the right of claim in respect of the communicate effectively with foreign authorities and serve judicial owner of an object belonging to the debtor, is entitled to detain the documents for foreign-based airlines/parties. object until his claim is satisfied. In accordance with Order No. 4R-190 of 10 September 2010 of the Director of the CAA on the establishment of the rules on the prohibition to leave and detention 3.5 What types of remedy are available from the courts of aircraft, an aircraft may be subject to temporary detention if or arbitral tribunals in your jurisdiction, both on i) an the charges stipulated by Article 72 of the Law on Aviation of the interim basis, and ii) a final basis? Republic of Lithuania, e.g. air navigation, airport charges, etc., are not paid. Moreover, any detention of aircraft shall meet the principle Article 145 of the Code of Civil Procedure establishes the following of proportionality, i.e. there should be a reasonable proportion principal interim measures: temporary seizure of the real property between the debt size and recoverability and aircraft value. of the debtor; temporary seizure of the debtor’s movable property, monetary funds and property rights; detention of the object owned by the debtor; and the creation of a record in the public register prohibiting 3.2 Is there a regime of self-help available to a lessor transactions of property rights of the debtor’s property, etc. or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights In accordance with Article 1.138 of the Civil Code of the Republic of under the lease/finance agreement? Lithuania, the following final remedies could be applied in different cases: acknowledgment of rights; restoration of the situation that Self-help instruments are not highly developed in Lithuania. Besides existed before the right was violated; prevention of unlawful actions; the detention right, according to Article 4.229 of the Civil Code, or prohibition from performing actions that pose a reasonable threat the lessor might enjoy specific rights if they are prescribed by the of the occurrence of damage (preventive action), etc.

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Moreover, the Arbitral Tribunal may grant the following interim In cases of mergers and acquisitions of air carriers, the relevant measures: prohibition against concluding agreements or taking market shall mean a commercial flight from one specific departure certain actions; an obligation of a party to preserve assets related to place to a particular arrival place, i.e. a flight from one airport to the arbitration, or to furnish a monetary deposit or bank or insurance another. guarantee; and an obligation to preserve evidence that might matter to the arbitration. 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain 3.6 Are there any rights of appeal to the courts from the regulatory clearance/anti-trust immunity from decision of a court or arbitral tribunal and, if so, in regulatory agencies? what circumstances do these rights arise?

Lithuania A notification concerning concentration shall be submitted to the If the parties opt for arbitration, there shall be no appeal procedure Competition Council of the Republic of Lithuania or the European in relation to an award. However, in accordance with the Commission, depending on the turnover threshold reached. exceptional and limited grounds established in Article 50 of the Law Provided that the undertakings comply with the commitments on Arbitration (i.e. infringement of public order, etc.) the Court of raised by the Competition Council or European Commission, a Appeal of Lithuania may set aside the arbitration award. concentration may be authorised. If the case is examined by the state court, each party has the right Under Article 6 Clause 1 of the Law on Competition, an anti- to appeal. If any party submits an appeal to the higher court, the competitive agreement may obtain regulatory clearance, provided decision does not come into force. Only once the ruling of the that it contributes to improving the production or distribution of appeal court is adopted does the decision come into force. goods or improving technical or economic progress while allowing The second appeal (cassation) to the Supreme Court is only possible consumers a fair share of the resulting benefit. The list of agreements in exceptional cases, e.g. serious breach of material or procedural that can acquire clearance was established by the Resolution of the rules, or deviation from case law of the Supreme Court. The Competition Council of the Republic of Lithuania of 15 July 2010 submission of the cassation does not suspend the entry into force of No. 1S-140, regarding agreements fulfilling the conditions of Article the judgment, unless the Supreme Court rules otherwise. 6 Clause 1 of the Law on Competition of the Republic of Lithuania.

4.4 How does your jurisdiction approach mergers, 4 Commercial and Regulatory acquisition mergers and full-function joint ventures?

4.1 How does your jurisdiction approach and regulate Mergers, acquisition mergers and full-function joint ventures joint ventures between airline competitors? shall be treated as a concentration. If certain turnover thresholds are met, the concentration is subject to mandatory notification to In each case, decisions shall be taken in accordance with the the Competition Council. Regulation No. 139/2004 also applies. general competition rules and an individual decision shall be made. Therefore, if the turnover thresholds listed in this Regulation are Depending on the market share and the turnover of the undertakings, met, notification must be made to the European Commission. competition-related issues are regulated by the Competition Council of the Republic of Lithuania and the European Commission. 4.5 Please provide details of the procedure, including All joint ventures meeting the turnover thresholds are subject to time frames for clearance and any costs of mandatory notification to the Competition Council. In all cases, notifications. the undertakings establishing the joint venture must provide the Competition Council with convincing evidence that the creation Under Article 11 of the Law on Competition, the Competition of the joint venture will not result in coordination of behaviour in Council shall examine the notifications of concentration submitted relevant horizontally or vertically related markets. in accordance with the established requirements and adopt the resolutions no later than within a term of four months. The Competition Council shall, within one month from receipt of a 4.2 How do the competition authorities in your notification of concentration meeting the established requirements, jurisdiction determine the ‘relevant market’ for the adopt a resolution to permit the implementation of concentration purposes of mergers and acquisitions? in accordance with the submitted notification or to permit the implementation of concentration in accordance with the conditions The definition of the relevant market is established by the Law and obligations established by the Competition Council, or a on Competition of the Republic of Lithuania and the relevant EU resolution to proceed with further examination of the notification legislation (Regulation No. 1/2003 and Regulation No. 139/2004). of concentration. The criteria for defining the relevant market are reiterated in the Entities which have submitted notifications of concentration shall be Guidelines on Relevant Market of the Competition Council, which, informed of the resolutions adopted by the Competition Council in to a large extent, correspond to the Commission Notice on the writing. If the Competition Council does not adopt the resolutions Definition of the Relevant Market. within the four-month term, entities or controlling persons shall In general, the relevant market is defined in several steps. The first have the right to implement concentration in accordance with the step is to define the relevant product by determining products that conditions formulated in the notification of concentration. may be substituted in terms of their quality, price and use. The Fees payable for the examination of notifications of concentration second step is to define the relevant geographical market, which is start at €1,621 and may reach €3,243, depending on the turnover of defined by determining the territory in which substitutability can the undertakings, legal fees excluded. take place. When defining the relevant product and geographical market, demand-side and supply-side substitutability are assessed.

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4.6 Are there any sector-specific rules which govern the 4.10 What are the mechanisms available for the protection aviation sector in relation to financial support for air of intellectual property (e.g. trademarks) and other operators and airports, including (without limitation) assets and data of a proprietary nature? state aid? At the national level, national patents, trademarks and designs can Under Articles 107 to 109 of the Treaty on the Functioning of the be registered under the Law on Patents of the Republic of Lithuania, European Union, state aid that distorts or could distort competition the Law on Trade Marks of the Republic of Lithuania and the is basically incompatible with the common market. Law on Designs of the Republic of Lithuania. European patents The rules of application of Articles 107 and 108 of the Treaty on the can be registered under the European Patent Convention (1973). Functioning of the European Union with regard to the provision of International patents can be registered under the Patent Cooperation Lithuania de minimis aid are established by Regulation No. 1407/2013. Treaty (1970). EU trademarks can be registered under Council Regulation No. 207/2009. International trademarks can be registered The conditions of the provision of financial support and state aid under the Madrid system for the international registration of marks. to airports and airlines are described in detail and regulated by EU designs can be registered under Council Regulation No. 6/2002. the Commission Guidelines on state aid to airports and airlines International designs can be registered under the Geneva Act (1999) (Communication from the Commission 2014/C 99/03). of the Hague Agreement Concerning the International Registration of Industrial Designs. 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these subsidies? 4.11 Is there any legislation governing the denial of boarding rights? On 1 June 2015, the Minister of Transport approved the rules on insignificant (de minimis) aid for air carriers seeking to start a new This matter is regulated under Regulation No. 261/2004 as of route (Order No. 3-227(1.5E)). The aid shall be granted to applicants 11 February 2004, establishing common rules on compensation who start a new regular route from/to Lithuanian airports or increase and assistance to passengers in the event of denied boarding and the frequency of existing routes from/to Lithuanian airports. The of cancellation or long delay to flights, and repealing Regulation maximum aid amount shall be €200,000 in three years. The criteria (EEC) No. 295/91 are directly applicable in Lithuania and the local for de minimis aid are further specified in the invitation to apply for legal acts make direct reference to the said EU Regulation. de minimis aid for new routes from Lithuanian airports, approved by the state enterprise “Lithuanian Airports”. 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? 4.8 What are the main regulatory instruments governing the acquisition, retention and use of passenger data, Liability for cancellation and/or late arrival/departure of flights may and what rights do passengers have in respect of be imposed on the air carriers pursuant to Regulation No. 261/2004 their data which is held by airlines? of 11 February 2004, establishing common rules on compensation and assistance to passengers in the event of denied boarding and of The Passenger Name Record (PNR) system is in the development cancellation or long delay to flights. stage at the moment. Lithuania is making preparations and all The CAA is the designated authority to carry out and supervise the necessary amendments on a legal basis for the implementation of enforcement of the abovementioned Regulation and is authorised the Directive of the European Parliament and of the Council on to review passengers’ complaints and impose relevant penalties on the use of Passenger Name Record (PNR) data for the prevention, the air carrier if it fails to respect the requirements imposed by the detection, investigation and prosecution of terrorist offences and Regulation. serious crime, which is intended to be adopted soon. In the event that the entity disagrees with the decision adopted by the CAA and/or the imposed penalty amount, such air carrier is 4.9 In the event of a data loss by a carrier, what entitled to challenge the legitimacy thereof at the competent court obligations are there on the airline which has lost the pursuant to regular civil procedure. data and are there any applicable sanctions?

Under Article 30 of the Law on Legal Protection of Personal Data of 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, the Republic of Lithuania, the relevant data controller and the data are imposed on the airport authorities? processor must implement appropriate organisational and technical measures intended for the protection of personal data against The Law on Aviation of the Republic of Lithuania is the basic legal accidental or unlawful destruction, alteration and disclosure, as well act governing airport authorities in Lithuania. Airport authorities as against any other unlawful processing. shall comply with the requirements established by Order No. 4R- Passengers have the right to get acquainted with the information 193 of Director of the CAA of 26 October 2004. concerning them, request that their data is corrected and demand Generally speaking, airport authorities are responsible for damages in case their personal data was used in an illegal way that maintenance of airport infrastructure, ensuring airport security and caused harm to a passenger. managing ground handling services. Notably, in cases where data is lost, an airline may be subject to Moreover, airport authorities are also bound by relevant EU a fine in accordance with Article 214, section 14 of the Code on legislation, e.g. Regulation No. 300/2008 on common rules in the Administrative Offences. field of civil aviation security, etc.

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Lithuania industry: the proliferation/regulation of unmanned aerial vehicles the infringement of consumer rights, including compensation for (UAVs); and Brexit’s effect on the aviation industry. losses, etc. Commercial UAVs and privately owned UAVs shall have a significant effect on aviation safety. Separate and specific UAV regulations are 4.15 What global distribution suppliers (GDSs) operate in inevitable. Current debates in the EU and US show that reaching your jurisdiction? regulatory consensus will not be easy. Lithuania, facing the proliferation of UAVs, has made its own regulatory steps and began The key global distribution suppliers (GDSs) in Lithuania are regulatory initiatives in 2014. The Lithuanian CAA has adopted a Amadeus and Galileo. Moreover, there are certain GDS suppliers recast of the unmanned aerial vehicle regulation. According to the attributed mainly to CIS countries and local air carriers/air operators regulation, new limitations on the operation of UAVs have come operating in Lithuania, e.g. Sirena Travel. into force (for example, above military zones, urbanised territories, international airports, etc.). All UAVs with a mass above 25 kilos are required to be licensed. Moreover, the ongoing developments 4.16 Are there any ownership requirements pertaining to in Scandinavia show that data protection rules shall be applicable GDSs operating in your jurisdiction? to UAV operators. This attitude has potential to spread across the whole of the EU. Pursuant to Regulation No. 80/2009 of 14 January 2009 on a Code of Conduct for computerised reservation systems, any such existing The second hot topic is Brexit and its effects on the aviation industry. ties (both, direct and indirect) between the GDS system vendors Brexit will challenge the core of the EU aviation industry’s so-called and air carrier/aircraft operators must be reported to the relevant “open sky” policy. From a purely legal standpoint, the “open sky” authorities and/or otherwise disclosed. The said Regulation is policy is a part of free movement rights, i.e. cornerstones of the directly applicable in Lithuania. EU. The free movement policy was established by the EU Founding Treaties and is ensured through the oversight of the European Court of Justice. If the “open sky” policy does not survive the negotiation 4.17 Is vertical integration permitted between air operators process, then the EU Member States will have to rely on existing and airports (and, if so, under what conditions)? bilateral agreements, signed before UK’s accession to the EU, or negotiate new ones. Also, the UK will have to look for substituting In accordance with the Law on Aviation and Order No. 4R-193 of instruments to gain the same rights as those deriving from EU third the Director of the CAA of 26 October 2004 regarding requirements parties’ “open sky” agreements. Moreover, EU carriers, looking for applicable to airports, an airport must and is entitled to perform a opportunities in the UK market, will have to obtain British AOCs. limited list of functions. Air operators’ activities do not fall within the functions allowed to be performed by airports in Lithuania. However, there are no other explicitly prescribed prohibitions for potential vertical integration if this integration meets fair competition criteria. However, such integration would require the scrutiny of competition authorities.

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Paulius Docka PRIMUS attorneys at law 7 Konstitucijos Ave. Vilnius Lithuania

Tel: +370 5 248 7337 Email: [email protected] URL: www.primus.legal

Paulius Docka is an attorney at law with more than 15 years of Lithuania experience. He graduated from Vilnius University Faculty of Law and the University of Leicester, UK. Mr. Docka started his career at the Ministry of Justice of the Republic of Lithuania. He continued his professional carrier at an Ernst & Young affiliated law firm and in 2005 established a law firm, which currently bears the name PRIMUS and is one of the largest pan-Baltic law firms. He is a member of the ICC Institute of World Business Law, a Fellow of the Chartered Institute of Arbitrators, a member of the International Arbitration Institute and a member of the Russian Arbitration Association. Mr. Docka was nominated as a highly recommended dispute resolution lawyer by Chambers and Partners, and as a leading aviation lawyer by Who’s Who Legal: Aviation Finance and Aviation Contentious. He mainly focuses on arbitration and aviation transactions.

PRIMUS is a full-service business law firm with specific expertise in the fields of Corporate, M&A, Banking & Finance, Dispute Resolution and Real Estate. The firm employs over 70 lawyers and support staff in Tallinn, Riga and Vilnius. PRIMUS acts for leading international and local companies, financial institutions, equity sponsors and funds in complex M&A, real estate and financing transactions. The firm’s partners are highly ranked by the main international legal directories such as the IFLR1000, Chambers Global, Chambers Europe and The Legal 500 in Banking and Finance, Real Estate, Corporate, M&A and Dispute Resolution.

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Malaysia Norhisham Abd Bahrin

Azmi & Associates Rosinah Mohd Salleh

autonomous civil aviation authority. However, the change 1 General has not been effected as yet, and is set to be in force in the near future from the date of this article. 1.1 Please list and briefly describe the principal 4. Malaysian Aviation Commission (“MAVCOM”) legislation and regulatory bodies which apply to and/ This is the economic regulator overseeing commercial and or regulate aviation in your jurisdiction. economic matters, as well as being an independent adviser to the Ministry of Transport on economic matters pertaining to The principal legislation regulating civil aviation in Malaysia is as civil aviation. follows: Acts 1.2 What are the steps which air carriers need to take in 1. Civil Aviation Act 1969 (“CAA 1969”); order to obtain an operating licence? 2. Civil Aviation (Amendment) Act 2015; (a) Any person intending to undertake carriage by air or use any 3. Civil Aviation Offences Act 1984; aircraft for the carriage of passengers, mail or cargo for hire 4. Carriage by Air Act 1974 (“CBAA 1974”); or reward for any journey between two or more places, of 5. International Interests in Mobile Equipment (Aircraft) Act which at least one place is in Malaysia, is required to apply 2006; for an operating licence from MAVCOM. 6. Airport And Aviation Services (Operating Company) Act (b) For scheduled flights, i.e. journeys with a fixed schedule, 1991; an air carrier is required to apply for an Air Service Licence (“ASL”). During the application process, a Provisional ASL 7. Malaysian Aviation Commission Act 2015 (“MAVCOM Act may be given to the applicant prior to issuance of an ASL. 2015”); (c) For unscheduled flights, i.e. unscheduled journeys, an air 8. Malaysian Aviation Consumer Protection Code 2016; and carrier is required to apply for an Air Service Permit (“ASP”). 9. Civil Aviation Authority of Malaysia Act 2017. Similarly, a Provisional ASP may be given to an applicant Regulations prior to issuance of an ASP. 1. Civil Aviation Regulations 2016; (d) Flights across Malaysia by other operators from contracting states which have a Transit Agreement with Malaysia are 2. Civil Aviation (Amendment) Regulations 2016; exempted from having an ASP or an ASL. 3. Civil Aviation (Aerodome Operations) Regulations 2016; (e) An air carrier who wishes to apply for an ASL or ASP may 4. Civil Aviation (Fees And Charges) Regulations 2016; make an application to MAVCOM using appropriate forms 5. Malaysian Aviation Commission (Aviation Service Charges) which are publicly available. Regulations 2016; and (f) MAVCOM will conduct an evaluation of the applicant and, 6. Minister of Transport Directives 2016. upon satisfactory conclusion, issue a Conditional Approval. The regulatory bodies which regulate civil aviation in Malaysia are (g) The applicant is then required to apply for an Air Operator as follows: Certificate (“AOC”) to the DCA, together with the Conditional Approval issued by MAVCOM. An AOC certifies that the 1. Ministry of Transport holder is competent to operate flights, and that the aircraft This is the principal policymaker for the aviation industry in operated by him on such flights is operated safely. Malaysia. (h) An ASL or ASP will then be issued to the applicant, subject to 2. Department of Civil Aviation (“DCA”) the applicant having a valid AOC issued by the DCA. This is the technical regulator, overseeing safety, maintenance (i) Documents to be submitted to MAVCOM on application for and security. an ASL or ASP include details of the company, shareholding 3. Civil Aviation Authority of Malaysia (“CAAM”) structure, organisational structure, financial status and projections, details of the applicant’s aircraft, aircraft This is the new technical regulator which incorporates the certificate(s) of airworthiness, and aircraft maintenance DCA to be in line with the International Civil Aviation programme. Organisation (“ICAO”) requirement, which has called on contracting states of the Chicago Convention to establish an

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1.3 What are the principal pieces of legislation in 1.8 Do the airports impose requirements on carriers your jurisdiction which govern air safety, and who flying to and from the airports in your jurisdiction? administers air safety? Airports in Malaysia impose a Passenger Service Charge (“PSC”) The principal legislation in Malaysia governing air safety is as (formerly known as “Airport Tax”), paid by departing passengers. follows: PSC is collected by airlines upon purchase of tickets and is only 1. Civil Aviation Act 1969 paid to Malaysia Airports Holdings Berhad upon completion of a This Act prescribes or supplements requirements relating flight. Passengers who do not travel on the flight for which they to, among others, maintenance of aircraft and components, have purchased the tickets are eligible for a full refund of the PSC.

certification of airworthiness of types of aircraft and PSC rates are as follows: Malaysia components, training organisations, and licences for maintenance engineers. Departing To PSC 2. Civil Aviation Regulation 1996 Rural Airports All Destinations RM 0 This Regulation sets out general rules relating to matters such as airworthiness of aircraft, maintenance of aircraft, Kuala Lumpur International All International Airport − Main Terminal RM 73 aircraft crew and licensing, operation of aircraft, conduct of Destinations operations, air traffic control and investigation of accidents. Building & Regional Airports 3. Aviation Offences Act 1984 Kuala Lumpur International All Domestic Airport − Main Terminal RM 11 ■ Certain international conventions relating to safety of Destinations passengers have also been given force of law via the Building & Other Airports Aviation Offences Act 1984. ■ Part IV of the Aviation Offences Act 1984 gives effect to: ■ the Montreal Convention 1971 for the Suppression of 1.9 What legislative and/or regulatory regime applies to Unlawful Acts Against the Safety of Civil Aviation; air accidents? For example, are there any particular and rules, regulations, systems and procedures in place which need to be adhered to? ■ the Montreal Protocol 1988 for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation. The following are applicable to air accidents: The regulatory body that governs air safety is the DCA. Regulations 1. Part XXVI Investigation of Accidents, Civil Aviation Regulations 2016. 1.4 Is air safety regulated separately for commercial, 2. ICAO Annex 13 – Aircraft Accident and Incident Investigation. cargo and private carriers? Procedures Air safety is not regulated separately for commercial, cargo and (a) All accidents involving aircraft issued with Certificates private carriers. of Airworthiness will be investigated by Inspectors of Air Accidents, who are appointed by the Ministry of Transport to carry out investigations into the circumstances and causes of 1.5 Are air charters regulated separately for commercial, air accidents. cargo and private carriers? (b) When an accident or serious incident occurs where the aircraft involved carry or are loaded with dangerous goods, Air charters are not regulated separately for commercial, cargo and for the safety of rescuers and investigators, it is the duty of private carriers. the commander or the operator or its representative to inform the Chief Inspector of Air Accidents and the Director General of Civil Aviation (“DGCA”) as soon as practicable, of the 1.6 As regards international air carriers operating in your presence of the dangerous goods on the affected aircraft. jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, 1.10 Have there been any recent cases of note or other restrictions and taxes which apply to international but notable developments in your jurisdiction involving not domestic carriers. air operators and/or airports?

Under the Civil Aviation Regulations 1996, an aircraft registered in A new statutory body which incorporates the DCA known as the a contracting state other than Malaysia or in a foreign state shall not Civil Aviation Authority of Malaysia (“CAAM”) is in the midst take on board or discharge any passengers or cargo in Malaysia for of being formed to fulfil the ICAO requirement, which has called valuable consideration without an operating permit granted by the on contracting states of the Chicago Convention to establish an Minister of Transport to the operator or charterer of the aircraft or to autonomous civil aviation authority. the government of the state in which the aircraft is registered. The Civil Aviation Authority of Malaysia Act 2017 will help Malaysia to ensure all businesses involving the civil aviation 1.7 Are airports state or privately owned? industry meet the standards and safety requirements of international civil aviation as set by ICAO. Airports in Malaysia may be state-owned or privately owned In addition, it will play a role in regulating, coordinating and depending on the airport. protecting the civil aviation industry from illegal disturbances, and will cooperate with any authority responsible for investigating incidents involving aircraft.

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The Civil Aviation Authority of Malaysia Act 2017 also authorises contracting state. The holder of a registered interest is then entitled CAAM to develop and encourage national civil aviation industrial to exercise certain remedies under the Cape Town Convention if the development programmes, conduct research and be involved in debtor defaults. This can include quick processes for deregistration search and rescue operations (“S&R”). and the return of an aircraft to the party with the international CAAM will have the freedom to attract and maintain qualified interest. technical staff, to ensure that Malaysia’s obligations in ensuring the Malaysia recognises that aircraft engines and other ancillary items safety of the national civil aviation industry are in line with ICAO’s may have separate ‘titles’, though these are not reflected in the aspirations. Certificate of Registration, which covers the entire aircraft asa whole and does not reflect the individual title of ownership of other aspects of an aircraft. Malaysia 2 Aircraft Trading, Finance and Leasing Notwithstanding, Malaysian law recognises that engines and other accessories of aircraft may be charged by a company in favour of a 2.1 Does registration of ownership in the aircraft register financier, per the Companies Act 2016. In performing a company constitute proof of ownership? search, the charge will show the specific assets charged by the company in favour of a third party, including the engines and other accessories. Registration of ownership of aircraft in the Aircraft Register Additionally, the owners and financiers of engines and other ancillary constitutes proof of ownership of a particular aircraft. The DCA will parts can enter into an aircraft mortgage by including circumstances issue a Certificate of Registration for aircraft registered in Malaysia. where the mortgage must be released before the transfer of ownership of the entire aircraft can be effected. This will allow protective measures preventing the owner of the engines and accessories from 2.2 Is there a register of aircraft mortgages and charges? being ‘dragged along’ to deal with new owners until the relevant Broadly speaking, what are the rules around the and necessary measures (redemption, removal of such engines and operation of this register? accessories from said aircraft, among others) have been made.

Yes. Any mortgage of a Malaysian aircraft may be entered into the Aircraft Register. Once a mortgage is registered, ownership of the 2.5 What (if any) are the tax implications in your aircraft cannot be transferred until the mortgage is discharged with jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), the consent of the mortgagee. and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as 2.3 Are there any particular regulatory requirements regards non-domestic purchasers and sellers of which a lessor or a financier needs to be aware of as aircraft and/or particular aircraft types or operations? regards aircraft operation? (a) The goods and services tax (“GST”) shall be charged and Aircraft may be registered and operated for commercial air transport levied on any supply of goods or services made in Malaysia. Aircraft trading shall be deemed as made in Malaysia if or aerial work in Malaysia if the said aircraft is registered in the the supplier belongs in Malaysia. Where the supply of any name of a qualified person, i.e. the Government of Malaysia, a aircraft involves their removal from a place in Malaysia to a citizen of Malaysia or a Malaysian company. place outside Malaysia, the aircraft shall be treated as supplied If a foreign company having a place of business in Malaysia holds in Malaysia and GST will be imposed on that supply. Where a legal or beneficial interest by way of ownership or a share in an the supply of aircraft involves their removal from a place aircraft, the aircraft may be registered by the DGCA in that person’s outside Malaysia to a place in Malaysia, the aircraft shall be name. However, the said aircraft cannot be operated for commercial treated as supplied outside Malaysia and hence no GST will air transport or aerial work in Malaysia unless the aircraft is leased be imposed on that supply. to and operated by a Malaysian entity. Supply of aircraft handling services in an airport is determined as zero-rated supply, in which no tax will be charged on that supply. However, a sale of an aircraft in Malaysia may attract 2.4 As a matter of local law, is there any concept of title GST on such sale. annexation, whereby ownership or security interests (b) Per section 4 of the Stamp Act 1949, transfer of aircraft via in a single engine are at risk of automatic transfer or bill of sale is chargeable for stamp duty on an ad valorem other prejudice when installed ‘on-wing’ on an aircraft basis, i.e. 3% of the market value of the aircraft or purchase owned by another party? If so, what are the conditions price, whichever is higher. to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks? 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. Malaysia has acceded to the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on If the transfer of the aircraft is effected within Malaysian International Interests in Mobile Equipment on Matters Specific territory, ad valorem stamp duty will be liable to be paid by the purchaser. to Aircraft Equipment (the Cape Town Convention), in light of the country’s interests in aircraft equipment. The Cape Town Exemption from stamp duty is only applicable in the case Convention has force of law in Malaysia pursuant to section 2 of of reconstructions or amalgamations of companies and in case of transfer of property between associated companies. the International Interests in Mobile Equipment (Aircraft) Act 2006. It is therefore advisable for tax efficiency purposes that the The Cape Town Convention allows the interests (referred to as aircraft is transferred and bill of sale is executed while the ‘international interests’) of lessors, financiers and certain others to aircraft is over international waters not governed under any be registered against certain aircraft objects (airframes, engines and jurisdiction, to allow the bill of sale not to be stamped. This helicopters) in circumstances where the debtor (a charger, buyer is especially so in the case that the aircraft is to be sold and under a conditional sale agreement or a lessee) is ‘situated’ in a transferred out of Malaysia.

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The DGCA may deregister the Malaysian aircraft if the outstanding 2.6 Is your jurisdiction a signatory to the main amount is unpaid at the end of six months after the date of the international Conventions (Montreal, Geneva and aircraft lien, or may sell the aircraft with the leave of the High Court Cape Town)? if the outstanding amount is unpaid at the end of one month after the date of the aircraft lien. Malaysia is a signatory to the following international Conventions: The DGCA shall also have right to recovery by civil action of any (a) Chicago Convention 1944: Malaysia deposited its notification fees or charges. of adherence on 7 April 1958. (b) Unpaid seller (b) Montreal Convention 1999: Malaysia ratified this Convention on 29 February 2008. An unpaid seller in possession of the aircraft may retain possession

(c) Cape Town Convention 2001: Malaysia submitted its of the aircraft until payment is received under the Sale of Goods Malaysia instrument of accession on 2 November 2005 and the Act 1957. Convention entered into force on 1 March 2006. (c) Income tax authorities Other aviation-based Conventions signed and/or ratified by Customs authorities may refuse clearance of any aircraft from any Malaysia include: aerodrome or airport in Malaysia until the income tax is paid by the (a) Warsaw-Hague Convention 1929, as amended at The Hague operator of the aircraft under section 105 of the Income Tax Act 1955 (Warsaw-Hague Convention); 1967. (b) Convention on the Privileges and Immunities of the (d) Creditor Specialized Agencies; A creditor may obtain an injunction restraining an aircraft pending (c) Warsaw-Hague Convention further amended by Montreal judgment and execution of the judgment debt. This remedy is Protocol No. 4; and equitable and discretionary in nature. (d) Guadalajara Convention 1961.

3.2 Is there a regime of self-help available to a lessor 2.7 How are the Conventions applied in your jurisdiction? 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? The Conventions referred to in question 2.6 above are given legal effect in Malaysia through the following statutes: Enforcement action to reacquire possession of the aircraft may (a) Chicago Convention 1944 via the Civil Aviation Act 1969; be carried out without court action. This self-help remedy must (b) Montreal Convention 1999 via the Sixth Schedule of the be exercised in a commercially reasonable manner pursuant to CBAA 1974; the provisions of the lease or financing documents. Further, it is (c) Cape Town Convention 2001 via the International Interests in advisable that an Irrevocable Deregistration and Export Request Mobile Equipment (Aircraft) Act 2006; Authorization (“IDERA”) is entered into by the Lessor/Financier (d) Warsaw-Hague Convention via the First Schedule to the to allow self-help proceedings. It is also advisable to enter into a CBAA 1974; Deregistration Power of Attorney with the IDERA, to allow the (e) Warsaw-Hague Convention further amended by Montreal Lender/Financier to deregister the aircraft in the event that it is Protocol No. 4 via the Fifth Schedule to the CAA 1974; challenged in the Malaysian courts. (f) Convention on the Privileges and Immunities of the In addition, under the International Interests in Mobile Equipment Specialized Agencies via the International Organizations (Aircraft) Act 2006, a chargee or lessor is allowed to take possession (Privileges and Immunities) Act 1992; and or control of the aircraft upon breach by the charger or lessee. A (g) Guadalajara Convention 1961 via the Second Schedule to the chargee may also sell or grant a lease, or collect or receive any CBAA 1974. income from the management or use of the aircraft, without a court The DCA ensures compliance by the main players in the aviation order. Before the selling or grant of a lease on an object, a chargee industry with the above statutes. is required to give prior notice of the proposed sale or lease to the interested person. 3 Litigation and Dispute Resolution 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For 3.1 What rights of detention are available in relation to example, is there a distinction in your jurisdiction aircraft and unpaid debts? regarding the courts in which civil and criminal cases are brought? The available rights of detention are as follows: (a) DCA The relevant court for aviation disputes would depend on the subject matter of the dispute and its value. There is no specific court for Under the Civil Aviation Regulations 2016, detention of aircraft aviation disputes. may be made by the DGCA if a person defaults in payment of any fees or charges to the DCA. Proceedings in relation to aviation disputes may be tried in the courts or referred to arbitration. Upon detention, details of detention such as amount due, date and time of detention, and date and time of the entry made, should be Courts recorded in the Aircraft Register and an aircraft lien shall be vested Civil disputes may be pursued in the following courts depending on in the DGCA upon such entry in the Aircraft Register. A notice the amount in dispute or the value of the claim: 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.

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Amount in dispute or value of Court 3.6 Are there any rights of appeal to the courts from the the claim decision of a court or arbitral tribunal and, if so, in First Class Magistrates Court RM 100,000 what circumstances do these rights arise?

Session Court RM 1 million There are rights to appeal against the decision of a court or arbitral High Court Unlimited tribunal. Courts Disputes between air service providers Cases heard in the lower courts may be appealed to a higher court. Disputes between air service providers may be referred to MAVCOM An appeal to the Court of Appeal or Federal Court requires the leave Malaysia by virtue of section 75 of the MAVCOM Act 2015 upon fulfilling of the Court of Appeal and Federal Court respectively. Permission the following prerequisites: to appeal will be given where the court considers that the appeal (i) the dispute must be on any matter under the MAVCOM Act would have a real prospect of success or there is some compelling 2015; and reason why the appeal should be heard. (ii) the parties must have first attempted to resolve their dispute Arbitration via mediation and it failed to be resolved. Parties must notify As a general rule, an arbitral award is binding. However, arbitration MAVCOM on the commencement date of mediation and decisions may be set aside by the High Court under the following parties will be told to resolve their disputes within 30 days or within 60 days. grounds in section 37 of the Arbitration Act 2005: (a) incapacity of the party to the arbitration agreement; In the event that the parties fail to resolve their dispute through mediation within the stipulated period, MAVCOM will commence (b) invalidity of the arbitration agreement; deciding on the matter. Decisions made by MAVCOM will (c) no proper notice was given of the appointment of an arbitrator be published and the parties will be provided with a copy of the or of the arbitral proceedings or the arbitrator was otherwise decision. MAVCOM’s decisions may be registered as judgments of unable to present that party’s case; the High Court and the High Court may make an order requiring the (d) the award deals with a dispute not contemplated or not falling parties to comply with its decision if any party fails to do so. within the terms of the submission to arbitration; (e) the award contains decisions on matters beyond the scope of the submission to arbitration; 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic (f) the composition of the arbitral tribunal or procedure was not airlines/parties and non-domestic airlines/parties? in compliance with the agreement of the parties; or (g) the High Court finds that the dispute was not arbitrable or the Court proceedings in Malaysia may be initiated by a writ or award is in conflict with the public policy of Malaysia. originating summons. Under Order 10 of the Rules of Court 2012, a writ and originating summons must be served on each defendant 4 Commercial and Regulatory 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 4.1 How does your jurisdiction approach and regulate defendant out of jurisdiction under Order 11 of the Rules of Court joint ventures between airline competitors? 2010. Joint ventures between airline competitors are regulated under the MAVCOM Act 2015. In fact, the MAVCOM Act 2015 is the first 3.5 What types of remedy are available from the courts act with a pre-merger notification and merger control element to or arbitral tribunals in your jurisdiction, both on i) an regulate competition in the aviation industry. interim basis, and ii) a final basis? Section 49 of the MAVCOM Act 2015 prohibits any agreement Remedies available vary based on the nature of the dispute. which has the object or effect of significantly preventing, restricting Generally, the following remedies may be awarded by the Malaysian or distorting competition in any aviation service market. Such courts or arbitration: agreements are known as prohibited agreements and may include agreements involving: price-fixing; sharing of the aviation service On an interim basis: market or sources of supply; limiting or controlling production; (a) damages; and limiting or controlling market outlets or market access; limiting (b) an injunction may be awarded to prevent a party from doing or controlling technical or technological development; limiting or something for a specified period or until final judgment is controlling investment; and bid-rigging. reached. Thus, joint ventures between airline competitors will not infringe On a final basis: the anti-competition rule under the MAVCOM Act 2015 if the same (a) damages; do not come within the purview of prohibited agreements in section (b) injunctions to require another party to do something or 49 of the MAVCOM Act 2015. prevent the other side from doing something; In addition, section 54 of the MAVCOM Act 2015 provides that (c) orders to take possession of an aircraft and other aviation mergers that have resulted, or may be expected to result, in a assets; and substantial lessening of competition in any aviation service market, (d) orders for the sale of an aircraft. are prohibited. The definition of merger under this section is inclusive of joint ventures. As such, a joint venture between airline competitors will be prohibited by MAVCOM if it results in or is expected to result in a substantial lessening of competition in the

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aviation service market. What amounts to ‘substantial lessening of competition’ is yet to be defined by MAVCOM. 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) 4.2 How do the competition authorities in your state aid? jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? There is no specific rule which governs financial support for the aviation sector. Currently, there is no provision or guideline in place for MAVCOM to determine ‘relevant markets’ for the purposes of mergers and acquisitions. The Malaysian Competition Commission uses the 4.7 Are state subsidies available in respect of particular

routes? What criteria apply to obtaining these Malaysia Hypothetical Monopolist Test to define a relevant market for subsidies? competition law purposes.

Generally, the Malaysian Government does not provide subsidies 4.3 Does your jurisdiction have a notification system in respect of particular routes. For non-economic aviation services whereby parties to an agreement can obtain conducted for rural communities in East Malaysia, the Malaysian regulatory clearance/anti-trust immunity from Government has appointed and grants subsidies to MASwings to regulatory agencies? provide those aviation services as a national service.

Yes; parties to the proposed merger may notify MAVCOM of the anticipated merger and apply to it for a decision on whether the 4.8 What are the main regulatory instruments governing anticipated merger may infringe section 54. the acquisition, retention and use of passenger data, and what rights do passengers have in respect of In addition, parties may apply to MAVCOM for exemption in their data which is held by airlines? relation to prohibited agreements under section 49 of the MAVCOM Act 2015 that have the object or effect of significantly preventing, The Personal Data Protection Act 2010 (“PDPA”) is the main restricting or distorting competition in any aviation service market. regulatory instrument governing the acquisition, retention and use An individual or block exemption (provided that parties fulfil of personal data in Malaysia for commercial purposes. section 50 of the MAVCOM Act 2015) may be applied by the parties Passengers have the right, upon request, to obtain information on to be exempted from the express prohibition under section 49 of the their personal data, limit the processing of personal data and also to MAVCOM Act 2015. update or make amendments to their personal data held by airlines.

4.4 How does your jurisdiction approach mergers, 4.9 In the event of a data loss by a carrier, what acquisition mergers and full-function joint ventures? obligations are there on the airline which has lost the data and are there any applicable sanctions? There is currently no merger control regime in Malaysia under the Competition Act 2010. Section 9 of the PDPA provides that when processing personal data, a data user shall take practical steps to protect the personal data, among 4.5 Please provide details of the procedure, including others, from any loss. There is no specific obligation imposed on the time frames for clearance and any costs of airline with regard to the loss of data. However, the contravention notifications. of this 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 There is no fee charged by MAVCOM for notification of mergers or imprisonment for a term not exceeding two years, or both. proposed mergers. The procedures for notification are as follows: (a) Parties shall inform MAVCOM regarding their merger or 4.10 What are the mechanisms available for the protection anticipated merger and apply to it for a decision. of intellectual property (e.g. trademarks) and other (b) MAVCOM will provide a self-assessment checklist to the assets and data of a proprietary nature? parties to assess whether the merger or the proposed merger will infringe the anti-competition rules. The protection of intellectual property in Malaysia covers the (c) Upon self-assessment, should the parties require an assessment protection of patents, trade marks, industrial design, geographical by MAVCOM, the parties shall inform MAVCOM and obtain indication, copyright and layout design which are respectively the relevant notification form from MAVCOM. governed by the Patents Act 1983, Trade Marks Act 1976, Industrial (d) Upon submission of the relevant notification form, Designs Act 1996, Geographical Indications Act 2000, Copyright MAVCOM will commence an initial assessment and may Act 1987, and Layout Designs of Integrated Circuits Act 2000. require provision of further information and documents from Patents, trade marks, industrial design and geographical indication the parties. may be protected by filing an application with the Intellectual (e) MAVCOM will make a final assessment on the merger Property Corporation of Malaysia (“MyIPO”). There is, however, no or proposed merger upon provision of documents and system of registration for copyright and layout design in Malaysia. information, and will provide its decision on whether the Protection of copyrightable works and layout design is provided prohibition in section 54 of the MAVCOM Act 2015 has been infringed. automatically under the Copyright Act 1987 and the Layout Designs of Integrated Circuits Act 2000, respectively, based on certain criteria (f) The duration of initial assessment and final assessment varies of eligibility. Nevertheless, copyright owners may be afforded more from case to case. The initial assessment may span one to two months. tangible protection by voluntarily notifying and depositing a copy of the work eligible for copyright with the MyIPO.

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4.11 Is there any legislation governing the denial of 4.14 To what extent does general consumer protection boarding rights? legislation apply to the relationship between the airport operator and the passenger? Denial of boarding rights is governed under the Malaysian Aviation Consumer Protection Code 2016 (“the Code”). According to The general consumer protection legislation does not generally govern Paragraph 11 of the Code, when an operating airline reasonably the relationship between the airport operator and the passenger. expects to deny boarding on a flight, it shall first contact passengers Consumer protection for passengers is specifically governed under to give them the option to volunteer to surrender their reservations. part X of the MAVCOM Act 2015. Passengers who volunteer shall be offered compensation and care

Malaysia in accordance with the First Schedule of the Code. If the number 4.15 What global distribution suppliers (GDSs) operate in of passengers who volunteer is insufficient, the operating airline your jurisdiction? may then deny boarding to any passenger and the airline shall immediately offer compensation in accordance with the First The principal GDSs in Malaysia are Amadeus, Mercator (Navitaire), Schedule. Sabre (Abacus) and Travelport (Galileo).

4.12 What powers do the relevant authorities have in 4.16 Are there any ownership requirements pertaining to relation to the late arrival and departure of flights? GDSs operating in your jurisdiction?

Late arrival and departure of flights is governed under the Code. No, there are no such requirements. MAVCOM has the right to impose a financial penalty on any person for an amount not exceeding RM 200,000 for the first non- 4.17 Is vertical integration permitted between air operators compliance with provisions of the Code governing late arrival and and airports (and, if so, under what conditions)? departure of flights. For subsequent non-compliance(s), MAVCOM may impose a fine of up to 10 times the amount of fine that was Please refer to question 4.1 above. imposed for the first non-compliance.

4.13 Are the airport authorities governed by particular 5 In Future legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments The Civil Aviation (Aerodrome Operations) Regulations 2016 affecting the aviation industry more generally in govern the establishment, maintenance and operation of aerodromes, your jurisdiction, are likely to feature or be worthy of including setting out the obligations of an aerodrome operator in attention in the next two years or so? relation to the operation of aerodromes. Among the obligations of an aerodrome operator set out under the According to MAVCOM, a new set of regulations will come into regulations are those in relation to: the maintenance and operation force that will penalise airport operators for poor service levels, but of an aerodrome; safety management systems; the storage of reward them for exceptional performance. inflammable goods and dangerous goods; the removal of obstacles This new set of regulations serves as a guideline to airport operators from aerodromes; environmental management programmes; lighting as to what service standards they need to comply with, as well as the of obstacles; aerodrome operations and services; aerodromes’ financial implications for non-compliance. physical characteristics; and aerodrome emergency planning. The objective of the new regulation is to ensure that airport operators remain committed and accountable for improving airport service levels and financial efficiency, for the benefit of air travellers in Malaysia.

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Norhisham Abd Bahrin Rosinah Mohd Salleh Azmi & Associates Azmi & Associates 14th Floor, Menara Keck Seng 14th Floor, Menara Keck Seng 203 Jalan Bukit Bintang 203 Jalan Bukit Bintang 55100 Kuala Lumpur 55100 Kuala Lumpur Malaysia Malaysia

Tel: +60 3 2118 5000 Tel: +60 3 2118 5000 Fax: +60 3 2118 5111 Fax: +60 3 2118 5111 Email: [email protected] Email: [email protected] URL: www.azmilaw.com URL: www.azmilaw.com

Norhisham is a Corporate and Mergers & Acquisitions Partner at Rosinah graduated with a Bachelor of Laws (LL.B.) degree from the Malaysia Azmi & Associates. His practice areas cover all corporate matters, University of Kent at Canterbury, England. She obtained her Bar-at- aviation, mergers & acquisitions, private equity & venture capital and Law qualification from, and is a member of, the Honourable Society cybersecurity. of Lincoln’s Inn, England. Rosinah was called to the Malaysian Bar in December 1994. Hisham is an Advocate & Solicitor at the High Court of Malaya and graduated from the International Islamic University Malaysia with She started her legal career in 1995 as an Associate at the legal firm an LL.B. (Hons.) in 1999. He also holds an M.B.A. in International of Messrs Nik Saghir & Ismail in Kuala Lumpur, where she practised Business from the Royal Docks Business School of the University of corporate law. In 1999, she took time off to study for her M.B.A. at East London. the University of Applied Sciences, Esslingen in Germany. Upon her return, Rosinah joined the RHB banking group as a Legal Manager in Hisham’s work is recognised in The Legal 500, IFLR 1000 and Asian charge of the securities business of the group. She left RHB in 2003 Legal Business. He is recommended in the fields of Corporate and to relocate to China, where she worked with the Hong Kong legal firm Mergers & Acquisitions in The Legal 500 Asia Pacific for 2016 and of Messrs. Ng & Shum at its Guangzhou, PRC branch. Rosinah was 2015. He is also the co-author of the Malaysian chapter in the Mergers admitted as a solicitor in England & Wales in September 2005. & Acquisitions Review for 2015 and 2016 (9th and 10th Editions), published by Law Business Research Ltd, London.

Azmi & Associates is a full-service Malaysian law firm based in Kuala Lumpur with more than 70 lawyers, in addition to its state-of-the-art technology system to better equip the Firm in providing legal services to clients worldwide. The Firm manages 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 investment, franchising, technology, 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 and North Asia. To cater to the growing demand from the Chinese-speaking markets, its China desk is staffed by Chinese-speaking professionals.

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Malta

Dingli & Dingli Law Firm Dr. Tonio Grech

Moreover, pursuant to section 4 of the Civil Aviation (Air Operators’ 1 General Certificates) Act, an aircraft registered in Malta shall not flyon any flight for the purpose of public transport, other than andin 1.1 Please list and briefly describe the principal accordance with the terms of a certificate granted to the operator of legislation and regulatory bodies which apply to and/ the aircraft, certifying that the holder of the certificate is competent or regulate aviation in your jurisdiction. to ensure that aircraft operated by him or her on such flights as are in question are operated safely. There are several laws regulating civil aviation in Malta, each Furthermore, market access within the European Union is regulated governing the different aspects of civil aviation. These are mainly by virtue of Regulation (EC) No. 1008/2008. The Civil Aviation the following: (Air Transport Licensing) Regulations contain the rules emanating ■ the Authority for Transport in Malta Act; from Regulation (EC) No. 1008/2008 on common rules for the ■ the Civil Aviation Act; operation of air services in the Community, which also apply to ■ the Eurocontrol Act; Malta as a Member State of the European Union. ■ the Civil Aviation (Air Operators’ Certificates) Act; ■ the Airports and Civil Aviation (Security) Act; 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who ■ the Civil Aviation (Security) Act; administers air safety? ■ the Aircraft Registration Act; ■ the Code of Conduct for Computerised Reservation Systems Under section 9 of the Authority for Transport in Malta Act, the Act; Authority has, inter alia, the following powers: ■ subsidiary legislation promulgated on the basis of the powers ■ to ensure a safe operational environment in accordance with given to the Minister for Transport in the several enabling the Convention on International Civil Aviation created in acts; and Chicago on 7 December 1944; ■ EU Regulations on civil aviation. ■ to regulate: transport by air; the registration, licensing and use The subsidiary legislation is vital in the regulation of civil aviation in of aircraft; the licensing of all commercial operations connected Malta because it is enacted specifically with regard to that aspect of with air transport and service providers; the construction, civil aviation which it purports to regulate. The following are a few maintenance, licensing and inspection of aerodromes and other examples: the Air Navigation Order governing, inter alia, aviation facilities connected with air transport; and to make provision for any matter that is provided for under the Authority for safety; the Civil Aviation Joint Aviation Requirements Order Transport in Malta Act in connection with air transport; making the JARs part of Maltese law; and the several regulations transposing EU directives into Maltese law. ■ to regulate air traffic management and airspace design, including communications, navigation, surveillance, airspace In Malta, aviation is regulated by the Civil Aviation Directorate, and air traffic management systems and procedures, as well which is a Directorate within the Authority for Transport in as aeronautical information services; Malta. This Authority falls within the remit of the Ministry for ■ generally to secure the safety, efficiency and regularity of Infrastructure, Transport and Communications. air navigation and the safety of aircraft and of persons and property carried therein, to prevent aircraft from endangering other persons and property and, in particular, to detain aircraft 1.2 What are the steps which air carriers need to take in for any purposes; and order to obtain an operating licence? ■ to license flight crew, air traffic controllers and apron controllers and to monitor the conduct of their medical On the basis of subsection 1 of article 6 of the Civil Aviation Act, no examination and to license aircraft maintenance engineers aircraft shall be used on any flight for reward or in connection with and other aviation personnel. any trade or business except under and in accordance with the terms Furthermore, by section 3 of the Civil Aviation Act, the Authority of a licence granted to the operator of the aircraft. Under the Civil has the power to appoint a person to act as director general for civil Aviation Act, this is called an “operator licence”, being a licence aviation in Malta to implement the strategies and objectives of the currently in force and authorising the operator to operate aircraft on Authority and to act in accordance with the policies, strategies and such flights as are in question. directives of the Authority. In doing so, he uses the powers given

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to him by the several laws and regulations on civil aviation, such as the Air Navigation Order and the Civil Aviation (Air Operators’ 1.9 What legislative and/or regulatory regime applies to Certificates) Act. Furthermore, the aviation requirements issued by air accidents? For example, are there any particular rules, regulations, systems and procedures in place the European Aviation Safety Agency (EASA) have also enhanced which need to be adhered to? air transport safety in Malta.

The procedure for the investigation of air accidents is regulated by 1.4 Is air safety regulated separately for commercial, the Civil Aviation (Investigation of Air Accidents and Incidents) cargo and private carriers? Regulations, which transposed into Maltese law Council Directive 94/56/EC. The sole objective of these Regulations is the prevention Under the Air Navigation Order, the main distinction between of accidents and incidents and not to apportion blame or liability. Malta public transport and private flights is the question of payment or reward. The ordinary rules of airworthiness, safety and private pilot 1.10 Have there been any recent cases of note or other licensing and crew are still applicable to private flights. Moreover, notable developments in your jurisdiction involving any rule of EASA affecting private flights is adopted in Malta. air operators and/or airports?

1.5 Are air charters regulated separately for commercial, To my knowledge there have been no recent cases of note in Malta cargo and private carriers? involving air operators and/or airports.

No, air charters are not regulated separately for commercial, cargo and private carriers. 2 Aircraft Trading, Finance and Leasing

1.6 As regards international air carriers operating in your 2.1 Does registration of ownership in the aircraft register jurisdiction, are there any particular limitations to be constitute proof of ownership? aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, An aircraft may be registered in the National Aircraft Register by restrictions and taxes which apply to international but any person referred to in article 6 and who may be: not domestic carriers. (a) an owner of the aircraft who operates the said aircraft; In Malta, market access is regulated by bilateral air service (b) an owner of an aircraft under construction or temporarily not agreements. Furthermore, as a Member State of the European being operated or managed; Union, air services between Malta and other Member States are (c) an operator of an aircraft under a temporary title which liberalised. There are no particular limitations for international satisfies the conditions which may be prescribed; or air carriers operating in Malta. According to article 9 of the Civil (d) a buyer of an aircraft under a conditional sale or title Aviation Act, an aircraft registered in any country or territory other reservation or similar agreement which satisfies the than Malta shall not take on board or discharge any passengers or conditions which may be prescribed and who is authorised cargo in Malta, being passengers or cargo carried or to be carried for thereunder to operate the aircraft. hire or reward or in connection with any trade or business, except Moreover, when an aircraft is registered by a registrant under points with the permission of the Authority for Transport in Malta, granted (c) or (d) above, every person who holds any interest by way of under article 9, to the operator or the charterer of the aircraft or to ownership or title in the aircraft or a share therein may make a the government of the country in which the aircraft is registered, request in writing to the director general to have his name, address and in accordance with any conditions to which such permission and ownership interests or title noted in the certificate of registration. may be subject, unless such aircraft is being used in the exercise Yes, before a court of law in Malta this would constitute a of traffic rights regarding access of European Union air transport presumption of ownership. undertakings on air routes in the territory of the European Union.

2.2 Is there a register of aircraft mortgages and charges? 1.7 Are airports state or privately owned? Broadly speaking, what are the rules around the operation of this register? Malta International Airport, which is the only international airport in Malta, is privately owned. It is presently owned and operated by The Aircraft Registration Act contains specific provisions with regard Malta International Airport plc. to mortgages and other charges. Mortgages are recorded by the director general of civil aviation in the National Aircraft Register in 1.8 Do the airports impose requirements on carriers the order of time in which they are produced to him for that purpose. flying to and from the airports in your country? Where it is stated in the instrument of the mortgage that it is prohibited to create further mortgages on an aircraft without the prior Under the Allocation of Slots at Airports Regulations, a scheduling written consent of the mortgagee, the director general shall make a coordinator is appointed and is solely responsible for the scheduling note in the National Aircraft Register to such effect, and the director of slots. He may consult the Airport Scheduling Committee on the general shall not record such further mortgage unless the consent scheduling of the slots, and, subject to the provisions of Regulation in writing of the holder of a prior mortgage is produced to him, and 6, his decision is final. any mortgage registered in violation of this provision shall be null On the basis of Regulation 6, an air carrier may submit a complaint, and void. to be made in writing to the Airport Scheduling Committee, which Provided that where such further mortgage is executed in favour of shall investigate that complaint and may make recommendations to an existing creditor, no such consent shall be required from such the scheduling coordinator to review or alter his decision. creditor.

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This is provided, further, that the above does not hinder the Added Tax Act (Chapter 406 of the Laws of Malta), the following registration of a special privilege where the Aircraft Registration supplies are exempt with credit: Act requires registration for its continuing validity and effect. (1) The supply of aircraft destined to be used by airline operators When it is stated in the instrument of mortgage that it is prohibited for reward chiefly for international transport of passengers to effect the transfer of the aircraft which is being mortgaged or and/or goods. charged, or of a share therein, without the previous written consent (2) The supply to constructors, owners or operators of aircraft of the mortgagee, the director general shall make a note in the referred to in (1) of equipment incorporated or used therein. National Aircraft Register to such effect, and the director general, (3) The supply of services consisting of the modification, notwithstanding any other provision of the Aircraft Registration Act, maintenance, chartering and hiring of aircraft referred to in

Malta shall not record any transfer of such aircraft or of a share therein, (1) or equipment referred to in (2). unless the consent in writing of such mortgagee is produced to him, (4) The supply to the owners or to the operators of aircraft except where the transfer is made pursuant to a court order in a sale referred to in (1) of goods for the fuelling or provisioning by auction of such an aircraft or pursuant to any other court order; any thereof. transfer registered in violation of this provision shall be null and void. (5) The supply of services other than those referred to in (3), carried out for the direct needs of aircraft referred to in Where a creditor has registered an international interest in the (1) and for the direct needs of their cargo such as towage, International Registry in accordance with the first schedule of the pilotage, rescue services, valuation, use of the airports, Aircraft Registration Act, it shall be lawful for the debtor (being services provided to aircraft operators by their agents acting the registrant or the owner of the aircraft, or both) to execute and as such, services necessary for the landing, take-off or stay file a prohibitory notice in favour of one or more creditors, in the in airports, and assistance provided to the passengers or the form prescribed, which shall be entered into the National Aircraft crew for the account of the airline operators. Register by the director general. With regard to the depreciation rates in relation to income tax, When a prohibitory notice is entered in the National Aircraft according to the Deduction for Wear and Tear of Plant and Register, the director general shall not thereafter record any security Machinery Rules, the depreciation rate for the airframe, engines and interest in the National Aircraft Register in accordance with this aircraft engine or airframe overhaul is 16.7% (in a six-year straight part, until the prohibitory notice is withdrawn by the creditor. line). Insofar as the interiors are concerned, these depreciate by 25% (in a four-year straight line). 2.3 Are there any particular regulatory requirements Article 47 of the Duty on Documents and Transfers Act (Chapter which a lessor or a financier needs to be aware of as 364 of the Laws of Malta) deals with exemptions for certain regards aircraft operation? marketable securities acquired or disposed of by persons defined therein. Amongst such persons are companies having more than An international interest registered in the International Registry half of their ordinary share capital, voting rights and rights to profits shall not be subordinate to any mortgage registered in the National held by any person who is not resident in Malta and who is not Aircraft Registry, even if the international interest is registered at a owned or controlled by, directly or indirectly, nor acts on behalf later date. Consequently, it is advisable for a mortgagee to also have of, an individual or individuals who are ordinarily resident and the mortgage registered in the International Registry. domiciled in Malta. With regard to aircraft leasing, the VAT Department has issued 2.4 As a matter of local law, is there any concept of title guidelines applying the standard rate of VAT of 18% on the annexation, whereby ownership or security interests established percentage of the lease deemed to be related to the use in a single engine are at risk of automatic transfer or of the aircraft in EU airspace. 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 2.6 Is your jurisdiction a signatory to the main of engines take pre-emptive steps to mitigate the risks? international Conventions (Montreal, Geneva and Cape Town)? Article 26 (4) of the Aircraft Registration Act (Chapter 503 of the Laws of Malta) lays down that where an engine has been attached Yes, Malta is a signatory to the main international Conventions. to an airframe, which is not also owned by the airframe owner, each of the owners shall retain the ownership of their thing and the 2.7 How are the Conventions applied in your jurisdiction? engine shall not accede to the airframe. Moreover, any security over the aircraft does not extend to any engine attached to the airframe The Conventions are applied by the courts of Malta. 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 3 Litigation and Dispute Resolution Aircraft Register or elsewhere.

3.1 What rights of detention are available in relation to 2.5 What (if any) are the tax implications in your aircraft and unpaid debts? jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), The detention of aircraft in respect of unpaid charges may be and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as achieved through a warrant of arrest of the aircraft, as a precautionary regards non-domestic purchasers and sellers of measure and/or as a means of enforcement. As a precautionary aircraft and/or particular aircraft types or operations? measure, the warrant of arrest may only be sued out by: (a) the holder of a mortgage or of an international interest, whatever the According to Item 7 of Part One of the Fifth Schedule of the Value amount of the mortgage or the international interest; or (b) any other

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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 3.4 What service requirements apply for the service of 1,000,000) in the case of an aircraft being used for public transport. court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

3.2 Is there a regime of self-help available to a lessor or a The sworn application by which a lawsuit commences is served on financier of aircraft if it needs to reacquire possession the defendant by a court marshall; other judicial acts are sent by of the aircraft or enforce any of its rights under the registered mail by the court registry officers. This applies across the lease/finance agreement? board, independently of who the parties are.

Under article 33 of the Aircraft Registration Act, without prejudice Malta to any default remedies as may be applicable under the Cape 3.5 What types of remedy are available from the courts Town Convention by virtue of the First Schedule to the Aircraft or arbitral tribunals in your jurisdiction, both on i) an Registration Act, the mortgagee shall, in the event of default of any interim basis, and ii) a final basis? term or condition of a registered mortgage or of any document or agreement referred to therein, and upon giving notice in writing to In respect of unpaid charges, an interim remedy may be achieved the debtor: through a precautionary warrant. The process takes only a couple (a) be entitled to take possession of the aircraft or share therein of days to obtain such a precautionary warrant. In such a case, in respect of which he is registered; but, except so far as may the plaintiff has to institute court proceedings on the merits of the be necessary for making a secured aircraft or share available case within 20 days of the issuance of the precautionary warrant as a security for the secured debt, the mortgagee shall not, of arrest by the court. As a precautionary measure, the warrant of by reason of the mortgage, be deemed to be the owner of the arrest may only be sued out by (a) the holder of a mortgage or of an aircraft or share, nor shall the mortgagor be deemed to have international interest, whatever the amount of the mortgage or the ceased to be the owner thereof; international interest, or (b) any other creditor in security of a claim (b) have the absolute power to sell the aircraft or share in respect of seven thousand euros (EUR 7,000) in the case of non-commercial of which he is registered; but where there are more persons aircraft, or one million euros (EUR 1,000,000) in the case of an than one registered as mortgagees of the same aircraft or aircraft being used for public transport. After obtaining judgment share, a subsequent mortgagee shall not, except under the in his favour, the plaintiff would then be able to request the court order of a court of competent jurisdiction, sell the aircraft or to issue an executive warrant of arrest of the aircraft, and if still not share without the concurrence of every prior mortgagee; and paid, the plaintiff could also institute proceedings for the judicial if the proceeds of sale, after discharging the secured debt, show a surplus in his hands, the mortgagee shall hold under sale of the aircraft and the ranking of creditors in the case that there trust or deposit the same for the benefit of other creditors and are two or more creditors. This process will normally be effected of the mortgagor-debtor; within a year. (c) have the power to apply for any extensions, pay fees, receive certificates, and generally do all such things in the name of the 3.6 Are there any rights of appeal to the courts from the owner or registrant as may be required in order to maintain decision of a court or arbitral tribunal, and, if so, in the status and validity of the registration of the aircraft; what circumstances do these rights arise? (d) have the power to lease the aircraft so as to generate income therefrom; and There is a right of appeal from a decision of a court and there is (e) have the power to receive any payment of the price, lease also a right of appeal from an arbitration award, unless the parties payments, and any other income which may be generated had renounced such a right in the arbitration agreement. Malta is from the management of the aircraft. a signatory to the New York Convention on the enforcement of arbitral awards. 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 4 Commercial and Regulatory regarding the courts in which civil and criminal cases are brought? 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? The Civil Courts are appropriate for aviation disputes. The Courts of Magistrates, in their civil jurisdiction, take cognisance of cases There are no sector-specific competition rules which apply to for an amount up to eleven thousand, six hundred and forty-six aviation in Malta. The general competition rules found in the euros and eighty-seven cents (EUR 11,646.87) and the First Hall Competition Act apply. The responsibility for the application of the Civil Court takes cognisance of cases for a higher amount. of competition rules in Malta lies principally with the Office for In the event of cases before the Courts of Magistrates in their civil Competition, as established by article 13 of the Malta Competition jurisdiction, appeals are heard by the Court of Appeal presided over and Consumer Affairs Authority Act. 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 4.2 How do the competition authorities in your the Criminal Courts, comprising the Courts of Magistrates in their jurisdiction determine the “relevant market” for the criminal jurisdiction, the Criminal Court and the Criminal Court purposes of mergers and acquisitions? of Appeal, presided over by one judge or three judges depending on whether the appeal is made from a decision of the Courts of So far, there has been no competition assessment by the Office for Magistrates in their criminal jurisdiction or the Criminal Court Competition regarding the aviation sector. It is therefore not certain respectively. that the SSNIP (Small but Significant and Non-transitory Increase in Price) test would be applied in Malta to define the relevant market

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for the purposes of a competition assessment in the aviation sector. What is certain is that the Office for Competition is bound to apply 4.8 What are the main regulatory instruments governing the decisions of the European Commission. the acquisition, retention and use of passenger data, and what rights do passengers have in respect of The criteria for assessing the competitive effect of a transaction their data which is held by airlines? are those that would be applied by the European Commission in assessing a similar transaction – that is: the welfare effects of the Regulation (EC) No. 80/2009, which repealed Regulation (EEC) transaction on the consumer; whether the market entry by a new No. 2299/89, protects passengers with regard to computerised party is commercially viable; the market dominance by two or more reservation systems. In 2007, the Maltese Parliament enacted carriers; and so on. the Code of Conduct for Computerised Reservation Systems Act Malta (Chapter 434 of the Laws of Malta), which provides protection for 4.3 Does your jurisdiction have a notification system passengers in relation to the data submitted by carriers. whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies? 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? Traders can obtain advice from the Office for Consumer Affairs established under the Malta Competition and Consumer Affairs The Computerised Reservation Systems Board, which is Authority Act, Chapter 510 of the Laws of Malta. established under the Computerised Reservation Systems Act, may impose disciplinary penalties on system vendors, parent carriers, 4.4 How does your jurisdiction approach mergers, participating carriers and/or subscribers for infringements of the acquisition mergers and full-function joint ventures? 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 Mergers, acquisition mergers and joint ventures are governed amount of the penalty, regard is had both to the seriousness and to by the Companies Act, Chapter 386 of the Laws of Malta. The the duration of the infringement. amalgamation of two companies may be effected by (a) merger by Such decisions imposing disciplinary penalties are not of a penal acquisition, or (b) merger by formation of a new company. The nature, and any such penalties shall be recoverable as a civil debt by companies may be owned by foreign shareholders. the Director of Civil Aviation by action before the competent court of civil jurisdiction. 4.5 Details of the procedure, including time frames for Carriers, whether they are parent or participating carriers, clearance and any costs of notifications. subscribers, or system vendors, are subject to the jurisdiction and the procedures of, and the administrative penalties imposed by, the No procedure or time frames for the obtaining of advice are outlined Computerised Reservation Systems Board. in the Malta Competition and Consumer Affairs Authority Act, Chapter 510 of the Laws of Malta. 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other 4.6 Are there any sector-specific rules which govern the assets and data of a proprietary nature? aviation sector in relation to financial support for air operators and airports, including (without limitation) There is a register for trademarks and patents at the department state aid? of the Comptroller of Industrial Property. Trademarks are filed in accordance with the provisions of the Trademarks Act, Chapter 416 In the case of state aid, which does not fall within the 26 categories of the Laws of Malta, and patents are filed in accordance with the of the General Block Exemption Regulation, clearance must be provisions of the Patents and Designs Act, Chapter 417 of the Laws obtained from the European Commission. of Malta. Copyright is protected by the Copyright Act. It enjoys The procedural steps are those that are applicable to Member civil protection, as well as a criminal sanction in the case of any States of the European Union. The Member State must notify the dealing with infringed articles, such as the distribution of pirated Commission of its intention to grant or alter its aid. The Commission goods. The courts which take cognisance of these matters are the will make a preliminary examination and decide whether the ordinary courts and there are no special courts established to deal measure submitted by the Member State qualifies as state aid and with these issues. whether it raises serious concerns as to its compatibility, in which case the Commission will proceed to the formal investigation 4.11 Is there any legislation governing the denial of procedure. boarding rights? The Member State is allowed to submit its observations on a decision of incompatibility of the proposed measure, upon which The Denied Boarding (Compensation and Assistance to Air the Commission will issue another decision. 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 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these passengers in the event of denied boarding and of cancellation or subsidies? long delay of flights, and repealing Regulation (EEC) No. 295/91 (Text with EEA relevance). No, they are not. 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

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concerning the rights of disabled persons and persons with reduced and with national regulations, as well as with any conditions that are mobility when travelling by air and Regulation (EC) No. 2006/2004 specified in the aerodrome licence. of the European Parliament and of the Council of 27 October 2004 on cooperation between national authorities for the enforcement of 4.14 To what extent does general consumer protection consumer protection laws of the Regulation on Consumer Protection legislation apply to the relationship between the Cooperation. airport operator and the passenger? The Package Travel, Package Holidays and Package Tours Regulation, which transposed into Maltese law Council Directive By the Civil Aviation (Rights of Disabled Persons and Persons 90/314/EEC, grants protection to consumers of package holidays with Reduced Mobility) Regulations, the airport operator must and tours. comply with the obligations pertaining to it as specified in Malta Regulation (EC) No. 1107/2006. Moreover, the airport operator can impose airport charges only within the parameters of the Airport 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? Economic Regulations. Furthermore, by the Civil Aviation Security Regulations, the airport operator must implement and maintain Under Regulation 5 of the Denied Boarding (Compensation and such airport security programmes as are appropriate to meet the Assistance to Air Passengers) Regulations, 2011, the operating air requirements of the national civil aviation security programme. carrier is guilty of an infringement punishable by an administrative fine of not less than four hundred and seventy euros (EUR 470) and 4.15 What global distribution suppliers (GDSs) operate in not exceeding five thousand euros (EUR 5,000). In the case of non- your jurisdiction? compliance with a compliance order, the director general (Consumer Affairs) may impose a daily fine of not less than one hundred and In relation to global distribution suppliers, the applicable law is twenty euros (EUR 120) and not more than two hundred and thirty Chapter 434 of the Laws of Malta, namely the Code of Conduct for euros (EUR 230) for each day of non-compliance. Computerised Reservation Systems Act. There is no restriction as Any person who feels aggrieved by a decision, order, administrative to the number of computerised reservation systems to be used. fine or measure imposed or taken by the director general (Consumer Affairs), may file an appeal before the Competition and Consumer 4.16 Are there any ownership requirements pertaining to Appeals Tribunal in terms of the Act. GDSs operating in your jurisdiction?

4.13 Are the airport authorities governed by particular There are no ownership requirements. legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? The licensing of airports is regulated by the Civil Aviation (Aerodrome Licensing) Regulations. The applicant for an aerodrome In the granting of an aerodrome licence, our law does not prohibit licence has to submit for acceptance by the director general of civil vertical integration; however, the need has never arisen to legislate aviation an aerodrome manual, and amendments thereto as may be on vertical integration insofar as air operators and airports are required from time to time. The manual shall consist of five parts concerned. The only international airport in Malta was, until 2002, which shall contain the information specified in appendix 1 to ICAO owned and operated by the government and, although privatised Document 9774. now, it is not owned or operated by any air operator. The aerodrome manual shall: ■ be typewritten or printed, and signed by the aerodrome operator; 5 In Future ■ be in a format that is easy to revise; ■ have a system for recording the currency of pages and 5.1 In your opinion, which pending legislative or amendments thereto, including a page for logging revisions; regulatory changes (if any), or potential developments and affecting the aviation industry more generally in ■ be organised in a manner that will facilitate the preparation, your jurisdiction, are likely to feature or be worthy of review and acceptance and/or approval process. attention in the next two years or so? Furthermore, the operator of an aerodrome used for public transport In our opinion, it is likely that more powers will be given to the purposes shall comply with the Standards and Recommended mortgagee. Practices of Volume 1 and Volume 2, Annex 14 to the Convention on International Civil Aviation, except for differences filed by Malta,

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Dr. Tonio Grech Dingli & Dingli Law Firm 18/2 South Street Valletta 1102 Malta

Tel: +356 2123 6206 Fax: +356 2124 0321 Email: [email protected] URL: www.dingli.com.mt Malta

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 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 medium-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, taxation 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.

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Mexico Luis A. Cervantes Muñiz

Cervantes Sainz, S.C. Alejandro Zendejas Vásquez

5. The Transport Medicine Service Regulations, which deal 1 General with the medical examination of aeronautical personnel. 6. The Ministry of Communications and Transport Interior 1.1 Please list and briefly describe the principal Regulations, which set forth the faculties and general activities legislation and regulatory bodies which apply to and/ of the General Bureau of Civil Aeronautics (Dirección or regulate aviation in your jurisdiction. General de Aeronáutica Civil – DGAC). 7. The Search, Rescue and Accident Investigation Regulations, Civil aviation law in Mexico is governed and regulated at a federal which deal with all steps of the procedure to be performed level. The legislative bodies applicable to aviation at the first and upon the occurrence of an air transport accident. second tiers are: Various other regulations also apply to civil aviation, such as the 1. The Federal Constitution, which provides the legal framework Mexican Official Standards and the circulars issued and enforced by from which the regulation of air transport derives. the Aviation Authority. 2. The Civil Aviation Law and the Regulations to the Civil The principal regulatory body is the Ministry of Communication Aviation Law, which regulate air transport, safety, security and Transport, through a dependent organism of the Undersecretary and air traffic rights. of Transport: the DGAC; in addition, certain general regulatory 3. The Airports Law and the Regulations to the Airports Law, faculties fall within the legal scope of other administrative bodies which regulate airport construction, operation, administration dependent on the Undersecretary of Transport through different and the relationship between airports, users and service agencies: the Mexican Airspace Navigation Services (Servicios a providers. These deal with specific matters such as the slot la Navegación en el Espacio Aéreo Mexicano – SENEAM) with allocation procedures in congested airports. respect to air navigation; the Airports and Auxiliary Services 4. The General Law of Communication Means: this was the (Aeropuertos y Servicios Auxiliares – ASA) with regard to jet fuel; prior governing law of air transport before the Civil Aviation and specific airports which are dependent on these services. As a and the Airports Law were issued. It covers those aspects not corollary, the Federal Antitrust and Competence Commission has included in the Civil Aviation Law. general faculties – not specific to aviation – to regulate competence 5. The National Security Law, which regulates the interaction of in given markets, including that of civil aviation. air transport in national security matters. 6. The Federal Rights Law, which establishes the amounts to 1.2 What are the steps which air carriers need to take in be paid for each administrative procedure filed before the order to obtain an operating licence? Ministry of Communication and Transport. 7. The Federal Law of Administrative Procedure, which There are various categories of air transport service. In general regulates the interaction between users and the aeronautical terms, for a carrier to obtain the necessary authorisations to operate authority. into and out of Mexico, evidence of compliance with four capacities 8. The Federal Law of Metrology and Standardisation: this law must be filed before the authority. Such capacities are: (i) legal provides the general legal framework from which Mexican capacity, in order to evidence the legal existence and full capacity of Official Standards derive. the carrier; (ii) administrative capacity, which refers to the capacity In addition, there are specific Regulations which are also applicable: of the carrier to have the necessary administrative resources to 1. The Technical Aeronautical Schools Regulations, which render the desired service; (iii) technical capacity, to evidence the regulate aviation schools. technical, safety, operational and performance elements which will allow the safe and uninterrupted rendering of a service; and (iv) 2. The Civil Aircraft Operations Regulations, which deal with specific matters applicable to sundry air transport services. financial capacity, which is almost self-explanatory and is used to assert the financial viability of the service to be rendered. 3. The Aeronautical Workshops Regulations, which apply to all activities, creation, certification and activities of the aeronautical workshops – including maintenance, repair and 1.3 What are the principal pieces of legislation in overhaul (MRO). your jurisdiction which govern air safety, and who 4. The Mexican Aeronautical Registry Regulations, which administers air safety? organise and regulate the activities of the Mexican Aeronautical Registry, as well as setting forth the faculties of Air safety in Mexico is administered and enforced by the DGAC. the Director thereof. Within the DGAC, a specific Deputy Directorate General for

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Air Safety and Security (DGASA) oversees this matter. This comprise private investment groups, public investment achieved administrative body regulates and governs the revision faculties and through IPO processes and, in some cases, they can also be operated enforces air safety and security provisions; in addition, the DGASA through public-private partnerships. Additionally, a large number of is the entity responsible for supervising Airport Commanders who, airports are owned by state governments. amongst others, are in charge of performing the daily and routine As a global consideration, all airports in Mexico are constructed, checks for air safety and security. All safety and security activities maintained, operated and administered through a concession title are governed by the Civil Aviation Law, the Regulations to the granted by the Ministry of Communication and Transport. Civil Aviation Law, the Technical Air Personnel Licensing Law and sundry Mexican Official Standards. 1.8 Do the airports impose requirements on carriers

Mexico flying to and from the airports in your jurisdiction? 1.4 Is air safety regulated separately for commercial, cargo and private carriers? Disregarding operational requirements, such as fees for the utilisation of airport facilities, there are no specific requirements Air safety and security in Mexico is enforced through the same imposed by airports, other than those set forth in the Civil Aviation legislative bodies for commercial, cargo and private carriers. Law, the Airports Law and the regulations thereto. Notwithstanding the foregoing, the Civil Aviation law sets forth a It should be noted that there are certain limitations for congested specific set of rules regarding air charter operation, particularly in airports. In Mexico, only Mexico City International Airport has the exercise of available air traffic rights. been declared as a congested airport. Among the limitations, it is important to emphasise that the most important of these refer to 1.5 Are air charters regulated separately for commercial, slot use, allocation and, in the case of Mexico City, limitations also cargo and private carriers? apply to the use of the airport’s terminal infrastructure capacity.

Air charters receive specific treatment under the Civil Aviation Law. 1.9 What legislative and/or regulatory regime applies to This has no bearing on air safety and security, nor on compliance air accidents? For example, are there any particular with operational standards when flying into and out of Mexico. rules, regulations, systems and procedures in place Notwithstanding, there are differences in the services which can be which need to be adhered to? performed with charter operations, the type of traffic rights available to be exercised and certain administrative procedures for requesting The DGAC has a specific Directorate for investigation, follow-up and authorisation for such operations. ruling on air accidents. Each investigation deriving from an air accident will follow the protocol set forth by the Directorate of Accidents. There are other federal and state agencies which can assist in the 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be investigation, such as the Republic Attorney General (Procuraduría aware of, in particular when compared with ‘domestic’ General de la República – PGR), state-level attorney generals’ offices or local operators? By way of example only, and civil protection agencies. All accident investigations, search and restrictions and taxes which apply to international but rescue activities must be performed in accordance with the Search, not domestic carriers. Rescue and Accident Investigation Regulations.

No major differences between domestic and foreign carriers may 1.10 Have there been any recent cases of note or other be observed in Mexico. The main difference to be highlighted on notable developments in your jurisdiction involving the operational side is that no foreign carrier – whether private, air operators and/or airports? scheduled, non-scheduled or from general aviation – is allowed to perform cabotage operations, in either of their varieties: stand-alone Several developments have taken place in the aviation sector very or continuous cabotage. recently. It is worth mentioning the initiatives deriving from the A consequence of this is that there is a limitation on the percentage authorisation for the construction of the new airport for Mexico City. of the capital stock of an air transport company in which foreign With regard to the bilateral structure of air transport, Mexico entered entities – whether individuals or companies – can participate. into negotiations with the government of the United States of America, The limit is 25% in domestic air transport, air taxi transport, and from which a new bilateral air services agreement resulted. The new specialised air transport. In addition, there is a limit of 49% for bilateral agreement was steered towards liberalising certain rights and a foreign company to participate in a concession or permit for encouraging each of the parties to open new commercial opportunities airfields. This limit can be exceeded upon authorisation from the for air carriers. In addition to the air service agreement with the United Ministry of Economy with the prior approval of the Ministry of States, Mexico updated or renegotiated agreements with: Belize; Communication and Transport. Canada; Colombia; Kuwait; the Philippines; Qatar; Saudi Arabia; the United Arab Emirates; and the United Kingdom. Furthermore, the 1.7 Are airports state or privately owned? Civil Aviation Law underwent a major amendment to incorporate the safety management system standards in regard to air safety. Mexico has 76 airports, not taking into consideration non-controlled airstrips. After a reform in the 1990s, four major airport groups 2 Aircraft Trading, Finance and Leasing were created: Grupo Aeroportuario del Pacífico (GAP), Grupo Aeroportuario Centro Norte (holder of OMA – Operadora Mexicana de Aeropuertos), Aeropuertos del Sureste (ASUR) and 2.1 Does registration of ownership in the aircraft register Grupo Aeroportuario de la Ciudad de México (GACM – the current constitute proof of ownership? holding company of Mexico’s City New Airport, NAICM – Nuevo Aeropuerto Internacional de la Ciudad de México). Such groups Registration of ownership in Mexico constitutes a declaration of

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the ownership of an aircraft – this includes ownership of any given 5. Convention on Offences and Certain other Acts Committed component thereto such as the engines, to the extent it is attached to on Board Aircraft (referred to as the Tokyo Convention the aircraft. Registration in Mexico also has the effects set forth by 1963). the Chicago Convention 1944. Registration is declaratory and has 6. Convention on International Interests in Mobile Equipment no constitutive effects. It is used to publicise and have erga omnes and its protocol regarding aviation equipment (known as the effects over the ownership. Cape Town Convention).

2.2 Is there a register of aircraft mortgages and charges? 2.7 How are the Conventions applied in your jurisdiction? Broadly speaking, what are the rules around the operation of this register? The Mexican Constitution sets forth the hierarchy of laws, and thus Mexico the applicability thereof. International treaties – used in a broad The Mexican Aeronautic Registry (Registro Aeronáutico Mexicano sense without distinguishing between treaties and conventions, nor – RAM) is organised in Register Sections. Amongst such Register entering into the discussion of those treaties related to human rights Sections, mortgages and liens in general can be annotated. – are immediately below the Constitution and above federal laws. Registration in the RAM can be performed by the Aviation Authority Thereafter, applicability of the conventions should be pre-emptive upon the request of a party evidencing a legal right and interest in to the provision of federal laws, and in the event of a conflict, the doing so, or through judicial mandate. latter should be adjusted in accordance to the conventions.

2.3 Are there any particular regulatory requirements 3 Litigation and Dispute Resolution which a lessor or a financier needs to be aware of as regards aircraft operation? 3.1 What rights of detention are available in relation to There are no specific regulatory requirements to be met. Upon aircraft and unpaid debts? execution of a purchase, sale, or sale and leaseback agreement, such agreement must be duly translated into the Spanish language, Article 1168 of the Commercial Code sets forth injunctive relief ratified before a Notary Public and registered before the Mexican provisions, including for the detention of any type of property or Aeronautical Registry. goods. This injunctive relief measure is granted by the judge in the absence of the defendant upon the filing of the lawsuit in the case 2.4 As a matter of local law, is there any concept of title that the requirements established in article 1175 are duly complied annexation, whereby ownership or security interests with. Evidence must be filed before the court that a liquidated debt in a single engine are at risk of automatic transfer or exists and that there is a founded suspicion that the property can be other prejudice when installed ‘on-wing’ on an aircraft subtracted to avoid the payment of the debt. Finally, the potential owned by another party? If so, what are the conditions damages that may be caused by the measure must be warranted. to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks? 3.2 Is there a regime of self-help available to a lessor Under local law, there is no concept of title annexation. 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? 2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- There is no regime of “self-help” available in Mexico. It is important added tax (VAT) and/or goods and services tax (GST), to note that Mexico adopted Option B of the Declarations to the and b) documentary taxes such as stamp duty; and Cape Town Convention. (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For Aircraft trading in Mexico is subject to Value Added Tax; depending example, is there a distinction in your jurisdiction on the transaction, Income Tax may also be applicable. regarding the courts in which civil and criminal cases are brought?

2.6 Is your jurisdiction a signatory to the main The Federal Courts are competent in aviation disputes as stated by international Conventions (Montreal, Geneva and the Civil Aviation Law. In the case that the dispute is commercial, Cape Town)? the value of the dispute may determine which court is competent. Finally, different courts rule on civil and criminal cases. Mexico is a signatory to the following: 1. Convention on International Civil Aviation (also known as the Chicago Convention). 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic 2. Convention for the Unification of Certain Rules for airlines/parties and non-domestic airlines/parties? International Carriage by Air (also known as the Montreal Convention 1999). The service of process by Mexican courts is always specific to 3. Convention on the International Recognition of Rights in the address of the defendant and is carried out by judicial clerks Aircraft (also known as the Geneva Convention). exclusively. There are no differences concerning the domestic or 4. Convention for the Unification of Certain Rules relating to foreign nature of an airline for the purposes of service of process. In International Carriage by Air (commonly referred to as the Warsaw Convention 1929). any case, if a foreign airline does not have the permanent address of

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a legal representative in Mexico, the notification would have to be by the COFECE – whose annual sales in the territory of Mexico carried out by diplomatic means. exceed 18,000,000 (eighteen million) times the DMWVFD; and (iii) the transaction implies the accumulation of assets or corporate capital exceeding 8,400,000 (eight million four hundred thousand) 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an times the DMWVFD and the annual sales of the economic agents interim basis, and ii) a final basis? involved, jointly or separately, exceed 48,000,000 (forty-eight million) times the DMWVFD. A ruling that has been rendered by a first instance court may be appealed and subsequently a direct amparo lawsuit may be filed 4.3 Does your jurisdiction have a notification system

Mexico against the appeal ruling. Arbitral awards are final, as recognised whereby parties to an agreement can obtain by the Commercial Code. Consequently, they can only be nullified regulatory clearance/anti-trust immunity from based on very specific causes of action set forth in article 1457 of regulatory agencies? the Commercial Code. Yes, the procedure needs to undergo a parallel and simultaneous review. Such review is performed by internal areas of the DGAC 3.6 Are there any rights of appeal to the courts from the and the COFECE. The DGAC review is governed by the Federal decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? Administrative Procedure Law (Ley Federal del Procedimiento Administrativo). Revision by the COFECE is regulated by the Federal Competition Law (Ley Federal de Competencia). Yes; in general terms, any party in a litigation may appeal the first instance ruling. That would not be the case in an arbitration, since the awards granted by an arbitration panel are final and can 4.4 How does your jurisdiction approach mergers, only be nullified for the reasons established in article 1457 of the acquisition mergers and full-function joint ventures? Commercial Code. If a transaction of the sort described in the above questions is to be carried out, two types of requirements should be met: antitrust and 4 Commercial and Regulatory corporate. As regards antitrust requirements, in the case that the operation is significant in terms of volume of operations, income or consideration involved, a formal notice must be filed before 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? the COFECE which is the Mexican authority on antitrust and competition matters. On the corporate side, certain corporate acts There are no specific provisions regulating joint ventures. Civil must be executed in order for the merger, for example, to be valid: a and commercial general legislation may be applicable to a joint merger agreement; shareholders’ meetings; and registration with the venture. Notwithstanding the foregoing, the validity of a joint Public Registry. Finally, it is worth noting that in the case that the venture between competing airlines is subject to authorisation from parties involved in a merger hold permits or concessions granted by both the Ministry of Communications and Transport and the Federal the Mexican authorities, then prior to the execution of the merger the Competition Authority. authorisation of those authorities may be needed in order to prevent forfeiture of the rights concerning the permits or concessions.

4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the 4.5 Please provide details of the procedure, including purposes of mergers and acquisitions? time frames for clearance and any costs of notifications. On a general basis, and disregarding the specifics of a given case – i.e. the filing of prior authorisation for a concentration – the “relevant If certain thresholds are met, the merger or full-function joint venture would be subject to the COFECE’s approval, which would market” for an airline concentration (the Federal Competition Law analyse whether the operation will have negative economic effects does not use the term “joint venture”) would be analysed under: on the relevant market. If so, this authority may reject the operation (i) the possibility of replacing the good or service on which the or establish certain conditions that the parties must comply with in concentration would have a direct effect; (ii) the distribution costs of order for the operation to materialise. On the contrary, if the analysis the specific service and financial thresholds thereto; (iii) the viability leads the authority to consider that no harm would be caused to the of the market access of other competitors; and (iv) the opinion of the relevant market, the authorisation would be issued and the parties sectorial authorities governing the good or service over which the would be free to formally execute all the corporate documents concentration would have a major impact. needed for such purposes. The COFECE has 60 days to issue its Additionally, for a joint venture to go into the review and ruling once the notice has been filed or the additional information consequently be subject to the authorisation of the Federal requests made by the authority have been complied with by the Commission of Economic Competence (COFECE – the Mexican interested parties. The parties must pay a fee of around US$8,000 authority on antitrust and competition matters), it needs to exceed for the COFECE to analyse the concentration notification. certain limits set forth by the Federal Competition Law (FCL). A Regarding corporate acts, the parties in the merger must first joint venture will require COFECE clearance when: (i) it implies execute a merger agreement where they set forth the terms and a concentration equal to or above 18,000,000 (eighteen million) conditions in which the merger would be carried out. Subsequently, times the daily minimum wage valid in Mexico City (DMWVFD a shareholders’ meeting should be held by each party involved to – a reference value determined by the Minimum Wage Commission approve the merger on the agreed terms, along with the financial which can be consulted on their website or in the Daily Official statements that will be used for the merger. Finally, the parties Gazette of the Federation); (ii) it implies the accumulation of 35% must register the corporate resolutions before the Public Registry, or more of the shares or assets of an economic agent – as defined considering that the merger will be effective only after three

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months of its registration. In the case that all the debts owed by boarding. As a complement, the Federal Consumer Protection Law the parties are covered at the time of the registration, the merger is applicable, as the relationship between an airline and a passenger will have full effect without a need for the aforementioned waiting is considered a commercial consumer affair. period. The estimated cost of the entire corporate process, including notary expenses and registration fees, would be around US$4,500, 4.12 What powers do the relevant authorities have in depending on the characteristics of the operation. relation to the late arrival and departure of flights?

4.6 Are there any sector-specific rules which govern the The Civil Aviation Law and its regulations provide specific aviation sector in relation to financial support for air enforcing faculties for an air carrier to properly use and adhere to operators and airports, including (without limitation)

its arrival/departure schedules. Should a violation be detected and Mexico state aid? enforcement pursued, this would be done through the enactment of an administrative sanctioning procedure, performed and enforced There are no specific rules regarding the aviation sector. by the DGAC. Parallel to the procedure which can be started by the DGAC, the Consumer Protection Agency (Procuraduría Federal 4.7 Are state subsidies available in respect of particular del Consumidor – PROFECO) has legal authority to initiate a routes? What criteria apply to obtaining these procedure on violations of the Federal Consumer Protection Law subsidies? due to late arrivals and departures under the parameters set forth by the Civil Aviation Law. No state subsidies are available; nor are these permitted by law.

4.13 Are the airport authorities governed by particular 4.8 What are the main regulatory instruments governing legislation? If so, what obligations, broadly speaking, the acquisition, retention and use of passenger data, are imposed on the airport authorities? and what rights do passengers have in respect of their data which is held by airlines? Airport and airport authorities are governed by the Civil Aviation Law and the Airports Law and its regulations. Passenger acquisition, maintenance and handling is governed and regulated by the Federal Personal Data Protection Law (Ley Federal de Protección de Datos en Posesión de Particulares). Passengers 4.14 To what extent does general consumer protection legislation apply to the relationship between the have a right, and carriers a corresponding obligation, to determine airport operator and the passenger? how their personal information is to be treated. With a detailed scope, passengers can determine how their information is maintained The relationship between an airport operator and a passenger would and for what purposes it is authorised to be used, and may limit the fall into the scope of the Consumer Protection Law (LFPC) so transfer of such information or request its deletion or destruction. long as the passenger is considered a user of the services of the airport. In spite of this, an airline would be jointly liable as the 4.9 In the event of a data loss by a carrier, what relationship between a passenger and an airport is created because obligations are there on the airline which has lost the of the passenger using an airline. data and are there any applicable sanctions?

Passenger data must be treated in accordance with the Federal 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? Law of Personal Data Protection. It is important to emphasise that compliance with the law is mandatory for the acquisition, maintenance, use, distribution and destruction of data. Data loss is The major computer reservation systems (CRSs), fixed-based pursued and sanctioned in accordance with this law and the sanction operators (FBOs), ground handling and ancillary GDS service will vary depending on the specific violation. providers operate in Mexico.

4.16 Are there any ownership requirements pertaining to 4.10 What are the mechanisms available for the protection GDSs operating in your jurisdiction? of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? GDSs, as long as they do not fall into the “investment – limited Industrial property – used as a general term – and intellectual activity” areas of the Foreign Investment Law, have no specific property – broadly used – are protected by the Mexican Institute of regulations. Their relationship is considered commercially and Industrial Property (IMPI) and the Mexican Institute for Authorial general laws are thus applicable. Rights (INDAUTOR). IMPI protects trademarks, patents, trade secrets, industrial designs, trade names and any right related to 4.17 Is vertical integration permitted between air operators industrial property. IMPI is the competent authority to file, pursue and airports (and, if so, under what conditions)? and solve any claim related thereto. INDAUTOR mainly deals with intellectual creations requiring copyright. No vertical integration is permitted. Additionally, there is a direct prohibition against air service operating companies, their 4.11 Is there any legislation governing the denial of holdings or subsidiaries, owning or acquiring, directly or indirectly, boarding rights? the control of airports or airfields. In this regard, there is also a maximum allowed threshold of 5% of the stock capital of an airport Yes, the Civil Aviation Law and the Regulations to the Civil concessionaire or permit-holder to own, hold or acquire stock Aviation Law directly regulate passenger rights, including denial of capital in an air transport company.

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passenger rights. The enactment of the aforementioned amendments 5 In Future created a legal regime that will give rise to intense discussions and legal procedures which, viewed on a stand-alone basis, could have 5.1 In your opinion, which pending legislative or a serious impact on the policies, operational models and revenue regulatory changes (if any), or potential developments currently held by international carriers. As the situation evolves affecting the aviation industry more generally in and the two relevant authorities – the Civil Aviation Authority your jurisdiction, are likely to feature or be worthy of on one side, and the Consumer Protection Agency on the other – attention in the next two years or so? determine their respective interpretation and application of the law, development during the first half of 2018 will be crucial for giving The year 2017 witnessed the enactment of several amendments to air transport companies a clear indication as to what can be expected Mexico the Civil Aviation Law and the Consumer Protection Law. Said from the application of the law. amendments are aimed at dealing with sundry matters pertaining to

Luis A. Cervantes Muñiz Alejandro Zendejas Vázquez Cervantes Sainz, S.C. Cervantes Sainz, S.C. Blvd. M. Avila Camacho 24, Piso 20 Blvd. M. Avila Camacho 24, Piso 20 Lomas de Chapultepec Lomas de Chapultepec 11000, Distrito Federal 11000, Distrito Federal Mexico Mexico

Tel: +52 55 9178 5040 Tel: +52 55 9178 5040 Fax: +52 55 5540 3433 Fax: +52 55 5540 3433 Email: [email protected] Email: [email protected] URL: www.cervantessainz.com URL: www.cervantessainz.com

Luis A. Cervantes Muñiz is a graduate of the Escuela Libre de Alejandro Zendejas Vázquez holds a Master’s degree in advanced Derecho (1980). Early in his career he became a partner at studies of International Air and Space Law from Universiteit Leiden, Santamarina y Steta, S.C. He subsequently spent a couple of years the Netherlands. He was admitted to practise law in 2001 and holds at Jáuregui y Navarrete, S.C. In 2001 he founded Cervantes Sainz, a B.A.-equivalent degree from Universidad Iberoamericana, Mexico S.C., where he currently practises law. Over the past three decades, City. His professional experience in the private sector has been Mr. Cervantes has been a Law Professor, teaching courses including focused primarily in the aviation industry. He worked for Interjet Mercantile Corporations, Commercial Law, Credit Instruments and Airlines as a junior in-house attorney; later to be appointed Legal VP Transactions, and Foreign Investment, both at Universidad Anáhuac in Grupo Hawk Mexico, a private air transport company. Mr. Zendejas and Universidad Iberoamericana. He is currently Professor of was later appointed as General Counsel for Vivaaerobus. In the public Commercial Law and Foreign Investment Law at Escuela Libre de sector, Mr. Zendejas served as General Deputy Technical Director Derecho, in both law school and postgraduate programmes. Mr. and General Counsel in the Civil Aviation Authority of Mexico (DGAC); Cervantes is an active member of the Mexican Bar Association (Barra he continued his public service career thereafter, being appointed as Mexicana de Abogados), the Illustrious Mexican School of Lawyers General Deputy Director for Air Transport and Aeronautical Control at (Ilustre y Nacional Colegio de Abogados de México), the Mexican the DGAC, where he was able to execute sundry bilateral air services Association of Corporate Lawyers (Asociación Nacional de Abogados agreements – amongst others, the Mexico-USA agreement – and de Empresa), the Mexican Institute of Mediation (Instituto Mexicano key amendments to the Civil Aviation Law in relation to air safety and de la Mediación), and the International Bar Association. security, as well as the foreign investment law regarding the maximum allowable percentage of foreign investment capital. As of February 2016, Mr. Zendejas has been in private practice with Cervantes Sainz, S.C.

Cervantes Sainz is a full-service law firm with an extensive array of creative problem-solving techniques for optimum, lasting outcomes. Founded by specialised attorneys with extensive legal experience and knowledge, we serve the local, national and international interests of businesses, institutions and individuals throughout Mexico. The firm strives to maintain working relationships with law firms across the United States, Canada, Latin America, Europe and Asia to serve the international needs of its clients. Cervantes Sainz specialises in domestic and international business transactions, cross-border restructuring and insolvency procedures, and controversies. We represent clients in a broad spectrum of transactional and complex litigious matters. The client and practice variety is matched by the diversity of our lawyers. The firm has developed a “one-firm” culture – a spirit of teamwork and cross-utilisation and support among practice areas throughout the firm. These include: Antitrust and Competition; Aviation and Aircraft Financing; Banking and Finance; Corporate; Energy; Insolvency and Restructuring; Labour and Employment; Intellectual Property; Litigation and Arbitration; Mergers and Acquisitions; and Real Estate.

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Netherlands Guido de Vos

AKD Benelux Lawyers Maaike Lustenhouwer

■ The airline owns or (dry) leases one or more aircraft. 1 General ■ The main activity of the airline is the operation of air services. ■ The airline has a transparent company structure. 1.1 Please list and briefly describe the principal ■ The airline is majority owned and controlled by EU Member legislation and regulatory bodies which apply to and/ States or residents thereof. or regulate aviation in your jurisdiction. ■ The airline complies with financial, insurance and good governance requirements. Principal legislation The application process takes up to three months. The legislation is based on the international conventions and European regulations on aviation. The principal pieces of legislation are: ■ Aviation Act (Luchtvaartwet); regulating permits for air 1.3 What are the principal pieces of legislation in transport, the Air Operator’s Certificate (AOC) and safety your jurisdiction which govern air safety, and who and security of civil aviation. administers air safety? ■ Act on Aviation (Wet Luchtvaart); regulating crew, nationality and registration of aircraft, airworthiness of aircraft, air The principal pieces of national legislation are the Aviation Act and traffic control, airports, military aviation and oversight and the Act on Aviation (see also question 1.1). Also worth mentioning enforcement. are the following regulations and decrees: ■ Working Hours Decree Transport (Arbeidstijdenbesluit ■ Aircraft Decree 2008 (Besluit luchtvaartuigen 2008); vervoer); regulating working and rest periods of the crew. regulating airworthiness. ■ Safety Investigation Board Kingdom Act (Rijkswet ■ Regulation on Aircraft Maintenance (Regeling onderhoud Onderzoeksraad voor veiligheid); establishing the Dutch luchtvaartuigen). Safety Board and regulating its task. ■ Aviation Supervision Regulation (Regeling Toezicht Main regulatory bodies luchtvaart). Civil aviation falls within the responsibility of the Ministry of ■ Aviation Licences Decree (Besluit bewijzen van bevoegdheid voor de luchtvaart). Infrastructure and Water Management. The main regulatory body is the Directorate-General for Mobility and Transport. Supervision ■ Air Traffic Regulation Luchtverkeersreglement( ). and enforcement is carried out by the Human Environment and Air safety is administered by the ILT; all certified companies are Transport Inspectorate (Inspectie Leefomgeving en Transport (ILT), audited at least once a year. Accidents are investigated by the Dutch the Dutch Civil Aviation Authority). Air traffic control services are Safety Board (Onderzoeksraad voor Veiligheid; see also question 1.9). regulated by the Air Traffic Regulation (Luchtverkeersreglement). The responsibility for air traffic control of the airspace controlled 1.4 Is air safety regulated separately for commercial, by the Netherlands has been distributed to Air Traffic Control cargo and private carriers? Netherlands (LVNL) and the military ATC service provider. Finally, investigations on incidents and accidents are carried out by the No, except for the distinctions under Community law. Dutch Safety Board (Onderzoeksraad voor veiligheid).

1.5 Are air charters regulated separately for commercial, 1.2 What are the steps which air carriers need to take in cargo and private carriers? order to obtain an operating licence?

Flights of air charters are regarded as non-scheduled air transport Air carriers require a valid AOC and operating licence to operate in and can be divided into intra-EU flights performed by EU operators the Netherlands. Requirements for obtaining an AOC are laid down that are permitted under EC Regulation 1008/2008 and flights that in EC Regulation 965/2012 and the Air Carriage Decree (Besluit are not governed by this Regulation. The latter are governed by the luchtvervoer). Decree on Non-scheduled Air Transport, which stipulates that the The following requirements apply for obtaining an operating licence: performance of charter flights requires permission from the minister. ■ The airline is established in the Netherlands. The assessment criteria for the granting of this permission are: (1) the ■ The airline holds an AOC issued by the Dutch authorities. potential negative effects on the profitability of scheduled air services;

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(2) the interests of users in the non-scheduled air services against the KLM and Malaysia Airlines. The court confirmed that the slot lowest possible price; and (3) the application of reciprocity by the coordinator was entitled to deny the slot transfer, in view of the authorities of the state where the air carrier has its domicile. fact that it had been agreed between the airlines only after Malaysia Airlines had ceased its operations at Schiphol Airport. The court held that Malaysia Airlines should already have returned its slots to 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be the slot coordinator under the IATA WSG, and therefore it was no aware of, in particular when compared with ‘domestic’ longer authorised to swap these slots. or local operators? By way of example only, restrictions and taxes which apply to international but not domestic carriers. 2 Aircraft Trading, Finance and Leasing

Netherlands No, there are not. 2.1 Does registration of ownership in the aircraft register constitute proof of ownership? 1.7 Are airports state or privately owned? In the Netherlands, a so-called negative system applies in relation to All major airports in the Netherlands are majority-owned by the the registration of ownership, meaning that registration is necessary state and municipalities. Amsterdam Airport Schiphol, Rotterdam to effect the transfer of ownership of registered aircraft. The actual The Hague Airport and Lelystad Airport are owned by the Schiphol situation regarding ownership may, however, differ from what is Group. Under the Aviation Act, Schiphol Airport should be majority stated in the public register. In practice, the registered owner will owned by the state or other governmental bodies. No specific rules be presumed to be the owner of a Dutch registered aircraft, but any apply in relation to private or public ownership of other airports. other party may challenge the registration through the court system and bring evidence against the registration by any means. Third parties are largely protected by law if they have relied on incomplete 1.8 Do the airports impose requirements on carriers or incorrect registrations. Also, ownership of aircraft registered in flying to and from the airports in your jurisdiction? other Geneva Convention Member States will be respected in the Netherlands (see question 2.6 below). Every airport with regional or national significance requires a so-called “airport decree”. These decrees are not adopted by the 2.2 Is there a register of aircraft mortgages and charges? airports, but by the provinces and the central government. The Broadly speaking, what are the rules around the decrees may stipulate rules for carriers in the fields of: operation of this register? ■ noise restrictions; ■ air pollution restrictions; Similar to ownership of aircraft, mortgages and charges are ■ types of aircraft permitted; and registered in the public register, which is held in Rotterdam by an ■ times of arrival and departure. independent government body referred to as “Kadaster”. No distinction is made between local and international carriers. This register is the official register maintained in accordance with the Geneva Convention on the International Recognition of Rights in Aircraft 1948. 1.9 What legislative and/or regulatory regime applies to In order to register an aircraft in the public register, it is required air accidents? For example, are there any particular that: rules, regulations, systems and procedures in place which need to be adhered to? ■ the aircraft is registered with the Dutch nationality register; ■ the aircraft is not also registered with any foreign nationality In case of an accident or incident, the captain, the operator and, if register; relevant, air traffic control are obliged to inform the Dutch Safety ■ the aircraft has a maximum take-off weight of at least 450 kg; Board (Onderzoeksraad voor Veiligheid). The Safety Board conducts and investigations independently, on request or on its own initiative. The ■ the request for registration of the aircraft with the public investigations are performed in accordance with the provisions and register has been approved by the court. principles of Annex 13 of the Chicago Convention and Directive Unregistered aircraft may be subject to a right of pledge only. (EC) 94/56. Mortgages require a notarial deed of mortgage created by a Dutch In case of an accident or incident, the captain, the operator and, if public law notary, and subsequent registration in the public register. relevant, air traffic control are obliged to inform the Dutch Safety For the probative value of registrations, see question 2.1 above. Board (Onderzoeksraad voor Veiligheid). With regard to (precautionary) arrest of aircraft, registration thereof in the public register is also required. 1.10 Have there been any recent cases of note or other The public register in relation to aircraft is not searchable online, but notable developments in your jurisdiction involving extracts from the register can be obtained in an expedient manner. air operators and/or airports?

2.3 Are there any particular regulatory requirements The Court of Amsterdam Noord-Holland recently confirmed the which a lessor or a financier needs to be aware of as proper assignment of cartel claims in decisions of 2 August 2017 regards aircraft operation? and 13 September 2017, in the case “Stichting Cartel Compensation/ KLM and others”, and the case “Equilib/KLM and others”. Both financial and dry leases are subject to the prior approval of In a decision of 10 November 2017, the court applied EU Regulation the ILT. Approval will be granted if the relevant provisions of 95/93 and the Worldwide Slot Guidelines of IATA in relation to a Community law have been fulfilled. The ILT grants its approval request of KLM for confirmation of the transfer of slots between with the addition of the aircraft to the AOC of the airline.

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The ILT follows the basic principle that the aircraft must be and the aircraft is located in the Netherlands at the time of delivery registered in the Dutch national register in order to ensure the (i.e., title transfer). The seller of the aircraft would be liable for the effective performance of oversight obligations. payment of Dutch VAT if the seller either resides or has a permanent In the case of a temporary dry lease-in of an aircraft registered in establishment in the Netherlands, to which the delivery of the another Member State, the two authorities must make agreements aircraft is attributable. If the seller is neither a resident nor has a with regard to the oversight. permanent establishment in the Netherlands the purchaser is liable for the payment of VAT (reverse charge) provided that he qualifies Leasing of aircraft registered in non-EU countries is only allowed as an entrepreneur for Dutch VAT purposes and is registered in the in exceptional circumstances and for a limited time, subject to Netherlands (resident or permanent establishment). compliance of the aircraft with safety standards, which are equivalent to those of Community and national legislations. The transfer will be exempt from VAT (a reduced rate of 0 per cent in Dutch VAT law) if the seller or buyer (in case of reverse charge) Netherlands demonstrates that the aircraft qualifies as an airline operating for 2.4 As a matter of local law, is there any concept of title reward predominantly (“chiefly”, in the words of the European annexation, whereby ownership or security interests Court of Justice) on international routes. In determining whether in a single engine are at risk of automatic transfer or other prejudice when installed ‘on-wing’ on an that is the case, all information may be taken into account which aircraft owned by another party? If so, what are the indicates the relative importance of the type of operations concerned, conditions to such title annexation and can owners turnover in particular. and financiers of engines take pre-emptive steps to Moreover, any VAT that is due in connection with the lease or mitigate the risks? purchase of an aircraft would not necessarily constitute costs for the purchaser, because it may be entitled to claim a refund of the VAT to Pursuant to section 10:127(3) of the Dutch Civil Code, the competent the extent it will use the aircraft for the supply of goods or services court in the Netherlands will apply the property laws of the country that are subject to VAT (VAT taxable activities). in which the aircraft has been registered. Dutch courts will therefore only apply Dutch property law when the aircraft has been registered in the Netherlands. 2.6 Is your jurisdiction a signatory to the main international conventions (Montreal, Geneva and Dutch property law employs the principle of accession, which means Cape Town)? that the owner of a good also becomes the owner of all the good’s component parts. There is a debate on whether the doctrine of The Netherlands is a signatory to the Montreal Convention 1999 and accession should be applied to aircraft engines. On the one hand, it is the Geneva Convention 1948. argued that aircraft engines are distinct objects for which the doctrine of accession does not apply. On the other hand, it is argued that The Cape Town Convention on International Interests in Mobile under Dutch law an engine can become a “component part” of the Equipment and the Aircraft Protocol entered into force on 1 aircraft, which would lead to application of the doctrine of accession. September 2010, but it only applies in certain parts of the Kingdom of the Netherlands. It entered into force for Aruba, Curaçao, St The latter view appears to better correspond with section 8:3a(2) Maarten and the Caribbean Netherlands (Bonaire, St. Eustatius and of the Dutch Civil Code, which contains a special provision on Saba), however, not in the Netherlands (in Europe). accession in relation to aircraft and their component parts, including engines that are “intended for use with the aircraft”. This view implies that if an engine becomes a component part of an aircraft, 2.7 How are the Conventions applied in your jurisdiction? the engine’s ownership automatically transfers to the owner of the aircraft. In the process, the original right of ownership on the engine, The Conventions are applied by the regular competent courts. There together with any security interests in the engine, cease to exist. If is no special body or court dedicated to matters governed by the an engine becomes a component part of an aircraft, it will also be Conventions. subject to any security interests in the aircraft, such as mortgages. In legal literature it is argued that “intended for use with the aircraft” implies that the engines have to be installed with a 3 Litigation and Dispute Resolution certain permanence. According to this view, an engine installed to temporarily replace another engine currently under maintenance 3.1 What rights of detention are available in relation to will not qualify as a component part of the aircraft, and therefore it aircraft and unpaid debts? is argued that the doctrine of accession, in any event, does not apply to engines installed on a temporary basis. Precautionary arrest The Netherlands is a signatory to the Rome Convention on 2.5 What (if any) are the tax implications in your Precautionary Arrest 1933. If the registered aircraft has the nationality jurisdiction for aircraft trading as regards a) value- of a state party to the Rome Convention 1933 (including Dutch added tax (VAT) and/or goods and services tax (GST), nationality), the following regime applies for a precautionary arrest. and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as First, leave has to be obtained from the district court. The competent regards non-domestic purchasers and sellers of court is the court where the aircraft is located or expected. Leave aircraft and/or particular aircraft types or operations? will not be granted if security has been provided for the total sum of the debt or for the value of the aircraft. Furthermore, the The purchase price of an aircraft is subject to Dutch VAT at a rate of Rome Convention stipulates that certain aircraft cannot be arrested 21 per cent, but may be reduced to 0 per cent if certain conditions (Article 3). are met. In case the aircraft does not have the nationality of a party to the The purchase price is subject to Dutch VAT at a rate of 21 per cent aforementioned Rome Convention 1933, the regime for arrest is if the seller qualifies as an entrepreneur for Dutch VAT purposes slightly different. The main differences are:

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■ that precautionary arrest can be levied on any aircraft; and reside in the Netherlands – the court within whose jurisdiction the ■ leave will only be granted if fear of embezzlement is authority has its domicile. demonstrated. All criminal law prosecutions Right of retention and privileged claims Criminal cases are brought before the criminal sector of the In general, creditors have a right to withhold the aircraft, but this competent district court. right does not come with any privileges in relation to the proceeds of a sale by execution. However, in such an event, claims regarding 3.4 What service requirements apply for the service of salvage costs, preservation costs and costs of the sale by execution court proceedings, and do these differ for domestic are privileged. airlines/parties and non-domestic airlines/parties?

Netherlands 3.2 Is there a regime of self-help available to a lessor The vast majority of legal proceedings are initiated by the service of or a financier of an aircraft if it needs to reacquire a writ of summons on the defendant. The bailiff is responsible for possession of the aircraft or enforce any of its rights such service. The service of a writ of summons on an airline or party under the lease/finance agreement? that does not have domicile or a branch office in the Netherlands is governed by EU Regulation 1393/2007 on the service in the Member Repossession of the aircraft States of judicial and extrajudicial documents in civil or commercial The party entitled to the aircraft can file a claim for repossession of matters, or the Hague Convention of 1965 on the Service Abroad the aircraft in summary proceedings or in substantive proceedings of Judicial and Extra-Judicial Documents in Civil and Commercial at the competent district court. Although only provisional measures Matters. The Dutch legal system is not familiar with service of a may be requested in summary proceedings, it is not necessary to writ in rem. initiate proceedings on the merits at a later stage. However, the provisional measure will only be awarded if an “urgent interest” is 3.5 What types of remedy are available from the courts demonstrated, which will generally be the case. or arbitral tribunals in your jurisdiction, both on i) an It is highly recommended to obtain leave for arrest of the aircraft interim basis, and ii) a final basis? for the purpose of surrender before filing the claim for repossession (see also question 3.1). Interim remedies from courts After the judgment for repossession has been obtained, the debtor The claimant can request provisional relief for preliminary must first be served with an order to comply with the judgment. injunctions in summary proceedings. The preliminary injunction Subsequently, the bailiff will take possession of the aircraft and may only be awarded if – all interests taken into account – an deliver it to the party entitled to it. urgent interest is demonstrated and it is likely that the claim will be awarded in the substantive proceedings as well. Interim measures Mortgage holders generally come in the form of a court order to act or to refrain from Mortgage holders cannot claim repossession of the aircraft, but can acting. The court can also order that penalties will become due to – if the aircraft is registered in the public register or the Geneva the claimant if the defendant does not respect the judgment. In Convention Register – have the aircraft arrested in execution. After certain circumstances the court can also order a party to make an the arrest has been entered in the register, the aircraft will be sold (advance) payment as an interim measure. by Dutch auction. Final remedies from courts Available final remedies are (compensatory) damages, restitution, 3.3 Which courts are appropriate for aviation disputes? surrender of goods, orders to act or to refrain from certain acts and Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction declaratory judgments (declaring agreements null and void). regarding the courts in which civil and criminal cases Arbitration are brought? If the parties have so agreed, the arbitral tribunal may award preliminary injunctions as well. The available final remedies are, in Civil disputes with an interest up to EUR 25,000, and all disputes principle, the same as the available remedies in court. concerning employment contracts, or rental, lease, and agency agreements 3.6 Are there any rights of appeal to the courts from the The competent court is the sub-district sector of the district court decision of a court or arbitral tribunal, and, if so, in (kantonrechter). Proceedings before the sub-district sector of the what circumstances do these rights arise? court do not require legal representation. Civil disputes with an interest of more than EUR 25,000 Decisions from courts Unless the dispute concerns one of the above mentioned subjects, Yes, judgments may be appealed to the Court of Appeal. Judgments the competent court is the district court. of civil courts may only be appealed if the (financial) interest is All administrative disputes higher than EUR 1,750. For all disputes against government authorities, including the Judgments of the Courts of Appeal may be appealed to the Supreme civil aviation authority, the competent court is the administrative Court. The only grounds of appeal to the Supreme Court are breach law sector of the district court. For disputes against local and of the law and breach of procedural rules. regional authorities, the competent court is the court within whose Decisions from arbitral tribunals jurisdiction the authority has its domicile. For disputes against the central government, the competent court is the court within whose Appeal is only available if the parties have agreed on the right of jurisdiction the petitioner resides or – if the petitioner does not appeal.

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4 Commercial and Regulatory 4.5 Please provide details of the procedure, including time frames for clearance and details of any costs of notifications. 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? The procedure before the ACM consists of two phases. In the first phase, the ACM decides if a permit for the concentration is There is no specific regulation for competition law assessment required. This phase can take up to four weeks (plus additional time regarding joint ventures between airline competitors. The regular for questions) and costs EUR 15,000. If a proposed concentration merger control rules are applicable to the acquisition of joint control does require a permit, the second phase is introduced. In this phase, in existing undertakings. In respect of newly created joint ventures, which takes up to 13 weeks (plus additional time for questions), the only those performing, on a lasting basis, all the functions of an

ACM decides whether a permit is granted. The costs for the second Netherlands autonomous economic entity (full-function joint venture) are subject to Dutch merger control rules. If a joint venture is not caught by the phase are EUR 30,000. merger control rules, self-assessment must be carried out to ensure compliance with the rules applicable for the prohibition of cartels 4.6 Are there any sector-specific rules which govern the and the abuse of a dominant position. aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid? 4.2 How do the competition authorities in your jurisdiction determine the “relevant market” for the purposes of mergers and acquisitions? In the Netherlands, there are no national competition rules that specifically govern financial support to the aviation sector. However, EU (state aid) rules do apply also in the Netherlands. Note that Mergers, acquisitions and full functional joint ventures are subject with regard to state aid, self-assessment should be carried out in to merger filings in the Netherlands if the combined aggregate worldwide turnover of the undertakings concerned is more than EUR accordance with current legislation of the European Commission 150 million and the net turnover of two or more of the undertakings for state aid issues. Beneficiaries of possible state aid can be concerned is at least EUR 30 million in the Netherlands. The affected in case of unlawful state aid too, because governments obligation to file and the turnover thresholds are (also) applicable and public bodies are obliged to recover financial benefits from to foreign-owned undertakings. It is prohibited to complete the those beneficiaries. State aid cases can come to the fore, e.g. on transaction before clearance has been obtained from the competition financing of airports or in start-up situations of airlines departing authority ACM (Autoriteit Consument en Markt). Sanctions apply from regional airports. if the parties abstain from filing a notification at the ACM prior to the transaction. Sanctions can be as high as EUR 900,000 or 10% 4.7 Are state subsidies available in respect of particular of the (worldwide) turnover, if that establishes a higher amount. routes? What criteria apply to obtaining these Individuals can also be fined up to EUR 900,000. subsidies?

4.3 Does your jurisdiction have a notification system EU Member States may impose public service obligations in whereby parties to an agreement can obtain accordance with EC Regulation No. 1008/2008 in respect of regulatory clearance/anti-trust immunity from scheduled air services between a European airport and an airport regulatory agencies? serving a peripheral or development region in its territory or on a thin route to any airport on its territory. Such route has to be Parties themselves are held responsible for a proper self-assessment considered vital for the economic and social development of the following the competition rules of proposed agreements, more region which the airport serves. The obligation should be imposed specifically if their agreements are in conformity with Article 6.3 of only to the extent necessary to ensure on that route the minimum the Dutch Competition Act. Article 6.3 holds an exemption to the provision of scheduled air services satisfying fixed standards of cartel prohibition. continuity, regularity, pricing or minimum capacity, which air Furthermore, if a party discovers it is involved in an agreement carriers would not assume if they were solely considering their prohibited by the competition rules, it can apply for leniency to the commercial interest. These public service obligations can only be ACM to obtain immunity from possible fines, or at least a reduction imposed after consultation with other Member States concerned of fines. and after informing the Commission. In relation to airports in the Netherlands, a public service obligation exists on the route Ostrava- Amsterdam on the initiative of the Czech Republic. 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? 4.8 What are the main regulatory instruments governing Mergers, acquisitions and full-function joint ventures are subject the acquisition, retention and use of passenger data, to merger filings in the Netherlands if the combined aggregate and what rights do passengers have in respect of their data which is held by airlines? worldwide turnover of the undertakings concerned is more than EUR 113.45 million and the net turnover of two or more of the undertakings concerned is at least EUR 30 million in the Netherlands. Dutch privacy legislation is laid down in the Data Protection Act The obligation to file, and the turnover thresholds, are applicable (DPA, in Dutch: Wet bescherming persoonsgegevens) which is based to foreign-owned undertakings. It is prohibited to complete the on Directive 1995/46 EC. The directive will be replaced with the transaction before clearance by the ACM. Sanctions apply if the general Data Protection Regulation (GDPR) as from 25 May 2018. parties neglect filing prior to the transaction. Sanctions can be as high The data protection legislation is enforced in the Netherlands by the as EUR 900,000 per violation or 10% of the (worldwide) turnover, Dutch Data Protection Authority (Autoriteit Persoonsgegevens, the if that is higher. Individuals can also be fined up to EUR 900,000. “Authority”).

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On the basis of the DPA and the GDPR, data can only be processed rights. The ILT has the power to impose fines on airlines in case fairly and lawfully by a controller for specified explicit and of structural noncompliance with the Regulation, but cannot force legitimate purposes and as long as the data is relevant. airlines to compensate the passenger. There are various grounds for legitimate data processing which do not require the consent of the data subject, such as the performance 4.12 What powers do the relevant authorities have in of a contract to which the data subject is a party or compliance with relation to the late arrival and departure of flights? a legal obligation. The data subject has the right to information regarding the processing The Slot Allocation Decree (Besluit Slotallocatie) stipulates that of its personal data. Subsequently, the data subject has the right to the operation of air services repeatedly and intentionally at times rectification, blocking or erasure of data, the processing of which significantly deviating from the allocated slot, and the usage of a slot in a fundamentally different way than was declared at the time Netherlands does not comply with the DPA. of allocation of the slot, is considered an abuse of the slots.

4.9 In the event of a data loss by a carrier, what In the above situation, the slot coordinator and the airport authorities obligations are there on the airline which has lost the will start discussions with the airline to prevent further abuse of data and are there any applicable sanctions? slots. If the gentle hand approach does not work, the ILT may decide to temporarily ground an aircraft to prevent its departure The airline, being a controller in the sense of the DPA, has outside the allocated slot time. Furthermore, the ILT may decide to the general obligation to implement appropriate technical and impose penalties for future slot time violations. organisational measures to protect personal data against accidental or unlawful destruction or accidental loss, unauthorised access, 4.13 Are the airport authorities governed by particular etc. The controller has the obligation to inform the Authority and legislation? If so, what obligations, broadly speaking, involved data subjects in case of data breaches. are imposed on the airport authorities? In case the loss of data has occurred while no appropriate technical and organisational measures to protect the data were in place, data Airports are regulated by the Act on Aviation and subordinate subjects may very well be able to seek damages against the controller. legislation. The airport operator requires a safety certificate and It will, however, normally be difficult for a data subject to prove that is responsible for the proper operation of the airport in accordance it has suffered substantial damages as a result of the data loss. with the law. In relation to Schiphol Airport, the Act on Aviation There are several possible sanctions relating to a breach of the Data contains specific rules on the establishment of airport charges and Protection Act, including penalties. The penalties will become more appeal possibilities for airlines. severe under the GDPR. 4.14 To what extent does general consumer protection legislation apply to the relationship between the 4.10 What are the mechanisms available for the protection airport operator and the passenger? of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? There is no specific consumer protection legislation directed at the There is no national design and trademark protection in the relationship between the airport operator and the passenger. Netherlands. Design and trademark protection is available for the Benelux territory and can be applied for at the Benelux Office for 4.15 What global distribution suppliers (GDSs) operate in Intellectual Property (BOIP). Design and trademark protection your jurisdiction? is, of course, also available for the European Community and can be applied for at the EU Intellectual Property Office (EU IPO) in All major GDSs operate in the Netherlands. Alicante.

National patent protection is available, Dutch patents can be filed at 4.16 Are there any ownership requirements pertaining to the Dutch Patent Office NL( Octrooicentrum). GDSs operating in your jurisdiction? There is no copyright agency at which one can register copyrighted works. No formalities are required to obtain copyright protection in There are none, except for the restrictions deriving from general the Netherlands. Use of a © sign and/or deposit of works may be competition law. useful for evidential purposes. In 1999, a sui generis database right was introduced based on EC Directive 1996/9. 4.17 Is vertical integration permitted between air operators The district court of The Hague has exclusive jurisdiction with and airports (and, if so, under what conditions)? regard to patents and EU trademarks and designs. There are no examples of vertical integration between air operators 4.11 Is there any legislation governing the denial of and airports in the Netherlands. No specific regulation exists for boarding rights? competition law assessment regarding vertical integration between air operators and airports. The regular merger control rules are Regulation (EC) 261/2004 on compensation and assistance to applicable. If vertical integration is not caught by the merger control passengers in the event of denied boarding and cancellation or long rules, self-assessment must be carried out to ensure compliance with delay of flights is directly applied in the Netherlands. Passengers the rules applicable for the prohibition of cartels and the abuse of a may initiate proceedings before the court in order to enforce their dominant position.

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movements is capped, and this maximum environmental capacity 5 In Future has now been reached at Amsterdam Airport Schiphol. An increase of airport capacity is not expected until after 2020. A notable effect 5.1 In your opinion, which pending legislative or of the capacity crunch is the fact that air cargo operators, faced with regulatory changes (if any), or potential developments a reduction in slots as from IATA season Winter 17/18, moved part affecting the aviation industry more generally in of their operations to regional airports and airports in neighbouring your jurisdiction, are likely to feature or be worthy of countries. The government is considering the introduction of attention in the next two years or so? a traffic distribution rule. Pursuant to the draft rule, carriers that perform flights to holiday destinations will be required to abandon A strong increase of air traffic in recent years has resulted ina slots at Amsterdam Airport Schiphol in exchange for slots at capacity crunch in relation to slots at airports in the Netherlands. Lelystad Airport. If the European Commission accepts the draft

For environmental reasons, the maximum number of aircraft distribution rule, the rule may enter into force in April 2019. Netherlands

Guido de Vos Maaike Lustenhouwer AKD Benelux Lawyers AKD Benelux Lawyers Wilhelminakade 1 Wilhelminakade 1 3072 AP Rotterdam 3072 AP Rotterdam Netherlands Netherlands

Tel: +31 88 2535432 Tel: +31 88 2535562 Email: [email protected] Email: [email protected] URL: www.akd.nl URL: www.akd.nl

In 2000, Guido de Vos graduated from the University of Leiden, and Maaike Lustenhouwer obtained her Master of Laws degree in Dutch since 2008 he has been part of the Transport & Energy group at AKD. civil law at Leiden University in 2008. Maaike began her career as a Guido is specialised in air transport and related logistic services. lawyer in 2008 and joined AKD in 2017. She is part of the Transport & Guido litigates in matters concerning the carriage of passengers Energy team based in Rotterdam. and cargo. In addition, he advises parties involved in the aviation Her principal areas of practice include: aviation; aviation-related industry on commercial contracts and disputes arising under aviation services; logistics; consumer law; and European law. Maaike mainly insurance agreements. Guido’s expertise encompasses legislation deals with claims and disputes that arise in relation to transport by in the field of public air-law, including the allocation of slots, landing air of passengers and cargo. Maaike litigates frequently on behalf rights, passenger rights, safety and security, environmental and noise of airlines in cases that relate to consumer rights, passenger rights, regulations and immigration legislation. baggage and cargo claims. Since 2008, Guido has been lecturing in air law at the International Institute of Air and Space Law at the University of Leiden. Guido is on the Steering Committee Service Providers of the Air Cargo Netherlands trade organisation.

AKD is one of the largest law firms in the Netherlands. With a team of 250 committed lawyers, civil-law notaries and tax lawyers, AKD delivers high- quality legal services and tax matters in nearly all legal fields, based on a full-service approach. Our client base varies from very large multinational companies to stock-listed Dutch entities, from large corporates to family-owned businesses, from financial institutions to municipalities and hospitals. AKD has a pragmatic approach to business issues and provides tailored solutions for a variety of client needs by taking current legal, economic and political reality into account. Recognised for its ability to solve complex legal and tax challenges creatively and successfully and driven by the ambition to consistently seek proactive ways to add value to our legal and tax services, AKD prides itself on professional excellence and dedication to its clients. AKD has an open, no-nonsense culture and seeks to create a transparent and inclusive environment.

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Romania Mihai Furtună

ONV LAW Ioana Anghel

■ EU Member States and/or residents thereof shall own over 1 General 50% of the share capital in the company and shall exercise direct or indirect control thereon, except in the case of the existence of an agreement entered into with a third country, 1.1 Please list and briefly describe the principal to which the EU is a party; legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction. ■ compliance with the financial conditions set forth in Article 5 of the Regulation; In Romania, the general legal framework regulating aviation law ■ compliance with the requirements provided in Article 11 of is structured on three levels: national; European; and international. (EC) Regulation no. 785/2004; and Romanian aviation law is in compliance with EU/EUROCONTROL/ ■ compliance with the requirements on goodwill set forth in Article 7 of the Regulation. EASA Regulation. The Romanian Civil Air Code (GO no. 29/1997, as further amended) An operating licence is available as long as the air carrier meets all represents the main regulation at the national level, setting forth of the above-mentioned conditions. general rules which are applicable in the field of civil aviation. The General Directorate of Civil Aviation is entitled at all times to The state authority in the aviation field is the Ministry of assess the financial outcomes of an air carrier to whom it granted Transportation, which has delegated some of its duties to the the licence, under which the authority may discontinue or cancel the Romanian Civil Aviation Authority. The Romanian Civil Aviation operating licence in the event that it is doubtful whether such an air Authority (RCAA)’s main duties include the application of national carrier may comply with its existing or prospective obligations over aviation regulations and monitoring compliance therewith by a 12-month term. Nevertheless, the competent authority may issue aeronautical operators, as well as the implementation of international a temporary licence for a maximum of 12 months until the financial covenants and agreements to which Romania must adhere. restructuring of the community air carrier has been completed. The RCAA, together with the Defence Ministry, coordinates the use of Romanian air space by civil and military aviation. 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety? 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? Air safety is governed by the European regulation related to air safety ((EC) Regulation no. 216/2008, (EU) Regulation no. 965/2012, etc.) At the European level, the required conditions for obtaining an and also by the national legislation, namely the Romanian Civil Air operating licence are provided under (EC) Regulation no. 1008/2008 Code and secondary legislation implementing the European rules. governing mutual rules for the operation of community air services. Order no. 808/2011, issued by the Ministry of Transportation, sets According to (EC) Regulation no. 216/2008, the European Aviation forth the procedures to award, discontinue or withdraw the operating Safety Agency (EASA), founded in 2002 by the EU, is responsible licence at the national level. The application to obtain an operating for the proper functioning and development of civil aviation safety licence shall be submitted to the Ministry of Transportation and and cooperates with the national authorities in air safety matters. Infrastructure – General Directorate of Civil Aviation, and the In Romania, the body responsible for flight safety oversight is the conditions that shall be met by the company with a view to obtaining Romanian Civil Aviation Authority, having the following main such a licence are enumerated hereunder: duties: ■ its main headquarters are located in Romania; ■ drafting air safety regulations and overseeing the ■ it owns an available air operator certificate (AOC); implementation of such regulations; ■ it owns one or several aircraft, either in virtue of a property ■ air operator certification, aviation personnel licensing and title or under a dry lease agreement; aeronautical product, part and appliance certification; ■ its main object of activity is either the exclusive operation of ■ aerodrome certification; air services or it may be combined with any other commercial ■ flight safety inspection; and use of the aircraft or aircraft repair and maintenance activities; ■ civil aircraft registration. ■ the structure of the company shall allow the state authority to enforce the provisions of (EC) Regulation no. 1008/2008 in respect of the operating licence;

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an application by the administrator of the airfield, the Ministry 1.4 Is air safety regulated separately for commercial, of Transportation is entitled to approve temporary measures and cargo and private carriers? waivers, thus allowing the operation of civil aircraft despite a significant impact on the environment. No. Our domestic law does not distinguish between commercial, cargo and private flights when it comes to flight safety; therefore, all air transport operators are subject to ongoing certification and 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular supervision by the Romanian Civil Aviation Authority, pursuant to rules, regulations, systems and procedures in place the provisions of the Civil Air Code. which need to be adhered to?

1.5 Are air charters regulated separately for commercial, The national legislation regulates air accidents under different acts, Romania cargo and private carriers? among which the most relevant are the Romanian Civil Air Code and G.D. no. 741/2008 for the approval of the Regulation of 9 July 2008 No, they are not. on emergency management generated by civil aviation accidents. The Romanian Civil Air Code states that the Investigation and 1.6 As regards international air carriers operating in your Examination Centre for Civil Aviation Safety is the authority jurisdiction, are there any particular limitations to be in charge of managing, coordinating and performing technical aware of, in particular when compared with ‘domestic’ investigations as a result of civil aviation events with a view to or local operators? By way of example only, determining the facts, the causes and the circumstances that led to restrictions and taxes which apply to international but the accident, as well as identifying prevention measures. It should not domestic carriers. be noted that this technical investigation is independent from criminal or disciplinary investigation. According to the Romanian Civil Air Code, all aircraft operating The Regulation of 9 July 2008 on the management of emergency in the national air space are obliged to pay a fee in order to use air situations caused by the occurrence of a civil aviation accident is a navigation services. All such fees are non-discriminatory for the special regulation setting forth the procedure that must be complied same categories of civil flight, irrespective of the nationality of the with, as well as the main institutions with duties in the management air operators or of the state where the aircraft was registered. The of air accidents, namely: Ministry of Transportation has the right to temporarily deny access to the national air space for aircraft operators who have failed to pay ■ The structures that provide alerting services (the Romanian Administration of Air Traffic Services – ROMATSA; the the fees to use air navigation services. National Company of Maritime Radio communications – RADIONAV S.A.; and the Special Communications Service). 1.7 Are airports state or privately owned? ■ The units responsible for coordinating rescue operations depend on the place where the accident occurred. Airports are both state- and privately owned. Most airports in Romania operate under the authority of the Ministry of Transportation 1.10 Have there been any recent cases of note or other or local county councils. Bucharest Banaesa International Airport – notable developments in your jurisdiction involving “Aurel Vlaicu” and Bucharest “Henri Coanda” International Airport air operators and/or airports? are administered by the Bucharest National Airport Company, in which the Romanian state owns 80% of the shares. Other airports Over the past year, the national competition authority (the are administered by state-owned companies; for example, Sibiu Competition Council) has shown particular attention to the aviation International Airport or Cluj “Avram Iancu” International Airport. sector. In this regard the authority has two ongoing investigations: Tuzla Airport is the only private airport in the country. one on a possible abuse of dominant position at Cluj “Avram Iancu” International Airport, consisting in a possible refusal by the airport administrator to grant the access to airport infrastructure which is 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? necessary for providing ground handling services; and the other having as its subject the alleged anticompetitive agreement between three companies that have restricted competition on the commercial Yes, they do. In Romania, according to the Civil Air Code, airport services market of Bucharest “Henri Coanda” International Airport administrators set certain charges for the use of facilities and services by concluding long-term joint venture contracts containing clauses provided by airports. Nevertheless, there are certain aircraft which that may have had an anticompetitive effect. are exempt from the payment of such fees, for example: Romanian military aircraft; foreign military aircraft which operate under Also worth mentioning is the investigation started this year by the bilateral agreements (exemptions are applicable only to airports authority regarding a possible sharing of the aviation insurance where the Romanian state is the controlling shareholder); and market. aircraft that carry out humanitarian and emergency aid operations. Last but not least, in the last year the number of international routes In the event that a civil aircraft fails to comply with these pecuniary departing from the regional airports has increased, especially the obligations, airfield administrators have the right to confine such routes operated by low-cost airlines, which has led to the growth an aircraft to the ground until the debts are written off or until a and development of regional airports. In this regard, this year Cluj satisfying security interest is given. “Avram Iancu” International Airport exceeded the annual traffic of 2 million passenger movements, becoming the second airport in Moreover, the Ministry of Transportation has the right to restrict the Romania to have exceeded this threshold. operation of civil aircraft on Romanian airports or in the Romanian air space, with a view to protecting the environment. Following

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2 Aircraft Trading, Finance and Leasing 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 2.1 Does registration of ownership in the aircraft register or other prejudice when installed ‘on-wing’ on an constitute proof of ownership? aircraft owned by another party? If so, what are the conditions to such title annexation and can owners No, it does not. According to the national legislation, civil aircraft and financiers of engines take pre-emptive steps to registration does not entail the emergence of rights, and its sole mitigate the risks? effect lies in the fact that the registered rights may be opposed to third parties. Romanian legislation does not provide the concept of title

Romania annexation, whereby ownership or security interests in a single Furthermore, Civil Romanian Air Regulation no. RACR-IA, engine are at risk of automatic transfer or other prejudice when “Registering civil aircraft”, edition 1/2016, sets forth that the civil installed ‘on-wing’ on an aircraft owned by another party. aircraft registration and the registration certificate do not constitute proof of legal title or ownership of a civil aircraft in the case of In such a situation, in practice, the legal status of the ownership/ litigation whose cause-at-issue is ownership of title in that particular security interests is conventionally regulated by the parties’ aircraft. agreement, in compliance with the common law. Proof of ownership of the aircraft may only be made by the actual In this regard, please note that since the Cape Town Convention or legal owner thereof, and it may range from a title of property, a has not been ratified by Romania, according to the national law, sales agreement, a final court decision or any other legal document any provisions of the Cape Town Convention on this issue are not whereby ownership is transferred, to a title of ownership – whereby applicable. possession and a usage right in the aircraft are transferred. 2.5 What (if any) are the tax implications in your 2.2 Is there a register of aircraft mortgages and charges? jurisdiction for aircraft trading as regards a) value- Broadly speaking, what are the rules around the added tax (VAT) and/or goods and services tax (GST), operation of this register? and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of Yes, according to the Civil Romanian Air Regulation no. RACR-IA, aircraft and/or particular aircraft types or operations? “Registering civil aircraft”, edition 1/2016, the register of aircraft mortgages and charges is operated by the Romanian Civil Aviation In Romania, GST is assimilated into value-added tax (VAT) and, Authority. according to national tax law, there is an exemption from VAT for The mortgages and charges are registered in the above-mentioned all aircraft purchased and used by airlines primarily engaged in register based on the documentation submitted by the applicant to the international passenger and/or freight transport, namely: (i) aircraft Romanian Civil Aviation Authority, which includes (i) the registration delivery, modification, repair, lease and rent, as well as aircraft request, (ii) the mortgage/charge title, and (iii) the proof of payment equipment delivery, modification, repair, lease and rent; and (ii) fuel of the fee for the registration service (180 EUR per aircraft). delivery. For any other aircraft transaction, the VAT is 19%. Unless otherwise stated, the first mortgage/charge registration, as The national legislation does not regulate documentary taxes such well as the following modifications, are available for a five-year as stamp duty for aircraft trading. period, with the possibility of renewing the registration, based on supporting documents. 2.6 Is your jurisdiction a signatory to the main The register of aircraft mortgages and charges is a public register international Conventions (Montreal, Geneva and and, upon request, the authority may release information regarding Cape Town)? mortgages and charges to the person concerned. Romania is a signatory to: 2.3 Are there any particular regulatory requirements ■ The Geneva Convention of 19 July 1948, to which it adhered which a lessor or a financier needs to be aware of as following the enactment of Act no. 64 of 13 July 1994. regards aircraft operation? ■ The Montreal Convention of 28 May 1999, ratified by GO no. 107/2000, which was approved by Act no. 14/2000. There are no special requirements, as civil common-law provisions ■ The Convention on International Civil Aviation Organisation and clauses specific to lease agreements are applied as prescribed (ICAO), to which Romania adhered in 1965. under the Romanian Civil Code and special laws regulating financial ■ The International EUROCONTROL Convention on air lease agreements under GO no. 51/1997. safety cooperation and the “Multilateral agreement regarding As regards lessors, the lease agreements entitle them to a writ of air fees” (concluded in Brussels on 12 February 1981), to execution, provided that the lease agreement is concluded in an which Romania adhered in 1995. authenticated form. Consequently, in the event that the lessee is in Romania is not a party to the Cape Town Convention. Nevertheless, default under the lease agreement, he/she may be executed against there is a bill on the adherence of Romania to the Cape Town rent payment without the interference of the court. Convention, which is currently under consideration and will probably be passed this year.

2.7 How are the Conventions applied in your jurisdiction?

Acceding to the Romanian Constitution, the treaties ratified by the Parliament become part of the domestic legislation. Therefore,

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the provisions of the conventions to which Romania is a party are directly applicable in Romanian legislation on condition of being 3.3 Which courts are appropriate for aviation disputes? ratified by the Parliament. Compliance with and enforcement Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction of the treaties and conventions are provided through the court of regarding the courts in which civil and criminal cases jurisdiction. are brought?

3 Litigation and Dispute Resolution Pursuant to the enforceable legislation, there are no specialised courts to deal with civil aviation disputes. National courts have the competence to adjudicate both civil and criminal cases in accordance 3.1 What rights of detention are available in relation to with rules of general, material and territorial competence as provided aircraft and unpaid debts? by the Civil and Criminal Proceedings Codes. Romania In civil matters regarding pecuniary claims, the district courts have A creditor is entitled to commence the detention proceeding the competence to settle litigation claims that include a maximum against an aircraft. Romanian legislation provides several types value of 200,000 RON inclusive, whereas claims over a higher of detention depending on the nature of the title on whose grounds amount are adjudicated at first instance by tribunals. such detention relies: ■ Seizing the assets, as part of the enforcement proceeding, 3.4 What service requirements apply for the service of entails the existence of an execution writ (court decision, court proceedings, and do these differ for domestic arbitration decision or an agreement). The seizure is airlines/parties and non-domestic airlines/parties? commenced by the bailiff in the absence of a court order. When under seizure, the aircraft is grounded and it is temporarily taken out of the civil circuit. In the event that the As regards natural or legal entities residing in Romania, the aircraft is mortgaged in favour of a third party, it may still be summons and further procedural documents are served ex officio put under seizure as long as the rights of the mortgagor are through procedural court agents. Parties who are abroad, but whose complied with. domicile or residence is known, are summoned, or procedural ■ Attachment is a proceeding which entails freezing the documents are served upon by means of a recommended letter moveable assets of the debtor with a view to realising them with declared contents and receipt confirmation. In the event that once the creditor obtains an execution writ. Depending on the domicile or the residence of the persons living abroad is not the nature of the debt, a bail may be needed whose value is known, these are served by means of advertisement (the summons consistent with the reason for which a writ of attachment is is displayed on the door of the court, on the court’s portal or at the sought. last known domicile of the summoned person). Also, a curator is ■ A writ of judgment may be ordered against an aircraft in appointed by the court to act as a lawyer who will represent the the event that the cause-at-issue of the litigation between interests of the summoned person. the parties is represented by an alleged claim thereupon. In The above-mentioned service is identical to that used for both certain situations, a writ of judgment may be sought in the companies registered in the UK and those registered in other states. absence of litigation, provided that an application to court is filed in less than 20 days. Finally, in the event that the court admits the issuance of a judgment writ, the beneficiary may 3.5 What types of remedy are available from the courts be obliged to set a bail. or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis?

3.2 Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire In Romania, both courts and arbitration tribunals pass provisional possession of the aircraft or enforce any of its rights and final decisions. under the lease/finance agreement? The decisions held by the courts entail the examination on the merits of the alleged right, and they become final following the No, there is not. Romanian legislation does not provide any specific adjudication of incidental challenges (appeal and, in some cases, security interests for lessors or aircraft financiers. second appeal) or as a result of failure by the interested party to As regards the repossession of a leased asset, the lease agreement challenge such decisions. grants an execution writ over the asset in the event that such an Litigation commences once the complaint is filed with the court, obligation arises out of the termination of the agreement and not on the condition that it complies with the admissibility conditions. out of rescission. In the latter case, the action is brought in court. In the event that such conditions are met, the defendant is served with the complaint in order to file a statement of defence. In cases In respect of the financiers, according to GO no. 51/1997, lease where the complaint has certain flaws, these are communicated to agreements, as well as personal and real securities agreements the plaintiff who has the obligation to remedy them; otherwise, entered into in order to pledge the assumed obligations, are the complaint is annulled. Provided that the defendant submits considered writs of execution. As a result, unless otherwise a statement of defence (which is compulsory; non-compliance provided for under the agreement, in the event that the lessee/user with this obligation shall lead to an interdiction on the part of the does not comply with the obligation to pay in full the rent for two defendant to submit evidence and raise exceptions), this is served consecutive months, the lessor/financier is entitled to rescind the upon the plaintiff so that he/she could file an answer to the statement lease agreement while the lessee/user is obliged to return the asset of defence. This proceeding is solely carried out in writing and, and pay the due amounts. In the event that the lessee fails to return subsequent to the setting up of the first hearing and the summoning the aircraft, the financier is entitled to commence the enforcement of the parties, the lawsuit itself is initiated and becomes final once proceeding against the lessee without resorting to court. the court passes a ruling. Challenges to court rulings are subject to the same proceedings as the complaint. The duration for a final settlement of litigation differs depending on its complexity and may range from one-and-a-half years to several years.

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The provisional decisions passed by the court are mainly aimed at namely those connected to its exploitation, and they comprise both ordering preservation measures. As a rule, these are ordered as a infrastructure services (runway facilities, runways, etc.) and services result of a motion and they are enforceable until the merits of the envisaging passenger and merchandise management. case are settled.

In the event that the parties choose arbitration, the arbitration award 4.3 Does your jurisdiction have a notification system is passed after the parties have exposed their claims and namely whereby parties to an agreement can obtain their defences. The award is final and it has the same applicability regulatory clearance/anti-trust immunity from with a view to enforcement proceedings as the decision passed by regulatory agencies? the court. Dispute resolution before an arbitration tribunal is a flexible proceeding and the parties have the possibility to choose the Yes, it does. Takeovers performed through the merger of two or Romania procedural rules by means of an arbitration convention. The claims several undertakings must be notified by each of the involved parties. are settled faster, usually within six months. In all the other cases, the notification must be submitted by the party The arbitration court may also order provisional or attachment who gains the control over the undertaking. The transaction must measures before or during arbitration and may ascertain certain be notified before it takes effect and after the conclusion ofthe factual circumstances. agreement. Following the examination of the transaction, the Competition Council may render one of the following decisions: 3.6 Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in ■ a resolution of non-objection when it is found that the merger what circumstances do these rights arise? does not fall under the scope of the Competition Law; or ■ a resolution to start an investigation because of doubts In respect of decisions of the court of jurisdiction, according to concerning compatibility with a normal competitive the procedural Romanian rules, the decisions passed by the court environment, in which case the authority can: (i) declare the are subject to different challenges. Depending on the nature of the merger incompatible with a normal competitive environment; (ii) render an authorisation decision if the merger does not litigation, the appeal may be the only challenge or an appeal may be raise significant obstacles for effective competition on the followed by a second appeal which exclusively envisages reasons Romanian market; or (iii) render a conditional authorisation related to the illegality of the appealed decision. decision establishing the obligations and/or conditions which Regarding arbitration, the Romanian lawmaker has excluded both must be fulfilled so that the merger can be compatible with a ordinary and extraordinary challenges in cases of arbitration. normal competitive environment. Nevertheless, the Civil Procedure Code stipulates the procedure according to which an arbitral award may be annulled. The action 4.4 How does your jurisdiction approach mergers, in annulment may constitute files only on certain limited grounds, acquisition mergers and full-function joint ventures? and the competence to rule on such grounds is vested in the Appeals Court located where the arbitration took place. There is no distinction in our domestic legislation between takeovers As regards the New York Convention of 10 June 1958, Romania (mergers, acquisition mergers or full-function joint ventures). adhered thereto under Decree no. 186 of 10 July 1961. A merger takes effect when the long-term change of control results from the merging of two or more previously independent 4 Commercial and Regulatory undertakings or parts of undertakings, or one or more persons, who, already holding control over at least one undertaking, or one or more undertakings directly or indirectly, or by purchase of securities or 4.1 How does your jurisdiction approach and regulate assets, either by contract or other means, acquire control directly joint ventures between airline competitors? or indirectly over one or several undertakings or parts thereof. The setting up of a joint venture company which operates like an Our national legislation does not set forth special regulations for autonomous economic entity also represents a merger. joint ventures between air operators. Joint ventures are regulated The obligation to notify the Competition Council applies to mergers by the national and European provisions, namely the Romanian where the aggregate turnover of the undertakings concerned Competition Act no. 21/1996, the Treaty on the Operation of the exceeds the equivalent in RON of 10,000,000 EUR and at least two European Union and Council Regulation (EC) no. 1/2003 of 16 undertakings involved in the merger have an individual turnover of December 2002 on the implementation of the rules on competition the equivalent in RON of more than 4,000,000 EUR. laid down in Article 101 (ex. Article 81 TEC) and Article 102 (ex. For the analysis of any other kind of merger, the Competition Article 82 TEC) of the Treaty. Council decides, based upon the following criteria: a) if two or more holding companies keep running (to a significant degree more than 4.2 How do the competition authorities in your 20% or 30%, as applicable), their operations on the same market as jurisdiction determine the ‘relevant market’ for the the joint venture, or on a market upstream or downstream from the purposes of mergers and acquisitions? market of the joint venture, or on a market in close relation with this market; or b) if, by setting up the joint venture, the undertakings The competent authority to receive a merger notification is the in question can eliminate competition for a significant part of the Competition Council. In order to determine the relevant market, products or services in question. both the Competition Council and the courts of jurisdiction take into account the market of the product or service on the one hand and the 4.5 Please provide details of the procedure, including geographical location on the other. The determination criteria are time frames for clearance and any costs of specific to the aviation industry and are applied depending on each notifications. particular situation. For example, in the case of airports, the service market is represented by the main operations performed in an airport, The notification procedure starts with Phase I and lasts: (i) 30 days

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from receiving a complete notification of a merger case, if the under the form of compensation for public service obligation and Competition Council concludes that the merger does not fall under will be assessed in accordance with Decision 2012/21/EU of the the scope of the Competition Law; or (ii) 45 days from receiving a Commission. Additionally, state subsidies for certain routes may be complete notification of a merger case, if the Competition Council granted under the provisions of Article 16 of (EC) Regulation no. will issue a decision of non-objection when it is found that the merger 1008/2008 in the case of air routes between a community airport and does fall under the scope of the Competition Law and a) there are no an airport situated on a peripheral area or an area under development serious doubts concerning compatibility with a normal competitive on its territory, or for low-traffic routes to any airport on its territory, environment, or b) serious doubts concerning compatibility with a if such a route is essential to the social and economic development normal competitive environment have been removed through the of the area where such an airport is located. commitments proposed by the undertakings and accepted by the

Competition Council. Romania 4.8 What are the main regulatory instruments governing Phase II has a maximum time schedule of five months from receiving the acquisition, retention and use of passenger data, a complete notification of a merger case, for which the Competition and what rights do passengers have in respect of Council subsequently decides to start an investigation because of doubts their data which is held by airlines? concerning compatibility with a normal competitive environment. The notification fee is 1,061 EUR for each notification. In Romania, the legal framework for data processing is mainly provided by Act no. 677/2001 which basically transposes Directive The national legislation also stipulates an authorisation fee for no. 95/46/CE, and by Act no. 506/2004 on electronic communication mergers. The fee is set between 10,000 and 50,000 EUR and the which implements Directive no. 2002/58/CE (the Directive will be final amount of the fee is determined by the Competition Council in repealed starting from 25 May 2018, when Regulation no. 679/27 of relation to the authorisation decision issued by the authority. May 2016 will be effective; the new regulation stipulates a two-year transitional period, during which the states must comply with the 4.6 Are there any sector-specific rules which govern the new requirements). aviation sector in relation to financial support for air The national authority which deals with personal data protection operators and airports, including (without limitation) is the National Authority for the Surveillance of Personal Data state aid? Processing. Any processing of personal data may be performed only upon the Although there are no national provisions in respect of financial express and univocal consent of the person at issue. The legislation support for airports and air companies, the European regulations are prescribes certain rights of the person at issue, namely the right to applied, namely the European Commission Guidelines on State aid be informed, free access to such data, the right to interfere with these to airports and airlines. The guidelines establish rules for state aid to data and the right not to be subject to an individual decision. Any airports and airlines, for three categories of state aid: investment in person who incurs a loss as a result of illegal data processing has the airport infrastructure; operating aid to regional airports; and start-up aid to airlines to launch new air routes. right to obtain remedy in court. For investment in airport infrastructure, the Guidelines set percentages for the maximum amount of state aid going into airport 4.9 In the event of a data loss by a carrier, what infrastructure. The percentages depend on the size of the airport obligations are there on the airline which has lost the (for an airport with passenger traffic of 3–5 million, up to 25% of data and are there any applicable sanctions? the investment costs; for an airport with passenger traffic of 1–3 million, up to 50%; and for an airport with passenger traffic of less The air company, as well as any other personal data operator, than 1 million, up to 75%), in order to ensure the right balance is compelled to apply adequate technical and organisational between public and private investment. measures in order to prevent personal data from accidental or illegal Operating aid to regional airports (with fewer than 3 million destruction, modification, unauthorised access or disclosure, as well passengers a year) is allowed only for 50% of the initial average as from any form of unlawful processing. operating funding gap calculated as an average of five years Non-compliance with the obligations to apply security measures preceding the transitional period of 10 years. To receive operating shall result in contravention liability of the personal data operator aid, airports need to work out a business plan paving the way towards or, as the case may be, in its criminal liability which is punishable full coverage of operating costs at the end of the transitional period. by a fine in the amount set forth by legislation. Essentially, the new guidelines are intended to initially reduce, and The application of contravention penalties does not exclude the then eliminate, as soon and as much as possible, the public funding civil liability of the personal data operator; therefore, any injured of airports and airlines. person may seek the repair of his/her loss as a result of the illegal processing of personal data. 4.7 Are state subsidies available in respect of particular routes? What criteria apply to obtaining these 4.10 What are the mechanisms available for the protection subsidies? of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? State subsidies may be granted for services of general economic interest (SGEI), but also in the case contemplated by Article 16 of The institutional and legal framework which acts as a safeguard is (EC) Regulation no. 1008/2008 regarding common norms for the mainly provided by two specialised institutions: the State Office for operation of air services in the community. Patents and Trademarks, which is the authority that grants protection As a result, the public authorities may consider in some cases that for industrial property; and the Romanian Copyright Office, which certain economic activities performed by airports or air operators is the authority with duties in respect of tracking, observance and fall in the category of services of general economic interest and investigation into the application of legislation on copyright and thus grant compensation for their performance. The subsidies are affiliated rights.

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The protection of industrial property rights is mainly regulated Aviation Regulation with reference to the authorisation of civil by Act no. 64/1991 regarding patents, Act no. 84/1998 regarding airdromes, RACR-AD-AADC. The airport administrator, namely trademarks and geographical indications and Act no. 129/1992 the natural or legal person who runs and manages an airport in regarding the protection of industrial design and models. Moreover, public or private property, has the following main duties: Romania transposed an important part of the community legislation ■ to obtain and maintain proper conditions in terms of safety, in respect of intellectual property – Directive no. 2008/95/CE to regularity and efficiency of the air operations performed on approximate the laws of the Member States relating to trade marks, the airdrome under the provisions of air legislation; Directive no. 98/71 CE regarding the legal protection of design, and ■ to maintain the organisational structure, the facilities and Directive no. 92/100/CEE regarding the lease and rent of certain airdrome equipment, the operational framework and safety rights affiliated to copyright in the area of intellectual property. management systems at the minimum level initially declared, Finally, in respect of legal remedies awarded by courts, there are Romania acknowledged and approved by the Romanian Civil Aviation specialised panels adjudicating intellectual property cases, thus Authority; and ensuring qualified platforms ni protecting such rights. ■ to perform only the activities/services which have received authorisation, and only under the specified conditions, abiding by the restrictions set forth in the Annex attached to 4.11 Is there any legislation governing the denial of the authorisation certificate. boarding rights?

The applicable legislation consists of the Convention to unify 4.14 To what extent does general consumer protection provisions regulating international air transportation, signed in legislation apply to the relationship between the Montreal in 1999, and (EC) Regulation no. 261/2004, which set out airport operator and the passenger? joint provisions as regards compensation and passenger assistance in the event of boarding denial, cancellation or prolonged delays. The relationship between the passenger and the airport operator is In the event that the air operator denies the boarding of a passenger due governed by (EC) Regulation no. 261/2004 and by common law to reasons other than poor health, safety and security requirements regarding consumer protection, Act no. 296/2004 on Consumer or inappropriate travel documents, the passenger is entitled to Protection, Ordinance no. 21/1992 regarding consumer protection damages of a fixed amount (consistent with the flight distance), – in case they do not contain provisions contrary to the Regulation. assistance (refunding the cost of the ticket, transportation to his/ In this respect, please see also the answer to question 4.12 above. her final destination by another airplane or means of transportation) and accommodating services (meals, accommodation, transfer, two 4.15 What global distribution suppliers (GDSs) operate in free-of-charge phone calls and fax or email messages). In respect your jurisdiction? of the court which applies the legislation, please see the answer to question 4.12 below. Amadeus, Sabre and Travelport operate in Romania.

In Romania, the National Authority for Consumer Protection is There are no express provisions in the national legislation with responsible for monitoring compliance with passengers’ rights as reference to ownership rights pertaining to GDSs. Nonetheless, set out in (EC) Regulation no. 261/2004. we apply the provisions of (EC) Regulation no. 80/2009 regarding In the event that the parties fail to settle amicably, the passenger is a behaviour code for IT systems to reserve and abolish (EEC) entitled to seek redress from the National Authority for Consumer Regulation no. 2298/89 of the Council. We must emphasise the Protection (if the incident occurred on the territory of Romania) fact that this Regulation sets forth specific guidelines to ensure real or from the competent national authority in the country where the competition between the participating carriers and the associated incident took place. The complaint shall be made according to the carriers, as well as ensuring compliance with non-discriminatory standard form issued by the European Commission and it must principles among air carriers, irrespective of whether these are or be solved within the 30-day legal term. The National Authority are not party to a computerised reservation system. for Consumer Protection shall impose a fine on the air operator, provided that it finds, upon investigation, that it failed to inform passengers or did not grant the due compensation/damages. 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? In the event that the above-mentioned endeavours do not result in a solution to the problem, the passenger may start legal proceedings Vertical integration is not expressly forbidden. Nevertheless, it against the air operator within two years as of the date of arrival at must abide by the conditions imposed by legislation in order to the destination, or as of the date on which the aircraft was supposed ensure legal competition dynamics. to have arrived, or as of the date on which the transportation terminated. 5 In Future 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in The obligations of airport administrators are provided both under your jurisdiction, are likely to feature or be worthy of national and European legislation. Hence, at the national level, attention in the next two years or so? such obligations are regulated by the Order of the Ministry of Transportation no. 161/2016 which approved the Romanian Civil Our focus is mainly on the following:

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■ The New Air Code, which is to be adopted with the following ■ At this moment, there are several regulatory initiatives on main changes: the applicability of the Air Code to military drone operation, including the new Air Code, which sets out air activities as well as to entities without a legal entity; different drone categories (depending on the drone weight) articulating provisions concerning the competence of the and specific operation rules in relation to these categories. airdrome administrator to set airport fees as well as concerning ■ Airport infrastructure development, especially on regional the principles for imposing such fees, namely transparency airports given the General Transport Master Plan of Romania and non-discrimination; withdrawing the competence of the (adopted by the Romanian Government in September Ministry of Transportation to grant exemption from payment 2016), which sets out the strategy for investment in airport of airport fees and granting such power to the airdrome infrastructure; namely, which airports will benefit from administrator; provisions regarding the right of the civil public funds for investment, and what kinds of investment aerodrome administrator’s air navigation service provider to will be carried out.

retain to ground aircraft whose operator failed to pay the fees Romania entitling him/her to use the aerodrome infrastructure or the ■ The ratification of the Cape Town Convention on international fees for air navigation services, as well as the modality that interests in mobile equipment. such retention right operates.

Mihai Furtună Ioana Anghel ONV LAW ONV LAW Calea Moșilor 51, 3rd floor Calea Moșilor 51, 3rd floor 030144, Bucharest 030144, Bucharest Romania Romania

Tel: +40 72 255 95 59 Tel: +40 74 502 72 77 Email: [email protected] Email: [email protected] URL: www.onvlaw.ro URL: www.onvlaw.ro

Mihai Furtună is a seasoned lawyer in domestic and international Ioana Anghel started specialising in aviation matters as soon as the assignments. He is also the founder of the Aviation practice at ONV firm established this practice in 2011. Her experience includes: drafting LAW, a practice that covers work ranging from regulatory issues to the regulatory input for aviation legislation (e.g. updating the Romanian Air procurement of suppliers, to the drafting and negotiating of various Code); advising technology manufacturers on regulatory compliance; commercial agreements, to advising clients on all related aspects of litigation following aircraft accidents; advisory services on buying, financing, leasing, selling and buying of aircraft, as well as litigation selling and registration of aircraft for tax purposes; and legal assistance following aircraft accidents. He and the members of the firm’s Aviation and consulting for the procurement and building of airport and related practice currently provide counselling to public authorities, aviation facilities, as well as for the organisation of air shows. She is a member technology manufacturers, private airports, associations of private of the Bucharest Bar and speaks Romanian, English and Italian. aircraft operators, labour unions, airport service providers, 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 professional 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.

ONV LAW has been at the forefront of the legal profession in Romania for almost 15 years, providing services in the areas of Aviation and Airport Infrastructure, Public Procurement and Concessions, Litigation, Corporate, Labour, Competition as well as Digital Law. In 2015, Bizlawyer, the highest-ranked journal for Romanian lawyers, acknowledged ONV LAW as a trend-setter in the aviation law market. The Aviation practice is best known for two things: a) the scope of aviation 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; assistance on 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 coordinate 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. ONV LAW is the only Romanian law firm that has been granted member status in Interlaw – a law firm network ranked by Chambers & Partners as Elite (Band 1), as well as in LNA (Legal Netlink Alliance) – a global alliance of carefully selected independent law firms. The firm has been growing steadily since 2000, currently providing a wide range of legal services to a portfolio of over 300 clients in Romania and abroad. The firm is committed to competence, creativity and trustworthiness: values that guide its team, activities and strategy.

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Spain Alfonso López-Ibor Aliño

Ventura Garcés & López-Ibor Abogados Pablo Stöger Pérez

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

1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ An application, accompanied by the necessary documents, has to or regulate aviation in your jurisdiction. be filed with the Directorate General of Civil Aviation, under the Ministry of Development, pursuant to the Ministerial Order of 12 The civil aviation regulatory bodies in Spain are the Directorate March 1998 on the granting and maintenance of operating licences General of Civil Aviation, an agency of the Ministry of Development, to carriers. The Directorate analyses and evaluates the application and the Spanish Air Safety Agency (“Agencia Estatal de Seguridad and its attachments. It is required to make a decision within three Aérea – AESA”), created by Royal Decree No. 184/2008, of 8 months of the date of the application. This decision is a formal February 2008, which also depends on the Ministry of Development. administrative decision. The Directorate General of Civil Aviation deals with strategic If there is no decision from the Directorate within three months from and political issues related to aviation, and AESA is in charge of the date of application, this will mean that the application has been licensing, operations, airworthiness and operator certificates, and it denied. The applicant can then apply for remedies as provided by is the entity in which sanctioning powers are vested. the law, namely to take the matter to the administrative courts that Article 149.20 of the Spanish Constitution states that all matters are part of the Spanish judiciary. In the event that the application relating to airports, general interest, control of, and circulation is expressly denied, the same remedies are available for the reversal through, the airspace, air transportation, meteorological services and of the decision, including the possibility of asking the European aircraft registration are under the authority of the central state (Spain Commission to review the case. being organised as follows: central state; autonomous communities; provinces; and municipalities). Apart from the constitutional rules, 1.3 What are the principal pieces of legislation in the basic civil aviation rules are: your jurisdiction which govern air safety, and who ■ the Air Navigation Act 1960 (Act No. 48/1960 of 21 July administers air safety? 1960); ■ the Aviation Safety Act 2003 (Act No. 21/2003 of 7 July Air transport is regulated by several rules. These include European 2003); Union and domestic rules. The key EU rules include: ■ the Air Navigation Penal and Procedural Act 1964 (Act No. ■ Regulation (EEC) No. 3922/1991 of 16 December 1991; 209/1964 of 24 December 1964); ■ Regulation (EC) No. 216/2008 of 20 February 2008; ■ the Chicago Convention 1944 (ratified in 1969); ■ Regulation (EC) No. 69/2014 of 27 January 2014; ■ the Warsaw Convention 1929 (ratified in 1930); ■ Regulation (EC) No. 748/2012 of 3 August 2012; ■ the Geneva Convention 1949 (ratified in 1952); ■ Regulation (EC) No. 965/2012 of 5 October 2012; ■ the Hague Protocol 1955 (ratified in 1965); ■ Regulation (EC) No. 1321/2014 of 26 November 2014; ■ the Montreal Protocol Nos. 1, 2 and 4 (all three ratified in ■ Regulation (EC) No. 1178/2011 of 3 November 2011; 1984); ■ Regulation (EC) No. 70/2014 of 27 January 2014; ■ the Rome Convention 1952 (ratified in 1957); ■ Regulation (EU) No. 2015/640 of 23 April 2015; ■ the Tokyo Convention 1963 (ratified in 1969); ■ Regulation (EU) No. 452/2014 of 29 April 2014; ■ the Hague Convention 1970 (ratified in 1972); ■ Regulation (EU) No. 391/2013 of 3 May 2013; ■ the Montreal Convention and Protocol 1971 (ratified in 1974 ■ Regulation (EU) No. 2016/1377 of 4 August 2016; and in 1992 respectively); ■ Regulation (EC) No. 1033/2006 of 4 July 2006; ■ the Montreal Convention 1999 (ratified in 2004); ■ Regulation (EU) No. 2015/340 of 20 February 2015; ■ the Cape Town Convention 2001 (ratified in 2013); ■ Regulation (EU) No. 1332/2011 of 16 December 2011; ■ the Aircraft Protocol (ratified in 2016); ■ Regulation (EU) No. 923/2012 of 26 September 2012; ■ European Union regulations; and ■ Regulation (EC) No. 300/2008 of 11 March 2008; ■ several domestic rulings.

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■ Regulation (EC) No. 272/2009 of 2 April 2009; regulated in accordance with the Ministerial Orders of 27 November ■ Regulation (EU) No. 2015/1998 of 5 November 2015; and 1997 and 12 March 1998. ■ Regulation (EC) No. 1079/2012 of 16 November 2012. Air transport services covering the rest of the world are subject to The domestic rules include: bilateral agreements. Spain has recently ratified the “open skies” treaty with the US. ■ Air Navigation Act No. 48 of 21 July 1960; In relation to airport charges such as landing fees, parking fees, ■ Royal Decree No. 57/2002 of 18 January 2002, which enforced the Rules on Air Navigation and the Air Safety Act handling fees, etc., they have undergone an increase, set forth in No. 21 of 7 July 2003; the Spanish State Budget Act for 2012, and they apply to all carriers using Spanish airports.

■ Royal Decree No. 547/2006 of 5 May 2006, concerning Spain third-country aircraft utilising Spanish airports; ■ Royal Decree No. 550/2006 of 5 May 2006, regarding the 1.7 Are airports state or privately owned? National Programme for the Safety of Civil Aviation and the National Committee of Civil Aviation Safety; Almost all 54 Spanish airports are State-owned and operated by a ■ Royal Decree No. 184/2008 of 8 October 2008, approving State-owned corporation named “Aena SME, S.A.”, formerly named the legal statute of the Spanish Air Safety Agency (AESA); “Aena Aeropuertos, S.A.” and thereafter “Aena, S.A.”, except ■ Royal Decree-Law No. 13/2010 of 3 December 2010, the airport of Murcia-Corvera (under construction), the airport of approving performances in tax, labour and liberalisation Ciudad Real, the airport of Castellón, the airport of Lérida-Alguaire, matters in order to promote investment and job creation; the airport of Teruel and the airport of Andorra-La Seu. ■ Spanish Law No. 1/2011 of 4 March 2011, which established There are many private aerodromes. They are mainly devoted to the State Safety Operational Programme for Civil Aviation and amended Spanish Law No. 21/2003 of 7 July 2003, on activities such as general aviation, firefighting, flying schools, etc. Aviation Safety; The following airports are operated by Aena SME, S.A.: A Coruña; ■ Royal Decree-Law No. 11/2011 of 26 August 2011, which Adolfo Suárez Madrid-Barajas; Albacete; Algecira; Alicante-Elche; created the Airport Economic Regulation Commission Almería; Asturias; Badajoz; Barcelona-El Prat; Bilbao; Burgos; Ceuta; (“Comisión de Regulación Económica Aeroportuaria”); Córdoba; El Hierro; Fuerteventura; Girona-Costa Brava; Gran Canaria; ■ Spanish Law No. 2/2012 of 29 June 2012, approving the Granada-Jaén F.G.L.; Huesca-Pirineos; Ibiza; Jerez; La Gomera; La State Budget Law, which established an increase in Spanish Palma; Lanzarote; León; Logroño-Agoncillo; Madrid-Cuatro Vientos; airport charges (in force until 1 January 2016); Málaga-Costa del Sol; Melilla; Menorca; Murcia-San Javier; Palma ■ Resolution of 16 July 2012 of the General Secretariat of de Mallorca; Pamplona; Reus; Sabadell; Salamanca; San Sebastián; Transport, which approved the National Safety Programme Santiago; Seve Ballesteros-Santander; Sevilla; Son Bonet; Tenerife for Civil Aviation (“Programa Nacional de Seguridad para Norte; Tenerife Sur; Valencia; Valladolid; Vigo; Vitoria; and Zaragoza. la Aviación Civil – (PNS)”); and Royal Decree-Law No. 13/2010, of 3 December 2010, created the ■ Ministerial Order of 12 March 1998 on the granting and company “Aena Aeropuertos, S.A.” (today, “Aena SME, S.A.”) maintenance of operating licences to carriers. which took over the management of airports which were previously The Ministry of Development, through the Spanish Air Safety managed by the public entity AENA. The intention of this is the Agency (“Agencia Estatal de Seguridad Aérea – (AESA)”), is the gradual privatisation of Aena Aeropuertos, S.A. Government department which governs air safety. Royal Decree-Law No. 8/2014, of 8 July 2014, started the privatisation process of Aena Aeropuertos, S.A., which went into 1.4 Is air safety regulated separately for commercial, the stock market in February 2015. Among the performed changes, cargo and private carriers? the company “Aena Aeropuertos, S.A.” changed its name to “Aena, S.A.” and thereafter to “Aena SME, S.A.”; the name of the public No, the same domestic rules as mentioned above regulate all air entity “Entidad Pública Empresarial Aeropuertos Españoles y operations, irrespective of their nature, with the exception of Navegación Aérea (AENA)” changed its name to “ENAIRE”; both military carriers. shall maintain their legal nature and functions.

1.5 Are air charters regulated separately for commercial, 1.8 Do the airports impose requirements on carriers cargo and private carriers? flying to and from the airports in your jurisdiction?

No, they are not. Yes. Spanish carriers need to have an operating licence in Spain and a valid air operator certificate (AOC). Foreign carriers need to have the same documents issued by their state of origin. Carriers which 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be are included in the list of airlines banned within the EU (“blacklist” aware of, in particular when compared with ‘domestic’ of dangerous airlines of the European Commission) are not allowed or local operators? By way of example only, to operate in Spain. restrictions and taxes which apply to international but not domestic carriers. 1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular A distinction is made between air transport services within the rules, regulations, systems and procedures in place European Union and those covering the rest of the world. which need to be adhered to? Air transport services within the European Union are regulated in accordance with the packages of 1987, 1989 and 1992, The Air Navigation Act 1960 refers briefly to aviation accidents in complemented by the rules regarding the allocation of slots. As article 134 where it is stated that the investigation of accidents shall far as domestic legislation is concerned, air transport services are be dealt with by the civil aviation authorities. Following ICAO’s

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annex XIII, and the incorporation into domestic law of Directive is the owner of the aircraft. This notation is purely informative; 94/56/EC of 21 November 1994 and Royal Decree No. 389/1998 that is, it does not create a right that is opposable (effective) vis- of 13 March 1998, the investigation procedures were updated and à-vis third parties. In order to register the aircraft, a form needs the duties and responsibilities of the Spanish Aviation Accident to be completed, which can be obtained from the Spanish Aircraft Investigation Bureau (“Comisión de Investigación de Accidentes e Registry (“Registro de Aeronaves”). Incidentes de Aviación Civil”) defined. Later on, articles 11 et seq. As a result of Royal Decree No. 1709/1996 of 12 July 1996, an of the Aviation Security Act No. 21/2003 of 7 July 2003 set up more aircraft owner having the nationality of a Member State of the appropriate rules, maintaining the bureau as a body independent European Union may also register its title in the Spanish Aircraft from the Directorate General of Civil Aviation (although under the Registry, but he/she has to appoint a representative in Spain for this

Spain jurisdiction of the Ministry of Development) and emphasising that purpose. the only purpose of the investigation of accidents and incidents is to The Register of Goods and Chattels only records ownership titles prevent future accidents and incidents, and not to apportion blame and mortgages. Said Register requires prior recording of title before or liability. recording a mortgage over the aircraft. Article 9 of Regulation (EU) No. 996/2010 of the European Parliament and of the Council of 20 October 2010 on the investigation and prevention of accidents and incidents in Civil 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the Aviation and repealing Directive 94/56/EC, states that aviation operation of this register? authorities, persons responsible for facilities and services relating to air navigation, owners, operators and crew members of aircraft, Yes. See question 2.1 above (final paragraph). and any person or entity involved with, or related to, an aviation incident or accident, must report the event to the Aviation Accident In addition, the recordation of ownership title or a mortgage in the Investigation Authority of the Member State involved in the accident, Register of Goods and Chattels may take around two to four weeks; which in Spain is the Spanish Aviation Accident Investigation the creation of a Spanish mortgage would require the payment Bureau (“Comisión de Investigación de Accidentes e Incidentes de of Spanish stamp duty at the rate of 0.5% (in certain regions this Aviación Civil”), as soon as it becomes known to them. Such report rate may be higher) over the amount of the secured obligation (the is to be made using the fastest and most efficient means available. principal of the loan plus an amount of interest which cannot exceed the interest accruing during a period of five years). Spain has introduced the aforesaid EU Regulation No. 996/2010 into domestic legislation by means of Royal Decree No. 632/2013 of 2 August, which regulates assistance to victims of civil aviation 2.3 Are there any particular regulatory requirements accidents and their relatives and amends the previous regulations on which a lessor or a financier needs to be aware of as investigation of air accidents. regards aircraft operation?

Yes. Under Spanish law, unpaid airport landing and parking charges 1.10 Have there been any recent cases of note or other would not create a lien over the aircraft. However, the owner of notable developments in your jurisdiction involving air operators and/or airports? an aircraft leased to a Spanish operator may be prevented by local airports from flying the aircraft away if there are outstanding airport ■ Ciudad Real Airport: in April 2016, Ciudad Real Airport fees and if there has been a change in the operator. was sold to Ciudad Real International Airport, S.L. (CRIA) In this respect, the applicable regulations would be the statute for a total of EUR 56.2 million as the result of the tendering whereby AENA, the Spanish airport authority, was created and is process with creditors initiated in 2009. CRIA is currently regulated, as described under question 4.13. waiting on the decision of the Spanish Air Safety Agency (AESA) for the granting of the requisite authorisations and Furthermore, any commercial transaction and operation executed in licences. Meanwhile, the negotiations with the institutions Spain requires the involved individual of non-Spanish nationality to and companies of both private and public sectors are under obtain a N.I.E. (Foreign Identity Number), for the consideration of way for the provision of the airport facilities. security and registration. ■ New Spanish Aircraft Registry Regulations since 1 December 2015: on 1 December 2015, the new Regulations which 2.4 As a matter of local law, is there any concept of title regulate the procedures for the recordation of aircraft in the annexation, whereby ownership or security interests Spanish Aircraft Registry entered into force. These new in a single engine are at risk of automatic transfer regulations abolished the previous regulations, which had or other prejudice when installed ‘on-wing’ on an been in force since 1969. 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 2 Aircraft Trading, Finance and Leasing mitigate the risks?

In Spain, the rule of accession does not apply to engines installed 2.1 Does registration of ownership in the aircraft register constitute proof of ownership? on-wing, as they are considered to be separate from the airframe. However, it is presumed that the mortgage over an aircraft also includes its engines unless otherwise agreed between the mortgagor No. In Spain, there are two registries: the Spanish Aircraft Registry; and the mortgagee. The only measure the aircraft engine owner and the Register of Goods and Chattels. can take to mitigate this risk is to enter into an agreement with The Spanish Aircraft Registry will register a foreign-owned aircraft the mortgagor, confirming that it does not have legal title over the leased by a Spanish operator. However, the Spanish Aircraft engine(s) installed on-wing. Registry has no jurisdiction over the recognition of ownership rights and priority interests. It may note the name of the party that

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2.5 What (if any) are the tax implications in your 3.2 Is there a regime of self-help available to a lessor jurisdiction for aircraft trading as regards a) value- or a financier of an aircraft if it needs to reacquire added tax (VAT) and/or goods and services tax (GST), possession of the aircraft or enforce any of its rights and b) documentary taxes such as stamp duty; and under the lease/finance agreement? (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of Under Spanish law, the legal rights of a party can only be enforced aircraft and/or particular aircraft types or operations? through court action, because Spanish courts have the monopoly of coercive power. Self-help measures are less developed than would Sales of an aircraft are subject to VAT if they are put at the disposal be the case under English or New York law. Moreover, Spanish of, i.e. delivered to, the buyer while in the territory of Spain law would not treat the obligations of the Lessor/Lender as absolute Spain (including Spanish air space and territorial waters). The sale of an and unconditional, since rights and obligations must be exercised aircraft will be exempted from transfer and documentary taxes, as it reasonably, and abuse of law is not permitted (article 7 of the Civil would be treated as a transaction carried out between two business Code). operators. A bill of sale is not subject to Spanish stamp duty. If the Lessor is seeking to repossess the aircraft following the occurrence of an event of default, it is required to pursue its claim 2.6 Is your jurisdiction a signatory to the main through judicial proceedings. In such a case, the Lessor would international Conventions (Montreal, Geneva and have to formally declare an event of default by serving an official Cape Town)? notice to the Lessee, and if the Lessee fails to redeliver the aircraft, the Lessor would have to start a declaratory action and at the same Please see question 1.1 where the main international conventions time apply for interim relief: the Lessor would be required to post a signed by Spain are listed. Spain is a member country of the substantial bank guarantee with the Spanish court to indemnify any Convention on Interests in Mobile Equipment made in Cape Town damage caused to the Lessee. In our experience, it may take three on 16 November 2001, by way of the accession instrument dated months to obtain an injunction from a Spanish court, although there 20 June 2013 and published in the State Gazette on 4 October is no definitive time period. 2013. Spain’s accession to the Aircraft Protocol of the Cape Town A Spanish court would base an injunction or an interim order Convention was published in the State Gazette on 1 February 2016 regarding the repossession of the aircraft on two requirements: (a) and the Aircraft Protocol came into force on 1 March 2016. the Lessor must submit to the Court a document evidencing the existence of its claim against the Lessee. In other words, it must 2.7 How are the Conventions applied in your jurisdiction? show that it has good legal right to take action against the Lessee (“fumus boni iuris”); and (b) there is a risk of considerable court They are directly applied by the Spanish courts in case of any delay (“periculum in mora”): for instance, the Lessee may have dispute. dissipated all or a large part of its assets before the Lessor is able to obtain a final judgment on its claim. This risk is difficult to prove and it depends very much on the subjective criteria of the relevant 3 Litigation and Dispute Resolution court. An ex parte order would be granted by a Spanish court only in exceptional situations. In most cases, the Spanish court will hold a hearing which the defendant will have the possibility to attend, 3.1 What rights of detention are available in relation to aircraft and unpaid debts? before granting an injunction.

A creditor of the owner of the aircraft may seize the aircraft for 3.3 Which courts are appropriate for aviation disputes? unpaid debts except if the route operated by the aircraft is considered Does this depend on the value of the dispute? For to be the provision of a public service. The creditor needs to apply example, is there a distinction in your jurisdiction to court, which will issue a court order seizing the aircraft. In order regarding the courts in which civil and criminal cases are brought? to release the detention, evidence of payment of the debt needs to be provided to the court, which will, in said case, issue an order to annul the seizure. The courts where a dispute is held depend on the matter, and not on the value of the dispute. Under Spanish law, unpaid airport landing and parking charges would not create a lien over the aircraft. However, it has to be taken Consequently, for cases of insolvency and passenger rights, the into account that the owner of the aircraft might be prevented by competent courts are the Commercial Courts (“Juzgados de lo local airports from flying the aircraft away if there are outstanding Mercantil”). airport fees and if there has been a change in the operator. In relation to any civil claim (claims for owed amounts, damages, Strictly speaking, air navigation, landing and parking charges etc.), the Civil Courts of First Instance (“Juzgados de Primera are Spanish taxes (“tasas” – users’ fees), so their collection can Instancia”) are competent. be enforced through tax procedures, which include seizure of the Criminal cases are brought in front of the Criminal Courts of aircraft and its sale through a public auction, but the aircraft owner Examination (“Juzgados de Instrucción”), and civil responsibility may obtain the repossession of the aircraft through court action, arising from criminal offences can also be claimed together with the taking into account that liability for landing and parking fees criminal complaint. generally lies with the operator. Finally, resolutions of the Governmental or Regulatory Bodies can be challenged in front of the Administrative Courts of Justice (“Juzgados de lo contencioso-administrativo”).

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(b) Right of appeal to the courts from the decision of an arbitral 3.4 What service requirements apply for the service of tribunal court proceedings, and do these differ for domestic The reasons for annulment of an award are very restricted airlines/parties and non-domestic airlines/parties? under Spanish law. The applicant must argue and prove that: a) the arbitration clause does not exist or is invalid; b) the For the purposes of proceedings before a Spanish Court, a notarised appointment of an arbitrator and/or the arbitration proceedings and apostilled power for litigation needs to be granted by the Plaintiff have not been properly notified or a party has been unable for to a Spanish court agent (“Procurador de los Tribunales”), any any reason to exercise its right of defence; c) the appointment document in English or in another foreign language must be filed of the arbitrators or the arbitration proceedings have not been with a Spanish translation, and Plaintiffs are subject to an ad valorem carried out in accordance with the agreement between the Spain user’s fee (“Tasa por el ejercicio de la potestad jurisdiccional”). parties (unless such agreement was contrary to mandatory law) or, in the absence of such an agreement, in accordance These service requirements do not differ for domestic airlines/ with the arbitration law; d) the arbitrator has decided about parties and non-domestic airlines/parties, i.e. the same requirements matters which cannot be arbitrated; or e) the award is contrary are applicable for everybody. to Spanish public policy. The motion of annulment has to be filed not later than two months from the date of the award in the High Court of Justice (“Tribunal Superior de Justicia”) of 3.5 What types of remedy are available from the courts the relevant Spanish region. Its decision is final. or arbitral tribunals in your jurisdiction, both on i) an interim basis, and ii) a final basis? Spain has ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. (i) Interim remedies: a plaintiff is entitled to ask for an injunction (“medida cautelar”) from the courts within a court proceeding and an arbitral proceeding. The party 4 Commercial and Regulatory requesting the injunction needs to justify (a) that there is an appearance, an indication or a token that he has a good legal 4.1 How does your jurisdiction approach and regulate right in relation to the claim (“fumus boni iuris”), and (b) joint ventures between airline competitors? that there is a great risk of loss of the object of the claim in case the injunction is not granted (“periculum in mora”). The injunction can consist in the attachment of goods or There is no specific law on joint ventures between airline monies, the recordation of the claim with a public registry, competitors. The applicable law is the Spanish Act No. 15/2007 a court order to cease an activity, the deposit of goods, the of 3 July 2007, on Defence of Competition, further developed by suspension of shareholder agreements or any other measure Royal Decree No. 261/2008 dated 22 February, in order to adapt it to protect the rights of the party requesting the injunction. to EU Competition regulations. The party asking for the injunction has to post a bond as a In terms of concentration, the Law focuses its definition on the guarantee to protect the rights of the defendant. existence of a stable change in the control structure, de iure or de It may take around three months to obtain a resolution facto, of all or part of one or more undertakings as a result of: (i) the granting an interim measure. merger of two or more previously independent undertakings; (ii) the (ii) Remedies on a final basis from a court are essentially acquisition by a company of control over all or part of one or more judgments which can be enforced in front of the courts of companies; or (iii) the creation of a joint venture and, in general, justice. The likely time it will take to obtain a judgment in the first instance depends on the relevant backlog of work of the acquisition of control over one or more companies, when they the court and may be between six months and one-and-a-half permanently perform functions of an autonomous economic entity. years. The further enforcement of the judgment also depends The Law establishes the market share threshold restriction at 30% on the court, and may take between one and three months. of the relevant market, and foresees a mechanism for the update Remedies on a final basis from an arbitral tribunal are of turnover (if the overall turnover in Spain of all the undertakings essentially awards which can be enforced in front of the involved in the concentration in the last financial year exceeds courts of justice. The likely time it will take to obtain an the amount of EUR 240 million, provided that at least two of arbitral award depends on the arbitrators and may take the undertakings reached a turnover exceeding EUR 60 million between three months and one year. The further enforcement individually in Spain). of the award depends on the court where it is enforced and may take between one and three months. 4.2 How do the competition authorities in your jurisdiction determine the ‘relevant market’ for the 3.6 Are there any rights of appeal to the courts from the purposes of mergers and acquisitions? decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? As a general rule, the relevant market must be defined according to the specific circumstances of the relevant situation. (a) Right of appeal to the courts from the decision of a court The judgments issued by a Court of First Instance can be In the context of “concentration” control, for scheduled flights, the challenged in front of the Court of Appeals (“Audiencia definition of the relevant market in air transport is generally made Provincial”), except in case of judgments issued in a verbal on the basis of a route or a bundle of routes. More specifically, proceeding (“juicio verbal”) where the claimed amount is in the KLM/Alitalia decision (see case M/JV-19-KLM/Alitalia), EUR 3,000 or lower. the European Commission concluded that each point-of-origin/ The judgments issued by the Court of Appeals can only point-of-destination pair constitutes a relevant market, and that such be challenged in front of the Supreme Court (“Tribunal market includes a route or a bundle of routes. Supremo”) under very restricted circumstances. In Spain, the competition authority is the National Competition and Markets Commission (“Comisión Nacional de los Mercados y de la Competencia – (CNMC)”) and the competent courts of justice

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for competition matters are the Administrative Courts of Justice Ministers, duly justified, that may authorise the concentration with (“Juzgados de lo contencioso-administrativo”). or without conditions, must be adopted within one month from the moment that the proceedings were raised to the Council of Ministers, and a report may be requested from the National Competition and 4.3 Does your jurisdiction have a notification system Markets Commission. whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from The Regulation develops the merger notification procedure, regulatory agencies? including two notification forms: one regular and the other abridged. The new regular notification is closer to the European Commission’s The Spanish Act No. 15/2007 of 3 July 2007, on Defence of form used for concentrations with EU dimensions. The abridged Competition, sets forth a leniency procedure, similar to the one in form relieves the parties of the need to submit a substantial amount Spain effect in the EU, whereby undertakings that, having been part of of information, thus considerably simplifying the notification a cartel, report the existence of the cartel and provide substantial process for operations that do not contain elements capable of evidence for the investigation, shall be exonerated from payment of affecting competition, which is understood to occur in the following the fine, provided they cease their conduct of infringement and have scenarios: (i) when none of the parties to the concentration operates not been the instigators of the prohibited agreement. Likewise, the in the same geographic and product market, or in related upstream, amount of the fine may be reduced for undertakings that collaborate downstream or neighbouring markets in which any of the other but do not meet the requirements for complete exemption. parties to the operation is active; or (ii) when the presence of the The leniency procedure in Spain has been developed from European parties in the market, due to its reduced importance, is not capable Regulation (EC) No. 139/2004 of 20 January 2004 on the control of of significantly affecting competition. concentrations between undertakings and by all related Commission decisions finally granting immunity or reduction of fines or rejecting immunity and leniency applications (1996, 2002 and 2007 Leniency 4.6 Are there any sector-specific rules which govern the aviation sector in relation to financial support for air Notices), which state the confidentiality of the procedure and the operators and airports, including (without limitation) obligation of the requestor of leniency to cooperate with the Antitrust state aid? Authorities throughout the procedure. According to the Regulation, only the first requestor of leniency will be given full immunity, ■ Communication from the Commission 94/C350/07 regarding provided that it supplies the Antitrust Authorities with information the application of articles 92 and 93 (not 87 and 88) of the EC allowing them to carry out an investigation that it would not have Treaty and article 61 of the EEA Agreement to State Aid in been able to start by itself, and which proves the existence of a cartel. the aviation sector; Companies that have already received the statement of objections ■ Council Regulation (EEC) No. 2408/92 of 23 July 1992 on from the European Commission and ring-leaders cannot claim access for Community air carriers to intra-Community air immunity. They can, however, request a reduced fine if they provide routes; and evidence that significantly helps the investigation. ■ Communication from the Commission C 2005 (312): Community guidelines on financing of airports and start-up aid to airlines departing from regional airports. 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? The general Spanish provisions on State aid are contained in Act No. 38/2003 of 17 November 2003 on subsidies. Please see question 4.1. 4.7 Are state subsidies available in respect of particular 4.5 Please provide details of the procedure, including routes? What criteria apply to obtaining these time frames for clearance and any costs of subsidies? notifications. Yes. The criteria which apply are those contained in the The Spanish Act No. 15/2007 of 13 July, on Defence of Competition, Communication from the Commission C 2005 (312). The essential foresees a system of mandatory notification of concentrations. With criteria contained in said guidelines is the “principle of the private regard to merger control procedure, the Law establishes two phases investor” in a market economy, following which it has to be of the procedure and allocates the competence for its handling and examined whether, under normal conditions, a private partner would resolution to the National Competition and Markets Commission. In have invested capital, based only on the foreseeable possibilities of the first phase, which shall have a maximum duration of one month, profit, regardless of any consideration of a social, regional policy or operations that do not raise competition problems will be analysed and sectorial nature. approved. In the second phase, which has a maximum duration of two In addition, in particular, in Spain, residents of the Canary Islands months, a more detailed analysis of the operation will be made, with and Balearic Islands, and the towns of Ceuta and Melilla benefit the participation of interested third parties, in order for the National from lower airfares subsided by the central and the relevant regional Competition Commission’s Council to adopt a final resolution. governments. Spanish law also provides for an obligation of public The procedure before the National Competition and Markets services in respect of routes to certain cities and islands establishing Commission foresees the imposition of conditions, the presentation frequencies of flights and maximum price levels. of commitments by the notifying parties to solve the possible problems of competition derived from the concentration, and the 4.8 What are the main regulatory instruments governing possible consultation of interested third parties. the acquisition, retention and use of passenger data, In the case that the Council issues a resolution prohibiting or and what rights do passengers have in respect of subordinating the authorisation to commitments or conditions, the their data which is held by airlines? Minister of Economy, Industry and Competition will have a 15-day period to raise the matter of the concentration with the Council of The EC Directive 1995/46 of 24 October 1995, on Personal Data Ministers for its intervention. The final decision of the Council of Protection, was implemented in Spain by the Spanish Data Protection

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Act No. 15/1999 of 13 December 1999 (LOPD). In addition, in There is also a Register of Patents and Trademarks which depends on April 2008 an enabling regulation of the LOPD (Royal Decree No. the Ministry of Industry (“Oficina Española de Patentes y Marcas”). 1720/2007) developed this legislation. Therefore, the LOPD and Requests for patents are filed with the Register of Patents and Royal Decree No. 1720/2007 constitute the legal framework for the Trademarks and, following an internal review 18 months after the privacy rights of individuals in connection with the processing of filing, the register publishes in its official gazette (“Boletín Oficial their personal data, and they apply to both private and public entities. de la Propiedad Industrial”) a proposal for a patent, which is The processing of personal data is, in general terms, subject to the subject to challenges from third parties. Thereafter, the register prior consent of the data subject, which may be provided expressly grants the requested patent and this decision is again published in or tacitly (with 30 days’ prior notice). Notwithstanding this general the register’s official gazette. Any third party is entitled to challenge

Spain rule, tacit consent may be deemed to have been given in situations the decision of the register in front of the Administrative Courts of where the processing of personal data takes place and relates to the Justice (“Juzgados de lo contencioso-administrativo”). The patent parties to a commercial agreement (such as the agreement which is granted for a non-extendable period of 20 years. The person would exist between an airline and its passengers). whose patent right is violated is entitled to seek protection of his In general terms, the information that must be provided to individuals rights from the courts of justice. The person whose patent right is when collecting personal data from the data subject is the following: violated is also entitled to seek from the courts of justice an interim ■ Existence of a database, its purpose and end-users, including remedy (injunction), in order to protect his patent rights. any assignees, where applicable. Trademarks are protected by means of their registration in the ■ Voluntary or mandatory nature of the information requested. aforementioned Register of Patents and Trademarks, and the ■ Consequences of the provision of, or refusal to provide, claimant can file civil and criminal actions to protect its rights, personal information. including claiming for damages. ■ The data subjects’ right to have access to, correct and cancel The courts which deal with issues relating to intellectual and any personal data relating to them, as well as their right industrial property are the Commercial Courts (“Juzgados de lo to oppose the processing activities performed by the data Mercantil”). With respect to the resolutions issued by the Register of controller. Patents and Trademarks in relation to the registration of trademarks ■ Name and address of the data controller and name and and patents with said register, the Administrative Courts of Justice are address of those responsible for the database in Spain, if the the competent courts. Criminal courts deal with criminal offences. data controller is located outside the EU.

4.11 Is there any legislation governing the denial of 4.9 In the event of a data loss by a carrier, what boarding rights? obligations are there on the airline which has lost the data and are there any applicable sanctions? The applicable legislation is Regulation (EC) No. 261/2004 of 11 February 2004, establishing common rules on compensation and Following the infringement of any provision of the Spanish Data assistance to passengers in the event of denied boarding and of Protection Act No. 15/1999 of 13 December 13, 1999 (LOPD) or cancellation or long delay of flights. The competent courts where of Royal Decree No. 1720/2007, investigation proceedings may be passengers are entitled to file their claims in relation to denial of opened, whether by a claim filed by the data subjects or a legitimate boarding rights are the Commercial Courts (“Juzgados de lo third party (e.g. a consumer association or other organisation Mercantil”). representing the interests of affected individuals), or ex officio by the Spanish Data Protection Agency. The LOPD determines 19 The Ministry of Transport can impose sanctions foreseen in the potential violations. They are divided into three categories: minor; Aviation Security Act 2003 (Act No. 21/2003 of 7 July 2003) which serious; and very serious. These violations are subject to penalties can be challenged in front of the Administrative Courts of Justice. depending on the nature of the personal rights affected, the volume There are many judgments and case law whereby Spanish courts of of data concerned, the profits obtained, the intent, the continued justice have ruled in favour of consumers (passengers). nature of the infringement, etc., ranging from: ■ Minor infringements: fine from EUR 900 to EUR 40,000. 4.12 What powers do the relevant authorities have in ■ Serious infringements: fine from EUR 40,001 to EUR relation to the late arrival and departure of flights? 300,000. ■ Very serious infringements: fine from EUR 300,001 to EUR Following the provisions of the Aviation Security Act 2003 (Act 600,000. No. 21/2003 of 7 July 2003), the Ministry of Transport, through Airlines can challenge the imposition of fines by the Spanish Data the Spanish Air Safety Agency (“AESA”), is entitled to impose Protection Agency in front of the Administrative Courts of Justice sanctions of up to EUR 250,000 against carriers as a consequence (“Juzgados de lo contencioso-administrativo”). Passengers in of these infringements, which can be challenged in front of the respect of whom data has been lost, are able to seek damages against Administrative Courts of Justice. the airline through court action. 4.13 Are the airport authorities governed by particular 4.10 What are the mechanisms available for the protection legislation? If so, what obligations, broadly speaking, of intellectual property (e.g. trademarks) and other are imposed on the airport authorities? assets and data of a proprietary nature? The State-owned corporation AENA (currently named “ENAIRE”) In Spain, there is an intellectual property office which depends is the Spanish airport authority in respect of air navigation and air on the Ministry of Culture (“Registro General de la Propiedad traffic control, which was incorporated by article 82 of LawNo. Intelectual”). 4/1990 of the State Budget for 1990 and is regulated by Royal Decree No. 905/91 of 14 June, as amended by Royal Decree No.

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1993/1996 of 6 September, by Royal Decree No. 1711/1997 of 14 November, by Royal Decree No. 2825/1998 of 23 December, and 4.16 Are there any ownership requirements pertaining to by Royal Decree No. 8/2014 of 8 July 2014, whereby it changed GDSs operating in your jurisdiction? its name to ENAIRE. It performs its duties as if it were a private company with respect to its contracting and ownership relationships. No; in Spain there are not any ownership requirements for GDSs to With respect to its public decisions, these are subject to the public operate in Spain, but there are some restrictions at European level. law regulations. Article 8 of the Regulation (EEC) No. 2299/89 of 24 July 1989 As a consequence of the privatisation process of AENA (now establishes that: (i) a parent or participating carrier shall not link the “ENAIRE”), Royal Decree-Law No. 13/2010 of 3 December use of any specific Central Reservation System (CRS) by a subscriber incorporated the State-owned company Aena Aeropuertos, S.A. with the receipt of any commission or other incentive for the sale or Spain (currently named Aena SME, S.A.), which is currently in charge issue of tickets for any of its air transport products; and (ii) a parent of the management of the 48 State-owned airports, while ENAIRE or participating carrier shall not require the use of any specific CRS remains in charge of the supervision and management of the air by a subscriber for any sale or issue of tickets for any air transport navigation and air traffic control. The Government has authorised products provided either directly or indirectly by itself. The European the sale of a stake of up to 49% of Aena SME, S.A., which went Commission may, by decision, impose fines on system vendors, parent into the stock market in February 2015. The shares were issued at carriers, participating carriers and/or subscribers for infringements of EUR 58 per share and traded at EUR 129,650 as of the end of the this Regulation, up to a maximum of 10% of the annual turnover for year 2016. Currently, ENAIRE owns 51% of the capital of Aena the relevant activity of the undertaking concerned. SME, S.A. Royal Decree-Law No. 13/2010 of 3 December also In fixing the amount of the fine, regard shall be had to boththe foresees the incorporation of subsidiaries of Aena SME, S.A. for the seriousness and the duration of the infringement. management of one or more particular airports.

Besides the Aena SME, S.A. airports network (48 airports), there are 4.17 Is vertical integration permitted between air operators also the airports listed under question 1.7 above (first paragraph). and airports (and, if so, under what conditions)? While the air navigation and air traffic control duties remain with ENAIRE, the management of privately owned airports is carried Yes, as long as the threshold foreseen in the Spanish Act 15/2007 out by its owners subject to an operating licence being granted by on Defence of Competition (“Ley de Defensa de la Competencia”) the Ministry of Transport. Before a licence is approved, several of 30% of the relevant market is not exceeded. Air operators and requirements have to be fulfilled (environmental impact, structure airports, like any other player, are subject to the general provisions of the air space, terminal facilities, airport operations handbook, which apply to competition matters. Please see questions 4.1 to 4.5. etc.). A building permit granted by the local municipality is also necessary, except for ENAIRE. 5 In Future 4.14 To what extent does general consumer protection legislation apply to the relationship between the 5.1 In your opinion, which pending legislative or airport operator and the passenger? regulatory changes (if any), or potential developments affecting the aviation industry more generally in In Spain, consumer protection is mainly regulated by the General your jurisdiction, are likely to feature or be worthy of Law for the Protection of Consumers and Users approved by Royal attention in the next two years or so? Legislative Decree No. 1/2007 of 16 November, but there are two other pieces of legislation that refer to the protection of passengers The Spanish Government approved, through Royal Decree No. in air navigation: 384/2015 of 22 May 2015, the Spanish Aircraft Registry Regulations ■ Law No. 48/1960 of 21 July, on Air Navigation: articles 92 to which came into force on 1 December 2015, which include light- 101 refer to the transport of passengers and their protection in structure aircraft and private aircraft for commercial use, which different situations that may arise as a result of, for example, previously had a specific system. These regulations substituted the flight delays or loss of luggage, and the corresponding former registration system. The regulations determine which aircraft obligations of the carrier. are excluded from registration and incorporate an adjustment on the ■ Regulation (EC) No. 261/2004 of 11 February 2004, list of checks for new aircraft that need to carry out test flights. establishing common rules on compensation and assistance The new regulations introduce a “register reserve” for those who to passengers in the event of denied boarding and of intend to register an aircraft in Spain, while carrying out the registration cancellation or long delay of flights. procedure. They also regulate the possibility of temporarily cancelling Consumer protection legislation focuses more on the prevention of the registration of an aircraft (for a time period of less than five years) abusive practices and the provision of information to consumers, when said aircraft is expected to be temporarily recorded abroad. while the two latter pieces of legislation described above focus more The purpose of the regulations is to modernise the Spanish Aircraft on the rights of passengers in case of denied boarding, cancellations, Registry, through a more agile, effective and efficient recordation long delay of flights and compensation for lost luggage. system, adapting it to the present requirements, permitting the application of the Cape Town Convention and the Aircraft Protocol 4.15 What global distribution suppliers (GDSs) operate in in Spain and guaranteeing an adequate complementarity between your jurisdiction? the Spanish Aircraft Registry and the Register of Goods and Chattels (“Registro de Bienes Muebles”). As a consequence of these The GDSs that operate in Spain are: Amadeus (which is the most regulations, documents to be filed in the Spanish Aircraft Registry important one in Spain and Europe); Sabre; and Galileo. need to have been filed previously with the Registry of Goods and Chattels, and there is an electronic communication system between both registries.

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Furthermore, it is worth noting that Spain became a member of the general law. However, no precedent has been set by the Spanish Aircraft Protocol to the Cape Town Convention on 1 March 2016. courts to clarify their understanding on the nature of IDERA; nor Under the new rules, in order to deregister an aircraft, the consent is there, for the time being, any precedent of the enforcement of an of the lessee is required, except when an Irrevocable Deregistration IDERA before the Spanish Aircraft Registry in order to deregister an and Export Request Authorisation (IDERA) is put in place and aircraft and export it unilaterally from Spain. annotated in the Spanish Registry of Goods and Chattels and, Finally, the regulation of drones (pilotless aircraft) will probably be thereafter, recorded in the Spanish Aircraft Registry. There is a risk modified and developed in the following years as a consequence of that the IDERA may be recharacterised in an insolvency proceeding the growth of this industry. as a power of attorney, in which case it will lapse by operation of Spain

Alfonso López-Ibor Aliño Pablo Stöger Pérez Ventura Garcés & López-Ibor Abogados Ventura Garcés & López-Ibor Abogados Calle López de Hoyos, 35, 3º A Calle López de Hoyos, 35, 3º A E-28002 Madrid E-28002 Madrid Spain Spain

Tel: +34 91 521 7818 Tel: +34 91 521 7818 Email: [email protected] Fax: +34 91 524 00 93 URL: www.venturagarceslopezibor.com Email: [email protected] URL: www.venturagarceslopezibor.com

Mr. López-Ibor holds a degree in Law from Universidad Complutense, Mr. Stöger holds a degree in Law (specialisation: EU Law) from Madrid, and additional degrees from the London School of Economics Colegio Universitario San Pablo C.E.U., Universidad Complutense, and Political Sciences and The Hague Academy of International Law. Madrid (1996), a diploma in EU Legal Studies and Economics from the He is a former member of the Spanish Diplomatic Service. University of Paris I – Panthéon-Sorbonne and a Specialist Diploma in European Studies from Universidad Complutense, Madrid (1999), Mr. López-Ibor is widely recognised for his expertise on aviation matters, and studied Law at the University of Vienna. He is a native German in terms of the regulation, asset financing and insolvency of Spanish speaker and also speaks French, English, Spanish and Catalan. airlines. He also has broad experience in aviation, construction and related litigation, corporate/M&A, banking and finance, restructuring His experience in the aviation industry comprises advising clients and insolvency, dispute resolution and insurance. in: the purchase, sale and financing of aircraft; aircraft lease and maintenance agreements; mortgages and other charges and He is Managing Partner of the firm’s Madrid office. Before joining guarantees on aircraft and engines; aircraft registration; repossession the firm in 2001, he was Managing Partner of Allen & Overy’s Madrid of leased aircraft and engines; permits and licences for operating in office. the air transport sector, including environmental issues; insurance He has been a member of the Madrid Bar Association since 1980, and and passenger claims; consumer issues; and related judicial and of the Civil and Commercial Court of Arbitration (CIMA) since 2003. arbitration proceedings. He speaks Spanish, English and French. Mr. Stöger is a member of the Madrid Bar Association.

Ventura Garcés & López-Ibor Abogados is a full-service law firm which is strategically positioned to provide its clients with the legal support they need to anticipate change and benefit from it. We represent a wide variety of business, financial, institutional and individual clients in a broad range of matters. Our industry areas are mainly: Aviation; Banking; Insurance; International Trade; New Technologies; Real Estate; Renewable Energy; Stock Market; Family Businesses; and Private Client. We provide advice to our clients in the following law areas: Commercial & Corporate; M&A; Private Equity; Venture Capital; Litigation; Arbitration; Dispute Resolution; Intellectual Property Law; Employment Law; and Tax. Our clients include major and mid-sized, publicly and privately held multinational corporations, domestic and international financial institutions, private equity houses, partnerships and emerging enterprises, and individual entrepreneurs doing or setting out to do business in Spain and/or the European Union. Our firm has offices in Madrid and Barcelona and comprises more than 45 lawyers.

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Sweden

Excello Law Stephan Eriksson

■ Category B – pertaining to aircraft with a maximum 1 General certificated take-off mass of less than 10 metric tonnes and/or fewer than 20 seats. 1.1 Please list and briefly describe the principal The Swedish Transport Agency issues form BSL14005, stipulating all legislation and regulatory bodies which apply to and/ documents needed for the application of an operating licence. Less or regulate aviation in your jurisdiction. documentation is needed for category B compared to category A.

The Swedish Transport Agency has authority in areas of transport 1.3 What are the principal pieces of legislation in by air, sea, rail and road. The authority is a matter of the Ministry your jurisdiction which govern air safety, and who of Enterprise and Innovation, which is a part of the Government administers air safety? Offices of Sweden. The Civil Aviation and Maritime Department is the part of the As a member of the European Union (EU), air transport safety in Swedish Transport Agency that monitors and regulates civil aviation Sweden is governed by the implementation of the general provisions in Sweden. Within the scope of its assignment, the authority inter of EC Regulation No 216/2008, including amendments, on common alia issues regulations pertaining to aviation, examines and issues rules in the field of civil aviation. The EC Regulation is referred to as permits relating to aviation, administers aircraft registrations and “Basic Regulation”. The provisions apply to several aspects of civil supervises aviation rules. The authority also assesses civil aviation, aviation, with some exceptions that may be regulated nationally, focusing primarily on safety and security. such as search and rescue (SAR). There are several implementing The Swedish Aviation Act and the Swedish Aviation Ordinance are rules issued under the aforementioned EC Regulation. important pieces of legislation for granting the Swedish Transport The EASA issues soft law in the form of certification specifications Agency authority in civil aviation. (CS), acceptable means of compliance (AMC) and Guidance Material As Sweden is a member of the European Union (EU), the Swedish (GM), and advises, among others, the Swedish Transport Agency on Transport Agency only has authority to certify aircraft and aircraft the application pertaining to the aforementioned EC Regulation. materials pertaining to aircraft listed in Annex II to EC Regulation The Swedish Aviation Act and the Swedish Aviation Ordinance No 216/2008 on common rules in the field of civil aviation. The constitute the main Swedish national legislation. European Aviation Safety Agency (EASA) is otherwise the regulating Furthermore, the Swedish Transport Agency issues regulations body, whose authority has been established in the aforementioned (TSFS). EC Regulation including amendments. The European Aviation See also question 1.1 above. Safety Agency also conducts oversight of the Swedish Transport Agency in several aspects pertaining to civil aviation. There is no sector-specific competition regulator in Sweden. 1.4 Is air safety regulated separately for commercial, The main competent authority for all competition matters is the cargo and private carriers? Swedish Competition Authority. The European Commission also has competence in competition matters, although it usually only The Swedish Transport Agency provides detailed safety regulations investigates if several Member States are involved. 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 1.2 What are the steps which air carriers need to take in obliged to retain additional permits to carry out such operations. order to obtain an operating licence? Certain non-commercial aerial operations do require specific permits, such as for flight training or surveillance purposes, the latter of which The conditions of obtaining an operating licence are stipulated in should be referred to as aerial work. EC Regulation No 1008/2008, specifically in Article 4. For helicopter operations, aerial work has been highly regulated There are two types of operating licence: in Sweden in a European context. This will change with the ■ Category A – pertaining to aircraft with a maximum introduction of common EU regulations, with the introduction of certificated take-off mass of 10 metric tonnes or more and/or Part-SPO (Specialised Operations), which is a part of EU Regulation 20 or more seats. No 965/2012 as amended by EU Regulation No 800/2013. These are applicable not only for helicopters.

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As for private flights, the regulations also contain Part-NCC and be answered: what happened; why did it happen; and what can be Part-NCO, which will regulate non-commercial flights. done to prevent similar occurrences in the future, or to mitigate the As for commercial flights, including cargo, Part-CAT is applicable. consequences should it happen again? If rescue services have been The standards for commercial operations are higher than those for used, an assessment of those will follow, which also has the purpose private operations. of making future improvements. A private flight, as opposed to a commercial flight, canbe The investigation should not apportion blame as this could be characterised by there not being any remuneration made for the counterproductive to answering the abovementioned questions. flight. “Cost-sharing” is usually accepted on private flights. In practice, the result of the investigation is often used by the police and public prosecutor. The Swedish Accident Investigation Authority does not normally investigate accidents of ultralight Sweden 1.5 Are air charters regulated separately for commercial, aircraft. Those accidents may be investigated by the police and may cargo and private carriers? also be reviewed by private organisations. EU Regulation No 996/2010 stipulates that all involved persons who Charter operators need a specific operating permit. The Swedish have knowledge of an accident or serious incident must, without Transport Agency has also issued Regulation TSFS 2011:104, undue delay, report the occurrence to the authority that is responsible applicable to charter flights. for the territory where the accident or serious incident occurred. For Sweden, the responsible authority is the Swedish Transport Agency. 1.6 As regards international air carriers operating in your In accordance with the Swedish Aviation Act, the pilot in command jurisdiction, are there any particular limitations to be is responsible for reporting an accident or a serious incident. If aware of, in particular when compared with ‘domestic’ or local operators? By way of example only, the pilot in command cannot fulfil his or her duties, the owner, or restrictions and taxes which apply to international but if the aircraft is not used by the owner, the user, of the aircraft is not domestic carriers. responsible for reporting an accident or serious incident or report if the aircraft is missing and cannot be found. As an EU Member State, EC Regulation No 1008/2008 on common An incident may also have to be reported even if the incident did rules for the operation of air services in the Community regulates not pose any immediate danger for the operation or aviation safety. access to the Swedish market. Accordingly, any operator who has An incident is to be reported to the Swedish Transport Agency. The been granted an operating licence which has been issued in any EU same principles apply if other circumstances could have led to a or EEA Member State is granted access to most routes in Sweden situation posing an immediate risk, or if there would be a risk factor (as in the rest of the EEA area). In order to gain access to the market if no correction is made. The authority which is the predecessor of with regard to routes between Sweden and states outside of the the Swedish Transport Agency issued regulation LFS 2007:68 on EEA, the operator must apply for the Swedish Transport Agency’s incident reporting. permission. The same applies for operators holding operating licences issued in a state outside of the EEA. 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving 1.7 Are airports state or privately owned? air operators and/or airports?

The Swedish Government indirectly owns 10 major Swedish The Swedish Consumer Agency supervises airlines’ provision of airports through the corporate group Swedavia. There are several adequate information about passenger rights in accordance with EC smaller airports which are owned by local/regional municipalities, Regulation No 261/2004. Due to non-compliance by 10 airlines, by local private enterprises or as joint ventures by both public and the Agency has imposed decisions under penalty of a fine, should private interests and investors. the airlines continue to give inadequate information about passenger rights in accordance with the Regulation. In July 2015, the Agency pursued the decision to the Stockholm district court against at least 1.8 Do the airports impose requirements on carriers one airline due to non-compliance with the decision. flying to and from the airports in your jurisdiction? See also question 4.12 below. Access to airports in Sweden is primarily governed by the licence that the Swedish Transport Agency has issued for the relevant 2 Aircraft Trading, Finance and Leasing airport. Other operational limits could apply and there might have to be, depending on the type of operation, an allocation of slots. EC Regulation No 1008/2008 stipulates that EU air carriers generally 2.1 Does registration of ownership in the aircraft register have access to all routes within the Community. constitute proof of ownership? An airport may impose further requirements on carriers operating to and from the airport. A registration of ownership could be used for the presumption that the registered owner is the owner of the aircraft. See also question 2.2 below. 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 2.2 Is there a register of aircraft mortgages and charges? which need to be adhered to? Broadly speaking, what are the rules around the operation of this register? The investigation of most air accidents and some serious incidents in Sweden is conducted by the Swedish Accident Investigation The Swedish Transport Agency administers a register over Authority. If an investigation is conducted, three questions are to acquisitions, leasing rights and mortgages in which the owners of

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aircraft may choose to register relevant information about their aircraft, provided that the aircraft is registered in the Swedish Civil 2.7 How are the Conventions applied in your jurisdiction? Aircraft Register, resulting in a perfected interest which is thereby better protected against other, unregistered corresponding interests The Conventions can either be transformed into Swedish law, or of third parties. there could be a specific law that incorporates a Convention into Swedish law.

2.3 Are there any particular regulatory requirements A Convention, just by its mere ratification, should not have the effect which a lessor or a financier needs to be aware of as that it becomes applicable law in Sweden. The European Union can, regards aircraft operation? alongside Sweden, ratify a Convention and incorporate it into EU legislation which could, depending on the type of EU legislation, Sweden An aircraft may be registered in the Swedish Civil Aircraft Register become applicable in Sweden without any further implementation. if the owner of the aircraft is an EU or EEA national or entity. Further, aircraft owned by foreigners from outside the EU or the 3 Litigation and Dispute Resolution 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. 3.1 What rights of detention are available in relation to aircraft and unpaid debts?

2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests The operator of an airport has a right of detention of an aircraft in a single engine are at risk of automatic transfer if the fees for the aircraft’s most recent landing are unpaid. The or other prejudice when installed ‘on-wing’ on an right of detention allows the operator of the airport to hinder the aircraft owned by another party? If so, what are the take-off of the aircraft. Further, aircraft located in Sweden may be conditions to such title annexation and can owners detained within the scope of the enforcement procedure for unpaid and financiers of engines take pre-emptive steps to debts. Such detention requires a court order and the applicant may mitigate the risks? be ordered to post a bond covering any damages the detention may cause if the application is successfully disputed. As a main rule, a single engine mounted on an aircraft is part of the Aircraft may under certain circumstances be detained in accordance aircraft. Since 1 April 2016, the Cape Town Convention has been with Swedish civil law, for instance in the event of unpaid in force in Sweden through Law 2015:860, making it possible to maintenance services. register rights to aircraft engines.

3.2 Is there a regime of self-help available to a lessor 2.5 What (if any) are the tax implications in your or a financier of an aircraft if it needs to reacquire jurisdiction for aircraft trading as regards a) value- possession of the aircraft or enforce any of its rights added tax (VAT) and/or goods and services tax (GST), under the lease/finance agreement? and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of No; in order to reacquire possessions of the aircraft or enforce any aircraft and/or particular aircraft types or operations? of its rights under the lease/finance agreement, the Swedish laws on enforcement and debt recovery apply. The Swedish Enforcement According to the Swedish Value Added Tax Law Authority is the competent authority. (Mervärdeskattelagen), chapter 3 § 21, the sale of an aircraft which is intended to be used by an air carrier mainly engaged in 3.3 Which courts are appropriate for aviation disputes? international air traffic is exempt from Value Added Tax (VAT). Does this depend on the value of the dispute? For The actual aircraft does not need to be used internationally – the example, is there a distinction in your jurisdiction main point is whether the air carrier does. Parts and equipment plus regarding the courts in which civil and criminal cases services related to parts and equipment for such aircraft are also are brought? exempt from VAT. The stamp duty for registration is normally 8,000 SEK. Any negative decision by the Swedish Transport Agency in respect of traffic licences may be brought before the Swedish Government. Decisions by the Swedish Transport Agency with regard to licences, 2.6 Is your jurisdiction a signatory to the main authorisations or other decisions which are negative to an applicant international Conventions (Montreal, Geneva and Cape Town)? may be appealed by the applicant to the Swedish administrative court in Linköping. If the applied law is, or is based on, EU law, the administrative court may refer the question to the Court of Justice of Sweden is a signatory to, among others, the following Conventions: the European Union (CJEU) in Luxembourg. The CJEU will try the ■ The 1999 International Convention of Montreal, ratified 29 case and refer back with its decision to the Swedish administrative April 2004. court, which will then give its decision based on the decision by the ■ The 1929 Warsaw Convention, ratified 3 July 1937. CJEU. This is a practice that is seldom used in aviation matters in ■ The Hague Protocol for the amendment of the Warsaw Sweden; it would also considerably delay the proceeding. Convention 1955, ratified 3 May 1963. Civil and penal cases normally have jurisdiction in the local ■ The 1944 Chicago Convention, ratified 7 November 1946. district court as the court of first instance. It is the same legal court ■ The 1948 Geneva Convention on the International Recognition (tingsrätt) that handles both civil and penal cases. It is also the of Rights in Aircraft, ratified 16 November 1955. same legal court notwithstanding the claimed amount, although the ■ The Cape Town Convention was ratified by Sweden on 1 process could differ. April 2016.

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or goods. This would not be applicable for the purpose of ground 3.4 What service requirements apply for the service of handling where one airport constitutes the relevant market. Other court proceedings, and do these differ for domestic means of transport could also be included in the relevant market, airlines/parties and non-domestic airlines/parties? which in such case would most often be railway travel. There could also be a distinction between time-sensitive and non-time-sensitive Normally, a Swedish court would informally use the same passengers or goods. 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. In the event that this does not work, 4.3 Does your jurisdiction have a notification system EC Regulation No 1393/2007 can be applied on the service in the whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from Sweden Member States of judicial and extrajudicial documents in civil or regulatory agencies? commercial matters (service of documents). The EC legislation on competition law abolished the system of 3.5 What types of remedy are available from the courts giving clearance for a hypothetical case. or arbitral tribunals in your jurisdiction, both on i) an For mergers, an application to the Swedish Competition Authority is interim basis, and ii) a final basis? needed if at least two of the companies individually have an annual turnover in Sweden of at least 200 million SEK and the companies The two standard remedies that can be used are the following: together have an annual turnover in Sweden of at least 1 billion SEK. ■ A physical or judicial person must make what is established; There could be an obligation for the application even if one of the inter alia, make a payment (fullgörelsetalan). companies does not have an annual turnover in Sweden of at least ■ A physical or judicial person has something established; 200 million SEK. If competition could affect several EU countries inter alia, it has been established that the person has entered and the companies’ turnover exceeds €5 billion or in some cases into a specific agreement or has had something delivered €2.5 billion, an application is to be made to the EU Commission. (fastställelsetalan). It is possible to apply for interim sequestration awaiting a final verdict. The applicant needs to produce a bond covering the possible 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? damages caused the other party by the sequestration.

The main concern is to determine that a transaction would not 3.6 Are there any rights of appeal to the courts from the substantially lessen competition within the relevant market. decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? For the competition assessment, non-stop/non-stop, non-stop/ indirect and indirect/indirect routes that overlap should be taken There are three national instances for courts having jurisdiction of into consideration when assessing the competition. Hub-to-hub civil and penal cases, and three national instances for administrative routes get a higher level of scrutiny. Several factors are considered; courts. There are also special courts, where the amount of instances inter alia, restriction of market power, market entry conditions could differ. and regulations. The dominance of two or more operators and the possible positive effect of increased efficiency following a merger A litigant can always appeal a case, but whether the case will be are also considered. tried in a higher court depends on the individual case and if a leave of appeal is required and granted. 4.5 Please provide details of the procedure, including time frames for clearance and any costs of 4 Commercial and Regulatory notifications.

As for mergers, the decision needs to be made by the Swedish 4.1 How does your jurisdiction approach and regulate Competition Authority within 25 days. If a party suggests an joint ventures between airline competitors? obligation, the timeframe is extended to 35 days. If the Swedish Competition Authority decides to start a special investigation, There are several options available to the competition authorities the Authority shall within three months bring the case before the for remedying concerns – inter alia: surrender of slots to a new Stockholm district court. That time frame can be extended if any of competitor; pricing constraints; access to a frequent flyer programme; the parties agree or if there are extraordinary reasons. an agreement to enter into interline; special prorate agreements with new competitors; agreements to enter into intermodal agreements; a frequency freeze; pricing constraints; and sale of certain assets. 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) 4.2 How do the competition authorities in your state aid? jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? There is no sector-specific competition regulation for aviation in Sweden. Instead, general competition regulations apply. The main The general principles that define the relevant market are also regulation is the Swedish Competition Act, which implements EU applicable in the aviation sector. The point of origin and the point legislation. of destination, in practice a specific route, could specify a relevant market. An airport in the vicinity could also be part of the same area, if that airport is a viable alternative option to be used for passengers

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The Swedish Patent and Registration Office is an appointed 4.7 Are state subsidies available in respect of particular authority for the protection of patents, design and trademarks. The routes? What criteria apply to obtaining these Office for Harmonization in the Internal Market (OHIM) registers subsidies? Community Trade Marks in the European Union.

Effective as of March 2014, the European Commission has changed its guidelines on state aid to airports. State aid for investments 4.11 Is there any legislation governing the denial of and operation of an airport is allowed if it is necessary to ensure boarding rights? transportation to and from a region. The possibilities for state aid are better for smaller airports and airports in rural or non-densely EC Regulation No 261/2004 entitles air carrier passengers

populated areas. subjected to denied boarding, cancellation or long delay of flights Sweden Aid to air carriers for new routes is allowed provided that the aid is to compensation. This could be in the form of reimbursement of the limited in time. In Sweden, there are procured routes as well as state cost of the ticket, rerouting, assistance and monetary compensation aid and municipal allowances to some non-state-owned airports. in the range of €250 to €600. Air carriers starting a new route are permitted to have state aid only A claim for compensation, if to be legally tried, can be brought if they can show prospects of being profitable within three years or before a district court (tingsrätt), which is the court of first instance. make an irrevocable commitment to operate the route for a period Applicable courts have jurisdiction of the place of departure, arrival not less than the period for which that state aid is given. or where the airline is domiciled. If the claimant is a consumer, the case could be brought before the court in Sweden where the The Swedish Transport Administration procures air transportation claimant is domiciled. and, in the procurement, stipulates how those airfares are to be regulated. The procurement is only done for routes where towns or Alternatively, a case, if the claimant is a consumer, can be tried for villages otherwise cannot get satisfactory transportation. Usually the free at the National Board for Consumer Disputes (ARN). Decisions authority sets forth in the procurement certain requirements that shall by the ARN are only recommendations and thus not legally binding. or should be fulfilled. The airline must meet all “shall” requirements, while meeting “should” requirements will give extra points. The 4.12 What powers do the relevant authorities have in price offered by the airline is viewed as a combination of fulfilled relation to the late arrival and departure of flights? points given, when the winning bidder is chosen. Airlines are not able to view others’ offers before the deadline of the procurement. The Swedish Consumer Agency supervises airlines’ provision of adequate information about passenger rights in accordance with EC 4.8 What are the main regulatory instruments governing Regulation No 261/2004. The Swedish Act on Air Transport (lag the acquisition, retention and use of passenger data, (2010:510) om lufttransporter) gives the Agency its authority. and what rights do passengers have in respect of In terms of non-compliance by an airline, the Agency can impose a their data which is held by airlines? decision under penalty of a fine. The fine can formally be decided by the Stockholm district court on application by the Agency. The main regulation is the Personal Data Act (personuppgiftslagen), which implements EC Directive 95/46 on the protection of personal data. 4.13 Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, The legislation gives passengers several rights; inter alia, to have are imposed on the airport authorities? the information deleted after a certain time and, upon request, to have access to the data. In order to establish and operate a public airport, the permission Sensitive personal information should not normally be stored about of, and a licence from, the Swedish Government or the Swedish a passenger, especially if no consent from the passenger has been Transport Agency is required. When deciding whether or not given. to grant a licence to an airport, an overall assessment is made which includes the public interest in the establishment, as well as 4.9 In the event of a data loss by a carrier, what considerations with regard to air safety, the environment, etc. The obligations are there on the airline which has lost the Swedish Transport Agency provides detailed rules and requirements data and are there any applicable sanctions? for the licensing of airports. For civil airports that have a paved runway of 800 metres or more, or which exclusively cater for The responsible person for the Personal Data Act could have penal helicopters, are open to the public and have some kind of instrument sanctions against him, but also civil compensation against him can landing procedure, EU Regulation No 139/2014 is applicable. be applicable. The employer of the responsible person normally has By implementation of EC Directive 2009/12 on airport charges, the economic responsibility for its employees such as the responsible two major Swedish airports, Stockholm-Arlanda and Gothenburg- person. Landvetter, are economically regulated by the Swedish Act on If an error has been made or if there has been a security breach, Airport Charges. There is no legislation governing the levying those are naturally to be addressed. of fees, etc. for smaller airports. However, airports owned by the Swedish Government through the Swedavia group are bound to set the airport fees in accordance with the principles set forth in ICAO 4.10 What are the mechanisms available for the protection Doc 9082 on Charges for Airports and Air Navigation Services, of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature? which includes the principles of transparency, relation between fees and costs, and non-discrimination. There are no aviation-specific mechanisms available for the protection of intellectual property. General copyright, patents, trademarks and design rights can be used for aviation.

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4.14 To what extent does general consumer protection 5 In Future legislation apply to the relationship between the airport operator and the passenger? 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments The principal aviation-specific passenger protection legislation is affecting the aviation industry more generally in provided by the EU. your jurisdiction, are likely to feature or be worthy of EC Regulation No 1107/2006 protects disabled passengers and attention in the next two years or so? passengers with reduced mobility when travelling by air. Refusal of carriage on those grounds might not be allowed. The regulation The Swedish Transport Agency has been outsourcing IT systems to Sweden requires air carriers to inform, assist and provide training to their foreign countries and without appropriate confidentiality agreements personnel and to grant compensation in case of non-compliance. in place. In one incident, outsourced data contained sensitive The EC Regulation No 80/2009 sets out a code of conduct for information regarding national security. Due to this security breach, computerised reservation systems. the director-general has been replaced and there has been political turmoil at the highest level. Three cabinet ministers have resigned. The EC Regulation No 2111/2005 requires passengers to be While the day-to-day operations at the Agency are not expected to informed of the identity of the operating air carrier. change much, the security breach could possibly have the effect that the Agency will generally be more prudent in order to avoid scrutiny – and 4.15 What global distribution suppliers (GDSs) operate in consequently, further unwanted publicity – from auditing authorities your jurisdiction? such as the EASA and The Parliamentary Ombudsman (JO). The Swedish Government has proposed that a passenger tax on The main GDSs are Amadeus, Galileo, Sabre and Worldspan by airline travel departing from Sweden be introduced in 2018. The tax Travelport. would range from SEK 80 to SEK 430 (around €8 to €45) depending on the distance flown. The Swedish Government is in the minority 4.16 Are there any ownership requirements pertaining to in the Swedish Parliament and the opposition is against the tax. The GDSs operating in your jurisdiction? Government could, however, include the proposed tax in the overall budget for 2018, which would give the opposition a disincentive to No, there are not. vote against it. It is therefore uncertain if the tax will be introduced. In October 2016, the Supreme Administrative Court delivered two judgments which grounded drones that took pictures in areas 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? accessible by the public unless a specific permit to photograph was applied for and granted. The permit was not easy to get, which effectively made almost all drone photography illegal. From August In principle, vertical integration between air operators and airports is 2017, the regulations have changed and drone pilots can now take permitted. Conditions for that integration are adherence to applicable pictures legally without a specific permit for photography. competition laws, and that all regulations and requirements are fulfilled individually by both the airport and the air operator. EU Regulation No 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data will apply from 25 May 2018. The Regulation is comprehensive and organisations that manage personal data, such as passenger information, must ensure that the Regulation is observed.

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Stephan Eriksson Excello Law Ferkens Gränd 3 111 30 Stockholm Sweden

Tel: +46 705 142 890 Email: [email protected] URL: www.excellolaw.se Sweden After graduating from Uppsala University (LL.M.) in 1987, Stephan Eriksson clerked at Gävle district court. He then went into private practice and became a member of the Swedish Bar in 1992. He is also a member of the American Bar Association (ABA) and the American Association for Justice (AAJ). He is a member of the European Air Law Association. As chair of the Pan European Organisation of Personal Injury Lawyers (PEOPIL) Aviation European Exchange Group, he regularly organises aviation seminars together with McGill University. In 2003 he took a year-long sabbatical during which he studied aviation and space law at the Institute of Air and Space Law (IASL) at McGill University in Montreal, Canada, where he received a postgraduate certificate. He regularly lectures on aviation law at McGill University, as well as Linköping University in Sweden. Since the early 1990s Mr Eriksson has been practising tort law in the United States; during this time he has been involved in numerous law proceedings within the US state and federal courts, primarily concerning Sweden-oriented matters. Stephan Eriksson is specialised in aviation mass disaster litigation and has worked on several accidents, including Air France Concorde flight AF 4590 in 2000, Scandinavian Airlines flight SK 686 in 2001, and the DHL/Bashkirian Airlines mid-air collision over Überlingen, Germany, in 2002. In 2004 he advised the families in the case of Flash Air flight 604. Stephan represented the majority of the families involved in Helios Airways flight 522 in 2005, and the families involved in the accident of Swedish Coast Guard CASA C-212 Aviocar. He also represented families affected by Kenya Airways flight 507 in 2007, Air France flight AF 447 in 2009, and Air India Express flight IX 812 in 2010. He represented the families of the crew of Norwegian Royal Airforce Hercules C-130, Mount Kebnekaise, Sweden, in 2012. He is representing families involved in Bhoja Air flight 213 in 2012, and Malaysian Air flight MH17 shot down over Ukraine in 2014. He has developed a renowned expertise in air passenger law and EU Regulation No 261/2004 regarding passengers’ rights in the event of denied boarding, cancellation or long delay of flights. Lately he has shifted his aviation practice more towards commercial aviation law, where, for example, he represents airlines, helicopter operators, air brokers, travel agencies and tour operators. Who’s Who Legal says: “Stephen Eriksson is highly proficient aviation practitioner with over 25 years’ experience advising major clients across the sector.”

Excello Law Sweden is a branch of Excello Law UK and offers a broad range of corporate and commercial law services from a team of highly experienced, partner-level lawyers, led by managing director John Tengstrom. The firm acts for small and medium-sized companies, business owners, banks and financial institutions, often acting as an adviser in national and international mergers and acquisitions. The team has broad experience in the banking and finance industry in both regulatory and compliance matters. The firm also handles aviation liability and commercial aviation, real estate, construction and business litigation.

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Switzerland Urs Haegi

VISCHER AG Dr. Thomas Weibel

launch date of commercial operation and before the expiry 1 General date of the existing operation licence, respectively), including appendices: 1.1 Please list and briefly describe the principal a) certificate on the Swiss or the European character of the legislation and regulatory bodies which apply to and/ company (Form 54.045 including appendices); or regulate aviation in your jurisdiction. b) leasing or management agreements for the respective aircraft; The Swiss Federal Office of Civil Aviation (FOCA) is the supervision c) aircraft list (registration marks, type of aircraft, seating authority responsible for safety (aircraft, flight operations, and capacity); infrastructure) and for aviation policy and strategy issues. d) evidence of own flight crews; Civil Aviation is regulated by two sources: domestic law; and e) tenancy agreement for the office of the operation international treaties. department (Post Holder Flight Operations); Domestic law f) business plan for two operational years; The main enactments are: g) certified balance sheet, income statement, auditor’s report; and ■ The Federal Civil Aviation Act (FCAA) h) opening balance sheet and financial plan (budget). The FCAA is the “basic law” concerning civil aviation in Switzerland. Based on the FCAA, many Ordinances have 3. File with FOCA certain corporate documents (articles of been enacted by the government, i.e., the Swiss Federal association, extract from the commercial register, certified Council, and the Department of the Environment, Transport, copy of the shareholders’ register, organisational chart with Energy and Communication (DETEC). information on Board and management). ■ The Federal Act on the Aircraft Records Register 4. File with FOCA an extract from the debt collection and bankruptcy register (Betreibungsregisterauszug) regarding See question 2.2 below. the CEO, the CFO, and the accountable manager. International law Carriers with an EU/EFTA operating licence do not need a separate There are about 180 bilateral and multilateral treaties. The main Swiss operating licence in addition (see Form 49.10). Apart from sources are: the AOC and the EU/EFTA operating licence, they have to file the ■ The Convention on International Civil Aviation (Chicago following documentation: Convention). 1. liability insurance for passengers, baggage, and cargo; ■ The Agreement between the European Community and 2. security programme; the Swiss Confederation on Air Transport (“EU-CH Agreement”), which entered into force on 1 June 2002. 3. list of aircraft used on routes from and to Switzerland (Form 49.06; if required by FOCA); Based on the EU-CH Agreement, Switzerland has adopted the 4. schedule (Form 49.01); relevant civil aviation regulation in the European Union. 5. contact information (e.g., handling agent in Switzerland); Federal legislative texts are freely available in German, French, and 6. contact person within the airline concerning Regulation (EC) Italian on www.admin.ch (Federal law/Classified compilation). No 261/2004 issues, i.e., compensation and assistance to passengers (Form 49.03; for FOCA use only); 1.2 What are the steps which air carriers need to take in 7. tariffs for the scheduled flights (Form 49.02); order to obtain an operating licence? 8. declaration of reciprocity for services in the fifth or seventh freedom to destinations outside the EU/EFTA issued by the For an operating licence for a commercial operator to transport competent national Civil Aviation Authority; and passengers and/or cargo with an aircraft, air carriers are required to: 9. request for a Route Licence (Form 49.04). 1. Hold an AOC from the competent national Civil Aviation Non-EU/EFTA carriers (see Form 49.07) are subject to further Authority (Regulation (EC) No 1008/2008). disclosure duties as set out in Form 49.12 (Operating Permit 2. File with FOCA the Application Form for an Operating Questionnaire). Licence (Form 49.05; at least 30 days prior to the intended

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the state authority of the Swiss Confederation having a mandate to 1.3 What are the principal pieces of legislation in investigate accidents and dangerous incidents involving, inter alia, your jurisdiction which govern air safety, and who aircraft. administers air safety? The principal legislation relating to investigation of air accidents Switzerland has adopted Regulation (EC) No 216/2008 of the includes: European Parliament and of the Council of 20 February 2008 ■ Art. 26 and Annex 13 of the Chicago Convention; on common rules in the field of civil aviation and establishing a ■ Regulation (EU) No 996/2010 of the European Parliament European Aviation Safety Agency. It is the main source of Swiss and of the Council of 20 October 2010 on the investigation aviation safety legislation. EASA Rules on Air Operations (OPS) and prevention of accidents and incidents in civil aviation; and Implementing Rules (IR) will be applicable in Switzerland. ■ Regulation (EU) No 376/2014 of the European Parliament

Furthermore, Switzerland has implemented safety management and of the Council of 3 April 2014 on the reporting, analysis Switzerland systems as provided for in ICAO Annexes 6, 11 and 14. and follow-up of occurrences in civil aviation; The FOCA administers air safety in Switzerland. ■ Art. 22 et seq. of the Federal Civil Aviation Act; and ■ Ordinance on Aviation Accidents and Severe Incidents. 1.4 Is air safety regulated separately for commercial, Any accident or severe incident must be reported to the STSB cargo and private carriers? immediately.

No, it is not. 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving 1.5 Are air charters regulated separately for commercial, air operators and/or airports? cargo and private carriers? On 16 August 2017, the Swiss Federal Council approved the signing No. The Swiss Federal Administrative Court has, however, of an agreement aimed at linking the Swiss and European aviation accepted that the operational regulation of Zurich Airport stipulates emission trading scheme (ETS) systems. Once the agreement is a departure prohibition after 10 p.m. solely applicable to air charters signed, and as emissions generated by aviation will be included (DFAC 2011/19). under the joint ETS system, the linkage will offer Swiss aviation companies who operate flights from Switzerland to the EEA and/or within Switzerland the possibility to trade with the corresponding 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be emissions throughout the European ETS system. aware of, in particular when compared with ‘domestic’ On 23 March 2017, Switzerland and France signed an or local operators? By way of example only, intergovernmental agreement addressing various taxation issues at restrictions and taxes which apply to international but the Basel-Mulhouse Euro-Airport (EAP). The main points of the not domestic carriers. agreement are that Swiss VAT shall be levied in the Swiss area of the EAP, France and Switzerland will split the receipts from corporation No. Airport concession holders are obliged to grant access to all tax paid by EAP, and companies in the Swiss area will pay French national and international airlines entitled to fly to Switzerland (Art. income tax and Swiss capital tax but will not be liable for the 36a of the Federal Civil Aviation Act). Any restrictions must be main local ancillary taxes levied in France, to which Swiss tax is detailed in the operational regulation of the airport and must not considered equivalent. Moreover, the French Directorate General be discriminatory. The operational regulation is subject to FOCA for Civil Aviation will be compensated for services provided in the approval. Swiss area of EAP. In a decision of 31 January 2017, the Swiss Federal Court of 1.7 Are airports state or privately owned? Administration (FCA) upheld a decree of the Swiss Secretary of Migration (SEM) imposing a fine of CHF 152,000 on Qatar Airways Both models exist. Zurich Airport is owned by a publicly traded for submitting no or insufficient passenger information regarding its company (at least ⅓ of the shares of which the canton of Zurich flights departing from Doha into Switzerland. The measure had been is legally bound to hold), whereas EuroAirport Basel-Mulhouse- invoked by the SEM in 2011 in the framework of security checks, Freiburg and Geneva Airport are owned by public corporations. according to which carriers operating flights departing from Doha, São Paulo, Abu Dhabi, Beijing, Shanghai, Dubai, Dar es Salaam, 1.8 Do the airports impose requirements on carriers Nairobi, Pristina, Istanbul, Moscow, Casablanca, and Marrakesh flying to and from the airports in your jurisdiction? needed to transfer, immediately after departure, their passenger lists plus further information. Yes. The most notable requirement is the payment of airport On 21 December 2016, the ECJ ruled that the “stop the clock” charges (Art. 39 of the Federal Civil Aviation Act). In addition, decision does not infringe the EU principle of equal treatment. The every airport has its own operational regulation which can contain “stop the clock” decision of the European Commission had suspended certain requirements regarding safety, environmental issues, noise the requirements to surrender emissions allowances imposed by its protection, slots, etc. aviation emission trading scheme (ETS) regarding flights between Member States of the European Economic Area (EEA) and third 1.9 What legislative and/or regulatory regime applies to countries. As the flights originating from or reaching Switzerland air accidents? For example, are there any particular were excluded from the temporary moratorium, the Swiss were at a rules, regulations, systems and procedures in place disadvantage vis-à-vis their European competitors and major third which need to be adhered to? country competitors from, e.g., the US, India, China, and Russia, leading to Swiss International Air Lines AG filing an application The Swiss Transportation Safety Investigation Board (STSB) is before the High Court of England and Wales, as England was Swiss

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airlines’ administering member according to the ETS. The High of the Federal Act on the Aircraft Records Register). There are no Court ruled that the European Law did not impose an obligation maintenance or mechanic’s priority rights. on the European Union to treat all third countries equally and thus Leases dismissed the application. The lessee of an aircraft can be registered in the Aircraft Register, In a decision of 2 February 2016, the Bulach District Court ruled that assuming that all the other requirements for a registration in the the Sturgeon, Nelson, and TUI decisions of the European Court of Aircraft Register (apart from legal ownership) are fulfilled. In the Justice (ECJ), establishing, and thereafter upholding, a standardised case of long-term lease agreements under which a Swiss lessee financial compensation for flights delayed by at least three hours, operates the aircraft, a non-Swiss owner may also be registered in did not apply in Switzerland. The court ruled that, although that the Aircraft Register. Furthermore, lease agreements with a period Switzerland has adopted the EU Air Passenger Rights Regulation of validity of more than six months can be registered in the Aircraft (261/2004) by virtue of the bilateral 1999 EU-Switzerland Air Record (Luftfahrzeugbuch). Such registration gives the lessor Switzerland Transport Agreement, it was doubtful whether Swiss courts and the lessee priority over all rights and agreements recorded must also follow ECJ case law subsequently rendered based the subsequently (except for statutory liens). However, the lessor regulation, especially if such case law, as in the case of Sturgeon, may unilaterally allow the registration of a mortgage, unless this is was a legislative rather than a judicial decision. In the case at explicitly excluded in the lease agreement. hand, the Bulach District Court decided that the abovementioned decisions were not precedents it had to follow. 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 2 Aircraft Trading, Finance and Leasing 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 2.1 Does registration of ownership in the aircraft register and financiers of engines take pre-emptive steps to constitute proof of ownership? mitigate the risks?

No. The Swiss Aircraft Register (Luftfahrzeugregister) relates Pursuant to Art. 22 para. 1 of the Federal Act on the Aircraft Records to the administrative registration of the aircraft (permit to fly, Register, engines that are specifically designated as such and airworthiness certificate, noise type certificate, nationality of registered jointly with an aircraft in the Aircraft Record are deemed ownership, call sign, etc.). Although the owner is registered in the to be part of such aircraft, regardless of whether they are installed Aircraft Register, the certificate of registration does not constitute ‘on-wing’ or not. Furthermore, there is the possibility of specifically proof of ownership. In addition, aircraft can be registered in the excluding an engine from a registration, which will render its fate Swiss Aircraft Record (Luftfahrzeugbuch), which registration independent from that of the aircraft. By consequence, if an engine constitutes proof of ownership. is registered along with an aircraft in the Aircraft Record, a mortgage on the aircraft will also affect the engine. If this is not desired, the engine must be specifically excluded when registering the aircraft in 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the the Aircraft Record. operation of this register? 2.5 What (if any) are the tax implications in your Yes; ownership and mortgages can be registered in the Aircraft jurisdiction for aircraft trading as regards a) value- Record (Luftfahrzeugbuch). In respect of ownership, the registration added tax (VAT) and/or goods and services tax (GST), is voluntary. and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as Registration of any right will only be made upon application by regards non-domestic purchasers and sellers of the owner and is only permissible for aircraft already registered aircraft and/or particular aircraft types or operations? in the Aircraft Register. Mortgages can only be set up, and will only become effective, upon registration in the Aircraft Record. The key question with respect to VAT handling of aircraft Any entry will first be published in the Swiss Official Gazette of transactions in Switzerland (sale/purchase/lease) is whether the Commerce (SOGC) and is subject to an objection period of 30 days. aircraft in question is imported into Switzerland and, if so, whether This 30-day period has to be borne in mind in any aircraft financing an exemption based on Art. 23 para. 2 no. 8 and Art. 53 para. 1(e) project. The Swiss FOCA, which runs the Aircraft Record, is rather of the Federal Law on Value Added Tax (VATL) applies. If a Swiss swift in handling the applications. Requests are usually handled registered aircraft is imported into Switzerland by a Swiss-domiciled within a few days. international air-carrier who professionally operates transportation Once a right is registered in the Aircraft Record, it can only be altered or chartered air traffic, and whose turnover from international flights or deleted by amending the respective registration. In other words, exceeds that of domestic air traffic, the sale, purchase, or lease as once registered in the Aircraft Record, any transfer of ownership by well as a list of other services provided to such air-carrier may necessity requires an amendment of the registration. 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 domiciled in Switzerland who qualify for 2.3 Are there any particular regulatory requirements such exemptions. Foreign air-carriers who are able to demonstrate which a lessor or a financier needs to be aware of as that they comply with the requirements of Art. 23 para. 2 no. 8 VATL regards aircraft operation? may also, under certain circumstances, apply for VAT exemptions on certain services. If an aircraft is imported by any other person/ Mortgages company who is not exempted, VAT is applied to any sale, purchase, Certain claims are granted priority over a registered mortgage, or lease transaction involving the aircraft. The same applies for any although Swiss legislation is more restrictive than foreign law aircraft imported into Switzerland and sold, purchased, or leased when it comes to accepting preferred security rights (see Art. 47 to a party (other than a commercial carrier exempted from VAT

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pursuant to Art. 23 para. 2 no. 8 VATL), regardless of whether the parties involved in the transaction are foreign parties and the aircraft 3.3 Which courts are appropriate for aviation disputes? is situated outside of Switzerland. Aircraft that are not imported Does this depend on the value of the dispute? For into Switzerland (e.g., when staying under custom supervision in example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases connection with maintenance and repair) are generally not subject are brought? to Swiss VAT on imports. Similar rules apply, due to various multilateral agreements (e.g., GATT or Free Trade Agreement There are no special courts (of any type) for aviation disputes. with EU and EFTA) to customs duty; accordingly, the import of aircraft or of spare parts is exempted from customs duty if such an Civil proceedings agreement is applicable. Civil claims in relation to aviation disputes must be brought before the ordinary civil courts. Four cantons (Aargau, Bern, St. Gallen, Switzerland 2.6 Is your jurisdiction a signatory to the main and Zurich) have specialised commercial courts competent if (i) international Conventions (Montreal, Geneva and the dispute is to be considered a commercial dispute, and (ii) the Cape Town)? value threshold of CHF 30,000 is exceeded, which will, in aviation disputes, almost invariably be the case. Chicago Convention 1944 Debt enforcement Switzerland ratified the Convention on 6 February 1947, prior to its Enforcement of mortgages is carried out by the competent Debt effective date of 4 April 1947. Enforcement and Bankruptcy Office (Betreibungsamt). The same Geneva Convention 1948 applies to the enforcement of financial claims if the creditor is in Switzerland ratified the Convention on 3 October 1960, prior to its possession of an enforceable title. If he does not hold such title, effective date of 1 January 1961. he may still initiate the enforcement procedure; however, in such cases the debtor may raise objection against the enforcement, and Montreal Convention 1999 the creditor will then have to obtain a court order before being able Switzerland ratified the Convention on 7 July 2005, prior to its to proceed with the enforcement procedure. effective date of 5 September 2005. Criminal proceedings Cape Town Convention 2001 Criminal charges are handled by the competent public prosecutors The Convention has so far not been ratified by Switzerland. and criminal courts, respectively. Administrative proceedings 2.7 How are the Conventions applied in your jurisdiction? Rulings (Verfügungen) by a federal authority (e.g., FOCA) can be challenged in administrative proceedings before the Swiss Federal As Switzerland follows the so-called monistic system, international Administrative Court. treaties are incorporated into the Swiss legal order without further legislation. A treaty can be directly applicable (“self-executing”) provided that its provisions are litigable, i.e., its content must be 3.4 What service requirements apply for the service of sufficiently precise and clear to constitute the basis for a decision court proceedings, and do these differ for domestic in a specific case. airlines/parties and non-domestic airlines/parties?

Service on domestic (Swiss) defendants is made via post (registered 3 Litigation and Dispute Resolution mail) or in person by court bailiffs. Defendants in jurisdictions with which Switzerland has concluded a Treaty dealing with service of documents (in particular, the Hague Conventions) are served 3.1 What rights of detention are available in relation to aircraft and unpaid debts? according to the standards provided for in the respective Treaty. Defendants in all other jurisdictions will be served with documents Pursuant to Art. 80 et seq. of the Federal Civil Aviation Act, a via consular or diplomatic channels. creditor, a mortgagee, or the owner (e.g., the lessor) of an aircraft However, only the document instituting the proceedings (or its can apply for seizure of the aircraft even if the claimant cannot equivalent) must be served upon foreign defendants via these channels produce an enforceable title. However, the following aircraft shall (and, thus, usually in a translated version). Foreign defendants not be subject to seizure: are invited, according to Art. 140 of the Civil Procedure Rules, to 1. governmental aircraft (which are designated or actually used appoint a Swiss domiciled recipient – usually a law firm – for all by public authorities on an exclusive basis); future communications. Defendants who fail to do so are served via 2. aircraft actually in service on scheduled flights of a public publication in newspapers or the Swiss Official Gazette of Commerce carrier (and its reserve aircraft); and (SOGC), which often results in default judgments. Communications 3. any other passenger or cargo aircraft ready to depart in from courts must therefore invariably be taken seriously. 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. 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? 3.2 Is there a regime of self-help available to a lessor or a financier of aircraft if it needs to reacquire possession Interim basis of the aircraft or enforce any of its rights under the lease/finance agreement? Seizure 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 No, this is not admissible under Swiss law (other than under the all the necessary precautions to make sure that the seizure will Cape Town Convention). have effect, it may still be advisable to explicitly request the court

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to deliver a notice of seizure to the Aircraft Register (FOCA), to This wording, as provided for in Art. 8 of the EU-CH Agreement, Skyguide, to the airport where the aircraft is currently positioned, corresponds to the applicable EU competition law (Art. 101 and 102 and to the owner of the aircraft (if the seizure was not directed of the Treaty on the Functioning of the European Union (TFEU)). against him, but, e.g., against a lessee). On the rare occasion that Switzerland has therefore, in fact, adopted the EU competition law. the rules on the seizure of aircraft are not applicable, a freezing On 1 December 2014, the Agreement between the European injunction (Arrest), as provided for in the Debt Enforcement and Union and the Swiss Confederation concerning cooperation on the Bankruptcy Act, may be obtainable. application of their competition laws came into force. It facilitates Arbitral tribunals: if a dispute is subject to arbitration, the creditor and strengthens the cooperation between European and Swiss may choose to apply for seizure at the state court or at the arbitral authorities. tribunal. The arbitral tribunal is only competent to grant injunctions such as a seizure once it has been constituted; the Swiss Rules on

Switzerland 4.2 How do the competition authorities in your International Arbitration therefore provide for the appointment of an jurisdiction determine the “relevant market” for the Emergency Arbitrator. purposes of mergers and acquisitions? Final basis A court judgment or arbitral award can order specific performance According to the EU-CH Agreement, the European Union of contractual or other duties, award compensation for damages, or institutions and not the Swiss competition authorities are competent can be a declaratory judgment. 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 3.6 Are there any rights of appeal to the courts from the (i.e., generally, a combined aggregate worldwide turnover of EUR decision of a court or arbitral tribunal, and, if so, in 5bn and an aggregate EU-wide turnover of each of at least two of the what circumstances do these rights arise? undertakings concerned of more than EUR 250m). Yes, decisions from a court of first instance can be appealed. Therefore, in most cases, the relevant market is not to be determined by Swiss authorities but by the EU institutions. A brief overview (exceptions are not mentioned): In the rare cases that remain within the Swiss competence, the Civil proceedings relevant market is determined based upon the “O&D” approach Decisions of state courts in civil proceedings can be challenged. The (“point of origin/point of destination”) as applied by the EU appeal has to be filed with the upper cantonal court, whose decision Commission. This approach is applied both to charter and scheduled can then be appealed before the Swiss Federal Supreme Court. airlines (see LPC 2008/4, p. 677). 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. 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain Criminal proceedings regulatory clearance/anti-trust immunity from Decisions of state courts in criminal proceedings can be challenged. regulatory agencies? The appeal has to be filed with the upper cantonal court, whose decision can then be appealed before the Swiss Federal Supreme Again, in most cases the EC Merger Regulation will apply (see Court. above, question 4.2). However, if Swiss law applies, the answer is Administrative proceedings yes, the Swiss Cartel Act provides for a notification system. Decisions rendered by the Federal Administrative Court can be appealed before the Swiss Federal Supreme Court. 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? Arbitral proceedings

Arbitral awards can only be appealed on the basis of very limited See above, question 4.1. 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. 4.5 Please provide details of the procedure, including time frames for clearance and any costs of notifications. Switzerland is a Member State of the New York Convention on the enforcement of arbitral awards. Notification of a planned concentration of undertakings must be made to the Swiss Competition Commission (COMCO). The 4 Commercial and Regulatory commission then has to decide within one month whether an examination is to be initiated. During that month, the concentration must not be implemented. After expiration of the one-month period, 4.1 How does your jurisdiction approach and regulate the applicant will receive either a clearance or the information that joint ventures between airline competitors? an investigation will be initiated. If no such notice is given within that time period, the concentration may be implemented without All agreements between undertakings, decisions by associations reservation. of undertakings, and concerted practices, including joint-ventures, In the event of an investigation being initiated, the Competition which may affect trade between Switzerland and the EC and which Commission must decide within a four-month period whether the are aimed at, or result in, the prevention, restriction or distortion concentration will be cleared. of competition within the territory covered by the Agreement between the European Community and the Swiss Confederation on The legal effect of a concentration that has to be notified is Air Transport (EU-CH Agreement), are prohibited. Contravening suspended. decisions or agreements are null and void. Exemptions are possible For the preliminary investigation of one month, the Secretariat of under the conditions foreseen by the EU-CH Agreement. the COMCO charges a flat fee of CHF 5,000. For the in-depth

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investigation, filing fees are charged on a time spent basis. The According to the Schengen and Dublin Association Agreements, hourly rates are between CHF 100 and CHF 400, depending on the the Council Directive 2004/82/EC of 29 April 2004 on the urgency of the case and the level of seniority of the case-handlers. 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 Federal Office of Migration 4.6 Are there any sector-specific rules which govern the (FOM) determines the flights for which air carriers are required to aviation sector in relation to financial support for air operators and airports, including (without limitation) transmit the personal data of the passengers (see Art. 104 FNA). state aid? The affected carriers are obliged to transmit the Advance Passenger Information (API) of all passengers to the Swiss authorities. Yes. The EU-CH Agreement stipulates an aviation-specific aid Details on how and where the data is to be delivered can be found scheme (Art. 13). This scheme corresponds almost literally to the under www.bfm.admin.ch/dam/data/bfm/eu/schengen-dublin/api- Switzerland regulation in the EU (Art. 107 TFEU). schnittstellenspezi-e.pdf. As a general rule, the EU-CH Agreement prohibits state aid which distorts or threatens to distort competition. Exceptions are provided 4.9 In the event of a data loss by a carrier, what for in the EU-CH Agreement. obligations are there on the airline which has lost the data and are there any applicable sanctions? The decision as to whether state aid is permissible under the aforementioned regulations lies with the Swiss authorities, who The FADP (see question 4.8 above) imposes the obligation on any are obliged to inform the EU authorities on such aid. Although not entity which collects data to put in place adequate security measures expressly provided for in the Agreement, the Swiss authorities are against data loss. If the loss of data is caused by insufficient security likely to follow the recent practice of the European Union (see the measures, the carrier may become liable for damages. 2014 Aviation Guidelines of the EU Commission, OJ C 99, 4 April 2014, pp. 3 to 34). Unauthorised access to sensitive data can be prosecuted.

4.7 Are state subsidies available in respect of particular 4.10 What are the mechanisms available for the protection routes? What criteria apply to obtaining these of intellectual property (e.g. trademarks) and other subsidies? assets and data of a proprietary nature?

The criteria are set out in Regulation (EC) No 1008/2008 of the Intellectual property rights are enforced by court action. Each of European Parliament and of the Council of 24 September 2008 on the 26 cantons of Switzerland has a single cantonal instance with common rules for the operation of air services in the Community, overall jurisdiction for intellectual property and related disputes. In which is also applicable in Switzerland. the cantons of Aargau, Bern, St. Gallen, and Zurich, competence lies with the commercial court. Subsidies for particular routes may be granted to an undertaking carrier operating a particular route under a public service obligation, A separate, exclusive jurisdiction has been granted to the newly created (2012) Federal Patent Court, as the first instance for patent as provided for in Art. 16 et seq. of the Regulation. Before deciding disputes, including action for infringement and claims concerning on such a public service obligation, the other Member States, the EU the existence or validity of a patent. For other civil actions related Commission, the airports concerned, and other air carriers operating to patents, the cantonal courts have concurrent jurisdiction. on that particular route must be consulted. An important and effective tool to efficiently prevent acts of infringement under intellectual property law is injunctive relief. 4.8 What are the main regulatory instruments governing If certain conditions can be demonstrated, a court injunction can the acquisition, retention and use of passenger data, be obtained relatively quickly. The claimant must demonstrate a and what rights do passengers have in respect of their data which is held by airlines? valid cause of action, an infringement, a resulting disadvantage that cannot be readily remedied, and urgency. Injunctive relief must be confirmed in the framework of subsequent ordinary court General rules proceedings unless the parties settle. The main regulatory instrument in Switzerland governing the Furthermore, intellectual property infringements may constitute a acquisition, retention and use of (passenger and other) data is the criminal offence. 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. 4.11 Is there any legislation governing the denial of boarding rights? The data subject generally has the right to inspect and to correct false, incomplete, or erroneous data. The collection of the data and Switzerland has adopted Regulation (EC) No 261/2004 regarding the purpose for which it is processed must be readily identifiable passenger rights in the event of denied boarding and of cancellation by the person concerned. There exists a duty to actively inform the or long delay of flights. person concerned if particularly sensitive personal data is involved. In the event of overbooking, the carrier may first determine whether Violations of the FADP can lead to criminal proceedings. passengers are willing to offer their seat against an indemnification Furthermore, the data subject enjoys all remedies generally available to be agreed upon. If no such volunteers can be found, the carrier under civil procedure rules (i.e., injunctions, right to restitution, or must compensate those passengers denied boarding with a payment right to claim damages). of up to EUR 600, depending on the distance of the flight. The Aviation-specific rules Regulation requires airlines to offer the relevant passenger meals, Aviation-specific rules are incorporated in the Federal Acton refreshments, and hotel accommodation as appropriate whilst Foreign Nationals (FNA). waiting for a rearranged flight. They must also cover any costs of transport between the hotel and the airport.

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The passenger rights under Regulation (EC) No 261/2004 must be enforced before the ordinary civil courts. 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? In 2012, a civil court of first instance ruled that Regulation (EC) No 261/2004 does not apply to a flight from Zurich to a non-EU All the major GDSs operate in Switzerland, e.g., Travelport, country. Amadeus, Sabre, etc. (not taking into account the many suppliers of Front-End Tools). 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? It is possible to file a passenger report with the FOCA, which can

Switzerland initiate administrative fine proceedings and impose fines of up to No. However, Switzerland has adopted Regulation (EC) No CHF 20,000 (Art. 91 para. 4 of the Federal Civil Aviation Act). 80/2009 of the European Parliament and of the Council of 14 The passenger report form is available under www.bazl.admin.ch January 2009 on a Code of Conduct for computerised reservation (Air Passenger Rights). 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 4.13 Are the airport authorities governed by particular rail-transport operator in a system vendor, or of a system vendor in legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? an air carrier or rail-transport operator.

Airports can only be run based on a concession by the federal 4.17 Is vertical integration permitted between air operators government. Such concessions are based on the Federal Civil and airports (and, if so, under what conditions)? Aviation Act and the Ordinance on the Aviation Infrastructure. The airport operators are licensed either for 50 years in the case of This is not specifically regulated in Switzerland. As long as the national airports, or 30 years in the case of regional airports. competition rules are respected and all the conditions for the The concession entails the right to run an airport commercially and approval of the airport operational regulation are fulfilled (especially, in this constellation, non-discrimination), an integration between air to raise fees. On the other hand, the airport operator is obliged to operators and airports should be permissible. 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. 5 In Future The operation of the airport must be in line with the Sectoral Aviation Infrastructure Plan (SAIP), and the applicant must have the management skills, technical knowledge, and funds necessary 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments for the operation of the airport, as provided for in the operational affecting the aviation industry more generally in regulation. your jurisdiction, are likely to feature or be worthy of All details regarding the operation of the airport are then to be attention in the next two years or so? specified in the operational regulation, which is subject to FOCA approval. Typical contents of the operational regulation are the As regards all fields of economy in trade in Europe and worldwide, organisation of the airport, operational hours, departure/arrival the implications of an upcoming Brexit, if and when it shall occur, procedures, ground handling, slots coordination, further commercial remain to be seen, also with respect to civil aviation in Switzerland. and non-commercial use of the airport, environmental issues, Moreover, Switzerland is, and remains, at the forefront of the an aerodrome design and operational manual according to ICAO development of Unmanned Aerial Vehicles (UAVs), also known as standards, and a Safety Management System. (civil) drones, and as with many other fields, regulations in this field follows the highly paced and dynamic technological developments of this topic. Regulations in this domain are likely to follow the 4.14 To what extent does general consumer protection developments in the European Union, where the European Aviation legislation apply to the relationship between the airport operator and the passenger? Safety Agency is in the course of creating a drone regulation framework for all EASA Member States. A final draft of such regulation framework is expected to be submitted to the European There is no consumer protection legislation specifically governing Commission at the end of 2017. the relationship between airport operators and passengers. In August 2017, the Sectoral Aviation Infrastructure Plan (SAIP), As regards the general consumer protection legislation (e.g., the which constitutes the government’s planning and coordination Unfair Competition Act), it must be noted that there is typically no instrument for civil aviation, setting out the purpose, required contractual relationship between passengers and airport operators. perimeter, main aspects of use, equipment, and general operating conditions for every aerodrome, was amended. The amendments address, amongst other things, the optimisation of landing and take- off routes at Zurich Airport and regulations on new take-off routes in case of windy or foggy weather conditions (so-called “south approach route”).

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Urs Haegi Dr. Thomas Weibel VISCHER AG VISCHER AG Schuetzengasse 1 Aeschenvorstadt 4 P.O. Box 5090 P.O. Box 526 8021 Zurich 4010 Basel Switzerland Switzerland

Tel: +41 58 211 3445 Tel: +41 58 211 3356 Fax: +41 58 211 3410 Fax: +41 58 211 3310 Email: [email protected] Email: [email protected] URL: www.vischer.com URL: www.vischer.com

Urs Haegi has been advising business owners and their companies Dr. Thomas Weibel LL.M. advises and represents clients before state on corporate and contract law, in transactions, business structuring courts and arbitral tribunals. His practice focuses on complex national Switzerland and succession planning, since the beginning of his legal career in and transnational commercial disputes, recognition and enforcement 1990. He has extensive experience in establishing businesses in of foreign judgments, injunctive relief, and white-collar crime. He has Switzerland and is also an acknowledged expert in the field of work extensive experience in aviation-related dispute resolution. Thomas and residency permits. He is a member of various Boards of Directors heads VISCHER’s dispute resolution team and is the deputy head of and Trustee Boards. Urs Haegi is president of the board of AirTrust VISCHER’s aviation team. He publishes and lectures on a regular AG, a subsidiary of Deutsche Lufthansa AG, Germany, holding all basis on national and international civil procedure law as well as shares of the Swiss carriers Swiss International Air Lines Ltd. and Swiss inheritance law. He is Editor in Chief for civil procedure law for Edelweiss Air. Urs Haegi is team leader of VISCHER’s aviation team. a periodical on Swiss case law. He is member of the IBA Aviation Law Committee. Urs Haegi was Managing Partner of VISCHER from 2006 to 2011 and President of the Zurich Bar Association in 2009 and 2010. 2017 has seen him named as President of the Swiss Bar Association.

VISCHER is an influential, innovative Swiss law firm dedicated to providing effective legal solutions to business, tax and regulatory matters. Our attorneys, 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 compromised. 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 “Aviation Law Firm of the Year – Switzerland”. Our offices are located in Zurich and Basel, the two largest business centres in Switzerland.

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Thailand Nattaporn Pengkul

Weerawong, Chinnavat & Partners Ltd. Panuwat Chaistaporn

Air Operator Certificate (the “AOC”) 1 General The AOC will be granted to an air carrier which has obtained an ATL. To apply for an AOC, certain documents (e.g. a business plan, 1.1 Please list and briefly describe the principal financial information and a maintenance plan) are required tobe legislation and regulatory bodies which apply to and/ submitted to the CAAT. or regulate aviation in your jurisdiction. When the MOT and the CAAT review an application, the capability of the applicant to operate an airline business and its compliance with The principal legislation relating to civil aviation includes (i) the Air all the requirements and manuals are the main things considered. Navigation Act B.E. 2497 (1954), as amended (the “Air Navigation Act”), (ii) the Notification of the Revolutionary Council No. 58 In addition to these two business licences, the Certificate of B.E. 2515 (1972), and (iii) any regulation, notification or order Registration and the Certificate of Airworthiness of each specific issued thereunder. The legislation empowers each of the Ministry aircraft are required in order for the airline to operate that aircraft. of Transport (“MOT”), the Civil Aviation Authority of Thailand (“CAAT”) and the Department of Airports (“DOA”) to regulate the 1.3 What are the principal pieces of legislation in aviation sector. your jurisdiction which govern air safety, and who The CAAT holds general and supervisory responsibilities administers air safety? regarding safety and aeronautical matters (other than those under the responsibility of the DOA), which include the registration of The Air Navigation Act and any regulation, notification or aircraft operated by Thai licensed operators. The DOA, which is an order issued thereunder. The CAAT is the main authority which organisation under the supervision of the MOT, is in charge of the administers air safety. operation of airports belonging to the government and acts as the operator of such airports. 1.4 Is air safety regulated separately for commercial, cargo and private carriers? 1.2 What are the steps which air carriers need to take in order to obtain an operating licence? No. However, different levels of requirements apply to each type of carrier, such as the stipulated insurance policy limit. An air transportation licence and an air operator certificate are the main licences required to be obtained prior to operating an airline 1.5 Are air charters regulated separately for commercial, business. cargo and private carriers? Air Transportation Licence (“ATL”) The following key requirements must be fulfilled by a company The CAAT is the administrative body, and the Air Navigation Act applying for an ATL: (along with any regulation, notification or order issued thereunder) governs air carrier businesses, regardless of whether they are 1. it must be a Thai company (i.e. at least 51% of the shares commercial, cargo or private operators. However, chartered flight are owned by Thai nationals or Thai government agencies, or Thai companies); operators are subject to a number of different levels of requirements, such as the stipulated policy limit, and the number of aircraft 2. the majority of the directors must be Thai nationals; required to be registered in the fleet. 3. the registered capital (which has been fully paid up) must be not less than THB 200 million; and 4. in the case of a regular flight service operation, there must be 1.6 As regards international air carriers operating in your a plan to acquire at least two aircraft for the fleet. jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ The air carrier (which meets the requirements above) shall submit or local operators? By way of example only, an application form along with a corporate authorisation document, restrictions and taxes which apply to international but an operation plan and an analysis of the feasibility of such operation not domestic carriers. plan to the MOT through the CAAT. Assuming that both international and domestic are Thai licensed carriers, they are subject to the same general regulations.

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receiver must be a Thai financial institution or any other person 1.7 Are airports state or privately owned? as prescribed in a ministerial regulation. Currently, foreign banks outside Thailand are not qualified to be a security receiver. Airports in Thailand are both state and privately owned.

While most of the airports outside Bangkok are owned by the 2.3 Are there any particular regulatory requirements DOA, Airports of Thailand Public Company Limited (which is a which a lessor or a financier needs to be aware of as state-owned enterprise) owns Suvarnabhumi Airport, Don Mueang regards aircraft operation? Airport, Chiang Mai Airport and Phuket Airport. Age of an aircraft that can be leased/financed to Thai airlines 1.8 Do the airports impose requirements on carriers On the date of application for registering an aircraft in the Thai aircraft Thailand flying to and from the airports in your jurisdiction? registry, an aircraft must not be over sixteen years old. However, if an operator will only operate such aircraft for cargo operations, the Apart from obtaining route permission from the CAAT, airport aircraft must not be over eighteen years old. A helicopter, on the date operators themselves do not impose any restriction or requirement of application, shall not be over five years old. on flying to and from the airports in Thailand. Deregistration of the aircraft In general, an aircraft can only be deregistered by the person 1.9 What legislative and/or regulatory regime applies to who registered the aircraft. In practice, as a foreign entity cannot air accidents? For example, are there any particular register an aircraft in Thailand, only the Thai operator that originally rules, regulations, systems and procedures in place registered the aircraft is able to apply for the voluntary deregistration which need to be adhered to? of the aircraft. An owner or lessor cannot apply for deregistration in its own right as owner or lessor. The Air Navigation Act is the main regulation that governs air A Thai lessee would normally be required to grant at the outset a accidents. The Air Accident Investigation Committee is responsible deregistration power of attorney for unilateral deregistration upon for investigation of any accident in relation to an aircraft. 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 1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving that the CAAT and other Thai authorities would still require a Thai air operators and/or airports? lessee’s confirmationor cooperation on such deregistration process.

As part of addressing significant safety concerns (SSC) raised by 2.4 As a matter of local law, is there any concept of title the International Civil Aviation Organisation, a number of laws annexation, whereby ownership or security interests and regulations have been enacted, including the regulations on re- in a single engine are at risk of automatic transfer or certification of air operators. 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 2 Aircraft Trading, Finance and Leasing of engines take pre-emptive steps to mitigate the risks?

In a situation in which engines or parts of an aircraft are removed and 2.1 Does registration of ownership in the aircraft register installed on another aircraft which is owned by another person, there constitute proof of ownership? is one important principle of law which needs consideration. Where several movables belonging to different persons become joined in As Thailand has an operatory registry, the registration of an aircraft such a manner as to become component parts or invisible, then the which is evidenced by the Certificate of Registration does not relevant owners become co-owners in the composite property (in constitute an absolute proof of ownership. The ownership over the proportion to the value of that person’s component part). However, aircraft can be proven by documents that show the transfer of title of if one of the component elements would be considered as the the aircraft to the owner (e.g. a bill of sale). “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. 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the There was a court case decades ago in which it was deemed that operation of this register? the car frame is the “principal” property and that the engine is a subsidiary part thereof. At that time, the court considered that, The concepts of aircraft mortgage and charges are not recognised without an engine, even though the form of the car frame remained under Thai law. Mortgages and security interests governed by foreign the same, it could not by its nature be considered a car, given that law cannot be registered in Thailand, as Thailand does not have a it would no longer be capable of propulsion. Nevertheless, there central registration system of legal interests in respect of the aircraft. 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 It is possible to pledge an aircraft under Thai law. The owner would of law. The issue to be considered is whether, taking into account pledge the aircraft to the lender, as the pledgee, and the owner and the business circumstance and engine/parts pooling agreement to the pledgee would agree that the third-party operator of the aircraft date, the engines and parts are deemed to be component parts or shall act as custodian of the aircraft for the pledgee. There is no invisible parts of the airframe. registration requirement in relation to the pledge. Possible ways to protect against that risk could be (i) a written It should also be noted that, since July 2015, an aircraft could be agreement included in the lease agreement that ownership over an granted as a security under Thai law by way of a business security engine or any significant parts is vested to the owner at all times under the Business Security Act B.E. 2558 (2015). The security irrespective of installation on another party’s airframe, (ii) requiring

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the lessee to furnish a letter of recognition of rights signed by the Airport charges owner of the other airframe in which an engine or any significant In principle, an aircraft may be seized if there is a violation of parts is installed, and (iii) clearly marking on the engine and any the provisions of the Air Navigation Act relating to the aircraft. other significant parts that they are subject to the ownership interest However, the meaning of the term “provisions ... relating to the of the owner. aircraft” is not precise. Airport charges include airport charges to be collected from passengers using the airport (or departure passenger 2.5 What (if any) are the tax implications in your service charges) and airport charges to be collected from an aircraft jurisdiction for aircraft trading as regards a) value- using the airport, including landing and parking charges. added tax (VAT) and/or goods and services tax (GST), While an airport charge is still outstanding, a competent officer may and b) documentary taxes such as stamp duty; and consider there to have been a violation of the provisions concerning Thailand (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of the aircraft and, therefore, seize the aircraft. aircraft and/or particular aircraft types or operations? Other matters An aircraft may be intercepted (and its use suspended) by a military An entity which is or is deemed to be resident, domiciled or carrying officer having the authority as specified in the anti-air warfare on any commercial activity or business in Thailand for Thai tax plan under Air Navigation Contraventions law. Furthermore, tax, purposes is subject to general tax regime (e.g. income tax and VAT). criminal and public interests are also factors that could see an In a transaction contemplated by the lease/financing of an aircraft, aircraft inspected or detained by the competent officers. there is documentary stamp duty as detailed below if the documents are executed in Thailand or their originals are brought into Thailand. 3.2 Is there a regime of self-help available to a lessor 1. A lease of aircraft is not subject to stamp duty. However, if a or a financier of an aircraft if it needs to reacquire lease is categorised as a hire purchase agreement, ad valorem possession of the aircraft or enforce any of its rights stamp duty applies. under the lease/finance agreement? 2. An aircraft pledge agreement is subject to ad valorem stamp duty unless the underlying loan documents secured by the As there are no “self-help” remedies under Thai law, if a lessee acts pledge agreement have been duly stamped. contrary to the terms of the lease/financing arrangement, the lessor 3. Each power of attorney (including but not limited to the or the financier may notify the lessee to comply with the agreement. deregistration power of attorney) is subject to stamp duty. If the lessee still fails to comply, the lessor or the financier may 4. Each duplicate and counterpart of any dutiable instrument is terminate the lease/financing arrangement and demand that the also subject to stamp duty. 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 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and take possession of an aircraft following a default under the lease/ Cape Town)? financing agreement, the lessor or the financier must prove to the satisfaction of the Thai court the existence of the lease agreement, The Geneva Convention was ratified by Thailand on 10 October the default and that it is the lessor’s or the financier’s right to take 1967, and the Montreal Convention was ratified on 4 August 2017. possession upon such default. Various documents must be furnished to the court, such as the executed lease agreement. However, Thailand is not a party to the Cape Town Convention. 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 2.7 How are the Conventions applied in your jurisdiction? general application relating to or generally affecting the enforcement of the parties’ rights and remedies, including the provisions of any Under Thai law, becoming a party to an international convention applicable laws relating to bankruptcy, insolvency, reorganisation does not automatically make such treaty a part of Thai law. To do or moratorium. so, the provisions of the convention must specifically be enacted. The Montreal Convention has been applied by the International Air 3.3 Which courts are appropriate for aviation disputes? Carriage Act B.E. 2558 (2015) (as amended). However, in relation Does this depend on the value of the dispute? For to the Geneva Convention, no such act has yet been enacted and, example, is there a distinction in your jurisdiction therefore, registration of rights over aircraft is not available. regarding the courts in which civil and criminal cases are brought?

3 Litigation and Dispute Resolution Generally, aviation disputes between the offshore financier/lessor and Thai airlines are under the jurisdiction of the Civil Court and the Central Intellectual Property and International Trade Court. 3.1 What rights of detention are available in relation to aircraft and unpaid debts? However, the Administrative Court will have jurisdiction over a case where there is a dispute over an order exercised by the MOT, An aircraft may be detained in certain circumstances as set out the CAAT and/or the DOA. below. Right of retention 3.4 What service requirements apply for the service of court proceedings, and do these differ for domestic A right of retention allows a person who has possession of an airlines/parties and non-domestic airlines/parties? aircraft to retain it until any obligation relating to the aircraft (e.g. repairer’s charge) is performed. The right may be exercised until the As a general rule, a notice of court proceeding must be served to a obligation is wholly performed. place where the concerned party is domiciled.

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3.5 What types of remedy are available from the courts 4.3 Does your jurisdiction have a notification system or arbitral tribunals in your jurisdiction, both on i) an whereby parties to an agreement can obtain interim basis, and ii) a final basis? regulatory clearance/anti-trust immunity from regulatory agencies? 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 Merger control is governed by the TCA which divides regulated petty case procedure is expedited quicker than ordinary civil cases mergers into two categories: those which require approval (pre- because fewer procedures are required. In a petty case, the court, at merger filing) from the Trade and Competition Commission (the its discretion, can order the parties to proceed with a reconciliation “TCC”) and those which only require notification to the TCC (post-merger notification). Essentially, submission of a pre-merger

and a hearing on the same day. Thailand A case will be considered as a petty case if (i) the relief applied for in filing will be required if the merger may result in the creation of such case is an amount not exceeding THB 300,000 or (ii) it is a case either a monopoly, or a business operator with a dominant position. involving the eviction of any person from an immovable property On the other hand, the merging entity (or merging entities) must with a rental of not exceeding THB 30,000 per month. However, notify the TCC after the completion of the merger if the merger may we have not yet come across a case where the courts agree to accept substantially lessen competition. lease repossession proceedings as a “simple case”. Where there are pending procedures in the courts of Thailand, interim 4.4 How does your jurisdiction approach mergers, proceedings (i.e. protective measures or an injunction) necessary to acquisition mergers and full-function joint ventures? safeguard an asset until the substantive dispute is finally resolved can be taken. Please refer to our response to question 4.3 above. With respect to foreign ownership, not only are foreigners not permitted to own With respect to arbitration, Thailand is a party to the New York over 49% of shares in the Thai airline, but they shall also not have Convention, which allows an arbitral award from internationally any effective control over the airline. 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 4.5 Please provide details of the procedure, including courts upon registration, thereby avoiding the need for a re-trial. time frames for clearance and any costs of The foreign arbitration venue may be any other appropriate country notifications. that is a party to the New York Convention. 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 3.6 Are there any rights of appeal to the courts from the days (plus a possible extension of 15 calendar days) from the date of decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? 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. 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. 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) 4 Commercial and Regulatory state aid?

A state bail-out for an airline does not exist under Thai law. However, 4.1 How does your jurisdiction approach and regulate certain tax exemption or reduction is granted if the airline obtains a joint ventures between airline competitors? business promotion from the Board of Investment of Thailand.

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 4.7 Are state subsidies available in respect of particular airline, or (ii) the creation of either a monopoly or a business operator routes? What criteria apply to obtaining these subsidies? with a dominant position; or may substantially lessen competition. A code share arrangement is allowed provided that an approval from No state subsidies are available. CAAT is obtained.

4.8 What are the main regulatory instruments governing 4.2 How do the competition authorities in your the acquisition, retention and use of passenger data, jurisdiction determine the ‘relevant market’ for the and what rights do passengers have in respect of purposes of mergers and acquisitions? their data which is held by airlines?

As the Trade Competition Act B.E. 2560 (2017) (the “TCA”) has There is no specific law in relation to personal data protection under recently come into force on 5 October 2017, the determination Thai law yet. However, as a general rule, an airline is prohibited thereof is still awaiting development. from disclosing passenger data without prior consent from the passenger.

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4.9 In the event of a data loss by a carrier, what 4.15 What global distribution suppliers (GDSs) operate in obligations are there on the airline which has lost the your jurisdiction? data and are there any applicable sanctions? FedEx, UPS and DHL are major GDSs operating from and to Please refer to our response to question 4.8 above. Thailand.

4.10 What are the mechanisms available for the protection 4.16 Are there any ownership requirements pertaining to of intellectual property (e.g. trademarks) and other GDSs operating in your jurisdiction? assets and data of a proprietary nature?

Thailand If a GDS does not register as a Thai air carrier, no ownership Thailand has a registration system for intellectual property (e.g. requirement applies. However, an offshore GDS, when operating trademarks and patents). The Central Intellectual Property and in Thailand, should take into account the regulations relating to a International Trade Court is the competent court for disputes business conducted by a foreign company. relating thereto.

4.17 Is vertical integration permitted between air operators 4.11 Is there any legislation governing the denial of and airports (and, if so, under what conditions)? boarding rights? Vertical integration is possible provided that it does not trigger the Yes, there is. If a passenger has checked in within the required time conditions set out in our response to questions 4.3 and 4.4 above. period and does not contravene any safety regulations, denial of boarding by the airline is prohibited. If it occurs, such passenger must be compensated. 5 In Future

4.12 What powers do the relevant authorities have in 5.1 In your opinion, which pending legislative or relation to the late arrival and departure of flights? regulatory changes (if any), or potential developments affecting the aviation industry more generally in Passengers are protected by the regulation issued by the MOT. your jurisdiction, are likely to feature or be worthy of An airline has a duty to compensate the passengers in the manner attention in the next two years or so? prescribed under the regulation. Currently, there are plans to further amend the existing Air Navigation Act. Based on our review of the draft of the amendment, 4.13 Are the airport authorities governed by particular one of the key changes is that the CAAT will be empowered to issue legislation? If so, what obligations, broadly speaking, a separate regulation in relation to the deregistration of aircraft are imposed on the airport authorities? (which it currently does not have authority to do so). The draft of the amendment is currently being reviewed by the Council of Airport authorities are subject to the Air Navigation Act and any State of Thailand. Once completed, the draft will be proposed to the regulation, notification, rule or order issued thereunder. Cabinet and the National Legislative Assembly for consideration, respectively. 4.14 To what extent does general consumer protection From our discussion with the CAAT, there is no plan for Thailand to legislation apply to the relationship between the join the Cape Town Convention in the near future. airport operator and the passenger?

Please refer to our response to question 4.11 and 4.12 above.

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Nattaporn Pengkul Panuwat Chaistaporn Weerawong, Chinnavat & Partners Ltd. Weerawong, Chinnavat & Partners Ltd. 22nd Floor, Mercury Tower 22nd Floor, Mercury Tower 540 Ploenchit Road, Lumpini, Pathumwan 540 Ploenchit Road, Lumpini, Pathumwan Bangkok 10330 Bangkok 10330 Thailand Thailand

Tel: +66 2 264 8000 Tel: +66 2 264 8000 Fax: +66 2 657 2222 Fax: +66 2 657 2222 Email: [email protected] Email: [email protected] URL: www.weerawongcp.com URL: www.weerawongcp.com

Ms. Nattaporn Pengkul is a partner in the projects and banking practice Mr. Panuwat Chaistaporn is an associate in the projects and banking Thailand group at Weerawong C&P. She advises banks, corporations and other practice group at Weerawong C&P. He advises borrowers and lenders clients in domestic and cross-border transactions. Nattaporn has on banking and finance matters, including structuring, negotiating and expertise in many industry sectors, including: banking and financial documenting transactions, as well as regulatory matters. Panuwat services; commercial and residential real estate; power and renewable obtained an LL.B. degree (1st Class Honours) from Thammasat energy; and transportation and infrastructure. Nattaporn was named University and an M.Jur. degree from the University of Oxford, UK. 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.

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 2014, 2015 and 2017 at the IFLR Asia Awards and in 2016 and 2017 at the Asian Legal Business Awards. The firm has been recognised for ‘going beyond’ in achieving results for clients by implementing innovative strategies.

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Ukraine

Sayenko Kharenko Andrei Liakhov

(q) Rules of Aircraft Certification, 2014; 1 General (r) Rules of Civil Aircraft Registration in Ukraine, 2012; (s) Rules of Carriage of Passengers and Baggage by Air, 2012 1.1 Please list and briefly describe the principal (the “Passenger and Baggage Carriage Rules”); legislation and regulatory bodies which apply to and/ (t) Rules of Carriage of Cargo by Air, 2006 (as amended) (the or regulate aviation in your jurisdiction. “Cargo Carriage Rules”); (u) Rules of Civil Aircraft Operators Certification, 2010 (as The air transportation sector in Ukraine is subject to an extensive and amended) (the “Civil Aircraft Operators Certification detailed regulatory regime based on the international conventions Rules”); duly ratified by the Ukrainian Parliament Verhovna( Rada). (v) Air Operators Certification Rules, 2005 (as amended); The principal regulatory instruments are: (w) Rules of Certification of Aviation Personnel in Ukraine, 1998 (a) Convention on International Civil Aviation (the “Chicago (as amended); and Convention”) together with 18 Annexes thereto; (x) Procedure for and Rules of Mandatory Aviation Insurance of (b) International Convention Relating to Cooperation for the Civil Aviation, 2002 (as amended). Safety of Air Navigation, 1960; There are two principal aviation regulatory bodies in Ukraine: (c) Convention on Offences and Certain Other Acts Committed (a) the Ministry of Infrastructure of Ukraine (the “Ministry of on Board Aircraft (the “1963 Tokyo Convention”); Infrastructure”) – the main governing body responsible (d) Convention for the Suppression of Unlawful Seizure of for promotion and implementation of state aviation sector Aircraft (the “1970 Hague Convention”); policies; and (e) Convention for the Suppression of Unlawful Acts against the (b) the State Aviation Service of Ukraine (the “State Aviation Safety of Civil Aviation (the “1971 Montreal Convention”); Service”) – the principal regulator and supervisor which (f) Protocol for the Suppression of Unlawful Acts of Violence directly controls all aspects of the air transportation sector in at Airports Serving International Civil Aviation (the “1988 Ukraine by, in particular, approving the specific aviation by- Montreal Protocol”); laws, issuing operating licences and air operator certificates (g) Convention for the Unification of Certain Rules for to air carriers, and controlling air carriers’ compliance with International Carriage by Air (the “1999 Montreal the rules of air operations. Convention”); (h) Convention on International Interests in Mobile Equipment 1.2 What are the steps which air carriers need to take in and the Aircraft Equipment Protocol (the “2001 Cape Town order to obtain an operating licence? Convention”); (i) Air Code of Ukraine, 2011 (as amended) (the “Air Code”); Air carriers may carry passengers and/or cargo only on the basis (j) Law of Ukraine “On Transport”, 1994 (as amended); of an operating licence issued by the State Aviation Service for (k) Law of Ukraine “On Transit of Cargo”, 1999 (as amended) an unlimited period. The procedure for the issue of the operating (the “Cargo Transit Law”) licence is currently governed by the Licensing Law and may be summarised as follows: (l) Law of Ukraine “On Liability of Air Carriers in International Carriage of Passengers”, 2002 (as amended) (the “Air (a) filing of an application for grant of an operating licence Carriers Liability Law”) together with supporting documents of the applicant, including its constitutional documents confirming that at (m) Law of Ukraine “On State Programme of Civil Aviation Air least 50 per cent of the share capital of the applicant is held Safety”, 2017 (the “State Programme of Air Safety”); by a Ukrainian body corporate or individual, and written (n) Law of Ukraine “On Licensing Types of Business Activities”, statement of the applicant confirming that it is not controlled 2015 (as amended) (the “Licensing Law”); by residents of states which exercise armed aggression (o) Licensing Terms for Carriage of Passengers, Hazardous against Ukraine; Cargo and Hazardous Waste by Air (the “Licensing Terms”); (b) the State Aviation Service has 10 business days to consider (p) Rules of Procedure for Granting and Revocation of Authority such application together with all the supporting documents; to Provide Air Services, 2014 (as amended) (the “Air (c) a decision on a licensing application must be published on the Services Rules”); web portal of electronic services; and

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(d) within 10 business days after the decision on a licensing party, the aviation regulations of Ukraine and agreements between application is published, the air carrier must pay the fee the aviation authorities. However, charter air services are carried for the licence in the amount of one subsistence minimum out by international air carriers in accordance with the aviation (UAH 1,700 from 1 December 2017 (approx. EUR 55)) and regulations of Ukraine only. file the confirmation of such payment with the State Aviation Service. Ukraine is not a party to the majority of international instruments in relation to the sixth freedom of the air. All routes are granted by In order to receive the licence, air carriers must comply with the the State Aviation Service on a reciprocal basis. It is the preferred Licensing Terms for Carriage of Passengers, Hazardous Cargo and practice of the State Aviation Service to incorporate into bilateral air Hazardous Waste by Air, which have been adopted by the State service agreements provisions about codes of sharing and/or pooling Aviation Service in accordance with the Licensing Law. provisions which are aimed at ensuring that Ukraine’s airlines have Ukraine a share of revenues on these routes. 1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety? 1.7 Are airports state or privately owned?

An extensive body of laws and regulations governs air safety Pursuant to the Air Code, airports may be both state and privately in Ukraine. The principal pieces of Ukrainian legislation on air owned. As a matter of practice, most Ukrainian airports are state or safety consist of the Air Code, the State Programme of Air Safety, municipally owned. the Air Carriers Liability Law, the Cargo Transit Law, the Decree of the President of Ukraine “On Emergency Measures Regarding 1.8 Do the airports impose requirements on carriers Promotion of Air Safety in Ukraine”, the newly adopted Aviation flying to and from the airports in your jurisdiction? Rules of Ukraine “General Rules on Flights within the Air Space of Ukraine”, and the Decision “On Measures for Protection of Ukrainian airports may determine the charges for ground handling National Interests in Aviation” adopted by the National Security operations. The charges for take-off and landing of aircraft, passenger and Defence Council of Ukraine. In addition, Annex 17 to the handling and air safety support are determined by the by-laws of the Chicago Convention, and the 1963 Tokyo Convention, 1970 Ministry of Infrastructure. Hague Convention, 1971 Montreal Convention and 1988 Montreal Protocol are all directly applicable in Ukraine as well. 1.9 What legislative and/or regulatory regime applies to General responsibility for ensuring compliance with air safety air accidents? For example, are there any particular rules and regulations lies with the State Aviation Service. In 2012 rules, regulations, systems and procedures in place the Cabinet of Ministers of Ukraine established the Interagency which need to be adhered to? Commission on Air Safety of Civil Aviation, an advisory body the main function of which is to coordinate the work of various Investigation of air accidents in Ukraine is regulated by Annex 13 to executive bodies related to civil aviation safety. the Chicago Convention, the Air Code, the State Programme of Air Safety, the Regulation on Investigation of Aviation Accidents and 1.4 Is air safety regulated separately for commercial, Incidents, 2010 and the Rules of Investigation of Aviation Accidents cargo and private carriers? and Incidents with Civil Aircraft in Ukraine, 2005 (as amended). The principal regulatory authorities in this area are the State The Ukrainian air safety legislation does not establish sectoral Aviation Service, which supervises and controls the air safety differences for different types of transportation by air. However, and air navigation service in Ukraine, and the National Bureau there are specific rules for carriage of military and hazardous cargo. of Investigation of Aviation Incidents and Accidents with Civil Aircraft, which conducts technical investigation of air accidents and incidents that occur involving civil aircraft in Ukraine. 1.5 Are air charters regulated separately for commercial, cargo and private carriers? 1.10 Have there been any recent cases of note or other Not entirely. A general legal framework sets out uniform regulation notable developments in your jurisdiction involving for commercial and cargo air charters. However, some instruments, air operators and/or airports? in particular the Cargo Transit Law and the Cargo Carriage Rules, set out specific requirements for carriage of cargo by air. The USA-Ukraine Open Skies Agreement came into effect in 2016, introducing the fifth freedom of the air into national legislation. According to the Agreement, there is no limitation on the flights 1.6 As regards international air carriers operating in your which the parties may carry out. jurisdiction, are there any particular limitations to be aware of, in particular when compared with ‘domestic’ Following the annexation of Crimea by the Russian Federation and or local operators? By way of example only, the imposition of international and internal Russia-related sanctions, restrictions and taxes which apply to international but Ukraine banned Russian airlines from flying to and from Ukraine not domestic carriers. as part of the state sanction policy. Since September 2015, there has not been a direct air communication between the two states. The Air Code provides that international air carriers operating in Transit flights and flights operated by Russian airlines with their Ukraine must have a licence and a certificate granted by the relevant final destination in Crimea have been restricted as well. Certain government body of their state. Scheduled air services are provided Russian airlines have been fined an aggregate amount of approx. by international air carriers in accordance with the International USD 27.9 million for breaching these restrictions. Civil Aviation Organization (“ICAO”) Rules, Standards and Recommendations, the international treaties to which Ukraine is a

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In June 2017, the Ukrainian government reduced the airport fees charged for airplane and passenger services at the Boryspil 2.5 What (if any) are the tax implications in your International Airport, the biggest Ukrainian airport. Inter alia, the jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), fee per departing passenger on international flights was reduced and b) documentary taxes such as stamp duty; and from USD 17.00 to 13.00. (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations? 2 Aircraft Trading, Finance and Leasing Aircraft supplies within the territory of Ukraine are subject to VAT 2.1 Does registration of ownership in the aircraft register at 20%, apart from export supplies, which are subject to zero-rate Ukraine constitute proof of ownership? VAT. VAT exemption exists for temporary import of particular types of aircraft (namely Embraer E145/170/190, ATR-42/74 Registration of an aircraft with the State Register of Civil Aircraft of and Bombardier Q400). The exemption was due to expire on 1 Ukraine does not constitute proof of ownership. Such registration January 2018, but the Parliament of Ukraine passed a bill aimed means that the aircraft is under Ukrainian jurisdiction and the State at an extension of the exemption to 1 January 2021. The bill has Aviation Service is entitled to control its flights and operation. yet to be signed by the President of Ukraine. There are no material Proof of ownership in the aircraft consists of a sale and purchase documentary taxes applicable to such transactions. agreement or another document on the basis of which the aircraft has been acquired. 2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)? 2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the operation of this register? Ukraine has ratified the 1999 Montreal Convention (effective as of 6 May 2009) and the 2001 Cape Town Convention (effective as of There is no special register of aircraft mortgages and charges in 1 November 2012). The Geneva Convention on the International Ukraine, therefore encumbrances over the aircraft are registered Recognition of Rights in Aircraft has not been ratified by Ukraine. with the State Register of Encumbrances over Movable Property. This Register is up to date, maintained by the Ministry of Justice 2.7 How are the Conventions applied in your jurisdiction? of Ukraine and information contained therein has a probative value of the encumbrance over a certain object of movable property. International conventions ratified by the Parliament of Ukraine Encumbrances over the aircraft should be registered with the State constitute a part of Ukrainian legislation and are applied in the Register of Encumbrances over Movable Property, based on the ordinary course by Ukrainian courts. ICAO Standards also form encumbrancer’s application on the day of its submission, provided part of Ukrainian legislation as these are an integral part of the that the nominal fee in the amount of UAH 34 (approx. EUR 2) has Chicago Convention. been paid.

3 Litigation and Dispute Resolution 2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation? 3.1 What rights of detention are available in relation to aircraft and unpaid debts? The Rules of Civil Aircraft Registration provide that an aircraft may be registered in the State Register of Civil Aircraft of Ukraine In general, the right of detention may be used by creditors under the only if it is (i) owned by a legal entity incorporated in Ukraine or Civil Code of Ukraine as a measure to enforce debtors’ obligations. a natural person resident in Ukraine, or (ii) rented or leased by a In particular, a creditor who legitimately possesses an item (e.g. an Ukrainian operator from the non-resident owner. aircraft or its spare parts) to be transferred to a debtor, is entitled to Due to the volatile economic environment in Ukraine, the National detain such item, should the debtor fail to perform its obligations in Bank of Ukraine has imposed several currency restrictions of which time or to indemnify the creditor against any losses related to such a lessor or a financier needs to be aware, should it decide to transfer item, until the debtor properly performs its obligations. funds from Ukraine under a cross-border lease agreement. Such right may be granted to a creditor in accordance with a contract or directly under the law. However, the right of detention 2.4 As a matter of local law, is there any concept of title may be used by a creditor providing that the following terms are annexation, whereby ownership or security interests observed: (i) the item is owned by the debtor or person other than in a single engine are at risk of automatic transfer the creditor; (ii) the creditor legitimately possesses the item; and (iii) or other prejudice when installed ‘on-wing’ on an the debtor has breached its obligations to the creditor. Moreover, the aircraft owned by another party? If so, what are the Air Code and other statutory instruments regulating civil aviation conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to stipulate that the respective Ukrainian authority is empowered to mitigate the risks? take measures for the recovery of debts for air navigation services, including detention of the debtor’s aircraft as well as suspension of There is no such concept under Ukrainian law. its operation.

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3.2 Is there a regime of self-help available to a lessor or a 3.5 What types of remedy are available from the courts financier of aircraft if it needs to reacquire possession or arbitral tribunals in your jurisdiction, both on i) an of the aircraft or enforce any of its rights under the interim basis, and ii) a final basis? lease/finance agreement? The particular type of interim and final remedies depends on the In terms of Ukrainian laws, the opportunity of an aircraft lessor to following: repossess its aircraft depends on the terms of the lease. In particular, (a) the nature of the dispute; the lease agreement may set out a lessor’s right to terminate the (b) the parties in the dispute; agreement beforehand should a lessee breach its obligations under (c) the type of judicial procedure; this agreement. In this case the lessor may demand that the lessee Ukraine return the aircraft without filing a claim. In the case that the lessee (d) the legal relationships involved; and refuses to return the aircraft, the lessor may apply to court. If this (e) the rights violated, etc. right is not provided in the lease agreement, the lessor may terminate For example, the Civil Code of Ukraine envisages the following the lease agreement before the expiry of its term and repossess the remedies: recognition of the claimant’s right; termination of an action aircraft only with the lessee’s consent or upon the decision of a court. which violates the claimant’s right; compensation of losses; and An aircraft financier could protect its rights under a finance other means for compensation of material damage, etc. In addition, agreement by entering into a mortgage agreement which contains the parties may agree in a contract any specific forms of remedy. provisions regarding satisfaction of creditors’ claims. Ukraine, being a signatory to the 2001 Cape Town Convention, made 3.6 Are there any rights of appeal to the courts from the a declaration under Article 54(2) thereof, allowing the repossessing decision of a court or arbitral tribunal, and, if so, in creditor or lessor to proceed against an aircraft or its engine without what circumstances do these rights arise? the permission of a court. Ukrainian court procedure rules define several stages for appeal against a court decision, in particular: appeal; cassation; and, in 3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For exceptional cases, revision of a court decision by the Supreme example, is there a distinction in your jurisdiction Court of Ukraine. In addition, a court decision may be reconsidered regarding the courts in which civil and criminal cases by the same court on the basis of newly discovered circumstances. are brought? Ukraine is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. Aviation disputes are generally considered by commercial and administrative courts and, more rarely, by courts of general 4 Commercial and Regulatory jurisdiction which consider civil and criminal cases. The particular type of court jurisdiction depends on the subject matter of, and party to, the dispute. For example, administrative courts consider disputes 4.1 How does your jurisdiction approach and regulate to which any state authority is a party. Commercial courts usually joint ventures between airline competitors? consider cases involving business entities in connection with the breach of contractual provisions, compensation of damage or debt There are no specific laws that regulate joint ventures between recovery, etc. Courts of general jurisdiction consider cases to which competing airlines. individuals are parties and which relate to damage to passengers’ Pursuant to the Ukrainian antitrust legislation, establishment of baggage, its delay or loss, etc. joint ventures may be defined as either a concentration or concerted practices. 3.4 What service requirements apply for the service of Establishment of joint venture is deemed to be a concentration if court proceedings, and do these differ for domestic its establishment does not entail coordination of behaviour between airlines/parties and non-domestic airlines/parties? joint venture partners, or between the joint venture itself and the joint venture partners. Due to this concept, a joint venture can Requirements for the service of court proceedings vary depending conduct business activity independently for a long period of time. on the jurisdiction of courts (i.e. administrative, commercial courts or courts of general jurisdiction). Establishment of joint venture is deemed to be concerted practices if such establishment results in coordination of behaviour between In general, the parties in legal proceedings shall be notified as to the joint venture partners, or between the joint venture itself and the the particular date and place of the court session by summons. For joint venture partners. instance, under the Civil Procedure Code of Ukraine, a summons shall be sent to a disputing party not later than three days before a court Both approaches require the prior clearance of the Antimonopoly session by registered mail or via courier to the address of the relevant Committee of Ukraine (the “AMC”), if the financial thresholds party. There are also certain additional options for the sending of a stipulated by the effective competition laws are met by the parties. summons in cases where a party to a dispute does not provide the court with its address, or does not reside at the provided address. 4.2 How do the competition authorities in your Generally, the rules for service of court proceedings to non-domestic jurisdiction determine the “relevant market” for the purposes of mergers and acquisitions? parties/airlines are set by the relevant bilateral and multilateral international treaties of Ukraine. Pursuant to the Ukrainian antitrust legislation, “relevant market” is a product market with certain product and geographical boundaries, which is affected or may be affected by a concentration.

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Geographical boundaries of the market mean the territory of trade The establishment of joint ventures may be considered as either a relationships arising around certain products, within which, under concentration or concerted practices (as described under question normal conditions, the consumers can easily meet their demand for 4.1 above). a certain product, and which normally coincide with the territory of the state, region, district, city, or parts thereof. 4.5 Please provide details of the procedure, including time Product market boundaries mean a product and/or an assembly of frames for clearance and any costs of notifications. similar, homogeneous objects of economic exchange, within the boundaries of which the consumer can, under normal conditions, The effective Ukrainian merger control regulations provide two transfer between the consumption of certain objects of economic options for review of concentration notifications: fast-track and exchange to the consumption of other such objects. regular procedures. Ukraine In its practice, the AMC defines the airline services market as According to the fast-track review procedure, the AMC reviews individual routes between cities, including international routes. a merger filing and grants approval for concentration within 25 calendar days in either of the following cases: 4.3 Does your jurisdiction have a notification system ■ only one party is active in Ukraine; or whereby parties to an agreement can obtain ■ combined market share of the parties does not exceed 15 per regulatory clearance/anti-trust immunity from cent of an overlapping Ukrainian market or 20 per cent of a regulatory agencies? vertically related Ukrainian market.

In the case that an agreement is qualified as potentially anti- Should the parties not meet the requirements for the fast-track competitive, it requires the prior clearance of the AMC. review procedure, the application for the approval of a concentration is supposed to be considered by AMC within the regular procedure, If a concentration/concerted practices is/are prohibited by the AMC, i.e. within 45 calendar days starting from the date of its submission. the Cabinet of Ministers of Ukraine may authorise a concentration/ concerted practices if a positive effect produced by the concentration/ The application for the approval of concerted practices is considered concerted practices in the public interest outweighs any negative by the AMC within three months and 15 days starting from the date consequences of the restriction of competition. of its submission. During the first 15 calendar days following the filing – theso- called “waiting period” – the AMC conducts an initial review of 4.4 How does your jurisdiction approach mergers, acquisition mergers and full-function joint ventures? completeness of the applications and may return them without review due to their incompleteness. Within the subsequent period, the AMC analyses the submitted information per se and decides In accordance with the effective Ukrainian antitrust legislation, whether to grant the approval. mergers and acquisitions relate to concentrations and accordingly require clearance by the AMC. The filing fee for a concentration is UAH 20,400 (approx. EUR Merger approvals are required whenever an economic concentration is 650), while the filing fee for concerted practices is UAH 10,200 consummated, provided that the parties exceed the relevant financial (approx. EUR 325). thresholds. In particular, for the purposes of the Ukrainian merger control rules, a concentration is deemed to occur, inter alia, in cases of: 4.6 Are there any sector-specific rules which govern the (a) mergers between undertakings (i.e. when two or more aviation sector in relation to financial support for air independent undertakings amalgamate into a new undertaking operators and airports, including (without limitation) and cease to exist as separate legal entities); state aid? (b) absorption of one undertaking by another (with one retaining its legal identity and the other ceasing to exist as a legal entity); There are several initiatives currently provided for by Ukrainian (c) acquisition of control directly or through other persons law. In accordance with Order No. 433 of the Ministry of Transport or entities by one or more undertakings over one or more and Communication (currently the Ministry of Infrastructure) dated undertakings, including by way of: 14 April 2008, an airport’s administration may by its own decision ■ direct or indirect acquisition (gaining control over or reduce airport fees and charges due, by as much as 80 per cent. Such acquiring a lease) of assets that amount to a going concern reduction shall give an impetus to exploit new routes. However, or a structural subdivision of an undertaking; such reduction should not violate anti-competition rules. ■ appointment to the post of a chair or deputy chair in the The Tax Code of Ukraine imposes 0 per cent VAT on international supervisory council, the executive (management) board or air carriage of passengers, baggage and cargo. Resolution No. any other supervising or executive body of an individual 944 of the Cabinet of Ministers of Ukraine dated 30 October 2013 who already occupies one or more such positions in sets out a governmental programme of airport development from another undertaking; or 2013 to 2023 (the “Programme”). The Programme states that ■ composition of the supervisory council, the executive major airports should remain state-owned and that an immediate (management) board, or any other supervising or executive reconstruction of certain facilities is required. It is planned to body of an undertaking, in such a manner as to enable the engage UAH 15.3 billion (approx. EUR 487 million) in investments same individuals to represent more than 50 per cent of the into the development of airport infrastructure and facilities under members of such bodies in two or more undertakings; state guarantee. (d) establishment by two or more undertakings of a joint venture, which in turn is intended to perform on a continuing basis all the functions of an autonomous economic entity; and 4.7 Are state subsidies available in respect of particular (e) direct or indirect acquisition of assets or participation routes? What criteria apply to obtaining these interests (including shares) in an undertaking that allows the subsidies? acquirer to reach or exceed 25 or 50 per cent of votes in the target undertaking’s highest management body. There are no state subsidies available.

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Patents are granted for inventions, utility models and designs. To 4.8 What are the main regulatory instruments governing meet patent eligibility requirements, the inventions and utility models the acquisition, retention and use of passenger data, should be new, non-obvious and industrially applicable. The designs and what rights do passengers have in respect of need only meet the criterion of novelty. The terms of patent validity their data which is held by airlines? depend on the registered object. The principle of universal novelty is applied in Ukraine when registering patentable objects. The Passenger and Baggage Carriage Rules stipulate that airlines should keep the data they hold on passengers confidential. However, The rights holder enjoys an intellectual property right in copyright passengers are deemed to authorise carriers to submit such data to objects from the moment of its creation/assignment and no formal (i) governmental authorities, (ii) officials and agents of the carrier, registration of rights and/or intellectual property right assignment transaction is required in Ukraine. Published and unpublished works

(iii) other carriers, or (iv) providers of additional services. Ukraine enjoy legal protection. The copyright is valid for the whole life of the Apart from provisions of the Passenger and Baggage Carriage author and 70 years after his/her death. Rules, the Law of Ukraine “On Personal Data Protection”, 2010 Valuable information may be protected as a commercial secret, (as amended) (the “Data Protection Law”) sets out the following which is a kind of confidential information. Ukrainian law defines a rights of persons providing their personal data: commercial secret as information which is secret in the sense that it (a) to know the place of personal data storage and its designation; is not, as a body or in the precise configuration and assembly of its (b) to request information of third parties to whom such data was components, generally known among or readily accessible to persons provided and the purposes of such provision; within the circles that normally deal with the kind of information in (c) to revoke consent to retention or usage of personal data; and question, as well as having commercial value because it is secret and (d) to use remedies and apply to the respective authorities in case has been subject to reasonable steps under the circumstances, by the of a breach of his/her personal data protection regime, etc. person lawfully in control of the information, to keep it secret. A person may decide at his/her discretion which information should be treated as a commercial secret, provided that all requirements 4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the described in definition above are complied with. Commercial data and are there any applicable sanctions? secrets are protected for an indefinite time as long as the above- mentioned requirements are met. Neither the Passenger and Baggage Carriage Rules nor the Data To secure rights in certain IP objects, the rights holder may register Protection Law impose direct obligations on carriers in case of them with the Customs Register of Intellectual Property Objects. loss of data. However, carriers are obliged to prevent such loss by The information is recorded in the aforementioned register upon establishing personal data protection systems. filing an application together with the documents, which confirms In case of violation of passengers’ personal data regime by courier, the rights to such object. passengers may have recourse to certain remedies, such as filing a claim before the court or applying to the designated authority (the 4.11 Is there any legislation governing the denial of Commissioner of the Parliament of Ukraine on Human Rights (the boarding rights? “Commissioner”)). The Commissioner’s powers and authorities include, among others, Denial of boarding rights by carriers is regulated by the Passenger rights to: and Baggage Carriage Rules and the Air Code, which comply with (a) conduct scheduled or unscheduled inspections of personal standards incorporated in EC Regulation No. 261/2004 and EC data holders, with unrestricted access to data storage facilities; Regulation No. 1107/2006. (b) request and have access to any information and/or documents The carrier may deny boarding when: (i) it is necessary in order to of data holders in order to control the proper level of data comply with regulatory provisions of the country of departure; or protection; and (ii) such denial is requested by the relevant Ukrainian governmental (c) issue obligatory instructions regarding the removal of authorities. The Passenger and Baggage Carriage Rules also set out inconsistencies and breaches of the data protection regime, etc. circumstances under which a carrier may deny boarding rights at its A breach of the personal data protection regime by the carrier may discretion; namely, if a passenger: lead to administrative responsibility if it results in illegal access by (a) refuses to go through a security check; third parties to such information or another violation of the data (b) has not paid, or has paid only part of, the ticket price or other provider’s rights. Section 18839 of the Code of Administrative charges due; Breaches prescribes a fine of between UAH 1,700 (approx. EUR (c) does not provide the required documents; 55) and UAH 34,000 (approx. EUR 1,080) for such a breach. (d) behaves aggressively towards other passengers or members A passenger may also use a civil litigation procedure in order to of the aircraft crew; or pursue compensation for damages. (e) is intoxicated by alcohol or narcotics. The list of circumstances includes rather vague wording (e.g. 4.10 What are the mechanisms available for the protection “passengers may pose a danger to other passengers (baggage, cargo) of intellectual property (e.g. trademarks) and other or aircraft”), leaving a certain level of discretion to air operators. assets and data of a proprietary nature? In case of denial of boarding under circumstances (a) and (b) above, the carrier is obliged to reimburse the full value of the Trademarks are subject to registration with the Ukrainian Patent and ticket, or propose reasonable re-routing under comparable transport Trademark Office, which is authorised to issue a certificate confirming conditions. This rule also applies to other cases of boarding denial, rights to the trademark (the “Certificate”). The Certificate is valid when such denial is due to the fault of the carrier (e.g. overbooking). for 10 years and may be renewed for the same period. Being a party to the Madrid system, Ukraine protects international trademark Moreover, in accordance with the Air Code, the carrier should also registrations designated to its territory. provide compensation in the range of EUR 250 to EUR 600 (the

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amount depends on the length of the flight). Such compensation may be decreased by 50 per cent when a passenger rejects reasonable 4.14 To what extent does general consumer protection rerouting proposals. In all other cases of denial, depending on the legislation apply to the relationship between the airport operator and the passenger? circumstances of such denial, the carrier may be entitled to claim costs and any damages caused by the actions of the passenger, deducting them from the ticket price. The relationship between the airport operator and the passenger falls under the scope of the Law of Ukraine “On the Protection of Consumers’ Rights”, 1991 (as amended). 4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? 4.15 What global distribution suppliers (GDS) operate in Ukraine your jurisdiction? In accordance with the Air Code, in case of late arrival a carrier shall provide to passengers: The following GDSs operate in Ukraine: Amadeus; Sabre Travel (a) meals and refreshments in reasonable relation to the waiting Network; and Travelport. time; (b) accommodation (in case the delay requires a stay of one or more nights); 4.16 Are there any ownership requirements pertaining to (c) transport between the airport and place of accommodation; GDSs operating in your jurisdiction? and (d) two telephone calls, telex or fax messages, or emails, free of There are no ownership requirements pertaining to GDSs operating charge. in Ukraine. If the delay exceeds five hours, the carrier should propose to the passengers a ticket price reimbursement or re-routing. 4.17 Is vertical integration permitted between air operators According to the Air Code, breaches of passenger carriage rules and and airports (and, if so, under what conditions)? failure to provide the requisite level of treatment are sanctioned with a fine of between UAH 8,500 (approx. EUR 270) and 17,000 (approx. The applicable laws remain silent on this matter. EUR 540). Persons authorised by the State Aviation Service and chief airport officers are entitled to file protocols fixing such breaches. 5 In Future During 15 days following the filing of a protocol, the State Aviation Service will consider it and impose the fine, to be discharged within a term of 15 days. 5.1 In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in 4.13 Are the airport authorities governed by particular your jurisdiction, are likely to feature or be worthy of legislation? If so, what obligations, broadly speaking, attention in the next two years or so? are imposed on the airport authorities? In 2015, the Ministry of Infrastructure adopted the Strategic Plan Airport operators shall obtain a certificate in accordance with for Development of Air Transport by 2020. It is expected that by the Rules of Certification of Airports, 2006 (as amended). An 2020 the regulatory authorities of Ukraine will have improved the aerodrome, attached to the airport, is subject to certification and air transport infrastructure of Ukraine, introduced tariff regulation registration with the State Register of Civil Aerodromes as well. The in relation to air navigation services and airport charges, and created procedure for obtaining the certificate and registration is set out in conditions for the promotion of competition in the aviation market. the Rules of Registration of Civil Aerodromes, 2005 (as amended), In that regard, the State Aviation Service has already initiated work which also set out applicable technical standards and requirements. on the simplification of various aspects of aviation regulation in In accordance with the Air Code, airport operators have the Ukraine (in particular, the Draft Aviation Rules of Access to the following obligations: Ground Handling Services Market have been prepared by the State (a) to ensure the orderly arrival and departure of aircraft; Aviation Service and are currently pending final approval). (b) to provide for on-land handling of aircraft, passengers, crew, It is expected that the legislation of Ukraine in the fields of baggage, cargo and post; certification of aerodromes/airports and airworthiness will be (c) to maintain in operational condition aerodromes and necessary harmonised with the relevant EU norms and standards. constructions, facilities and personnel devices (such condition Experts also anticipate the signing of the EU-Ukraine Common corresponding to the relevant technical requirements); Aviation Area Agreement in the near future. The main obstacle to (d) to provide for border, customs, sanitary and other types of the signing of the Agreement by EU Member States is the dispute controls (for international airports); between the United Kingdom and Spain regarding Gibraltar. (e) to secure an efficient client-administration communication system; (f) to provide meteorological information to aircraft; and (g) to ensure the efficient provision of services to airport visitors, etc.

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Andrei Liakhov Sayenko Kharenko 10 Muzeyny Provulok 01001 Kiev Ukraine

Tel: +380 44 499 6000 Email: [email protected] URL: www.sk.ua Ukraine Andrei Liakhov is a partner at Sayenko Kharenko. Dr. Liakhov has over 20 years of professional experience with leading international law firms, companies and government institutions in the United Kingdom, the Russian Federation, Lithuania, Canada and Ukraine. Dr. Liakhov advises extensively on the most sophisticated cross- border corporate transactions and has expert knowledge in the fields of aviation, natural resources and mining. Dr. Liakhov has advised on a number of cross-border transactions in the aviation sector, including: on Ukrainian competition law issues related to the acquisition of the world’s leading companies in the aviation sector; on the financing of the construction and commissioning of a new international airport; on aircraft sales and leasing arrangements; and on corporate restructuring and fleet upgrades for the leading airlines in the CIS. Dr. Liakhov earned a PGL degree from the College of Law of England and Wales, is an Honorary Doctor of Law of Karlov University in Prague, and gained a Doctor of Law degree from the Academy of Sciences of the USSR and a Doctor of Law degree from the Academy of Sciences of Lithuania.

Sayenko Kharenko enjoys a global reputation as a leading Ukrainian law firm with an internationally oriented full-service practice. The firm has a highly specialised aviation team boasting years of experience in advising on aviation law matters involving Ukraine and the CIS countries. Sayenko Kharenko’s aviation group includes lawyers admitted in Ukraine, Russia and the UK, and regularly advises the largest companies in the sector on a broad spectrum of legal issues, ranging from Ukrainian competition law matters to international financings, cross-border acquisitions, construction and commissioning of new terminals, aircraft sales and leases, corporate restructurings, and dispute resolution proceedings.

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STA Law Firm Smriti Ganotra

The Civil Aviation Law applies to all aircraft registered in the UAE, 1 General air traffic control, communications and civil airports, whereas the Aviation Authority Law has established the General Civil Aviation 1.1 Please list and briefly describe the principal Authority (GCAA). legislation and regulatory bodies which apply to and/ The GCAA is the regulatory authority which is designated to ensure or regulate aviation in your jurisdiction. proper compliance with the Civil Aviation Law in the UAE, whilst emphasising the concept of security and safety. Having exclusive The UAE’s principal legislation governing aviation law is as authority over the aviation industry in the UAE, the GCAA is follows: responsible for en route air navigation services and all aspects of ■ Federal Law Number 20 of 1991 regarding the civil aviation air safety. (the Civil Aviation Law); Subsequently, each Emirate has its own aviation authority which ■ Federal Law Number 4 of 1996 concerning the Aviation regulates all matters related to aviation in its respective Emirate, Authority (the Aviation Authority Law); such as the Dubai Aviation Authority established under Law Number ■ Federal Law Number 20 of 2001 concerning the amendments 21 of 2007, Department of Abu Dhabi Civil Aviation, Department in the Aviation Authority Law; of Civil Aviation of Ras Al Khaimah, Sharjah Department of Civil ■ Federal Law Number 8 of 1983 issuing Commercial Aviation, and Department of Civil Aviation Fujairah. Transaction Law, providing rules for Air Carriage; and ■ Federal Act Number 22 of 1972 concerning the participation 1.2 What are the steps which air carriers need to take in by the UAE in the project for establishment of an Arab order to obtain an operating licence? Testing Unit for Air Navigation Equipment. Regulations There are several steps involved in obtaining an operating licence ■ Civil Aviation Regulation – Licensing Regulation of July for air carriers which are as follows: 2011; a. Pre-application Stage: Prior to submitting an online ■ Civil Aviation Regulation – General Regulation of March application, the applicant is required to meet with the GCAA 2013; and should discuss his initial plan during his pre-application ■ Civil Aviation Regulation – Operations Regulation of July meetings. During this stage, the applicant submits a pre- 2011; application statement of intent and the documents required by the GCAA. On the basis of information provided by the ■ Civil Aviation Regulation – Airworthiness Regulations of applicant, the GCAA will provide the formal application to July 2011; be submitted by the applicant. ■ Civil Aviation Regulation – Aviation Safety Regulations of b. Formal Application Stage: This stage commences when the February 2011; applicant submits a formal application for an Air Operator ■ Civil Aviation Regulation – Aviation Security Regulations of Certificate (AOC) along with several documents and manuals May 2016; describing its operations as directed by the GCAA. The ■ Civil Aviation Regulation – Air Navigation Regulations of application should begin at least 90 days prior to the actual September 2011; revenue operations. ■ Civil Aviation Regulation – Aerodromes Emergency Services c. Document Evaluation Stage: This stage involves a detailed of February 2017; evaluation of documents and manuals for their content and ■ Civil Aviation Regulation – Safety Management System of compliance. During this stage, the GCAA will ascertain the June 2016; technical fitness of the operations proposed by the operator. The documents and manuals should be submitted for ■ Civil Aviation Regulation – Concerning Unmanned Aircraft consideration at least 60 days prior to the commencement of Systems (CAR UAS) of February 2017; proposed operations in order to avoid undue delay. ■ Civil Aviation Regulation – Transport of Dangerous Goods d. Inspection Stage: During this stage, the GCAA will inspect by Air of May 2015; whether or not the physical facilities and equipment proposed ■ Civil Aviation Regulation – Foreign Operators Regulation of by the applicant are suitable for the type and size of the October 2016; and operation. The applicant must demonstrate his ability to ■ Civil Aviation Regulation – Light Sport Aircraft of March comply with all requirements and operating practices prior to 2013. the beginning of actual revenue operations.

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e. Certification Stage: This stage begins when the GCAA is satisfied with the applications and proposed operations of 1.8 Do the airports impose requirements on carriers the applicant and takes the necessary steps to issue the AOC. flying to and from the airports in your jurisdiction? However, if the GCAA is unsatisfied during the Inspection Stage, the Certification Stage will not take place until the UAE airports impose several charges on outbound and inbound safety and security requirements are complied with. airlines, as follows: a. Passenger Service Charge (PSC), which is to be paid by the 1.3 What are the principal pieces of legislation in outbound airline. Infants, aircraft operating crew and transit/ your jurisdiction which govern air safety, and who transfer passengers continuing travel within 24 hours are administers air safety? exempted from PSC. b. Passenger Security and Safety Fee (PSSF), payable on The principal piece of legislation which governs air safety is the outbound airlines. Infants, aircraft operating crew and Civil Aviation Law; however, there is the Aviation Safety Regulation transit/transfer passengers continuing travel within 24 hours are exempted from PSSF.

(the Safety Regulation) of February 2011, which governs air safety. United Arab Emirates The Safety Regulation consists of three chapters: passenger cabin c. Advance Passenger Information Fee (API) for arriving safety; transport of dangerous goods by air; and aviation accident passengers on inbound airlines. Infants, aircraft operating and incident investigation. crew and transit passengers continuing travel within 12 hours are exempted from API. The Aviation Security Affairs Sector administers and provides d. Passenger Facility Charge (PFC), which has recently been safety to the aviation industry, and the sector consists of several implemented and is payable by outbound airlines for departing departments, as follows: passengers. Infants, operating crew and transit passengers ■ Air Navigation and Aerodrome (ANA). with two flights on the same journey are exempted; however, ■ Airworthiness (AW). transfer passengers are obliged to pay this charge. ■ Flight Operation (FOP). ■ Licensing (LIC). 1.9 What legislative and/or regulatory regime applies to ■ Policy, Regulation and Planning (PRP). air accidents? For example, are there any particular rules, regulations, systems and procedures in place which need to be adhered to? 1.4 Is air safety regulated separately for commercial, cargo and private carriers? Civil Aviation Regulation Part VI-Chapter 3 (the Air Accident Regulation) applies to air accident and incident investigation. Commercial aircraft and private aircraft are regulated under the The Air Accident Regulation governs commercial, private, leased Civil Aviation Regulation on Air Safety of February 2011; and the and chartered aircraft. It further includes, but is not limited to, Civil Aviation Regulation on Transport of Dangerous Goods by Air procedure for investigation, objectives of investigation, powers of May 2015 regulates cargo. of investigators, responsibilities of the GCAA, the roles of the investigating committee, investigations conducted by foreign states, and more. 1.5 Are air charters regulated separately for commercial, cargo and private carriers? Procedure a. Any person having knowledge of an aircraft accident or Air charters for commercial, cargo and private carriers are regulated incident should immediately notify the GCAA, and such under the Air Safety Regulation of February 2011. notification should include all the details including, but not limited to: the manufacturer, model, nationality, registration mark and serial number of the aircraft; complete details of 1.6 As regards international air carriers operating in your the owner; the date and time of the accident; complete details jurisdiction, are there any particular limitations to be of the flight commander and cabin crew; the last point of aware of, in particular when compared with ‘domestic’ departure; and the landing destination. or local operators? By way of example only, b. Upon the receipt of the information, the GCAA will request restrictions and taxes which apply to international but not domestic carriers. that the state of the operator, the state of the manufacturer and the state of design provide the complete details regarding the aircraft. No, there are no specific restrictions applied on international aircraft Thereafter, the GCAA will establish an Accident Investigation that enter into the UAE; however, aircraft from Qatar have recently Committee to investigate the cause behind such accident. been restricted from entering the UAE.

1.10 Have there been any recent cases of note or other 1.7 Are airports state or privately owned? notable developments in your jurisdiction involving air operators and/or airports? All the major airports in each Emirate are owned by the government of the respective Emirate or the Department of Civil Aviation in The Dubai Government is planning to increase the number of flights, that Emirate. However, there are several privately-owned airports and it is anticipated that it will handle 100 million passengers on an in Abu Dhabi, such as: Al Futaysi Airport, owned by Hamad bin annual basis. Hamdan Al Nahyan; Al Jazeirah Airport, owned by Al Jazeirah Aviation Club; Arzanan Airport, owned by the Zakum Development Company; and Buhasa Airport, owned by the Abu Dhabi Company for Onshore Oil Operations.

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2 Aircraft Trading, Finance and Leasing 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), 2.1 Does registration of ownership in the aircraft register and b) documentary taxes such as stamp duty; and constitute proof of ownership? (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of The GCAA, after having approved the application, will register the aircraft and/or particular aircraft types or operations? aircraft, including complete details of the aircraft in the Certificate of Registration (COR), and will hand over the COR to the owner Federal Decree Number 8 of 2017 concerning Value Added Tax (the of the aircraft or his representative, which will constitute proof of VAT Law) is applicable for companies incorporated in the UAE. ownership. Therefore, companies are obliged to pay five (5) per cent VAT on all goods and services; however, there are several exemptions for certain goods and services, within which a zero-tax rate will apply, 2.2 Is there a register of aircraft mortgages and charges? United Arab Emirates such as the supply of means of transport by air used to transport Broadly speaking, what are the rules around the operation of this register? passengers and goods, or the supply of aircraft specifically for assistance in rescue by air. There is no mortgage register in the UAE; however, the creditors financing the foreign aircraft must have the existence of any foreign- 2.6 Is your jurisdiction a signatory to the main registered mortgage noted by the GCAA in its files. international Conventions (Montreal, Geneva and Cape Town)? The GCAA also has the authority to acknowledge irrevocable deregistration and export request authorisation, registered under the Cape Town Convention in an international registry. The following are the international Conventions signed by the UAE: a. The Cape Town Convention on International Interests in All the aircraft mortgages in the UAE are required to be registered Mobile Equipment, signed on 2 April 2008. in the Aircraft Register, along with the prior approval of the GCAA. Post the mortgage, the GCAA will issue a new Certificate of b. The Convention for the Suppression of Unlawful Acts Against Safety of Civil Aviation (the Montreal Convention), Registration, upon submission of following documents: signed on 23 September 1971. a. A certified copy of the certificate of true commercial name of c. The Chicago Convention. the entity, issued by the Commercial Registry of the state in which it was registered. d. The Convention on Offences and Certain Other Acts committed on Board Aircraft (the Tokyo Convention), signed b. A certified copy of the Board Resolution. on 14 September 1963. c. A notarised confirmation letter signed by the entity’s legal e. The Warsaw Convention for Unification of Certain Rules representative. Relating to International Carriage by Air, signed in 1929. d. The changed registration plate. f. The Convention on Suppression of Unlawful Seizure of Aircraft (the Hague Convention), signed on 16 December 2.3 Are there any particular regulatory requirements 1970. which a lessor or a financier needs to be aware of as regards aircraft operation? 2.7 How are the Conventions applied in your jurisdiction? In accordance with Article 28 and 29 of the Civil Aviation Law, the The UAE has ratified numerous international Conventions in GCAA has the authority to register the aircraft in the name of lessor, relation to civil aviation, and have simultaneously given them legal if he is a qualified person. The aircraft will remain registered for the status through the following statutes: duration of the lease agreement period, subject to provisions of the Civil Aviation Law. ■ Federal Decree Number 95 of 1980 approving the state’s Accession to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, signed at Montreal 2.4 As a matter of local law, is there any concept of title on 23 September 1971. annexation, whereby ownership or security interests ■ Federal Decree Number 8 of 1981 approving the state’s in a single engine are at risk of automatic transfer accession to the Convention for the Suppression of Unlawful or other prejudice when installed ‘on-wing’ on an Seizure of Aircraft, signed at The Hague on 16 December aircraft owned by another party? If so, what are the 1970. conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to ■ Federal Decree Number 9 of 1981 approving the state’s mitigate the risks? accession to the Convention on Offences and Certain Other Acts Committed On Board Aircraft, signed at Tokyo on 14 September 1963. The Civil Aviation Law is silent on the concept of title annexation wherein the ownership or security interests in a single engine are ■ Federal Decree Number 13 of 1986 concerning the state’s at risk due to automatic transfer upon installation ‘on-wing’ on an accession to the Warsaw Convention for the Unification of Certain Rules relating to International Carriage by Air (1929). aircraft. ■ Federal Decree Number 85 of 1986 concerning the state’s membership of the World Meteorological Organization. ■ Federal Decree Number 79 of 1988 ratifying the state’s accession to the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, supplementary to the Convention for Suppression of Unlawful Acts against the Safety of Civil Aviation.

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The GCAA ensures compliance with the aforementioned international treaties and Conventions to which the UAE is a party. 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? 3 Litigation and Dispute Resolution Court proceedings in the UAE initiate by filing a claim in the relevant court along with the court fees. The claim is served on 3.1 What rights of detention are available in relation to each defendant in the proceedings personally; however, if the court aircraft and unpaid debts? is unable to locate the defendant, investigations are carried out by several government authorities in the respective Emirate, and if this There are no detention rights that exist with respect to unpaid fees investigation is unsuccessful, the court orders that the service take or any air navigation fees. However, the GCAA can recover the place by way of publication in the newspapers in both languages amount by filing a civil action in a civil court against the owner, (Arabic and English). operator or lessee of the aircraft.

However, for parties residing outside the jurisdiction of the court United Arab Emirates or outside UAE territory, the court will permit the service of court 3.2 Is there a regime of self-help available to a lessor proceedings directly to the other party residing outside the country. 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? 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? The UAE does not recognise the self-help regime; however, pursuant to the Civil Aviation Regulations and Civil Aviation Advisory Publication Number 58, the GCAA has framed a procedure for The remedies available to the claimant generally depend the nature irrevocable De-Registration and Export Request Authorization and size of the dispute. The remedies may be awarded as follows: (IDERA), under which an approval from the UAE courts is not Interim basis required. An IDERA entered into by a lessor and financier allows a. Preliminary injunction, to prevent the other party from doing them to initiate self-help proceedings. something until the final judgment is passed; and However, with regard to leases of aircraft, there are, primarily, three b. damages. types of leases available, as follows: Final basis ■ Wet Lease: Under a Wet Lease agreement, the company a. Damages; which is leasing out the aircraft is required to provide Aircraft, b. orders to hold possession of the aircraft; Crew, Maintenance and Insurance (ACMI) to the lessee. The Wet Lease is for a short time span, and during that span, the c. de-registration of an aircraft; lessor holds the AOC, whereas the lessee is obliged to pay d. sale of an aircraft; and other charges or fees such as airport fees, charges and other e. final injunctions requiring one party to do something and duties. The lessee even has financial control over the aircraft simultaneously prevent the other party from a certain act. operations. ■ Damp Lease: In a Damp Lease, the lessor provides the aircraft, maintenance and insurance, except the crew. Thus, 3.6 Are there any rights of appeal to the courts from the it is the responsibility of the lessee to hire the crew. decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise? ■ Dry Lease: Under this arrangement, the lessor is only obliged to provide the aircraft; the rest is maintained by the lessee. This lease is for more than a year, and can be extended up Yes, parties to the dispute have the right to file an appeal in the to half the life of the aircraft. The lessee in this lease has to relevant court against the decision of a lower court or of an arbitral obtain its own AOC. tribunal. Civil Aviation Regulation Part I, including Definitions, also defines Parties can file appeals in the Court of Appeal against the final Dry Lease and Wet Lease as mentioned above. decision passed by the Court of First Instance in relation to issues of law. However, the law imposes a time limitation on such appeals, which is of thirty (30) days, within which the appellant should file 3.3 Which courts are appropriate for aviation disputes? an appeal in the court. Does this depend on the value of the dispute? For example, is there a distinction in your jurisdiction The Decision passed by Arbitral Tribunal is binding upon the parties; regarding the courts in which civil and criminal cases however, there are certain cases in which the decision passed by the are brought? arbitral tribunal can be set aside by the Court of Appeal or other relevant court, which are as follows: There are no specific courts assigned for resolving aviation disputes; ■ invalidity of the arbitration agreement; UAE courts adjudicate aviation disputes in the country, depending ■ failure to adhere to the rules and regulations of arbitration upon the value of the dispute and the Emirate in which the aircraft proceedings; is situated. ■ the award passed by the tribunal is beyond the scope of The UAE has signed and acceded to the Cape Town Protocol, which submission to arbitration; outlines that parties to an agreement, contract of sale, guarantee, and ■ the arbitral tribunal was not composed within the rules and agreement may decide the law governing their disputes. procedures agreed between the parties; and ■ the dispute between the parties is not arbitrable in nature.

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4 Commercial and Regulatory 4.5 Please provide details of the procedure, including time frames for clearance and any costs of notifications. 4.1 How does your jurisdiction approach and regulate joint ventures between airline competitors? The Competition Law provides that, in a proposed economic concentration which will have a severe impact on competition in the Joint ventures between airlines are regulated by Federal Law relevant market or will create a dominant position of the acquirer, Number 2 of 2015 concerning Commercial Companies. There are the procedure through which the acquirer can seek clearance from several types of joint venture, such as a Limited Liability Company, the MOE is as follows: Public Joint Stock Company, Private Joint Stock Company and Limited Partnership Company. The LLC is considered the most ■ The acquirer should submit an application in order to seek pre-approval from the Competition Authority of the MOE suitable option, due to its flexible management system. The main thirty (30) days prior to the contract. consideration in choosing a joint venture on the UAE mainland is ■ Post receiving the application, the competition authority will United Arab Emirates the shareholding ratio, which is restricted to 49 per cent for a foreign undergo a substantive test. company. Through the substantive test, the competition authority will ascertain The company also has an option to opt for a free zone for establishing the effects of the merger in the relevant market and whether or not a joint venture. A free zone offers several advantages, such as the the merger will create a dominant position in the market. However, availability of 100 per cent ownership in the venture. it is still unclear whether or not parties can proceed with signing the agreement without actually obtaining approval from the authority. 4.2 How do the competition authorities in your There is no specific cost for notifying the authority regarding a jurisdiction determine the ‘relevant market’ for the merger. purposes of mergers and acquisitions?

The competition authorities do not provide any clear guidance in 4.6 Are there any sector-specific rules which govern the order to explain what constitutes a ‘relevant market’. However, aviation sector in relation to financial support for air Federal Law Number 4 of 2012 on Regulation of Competition (the operators and airports, including (without limitation) state aid? Competition Law) defines a relevant market as a commodity, service, or a group or products or services which may be substituted, on the basis of its price, characteristics and uses, or whose alternatives may The GCAA does not specifically provide rules governing financial be chosen to meet customers’ needs in any specific geographical area. support for air operators and airports. However, the definition of the relevant market may vary according to However, the Dubai Government recently planned for an initial $3 the establishment’s position in the market, economic consideration billion financial deal in order to support Dubai International Airport captured by the company, or any restrictive agreement signed by and Al Maktoum International Airports. Financial support will be the parties. provided by a consortium of Dubai entities, including the State- owned Investment Corporation of Dubai, the Dubai Department of Finance, and the Dubai Aviation Corporation. 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from 4.7 Are state subsidies available in respect of particular regulatory agencies? routes? What criteria apply to obtaining these subsidies? Yes, parties entering into a merger or capturing a significant economic consideration in the market are obliged to notify the Ministry of The UAE government does not provide any subsidies to aircraft Economy (MOE) of the relevant Emirate. The notification must take with respect to particular routes. place thirty (30) days prior to the signing of the merger agreement. 4.8 What are the main regulatory instruments governing 4.4 How does your jurisdiction approach mergers, the acquisition, retention and use of passenger data, acquisition mergers and full-function joint ventures? and what rights do passengers have in respect of their data which is held by airlines?

The Competition Law regulates mergers, acquisition mergers Federal Law Number 5 of 2012 on Combatting Cybercrimes (the and full-function joint ventures. The Competition Law includes Cybercrime Law) is the primary piece of legislation which governs restrictions on anti-competitive practices and simultaneously the acquisition, retention and use of passenger data. imposes merger control measures. The Competition Law provides that the acquirer of a proposed economic concentration which has Passengers have the right to limit the information held by airlines the potential to affect the relevant market is required to inform or to make any changes to such information. The Cybercrime Law the Ministry of Economy thirty (30) days prior to the commercial imposes severe penalties on the accused when actions result in the transaction. Also, it is obligatory for the companies to inform the disclosure of personal information to the public. MOE if the market share of the parties exceeds forty (40) per cent of the total transactions undertaken in the relevant market. 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?

The Cybercrime Law does not specifically lay down obligations on the airlines in the event of loss of personal data; however, there is an

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obligation on the data controller to ensure that the data is processed Dubai International Airport and Al Maktoum International Airport, properly, and to take preventive measures against the unauthorised under the Companies Law. use or disclosure of personal data.

4.14 To what extent does general consumer protection 4.10 What are the mechanisms available for the protection legislation apply to the relationship between the of intellectual property (e.g. trademarks) and other airport operator and the passenger? assets and data of a proprietary nature? Federal Law Number 24 of 2006 on Consumer Protection does not The protection of intellectual property covers protection of specifically govern the relationship between the air operator and the trademarks, patents, copyright, geographical indications and passenger. industrial designs. The laws regulating intellectual property are: Federal Law Number 31 of 2006 pertaining to Industrial Regulation 4.15 What global distribution suppliers (GDSs) operate in and Protection of Patents, Industrial Designs and Drawings; Federal your jurisdiction? Law Number 7 of 2002 concerning Copyrights and Neighbouring United Arab Emirates Rights; and Federal Law Number 37 of 1992 on Trademarks as The Major Global Distribution Suppliers in the UAE are Rakha Al- amended by Law Number 8 of 2002. Khaleej International LLC and Global Distribution FZE. The aforementioned types of intellectual property can be protected by filing an application with the MOE, which undertakes a substantive test. Thereafter, upon satisfying itself of the validity of 4.16 Are there any ownership requirements pertaining to GDSs operating in your jurisdiction? the documents submitted, the MOE issues the registration certificate to the owner of the intellectual property. GDSs operating in the UAE can be in the form of Limited Liability Company, wherein fifty-one (51) per cent of the shares are held by 4.11 Is there any legislation governing the denial of a UAE national. boarding rights?

The GCAA does not have any specific regulations governing the 4.17 Is vertical integration permitted between air operators and airports (and, if so, under what conditions)? denial of boarding rights; however, each major carrier in the UAE, such as Emirates, Etihad and Flydubai, has its own conditions for carriage and its own rules by which it may deny passengers their Yes, air operators or airports can enter into joint ventures or mergers, boarding rights. as mentioned in question 4.1. On a similar note, passengers denied boarding rights involuntarily are entitled to claim compensation. 5 In Future

4.12 What powers do the relevant authorities have in 5.1 In your opinion, which pending legislative or relation to the late arrival and departure of flights? regulatory changes (if any), or potential developments affecting the aviation industry more generally in Under the Air Transport Regulations of 2007, the Department of your jurisdiction, are likely to feature or be worthy of Transport obliges the aircraft operators to establish minimum attention in the next two years or so? service quality standards, which include compensation for delayed flights. In order to improve the safety of helicopters operating in the UAE, the GCAA issued Information Bulletin of 2017, on 8 February, which provides the guidance applicable to the Civil Aviation 4.13 Are the airport authorities governed by particular Advisory Publication (CAAP). The guidelines must be complied legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? with from 1 January 2018 by the following operators: ■ CAAP 70 operators must ensure that they adhere to the The authorities managing airports in the respective Emirates physical specifications and register themselves with the GCAA, and should obtain a landing area certificate. are regulated by Federal Law Number 2 of 2015 on Commercial Companies (the Companies Law). For example, the Dubai Airports ■ CAAP 71 operators are required to obtain a primary Company in the Emirate of Dubai is the airport authority regulating accountable organisation approval from the GCAA.

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Rini Agrawal Smriti Ganotra STA Law Firm STA Law Firm 3517, Al Maqam Tower 3517, Al Maqam Tower Abu Dhabi Global Market Abu Dhabi Global Market Abu Dhabi Abu Dhabi United Arab Emirates United Arab Emirates

Tel: +971 2 644 4330 Tel: +971 2 644 4330 Fax: +971 2 644 4919 Fax: +971 2 644 4919 Email: [email protected] Email: [email protected] URL: www.stalawfirm.com URL: www.stalawfirm.com

Rini is a Senior Associate at STA Law Firm. Her areas of practice Smriti graduated with a Bachelor of Laws (LL.B.) from the College of include all matters concerning Corporate, Commercial, Aviation, and Legal Studies, University of Petroleum and Energy Studies, India. Her Mergers and Acquisitions. She completed her LL.M. at the University practice areas mainly involve Corporate, Commercial and Aviation of Nottingham, UK in 2012, specialising in International Commercial Law. United Arab Emirates Law.

STA is an international law firm headquartered in the Emirate of Dubai, UAE with a multijurisdictional presence. STA offers a multifaceted and well-rounded approach to addressing the legal needs of corporate clients, banking institutions, national and multinational corporations. STA works alongside several groups of companies within the Oil and Gas, Maritime, Real Estate, Construction, Hospitality, Aviation and Healthcare sectors regionally and internationally.

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United Kingdom Alan D. Meneghetti

Katten Muchin Rosenman UK LLP K&L Gates LLP Philip Perrotta

Legislation 1 General As with its European Union (“EU”) neighbours, legislation is a mix of local law, international treaties and EU regulations and directives. 1.1 Please list and briefly describe the principal Some of the principal pieces of domestic UK legislation are: legislation and regulatory bodies which apply to and/ ■ Civil Aviation Act 1982 (as amended). or regulate aviation in your jurisdiction. ■ Operation of Air Services in the Community Regulations 2009 – Statutory Instrument No 41 2009. Regulatory Bodies ■ Air Carrier Liability (No 2) Regulations 2004 – Statutory There are a number of bodies which have the authority to regulate, Instrument No 1974 2004. administer and control civil aviation. The UK bodies are chiefly: ■ Community Air Carrier Liability Order 2004 – Statutory the Secretary of State for Transport; and the Civil Aviation Authority Instrument No 1418 2004. (“CAA”). The European Aviation Safety Agency (“EASA”) has ■ Civil Aviation (Denied Boarding, Compensation and authority in respect of aviation safety regulation within EU Member Assistance) Regulations 2005 – Statutory Instrument No 975 States pursuant to Regulations having direct application (see 2005. Regulation 216/2008). ■ Civil Aviation (Insurance) Regulations 2005 – Statutory The Secretary of State for Transport Instrument No 1089 2005. The Department for Transport (in exercising the authority of ■ Civil Aviation Act 2006. the Secretary of State for Transport) is the governmental body ■ Civil Aviation (Provision of Information to Passengers) responsible for civil aviation. The Secretary of State has a general Regulations 2006 – Statutory Instrument No 3303 2006. responsibility for organising, carrying out and encouraging measures ■ Civil Aviation (Access to Air Travel for Disabled Persons and for the development of civil aviation and the related aviation Persons of Reduced Mobility) Regulations 2007 – Statutory industry, for the promotion of its safety and efficiency, for research Instrument No 1895 2007. into questions relating to air navigation, and for the safeguarding of the health of persons on board aircraft. ■ Civil Aviation (Allocation of Scarce Capacity) Regulations 2007 – Statutory Instrument No 3556 2007. The Secretary of State has statutory powers relating to aviation Lastly, Her Majesty’s (“HM”) Government, from time to time, security (see, for example, the Aviation and Maritime Security Act appoints commissions to investigate certain aspects of the aviation 1990). industry, the most recent and highly publicised being the Airports Furthermore, the Secretary of State has responsibility for advising Commission into the expansion of London’s airport capacity, which on, and where appropriate, implementing Orders of Council (made was chaired by Sir Howard Davies and issued its final report in July by the Crown) to effect international obligations and standards in 2015. UK domestic legislation. The Civil Aviation Authority (“CAA”) 1.2 What are the steps which air carriers need to take in The CAA is an independent body responsible for economic, order to obtain an operating licence? safety and consumer protection regulation, and airspace policy. In addition, the CAA advises the UK Government on aviation The CAA is the competent licensing authority in the UK in almost issues, represents consumer interests, conducts economic and all matters relating to the granting of operating licences. There scientific research and produces statistical data. The CAA acts are two types of operating licence: Type A; and Type B. Type B in the regulation of aviation without detailed supervision by the operating licences are for operators of aircraft with 19 or fewer Government. Under current legislation, policy formation in route seats; Type A operating licences are for operators of aircraft with 20 and air transport licensing is the responsibility of the CAA, although or more seats. A Type B operating licence may also be granted to the Secretary of State retains specified powers both of direction and operators of larger aircraft with a limited scope of activity. of guidance. The CAA exercises certain licensing and other powers under European Regulations, notably in connection with operational In order for the licence to be granted, the CAA must be satisfied that safety and airworthiness. In certain respects the CAA acts for EASA the applicant fulfils the conditions set down in European Regulation in the UK. It also has concurrent powers with the Competition and 1008/2008, including that: Markets Authority (“CMA”) to enforce competition law in relation ■ its principal place of business is located in the Member State to air trafficservices and airport operation services. whose competent licensing authority is to grant the operating

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licence; for an operator having its principal place of business (Article 28) and equality of conditions for use of aerodromes for in the UK, the CAA is the competent authority; international and domestic aircraft (Article 15). Article 15 of the ■ it holds a valid air operator certificate issued by a national Convention further provides for equality of charges for use of authority of the same Member State; aerodromes. ■ it has one or more aircraft at its disposal through ownership Under the Air Navigation Order 2009, an aircraft registered in a or a dry lease agreement; state other than the UK must not take on board or discharge any ■ its main occupation is to operate air services in isolation or passengers or cargo in the UK for valuable consideration without combined with any other commercial operational of aircraft an operating permit granted by the Secretary of State. Such permit or the repair and maintenance of aircraft; will only be granted if the necessary traffic rights exist (under ■ its company structure allows the competent licensing authority bilateral international agreement or otherwise), and is also subject to implement the relevant provisions of the Regulation; to satisfying the Department for Transport of compliance by the ■ Member States and/or nationals of Member States own more operator with administrative requirements relating to the carrier’s United Kingdom than 50% of the undertaking and effectively control it directly aircraft and its insurance arrangements. or indirectly through one or more intermediate undertakings, except as provided for in an agreement with a third country to which the European Community is a party; 1.7 Are airports state or privately owned? ■ it meets the financial conditions specified in Article 5 of the Regulation; They are privately owned. For example, London Heathrow is owned ■ it complies with the insurance requirements specified in by Heathrow Airport Holdings Limited; Aberdeen, Glasgow and Article 11 of the Regulation and in European Regulation Southampton airports are owned by AGS Airports; and Manchester 785/2004; and Airport is owned by Manchester Airports Group plc. They are ■ it complies with the provisions on good repute as specified in licensed and regulated by the CAA. Article 7 of the Regulation. 1.8 Do the airports impose requirements on carriers 1.3 What are the principal pieces of legislation in flying to and from the airports in your jurisdiction? your jurisdiction which govern air safety, and who administers air safety? Conditions of use are imposed, as well as charges. Users of airports are subject to airport charges, which are regulated by the CAA under UK legislation is contained in the Civil Aviation Act 1982 and the the Civil Aviation Act 2012 and Airport Charges Regulation 2011. Air Navigation Order 2009 (as amended). Another important source ‘Airport charges’ means (a) charges levied on operators of aircraft in of law is European legislation, which has direct application in the connection with the landing, parking or taking-off of aircraft at the UK concerning safety aspects of aircraft, operators, maintenance airport (but excluding charges for air navigation services and certain and design organisations, and personnel in commercial transport. penalties in connection with aircraft noise and vibration caused by See, for example, the European Regulations: 216/2008 (as amended; aircraft), and (b) charges levied on aircraft passengers in connection “Basic Regulation”); 7/2013 (rules for airworthiness of aircraft and with their arrival at, or departure from, the airport by air. products and certification of design and production organisations); 1321/2014 (continuing airworthiness and approval of involved 1.9 What legislative and/or regulatory regime applies to organisations and personnel); 2015/445 (aircrew); and 859/2009 air accidents? For example, are there any particular (“EU-OPS” – operating safety requirements and standards). The rules, regulations, systems and procedures in place CAA is responsible for administering air safety on a day-to-day which need to be adhered to? basis, in its own capacity and for EASA. The UK is a party to the Chicago Convention 1944. Article 26 and 1.4 Is air safety regulated separately for commercial, Annex 13 to that convention make provisions for the investigation cargo and private carriers? of air accidents. The UK implements the relevant requirements by way of the legislation discussed below. The CAA regulates all aspects of the aviation industry. Whilst the The Air Accidents Investigations Branch (“AAIB”) is responsible regulator is the same in all three cases, there are different regulations for the investigation of civil aircraft accidents and serious incidents and standards which have to be adhered to. in the UK. The AAIB is an independent part of the Department for Transport.

1.5 Are air charters regulated separately for commercial, The principal legislation relating to investigation of air accidents cargo and private carriers? includes: ■ European Regulation No 376/2014 on the investigation and The CAA regulates all aviation activity (apart from military). prevention of accidents and incidents in civil aviation. ■ UK Civil Aviation (Investigation of Air Accidents and Incidents) Regulations 1996. 1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be ■ UK Civil Aviation (Investigation of Military Air Accidents at aware of, in particular when compared with ‘domestic’ Civil Aerodromes) Regulations 2005. or local operators? By way of example only, The AAIB has the power to require the detention and preservation restrictions and taxes which apply to international but of evidence, and has powers of enquiry. Assistance of the local not domestic carriers. police is routinely available to AAIB investigators to secure an accident site. The AAIB reports to the CAA and other civil aviation The UK is a party to the Chicago Convention 1944, which provides authorities having responsibility for oversight of any aspect of the for availability, so far as practicable, of aerodromes in its territory accident. Reports into civil air accidents are published.

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be, so as to confirm the security priority referred to in the section 1.10 Have there been any recent cases of note or other headed “Priority” below). Leases and other charges not constituting notable developments in your jurisdiction involving in rem rights in a ‘G’-registered aircraft (such as mortgages) cannot air operators and/or airports? be registered, and there is no separate register maintained by the CAA for the registration of ownership rights in engines or parts. In June 2014, the Court of Appeal held that a technical problem is not Mortgage Registration considered to be an extraordinary circumstance under Regulation EU 261/2004 and accordingly cannot be used as a basis for an airline to Applicants for registration of a mortgage must complete and provide escape from its obligation to compensate passengers for long delays, to the CAA a Form CA1577 (see www.caa.co.uk), together with cancellations, rerouting and/or denied boarding (Jet2.com v Huzar a complete copy of the related aircraft mortgage deed (provided it [2014] EWCA Civ 791). has been certified as a true copy by the applicant). The CAA will then confirm, in writing, to the applicant once an aircraft mortgage At a “macro” European level, the European Commission is registration application is successful. currently investigating a complaint, brought against Lufthansa’s United Kingdom 2015 introduction of a €16 surcharge on seats booked through the The registration fees for an aircraft mortgage by the CAA vary global distribution suppliers, such as Travelport, Travelsky, Sabre according to the maximum take-off weight (“MTOW”) of the and Amadeus, alleging breach of Council Regulation (EC) 2299/89. subject aircraft. They are currently as follows (and are subject to Although the investigation began in 2015, there has been renewed revision annually): interest as a number of other airlines have announced similar introductions to incentivise the use of their own, or new distribution Maximum Take-off Weight CAA Charge capability (“NDC”), booking systems. 5,700 kg and under £175 A long-running commission of enquiry, chaired by Sir Howard 5,701 kg to 15,000 kg £347 Davies, gave its recommendation in July 2015 that a third runway be built at London Heathrow. In October 2016, HM Government 15,001 kg to 50,000 kg £578 approved a third runway at Heathrow to expand the UK’s airport Over 50,000 kg £1,040 capacity. A public consultation on the effects of the expansion of Heathrow followed that decision. In June 2017, the Transport For aircraft mortgages which attach to a number of aircraft, the CAA Secretary confirmed that approval for the third runway will be registration fee is levied on the heaviest aircraft by MTOW, plus sought in this Parliament. Construction is anticipated to begin in £175 for each additional aircraft attached. 2020, with the runway completed in 2025. Priority An aircraft mortgage registered on the United Kingdom Aircraft 2 Aircraft Trading, Finance and Leasing Mortgage Register will take priority over all other non-registered or subsequently registered mortgages. It constitutes notice of the 2.1 Does registration of ownership in the aircraft register relevant mortgage being given to all relevant third parties, and all constitute proof of ownership? persons are thereby deemed to have express notice of all of the details appearing in the United Kingdom Aircraft Mortgage Register. The United Kingdom Register of Civil Aircraft, maintained by the If the relevant mortgagor is a company registered in England and United Kingdom CAA, is not a register of legal ownership, and Wales, in order to obtain all the protections conventionally afforded therefore registration of ownership does not constitute proof of to a mortgagee, it will be necessary to also register the relevant ownership of a particular aircraft. However, it often provides non- mortgage at Companies House pursuant to the provisions of the conclusive prima facie evidence. Companies Act 2006 as it will become void against an appointed To register aircraft on the United Kingdom Register of Civil Aircraft, insolvency agent of the mortgagor (whether an administrator, a a Form CA1 (see www.caa.co.uk) is submitted either by the owner liquidator or a secured creditor). or by the so-called ‘charterer by demise’ (by virtue of a relevant It should be noted, however, that this priority position of an aircraft loan, lease, hire or hire purchase) eligible to register in accordance mortgage is nevertheless subject to certain other in rem rights with the Air Navigation Order 2009 [see Endnote 1]. (“liens”) of third parties to retain or detain the relevant aircraft until As part of the application procedure, the CAA may request additional a claim for payment (e.g. in respect of maintenance or repair of the information in order to process an application for registration (for aircraft or in respect of an unpaid purchase price for the aircraft) example, a certified copy of a bill of sale evidencing the ownership has been satisfied. These liens are created both by statute and under of the aircraft to be registered). common law, and they are also capable of creation by contract between parties. In addition, certain specific rights are created Further guidance on the requirements for registration of aircraft on by statute for relevant regulatory authorities to detain the aircraft the United Kingdom Register of Civil Aircraft is available at www. (e.g. the CAA for unpaid airport and air navigation charges, the caa.co.uk. UK Environment Agency for unpaid penalties under the European Emissions Trading Scheme, and HM Revenue & Customs in respect 2.2 Is there a register of aircraft mortgages and charges? of unpaid taxes). In certain circumstances, these rights of detention Broadly speaking, what are the rules around the will also include a power of sale of the relevant aircraft, or attach to operation of this register? the rest of the operating fleet of which the aircraft is a part despite different ownership. The CAA maintains the United Kingdom Aircraft Mortgage Register The limited case law in English law which applies as precedent to (pursuant to the Mortgaging of Aircraft Order 1972). There are no the matter of the priority of aircraft liens and statutory detention restrictions as to who can be registered as a mortgagee, and any rights, suggests strongly that an aircraft lien or statutory detention mortgage charging a UK-registered aircraft by way of security may right will take priority over a registered aircraft mortgage. be registered (and indeed, from a mortgagee’s perspective, should

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Liens are not registrable. However, in dealing with the concerns this way reduces any risk of liability of the lessor or the mortgagee of mortgagees, it is possible to seek to manage the risks of (as the case may be) of the relevant aircraft to third-party claims detention and sale of a registered aircraft by way of contractual for compensation for losses due to a repossession (in the case of obligations of owners and operators limiting the creation of liens aircraft in scheduled operation in particular, such losses can be to ‘permitted liens’. These obligations are generally complemented substantial), assists with ensuring the cooperation of the CAA with by contractual monitoring rights, established in the relevant loan or their issuing necessary permissions for the continued flight of the lease agreements, which include requirements to provide ‘statement aircraft affected, and is also presentable to any prospective third- of account’ letters, authorising information regarding relevant party purchaser of the aircraft as proof of the right of the mortgagee, payments giving rise to liens, to be provided directly to the mortgagee or indeed the owner, to sell the aircraft with good title, free of any by the relevant regulatory authority. This is generally effective in trailing interests of the relevant mortgagor or lessee (subject to any providing an early warning of any potential detention or retention other third-party rights over the relevant aircraft). of a relevant aircraft, and in ensuring the timely termination of the In addition, and by way of further potential protections, if it can be United Kingdom relevant operating agreement before liens are enforced. demonstrated to the court that a risk exists or that the relevant aircraft Priority Notices is treated in a way which frustrates the rights of a mortgagee or A potential mortgagee of a registered aircraft can ‘pre-register’ a lessor (for example, removal by an operator of the aircraft from the mortgage with the CAA by entering a priority notice, utilising CAA jurisdiction or by a clear and material degradation of the condition of Form CA1330 (obtained from www.caa.co.uk). The priority notice the aircraft in the circumstances), it is possible to apply to the court, remains valid for 14 working days from and including the date of on an expedited basis, for an interim injunction ordering detention entry, and during this period either the relevant aircraft mortgage of the aircraft by the mortgagor/lessee until judgment regarding must be registered or a further priority notice entered. The relevant repossession of the aircraft has been given by the court. This type aircraft mortgage, once registered with the CAA, will then take its of application may be made without notice to the operator of the priority from the date of registration of the original priority notice. relevant aircraft if the mortgagee or the lessor (as the case may be) The registration fees for such priority notices vary according to the can demonstrate the urgency of the matter to the court in accordance maximum take-off weight of the subject aircraft, and are currently with the applicable Civil Procedure Rules. In these circumstances, as follows (subject to revision annually): the mortgagee or the lessor (as the case may be) will be required to provide a cross-indemnity for any third-party claims arising from a Maximum Take-off Weight CAA Charge sudden detention of the aircraft (not, however, in favour of the relevant mortgagor, lessee or operator of the relevant aircraft, on the basis 15,000 kg and under £52 that it is assumed that an appropriate indemnity from such party has Over 15,000 kg £104 already been given in respect of, among other things, losses arising from the repossession of the relevant aircraft following a default). The relevant registration fee is applied by the CAA on a ‘per aircraft’ It should nevertheless be noted that a right to repossess the relevant basis. aircraft would always be subject to any liens and other statutory Mortgage Searches detention or retention rights of third parties (as described more fully in “Priority” under question 2.2 above). A search of the United Kingdom Aircraft Mortgage Register for entries registered against relevant aircraft can be made by submitting a CAA Form CA350 (obtained from www.caa.co.uk) to 2.4 As a matter of local law, is there any concept of title the CAA. Search fees are currently £29 per aircraft and are revised annexation, whereby ownership or security interests on an annual basis. Certified copies of the entries on the Mortgage in a single engine are at risk of automatic transfer Register are available at £29 per aircraft. 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 2.3 Are there any particular regulatory requirements and financiers of engines take pre-emptive steps to which a lessor or a financier needs to be aware of as mitigate the risks? regards aircraft operation? English law as a rule recognises the concept of accession, which is As regards the lessor of an aircraft registered with the CAA, similar to the nature of an annexation of title, for example by the theoretically it is permitted to take enforcement action to repossess owner of an aircraft to which an engine owned by another party is the aircraft following a default by the lessee concerned on the affixed. Nevertheless, limited case law on the subject is exclusively relevant lease terms, without enforcing through the courts, i.e. related to real estate (that is, immovable assets) and there is perceived as a ‘self-help’ remedy. To that end, lease terms and conditions to be little or no risk as a matter of English law to loss of or prejudice conventionally contain an indemnification of the owner/lessor of to title when aircraft engines are installed on a different airframe. a relevant aircraft against losses and/or claims it incurs as a result Nevertheless, it is common market practice (also in order to manage of a repossession action. Similarly, the mortgagee of an aircraft certain risks arising due to conflicts of law and legal systems as they registered with the CAA may take peaceful possession of an aircraft apply to these most mobile assets) for engine owners and financiers following a similar default and it will then, in addition, have the to require entry into a contractual “recognition of rights” agreement power to sell the relevant aircraft if such power is properly and governed by English law between the relevant parties as a condition expressly described in the relevant mortgage agreement. to installing an engine on a different airframe. In addition, while Nevertheless, in practice it is generally advisable for the lessor or the aircraft engines are not capable of being registered (and thereby mortgagee of a relevant aircraft registered with the CAA to pursue providing constructive notice of ownership to third parties) in the an application for repossession of the aircraft in court, particularly United Kingdom, ratification of the Cape Town Convention affords if there is any question as to whether a default has actually occurred the opportunity for engine owners and financiers to register an and/or the relevant mortgagor or lessee of the aircraft concerned “international interest” in the asset with the International Registry resists or is likely to resist repossession. A court order obtained in of Mobile Assets.

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The CTC is effective in the United Kingdom but will not be 2.5 What (if any) are the tax implications in your applied retrospectively, i.e. any rights and interests existing prior to jurisdiction for aircraft trading as regards a) value- ratification of the CTC will retain their priority without the need for added tax (VAT) and/or goods and services tax (GST), registration. This avoids additional administrative hurdles resulting and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as from the ratification of the CTC, but at the same time means that it regards non-domestic purchasers and sellers of is not possible to register such pre-existing interests. aircraft and/or particular aircraft types or operations? It is worth noting that, although it does not change any relevant provisions of English law as regards the creation of in rem security In relation to a), the supply, charter or hire of “qualifying aircraft” are interests generally, that law will not apply to determine whether an zero rated for VAT purposes. The definition of “qualifying aircraft” international interest under the CTC is validly created. This will was narrowed in January 2011 to bring the United Kingdom more in depend entirely on the CTC and its requirements in the case of an line with the rest of Europe. Since then, a qualifying aircraft must aircraft, debtor location or aircraft registration in a “CTC country” be: i) used by an airline operating for reward chiefly on international (and compliance with the formalities set out in Article 7 of the United Kingdom routes; or ii) used by a State institution and of a weight of not less CTC), and an aircraft mortgagee may be able to rely on the rights than 8,000 kg and neither designed nor adapted for use for recreation and remedies available under the CTC for such international interest or pleasure. in the relevant aircraft. This is broadly the position also in relation to VAT applicable to It is also worth noting that by adopting the Alternative A insolvency the importation of aircraft into the United Kingdom, except where regime (with a 60-day waiting period for the asset to be returned to the aircraft has been imported previously into a Member State of the creditor), the UK has furthermore decided to grant additional the European Union and is classified to be in “free circulation” for protection to financiers and lessors in a debtor insolvency scenario. customs purposes. In relation to b), there are no documentary taxes (e.g. stamp duty) applicable to the buying and selling (i.e. trading) of aircraft in 3 Litigation and Dispute Resolution England and Wales).

3.1 What rights of detention are available in relation to 2.6 Is your jurisdiction a signatory to the main aircraft and unpaid debts? international Conventions (Montreal, Geneva and Cape Town)? An unpaid seller in possession of the aircraft may retain possession of the aircraft until payment is received (Sale of Goods Act 1979). Chicago Convention 1944 The Civil Aviation Act 1982 provides for a salvage lien on an aircraft The United Kingdom was a signatory to the Chicago Convention in where “any services are rendered in assisting, or in saving life from, 1944 and it was ratified on 1 March 1947 prior to its effective date or in saving the cargo or apparel of, an aircraft in or over the sea of 4 April 1947. or any tidal water, or on or over the shores or any tidal waters”, Geneva Convention 1948 according to the national and international regulatory framework of The United Kingdom was a signatory to the Geneva Convention in the law of maritime salvage. 1948, but has not ratified it. In common law, under specific conditions, a possessory lien arises Montreal Convention 1999 in favour of a person who has expended labour and skills on the The Montreal Convention has legal effect in the United Kingdom improvement of a chattel. The requirement for ‘improvement’ is through the Carriage by Air Acts (Implementation of the Montreal now uncertain under English law. Liens in favour of maintenance Convention 1999) Order 2002/263. The limits of liability for organisations are widely considered to arise in common law; air carriers pursuant to the Montreal Convention have been however, in the majority of cases the right of lien is expressed subsequently amended by way of the Carriage by Air (Revision of contractually and there is no requirement for ‘improvement’. Limits of Liability under the Montreal Convention) Order 2009. Under the Civil Aviation Act 1982, the person managing or owning Cape Town Convention (“CTC”) an aerodrome may detain an aircraft where its operator has not paid The CTC entered into force in the United Kingdom and thereby the applicable airport charges in respect of that aircraft, or of any became effective as United Kingdom national law on 1 November other aircraft, which that operator operates. Customs and excise 2015 following its ratification on 27 July 2015, as implemented authorities may detain an aircraft to enforce their charges against by the International Interests in Aircraft Equipment (Cape Town an operator. Convention) Regulations 2015 and several declarations. The Transport Act 2000 provides that an aircraft may be detained and sold where its operator has not paid charges relating to air 2.7 How are the Conventions applied in your jurisdiction? navigation services provided by the CAA, the Secretary of State or Eurocontrol. The Chicago Convention is integrated into English law and Of less frequent application, a creditor may obtain a freezing applicable in the jurisdiction as a matter of international law. Any injunction, restraining an aircraft pending judgment and execution dispute as to its implementation by the United Kingdom would be of the judgment debt. The creditor will have to demonstrate inter heard through the International Court of Justice. As a practical alia that there is a real risk of ‘dissipation’ of the debtors’ assets matter, the principles of the Chicago Convention are implemented other than in the debtor’s usual course of business, and that the value at the national level in the United Kingdom by the CAA. of the debt is commensurate with that of the aircraft. The remedy As detailed above, the Montreal Convention became effective is equitable and discretionary; a court will exercise considerable in the United Kingdom pursuant to the Carriage by Air Acts caution before granting it. (Implementation of the Montreal Convention 1999) Order 2009 and There is no domestic legislation prohibiting the detention of it can be applied in the UK courts, without particular limitation, on commercial transport aircraft. that basis.

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3.2 Is there a regime of self-help available to a lessor 3.4 What service requirements apply for the service of or a financier of an aircraft if it needs to reacquire court proceedings, and do these differ for domestic possession of the aircraft or enforce any of its rights airlines/parties and non-domestic airlines/parties? under the lease/finance agreement? Pursuant to Part 6 (Service of Documents) of the Civil Procedure There is no relevant statutory regime of ‘self-help’ rights (subject Rules, where the claim form is being served in the ‘jurisdiction’ to the limited exceptions mentioned below). English law allows (defined as England and Wales and any part of the territorial waters the exercise of extant rights to repossess chattels, including aircraft, of the United Kingdom adjoining England and Wales), a claim may without the need for a court order. A person seeking to exercise be served by a number of methods including (without limitation) by rights on this basis can only do so peaceably and lawfully. There personal service, first class post, or by service on the defendant’s are no collateral rights of enforcement as a matter of law, without solicitors, fax or other means of electronic communication. a court order. Accordingly, the exercise of such rights on a self- United Kingdom The court will serve the claim form (subject to certain exceptions, help basis usually requires the person in possession or control of for example where the claimant has notified the court that the the aircraft to accede to that exercise. The rights must be extant claimant wishes to serve it). (under the finance instruments or lease) and clearly demonstrable to third parties. The more usual course of action will be to obtain In the event that the defendant is established out of the jurisdiction, a court order. 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 The Bills of Sale Acts 1878 and 1882 allow seizure in the event of appointed and the agent’s authority has not been terminated. certain events of default (specified in the Acts) relating to a security bill of sale. Those acts do not apply to a registered mortgage of an It may be necessary for the claimant to obtain the court’s permission, aircraft. in certain circumstances e.g. where no agent for service of process is appointed, to serve a claim form on a defendant outside the jurisdiction. The claimant must file at court a notice with the claim 3.3 Which courts are appropriate for aviation disputes? form containing a statement of the grounds on which it is entitled to Does this depend on the value of the dispute? For serve the claim form out of the jurisdiction. example, is there a distinction in your jurisdiction regarding the courts in which civil and criminal cases are brought? 3.5 What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on i) an Civil disputes concerning personal injury or property damage may interim basis, and ii) a final basis? be pursued in the Queen’s Bench Division of the High Court or in the County Court in accordance with the criteria summarised Remedies vary depending on the nature of the dispute. In general below. ‘Commercial claims’ (see below) should be pursued in terms, there are both (for historical reasons) legal and ‘equitable’ the Commercial Court of the Queen’s Bench Division of the High remedies and the following may be available: Court, or in the County Court. ■ On an interim basis: Civil proceedings for damages or a specified sum may not be started ■ an injunction order to prevent the other party from doing in the High Court unless the value of the claim exceeds £25,000; if something until final judgment is reached; and not, proceedings should be started in the County Court. ■ damages. Civil proceedings which include a claim for damages in respect of ■ On a final basis: personal injuries must not be started in the High Court unless the ■ damages; value of the claim is £50,000 or more. ■ injunctions to prevent the other side from doing something Subject to the above, pursuit of a claim in the High Court is or requiring the other party to do something; appropriate where: ■ possession orders to take control of an aircraft and other ■ there is a degree of complexity of the facts, legal issues, aviation assets; and remedies or procedures involved; and/or ■ orders for the sale of an aircraft. ■ the outcome of the claim is of importance to the public in general. 3.6 Are there any rights of appeal to the courts from the A case may be started in the Commercial Court only if it fulfils the decision of a court or arbitral tribunal and, if so, in characteristics of a ‘commercial claim’; namely any claim arising what circumstances do these rights arise? out of the transaction of trade and commerce, including any claim relating to a business document or contract, the export or import of From a Court Decision goods or the carriage of goods by land, sea, air or pipeline. A party requires permission to appeal from a County Court or High Although there is no rigid financial limit, a claim for less than Court decision. £200,000 is likely to be transferred out of the Commercial Court A request for permission to appeal can (and if appeal is to be sought, unless it involves a point of special commercial interest. The should) be made to the lower court at the hearing at which the majority of cases arising out of the finance or lease of aircraft will be decision to be appealed is made. Thereafter, permission may be heard by the Commercial Court. The majority of cases concerning sought directly from the appeal court. death, serious injury or serious property damage claims arising out of air accidents will be heard by a Court of the Queen’s Bench Permission to appeal will only be given where the court considers Division of the High Court. 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 Civil and criminal cases will be heard in separate courts. instances, the trial judge will be considered best placed to judge the facts of the case. An appeal from factual findings is usually difficult to pursue. The category and level of court to which an appeal is

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to be made depends on the level of the court making the decision revenue-sharing and joint management of schedules, pricing and which is being appealed. There is no automatic stay of execution of capacity. The Commission closed its investigation after the parties a judgment or order while appeal is pursued. offered extensive commitments to make landing and take-off slots A route of appeal lies from the Court of Appeal to the Supreme available at London Heathrow, which were considered essential to Court. Again, permission to appeal is required. facilitate the entry or expansion of competitors on routes between London and New York, Boston, Dallas and Miami (London-New From an Arbitral Tribunal York: 21 slots weekly (3 daily); London-Boston: 14 slots weekly As a general rule, an arbitrator has the same powers as any court, and (2 daily); London-Miami: 7 slots weekly (1 daily); London-Dallas: an arbitral tribunal’s decision is binding. There is no right of appeal 7 slots weekly (1 daily)). The parties also offered to conclude with to the courts on a question of fact. There are narrow exceptions to competitors fare combinability and special pro-rate agreements, as this general rule. well as to provide access to the parties’ frequent-flyer programmes. A party may challenge an arbitral award for lack of jurisdiction In May 2013, the Commission cleared a revenue-sharing joint (section 67 of the Arbitration Act 1996). It is also possible to venture focusing on transatlantic passenger routes (in particular, United Kingdom challenge the arbitrator’s award on the basis of a serious irregularity Frankfurt-New York), accepting binding commitments from Star (section 67 of the Arbitration Act 1996). The definition of a ‘serious Alliance members Air Canada, United and Lufthansa (COMP/39595 irregularity’ includes exceeding the arbitrator’s powers, failure to Continental/United/Lufthansa/Air Canada). comply with the general duties imposed on the arbitrator or failure Similarly, in May 2015, the Commission decided to make binding to deal with all the issues. commitments offered by Air France/KLM, Alitalia and Delta – all A party may appeal to the High Court on a question of law arising members of the SkyTeam airline alliance – to address concerns over out of the arbitral award. The court will only intervene if the their transatlantic joint ventures with respect to capacity, schedules, arbitrator’s decision is obviously wrong or ‘the question is one of pricing and revenue management and sharing of profit and losses, general public importance and the decision of the tribunal is at least which has the object and effect of restricting competition on three open to serious doubt’. routes, namely: (i) Amsterdam-New York; (ii) Rome-New York; and (iii) Paris-New York (COMP/39964 AF-KL/DL/AZ). 4 Commercial and Regulatory In relation to codeshare agreements, neither national nor European competition laws provide specific rules; the legal test applied being based on the exemption criteria of Article 101(3) TFEU and/or 4.1 How does your jurisdiction approach and regulate the corresponding provisions of the competition laws of the EU joint ventures between airline competitors? Member States. The current EU case law is limited. In the SAS/Maersk Air UK competition law reproduces in virtually identical form EU case, in which the parties notified a codeshare agreement to the competition law, sections 2 and 9 of the UK Competition Act 1998 Commission for clearance, with an underlying cartel agreement (“CA 1998”) setting out provisions similar to the prohibition of in the form of a broad market-sharing agreement between the anticompetitive agreements and the exemption criteria (Article parties, the Commission concluded that this agreement was a 101(1) and 101(3) of the Treaty on the Functioning of the European serious infringement of competition and fined the parties a total of Union (“TFEU”)). A joint venture between airline competitors €52.5m, which was confirmed by the EU Court of First Instance would, therefore, have to satisfy the four exemption criteria of (see COMP/37.444 – SAS/Maersk Air and COMP/37.386 – SUN section 9 CA 1998 and/or Article 101(3) TFEU. In summary: Air/SAS and Maersk Air, 18.7.2001 (2001/716 EG) confirmed by (a) the agreement should generate efficiency gains for the parties CFI decision T-241/01, 18.07.05). At the national level, codeshare or promote economic progress (e.g. costs savings through cases were investigated by the Italian National Competition joint operations or improved services); Authority (see the Alitalia/Volare case and the Alitalia/Meridiana (b) consumers should receive a fair share of those benefits (e.g. case). In the Alitalia/Volare case the Italian Competition Authority including the passing on of savings through lower prices); considered the codeshare agreement restrictive but the decision was reversed by the court (both first instance and second instance), and (c) the agreement should not impose on the undertakings concerned, restrictions which are not indispensable to the in the Alitalia/Minerva case, the Authority considered the codeshare attainment of these objectives. Restrictions should be agreement not to be restrictive. proportionate; and In addition, on 11 February 2011 the Commission opened an (d) the agreement should not eliminate effective competition. investigation on free-flow parallel hub-to-hub codeshare arrangements This is a market power test, requiring that there should be between Lufthansa and Turkish Airlines and between Brussels effective competition outside of the joint venture. Airlines and TAP Air Portugal. These investigations are ongoing. The European Commission (the “Commission”) and the European With regard to non-overlapping block space and interlining National Competition authorities (hereinafter referred to as “EU agreements, these are viewed by EU regulators as pro-competitive and regulators”) have not yet blocked airline alliances, which are have been accepted subject to commitments by the Commission in usually considered to produce substantial efficiencies and consumer several merger clearance decisions pursuant to Regulation 139/2004 benefits, but have, often following lengthy investigations and (please see: Air France/KLM, case COMP/M. 3280, paragraph 158 negotiations with the parties, required commitments from the (j); Lufthansa/SNAirholdings, Case COMP/M. 5335, paragraph 441; parties, to be satisfied that the alliance qualifies for exemption, in and Lufthansa/Swiss, Case COMP/M. 3770, paragraph 196). particular that competition is not eliminated. In relation to highly integrated airline alliances, the so-called “metal 4.2 How do the competition authorities in your neutral alliances”, the European Commission closed an investigation jurisdiction determine the ‘relevant market’ for the on 14 July 2010 into the British Airways, American Airlines and purposes of mergers and acquisitions? Iberia (members of the Oneworld alliance) highly integrated transatlantic alliance, covering all routes between North America The UK competition authorities will follow an analysis similar to and Europe (see case No 39596 BA/AA/IB). This alliance involved that of the Court of Justice of the European Union (“CJEU”) and the

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Commission. These have defined the relevant market in decisions (this threshold is intended to exclude relatively minor regarding the aviation sectors as follows: acquisitions by large companies or acquisitions with only a minor European dimension); or Origin and Destination (“O&D”) City Pairs ■ unless each of the companies concerned achieves more than This evaluation considers a demand-side perspective, whereby two-thirds of its aggregate Community-wide turnover within customers consider all possible alternatives of travelling from a one and the same Member State (this threshold – the so-called city of origin to a city of destination, i.e. an O&D city pair (which “two-thirds rule” – is intended to exclude cases where the generally are considered unsubstitutable by a different city pair). effects of the merger are felt primarily in a single Member Premium and Non-Premium Passengers State, when it is more appropriate for the national competition authorities to deal with it) (Article 1(2), Merger Regulation). The different services appeal to different passenger groups with varying travel needs and price sensitivities. First and Business Class Alternatively: ticket passengers are less price-sensitive than Economy ticket users. ■ the combined aggregate worldwide turnover of all undertakings

United Kingdom The Commission considers that Business and First Class tickets on one concerned is more than €2.5 billion (instead of €5 billion); hand, and Economy on the other, are two different product markets. ■ the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than €100 million Non-Stop and One-Stop Flights (instead of €250 million); EU regulators consider that the degree of competitive constraint ■ the combined aggregate turnover of all undertakings imposed by one-stop services varies according to the route and concerned is more than €100 million in each of at least three assesses the precise impact of competing one-stop flights on the Member States; parties’ joint venture on a route-by-route basis. ■ in each of at least three of these Member States, the aggregate Airport Substitution turnover of each of at least two of the undertakings concerned Where more than one airport in a city at one end of the route offers is more than €25 million; and passenger air transport services, this must be assessed for market ■ unless each of the companies concerned achieves more definition purposes. The market definition for airports is based on than two-thirds of its aggregate Community-wide turnover a catchment area of airports considered substitutable by passengers. within one and the same Member State (Article 1(3), Merger Regulation). The relevant market may vary according to the type of passengers: premium and non-premium passengers; or time-sensitive and non- The relevant legislation applicable to EU merger control is Council time-sensitive passengers. Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ L 24, 29.01.2004). UK Merger Control 4.3 Does your jurisdiction have a notification system whereby parties to an agreement can obtain “Relevant Merger Situation” regulatory clearance/anti-trust immunity from A relevant merger situation under the UK merger rules arises where: regulatory agencies? ■ two or more enterprises “cease to be distinct” – in essence, the transfer from one party to another of an “enterprise”, No. The notification system was abolished by Regulation 1/2003, which is broadly defined to include business activities of which entered into force on 1 May 2004, and since then it has no any kind; and either: as a result of the merger, the combined longer been possible to notify agreements to the CMA (or indeed enterprises will supply or acquire 25% or more of any goods the European Commission) for clearance. Parties now also need or services in the UK or a substantial part of the UK; or an to ensure that their agreement satisfies the exemption criteria of existing share of supply of 25% or more will be enlarged section 9 CA 1998 and/or Article 101(3) TFEU, on which section (section 23, Enterprise Act 2002) (it should be noted that the 9 is closely based. “share of supply” test is not a market share test but, rather, focuses on the share of supply of the most narrow reasonable description of goods or services); or 4.4 How does your jurisdiction approach mergers, ■ where the value of the turnover in the UK of the enterprise acquisition mergers and full-function joint ventures? being taken over exceeds £70 million. Obligation to Notify The legislation applicable to UK merger control is the Enterprise Act 2002 (the “Act”). Mergers (including, acquisitions and full- With the exception of special cases of mergers involving newspapers, function joint ventures) are not subject to a system of mandatory broadcasters or water companies, there is no obligation to notify proposed or completed mergers. However, it is possible, and will notification in the UK. However, where a merger falls outside the in many cases be advisable, to notify the CMA, since if a merger turnover thresholds of the EU Merger Control Regulation 139/2004, may result in a “substantial lessening of competition” in the UK but falls within the definition of “relevant merger situation” within market, failure to obtain prior clearance risks a reference to a more the Act (see below), the CMA will have jurisdiction to investigate in-depth investigation and analysis by the CMA (known as a “Phase it within four months of completion or the date it was made public, 2 investigation”), with the possible consequences described below, whichever is later (discussed below). which may include a requirement that the purchaser divest. EU Merger Control A merger will have an EU dimension and will have to be notified to 4.5 Please provide details of the procedure, including the Commission if either: time frames for clearance and any costs of ■ the combined aggregate worldwide turnover of all the notifications. companies concerned is more than €5 billion (this threshold is intended to exclude mergers between small and medium- UK Merger Control Timing and Fees sized companies); and The CMA has an administrative (non-binding) timetable, to which ■ the aggregate Community-wide turnover of each of at least it usually adheres, to take a decision on a notified merger within 40 two of the companies concerned is more than €250 million working days of receiving a complete notification. The waiting time

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for a decision will be greater if the CMA has serious concerns or if of a region will be considered compatible with the internal market undertakings by the parties to address competition difficulties have pursuant to Article 107(3)(c) of TFEU, if the cumulative conditions to be explored. in the Guidelines are satisfied. The conditions that will be considered A fee is payable to the CMA in respect of relevant merger situations. (in relation to start-ups) as contributing to the achievement of an The fees payable are, since August 2012: objective of common interest are: (i) if the airline increases the mobility of EU citizens and connectivity as well as the connectivity ■ £40,000, where the UK turnover is less than £20 million; of the regions by opening new routes; or (ii) if the airline facilitates ■ £80,000, where the UK turnover is between £20 million and the development of remote regions. £70 million; The Guidelines also acknowledge that airlines are not always ■ £120,000, where the UK turnover is between £70 million and £120 million; and prepared to run the risk of opening new routes from unknown and untested airports, and may not have appropriate incentives to do ■ £160,000, where the UK turnover is over £120 million. so. Consequently, start-up aid will only be considered compatible A merger fee is not payable if the merger involves the acquisition of for routes linking an airport with less than 3 million passengers per United Kingdom an interest that is less than a controlling interest and the CMA has annum to another EU airport. Additionally, start-up aid for routes investigated the acquisition on its own initiative. This exception linking an airport with more than 3 million passengers per annum and does not apply if the merger parties notified the acquisition by less than 5 million passengers per annum and which are not located submitting a merger notice. in remote areas are only likely to be considered compatible with Furthermore, a person or corporate body acquiring an interest is exempt the internal market in duly substantiated (and indeed exceptional) from paying a merger fee if, in its most recent financial year before the cases. Linking an airport with more than 5 million passengers per time the fee would become payable, it meets the criteria for small or annum not located in remote regions, however, cannot be considered medium-sized enterprises, as defined by reference to certain provisions compatible with the internal market. in the Companies Act 2006. For financial years beginning on or after 1 January 2016 and, if the directors of the acquirer so decided, financial years beginning on or after 1 January 2015, the acquirer qualifies as 4.7 Are state subsidies available in respect of particular small or medium-sized if it, or the group of which it is a member routes? What criteria apply to obtaining these subsidies? (as defined in section 474 of the Companies Act 2006), has satisfied certain criteria laid down by the CMA (which is more fully detailed in the relevant section of the government website: www.gov.uk). Yes. There are specific EU state aid rules as regards public service compensation granted to undertakings entrusted with the operation If the CMA believes that a merger has resulted or may be expected of services of general economic interest (“SGEI”), which also cover to result in a substantial lessening of competition, and satisfactory the aviation sector. These rules are set out in Commission Decision undertakings cannot be agreed with the parties, the CMA will of 28 November 2005 on the application of Article 86(2) of the EC evaluate the competitive effects of the merger and may, where it Treaty to state aid in the form of public service compensation granted believes the merger has or may result in a substantial lessening of competition in the UK market, refer the merger for an in-depth to certain undertakings entrusted with the operation of services (“Phase 2”) investigation. The CMA has a wide range of powers, of general economic interest (OJ No L312/67, 29.11.05). The including to prevent the merger proceeding or divestment if the Commission’s decision covers compensation for SGEI generally, but proceeding has already taken place. 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 4.6 Are there any sector-specific rules which govern the that in which the SGEI was assigned does not exceed 300,000 aviation sector in relation to financial support for air passengers, will be considered compatible with the common operators and airports, including (without limitation) market and not requiring notification; and state aid? ■ the same rule applies to public service compensation for airports, if average annual traffic during the two financial At UK level, no. At EU level, yes. The specific rules on state aid years preceding that in which the SGEI was assigned does for the aviation sector are set out in the Guidelines on State Aid not exceed 1 million passengers. to Airports and Airlines (Communication from the Commission, 2014/C 99/03). The Guidelines cover the presence of state aid within the meaning of Article 107 (1) of TFEU, investment aid, 4.8 What are the main regulatory instruments governing public service compensation for airlines and airports and so forth. the acquisition, retention and use of passenger data, and what rights do passengers have in respect of Public Funding of Airports their data which is held by airlines? In order to assess whether an undertaking has benefited from an economic advantage, the Guidelines set out that the Market The Data Protection Act 1998 (“DPA”) governs the collection and Economy Operator (“MEO”) test will be applied. The test will be use of personal data in the UK. The DPA implemented EU Directive based on available information and foreseeable developments at 95/46/EC. the time at which the public funding was granted. When an airport Broadly, the DPA applies to the processing (such as obtaining, benefits from public funding, the Commission will assess whether recording, holding, using, disclosing or erasing) of personal data. such funding constitutes aid by considering whether, in similar The obligations under the DPA are on the “data controller”, who circumstances, a private-sector funder would have granted the same is the person that determines how personal information can be funding. Should such funding have been regarded as being granted processed. A “data processor” is a person who processes data on in circumstances which correspond to “normal” market conditions, behalf of the data controller. The data controller remains legally then it is not regarded as state aid. responsible for the processing of personal data by the data processor. Start-up Aid for Airlines The DPA’s jurisdictional scope includes persons who: The Guidelines acknowledge that state aid granted to airlines for the (a) are incorporated in the UK; launching of a new route with the aim of increasing the connectivity

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(b) have an office, branch or agency in the UK; or approved by Parliament as a whole on 14 April and by the Council (c) have a regular practice in the UK. of the EU on 21 April 2016. Data controllers must ensure that data is processed in accordance The PNR Directive obliges airlines to hand EU countries their with eight data protection principles; namely that personal data is: passengers’ data in order to help the authorities fight terrorism (a) fairly and lawfully processed; and serious crime. It requires more systematic collection, use and retention of PNR data on air passengers, and therefore has an impact (b) obtained only for specified lawful purposes; on the rights to privacy and data protection. (c) adequate, relevant and not excessive for the purposes; It is also worth noting that EU countries have bilateral PNR (d) accurate and up to date; agreements with third countries in the wake of terrorist attacks (e) not kept for longer than is necessary; across the EU and in the USA. Each of the agreements sets out the (f) processed in accordance with the rights of data subjects; use of PNR data collected by airlines for law enforcement purposes.

United Kingdom (g) protected by ensuring that appropriate technical and organisational measures are taken against the unauthorised or 4.9 In the event of a data loss by a carrier, what unlawful processing of the personal data, as well as against obligations are there on the airline which has lost the accidental loss or destruction of, or damage to, personal data; data and are there any applicable sanctions? and (h) not transferred outside of the European Economic Area Under the current legislative regime, there is no mandatory (subject to specified exemptions). obligation for an airline to notify the Information Commissioner’s All data subjects, such as individual passengers, have the right to: Office (“ICO” – the regulatory body in charge of the DPA) of a data (a) access a copy of the information comprising their personal breach. data; Where an individual has suffered damage due to a data controller’s (b) object to processing that is likely to cause them damage or breach of the DPA, that individual is entitled to claim compensation distress; from the data controller. (c) prevent processing for direct marketing; The ICO has the power to fine data controllers up to £500,000 for (d) object to decisions being taken by automated means; serious breaches of the DPA. The data controller may appeal the (e) have inaccurate personal data rectified, blocked, released or imposition of a fine to the Information Rights Tribunal. destroyed; and The DPA creates several criminal offences, including (amongst others) (f) claim compensation for damage caused by a breach of the unlawfully obtaining personal data, selling personal data obtained DPA. unlawfully and failing to comply with an enforcement notice. There is no minimum period for which controllers must hold The ICO’s other coercive powers include issuing information personal information; rather, they must securely delete personal data notices requiring organisations to provide it with information and when that personal data is no longer necessary for the purposes for issuing binding undertakings to organisations with which they must which it was collected. Individuals may only request that personal comply. data be deleted by the data controller where it is inaccurate. It is worth noting here that the new General Data Protection It is worth noting that, in May 2016, a new General Data Protection Regulation (see question 4.8 above) has enhanced notification Regulation (Regulation 2016/679) (“GDPR”) came into effect provisions around data losses, as well as allowing the relevant data across the EU, and this will come into force in each Member State protection regulators the authority to levy significantly increased on 25 May 2018. As a Regulation, it will have direct effect in each fines for non-compliance with the provisions of the Regulation. EU Member State from 25 May 2018, as well as the Member States of the European Economic Area (“EEA”), and so will go a long way towards harmonising the EU data protection regime (which 4.10 What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other has been notoriously fragmented to date). Among the changes to assets and data of a proprietary nature? data protection legislation implemented via the GDPR, some key points include: i) requiring freely given, specific, informed and The UK has an Intellectual Property Office (“IPO”). Trademarks, unambiguous consent from a data subject which must be as easy to patents and designs are registrable with the IPO. withdraw as it is to give; ii) the provision of clear and unambiguous information regarding what the data is to be used for, how long it is Copyright protection applies to original works upon creation of the to be used for and the requirement to set out exactly what the data work, without the need for registration (copyright is not registrable subject’s rights are in relation to the personal data they provide; iii) in the UK). The UK has a relatively low threshold of originality maximum fines for breach of the GDPR are the higher of 4% of for a work to be considered an original work which is protected annual global turnover or €20 million; iv) requiring organisations by copyright. Databases may be protected by copyright and/or who engage in “regular and systematic monitoring” of data subjects database rights. “on a large scale” to appoint a data protection officer (also known as A patent may be filed online or in hard copy. A patent application a “DPO”); and v) the requirement for those processing personal data should include a full description (including drawings) of the to be accountable and provide adequate technical and organisational invention, the claims defining the invention, an abstract summarising measures to protect any personal data held. the invention’s technical features and the relevant IPO forms. On 2 December 2015, a provisional deal was reached by the Some intellectual property disputes may be heard initially by the European Parliament and Council on an EU Directive regulating IPO. The Intellectual Property Enterprise Court (“IPEC”) is a the use of Passenger Name Record (“PNR”) data for the prevention, specialist court that deals with lower-value or lower-complexity detection, investigation and prosecution of terrorist offences and intellectual property disputes. There is a £500,000 cap on the serious crime, and was endorsed by the Civil Liberties, Justice and amount of damages that can be claimed (although this can be waived Home Affairs Committee on 10 December 2015. The Directive was if agreed by the parties). There is a small claims track within the

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IPEC which is appropriate if the claim has a value of £10,000 or The airport operator is responsible for ensuring that the landing less. More complex or valuable cases will be heard in the Chancery ground and runway remain clear of unmarked and unlit obstructions Division of the High Court. pursuant to the Air Navigation (Consolidation) Order 1923. There is also a statutory duty for an airport operator to take care, 4.11 Is there any legislation governing the denial of as in all reasonable circumstances, to see that a visitor shall be safe boarding rights? in using the premises for the purposes for which he is invited, or permitted, by the operator, to be there. Failure to install, maintain European Regulation 261/2004 provides rules concerning and use the proper equipment to enable aircraft to take off and land compensation for denied boarding. Airlines must ensure that a clearly safely will attract liability, and there may be liability to passengers legible and visible notice containing prescribed wording is displayed of aircraft which crash if there is a failure to have or to use adequate to passengers at check-in, and must provide passengers affected by rescue equipment. denied boarding with a notice setting out the rules for compensation. Airport operators have also been held liable where there was a United Kingdom Proposals to amend Regulation 261 have been under consideration known hazard and no effective system to discover and disperse for several years but remain to be finalised. In recognition of the need birds, leading to bird strikes. for more immediate action, in June 2016 the European Commission published Interpretative Guidelines on the Regulation, to clarify the 4.14 To what extent does general consumer protection understanding of passenger rights in this area. legislation apply to the relationship between the Under the Civil Aviation (Denied Boarding, Compensation and airport operator and the passenger? Assistance) Regulations 2005, the CAA is responsible for enforcement of the operators’ compliance with these rules; the Air Transport Users The Consumer Protection Act 1987 and the Consumer Rights Act Council is the body to receive complaints. It is an offence, subject to a 2015 apply to aviation-related matters, providing a cause of action defence of due diligence, for an operating air carrier to fail to comply to a passenger against a manufacturer. The Enterprise Act 2002 is with the obligations imposed under the above. also applicable to aviation: it gives the CMA powers of enforcement in relation to consumer legislation.

4.12 What powers do the relevant authorities have in relation to the late arrival and departure of flights? 4.15 What global distribution suppliers (GDSs) operate in your jurisdiction? European Regulation 261/2004 establishes common rules on compensation and assistance to be given to passengers in the All the major GDSs operate in the UK, i.e. Travelport, Amadeus, event of cancellation or long delay. Pursuant to the UK domestic Sabre, etc. legislation – the Civil Aviation (Denied Boarding, Compensation and Assistance) Regulations 2005 – the CAA is empowered to pursue 4.16 Are there any ownership requirements pertaining to enforcement proceedings against an airline for non-compliance with GDSs operating in your jurisdiction? the European rules. If proved, an airline will be liable to a fine not exceeding £5,000 for each offence. No, there are no ownership requirements specific to GDSs operating in the UK, beyond the general UK company law applicable to 4.13 Are the airport authorities governed by particular all companies. Foreign-domiciled companies may operate in the legislation? If so, what obligations, broadly speaking, UK without registering a UK company or branch. UK-registered are imposed on the airport authorities? companies are not required to have a local shareholder or director; they just need to have a registered address in the UK. The Civil Aviation Act 1982 and the Air Navigation Order 2009 stipulate that where an aerodrome is open for public use, the 4.17 Is vertical integration permitted between air operators aerodrome must be available to all, on equal terms, whether they are and airports (and, if so, under what conditions)? foreign or domestic carriers. There are numerous other obligations imposed upon an airport operator by law of application not limited There is not a prohibition of vertical integration between air to aviation; for example, concerning employment, health and safety operators and airports. In such a case, however, competition rules and disability discrimination. particularly prohibiting abuse of a dominant position (section 18 The Civil Aviation Act 2012 has introduced a new system of CA 1998 and/or Article 102 TFEU) will prohibit any discriminatory economic regulation of airport operators. Certain airports will charges for access to airport infrastructure, or denial of access where require a licence to levy airport charges, and the CAA can impose this affects trade and is not objectively justified. such conditions on that licence as it deems necessary to promote competition (e.g. capping the percentage by which charges at a particular airport may be increased, by a certain percentage or by 5 In Future reference to a particular index (such as the Retail Price Index)).

The Transport Act 2000 requires airport operators to keep records 5.1 In your opinion, which pending legislative or of aircraft movements in order to facilitate the assessment and regulatory changes (if any), or potential developments calculation of charges. The Civil Aviation (Chargeable Air Services) affecting the aviation industry more generally in (Records) Regulations 2001 govern the format and content of the your jurisdiction, are likely to feature or be worthy of aircraft movement log, which must be kept at any airport pursuant attention in the next two years or so? to section 88 of the Civil Aviation Act 1982. Pursuant to the Air Navigation Order 2009, the aerodrome licence-holder must ensure It is clear that developments in the data protection space involving the that the messages and signals between an aircraft and the air traffic collection, retention, processing and use of personal – specifically, control unit at the aerodrome are recorded, complete and preserved. PNR data – are going to feature as a major area of concern and

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focus for airlines and airports in the future, let alone the next two years. The advent of the new General Data Protection Regulation Endnote in the EEA as well as the introduction of the PNR Directive (and the 1. Under Part 1 Article 4(3) of the Air Navigation Order 2009, national variations that are likely to arise in relation to that Directive) an aircraft must not be registered or continue to be registered will require operators in this industry not only to ensure compliance, in the United Kingdom if it appears to the CAA that: but also to implement mechanisms, processes and procedures in the (a) the aircraft is registered outside the United Kingdom and run up to implementation, to ensure they are not found wanting that such registration does not cease by operation of law when it comes not only to the legislative requirements around the when the aircraft is registered in the United Kingdom; collection and provision of that data but also the secure handling, (b) an unqualified person holds any legal or beneficial retention and use of it. interest by way of ownership in the aircraft or any share The new Package Travel Directive (2015/2302/EU), which entered in the aircraft; into force on 31 December 2015, has a deadline for transposition (c) the aircraft could more suitably be registered in some United Kingdom into the national laws of the EU Member States of 1 January 2018 other part of the Commonwealth; or and an effective date of 1 July 2018. This too will have an impact (d) it would not be in the public interest for the aircraft to be, on carriers, as it has a scope which extends beyond the traditional or to continue to be, registered in the United Kingdom. holiday package booked through a tour operator and covers many Pursuant to Part 1 Article 5(1), only the following persons other forms of combined travel (for example, fly-drive holidays are qualified to hold a legal or beneficial interest by way of and flight-hotel bookings). These forms of combined travel will be ownership in an aircraft registered in the United Kingdom or protected as a package under the Directive, in particular where the a share in such an aircraft: travel services are booked at the same time and as part of the same (a) the Crown in right of HM Government in the United booking process or where they are offered for an inclusive price. Kingdom and the Crown in right of the Scottish Consumer rights legislation will continue to strengthen in the UK Administration; as a result of the Consumer Rights Act 2015 and the ever-present (b) Commonwealth citizens; bolstering of Regulation 261/2004, primarily by the CJEU’s (c) nationals of any EEA state; interpretation of the Regulation, as now clarified to an extent by the (d) British protected persons; 2016 Interpretative Guidelines, but also in relation to a revision to (e) bodies incorporated in some part of the Commonwealth the Regulation (which remains to be agreed). and having their principal place of business in any part In addition, as much of the aviation law in England and Wales stems of the Commonwealth; from the European Union, it will be important to keep a close eye on (f) undertakings formed in accordance with the law of an the development of plans for Brexit and any agreed transition period. EEA state which have their registered office, central As at the date of publication, there has been much talk of the impact administration or principal place of business within the which Brexit may have on, amongst other things, the ownership EEA; or shareholding of airlines, rights to land in and fly over different (g) firms carrying on business in Scotland; in this sub- countries in the EU, and generally what legislation will continue paragraph ‘firm’ has the same meaning as in the to apply in the UK. Directives will apply, as they are implemented Partnership Act 1890 (c39). into local UK law by domestic legislation, which will continue to Under Part 1 Article 5(4) of the Air Navigation Order 2009, if apply unless repealed; but it is uncertain what regulations (which an aircraft is chartered by demise to a person qualified under have direct effect and which will cease to apply on Brexit) the UK paragraph (1), the CAA may, whether or not an unqualified will wish to continue to apply. In short, little has been agreed by the person is entitled as owner to a legal or beneficial interest in the aircraft, register the aircraft in the United Kingdom in UK and EU teams negotiating the UK’s withdrawal from the EU. the name of the charterer by demise if it is satisfied that the aircraft may otherwise be properly registered. There is also a discretion for the CAA to register an aircraft which is owned by a person not qualified under Part 1 Article 5(1) where the owner resides or has a place of business in the United Kingdom, but such aircraft must not be used for commercial air transport, public transport or aerial work (Part 1 Articles 5(2) and (3)).

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Alan D. Meneghetti Philip Perrotta Katten Muchin Rosenman UK LLP K&L Gates LLP Paternoster House One New Change 65 St Paul’s Churchyard London EC4M 9AF London EC4M 8AB United Kingdom United Kingdom Tel: +44 20 7648 9000 Tel: +44 20 7770 5232 Fax: +44 20 7648 9001 Fax: +44 20 7776 7621 Email: [email protected] Email: [email protected] URL: www.klgates.com URL: www.kattenlaw.co.uk

Alan D. Meneghetti is a partner in the Corporate and Commercial group Philip Perrotta is a partner in the firm’s London office, where he is at Katten Muchin Rosenman UK LLP. He undertakes a full range of responsible for the Aviation Finance group and is a member of the

commercial and regulatory work in the general commercial, aviation Banking & Asset Finance practice group. The nature of his practice is United Kingdom and aerospace sectors. His practice ranges from handling regulatory truly international and he frequently works with clients across Europe issues to the procurement of suppliers and responses to tenders, and South East Asia, specifically in Milan and Singapore, as part of the to data protection and privacy, information technology, intellectual service provided to clients in this practice area. property, and the drafting and negotiating of various commercial He is an aviation finance and aviation specialist, recognised asa agreements, such as outsourcing, supply, service, and research “leading expert”, regularly receiving commendations in the legal and development. He has worked extensively on matters in Africa, directories, for example for being “very strong” and “dealing with all the Europe, the USA and the United Kingdom. Alan is a regular contributor big points without ever over-lawyering them”. He is “experienced” and to publications and speaker at conferences in these sectors, and his ensures “an excellent and accessible service” to clients (The Legal 500). articles and book reviews have been widely published. Philip acts for a broad range of significant aircraft lenders, lessors and operators globally, and has successfully concluded literally hundreds of transactions involving commercial and business aircraft, aero engines and other aviation assets in jurisdictions across all the continents. He is a regular contributor at industry events, and is often requested to comment on relevant developments in a variety of segments of the aviation finance market.

Katten Muchin Rosenman UK LLP acts for clients operating in the aviation, real estate, corporate, banking and finance, and financial services sectors. Katten’s aviation practice covers all aspects of commercial and private legislation, from the finance and purchase of aircraft to the supply of parts and materials for them, and the defence and prosecution of claims in the sector (including a full range of EU regulatory and compliance work). The firm’s aviation group acts across the aviation sector, representing manufacturers, operators, suppliers, investors and finance houses. In addition, our banking and finance team acts for lenders and borrowers across a range of lending products and the financial services team acts for trading platforms, clearing houses, all types of investment and trading firms, and funds. With US-qualified lawyers in the London office sitting alongside their UK counterparts, and as part of a platform spanning the United States and Asia in centres of finance, including Charlotte, Chicago, Los Angeles, New York, Shanghai and Washington, D.C., the London office offers skilled, integrated legal advice for domestic and international clients operating in the United Kingdom, Europe, United States and Asia. 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 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 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.

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USA Diane Westwood Wilson

LeClairRyan Rebecca Tingey

Applications are published for public comment. Carriers may seek 1 General an exemption allowing them to begin operations prior to the DOT’s decision. 1.1 Please list and briefly describe the principal Safety authority legislation and regulatory bodies which apply to and/ US carriers are required to hold an Air Carrier Certificate and or regulate aviation in your jurisdiction. Operations Specifications (14 CFR Parts 121 and 135). Foreign carriers are required to hold Operations Specifications only (14 CFR ■ Department of Transportation (“DOT”), a federal Cabinet Part 129). The FAA determines whether the carrier meets certain department of the US government. safety regulations and standards. US carriers undergo five phases in ■ Federal Aviation Authority (“FAA”), an agency of the DOT the certification process: (1) pre-application; (2) formal application; that regulates US civil aviation, including commercial space (3) document compliance; (4) demonstration and inspection; and (5) transportation. certification. ■ National Transportation Safety Board (“NTSB”), an independent agency that investigates and determines the probable cause of aviation accidents. 1.3 What are the principal pieces of legislation in ■ Department of Homeland Security’s (“DHS”) Transportation your jurisdiction which govern air safety, and who Security Administration (“TSA”) and Customs and Border administers air safety? Protection (“CBP”). TSA is responsible for airport security and works in conjunction with CBP to screen airlines The FAA, established by the Federal Aviation Act of 1958, codified passengers and employees at airports. under 49 USC Subtitle VII, administers air safety, and dictates and ■ Title 14 of the Code of Federal Regulations (“CFR”), oversees: Aeronautics and Space, issued by the FAA. ■ Airport operations (14 CFR Part 139). ■ Title 49 of the CFR, entitled Transportation, issued by the ■ All aspects of commercial flight operations and pilot DHS and DOT. qualifications and fitness (14 CFR Parts 61, 91, 121, 125, and ■ Title 49 of the United States Code (“USC”), entitled 135). Transportation, enacted by the US Congress. ■ Aircraft maintenance and repair (14 CFR Parts 43 and 145). ■ The standards governing the design and manufacture of 1.2 What are the steps which air carriers need to take in aircraft (14 CFR Parts 21, 25, and 33). order to obtain an operating licence? ■ The regulation of the national airspace (14 CFR parts 71 and 77). An air carrier must obtain two separate authorisations: economic ■ The certification of airports (14 CFR part 139). authority issued by the DOT; and safety authority issued by the FAA. 1.4 Is air safety regulated separately for commercial, Economic authority cargo and private carriers? Pursuant to 49 USC § 41101, an economic authorisation must either be in the form of a “certificate of public convenience and necessity” Yes and no. Aviation regulations are primarily based upon aircraft or in the form of an exemption, such as those applicable to air taxis size, as measured by the number of passenger seats and payload or air commuters. All carriers must file an application on the public capacity, and whether the operation involves common carriage docket at http://www.regulations.gov. of passengers and/or cargo. Generally, 14 CFR Part 121 applies US air carrier applications are analysed for: (1) US citizenship (49 to operators involved in scheduled common carriage, such as USC § 40102(a)(15)); (2) managerial competence; (3) financial airlines and cargo carriers; 14 CFR Part 125 applies to operators of fitness; and (4) legal compliance. Foreign air carrier applications larger aircraft not involved in common carriage; and 14 CFR Part are analysed for: (1) foreign citizenship; (2) operational and financial 135 applies to commuter or on-demand operations of air carriers, fitness; and (3) whether the carrier is covered by a bilateral agreement commercial operators, or operators of large aircraft. These Parts (14 CFR Parts 211 and 302). Foreign carriers must hold a valid permit set forth varying operation requirements relating to equipment, issued by the DOT pursuant to 49 USC § 41301 or a valid exemption. maintenance, pilot qualifications and training, and other matters. 14 The DOT’s final decision to grant or deny the application of a foreign CFR Part 129 contains regulations pertaining to foreign air carriers carrier is subject to review by the President of the United States. operating in the US.

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After a civil aviation accident, the airline must immediately notify 1.5 Are air charters regulated separately for commercial, the local field office of the NTSB (49 CFR § 830.5) and timely cargo and private carriers? notify family members of passengers (49 CFR § 1136). The airline must preserve aircraft wreckage, cargo, and data recorders until Regulation of an air charter operator depends upon its size and type. the NTSB takes custody (49 CFR § 830.10(a)). The airline must The governing regulations are found in 14 CFR Parts 135 and 298 also retain all records, reports, internal documents and memoranda (on-demand for both passenger and cargo, with smaller aircraft); dealing with the accident, and permit inspection of pertinent records 212 (large aircraft); and 380 (public charters for both small and large by the NTSB (49 CFR § 830.9(a) and 830.10(d)). aircraft). After completing its investigation, the NTSB prepares a public final report (49 CFR Parts 831 and 45). Pursuant to the Aviation Disaster USA 1.6 As regards international air carriers operating in your Family Assistance Act of 1996 and Foreign Air Carrier Family jurisdiction, are there any particular limitations to be Support Act of 1997, both US and foreign carriers are required to aware of, in particular when compared with ‘domestic’ have in place a Family Assistance Plan, which identifies how the or local operators? By way of example only, restrictions and taxes which apply to international but carrier will address the needs of families and passengers involved in not domestic carriers. any accident resulting in a major loss of life.

Foreign air carriers are generally treated similarly to US air carriers 1.10 Have there been any recent cases of note or other through bilateral air transport or service agreements. Under 49 CFR notable developments in your jurisdiction involving Part 1546 – the International Aviation Safety Assessment Program air operators and/or airports? – foreign air carriers must meet additional safety requirements. In determining whether to grant a foreign air carrier an operating At the end of 2016, a federal judge in the District of Columbia licence, the FAA will consider the existence of an effective aviation denied the motion to dismiss brought by the airline defendants security agreement between the US and the foreign air carrier – American, United, Delta, and Southwest – in a nationwide, applicant’s homeland. multidistrict antitrust litigation. The proposed class action alleges that the airlines conspired to raise, maintain, and/or stabilise prices 1.7 Are airports state or privately owned? for air transportation services by colluding to limit capacity on their respective airlines substantially compared to those of other domestic Airports in the US are both privately and publicly owned. Almost all air carriers, despite stagnant or decreasing demand and declines in airports servicing commercial operators are owned by municipalities the cost of fuel. In denying the motion to dismiss, the court noted (such as Chicago, which owns Chicago O’Hare International that plaintiffs had adequately pleaded “parallel conduct on the part of Airport), or states (such as Maryland, which owns Baltimore- defendants coupled with sufficient evidence to raise the suggestion Washington International Thurgood Marshall Airport). Actual of a preceding agreement to limit capacity in their respective airlines, operation of the airports, however, is often handled by specially as a result [of which] the airfares rose during that period”. The created public entities. For example, the Port Authority of New York plaintiffs’ class certification motion is due in April 2018. and New Jersey, an interstate compact, operates several airports in In April 2017, United made headlines when security officers with New York and New Jersey. the Chicago Department of Aviation forcibly removed a 69-year- old passenger from an overbooked flight – an incident that was caught on video and quickly went viral. The passenger alleged 1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction? that he sustained a broken nose, concussion, and lost two of his teeth. A lawsuit filed by the passenger against United was quickly Airports, like all commercial enterprises, generally seek to and confidentially settled. In response to the incident, United and maximise their profitability when allocating leasehold space, gate many major US carriers significantly increased the amount of assignments, and times of operation, while working closely with the compensation offered to bumped passengers. airlines to support shared handling arrangements. The FAA Airport Safety Program addresses general aviation airport safety, runway 2 Aircraft Trading, Finance and Leasing safety, and safety management systems. The FAA Passenger Facility Charge Program caps at $4.50 the passenger fee that can be collected at major airports (commercial airports controlled by 2.1 Does registration of ownership in the aircraft register public agencies). constitute proof of ownership?

1.9 What legislative and/or regulatory regime applies to No; 49 USC § 44103 provides that a Certificate of Registration is air accidents? For example, are there any particular “not evidence of ownership of an aircraft in a proceeding in which rules, regulations, systems and procedures in place ownership may be in issue”. While the FAA Aircraft Registry lists which need to be adhered to? an “owner” of each registered aircraft and evidence of ownership is required to record such registration with the FAA, the Certificate of The NTSB is responsible for conducting investigations of civil Registration does not in and of itself constitute proof of ownership aviation accidents to determine probable cause and issue safety of an aircraft. The best evidence of ownership for an FAA-registered recommendations. For general aviation accidents, the responsible aircraft is an original bill of sale from the manufacturer/seller to the NTSB field office often delegates the investigation to the FAA current owner. Where the aircraft has had more than one previous pursuant to Section 304(a)(1) of the Independent Safety Board Act owner, it is recommended that the current owner obtain bills of of 1974. The Federal Bureau of Investigation and/or the Department sale for all previous title transfers such that the full chain of title is of Justice (“DOJ”) will get involved if the accident was likely to documented. have been the result of a criminal act.

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2.2 Is there a register of aircraft mortgages and charges? 2.6 Is your jurisdiction a signatory to the main Broadly speaking, what are the rules around the international Conventions (Montreal, Geneva and operation of this register? Cape Town)?

The FAA Aircraft Registry is a publicly searchable registry All of the main multilateral aviation treaties – international maintained in Oklahoma City, Oklahoma, where mortgages and Conventions – have been entered into force in the US: other security interests can be recorded against an aircraft. The ■ Convention on International Civil Aviation (the “Chicago requirements for recordation of mortgages and other security Convention”).

USA interests are set forth in 14 CFR Part 49. All registration documents ■ Convention on the international Recognition of Rights in must include the manufacturer, model, serial number and registration Aircraft. number, and original signatures must be submitted. ■ Convention for the Unification of Certain Rules relating to The FAA Aircraft Registry also serves as the entry point for the International Carriage by Air (the “Warsaw Convention”). registering ownership and security interests pursuant to the Cape ■ Convention on Offenses and Certain Other Acts Committed Town Convention and related Protocol on Aircraft Equipment. on Board Aircraft (the “Tokyo Convention”). ■ Montreal Protocol No. 4 to amend the Warsaw Convention as 2.3 Are there any particular regulatory requirements Amended by the 1955 Hague Protocol. which a lessor or a financier needs to be aware of as ■ Convention for the Unification of Certain Rules for regards aircraft operation? International Carriage by Air (the “Montreal Convention”). ■ Convention on International Interests in Mobile Equipment Aircraft operations are regulated by both the FAA and the (the “Cape Town Convention”) and Aircraft Equipment DOT. A lessor or financier should require its lessee/operator to Protocol. maintain compliance with all applicable FAA and DOT regulatory requirements. The lessee/operator will need to meet certain requirements (including licensure depending on the type of 2.7 How are the Conventions applied in your jurisdiction? operation) pertaining to who may operate the aircraft and the type of operations that can be conducted. The lease agreement should The federal courts of the United States have jurisdiction over issues state clearly that the lessee maintains operational control. Lease of treaty interpretation. The Montreal Convention has been the agreements that contemplate operations by an uncertificated operator subject of enforcement by the US Supreme Court. See, e.g., EL AL (e.g., Part 91), must contain a truth-in-leasing clause meeting the Israel Airlines v. Tseng, 525 U.S. 155 (1999) (a seminal international requirements set forth under 14 CFR Part 91 and must be filed with aviation case upholding the preemptive effect on local law of the FAA for truth-in-leasing purposes only. treaties of the United States, such as the Montreal Convention). Although the Montreal Convention, and its predecessor the Warsaw 2.4 As a matter of local law, is there any concept of title Convention, have been the subject of significant litigation, the annexation, whereby ownership or security interests Geneva and Cape Town Conventions have not. Courts that have in a single engine are at risk of automatic transfer considered the Geneva Convention have concluded that any interest or other prejudice when installed ‘on-wing’ on an in an aircraft that has been regularly recorded in the public record of aircraft owned by another party? If so, what are the the contracting state in which the aircraft is registered takes priority conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to over all other interests in the aircraft and must be recognised by all mitigate the risks? contracting states, regardless of domestic law. There is a dearth of reported decisions interpreting the Cape Town Convention. Indeed, The Cape Town Convention, to which the US is a signatory, a federal court in Kansas permitted expert testimony regarding the provides at Article XIV(3) of the Aircraft Equipment Protocol, that existence and nature of the Cape Town Convention and whether it “ownership of or another right or interest in an aircraft engine shall applied to the particular facts of the case. not be affected by its installation on or removal from an aircraft”. 3 Litigation and Dispute Resolution 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), 3.1 What rights of detention are available in relation to and b) documentary taxes such as stamp duty; and aircraft and unpaid debts? (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of The rights of creditors are governed by state law and vary depending aircraft and/or particular aircraft types or operations? on the type of debt, priority of any lien, and whether the lien has been perfected. In general, however, if the aircraft owner or operator has There is no VAT in the US; however, each state has its own tax unpaid debts and is not under bankruptcy court protection, a creditor laws. In addition, within a state, there may be county or city tax may obtain a court judgment enforceable in accordance with the laws. Most states collect sales tax on transactions involving tangible personal property. Certain states – Montana, New Hampshire, and relevant state laws and procedures. In addition, if the creditor is Oregon – do not have a state sales tax. Therefore, if delivery of the able to meet certain criteria, it may be able to obtain a pre-judgment aircraft is made in one of these states, there will be no state sales tax restraining order or injunction preventing the debtor from moving assessment. Certain states, such as Massachusetts, exempt aircraft the aircraft. There is an FAA Aircraft Registry in which a lien from sales tax. Many states have a “fly-away” exemption, meaning against an aircraft may be registered pursuant to 49 USC § 44107, that the transaction will be exempt from sales tax if it is flown out of et seq. the state within a specified period of time afterthe transaction closes.

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3.2 Is there a regime of self-help available to a lessor 3.5 What types of remedy are available from the courts or a financier of an aircraft if it needs to reacquire or arbitral tribunals in your jurisdiction, both on i) an possession of the aircraft or enforce any of its rights interim basis, and ii) a final basis? under the lease/finance agreement? Both the courts and arbitral tribunals have broad authority to award The Cape Town Convention and its Aircraft Equipment Protocol interim and final remedies. A Temporary Restraining Order and may affect default remedies available in the US, depending on the Preliminary Injunction, two types of interim relief, are generally type of aircraft, its place of registration, the location of the debtor, limited to situations where the party seeking such relief can and whether the transaction documents create an “international demonstrate that it will be irreparably harmed if interim relief is USA interest”. Also, the US Declaration to Cape Town makes clear that not granted. For example, in New York State Court where many the US respects applicable local laws with respect to non-consensual commercial contract cases are filed, an aggrieved party may seek liens. a temporary restraining order and proceed by order to show cause, In addition, the Uniform Commercial Code, which has been adopted which can result in a decision in less than one week. in some form by all 50 states, permits a lessor to repossess leased In a court proceeding, a final judgment follows a decision on the equipment or render the equipment unusable, provided that it does merits – by motion or, if necessary, after trial. not cause a breach of the peace. Upon seizure, the lessor may then retain, sell, lease, or otherwise dispose of the aircraft and apply the After the issuance of a final arbitration award, the successful party proceeds to satisfy the debt. The rights of the lessor may be limited may bring a court proceeding to confirm the award and convert it by the applicable lease and/or financing agreements. into a judgment. Conversely, the aggrieved party can seek to vacate the award in whole or in part.

3.3 Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For 3.6 Are there any rights of appeal to the courts from the example, is there a distinction in your jurisdiction decision of a court or arbitral tribunal and, if so, in regarding the courts in which civil and criminal cases what circumstances do these rights arise? are brought? In state court, the rights of appeal vary from state to state, with Civil and criminal cases are brought in both state and federal courts. potentially no right of appeal until there is a final judgment. Some State courts have broad jurisdiction and can hear almost any civil or states, such as New York, permit interlocutory appeals, which can criminal case, as long as it is not preempted by federal law. Which is dramatically affect the length and outcome of the proceedings. the correct state court can depend on the amount in controversy, and Certain appeals may only be by permission. whether the case is civil or criminal. Civil claims may only be filed In federal court, interim appellate review of district court rulings in federal court: (1) when the claim involves a federal question (i.e., is available only in limited circumstances; for example, pursuant arises under or implicates a federal treaty, law, or regulation, e.g., to Federal Rule of Civil Procedure 23(f) (discretionary appeal of the Montreal Convention); or (2) if the claim is between citizens order granting or denying class action certification), 28 USC § 1292 of different states and the amount in controversy exceeds $75,000. (interlocutory decisions), and a writ of mandamus (a request that The Judicial Panel on Multidistrict Litigation has authority, under the circuit court of appeal mandate the district court to award the 28 USC § 1407(a), to consolidate cases properly brought in federal relief denied). court. The Multiparty, Multiforum Trial Jurisdiction Act of 2002, In arbitral proceedings, obtaining interim court review is extremely grants federal court jurisdiction where at least 75 persons have been difficult, and the Federal Arbitration Act severely curtails killed in a single accident where there is “minimal diversity” (28 judicial review of arbitration awards. In the US, there is a strong USC § 1369). Although all actions governed by an international presumption for enforcement of agreements to arbitrate and the aviation treaty to which the United States is a party fall within courts are very deferential to arbitration decisions. The Seventh federal question jurisdiction, many plaintiffs’ attorneys continue to Circuit recently sanctioned a plaintiff’s attorney for repeatedly file their cases in state court. attempting to circumvent an agreement to arbitrate. See, e.g., Hunt v. Moore Bros., 861 F.3d 655 (7th Cir. 2017). 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? 4 Commercial and Regulatory

Each state has its own procedural rules that govern service of process. In the federal courts, service of process is governed by the Federal 4.1 How does your jurisdiction approach and regulate Rules of Civil Procedure and may vary depending on the type of joint ventures between airline competitors? defendant. Typically, a summons and complaint must be personally served on a defendant or an agent of the defendant. In certain The DOT primarily regulates joint ventures that result in the sharing circumstances, service may be accomplished by alternative methods, of services and/or revenue in the following ways: such as email, Facebook, and certified mail. See, e.g., Ferrarese v. ■ Corporate Service Agreements, Code-Sharing: The DOT Shaw, 164 F. Supp. 3d 361 (E.D.N.Y. Jan. 20, 2016); and Juicero, regulates joint ventures between major air carriers under 49 Inc. v. Itaste Co., 2017 WL 3996196 (N.D. Cal. June 5, 2017). USC § 41720. The DOT does not approve or disapprove the agreement; rather, it reviews the agreement to ensure that it The US is a party to the Convention on the Service Abroad of is not anticompetitive and would not harm the public. The Judicial and Extrajudicial Documents in Civil or Commercial DOT can take action under 49 USC § 41712, the statute Matters (Hague Service Convention). regarding unfair or deceptive practices and unfair methods of competition.

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■ Global Airline Alliances: Major US and foreign air carriers responsible for reviewing mergers, acquisitions, and joint ventures may, under 49 USC § 41308–41309, request a grant of under the HSR Act to determine whether the transaction will or immunity from the US antitrust laws to operate alliances. may lessen competition and to determine whether the transaction In evaluating applications, the DOT employs a two-step should be approved, modified, or rejected. The DOT may submit analysis. First, the DOT determines whether a proposed its findings to the DOJ for review and use in the decision-making alliance “substantially reduces or eliminates competition”. process. If it does, then the DOT must disapprove the application unless the DOT finds that the alliance “is necessary to meet Additionally, if a US air carrier is formed as a result of the merger, a serious transportation need or to achieve important public acquisition, or full-function joint venture, the owner must be a citizen benefits” and there is not a less anti-competitive alternative. of the US as defined under 49 USC § 40102,i.e. , the entity must: (1) USA An alliance that has received immunity is required to comply be organised under the laws of the US or a state; (2) have a corporate with the operating constraints and reporting requirements president that is a US citizen; (3) have two-thirds of its board of specified in a final DOT order. directors and other managing officers comprised of US citizens; (4) be under the actual control of US citizens; and (5) be 75% (or 4.2 How do the competition authorities in your greater) owned (with a voting equity interest) by US citizens. jurisdiction determine the ‘relevant market’ for the purposes of mergers and acquisitions? 4.5 Please provide details of the procedure, including time frames for clearance and any costs of The “relevant market” is determined by looking at the relevant notifications. product (goods and services) and geographic markets to assess whether the desired merger or acquisition will or may substantially The HSR Act requires notification to the FTC and DOJ and the lessen competition, and whether consumers in the relevant market submission of a filing fee and detailed information about each party’s can find a suitable alternative in a reasonable time at similar cost business, including the rationale and plans for the transaction. The and quality. agencies will determine whether additional information is needed The relevant product market is typically defined by the line of or whether they want to challenge the transaction or allow the commerce being offered, such as scheduled passenger or cargo transaction to close (16 CFR Parts 801, 802, and 802). flights from Point A to Point B or control or ownership of landing Parties seeking approval of a joint venture within the meaning of 49 rights or slots. The relevant geographic market is typically defined USC § 41720, or a cooperative agreement, and/or antitrust immunity by where the companies involved compete, often based on routes for a proposed alliance, must submit an application to the DOT. The or city-pairs. DOT shall grant approval and/or request for an exemption where: The DOJ and the Federal Trade Commission (“FTC”) are typically (1) it is not in violation of the laws of 49 USC § 413; (2) it is not concerned about transactions that significantly raise concentration adverse to the public interest; and (3) it does not substantially reduce levels in city-pair markets. The DOJ will look at the effect in all or eliminate competition, unless it is necessary to meet a serious city-pair markets served by both of the carriers involved in terms of: transportation need or to achieve important public benefits. (1) non-stop service; and (2) non-stop and connecting service. The The DOT must provide notice to the Attorney General and the DOJ recognises that non-stop service between cities is important Secretary of State and an opportunity to comment, and a hearing if because business travellers are less likely to regard connective required. The DOT must make a final decision within six months service as a reasonable alternative. Cities served by more than one of receipt if there is no hearing, or 12 months if there is a hearing. commercial airport, such as Los Angeles, San Francisco, New York, Chicago, and Washington, D.C., may be considered an airport pair. 4.6 Are there any sector-specific rules which govern the aviation sector in relation to financial support for air 4.3 Does your jurisdiction have a notification system operators and airports, including (without limitation) whereby parties to an agreement can obtain state aid? regulatory clearance/anti-trust immunity from regulatory agencies? The federal government does not provide direct financial support to US airlines, with the exception of the programs set forth in question Yes. US carriers seeking to merge or acquire another carrier must 4.7 below. Under the Airline Deregulation Act, the government may provide notice to the DOJ and FTC pursuant to Section 7a of the not enforce a law, regulation, or other provision related to a price, Clayton Act, otherwise known as the Hart-Scott-Rodino Antitrust route, or service of an air carrier providing transportation. Improvements Act (“HSR Act”) (15 USC § 18a). The initial HSR Act filing must contain basic information, which the DOJ will use to The federal and state governments, however, do provide financial determine whether more extensive review is appropriate. support to airports, as described in question 4.13 below, sourced primarily through the Airport Improvement Program (“AIP”), As described in question 4.1, parties seeking to form a cooperative which provides funding through FAA grants, for airport capital agreement, or joint venture within the meaning of 49 USC § 41720, improvements related to enhancing airport safety, capacity, security, or to obtain an exemption from antitrust laws for a proposed alliance, and environmental concerns through grants from the FAA. Projects must submit an application for the DOT for clearance (49 USC §§ related to airport operations and revenue-generating improvements 41308–41309). are generally not eligible for funding.

4.4 How does your jurisdiction approach mergers, 4.7 Are state subsidies available in respect of particular acquisition mergers and full-function joint ventures? routes? What criteria apply to obtaining these subsidies? Depending on the size of the parties involved and the value of the proposed merger or joint venture agreement, parties seeking to Subsequent to the Airline Deregulation Act, the federal government merge or acquire another carrier must notify the DOJ and FTC prior enacted the Essential Air Service (“EAS”) Program, which permits to closing. See question 4.3. By agreement with the FTC, the DOJ is the federal government to subsidise air carriers to serve small, rural

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communities to maintain a minimal level of scheduled air service security procedures, data disposal procedures, and notification of to those communities. Generally, the DOT will subsidise between a security breach. States also typically allow for private rights of two to four round trips per day with a 19-seat aircraft between an action by individuals, and enforcement actions by state Attorneys EAS community and a major hub airport. In selecting a carrier, General, for civil penalties, damages, and/or injunctive relief, in the the DOT considers: (1) service reliability; (2) contractual and event of a data loss or breach. marketing arrangements with a larger carrier at the hub; (3) interline EU citizens may seek recourse through the EU-US PNR Agreement. arrangements with a larger carrier at the hub; and (4) community In 2015, Congress passed the Cybersecurity Act, which includes views (49 USC §§ 41731–41732). a limited legal and antitrust safe harbour for companies to share The Alternative Essential Air Program designates funds directly to

information on cyberattacks among themselves and with the USA the municipality or airport authority instead of to the carrier, which government. allows the community to recruit air service that would not otherwise meet EAS guidelines. 4.10 What are the mechanisms available for the protection The Small Community Air Service Development program is a of intellectual property (e.g. trademarks) and other grant program to provide financial assistance to small communities assets and data of a proprietary nature? to help them enhance their air service (49 USC § 41743). To be eligible, the airport serving the community cannot be larger than a Federal registration of trademarks is not required by federal law, small hub airport and the community must demonstrate that it has but will enhance an airline’s rights because it provides a legal insufficient air carrier service, or unreasonably high airfares. The presumption of the exclusive right to use the trademark throughout DOT may provide assistance to an air carrier to subsidise service to the US or in connection with the goods and services identified with and from an underserved airport for a period of up to three years, or the registration. The Lanham Act establishes a procedure for federal it may provide assistance to an underserved airport. registration of trademarks with the US Patent and Trademark Office (15 USC § 1501, et seq.). Copyrights are registered with the US 4.8 What are the main regulatory instruments governing Copyright Office. the acquisition, retention and use of passenger data, and what rights do passengers have in respect of their data which is held by airlines? 4.11 Is there any legislation governing the denial of boarding rights? Under the Intelligence Reform and Terrorism Prevention Act of 2004 (49 USC § 114) and the TSA’s Secure Flight Program (49 FRC Parts Under 14 CFR Part 250, the DOT permits airlines to oversell tickets 1540 and 1560), for the purpose of security screening, airlines that for a flight; however, Part 250 mandates compensation and other operate flights to and from the US are required to collect passenger protections for passengers who hold “confirmed reserved space” name records (“PNR data”), which includes the passenger’s full on a flight, have complied with the carrier’s contract of carriage, name, date of birth, and gender. Records of individuals who are have met the carrier’s requirements regarding check-in time and not potential or confirmed matches on the No Fly List are destroyed appearance at the gate, and have been involuntarily denied boarding within seven days of travel. Under the Privacy Act of 1974, because the flight was oversold. Before denying boarding to passengers may request a copy of or make corrections to their PNR passengers, an airline must solicit volunteers to relinquish their seats data. In addition, air carriers typically have their own privacy policy in exchange for compensation. If there are not enough volunteers, and are subject to state privacy laws. EU citizens are covered by the a carrier may deny boarding against a passenger’s will, provided EU-US PNR Agreement. that the carrier pays the passenger immediately with Denied Board The DOT protects the privacy of consumers under 49 USC § 41712, Compensation, which varies depending upon the planned arrival which prohibits unfair or deceptive trade practices. The DOT has time of the substitute transportation, if available, and whether the determined that an airline or ticket agent may violate the privacy of flight is domestic or international. For example, if the substitute an airline passenger by: (1) violating the terms of its privacy policy; transportation is scheduled to arrive at the final destination more (2) gathering or disclosing private information in a way that violates than two hours later (or four hours internationally), or if the airline public policy, is immoral, or causes substantial consumer injury not does not make any substitute travel arrangements, the compensation offset by countervailing benefits; (3) violating a rule issued by the doubles (400% of the one-way fare, $1,300 maximum). DOT identifying specific privacy practices to be unfair or deceptive; The carrier must notify the DOT of all passengers involuntarily or (4) violating the Children’s Online Privacy Protection Act denied boarding, on a quarterly basis. The DOT may seek (“COPPA”) or FTC rules implementing COPPA. Individuals may enforcement action against air carriers that improperly deny file privacy-related complaints with the DOT’s Aviation Consumer passengers boarding under Part 20 as well as 49 USC § 41712. Protection website. 4.12 What powers do the relevant authorities have in 4.9 In the event of a data loss by a carrier, what relation to the late arrival and departure of flights? obligations are there on the airline which has lost the data and are there any applicable sanctions? The DOT can seek enforcement action with civil penalties against an air carrier for the unrealistic scheduling of flights, including by Federal law does not specifically regulate the loss of private holding out a chronically delayed flight as an unfair or deceptive consumer data or a data breach in the aviation industry. As described practice and an unfair method of competition. A chronically delayed in question 4.8, however, a passenger may file a privacy-related flight is defined as any domestic flight that is operated at least 10 complaint under the DOT’s unfair and deceptive practice statute, times a month and arrives more than 30 minutes late (including whereby an entity can be fined up to $27,500 per violation. cancelled flights) more than 50% of the time. The holding out of a Air carriers are subject to their own privacy policies and state privacy chronically delayed flight for more than four consecutive months is laws. State privacy laws often require, among other things, reasonable a violation of Section 41712 (14 CFR § 399.81).

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In addition, DOT regulations require carriers to notify passengers of known delays, cancellations, and diversions (14 CFR 259.8). DOT 4.16 Are there any ownership requirements pertaining to regulations also prohibit US and foreign air carriers from allowing GDSs operating in your jurisdiction? a passenger to involuntarily experience a tarmac delay of longer than three hours for domestic flights and four hours for international No. However, the DOT can monitor the actions of GDSs under its flights, with exceptions for certain safety, security, and air traffic unfair and deceptive practice statute, 49 USC § 41712. control concerns (14 CFR 259.4). There have been multiple instances of carriers being fined substantial amounts for failure to 4.17 Is vertical integration permitted between air operators comply with the tarmac delay rule, pursuant to 49 USC §§ 42301, and airports (and, if so, under what conditions)? USA 41712, and 46301. There are patterns of vertical integration in the US, particularly with multiple major operators contracting with smaller operators 4.13 Are the airport authorities governed by particular at regional airports. The operators, however, generally enter into legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities? lease agreements with airports and there is oversight because of competition concerns given that airports are natural monopolies. “Local” competition in the New York area (with JFK, Newark, and The FAA, pursuant to 14 CFR Part 139 and 49 USC § 44706, issues LaGuardia being in competition with each other and JFK’s multiple Airport Operating Certificates to airports that serve scheduled terminals being operated individually by multiple different carriers passenger-carrying operations using aircraft originally designed and non-carriers), can be viewed as an exception. with more than nine passenger seats, or an unscheduled passenger- carrying operation using an aircraft originally designed with more than 30 passenger seats. To satisfy the Part 139 standards, an airport 5 In Future must maintain an FAA-approved Airport Certification Manual, which ensures that safety and maintenance requirements are met. 5.1 In your opinion, which pending legislative or Airports that accept federal funding, such as through the AIP, accept regulatory changes (if any), or potential developments obligations as part of the grant assurances to operate and maintain affecting the aviation industry more generally in the airport in a safe and serviceable condition, not grant exclusive your jurisdiction, are likely to feature or be worthy of attention in the next two years or so? rights, mitigate hazards to airspace, and use airport revenue properly. Operators must also comply with security requirements imposed by the TSA and CBP. Regulations governing Unmanned Aircraft Systems (“UAS”) continue to be the subject of hot debate. In October 2017, a In the event of an excessive tarmac delay, federal law requires Massachusetts federal court struck down a city ordinance that airport authorities to provide for the deplanement of passengers, to attempted to regulate drone operations, finding that most of the the extent practicable (49 USC § 42301). ordinance was preempted by federal law since it “essentially constitute[d] a wholesale ban on drone use” and was an 4.14 To what extent does general consumer protection “interven[tion] in the FAA’s careful regulation of aircraft safety”. legislation apply to the relationship between the The decision is a significant victory for the FAA and drone operators. airport operator and the passenger? Also in October 2017, the White House issued a Presidential Memorandum, directing the DOT and FAA to launch a three-year Airports must provide accessibility to passengers with disabilities UAS Integration Pilot Program. According to the FAA, the program through compliance with applicable sections of the Americans is meant to “safely test and validate advanced operations for drones with Disabilities Act of 1990 (49 USC §§ 12101–12213), Section in partnership” with “a select number of State, local and tribal 405 of the Rehabilitation Act of 1973 (29 USC § 794), and the Air jurisdictions”. Carrier Access Act of 1986 (40 USC § 41705, 14 CFR Part 382). Another significant development in 2017 is the Sixth Circuit’s When airport owners and operators accept federal grants, such as dramatic expansion, in Doe v. Etihad Airways, P.J.S.C., 870 F.3d through the AIP, the Federal Aid to Airports Program, or the Airport 406 (6th Cir. 2017), of the scope of a carrier’s liability under the Development Air Program, they agree to operate their facilities in Montreal Convention. In Etihad, the Sixth Circuit held that a safe and efficient manner and to comply with certain conditions emotional damages are recoverable “so long as they are traceable to and assurances. These assurances include that the airport will be the accident, regardless of whether they are caused directly by the available for public use on fair and reasonable terms without unjust bodily injury” (emphasis in original). Prior to Etihad, the Second, discrimination. Fifth, Eighth, and Eleventh Circuit Courts of Appeal, had held that under the Montreal Convention (and the predecessor Warsaw Convention), a carrier’s liability for emotional damages is limited to 4.15 What global distribution suppliers (GDSs) operate in damages that result from the bodily injury. A petition for rehearing your jurisdiction? by Etihad was denied by the Sixth Circuit on October 6, 2017. Given the conflict between the Sixth Circuit’s recent decision and Amadeus, Sabre and Travelport. the other Circuit courts, a petition for writ of certiorari to the United States Supreme Court will likely be filed by the time this guide goes to print.

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Diane Westwood Wilson Rebecca Tingey LeClairRyan LeClairRyan 885 Third Avenue 885 Third Avenue Sixteenth Floor Sixteenth Floor New York, NY 10022 New York, NY 10022 USA USA

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Ms. Wilson has a commercial litigation and ICC and AAA arbitration Rebecca Tingey focuses her practice on complex commercial litigation practice, representing clients internationally and throughout the United and arbitration and represents domestic and international clients from States, with particular expertise in the aerospace, aviation, and airline various industries, including aviation and airline, insurance, finance, and industries. Ms. Wilson has been personally handling complex disputes manufacturing. She counsels and defends airlines, airport operators and and working with counsel around the world for over 30 years. From developers, and component part manufacturers in state and federal courts. Brazil to London to Bangkok, Ms. Wilson has handled major and minor Ms. Tingey’s commercial litigation experience includes representing claims and multijurisdictional litigation. corporate entities and individuals in matters involving business torts and breach of contract, employment disputes, and shareholder disputes. Ms. Among other significant matters, Ms. Wilson represented EL AL in the Tingey also has experience litigating securities fraud and consumer fraud landmark United States Supreme Court multilateral treaty case, EL AL class actions. Ms. Tingey has been recognised as a “Rising Star” by New Israel Airlines v. Tseng, establishing that in cases involving international York Metro Super Lawyers for the past four years. A graduate of Brooklyn air transportation, the Montreal Convention is the exclusive cause of Law School (J.D.), cum laude, and Cornell University (A.B.), Ms. Tingey action, barring recovery under any other alternative theory of liability. is admitted in New York. The transcript and audio of Ms. Wilson’s argument before the Supreme Court is available at: https://www.oyez.org/cases/1998/97-475. Ms. Wilson provides strategic counselling and representation to a wide variety of airlines, airports and manufacturers in the aerospace, aviation, and other industries in state and federal courts, as well as assisting them in long-term strategic business decisions.

LeClairRyan provides business counsel and client representation in corporate law and litigation. The firm boasts a roster of 350 attorneys representing a full spectrum of clients nationwide. Our aviation industry team represents clients throughout the country and around the world, including leading domestic and international commercial airlines, aviation product manufacturers, aviation service providers, airport developers, owners and operators of private aircraft entities, lessors, financiers, insurers and regulatory bodies. Our team has significant experience representing aviation clients in all facets of aviation law, including litigation; NTSB investigations; regulatory, administrative and enforcement matters before the FAA, DOT, TSA, state justice and other federal and state bodies; airport and aircraft security, employment issues, and the regulation of unmanned aircraft systems (UAS). LeClairRyan also offers clients the talents of attorneys in practice areas such as intellectual property, products liability, labour and employment, finance, corporate services, general counsel and secondments, commercial transactions, and real estate.

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