2016 Contributing Editors John Balfour and Mark Bisset

2015 Ltd

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2016

John Balfour and Mark Bisset Contributing editors

Transport Air Air

GETTING THE DEAL THROUGH Air Transport 2016 Air Transport 2016

Contributing editors John Balfour and Mark Bisset Clyde & Co LLP

Publisher Law Gideon Roberton The information provided in this publication is [email protected] Business general and may not apply in a specific situation. Research Legal advice should always be sought before taking Subscriptions any legal action based on the information provided. Sophie Pallier Published by This information is not intended to create, nor does [email protected] Law Business Research Ltd receipt of it constitute, a lawyer–client relationship. 87 Lancaster Road The publishers and authors accept no responsibility Business development managers London, W11 1QQ, UK for any acts or omissions contained herein. Alan Lee Tel: +44 20 3708 4199 Although the information provided is accurate as of [email protected] Fax: +44 20 7229 6910 September 2015 be advised that this is a developing area. Adam Sargent © Law Business Research Ltd 2015 [email protected] No photocopying without a CLA licence. First published 2oo6 Printed and distributed by Dan White Tenth edition Encompass Print Solutions [email protected] ISSN 1751-9098 Tel: 0844 2480 112

Global Overview 7 Iceland 90 John Balfour Erlendur Gíslason Clyde & Co LLP Logos Legal Services

Afghanistan 11 India 95 M Wisal Khan and Ghazi Khan Amir Singh Pasrich and Mohana Malhotra Legal Oracles I.L.A. Pasrich & Company

Argentina 15 Indonesia 106 Elizabeth Mireya Freidenberg Wahyuni Bahar and Anggia Rukmasari Freidenberg, Freidenberg & Lifsic Bahar & Partners

Austria 21 Italy 110 Joachim J Janezic Laura Pierallini Recht & Co – Janezic & Schmidt Rechtsanwälte OG Studio Pierallini

Bahamas 25 Japan 117 Arthur K Parris Shuji Yamaguchi ParrisWhittaker Okabe & Yamaguchi

Belgium 28 Malta 121 Birgitta Van Itterbeek Tonio Grech Monard Law Dingli & Dingli Law Firm

Brazil 33 Mexico 127 Renata Iezzi Javier Alegre and Carlos Campillo Basch & Rameh Advogados Associados Alegre, Calderón y Márquez Abogados

Canada 38 Netherlands 133 Laura M Safran QC and Prasad Taksal Jeroen Timmermans, Laetitia Kunst-den Teuling and DLA Piper (Canada) LLP Ruben Elkerbout Stek Cayman Islands 45 Louise Groom and Ellie Crespi-McCarthy New Zealand 139 Harneys Frank Porter, Anita Birkinshaw and Rishalat Khan Buddle Findlay Denmark 49 Henrik Kleis and Rune Hamborg Nigeria 145 Delacour Law Firm Etigwe Uwa SAN, Chinasa Unaegbunam and Queenette Hogan Streamsowers & Köhn Dominican Republic 55 Rodolfo Mesa Chavez Norway 151 Mesa & Mesa Abogados Knut Boye, Ingar Fuglevåg and Camilla Flatum Advokatfirmaet Simonsen Vogt Wiig AS European Union 59 Geert Goeteyn Poland 155 Shearman & Sterling LLP Krystyna Marut, Edyta Michalak and Anna Burchacińska-Mańko MMMLegal Legal Counsels France 71 Vonnick Le Guillou, Edouard Sarrazin, Marie Bresson, Portugal 160 Jonathan Rubinstein and Guilhem Argueyrolles João Pedro Alves Pereira and João Marques de Almeida DLA Piper France APTS – Alves Pereira & Teixeira de Sousa RL

Germany 77 Russia 166 P Nikolai Ehlers Mikhail Sokolov, Anna Arkhipova and Sergey Seliverstov Ehlers, Ehlers & Partner Sokolov, Maslov and Partners

Greece 83 Singapore 172 Betty Smyrniou and Konstantina Linardou Rajaram Ramiah and Amos Tan Bahas, Gramatidis & Partners Quahe Woo & Palmer LLC

2 Getting the Deal Through – Air Transport 2016 © Law Business Research Ltd 2015 CONTENTS

Sweden 178 United Arab Emirates 198 Stephan Eriksson and Erik Hägnefors Sander Donald H Bunker, Ian Veall, Christine Veall and Henock Girma Advokaterna Liman & Partners AB Donald H Bunker and Associates

Switzerland 183 United Kingdom 202 Andreas Fankhauser John Balfour Baumgartner Mächler Clyde & Co LLP

Turkey 189 United States 208 M Ali Kartal Andrew J Harakas and Christopher Carlsen Aybay & Aybay Clyde & Co US LLP

Ukraine 193 Uruguay 216 Anna Tsirat Gonzalo Yelpo Jurvneshservice International Legal Services Yelpo & Facal Abogados

www.gettingthedealthrough.com 3

Preface

Air Transport 2016 Tenth edition

Getting the Deal Through is delighted to publish the tenth edition of Air Transport, which is available in print, as an e-book, via the GTDT iPad app, and online at www.gettingthedealthrough.com.

Getting the Deal Through provides international expert analysis in key areas of law, practice and regulation for corporate counsel, cross-border legal practitioners, and company directors and officers.

Throughout this edition, and following the unique Getting the Deal Through format, the same key questions are answered by leading practitioners in each of the jurisdictions featured. Our coverage this year includes Austria, the Cayman Islands, France, Singapore, Sweden, Turkey and Ukraine.

Getting the Deal Through titles are published annually in print. Please ensure you are referring to the latest edition or to the online version at www.gettingthedealthrough.com.

Every effort has been made to cover all matters of concern to readers. However, specific legal advice should always be sought from experienced local advisers.

Getting the Deal Through gratefully acknowledges the efforts of all the contributors to this volume, who were chosen for their recognised expertise. We also extend special thanks to the contributing editors, John Balfour and Mark Bisset of Clyde & Co, for their continued assistance with this volume.

London September 2015

5www.gettingthedealthrough.com Getting the Deal Through – Air Transport 20165 © Law Business Research Ltd 2015 Clyde & Co LLP GLOBAL OVERVIEW

Global overview

John Balfour Clyde & Co LLP

An international business needs international rules. So it is not surpris- One restrictive provision remaining in most bilateral agreements, ing that international conventions provide a number of rules that apply to however, is that of enabling one party to the agreement to refuse to grant international air transport. That the need was recognised at an early stage operating permission to, or to withdraw it from, a carrier from the other is evident from the fact that the Warsaw Convention was signed in 1929 party if that carrier is not substantially owned and effectively controlled and the Chicago Convention in 1944. by its home state or nationals of its home state. This provision in bilateral The Warsaw Convention deals with the liability of air carriers in agreements has essentially prevented cross-border mergers and takeovers respect of carriage by air. It has been amended on several occasions, and between airlines, and has encouraged the development of consolidation by has recently been replaced to a large extent by the Montreal Convention way of alliances. 1999. The Chicago Convention is concerned with various aspects of air transport, particularly aircraft and the right to fly, and also established the Liability and Warsaw/Montreal International Civil Aviation Organization (ICAO). It provides the basis for The Warsaw Convention was a visionary initiative, particularly as at the regulation of many areas of air transport. In addition, there are several the time it was conceived and agreed, aviation was still very much in its international conventions about crimes on board or involving aircraft, and infancy. Since 1929, the Convention has done much to bring order where the Cape Town Convention 2001, which is relevant to aircraft financing. there might otherwise have been chaos, and to contribute to the orderly Air transport is also highly regulated at a national level – principally development of a broadly harmonised system of liability in respect of car- from a safety point of view, but also from an economic point of view. riage by air. Traditionally, access to the market and the behaviour of airlines in the mar- The main features of the Warsaw Convention are: ket have been restricted and regulated, although there has been significant • presumed liability of the airline for passenger death and bodily injury, liberalisation recently, at least in some areas of the world. Somewhat para- loss or damage of baggage and cargo and delay, with only limited doxically, as access to markets is liberalised and deregulated, it becomes defences; more necessary to regulate behaviour in the market in other ways, particu- • limits of liability, breakable only in exceptional circumstances; larly through competition laws, which have an increasing relevance for the • rules on the jurisdiction in which claims may be brought; air transport industry. • a two-year time bar; and There is a third level of regulation, at regional level, most notably in • exclusivity of remedies regarding claims within its scope. the European Union, where much has been done to break down national barriers and liberalise air transport on the one hand, and to harmonise con- In many ways, the Convention has worked well, particularly in resolving ditions and introduce regulation intended to ensure that competition is not difficult conflicts of laws and jurisdictional questions that otherwise would distorted on the other. have arisen. Its liability limits, however, particularly in respect of passenger death and injury, became increasingly controversial. Starting some 40 The Chicago Convention years ago, various steps were taken outside the Convention to try to rem- Other than the establishment of the ICAO, the Chicago Convention is con- edy the situation – partly by airlines voluntarily agreeing a higher limit and cerned with two main areas: the basic system of the registration and regu- partly by certain countries, or groups of countries, requiring airlines to do lation of aircraft; and the right to fly (or rather lack of it). so. By 2000, most major airlines in the world, either voluntarily, or as the The Chicago Convention requires every aircraft to be registered on the result of such national or regional requirement, had agreed not to apply any national register of a contracting state, which is to be responsible for regu- limit in respect of passenger death or injury, and also to waive any defence lating the safety of the aircraft and its operation and the competence of its up to a level of 100,000 special drawing rights (SDR). crew and those who maintain it. The Convention provides for the adop- These changes, and certain others, were incorporated into interna- tion of international standards and recommended practices in a number tional law by the Montreal Convention, signed in 1999, and designed to of areas, such as airworthiness of aircraft, licensing of personnel, etc. The replace the Warsaw Convention where it applies. The principal innovation basic principle is that certificates and licences that meet these standards that the Montreal Convention makes – the abolition of the passenger liabil- and are issued by one contracting state should be recognised by other con- ity limit and the introduction of strict liability up to a level of 100,000 SDR tracting states, although exceptions are allowed. (increased as from 1 January 2010 to 113,100 SDR, to take inflation into The other main area dealt with by the Convention is the right to fly account) – is less radical in practice than it looks, because many airlines internationally – or rather the lack of such right, as the Convention is had already adopted this position, as mentioned above. restrictive in this respect. It commences by affirming that the contracting There are three other main differences between the Montreal and states recognise that every state has complete and exclusive sovereignty Warsaw Conventions: over the airspace above its territory, and goes on to provide that no sched- • the baggage liability limit is more or less trebled and no longer based uled international air service may be operated over or into a contracting on weight (so that Montreal introduced a limit of 1,000 SDR per pas- state without its special permission (although there is a greater degree of senger, now 1,131 SDR to take account of inflation, compared with a liberalisation in respect of non-scheduled services). This has led to the previous limit of 250 gold francs or 17 SDR per kilogram) – a change emergence of a web of bilateral air service agreements between countries, with greater practical than legal consequences; under which traffic rights are granted on a reciprocal basis. Traditionally, • the cargo limit (of originally 17 SDR per kilogram, but increased to 19 these agreements have been restrictive and protective of competition, SDR, to take account of inflation) is unbreakable – even in the event of although there has been significant liberalisation recently in some parts of intentional or reckless misconduct. This is also the position under the the world. Warsaw Convention as amended by Montreal Protocol No. 4, but not many states are party to that; and www.gettingthedealthrough.com 7

• the Montreal Convention adds a fifth jurisdiction in which claims may person is at an airport and the act is likely to cause serious injury or death or be brought, namely the country of the passenger’s principal and per- cause other types of damage or destruction prejudicial to safety. manent residence, provided that the airline operates there, either on The Convention applies if either the place of take-off or the place its own or under an arrangement with another airline such as code- of actual or intended landing is situated, or the offence is committed or sharing. The effects of this additional jurisdiction still have to be seen, the offender found, outside the state of registration of the aircraft. The but they could be quite significant in legal terms in some cases, where Convention obliges the state where the offence is committed, the state they enable a US passenger, or his or her dependants, who would not of registration of the aircraft, the state in which the lessee of the aircraft otherwise have been entitled to do so, to bring a claim in the US and has its main residence or place of business and the state where the aircraft recover US levels of damages. lands with the offender on board to take all necessary measures to establish jurisdiction, and the state in whose territory the offender is to extradite him At present, 111 states and the EU are party to the Montreal Convention, or her to one of those states or take steps to establish its own jurisdiction. including all EU and EEA states and the US, China, India, Australia and A convention on the suppression of unlawful acts relating to interna- a number of other important aviation states, although some important tional civil aviation and a protocol amending the 1970 Hague Convention states (eg, Russia) are not yet party. As a result, a potentially confusing were signed in Beijing in 2010, but neither is yet in force. position exists whereby, depending on the route of the journey, sometimes the Montreal Convention applies and sometimes the Warsaw Convention Aircraft financing applies. This situation will continue, although increasingly diminish, until The Cape Town Convention on International Interests in Mobile all states have ratified the Montreal Convention. Equipment, supplemented by a Protocol on Matters Specific to Aircraft Two further conventions were signed in Montreal in 2009 on the sub- Equipment, was adopted on 16 November 2001 and entered into force on ject of damage caused by aircraft to third parties, but neither is yet in force. 1 March 2006. At present, 57 states and the EU are party to it. Its principal aim is to establish common rules dealing with the financ- Crimes ing and leasing of aircraft and an international system for the registration of There are three international conventions specifically concerned with rights and interests arising in connection therewith, so as to reduce the risks crimes on aircraft and affecting aviation, as follows. of lending for aircraft financiers, and hence reduce the cost of borrowing. The Convention also establishes an international register, administered by The Tokyo Convention 1963 the ICAO, in which various interests in aircraft can be registered, where- The Tokyo Convention 1963 was drawn up principally to deal with prob- upon they will take priority over subsequently registered and unregistered lems that had been experienced in practice concerning jurisdiction and interests. extradition in the case of criminal offences committed on board aircraft off the ground. It entitles and obliges the state of registration of the aircraft, European Union measures if it is party to the Convention, to establish jurisdiction in respect of such Although the European Economic Community (now known as the European offences, and entitles other states to exercise jurisdiction if the offence has Union) was founded in 1957, it was not until the 1980s that it started to make effects for that state. It also provides that such an offence is to be treated its effects felt in the air transport sector. Since then, progress has been sig- for extradition purposes as if committed in the state of registration of the nificant and there now exists a virtually complete internal market in air aircraft, as well as where it was in fact committed, so that extradition may transport among the 28 EU member states (and the three EEA states). be sought and granted under existing extradition treaties, although the Convention creates no obligation to grant extradition. Liberalisation It gives power to the aircraft commander to impose reasonable meas- The way in which this result was achieved was principally as a result of ures if he or she has reasonable grounds to believe that a person has com- three ‘packages’, which liberalised access to routes, fares and rates in mitted or is about to commit such an offence, or an act jeopardising safety or a phased process between 1988 and 1993. In addition, the third package good order on board. The measures, including restraint, are those that are introduced common licensing requirements for air carriers and the prin- necessary to protect the safety of the aircraft, and persons and property on ciple that any air carrier satisfying these requirements had to be allowed board, to maintain good order and discipline, or to enable the commander to operate, thus at the same time bringing an end to national monopolies to deliver the person to competent authorities or to require the person to and enabling an airline from one EU member state to establish itself and disembark. acquire an airline in another member state. Although the legal changes A protocol to amend the Convention was signed in Montreal in 2014 were slow to produce practical results, in due course they led to significant but is not yet in force. developments, not least the emergence and increasing expansion of low- cost carriers and cross-border operations. The third package was consoli- The Hague Convention 1970 dated into and replaced by a new regulation with effect from 1 November The Hague Convention 1970 is aimed mainly at hijacking. It makes it an 2008, which basically continues the previous provisions but adds some offence for a person on board an aircraft in flight to unlawfully, by force or new rules, particularly on the transparency of fares. by other form of intimidation, seize or exercise control of the aircraft, or attempt to do so or be an accomplice to such an offence or attempt. Air transport policy legislation The Convention applies if either the place of take-off or the place of The basic liberalisation laws have been accompanied by a growing body landing is a state other than the state of registration of the aircraft. Each of of legislation dealing with other aspects relevant to air transport, comple- the states of registration of the aircraft, the state where the aircraft lands menting liberalisation measures and harmonising rules and standards in with the offender on board and the state in which any lessee of the aircraft the areas of environmental and consumer protection. has its main residence or place of business must take all necessary measures Regulation No. 95/93 (as amended by Regulation Nos. 894/2002 and to establish jurisdiction. The state in whose territory the offender is must 793/2004) provides common rules on slot allocation at airports within either extradite the offender to one of those states or take steps to establish the EU. Directive 96/67 introduces greater competition into the ground- its own jurisdiction. handling market at airports within the EU. The practical effects of both The Convention also aims to facilitate extradition by treating the measures have been somewhat limited, but the ground-handling Directive offence as having been committed not only where it occurred but also will soon be updated. More recently, Directive 2009/12 on airport charges in the other three states mentioned above, and providing that it is to be was adopted, but it makes only modest changes. treated as an extraditable offence as between contracting states. On the technical front, Regulation No. 3922/91 provides for the harmonisation of technical requirements and administrative procedures, and Montreal Convention 1971, supplemented by the Montreal Protocol mutual recognition, in connection with the design, manufacture, operation 1988 and maintenance of aircraft and persons and organisations involved in The Montreal Convention 1971 is aimed at similar behaviour, but with these tasks. This regulation has been significantly supplemented recently a broader scope. It makes it an offence for a person to perform an act of by Regulation No. 216/2008, which also establishes the European Aviation violence against a person either when the person is on board an aircraft in Safety Agency. flight and the act is likely to endanger the safety of the aircraft, or when the Regulation No. 996/2010 establishes rules concerning the investigation and prevention of civil aviation accidents and incidents and Directive

8 Getting the Deal Through – Air Transport 2016

2003/42 contains rules on occurrence reporting in civil aviation. Regulation The European Commission has applied the treaty’s rules on state aid No. 300/2008 lays down common basic standards on aviation security, and to a number of cases of assistance to airlines, in most cases permitting Directive 2004/36 lays down rules and procedures for ramp inspections of the assistance, either on the ground that it does not constitute ‘aid’ or in third-country aircraft using airports within the EU. return for commitments given by the government or airline concerned. In In March 2004, four regulations (Nos. 549/2004 to 552/2004) were some cases, the European Commission has found the assistance to be con- adopted with the intention of creating a single European sky by laying trary to the rules – for example, in February 2004 in respect of assistance down common provisions on various aspects of the provision of air traffic given by Charleroi Airport in Belgium and its regional government owner management services. They were amended by a ‘second package’ of meas- to Ryanair, although its decision was annulled by the European Court of ures in October 2009, and there is a current proposal for a further update. Justice towards the end of 2008. There have been several directives aimed at reducing aircraft noise (most The European Commission has also used its powers under the Merger recently Directive 2006/93), and Directive 2008/101 included aviation Regulation (139/2004) to investigate a number of concentrations involving within the EU emissions trading scheme. airlines, in each case except three (Ryanair/Aer Lingus (twice) and Aegean/ In relation to passenger protection, Regulation No. 2027/97 abolished Olympic (the first time)) permitting the concentration to proceed, but often the Warsaw Convention’s passenger liability limit in respect of EU-based on the basis of various commitments accepted by the airlines in question airlines, and was amended by Regulation No. 889/2002 to bring the liabil- intended to facilitate new entry and competition, principally by way of giv- ity position of these airlines into line with the Montreal Convention. ing up slots at congested airports. Regulation No. 785/2004 imposes various minimum insurance Although the state aid rules only apply to aid given by governments requirements on air carriers and aircraft operators. Regulation No. of EU member states, Regulation No. 868/2004 enables the European 261/2004 lays down rules on compensation and assistance to passengers Commission to take action against airlines from non-EU states receiving in the event of denied boarding, cancellation and long delay. Regulation subsidy from public sources or engaging in unfair pricing practices, in such No. 2111/2005 authorises the European Commission to establish a black- a way as to cause injury to EU airlines, by imposing duties on them. The list of airlines banned from operating in the EU, and obliges carriers and European Commission has not yet exercised these powers, and is currently others selling air tickets to advise passengers of the identity of the carrier working on a possible amendment or replacement of the regulation. actually operating the flight. Finally, Regulation No. 1107/2006 imposes obligations on airlines and airports with regard to passengers with reduced External relations mobility. With the internal air transport market in the EU more or less completed, the European Commission has recently been turning its attention to the Competition rules question of external aviation relations. Its hand was considerably strength- The internal market in aviation within the EU has been achieved largely by ened by the judgments of the European Court of Justice in November the legislative measures mentioned above, but application of the competi- 2002 in infringement proceedings that the European Commission brought tion rules contained in the EU Treaty has also played an important part. against various member states in respect of their air services agreements Original doubts about whether the competition rules even applied to air with the US. Although the court upheld the validity of these agreements in transport were dispelled by the landmark judgment of the European Court most respects, it held that member states had infringed their EU law obli- of Justice in 1986 in the Nouvelles Frontières case. Following that judg- gations in connection with the right of establishment by allowing a tradi- ment, special regulations were introduced implementing the competition tional ‘nationality clause’ to subsist in the agreements – namely, a clause rules for air transport within the EU. This special regime ended on 1 May permitting the US to withhold or withdraw operating rights from an airline 2004 and since then air transport has been subject to competition rules in if it is not substantially owned and effectively controlled by the home state exactly the same way as other industry sectors. This means that air trans- or its nationals. port between the EU and non-EU states is now fully subject to competition Following the judgments, the European Council gave the European rules – a fact perhaps not as widely appreciated as it should be. Commission a mandate to negotiate with third countries to amend air ser- The European Commission has applied the competition rules to a vice agreements to bring them into line with the judgments, while the right number of airline practices, agreements and arrangements. It has issued of individual member states to continue to negotiate air service agreements decisions granting exemptions for a number of airline alliances, subject to was recognised, provided that they respect certain conditions. Such negoti- conditions – including the three main global airlines. ations have been successfully concluded between the commission and over The European Commission has also imposed fines in several cases 40 other countries. At the same time, the European Commission has been where it has found infringement of the competition rules – most signifi- proceeding with fuller negotiations with various other states, particularly cantly, fines amounting to almost €800 million imposed on 11 airlines in neighbouring and nearby states: common aviation area agreements have November 2010 for a cartel on air cargo surcharges. been concluded with Switzerland, Morocco, Georgia, Jordan, Moldova, Israel and with the eight Balkan countries. A significant breakthrough took

John Balfour [email protected]

The St Botolph Building Tel: +44 20 7876 5000 138 Houndsditch Fax: +44 20 7876 5111 London EC3A 7AR www.clydeco.com United Kingdom

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© Law Business Research Ltd 2015 GLOBAL OVERVIEW Clyde & Co LLP place on 30 April 2007, with the signature of the Air Transport Agreement moving from regulation controlling entry to the market and the ability to between the EU and the US, which came into provisional effect on 30 March compete to the other types of regulation necessary in a competitive mar- 2008. While it did not go as far as the commission would have liked, and ket. This is in the form of competition rules and other measures designed was only extended to a limited extent by the protocol that has been applied to ensure fair conditions for competition and protection of consumers. since 24 June 2010, it essentially applies ‘open skies’ principles between the As such rules and measures are applied on a national or regional (eg, US and the EU and confirms that the US will accept that any EU airline can EU) basis, there is an increasing risk of international fragmentation, and operate to or from the US from any point in the EU. A similar agreement was of airlines having to satisfy a variety of differing rules – something that the signed with Canada early in 2009 and with Brazil in 2011. Chicago Convention and the ICAO system have on the whole successfully avoided in relation to safety rules. Paradoxically, this is taking place at Rules and regulation the same time as increasing consolidation among airlines. It may become The air transport industry will always remain highly regulated from the desirable for the ICAO’s areas of competence to be extended, or for air safety point of view. In relation to other forms of regulation, the focus is transport to be more fully involved in the WTO system.

10 Getting the Deal Through – Air Transport 2016

Afghanistan

M Wisal Khan and Ghazi Khan Legal Oracles

General operational requirements provided thereunder, except where such persons are exempt from such requirements. 1 Which bodies regulate aviation in your country, under what basic laws? 4 Is access to the market for the provision of air transport Prior to the promulgation of new aviation legislation in 2012, the Ministry services regulated and, if so, how? of Transport and Civil Aviation regulated civil aviation in Afghanistan. The Yes. Air carriers can access the market after their existence is duly estab- newly established independent body, the Civil Aviation Authority (CAA), lished in accordance with the Aviation Law and international stand- pursuant to the Civil Aviation Law, 2012 (the Aviation Law), now regulates ards. The procedure for establishment of an air carrier is provided in the it. Regulation on the Incorporation of Air Operating Entities 2009 (the Air In addition, as a party to the Chicago Convention, Afghanistan has Operators Incorporation Regulation) and the Private Investment Law laid down the Civil Aviation Safety Regulations (the Safety Regulations) 2005 (the Investment Law). The Air Operators Incorporation Regulation in accordance with the standards set forth and recommended by the requires the applicant to have, inter alia: International Civil Aviation Organization (ICAO). • a sound and competent flight safety, technical and managerial organisational structure with highly competent human resources; Regulation of aviation operations • an operations manual; 2 How is air transport regulated in terms of safety? • a business plan; Air transport in terms of safety is regulated in accordance with the Safety • a security programme; Regulations. The Safety Regulations present ICAO standards as regulatory • an ICAO registration certificate and three-digit code; and requirements for aircraft operations in Afghanistan mainly derived from • approval from the Council of Ministers. Title 14 of the United States Code of Federal Regulations (14 CFR) and the European Joint Aviation Requirements (JAR). The Safety Regulations com- Further, in order to operate, air carriers must obtain an air operator’s cer- prise 11 parts and provide, inter alia, for the following: tificate (AOC) from the CAA. The detailed procedure for obtaining an • Part 1: general policies, procedures and definitions; AOC and the application requirements are set out in Part 9 of the Safety • Part 2: licensing of personnel; Regulations. • Part 3: certification and administration of aviation training Access to the market for the provision of domestic air transport services organisations; within the country is available only to aircraft registered in Afghanistan. • Part 5: aircraft airworthiness; • Part 7: safety requirements for instruments and equipment; 5 What requirements apply in the areas of financial fitness and • Part 8: operation of aircraft and flight norms; nationality of ownership regarding control of air carriers? • Part 9: air operation certification, flight operations management, Part 10 of the Safety Regulations requires a foreign air operator to have maintenance requirements, security management and dangerous sufficient financial resources to conduct safe operations within and to and goods management; from Afghanistan. The CAA determines the financial fitness of the appli- • Part 10: operation requirements for foreign commercial air carriers; cant or air carrier, keeping in view the type of operations, operations base and and flight outesr provided in the business plan. • Part 11: aerial work operations. There are no restrictions or limitations on nationality of ownership regarding control of air carriers. The Investment Law and the Air Operators The CAA enforces the Safety Regulations. However, they have not been laid Incorporation Regulation permits 100 per cent foreign ownership in an air down in accordance with the Regulation on the Procedure and Preparation carrier incorporated in Afghanistan. of Legislative Documents and have not been gazetted as required under the Regulation on Publication and Enforcement of Legislative Documents 6 What procedures are there to obtain licences or other rights to 1999. Therefore, the enforceability of the Safety Regulations is question- operate particular routes? able in view of the laws of Afghanistan. While applying for an AOC the applicant/air carrier is also required to state in its application the routes intended to be used. The routes approved by 3 What safety regulation is provided for air operations that do the CAA are specified in the air transport certificate (ATC). not constitute public or commercial transport and how is the distinction made? Domestic routes are largely allocated at the discretion of the CAA while international routes are regulated in accordance with mutual agreements Air operations that do not constitute public or commercial transport are on bilateral air services or international treaties to which Afghanistan is a regulated by Part 11 of the Safety Regulations: aerial work operations. party. Pursuant to article 5(3) of the Aviation Law, aircraft operations can take place for specialised services. Clause 1.1.2(a)(1) of Part 11 of the Safety 7 What procedures are there for hearing or deciding contested Regulation defines ‘aerial work’ as an aircraft operation in which an air- applications for licences or other rights to operate particular craft is used for specialised services such as agriculture, construction, routes? photography, surveying, observation and patrol, search and rescue, aerial advertisement, etc. There are no specific procedures for hearing contested applications. Part 11 of the Safety Regulations requires all persons who conduct Applications are examined by the CAA based on the merit of the applicant, aerial work in Afghanistan to comply with the applicable airworthiness and which is assessed according to the applicant’s readiness and the suitability www.gettingthedealthrough.com 11

© Law Business Research Ltd 2015 AFGHANISTAN Legal Oracles of the air operations such as number of aircraft, frequencies, type of air- 10 Are there specific rules in place to ensure aviation services craft, aircraft use, market size, financial situation and an increase in tour- are offered to remote destinations when vital for the local ism and facilitating consumers. The CAA is authorised to prohibit the economy? issuance of ATCs to foreign applicants or limit them to fulfilment of special There are no specific rules in place to ensure that aviation services are conditions. offered to remote destinations when vital for the local economy. However, the CAA intends to lay down rules by providing tax incentives to air carriers 8 Is there a declared policy on airline access or competition and, providing services to remote destinations. if so, what is it? There is no declared policy of the CAA on airline access or competition. 11 Are charter services specially regulated? However, access to airline services depends on the general policy of the No. Charter services are considered part of commercial air transport ser- Ministry of Transport and the CAA depending on the licensing criteria pro- vices and therefore are subject to the provisions of the Aviation Law, the vided in the Aviation Law and the Air Operators Incorporation Regulation. Safety Regulations and the Airport and Civil Aviation’s Installation Fee Regulation (ACAIFR). 9 What requirements must a foreign air carrier satisfy in order to operate to or from your country? 12 Are airfares regulated and, if so, how? Pursuant to article 9 of the Aviation Law and Part 9 of the Safety Airfares were not regulated under the Civil Aviation Law 2003. The new Regulations, no foreign air carrier is allowed to operate in Afghanistan Aviation Law provides that air carriers shall fix airfares and thereafter unless it holds an AOC from its respective country and is duly authorised obtain approval of the same from the CAA. However, the CAA has not yet by the terms and conditions thereof to conduct air operations to and from started regulating airfares as required by the new Aviation Law. Further, Afghanistan. The CAA grants the AOC in consideration of a fee in accord- the Law on Protection of Competition, published in the Official Gazette ance with the provisions of the Aviation Law. Issue No. 1010 dated 30 June 2010 (the Competition Law), prohibits unjust Part 10 of the Safety Regulations provides that requirements under- commercial practices provided thereunder. lined in the applicable provisions of Parts 7 and 8 of the Safety Regulations, and applicable standards contained in the Annexes to the ICAO Aircraft Convention, shall be applicable to the foreign air carrier as well as any other requirements specified by the CAA. 13 Who is entitled to be mentioned in the aircraft register? Do However, foreign air carriers are required to hold operations specifica- requirements or limitations apply to the ownership of an tions provided by the CAA. The application for OPs must be filed with the aircraft listed on your country’s register? CAA in the form and manner prescribed by the CAA and be supported by, Pursuant to the provisions of article 16 of the Aviation Law, aircraft regis- among others, the following documents: tration is the responsibility of the CAA, which shall maintain an Aircraft • a copy of a valid AOC or equivalent document issued by the relevant Registry. The Aviation Law requires the CAA to examine ownership docu- foreign authority; ments of the aircraft and its engines, wings and all other parts at the time • a copy of the licence or authorisation granted to the air carrier by the of registration of the aircraft. Persons who wish to register an aircraft in appropriate CAA of the state of the air operator to operate an air trans- Afghanistan should have ownership rights or possessory rights to the port service to and from Afghanistan; aircraft such as a lease. The CAA registers leased aircraft in the Aircraft • a copy of the approval page for a minimum equipment list for each air- Registry after confirmation of the same from the owners of the aircraft. craft type intended to be operated by the air carrier in Afghanistan; In addition, Part 4 of the Safety Regulations requires that the name of the • a representative copy of a certificate of registration and certificate of owner and the operator of the aircraft shall appear on the certificate of airworthiness issued for the aircraft types proposed to be operated by registration. the air operator in Afghanistan; There are no nationality limitations with regard to ownership of an air- • a copy of a document identifying the maintenance checks that are craft. In view of article 17 of the Aviation Law and Part 4.2.1.2 of the Safety required to be carried out for aircraft of the air carrier while they are Regulations, aircraft are eligible for registration if they are owned by: operated in Afghanistan (ie, a maintenance programme); • government institutions; • a copy of any equivalent operations specifications issued by the for- • domestic and foreign entities; eign CAA/relevant authority for any specialised flight operations • aid agencies and social organisations; specifications requested by the foreign air operator for operations in • private enterprises; or Afghanistan; and • local and foreign individuals. • a proposed aircraft operator security programme for the foreign air operator who does not hold an AOC issued by the CAA that meets the 14 Is there a register of aircraft mortgages or charges and, if so, requirements of the Safety Regulations, for the acceptance and subse- how does it function? quent approval of the Authority. There is no register of aircraft mortgages in Afghanistan. Although Afghanistan is a signatory to the Convention on International Interests in Operation specifications contain details of the purpose of issuance, appli- Mobile Equipment, the Convention has not been ratified by the Afghan cation and duration, limitations required by the operator, general provi- parliament. In view of article 90 of the Constitution of Afghanistan, ratifi- sions, en-route authorisation and limitations, aerodrome authorisations cation of international treaties and conventions is under the powers of the and limitations, maintenance, mass and balance, interchange of equip- parliament. International treaties and conventions not ratified in accord- ment operations, and aircraft leasing operations. ance with the International Treaties Law promulgated in 1989 are not The Safety Regulations also require a foreign air carrier to use an air- enforceable in Afghanistan. craft technical log and carry an air operations manual, documents and Aircraft mortgages or charges may, however, be registered under the flight crew licences and other additional information, forms and docu- mortgage laws in the general mortgage registries maintained by different ments prescribed under Part 10 of the Safety Regulations. authorities. Further, as required by the Aviation Law, foreign air carriers are not allowed to conduct domestic operations within Afghanistan and their 15 What rights are there to detain aircraft, in respect of unpaid international services are regulated in accordance with mutual agreements airport or air navigation charges, or other unpaid debts? on bilateral air services or international treaties to which Afghanistan is a party. Generally, there is no specific detention right available to the CAA in Further, a foreign air carrier shall also supply to the CAA proof of respect of unpaid airport or air navigation charges or other unpaid debts. insurance of the aircraft, flight crew, passengers, luggage and cargo in However, Chapters 9 of the Aviation Law provides a range of penalties for accordance with the international conventions and applicable laws and failure of an operator to fulfil its financial obligations and pay aviation ser- regulations. vice charges, including fines, suspension of flights and cancellation of the AOC. Further, the CAA may also exercise the right to lien available under the Civil Law of Afghanistan.

12 Getting the Deal Through – Air Transport 2016

16 Do specific rules regulate the maintenance of aircraft? for the death of a person) or arsh (the Islamic concept of fixed compensa- Yes. Part 9 of the Safety Regulations provides maintenance requirements tion for injury not resulting in death of a person) or hukumat al-’adl (the of aircraft in respect of operational and emergency equipment and air- Islamic concept of compensation for injury not resulting in the death of a worthiness. Air carriers shall ensure that their aircraft are maintained and person). released to service by either an approved maintenance organisation cer- With regard to loss or damage to baggage or cargo, air carriers are tificated under Part 6 of the Safety Regulations or by an equivalent system. liable to pay 1,000 afghani per kilogram for loss of baggage and cargo, and Pursuant to the provisions of article 42 of the Aviation Law, the CAA 20,000 afghani against each passenger for damage to baggage in the pos- shall issue a certificate of airworthiness, which shall contain information in session of the passenger within the aircraft. Where the value of the cargo respect of operational guides, flight safety requirements and other require- or baggage is higher than the amount of compensation mentioned above, ments and limitations. then requirements of the provisions of article 67 of the Aviation Law shall be fulfilled before loading of such baggage and cargo. Airports 25 Are there any special rules about the liability of aircraft 17 Who owns the airports? operators for surface damage? All airports in Afghanistan are state-owned and operated by the CAA. Yes. Compensation rules mentioned in question 24 are also applicable to operators for surface damage. Pursuant to the provisions of article 65 of 18 What system is there for the licensing of airports? the Aviation Law, any event that causes death or any other injury to a pas- There is no system for the licensing of airports. However, the new avia- senger in the aircraft or when boarding or disembarking the aircraft shall tion law authorises the CAA to lease out parts of airport facilities and be compensated. Article 50 of the Aviation Law further creates liability of structures, with the exception of air traffic control services, aviation infor- the carrier for damage caused by objects that fall from, or are thrown out mation services, aviation communication services and arrival and depar- of, the aircraft. ture strips, to third parties. The CAA is contemplating initiating the same However, the air carrier would not be liable to compensate the passen- in the near future. gers if it is established that loss or damage was caused due to a fault in the cargo itself or its packing. 19 Is there a system of economic regulation of airports and, if so, how does it function? 26 What system and procedures are in place for the investigation of air accidents? Yes. In view of the ACAIFR promulgated in 2005, airports are divided into three categories in respect of airport structure and technical facilities. In The CAA conducts investigation of air accidents. Once an accident is addition, Hamid Karzai Airport in the capital Kabul, Kandahar Airport reported to the CAA, it appoints an investigation team. Investigations are in Kandahar province. Mazar Sharif Airport in Mazar province and Herat conducted in accordance with Parts 8 and 9 of the Safety Regulations and Airport in Herat province are international airports. All airport charges are the policies of the CAA. Investigation reports are submitted with the CAA, collected in accordance with the rates provided under the ACAIFR for each which may be made public. airport category. 27 Is there a mandatory accident and incident reporting system 20 Are there laws or rules restricting or qualifying access to and, if so, how does it operate? airports? The Aviation Law requires the pilot in command to report any threat or dan- Generally, all aircraft are required to land at the designated airports and ger posed to the aircraft and its passengers. The Aviation Law also requires strips complying with all the requirements stipulated by the CAA. The any person who finds traces of a lost or damaged or destroyed aircraft to Aviation Law authorises the CAA to restrict or qualify access to airports report to local authorities immediately. Part 8 of the Safety Regulations due to the unavailability of necessary facilities required for safety of the provides detailed rules with regard to mandatory reporting. aircraft or for public security reasons. Further, the Aviation Law prohibits the entry of unauthorised persons in airport vicinities that have been des- Competition law ignated with special signs. 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? 21 How are slots allocated at congested airports? There are no competition rules in the aviation sector in Afghanistan. Slots are allocated by the CAA at each individual airport in accordance General provisions of the Competition Law would be applicable. with the aerodrome and en-route procedures published and edited by the CAA from time to time and other policies of the individual airports. 29 Is there a sector-specific regulator or are competition rules applied by the general competition authority? 22 Are there any laws or rules specifically relating to ground handling? There is no regulator for competition in the aviation sector. In view of the Competition Law, the National Competition Board (NCB) is the only Part 9 of the Safety Regulations requires an AOC holder to arrange appro- regulator that is responsible for regulating competition-related mat- priate ground handling facilities at each airport to ensure the safe servicing ters. However, the NCB has not yet started functioning, even though the and loading of its flights. The Safety Regulations allow air carriers to sub- Competition Law has been in effect since 2010. Instead, a new body, the contract services related to ground handling to external agencies. Rules of Competition Promotion and Consumer Protection Directorate under the the Competition Law are applicable in case of unjust commercial practices Ministry of Commerce and Industry is given mandate to regulate matters and agreements concluded in violation of its provisions. related to competition. 23 Who provides air traffic control services? And how are they 30 How is the relevant market for the purposes of a competition regulated? assessment in the aviation sector defined by the competition Air traffic control services are provided and regulated by the CAA in authorities? accordance with Part 8 of the Safety Regulations. Since there is no regulator and no sector-specific competition rules exist in Afghanistan, there are no criteria that define the relevant market for com- Liability and accidents petition assessment. 24 Are there any special rules in respect of death of, or injury to, passengers or loss or damage to baggage or cargo in respect of 31 What are the main standards for assessing the competitive domestic carriage? effect of a transaction? Yes. Chapter VIII of the Aviation Law provides special rules with respect In view of the provisions of the Competition Law, there are three types of to death of or injury to passengers or loss or damage to baggage or cargo in infringement of competition rules: domestic carriage. With regard to death or injury of a passenger, the air car- • transactions, contracts or agreements that tend to prevent, restrict or rier shall pay diyya (the Islamic concept of compensation as blood money distort fair competition and harm consumers are prohibited; www.gettingthedealthrough.com 13

• unjust commercial practices and the abuse of a dominant position in 36 Must clearance from the competition authorities be obtained a market that results in prevention, restriction and distortion of fair before state aid may be granted? competition are prohibited; and Not applicable. • mergers by one or more undertakings that result in any of the following are prohibited: 37 If so, what are the main procedural steps to obtain clearance? • unjust commercial practices in the market; Not applicable. • an extraordinary increase or decrease in prices; • creation of a dominant position or strengthening of a dominant 38 If no clearance is obtained, what procedures apply to recover position in favour of a person; and unlawfully granted state aid? • establishment of a controlling entity in the market. Not applicable. The Competition Law prohibits acquisition of assets, capital or shares of an entity that distort fair competition in one or more markets. Miscellaneous The Competition Law prohibits the abuse of a dominant position in a 39 Is there any aviation-specific passenger protection market for goods or services within the entire country. legislation? 32 What types of remedies have been imposed to remedy No. However, the Aviation Law provides basic and general rules regarding concerns identified by the competition authorities? cancellation and airfares. In addition, general provisions of the Civil Law 1977 and the Commercial Code 1955 would be applicable with regard to The Competition Law authorises the NCB to initiate investigation pro- denied boarding, cancellation and delays. ceedings with regard to transactions and acts that may infringe competition rules. As a result, the NCB may undo all transactions, agreements, 40 Are there mandatory insurance requirements for the mergers and acquisitions, and impose fines and order cessation of the busi- operators of aircraft? ness operations of the violators. Persons affected by unjust commercial and anti-competitive practices may bring compensation claims under the Yes. Article 10 of the Aviation Law stipulates that air carriers shall obtain Competition Law in the competent courts. Since the competition regime is insurance for the aircraft, flight crew, passengers, luggage and cargo in very new in Afghanistan, cases under the Competition Law are rare. accordance with the international conventions and applicable laws and regulations. Financial support and state aid 41 What legal requirements are there with regard to aviation 33 Are there sector-specific rules regulating direct or indirect security? financial support to companies by the government or In view of the Aviation Law, the CAA is responsible for security of the civil government-controlled agencies or companies (state aid) in aircraft, airports and aviation facilities with coordination of the relevant the aviation sector? If not, do general state aid rules apply? law-enforcement agencies in accordance with ICAO standards and inter- There are no sector-specific rules regulating direct or indirect financial national procedures. To this end, the CAA takes all necessary measures support to companies by the government or government-controlled agen- with regard to security of airports, passengers and crew screening includ- cies or companies in the aviation sector in Afghanistan. However, the ing aerodrome security. Public Finance and Expenditure Management Law governs direct financial support to companies by the state. 42 What serious crimes exist with regard to aviation? The Aviation Law and other criminal laws of Afghanistan establish a num- 34 What are the main principles of the state aid rules applicable ber of crimes relating to aviation that include: to the aviation sector? • any act of aggression against a person on-board an aircraft in flight if Not applicable. such action endangers the safety of the aircraft; • use of force or threat to use force and seizure of an aircraft thereof; and 35 Are there exemptions from the state aid rules or situations in • hijacking of an aircraft. which they do not apply? Not applicable.

M Wisal Khan [email protected] Ghazi Khan [email protected]

2nd Floor Tel: +93 20 221 1427 Park Plaza, Shahr e Naw www.legaloracles.com Kabul Afghanistan

14 Getting the Deal Through – Air Transport 2016

Argentina

Elizabeth Mireya Freidenberg Freidenberg, Freidenberg & Lifsic

General • Law Nos. 22,028, 23,399 and 23,519 (ratification of the 1977, 1984 and 1980 Montreal amendments to the Chicago Convention); 1 Which bodies regulate aviation in your country, under what • Law No. 14,111 (ratification of the Warsaw Convention 1929); basic laws? • Law No. 17,386 (ratification of the Hague Protocol 1955); The National Civil Aviation Agency (ANAC) (Executive Decree 239/2007 • Law No. 23,556 (ratification of the 1975 Montreal Protocols modifying and Executive Decree 1770/2007). ANAC has authority regarding the the Warsaw Convention and the Hague Convention); compliance with the Argentine Aeronautical Code (AAC) and bilateral and • Decree-Law No. 12,359/57 (ratification of the Geneva Convention 1948 multilateral international agreements, to which Argentina is a party and all on the International Recognition of Rights in Aircraft); matters regarding air transport and civil aviation and airport activities, as • Law No. 17,404 (ratification of the Rome Convention 1952 on Damage well as developing Argentina’s air policy. Caused by Foreign Aircraft to Third Parties on the Surface); In accordance with Executive Decree 1770/07, articles 13 and 26, the • Decree-Law No. 18,730/70 (ratification of the Tokyo Convention 1963 Secretary of Transportation (ST) will deal exclusively with fare regulations, on Offences and Certain Other Acts Committed on Board Aircraft); air policy related to the concession of airports and traffic rights and the • Law No. 19,793 (ratification of the Hague Convention 1970 for the negotiation of bilateral agreements. Suppression of Unlawful Seizure of Aircraft); As of 1 July 2009, ANAC has jurisdiction over: • Law No. 20,411 (ratification of the Montreal Convention 1971 for the • operational matters; Suppression of Unlawful Acts Against the Safety of Civil Aviation); • the granting of slots (in conjunction with the airport concessionaire in • Law No. 23,111 (ratification of the Rome Convention 1933 for the certain airports); Unification of Certain Rules on Precautionary Arrest of Aircraft); • the granting of traffic rights to the carriers; • Law No. 23,915 (ratification of the 1971 Protocol for the Suppression • the granting of licences to technical personnel; of Unlawful Acts of Violence at Airports Serving International Civil • operators; Aviation); • technical certification of aircraft; and • Law No. 25,806 (sub-regional agreement with Bolivia, Chile, Brazil, • handling of the aircraft registry, the accidents investigation board, Paraguay, Peru and Uruguay. Fortaleza Agreement for the exchange of meteorology. traffic rights in routes outside of the scope of the bilateral air services agreements between those countries); Since the creation of Executive Decree 1840/2011, air traffic control • Law No. 26,451 (the Convention for the Unification of Certain Rules has been under the jurisdiction of the Argentinian Air Force General for International Carriage by Air signed at Montreal on 28 May 1999); Directorate of Air Traffic Control and overseen by ANAC. and The basic aeronautical laws and regulations are Law No. 17,285, as • Law No. 14,457 (ratification of the 1948 Geneva Convention on the amended by Law No. 22,390 (ACC) and Executive Decree 326/82, which international recognition of rights in aircraft). regulate the activities connected with the civil and commercial use of private aircraft, infrastructure, liability, insurance, contracts on aircraft, the Argentina has also signed bilateral agreements on air transport services National Aircraft Register, personnel, etc. with the following countries ratified by the following laws: Article 2 of the AAC sets forth that when a matter is not contemplated • Law No. 23,339 (Germany); within its norms, the matter has to be resolved by the general principles of • Law No. 17,988 (Bolivia); aeronautical rules, uses, traditions and customs of the aeronautical activ- • Law No. 13,920 (Brazil); ity. If the solution of the case remains confused despite the application of • Law No. 23,453 (Canada); those rules, analogous laws and general principles of the law of the country • Law No. 25,834 (Korea); should be applied. • Law No. 25,836 (Netherlands); Executive Decree 919/2010 created the Ministry of Tourism. The • Law No. 23,970 (Denmark); decree provides that the Ministry of Tourism will, in connection with the • Law No. 23,426 (United States); ST, participate in the elaboration, implementation and coordination of the • Decree-Law No. 35,544 (Spain); air transport policy only when it is related to a tourism matter. • Decree-Law No. 431/63 (Switzerland); Other air transport regulations include Law No. 19,030 as amended • Law No. 23,558 (France); by Law No. 19,534 (the National Policy on Commercial Air Transport), Law • Law No. 25,805 (Russia); No. 26,102 Airport Security Police (PSA), Executive Decree No. 239/07 as • Law No. 13,913 (Italy); amended by Executive Decrees 1770/2007, 52/94 as amended by Executive • Law No. 25,397 (Malaysia); Decrees 1012/2006, 2186/92, 1401/98, 1470/97, Executive Decree 1364/90 • Law No. 22,912 (Mexico); regulated by Air Force Resolution 444/91, and Executive Decree 2145/73 • Law No. 25,621 (Mexico); as amended by Executive Decrees 480/94 and 698/01. Argentine Civil • Law No. 23,969 (Norway); Aviation Regulations (RAAC) approved by ANAC Resolution No. 3/2005 • Law No. 23,911 (New Zealand); and many others also regulate air transport in Argentina. • Law No. 17,103 (Paraguay); Argentina has ratified the following multilateral conventions: • Law No. 25,833 (UK); • Decree-Law No. 15,110/46, Law No. 13,891 and Law No. 25,622 (ratifi- • Law No. 26,188 (China); cation of the Chicago Convention 1944); • Law No. 25,025 (Singapore); • Law No. 24,237 (Sweden); www.gettingthedealthrough.com 15

• Law No. 16,748 (Switzerland); Domestic and international scheduled services are granted by con- • Law No. 26,450 (Panama); cession of the executive authority (ANAC or ST) but the concession to • Law No. 26,677 (Ecuador); and operate a route does not imply exclusivity. • Memorandum No. 2074 (Qatar). Non-scheduled domestic and international services require authorisation granted by the same listed authority. Memoranda of consultation have been agreed between Argentina and International transport may be operated by foreign companies in most of the countries with which it has signed the above agreements to accordance with the international air services agreements signed by amend or modify the ratified agreements. Argentina, or under authorisation from the Argentine federal authority Bilateral air services agreements have also been signed with Turkey, the (ANAC) in the legal framework of Law No. 19,030 as amended by Law United Arab Emirates and South Africa, but they still have not been ratified No. 19,534. by law. Other memoranda of consultation have been signed with countries 5 What requirements apply in the areas of financial fitness and with which no bilateral air services agreements are in force. nationality of ownership regarding control of air carriers? According to AAC article 105, no permit or concession will be granted with- Regulation of aviation operations out examining the technical expertise and financial soundness of the peti- 2 How is air transport regulated in terms of safety? tioner. Such control is conducted throughout the duration of the permit or concession once granted by the authority. A permit or concession may be The ANAC (formerly the AAF) sets out the rules on safety and checks revoked by the Aeronautical Authority upon failure to comply with any pre- compliance. established condition attached to the granting of the permits. Every aircraft must fly with a pilot on board who is the principal According to section 99 of the AAC, 51 per cent of the share capital of authority. In the case of danger, the captain must stay at his or her position an air carrier must be owned by Argentine individuals or Argentine legal until all of the safety measures have been taken. He or she ensures the effi- entities, who must be domiciled in Argentina. In the case of legal enti- ciency of the aircraft and the safe conditions of the flight before taking off. ties, the president of the corporation must be Argentine and 51 per cent A mechanic licensed by the Argentine Authority must approve the safety of the members of the administrative bodies must also be Argentine. conditions of the aircraft before it takes off. A flight dispatcher licensed by Furthermore, the chairman of the board and two-thirds of the board the Argentine Authority takes responsibility for the weight and balance of members must also be Argentine. The AAC (section 129) establishes a the aircraft before it takes off, even if remote dispatch is implemented. public hearing procedure for Argentine carriers requesting a concession As of 1 July 2009, ANAC establishes general rules related to aircraft or permit, which is regulated by Executive Decree 1492/92 as amended by circulation and may impose restrictions when national defence, public Executive Decree 2186/92. Aircraft with a take-off weight of less than 38 interest or the safety of the flight is at risk. tons can be excluded from this procedure. No aircraft can fly without a crew with valid licences, aircraft airwor- Executive Decree 52/94 as amended by Executive Decree 1012/06 has thiness and registration certificates, and a logbook. It is also required that clarified that Argentine commercial corporations as referred to in section when an aircraft has been repaired, modified or built, that an inspection is 99 of the AAC may apply for the granting of a permit or concession even if carried out by the aeronautical authority before an aircraft can take off. The its shareholders are foreigners. authority can inspect persons, aircraft, crew and carried goods, particularly There are several law projects to derogate both decrees, but at the time those that may endanger the safety of the flight, before departure, during of writing none of them has been formally discussed by Congress. flight, upon landing and while on the ground, taking the proper measures to secure the safety of the flight (AAC sections 3, 8, 9, 10, 12 and 13, Law No. 6 What procedures are there to obtain licences or other rights to 24,051 on Hazardous Remains). The PSA is in charge of security within the operate particular routes? airport terminals and ramp according to Law No. 26,102. A National Safety Operational Programme for Civil Aviation (2008/2011) was approved by The licence or concessions procedure to operate particular routes is estab- the Argentine Air Force on 2/5709 by Disposition 28/2009 and revised by lished by Law No. 19,030 as amended by Law No. 19,534 and by Executive Disposition 074/10. Decree 2186/92. Licences are granted in relation to certain routes and for ANAC is responsible for compliance with the Chicago Convention a period that will not exceed 15 years (the licence is renewable). See ques- norms and its Annexes regarding safety. tion 5.

3 What safety regulation is provided for air operations that do 7 What procedures are there for hearing or deciding contested not constitute public or commercial transport and how is the applications for licences or other rights to operate particular distinction made? routes? Section 92 of the AAC makes a distinction between air service transporta- The party interested in obtaining licences to operate commercial air ser- tion (the commercial transportation on an aircraft of passengers or goods vices will have to describe the characteristics of the service it intends to from one airport to another), and aerial work, which includes all com- operate and provide the documentation required by law. After the applica- mercial air operations that are not transportation. To perform aerial work, tion is filed by the carrier, the authority will check if all the requirements operators need an authorisation granted by ANAC (AAC section 131/32). have been met and notify the interested parties that a public hearing will be Aircraft performing aerial work must comply with the general aviation called. The interested parties must register with the Air Transport Board to regulations and the rules applicable to any special equipment they carry take part in the hearing and be able to contest the application of the peti- on board. tioners (AAC 129, Executive Decrees 1492/92 and 2186/92). Safety is governed by the AAF Resolution (RAAC) approved by the Joint Resolution 3/2005 issued by three AAF agencies (the Air Transport 8 Is there a declared policy on airline access or competition and, Authority, the Air Navigation Authority and the Air Licensing Authority). if so, what is it? On 18 November 2010, ANAC issued Resolution 980 approving modifica- Law No. 19,030 as amended by Law No. 19,534 governs Argentine Air tion No. 2 to the third edition of the Civil Avation Regulations with regard Policy. to Parts 1, 18, 61, 63, 64, 65, 67, 91, 119, 121, 135 and 145 (see www.anac. From 1998 onwards, permits and concessions to new carriers have only gov.ar). been granted on the basis of unsatisfied demand for certain routes. A detailed procedure to ascertain the unmet demand and the granting of routes is estab- 4 Is access to the market for the provision of air transport lished in Annex 2 to Executive Decree No. 1401/98 as amended by Executive services regulated and, if so, how? Decree 2186/92. Antitrust Law No. 25,156 may apply to airline agreements For the provision of domestic transport, according to sections 97 and and mergers (see question 28). following of the AAC, Argentine individuals or corporations domiciled in Argentina may be eligible to obtain an authorisation from the federal government (see question 5).

16 Getting the Deal Through – Air Transport 2016

9 What requirements must a foreign air carrier satisfy in order If the aircraft weighs less than six tons it can bear provisional Argentine to operate to or from your country? registration if it is connected with a carrier holding commercial authority The party interested in obtaining traffic rights to operate between a for- (article 43 CCA). eign country and Argentina and vice versa must comply with the following requirements: 14 Is there a register of aircraft mortgages or charges and, if so, • a diplomatic designation by the country of the carrier’s flag; how does it function? • the foreign carrier must register as an Argentine branch of the foreign Mortgages and any rights on aircraft are registered at the Public Aircraft corporation at the Argentine Superintendency of Corporations under Registry. the terms of section 118 of the Corporations Law No. 19,550; and A public or private instrument, duly notarised and legalised by the • once the foreign carrier has been duly registered in Argentina as a nearest Argentine consulate or apostilled if the transaction was imple- branch it must request the authorisation to operate international mented outside Argentina, is necessary for registration (AAC sections 45, scheduled or non-scheduled air services to the Argentine Aeronautical 52, 53 and sections 1 and 28 of Executive Decree 4907/73). Authority and provide: The Aircraft Registry functions under the AAC and regulations estab- • the corporation’s documents; lished by Decree 4907/73. The registry issues regulations from time to • the commercial and operative permits obtained in its country of time that must be complied with by the parties that intend to register rights origin; on aircraft. • details of the aircraft that it intends to operate in the route; • certificates of registration and airworthiness; 15 What rights are there to detain aircraft, in respect of unpaid • an insurance certificate that covers the carrier’s operations; and airport or air navigation charges, or other unpaid debts? • its liability regarding its passengers, cargo and mail, third parties Section 73 of the AAC sets forth the only five scenarios where an aircraft on the ground and crew members. may be detained: • in case of a judicial sentence being executed; 10 Are there specific rules in place to ensure aviation services • in case of credits being granted for the accomplishment of a trip; are offered to remote destinations when vital for the local • in case of unpaid credits originating in an aircraft contract of sale; economy? • in case of unpaid airport fees for more than three months (according to Sections 48 to 50 of Law No. 19,030 establish that public transport services Executive Decree 1674/1976); and may be authorised if there is a national interest in providing services to • in case of non-compliance with certain regulations (deportees) set areas where public transport needs are not fulfilled. forth in the Immigration Law No. 25871 (article 48). Executive Decree No. 1012/2006 sets out that the provisions for emergency air transport in Argentine territory previously declared by Executive Finally, it should be noted that Argentina is a party to the Convention for Decree 1654/2002 will continue. The main reason for the continuity of air the Unification of Certain Rules relating to the Precautionary Attachment transport emergency provisions is to protect transport to remote destina- of Aircraft (Law 23,111). tions and keep the different areas of Argentina connected. Article 138 AAC sets forth that certain routes of special interest to 16 Do specific rules regulate the maintenance of aircraft? Argentina may be subsidised under certain conditions. Maintenance is regulated by the the RAAC and the Regulations of Airworthiness issued by ANAC (formerly the AAF). Those regulations 11 Are charter services specially regulated? apply to all aircraft that bear Argentine registration and also to aircraft with Charter services are regulated by Executive Decree, 1470/97, 1364/90 a foreign registration if they are operating for an Argentine carrier. (Incoming), Resolution ST No. 205/1998 and Tourism Secretary Resolution No. 173/95 (outgoing). Some bilateral agreements contain provisions on Airports charter flights. 17 Who owns the airports? 12 Are airfares regulated and, if so, how? Section 25 of the AAC establishes that airports may be public or private. Public airports are owned by the provincial or federal government and may Resolution SSTA 275/87 establishes that there are minimum and maxi- be granted in concession to private entities. mum limits for domestic fares for each route. Carriers must notify the ST of the fares that will apply for each route. Executive Decree 1012/06 sets 18 What system is there for the licensing of airports? forth that fares for domestic transport must be charged by the carriers with regard to Executive Decree No. 1654/2002 and complementary Resolution The licences are granted by the executive power by means of public 35 of the Ministry of Production, which establishes the possibility of apply- bidding. ing touristic fares from those fixed, on routes of geopolitical, strategic or tourism interest. From time to time the ST has authorised increases in 19 Is there a system of economic regulation of airports and, if so, domestic airfares (ie, Resolution ST 257/08, ST 210/10 and ST 23/2012). how does it function? International airfares are deregulated but carriers must register its For airports that have been privatised, the terms and conditions of the con- applicable airfares with ANAC. cession are to be complied with by the concessionaire. Such terms and conditions require the concessionaire, among other obligations, to pay a fee Aircraft and to make certain investments in each of the privatised airports. Some concessionaries must pay a fixed fee, and others pay a percentage of the 13 Who is entitled to be mentioned in the aircraft register? Do income they receive. requirements or limitations apply to the ownership of an Investments, control and planning of the privatised airports must be aircraft listed on your country’s register? regularly reported to the Regulatory Agency for the National System of Section 48 of the AAC, as governed by Executive Decree 4907/73, states Airports (ORSNA) for approval. that the only requirement for registering an aircraft in Argentina is to Aeropuertos Argentina 2000 SA (AA2000) is the current conces- have legal domicile in the country, which applies to both individuals and sionaire of 33 airports of the National Airport System including Ministro corporations. Pistarini, Ezeiza Airport and Aeroparque Jorge Newbery, serving Buenos Section 42 of the AAC sets out that aircraft that have a take-off weight Aires. This concession contract was renegotiated in 2007 as set forth in of more than six tons may obtain a provisional Argentine registration if Executive Decree 1799/2007. By the negotiation terms the AA2000 has they comply with certain requirements. In this case the owner or mortga- the obligation to invest in the airport but not to pay a fee. This concession gee of the aircraft (or both) is recorded in the aircraft register. This section is controlled by the ORSNA. is used by Argentine carriers when leasing or acquiring aircraft in a foreign Many investments will be made by forming a trust. The airport conces- country to obtain a provisional Argentine registration until the full price sionaire will assign part of the airport fees and taxes to a fiduciary trustee in agreed for the transaction is fully paid. order to grant the execution of new construction.

www.gettingthedealthrough.com 17

20 Are there laws or rules restricting or qualifying access to when the accident that occasioned the damage had taken place on board airports? the aircraft or during embarkation or disembarkation. (Note that Argentine Access to public airports should be granted by ANAC, in the framework courts also award moral, not just corporal, damages.) The carrier is also of Title I, Chapter I of the AAC. Every commercial arrival or departure to responsible in cases of destruction, loss or damage of registered luggage public airports must be authorised by ANAC. and cargo, when the cause of the damage has taken place during transpor- In order to operate international flights the airport must have been tation. The carrier will not be held responsible if it proves that it has taken qualified as an international airport by the aviation authority. all the necessary measures to avoid the damage, that it was impossible for Airport access restrictions (operation procedures) are published in it to take them, or if it proves that the person that has suffered the damage NOTAMs (notices concerning the conditions or changes to any facility) caused it or contributed to causing it. issued by the aviation authority. The carrier’s liability is limited. The limitation will not, however, operate when the damage is caused by its wilful misconduct or by a carrier’s 21 How are slots allocated at congested airports? employee. Argentina is a party to the Convention for the Unification of Certain Disposition 006/2003 issued by the former Undersecretary of Civil Rules Relating to International Carriage by Air, signed at Warsaw on Aviation that established the slot allocation procedure was replaced by 12 October 1929 (Law No. 14,111); the Protocol to Amend the Convention ANAC Resolution No. 764/10. for the Unification of Certain Rules Relating to International Carriage by Before a scheduled or non-scheduled commercial service is approved Air, signed at Warsaw on 12 October 1929 and signed at The Hague on by the Aviation Authority the airport principal (appointed by the Aviation 28 September 1955 (Law No. 17,386); the Additional Protocols No. I, II, Authority) and the airport administrator (appointed by the airport owner III and IV to amend the Convention for the Unification of Certain Rules or concessionaire) must approve the slots. There are no specific rules for Relating to International Carriage By Air signed in Warsaw on 12 October congested airports. 1929 (Law No. 23,556) and the Convention for the Unification of Certain Rules for International Carriage by Air signed in Montreal on 28 May 1999 22 Are there any laws or rules specifically relating to ground (Law No. 26,451). handling? Executive Decree 2145/73 sets forth that the AAF is the exclusive provider 25 Are there any special rules about the liability of aircraft of ground handling to airlines at airports and authorises the AAF to assign operators for surface damage? such service to third parties. Consequently, the AAF has assigned the right The operator is responsible for damages caused by an aircraft in flight or to perform ground handling to a state-owned corporation, Intercargo SAC. a person or a thing thrown from it or abnormal noise. The responsibility Executive Decrees 480/94 interpreted Executive Decree 2145/73 as of the operator can be attenuated or exempted, if it proves that the victim follows: carriers operating in Argentine airports may self-handle but may caused the damage or contributed to causing it. Liability is limited accord- not provide services to other operators. ing to the aircraft’s take-off weight (sections 155 to 162 of the AAC). Law Executive Decree 698/01 removed for domestic carriers the handling No. 23,111 ratified the Rome Convention 1933 for the Unification of Certain services exclusivity, allowing carriers to provide handling services not only Rules on Precautionary Arrest of Aircraft. to themselves but also to other domestic operators. See question 1 regarding AAF duties being transferred to ANAC. 26 What system and procedures are in place for the investigation ORSNA Resolution 421/11 establishes new fares for ramp services. of air accidents? 23 Who provides air traffic control services? And how are they Accident investigations are regulated by Annex 13 to the Chicago regulated? Convention, AAC sections 185 to 190 and Executive Decree 934/70. The Accidents Investigation Board, which was within the jurisdiction On 30 July 2015, Law 27.161 was published in the Argentine Public Gazette. of ANAC, was moved by Executive Decree 1192/10 to the jurisdiction of Law 27.161 creates a government agency with the purpose of providing the secretary of transportation. The Accidents Investigation Board is in air navigation services. The agency is Air Navigation Company Argentina charge of carrying out the investigation. It will determine the causes of Sociedad del Estado (EANA SE) within the legal framework of the Ministry accidents and incidents to aircraft or produced by them. of the Interior and Transportation. This newly created government agency will provide service for commercial and civil navigation services since the 27 Is there a mandatory accident and incident reporting system wording of the law specifically exempts services provided at airports by the and, if so, how does it operate? Ministry of Defence. The role of Law 27.161 is to provide an essential public service and Sections 185 to 190 of the AAC and Executive Decree 934/70 govern acci- describes which are the public services that it will provide: administra- dent investigations in Argentina. tion of air transit and ATC; administration of air traffic flow management, According to the above norms, any person who knows of a flight acci- airspace management, aeronautical information services, aeronautical dent or incident has to communicate this to the closest authority (military communication services, communications, navigations and surveillance, agency or police) who will immediately notify the Accidents Investigation aeronautical meteorological services, search and rescue and the Airport Board. Until the arrival of the personnel in charge of the investigation a Reservation Office. guard must be stationed at the accident site to avoid the site being dis- EANA SE will be a state-owned company and its shareholders will turbed or evidence being removed. be the Ministry of the Interior and Transportation and the Ministry of Defence. Competition law The services to be provided by EANA SE are those that at this time are 28 Do sector-specific competition rules apply to aviation? If not, provided by the Argentine Air Force and the personnel and budget of the do the general competition law rules apply? latter will be transferred from the Air Force to EANA SE. There are no sector-specific competition rules applied to aviation, general EASA SE will be ruled by the legal norms and principles of private cor- competition rules apply instead. porations. The employee contract of EANA SE will be ruled by the labour Antitrust Law No. 25,156 establishes a procedure to avoid disloyal com- law. petition based upon the abuse of a dominant position. In addition, the fees charged for the provision of services to users will constitute, among other funds, the budget of EANA SE. 29 Is there a sector-specific regulator or are competition rules applied by the general competition authority? Liability and accidents The competition rules are applied by the National Antitrust Commission 24 Are there any special rules in respect of death of, or injury to, (CNDC), which is the competition authority. passengers or loss or damage to baggage or cargo in respect of The CNDC must request the opinion of the aviation authority in avia- domestic carriage? tion-related matters. According to sections 139 to 154 of the AAC, the carrier is responsible for the damages caused by death or corporal injury suffered by a passenger

18 Getting the Deal Through – Air Transport 2016

30 How is the relevant market for the purposes of a competition regulations exonerating government debt to allow for the privatisation of assessment in the aviation sector defined by the competition a state-owned company. authorities? Nevertheless, when Aerolíneas Argentinas Sociedad del Estado, a The competition authorities have not defined the relevant market in the state-owned company, was privatised as Aerolíneas Argentinas SA, a pri- aviation sector. However, Law No. 25,156 defines the characteristics of the vate corporation, it was exonerated by the government of all liabilities dominant position of an offeror of services with the intention of prevent- (Executive Decrees 1591/89, 461/90, 575/90, 1024/90, 1354/90, 2201/90 ing offerors from unilaterally determining fares or avoiding competition; and 2438/90). the relevant market may be defined as that in which one or more airlines, At present, Aerolíneas Argentinas SA is again a state-owned company. regardless of flag country, effectively exercise traffic rights between two Law No. 26,466 of 2008 stated that the stocks of Aerolíneas Argentinas SA countries. (AR) and its subsidiaries and affiliate companies are of ‘public interest’ and the stock is subject to expropriation in accordance with the Expropriation 31 What are the main standards for assessing the competitive Law (Law No. 21,499). effect of a transaction? The above-mentioned Law No. 26,466 also says that the executive power shall provide the mechanism to cover the financial needs of AR and The main objective of the Antitrust Law is to protect the general economic it shall prepare AR business, strategic and operative plans. interest (consumers and other competitors) and competition in the markets. Law No. 25,156 introduces a preventive control that aims to avoid the 36 Must clearance from the competition authorities be obtained abnormal operation of the market. A commercial operation is considered before state aid may be granted? to be detrimental to the general public when an offeror gains control of the market. Law No. 25,156 is aimed at preventing the irreversible effects that Clearance does not need to be obtained from the competition authority an economic concentration of corporations might have on competition and before state aid can be granted. the results that such a concentration might produce. 37 If so, what are the main procedural steps to obtain clearance? 32 What types of remedies have been imposed to remedy See question 36. concerns identified by the competition authorities? Mergers and acquisitions must be notified to the CNDC. 38 If no clearance is obtained, what procedures apply to recover In the case of mergers or acquisitions worth more than 200 million unlawfully granted state aid? pesos, previous authorisation from the CNDC must be requested and In all cases where state aid is unlawfully granted, administrative and crimi- obtained. nal procedures to recover illegally spent public funds apply. A few years ago, the CNDC rejected a vertical integration between an The Criminal Code (CC) contemplates the following measures: airport concessionaire and an airline. The CNDC in this case evaluated the • section 260 establishes that a government employee who gives funds airport concessionaire’s power to govern the regulation of fares. The nega- or effects a different destination from that which the law sets forth will tive evaluation of the effects of vertical integration was based on the exist- be punished; and ence of incentives that the airport operator (integrated vertically) could • section 248 establishes that a government employee who violates the have used to expand its market power to domestic air transport. constitution, federal or local laws or does not carry out laws that he or Law No. 25,156 establishes fines in case of its violation, which may be she is obliged to fulfil will be punished. appealed to the judicial courts. A motion to vacate the administrative decision must be filed in court in Financial support and state aid order to recover funds from the beneficiary. 33 Are there sector-specific rules regulating direct or indirect Miscellaneous financial support to companies by the government or government-controlled agencies or companies (state aid) in 39 Is there any aviation-specific passenger protection the aviation sector? If not, do general state aid rules apply? legislation? There are sector-specific rules regulating direct or indirect financial sup- The Ministry of Economy, Public Works and Services Resolution 1532/98 port to individual companies by the government in the aviation sector establishes domestic and international general conditions for contracts and they are contemplated in section 138 of the AAC, section 6 of Law No. for air transport. Passenger protection rules regarding denied boarding, 19030 and Executive Decree 1012/2006. cancellations and delays are included. Also, there are several state aid regulations that support the aviation Package and holiday protection has been established by several rules sector in matters of fuel and fares (eg, ST Resolutions 360/2007, 257/2008 issued by the tourism secretary, enacted in the framework of the Brussels and 315/2008, which set forth a compensation regime for domestic sched- Convention of 1970 ratified by Law No. 19,918/72. uled flights’ fuel price). In the case of bankruptcy the passenger must file a proof of claim of his or her credit against the insolvent airline like any other creditor before 34 What are the main principles of the state aid rules applicable the commercial courts. to the aviation sector? There are no specific protection laws in case of disabled passengers and Section 138 of the AAC states that the federal government may subsidise CRS/Distribution. Nevertheless there are general rules such as Law No. air transport services on routes of public interest. 22,431, Law No. 23,592, Law No. 24,515 and Executive Decree 1086/2005, This means that the state may grant subsidies at its discretion for com- etc, which prevent discrimination. mercial transport or aerial work, when the route to be subsidised or the Furthermore Argentina is a party to several treaties that prevent dis- aerial work activity is declared of public interest. crimination including, among others: Section 6 of Law No. 19,030 also establishes that the state will distrib- • the American Convention on Human Rights (Law No. 23,054); ute financial aid to compensate for financial loss originating from the appli- • the American Declaration of the Rights and Duties of Man; cation of promotional fares in scheduled air transport services to remote • the Universal Declaration of Human Rights; destinations that have been declared to be of general interest of the state • the International Pact of Civil and Political Rights (Law No. 23,313); where the service is not cost-effective. Executive Decree 1012/2006 estab- • the International Pact on Economic Social and Cultural Rights (Law lishes a minimum and a maximum level for domestic air carriers’ fares. No. 23,313); • the International Convention on the Elimination of all Forms of Racial 35 Are there exemptions from the state aid rules or situations in Discrimination (Law No. 17,722); which they do not apply? • the International Convention on the Elimination of All Forms of Discrimination against Women (Law No. 23,179); Provided the preconditions mentioned in question 33 are met, the gov- • the Convention on the Rights of the Child (Law No. 23,849); and ernment may grant subsidies to the best of its judgment. There are no • the Convention Against Torture and Other Cruel, Inhuman or general exemptions or other limitations contemplated by the applicable Degrading Treatment or Punishment (Law No. 23,338).

www.gettingthedealthrough.com 19

Any passenger, as a service user, is protected by Law No. 24,240 as amended comply with ICAO and Argentine legal standards (in particular with PSA by Law No. 26,361 (Consumer Rights Protection Law). Nevertheless, sec- Disposition 074/10). tion 63 of said law sets forth that international liability conventions that regulate aviation liability take priority over Law No. 24,240. 42 What serious crimes exist with regard to aviation? Serious aviation crimes are established in the Criminal Code (CC). They 40 Are there mandatory insurance requirements for the include: operators of aircraft? • threats to the safety of an aircraft, aggravated penalties apply if those Sections 191 to 196 of the AAC establish that the following insurance must threats result in an air accident, injuries to, or the death of a person be provided to the aviation authority in order to operate aircraft: (section 190 of the CC); • employee insurance (for all those who carry out functions on board); • impediment or obstruction of the normal functioning of air transport • insurance against damage caused by death or injury suffered by a pas- (section 194 of the CC); senger (note that according to Argentine jurisprudence moral dam- • abandoning an aircraft or position before arriving at the final destina- ages are granted for death or personal injury as well as for delay or tion (section 195 of the CC); cancellation of flights) or damage to transported cargo and mail; and • acts of imprudence or negligence that cause an accident or air colli- • insurance against damages caused to third parties on the surface. sion, with aggravated penalties applying if the accident or collision causes injuries or death of a person (section 196 of the CC); and For international flights the insurance must at least cover the liability limi- • piracy: acts of plundering or violence against an aircraft while in flight tations set forth in the international conventions that have been ratified by or while engaged in pre-flight operations, or against persons or prop- Argentina and those established by the AAC. erty on board, without being duly authorised by a belligerent nation. This also includes usurpation of the aircraft authority, impediment 41 What legal requirements are there with regard to aviation or obstruction of the defence of the aircraft attacked by hijackers and security? dealing with hijackers. Aggravated penalties apply if the act of piracy Law No. 26,102 created the PSA, a specific police force to ensure airport causes injuries or the death of a person (section 198 and 199 of the security. The PSA controls all airports and installations, and the areas near CC). to all airports. Each carrier operating in, to and from Argentina must provide the PSA See question 1 regarding ratification by Argentina of the conventions that with its security manual for the PSA’s approval. Security manuals must deal with criminal activities related to aviation.

Freidenberg, Freidenberg & Lifsic

Elizabeth Mireya Freidenberg [email protected]

25 de Mayo 611 Tel: +54 11 4311 0598 Piso 3º, Ofic 3, Bloque II Fax: +54 11 4311 0852 1002 Buenos Aires Argentina

20 Getting the Deal Through – Air Transport 2016

Austria

Joachim J Janezic Recht & Co – Janezic & Schmidt Rechtsanwälte OG

General oversight authority. Since the end to all opt-out periods is fast approaching there will no longer be a set of national rules. 1 Which bodies regulate aviation in your country, under what basic laws? 4 Is access to the market for the provision of air transport According to the Austrian Constitution aviation is a federal subject mean- services regulated, and if so how? ing that legislation and enforcement have to be done on the federal Market access follows the respective European Regulations – mainly Reg level. The central law is the Austrian Aviation Act dating back to 1957 (EC) No. 1008/2008, which rules that for intra-Community air services but amended several times, which is accompanied by a few other spe- (including domestic air services) no special permission is required. For air cific laws (eg, the Law on Aviation Security, the Law on Transportation services to and from third countries a specific route licence according to of Dangerous Goods, etc) and ordinances (eg, the Ordinance on Civil the Law on Air Services 2008 (BGzLV 2008) needs to be obtained. Aviation Personnel, the Ordinance on the Air Operator Certificate (AOC), the Ordinance on the Rules of the Air, etc). Since European aviation law has 5 What requirements apply in the areas of financial fitness and recently became more and more harmonised, the importance of national nationality of ownership regarding control of air carriers? legislation has gradually decreased. The most important regulatory bodies are the Ministry of Transport, Innovation and Technology (BMVIT) According to article 5 of Reg (EC) No. 1008/2008, certain special financial and Austro Control, which is not only the central Austrian administrative conditions have to be met to obtain an operating licence. For example, the aviation authority but also the national air navigation service provider and applicant for an operating licence has to produce a business plan for at least national meteorological service provider. The provinces and municipal the first three years. The documents presented to the authority shall also authorities are responsible for some (minor) activities (eg, the approval of detail the applicant’s financial links with any other commercial activities airfields, off-field landings and take-offs, approval of aviation obstacles). in which the applicant is engaged either directly or through related under- Regulatory affairs regarding air sports are delegated to the Austrian Aero takings. There are no specific national rules detailing European law on the Club, a private sports club that is entitled to act on behalf of the Republic national level, but the BMVIT has published on its website a comprehen- of Austria. sive document explaining what is expected to be presented by an applicant. Particular to Austria, the competent authority for the procedure to Regulation of aviation operations obtain an AOC is Austro Control, whereas the BMVIT is the competent authority to check the financial fitness and to issue the operating licence. 2 How is air transport regulated in terms of safety? Regarding control of air carriers, there are no specific national rules Since Austria is a member of the European Union most issues are ruled by beyond article 4(f) of Reg (EC) No. 1008/2008. or in accordance with the respective acquis communautaire. For those activities not subject to Reg (EC) No. 1008/2008 (eg, air ser- Since Austria applies the European regulations in most cases at vices performed by non-power-driven aircraft or ultralight power-driven the latest possible moment (but always in accordance with the ‘opt-out aircraft or both, and local flights) the respective European rules would be rules’) some of the issues ruled by the Air Crew Regulation (Reg (EU) No. applied per analogiam. 1178/2011), the Air Operations Regulation (Reg (EU) No. 965/2012) and the other Implementing Regulations to EASA Basic Regulation (Reg (EC) No. 6 What procedures are there to obtain licences or other rights to 216/2008) are still subject to national law. Where European law is already operate particular routes? applicable the national laws and ordinances are restricted to designate the For intra-Community air services according to article 15 of Reg (EC) No. competent authority and rule on those issues reserved for the national leg- 1008/2008 no specific route licence is required. islator (eg, to detail the airspace structure in accordance with Part-SERA). For third-country traffic there are several bilateral air service agree- Aircraft, crew, operations and aerodromes that are not within the ments concluded by Austria with about 100 countries globally. Within the scope of the harmonised European law are ruled by the applicable national scope of those air service agreements air carriers might apply to be desig- laws and ordinances (eg, the Ordinance on Civil Aircraft (ZLLV 2010), nated by Austria. the Ordinance on the Noise Emission of Civil Aircraft (ZLZV 2005), the For third-country traffic on a scheduled basis such applications have to Ordinance on Aviation Personnel (ZLPV 2006) and the Ordinance on be submitted 30 days in advance; and in case of limited traffic rights under Aerodromes (ZFV 1972). bilateral air services agreements 60 days in advance. For those aircraft operations not covered by Reg (EU) No. 965/2012, For third-country traffic, on a non-scheduled basis, the same condi- there are no specific rules on a national level. tions as for scheduled traffic apply, except aircraft below 14kg maximum take-off mass (MTOM), humanitarian or rescue flights – these flights do 3 What safety regulation is provided for air operations that do not need prior approval, therefore no application is required. not constitute public or commercial transport, and how is the distinction made? 7 What procedures are there for hearing or deciding contested In Austrian aviation law, there is no specific definition of ‘commercial applications for licences or other rights to operate particular activity’ (as, for example, in article 3(i) of the EASA Basic Regulation). routes? Therefore, there is no precise distinction between commercial air trans- There is a directory of traffic rights (available traffic rights or allocated port, specific operations (ie, aerial work) and non-commercial operations. traffic rights) kept by the BMVIT; this directory is accessible to interested It cannot be denied that in the past some commercial activities were han- operators. All applications for limited traffic rights will be published so that dled as private and therefore did not come to the attention of the competent competitors may apply within 30 days of such publication. The BMVIT www.gettingthedealthrough.com 21

© Law Business Research Ltd 2015 AUSTRIA Recht & Co – Janezic & Schmidt Rechtsanwälte OG then chooses applicants that best meet market demands, based on criteria For aircraft that do not fall under the scope of the European legisla- such as financial fitness, sustainability, frequency, capacity offered, etc. tion (eg, aircraft referred to in Annex II of the EASA Basic Regulation) the ZLLV 2010 applies and rules that only an approved maintenance organi- 8 Is there a declared policy on airline access or competition, and sation is permitted to maintain aircraft and that the work has to be done if so what is it? according to a maintenance programme. Basically, the system is quite Since Austria is a member state of the European Union, EU market access similar to the one established according to European legislation. and competition rules apply, but there is no declared national airline access or competition policy. Airports 17 Who owns the airports? 9 What requirements must a foreign air carrier satisfy in order In Austria there are six airports (in the sense of the definition of article 64 to operate to or from your country? of the Austrian Aviation Act): Graz, Innsbruck, Klagenfurt, Linz, Salzburg The ‘third country operators’ have to fulfil EU safety legislation, espe- and Vienna. Basically the airports are directly or indirectly owned by public cially Reg (EU) No. 452/2014. They are subject to the Safety Assessment of entities (provinces or municipalities where the airport is located). The only Foreign Aircraft (SAFA) ramp-checks. exemption is the airport of Vienna, which is owned by a company limited by shares. Fifty per cent of the shares are in free float, 20 per cent owned 10 Are there specific rules in place to ensure aviation services by the city of Vienna, 20 per cent owned by the province of Lower Austria are offered to remote destinations when vital for the local and 10 per cent owned by an employee share foundation (according to the economy? information published on the website of the airport). No. Because Austria is a small country Reg (EC) No. 1008/2008 applies but Airfields (in the sense of the definition of article 65 of the Austrian in this context is of no practical relevance. Aviation Act) are owned by private entities, such as airsports clubs, HEMS- operators, etc. 11 Are charter services specially regulated? No, charter services are deemed to be a ‘normal’ commercial air transport 18 What system is there for the licensing of airports? activity and therefore are not specially regulated. The only time where the The Austrian Aviation Act establishes a two-step procedure to obtain national legislator differentiates between scheduled and charter services is a licence: in the first step the airport project has to be presented to and when obtaining route licences (see question 6). approved by the competent authority, whereas in the second step the competent authority verifies that the airport was built according to the approval 12 Are airfares regulated, and if so, how? given and then grants an operating licence. This procedure not only applies Basically the European legislation (Reg (EC) No. 1008/2008 and to the construction of airports but also to the extension or restriction of an 868/2004) regarding airfares apply. Outside the scope of the European airport. The competent authority for airports is the BMVIT, whereas the legislation airfares are subject to bilateral air services agreements. If there competent authorities for airfields are district authorities. is no provision in an air service agreement the BMVIT is entitled to require an air carrier to subject airfares to an ex ante approval (article 17 BGzLV). 19 Is there a system of economic regulation of airports, and, if so, When approving airfares the BMVIT has to apply the respective European how does it function? legislation per analogiam. Airports are required to establish general terms and conditions for its use. These general terms and conditions shall contain a catalogue of fees and Aircraft charges to provide any operator the same (economical) opportunity to use the airport, its facilities and services. The catalogue of fees and charges is 13 Who is entitled to be mentioned in the aircraft register? Do subject to a prior approval by the Ministry of Transport according to the requirements or limitations apply to the ownership of an rules of the Airport Charges Law, which implemented Directive 2009/12/ aircraft listed on your country’s register? EC into national law. The Austrian aircraft register is subject to article 16 of the Austrian Aviation Act and articles 6-10 of the ZLLV 2010. The aircraft register consists of two 20 Are there laws or rules restricting or qualifying access to parts, one accessible to the public and the other containing confidential airports? information. Only the operator of an aircraft is named in the public part of The Austrian Aviation Acts states that airports shall grant access to the the register (as well as in the certificate of registration), whereas the owner airport, its facilities and services to any operator under the same condi- is not disclosed. Following this principle there are no restrictions in place tions which have to be outlined in the general terms and conditions above regarding the ownership, but the operator has to be an European citizen or described. Therefore, airport operators are subject to an obligation to con- a company established under the laws of an EU member state. If this natu- tract which might be enforced before a court. ral or legal person does not have a permanent residence or the principal Of course, if airport fees and charges are unpaid the airport would be place of business in Austria a person shall be nominated who is entitled to entitled to refuse to serve the operator in the future (see question 15). accept delivery of official documents on behalf of the operator. 21 How are slots allocated at congested airports? 14 Is there a register of aircraft mortgages or charges, and if so how does it function? The respective European legislation (Reg (EEC) No. 95/93) is implemented in Austria by means of the ‘Slot Coordination Ordinance 2008’ (SlotKV No, there is no such register. Even if there were some political considera- 2008). By this ordinance a distinction is made between coordinated air- tions to establish such a register (for mobile goods in general) it was never ports and scheduled facilitated airports. Vienna airport generally is a coor- realised. dinated airport, as is the airport of Innsbruck on Saturdays and Sundays during the winter season. A special company (Slot Coordination Austria 15 What rights are there to detain aircraft, in respect of unpaid – SCA) was founded to allocate slots to operators for coordinated airports, airport or air navigation charges, or other unpaid debts? whereas for scheduled facilitated airports SCA is limited to a coordinating There are no rights to detain an aircraft in respect of unpaid debts (includ- and supervisory role. ing airport or air navigation charges); they are subject to the ‘normal’ law enforcement proceeding for civil claims (including the opportunity to 22 Are there any laws or rules specifically relating to ground obtain a judicial pledge). Since, according to Austrian law, airport charges handling? and air navigation charges are considered to be civil claims, service provid- Ground handling is regulated by the Airport Groundhandling Law (which ers are entitled to refuse future services if there are unpaid debts. implements the respective European legislation (Directive 96/67/EC). 16 Do specific rules regulate the maintenance of aircraft? Maintenance of aircraft is mainly subject to the respective European legislation (Reg No. (EU) 1321/2014 and its Parts-M and -145).

22 Getting the Deal Through – Air Transport 2016

23 Who provides air traffic control services? And how are they Competition law regulated? 28 Do sector-specific competition rules apply to aviation? If not, Based on the respective European legislation the market for air traffic do the general competition law rules apply? services is an open market. In reality air traffic services within the flight Beyond the scope of European legislation there are no aviation-specific information region of Vienna and at all Austrian airports are provided by national competition rules. The general rules (Austrian Act against Unfair Austro Control under the oversight of the BMVIT. Besides the applicable Competition and Austrian Cartel Act) apply. European legislation some articles of the Austrian Aviation Act and of the ordinance on the Rules of the Air (LVR 2014, which basically implements 29 Is there a sector-specific regulator or are competition rules Part-SERA) regulate air traffic services. applied by the general competition authority? Liability and accidents There is no aviation-specific regulator. The general competition authority is the Austrian Competition Authority. 24 Are there any special rules in respect of death of, or injury to, passengers or loss or damage to baggage or cargo in respect of 30 How is the relevant market for the purposes of a competition domestic carriage? assessment in the aviation sector defined by the competition According to Regulation (EC) 2027/97, the Montreal Convention (MC) authorities? applies if the flight was performed by a commercial operator. For private There are no specific rules on the national level, meaning that the mar- operations and other operations out of the scope of the European leg- ket definition follows the rules which were developed by the European islation (ie, operators without an operating licence under Reg (EC) No. Commission along with the jurisprudence of the European Court of Justice. 1008/2008) the Austrian Aviation Act provides rules which basically follow the pattern of the MC, so one could say that liability always follows the 31 What are the main standards for assessing the competitive systematic of the MC. effect of a transaction? As mentioned before, there are no specific rules at national level. 25 Are there any special rules about the liability of aircraft operators for surface damage? 32 What types of remedies have been imposed to remedy The Austrian Aviation Act (articles 148–155) contains special rules for this concerns identified by the competition authorities? type of liability if an accident during the operation of an aircraft results in There are no specific rules at national level. the death or injury of a person or damage to property. The law establishes a strict liability limited by an amount which is related to the MTOM of the Financial support and state aid aircraft causing the damage. The law provides rules in case more than one operator was involved or more than one persons were killed or injured. 33 Are there sector-specific rules regulating direct or indirect The claimant has to notify the operator of the aircraft within three months financial support to companies by the government or of being aware of the death, injury or damage otherwise the claim would government-controlled agencies or companies (state aid) in become time-barred. The collision of aircraft is considered as a third-party the aviation sector? If not, do general state aid rules apply? liability scenario. There are no aviation-specific national rules, but the respective European law (eg, article 107 et seq) applies. 26 What system and procedures are in place for the investigation of air accidents? 34 What are the main principles of the state aid rules applicable There is no special provision on the national level which goes beyond the to the aviation sector? scope of Regulation (EU) No. 996/2010, which was implemented into the There are no specific rules at national level. national law by the Austrian Act on Safety Investigations (UUG 2005). The accident and incident investigation (nowadays called: safety 35 Are there exemptions from the state aid rules or situations in investigation) is performed by the Safety investigation authority of the which they do not apply? Federation (SUB) which is an safety investigation body outsourced from the BMVIT; the SUB is responsible for the safety investigation not only in the As said before there are no specific rules at national level. field of aviation, but also for railways, ships and cable cars (multimodal). Owing to the structure of this outsourced body it is supposed to be able to 36 Must clearance from the competition authorities be obtained act independently from the BMVIT. The only purpose of the safety investi- before state aid may be granted? gation is to determine the causes of the accident and to provide safety rec- There are no specific rules at national level. ommendations to prevent that the ‘same accident’ might be happening a second time. The causes and the safety recommendations are summarised 37 If so, what are the main procedural steps to obtain clearance? in a report published on the SUB’s website. It is not the task of the safety There are no aviation-specific rules at national level, but Regulation (EC) investigation board to apportion blame or liability. If the accident results in No. 659/1999 is applicable. a bodily injury of a person or death of a person, a parallel criminal investigation will be conducted by the police under the supervision of the public 38 If no clearance is obtained, what procedures apply to recover prosecutor. The relationship between the judicial authorities and the safety unlawfully granted state aid? investigation board is ruled in two decrees of the Ministry of Justice. There are no aviation-specific rules on the national level, but article 14 of Regulation (EC) No. 659/1999 is applicable. 27 Is there a mandatory accident and incident reporting system, and if so, how does it operate? Miscellaneous The Austrian Aviation Act states in its article 136 and in the ordinance detailing this article an obligation for operators of an aircraft, pilots, 39 Is there any aviation-specific passenger protection maintenance engineers, aerodrome personnel, air traffic controllers, etc, legislation? to report accidents and serious incidents immediately to the reporting All respective EU legislation has been fully implemented in the Austrian office which is located within Austro Control. Austro Control provides an Law. online reporting form on its website. Austro Control shall deliver all incom- By 28 May 2015 a new (national) Agency for the Protection of ing reports to the safety investigation body (see question 26) which then Passenger’s Rights was founded. This agency is the enforcement body that conducts the investigation. The legal basis for the reporting system will be has to be established by member states with respect to article 16 Regulation replaced by Regulation (EU) No. 376/2014 by 15 November 2015. (EC) No. 261/2004 and article 14 Regulation (EC) No. 1107/2006. The rules of Directive 90/314/EEC on package holidays were implemented in the Austrian Consumer Protection Act.

www.gettingthedealthrough.com 23

41 What legal requirements are there with regard to aviation Update and trends security? Given the importance and dynamic nature of European aviation Regulations (EC) 300/2008, 272/2009, (EU) 1254/2009 and 72/2010 have law, the national legislator aims to implement the EU legislation been fully implemented. These regulations are completed by the Austrian in a timely manner. A lot of effort in recent years has gone into Aviation Security Act (LSG 2011) and the Ordinance on the National implementing Reg (EU) No. 1178/2011 and 965/2012 on Air Crew Security Programme. All operators (of aircraft, aerodromes, etc) must set and Air Operations; this process is still ongoing. up a security programme that needs approval by the competent authority The discussion on the abolition of the national law on ticket (either the Ministry of the Interior or the local administrative authorities). taxation (a tax introduced in 2010 by the FlugAbgG which is imposed on every ticket sold to a passenger departing from an 42 What serious crimes exist with regard to aviation? airport) is still ongoing. Following Austria’s obligations according to the Tokyo Convention on offences and certain other acts committed on board aircraft and the Hague Convention for the suppression of unlawful seizure of aircraft two aviation- There is no specific protection of air passengers against the risk of an specific articles were implemented in the Austrian Criminal Code (StGB): air carrier’s insolvency; passengers’ claims are treated as ‘normal’ credi- article 185 about aircraft hijacking and article 186 about wilful threats tors’ claims (meaning that after the insolvency they might expect to receive against aviation safety. Of course, other articles of the StGB might be appli- a certain dividend of their claims. cable if the crimes committed have a terroristic background. Regarding CRS Regulation (EC) No. 80/2009 provides a code of conduct.

40 Are there mandatory insurance requirements for the operators of aircraft? Regulation (EC) 785/2004 states an obligation of operators of aircraft to be insured against aviation-typical risks (passenger liability and third-party liability). The rules of this regulation are completed by articles 164 et seq Austrian Aviation Act which provide, inter alia, a direct claim against the insurer.

Joachim J Janezic [email protected]

Lagergasse 57a Tel: +43 316 722220 8020 Graz Fax: +43 316 722220 330 Austria www.rechtundco.at

24 Getting the Deal Through – Air Transport 2016

Bahamas

Arthur K Parris* ParrisWhittaker

General In addition, foreign applicants must provide: • proof of all violations, accidents, incidents or occurrences for last fis- 1 Which bodies regulate aviation in your country, under what cal period; basic laws? • a confirmation letter and receipt from the Department of Civil Aviation in the Bahamas is regulated by the Bahamas Civil Aviation Aviation indicating no outstanding debt to the Department for Authority (BCAA), under the Bahamas Civil Aviation Act. Services, Permits and Licences; and • a report on whether there have been changes in the beneficial owners Regulation of aviation operations of the operator. 2 How is air transport regulated in terms of safety? 7 What procedures are there for hearing or deciding contested Aviation operations are regulated by the Bahamas Civil Aviation Act sup- applications for licences or other rights to operate particular plemented by the Bahamas Civil Aviation Safety Amendment Regulations routes? (BASR) 2001. The BCAA may deny an application for an AOC if it finds that the applicant is not properly or adequately equipped or is not able to conduct safe opera- 3 What safety regulation is provided for air operations that do tions in commercial air transport; the applicant previously held an AOC not constitute public or commercial transport and how is the which was revoked; or an individual that contributed to the circumstances distinction made? causing the revocation process of an AOC obtains a substantial ownership Safety regulations for private operations and aerial work are included or is employed in a position stated by this regulation. within the BASR, which contains extensive, detailed provisions regarding There is an appeals process for both denied applications and amend- private operations and aerial work at Schedule 11 (including glider towing; ments made to AOCs. The process and the timescale of the appeal will banner towing; TV and movie operations; sightseeing; fish-spotting and depend on the nature of the denial and the grounds for appeal. traffic reporting). 8 Is there a declared policy on airline access or competition and, 4 Is access to the market for the provision of air transport if so, what is it? services regulated and, if so, how? No. There is no declared policy on airline access or competition. No. There is no market regulation for the provision of air transport services. 9 What requirements must a foreign air carrier satisfy in order 5 What requirements apply in the areas of financial fitness and to operate to or from your country? nationality of ownership regarding control of air carriers? See question 6. Bahamian operators must have an air operator’s certificate (AOC) in order to fly any aircraft, and there are important elements that will be taken into 10 Are there specific rules in place to ensure aviation services account when an AOC is applied for. These requirements include having are offered to remote destinations when vital for the local regard to the nationality of the applicant and the ability of the applicant to economy? meet any financial obligations, whether actual or potential. Not applicable. 6 What procedures are there to obtain licences or other rights to 11 Are charter services specially regulated? operate particular routes? Charter services are regulated by the BASR alongside all other aviation Bahamian applicants to obtain an AOC must provide the following docu- services: there are no special or separate regulations. There are a few spe- mentation to the BCAA: cific requirements that apply solely to charter services, most notably that • approval from Flight Standards for the annual technical assessment AOC holders of charter services are required to have a system for providing for each aircraft in the fleet; flight preparation documents and determining the departure and arrival • the operators or carriers operations manual and annual revision times of the flights at all airports approved by the BCAA. amendments; • an affidavit verifying that there are no outstanding violations, acci- 12 Are airfares regulated and, if so, how? dents, incidents or occurrence for last fiscal period; • a confirmation letter and receipt from the Department of Civil Airfares are not regulated in the Bahamas. Aviation indicating there is no outstanding debt to the Department for services, permits and licences; Aircraft • any changes in the beneficial owners of the operator and or carrier; 13 Who is entitled to be mentioned in the aircraft register? Do • the names and date of birth of all pilots and qualifications, last profi- requirements or limitations apply to the ownership of an ciency check, all pilot licences and current medical certificate applica- aircraft listed on your country’s register? ble to them; • a copy of the operations balance sheet for the last fiscal period and The owner – whether an individual or a company – will be named on the air- bank reference letter; and craft register. If a company, the directors will be named. Individuals must • a business licence or receipt. provide identification, such as a passport. Directors must provide their signatures, and there must also be the signature of the persons who have been www.gettingthedealthrough.com 25

© Law Business Research Ltd 2015 BAHAMAS ParrisWhittaker given the authority to transact on the directors’ behalf on matters relating Liability and accidents to the aircraft registration or operations. 24 Are there any special rules in respect of death of, or injury to, passengers or loss or damage to baggage or cargo in respect of 14 Is there a register of aircraft mortgages or charges and, if so, domestic carriage? how does it function? The BASR require the pilot to notify the nearest appropriate authority, by There is currently no register of aircraft mortgages in the Bahamas. the quickest available means, of any accident involving his or her aircraft that results in serious injury or death of any person. The liability of the car- 15 What rights are there to detain aircraft, in respect of unpaid rier is enforceable for the benefit of such of the members of the passenger’s airport or air navigation charges, or other unpaid debts? family as sustained damage by reason of his death. There are, at present, no rights to detain aircraft in respect of such charges The carrier is liable for damage sustained in the event of the destruc- and debts. tion or loss of, or of damage to, any registered luggage or any goods, if the Aircraft may be detained if there are concerns regarding the safety and occurrence which caused the damage sustained took place during the car- airworthiness of the craft. riage by air.

16 Do specific rules regulate the maintenance of aircraft? 25 Are there any special rules about the liability of aircraft The BASR include numerous specific rules regarding the ongoing mainte- operators for surface damage? nance programmes for aircraft. Liability as regards surface damage is covered by general rules regarding The AOC holder’s aircraft maintenance programme and any subse- the liability of aircraft operators within the Civil Aviation Act. Where mate- quent amendment shall be submitted to the state of registry for approval rial loss or damage is caused to property on land by a person in, or an article prior to use. Acceptance by the BCAA will be conditional upon prior or person falling from, an aircraft while in flight, taking off or landing, then approval by the state of registry, or where appropriate, upon the AOC unless the loss or damage was caused or contributed to by the negligence holder complying with recommendations provided by the state of registry. of the person by whom it was suffered, damages in respect of the loss or The BCAA will require an operator to include a reliability programme damage shall be recoverable without proof of negligence or intention or when the BCAA determines that such a reliability programme is necessary. other cause of action, as though the loss or damage had been caused by the When such a determination is made by the BCAA, the AOC holder shall wilful act, neglect, or default of the owner of the aircraft (subject to certain provide such procedures and information in the AOC holder’s mainte- conditions set out within the Act). nance control manual. Approval by the BCAA of an AOC holder’s maintenance programme and any subsequent amendments shall be included in 26 What system and procedures are in place for the investigation its operations specifications. of air accidents? The Air Accident Investigation and Prevention Unit (AAIPU) is the acci- Airports dent investigation unit of the Bahamas Civil Aviation Department. The 17 Who owns the airports? AAIPU was established within the Flight Standards Inspectorate in 2001, There are numerous airports in the Bahamas region. They are all either in compliance with International Civil Aviation Organization (ICAO) government owned or privately owned by various companies. standards to investigate aircraft accidents and incidents. The Unit fulfils its responsibilities by investigating accidents and serious incidents occur- 18 What system is there for the licensing of airports? ring within the Bahamas and wherever in the world there are Bahamas- registered aircraft and Bahamas citizens involved. All airports are owned and operated by government. The situation relating The AAIPU performs its functions in accordance with the provisions of to the licensing of airports is currently unclear. the Bahamas Civil Aviation (Safety) (Amendment) Regulations (CASAR) 2010, Schedule 19, Annex 13 to the Convention on International Civil 19 Is there a system of economic regulation of airports and, if so, Aviation and, where applicable, relevant international agreements. The how does it function? AAIPU does not investigate for the purpose of apportioning blame or to Not applicable. provide a means for determining liability, but to prevent future accidents.

20 Are there laws or rules restricting or qualifying access to 27 Is there a mandatory accident and incident reporting system airports? and, if so, how does it operate? No. There are no laws or rules restricting or qualifying access to airports. Pilots in charge are required to submit a report to the BCAA of any accident that occurred while he or she was responsible for the flight. In addition they 21 How are slots allocated at congested airports? must ensure that whenever an aircraft has flight recorders installed, those The allocation of slots is undertaken in keeping with the guidelines and recorders are operated continuously from the instant. Flight data recorders requirements of the International Air Transport Association’s Scheduling and flight deck voice recorder must not be disabled, switched off or erased Services Group. during flight, unless necessary to preserve the data for an accident or incident investigation. In event of an accident or incident, the pilot in charge 22 Are there any laws or rules specifically relating to ground shall act to preserve the recorded data for subsequent investigation. handling? Competition law The BASR provide for a large number of rules regarding aspects of ground handling, including that personnel engaged in ground handling, storage 28 Do sector-specific competition rules apply to aviation? If not, and loading of dangerous goods have received training to enable them do the general competition law rules apply? to carry out their duties in respect of dangerous goods; and that the AOC No. There are no applicable sector-specific competition rules. holder shall arrange appropriate ground handling facilities at each airport used to ensure the safe servicing and loading of its flights. 29 Is there a sector-specific regulator or are competition rules applied by the general competition authority? 23 Who provides air traffic control services? And how are they regulated? Not applicable. The Department of Civil Aviation is responsible for the safe and orderly 30 How is the relevant market for the purposes of a competition flow of air traffic via its air traffic control services. Air traffic controllers assessment in the aviation sector defined by the competition undergo a rigorous selection and training process. authorities? Not applicable.

26 Getting the Deal Through – Air Transport 2016

31 What are the main standards for assessing the competitive 38 If no clearance is obtained, what procedures apply to recover effect of a transaction? unlawfully granted state aid? Not applicable. Not applicable.

32 What types of remedies have been imposed to remedy Miscellaneous concerns identified by the competition authorities? 39 Is there any aviation-specific passenger protection Not applicable. legislation? No. There is no aviation-specific passenger protection legislation. Financial support and state aid 33 Are there sector-specific rules regulating direct or indirect 40 Are there mandatory insurance requirements for the financial support to companies by the government or operators of aircraft? government-controlled agencies or companies (state aid) in There are no mandatory insurance requirements for aircraft operators the aviation sector? If not, do general state aid rules apply? within the Bahamas Civil Aviation Act or the BASR. No. There are no applicable sector-specific or general state aid rules. 41 What legal requirements are there with regard to aviation 34 What are the main principles of the state aid rules applicable security? to the aviation sector? In 2013 the Bahamas signed a pre-clearance security agreement with the Not applicable. Transportation Security Administration’s Office of Global Strategies of the US Department of Homeland Security in moves to significantly strengthen 35 Are there exemptions from the state aid rules or situations in its aviation security measures. The Bahamas was the first Caribbean coun- which they do not apply? try to implement the programme, which identifies and mitigates risks at Not applicable. nearly 300 foreign airports from which US airlines operate or US-bound passengers and cargo depart. 36 Must clearance from the competition authorities be obtained before state aid may be granted? 42 What serious crimes exist with regard to aviation? Not applicable. A number of serious aviation-related crimes exist including threatening and abusive behaviour onboard aircraft and aviation-related fraud. There 37 If so, what are the main procedural steps to obtain clearance? is no separate aviation crimes Act in the Bahamas, and crimes related to aviation are prosecuted under general criminal legislation. Not applicable. * The content of this chapter is accurate as of September 2014.

Arthur K Parris [email protected]

Suite 10, Seventeen Centre, Bank Lane Tel: +1 242 352 6110 PO Box F-43018 Fax: +1 242 352 6114 Freeport www.parriswhittaker.com Grand Bahama The Bahamas

www.gettingthedealthrough.com 27

Belgium

Birgitta Van Itterbeek Monard Law

General 4 Is access to the market for the provision of air transport services regulated and, if so, how? 1 Which bodies regulate aviation in your country, under what basic laws? EC Regulation No. 1008/2008 of 24 September 2008 is directly applicable in Belgium. A Ministerial Decree of 3 August 1994 further sets out the There are three regulatory bodies in Belgium: general authority lies with licence requirements for the commercial operation of aircraft. the Civil Aviation Authority of the Federal Public Service of Mobility and The licence and the air operator’s certificate (AOC) are issued by the Transport, which was created by the Law of 27 June 1937 and its Royal Civil Aviation Authority. Decree of 15 March 1954 (as amended); Belgocontrol is responsible for air traffic control and civil air navigation services for Luxembourg and 5 What requirements apply in the areas of financial fitness and Belgium and was created by the Law of 19 December 1997; and the Belgian nationality of ownership regarding control of air carriers? Supervising Authority for Air Navigation Service, which was created in the context of the Single European Sky by the Royal Decree of 14 February The applicants must have their principal place of business and, if any, their 2006. registered office in Belgium. Applicants must have at least one aircraft registered in Belgium, adequate insurance and evidence that the company is Regulation of aviation operations and will continue to be owned directly or through a majority shareholding by a company established and controlled by a company or person estab- 2 How is air transport regulated in terms of safety? lished in the European Economic Area (EEA). The application must be A distinction should be made between international conventions and trea- accompanied by the documents that identify the applicant and its share- ties that are directly applicable and their implementation instruments, EU holding structure and the routes it wishes to operate together with all the regulations and directives and Belgian law. documents required pursuant to EC Regulation No. 1008/2008. Except for The Chicago Convention was ratified in Belgium on 30 April 1947 and certain exceptions set out in the royal decree, an operating licence may not was implemented by the Royal Decree of 15 March 1954, which has been be granted if the operator has not previously obtained a certificate affirm- amended several times. The Law of 30 April 1947 has been further imple- ing that the operator has the ability and resources to ensure the safe opera- mented by another 24 royal and ministerial decrees. In effect that law, tion of the aircraft for the activities set out in the certificate. The AOC is together with the Law of 27 June 1937 and the Royal Decree of 15 March also issued by the Civil Aviation Authority. 1954, are the basic regulations for aviation operations in Belgium. The financial fitness criteria are those laid down in EC Regulation No. The basic regulations with respect to technical operations are laid 1008/2008. down in the Royal Decree of 9 January 2005 and, with respect to flight operation licences, in the Royal Decree of 10 January 2000. The Ministerial 6 What procedures are there to obtain licences or other rights to Decree of 13 February 1970, as amended (see especially Ministerial Decree operate particular routes? of 20 October 2003), sets out further technical requirements for the opera- Once an AOC and licence have been obtained, the airline may operate tion of aircraft of 5,700kg or more as well as organisational requirements any intra-European route and routes to third countries in respect of which for the airline and the maintenance of aircraft. a licence and AOC have been obtained. To be able to operate routes out- As a result of EC Regulation No. 3922/91, the JAR rules also apply side EU or EEA countries, the airline must be designated by the minister of in Belgium and have been further implemented by the Royal Decree of transport under bilateral air transport treaties. In accordance with the Law 25 June 2001. With the creation of the European Aviation Safety Agency of 3 May 1999 with respect to scheduled air service an airline can be so des- (EASA), many safety issues are now further regulated and harmonised at ignated if it has an operating licence issued by the Kingdom of Belgium in EU level. accordance with the EU regulations. Moreover, the minister can take into account the following elements in designating an airline: 3 What safety regulation is provided for air operations that do • compliance with bilateral treaties; not constitute public or commercial transport and how is the • the interests of passengers; distinction made? • the investments realised or to be realised for the operation of the ser- The Royal Decree of 15 March 1954 applies to all civil aircraft whether vices for which it will be designated; or not they are used for commercial transport. However, with respect to • the consequences of such operations for the development of Belgium the licence requirements for commercial transport, a distinction is drawn as an economic centre and for employment in the air transport sector; between taxi services and other commercial operations. A taxi service is • the environmental nuisance; and defined as aircraft with no more than 10 seats and in respect of which the • the use of the fleet for the needs of the government in times of crisis. destination is fixed by the users without any seat going to other commercial passengers. The licence requirements for taxi services are less stringent Non-scheduled air services are considered on a case-by-case basis within than for other commercial operations. If an aircraft is not used for commer- the framework of the bilateral treaties. cial transport, the licence requirements for commercial operations do not apply. Both the Royal Decrees of 9 January 2005 with respect to technical 7 What procedures are there for hearing or deciding contested operations and of 10 January 2000 with respect to flight operation licences applications for licences or other rights to operate particular make a clear distinction between the different types of aircraft. routes? Any appeal can be lodged with the Minister of Transport. Appeals against decisions of the minister can be filed with the Council of State.

28 Getting the Deal Through – Air Transport 2016

8 Is there a declared policy on airline access or competition and, including over the internet, for example the information to the consumer if so, what is it? with respect to prices, costs and services has to be clear and detailed and A distinction should be made between intra-European access or competi- specify whether the consumer can revoke its purchase within 14 days (pre- tion and access by airlines established outside the EEA. Belgium has imple- viously seven days). The revocation right is the default position, unless the mented no state policies over and above the EU regulations in this respect. services are rendered within this 14-day period or the services are immedi- Access to the Belgian territory for airlines established outside the EEA ately executed and invoiced. If these conditions are not fulfilled, the con- is laid down in bilateral treaties. sumer is not obliged to pay.

9 What requirements must a foreign air carrier satisfy in order Aircraft to operate to or from your country? 13 Who is entitled to be mentioned in the aircraft register? Do A distinction has to be made between an EU air carrier and any other air requirements or limitations apply to the ownership of an carriers and flight within the EU and to a non-EU member state. In accord- aircraft listed on your country’s register? ance with EC Regulation No. 1008/2008, article 15, any EU air carrier duly The Royal Decree of 15 March 1954 provides that the following aircraft can licensed by its home country in accordance with the above-mentioned EC be registered in the Belgian aviation register: regulation can freely operate intra-European routes. No member states can • civil aircraft that are fully owned by nationals of an EU member state submit the Community air carrier to any further formalities or conditions. or nationals of an EEA country who are domiciled in Belgium; or The Royal Decree dated 18 August 2010 regulates the allocation of • civil aircraft wholly owned by legal entities incorporated under Belgian traffic rights to non-EU countries. Only EU air carriers established in law and whose main shareholders, managing shareholders, directors Belgium are entitled to traffic rights to non-EU member states. These air- or agents are nationals of an EU member state or of an EEA country. lines must submit to the Belgian Civil Aviation Authority a formal request together with a copy of their AOC, insurance certificate, evidence that the The following aircraft can be registered with the prior authorisation of the airline is established in Belgium in accordance with Community law, infor- Minister of Communications: mation on the operational and financial sustainability and information on • civil aircraft part-owned by: the planned flights and the possible acceptance of the applicant to cover • nationals of an EU member state or of an EEA country who are in exceptional circumstances any required capacity to fulfil the national domiciled in Belgium; or or international requirements of Belgium. The allocation of traffic rights • legal entities formed under Belgian law and whose main share- and the possible limits on the number of flights will be determined by the holders, managing shareholders, directors or agents are nationals terms and conditions of the applicable bilateral treaty. A non-Community of an EU member state or of an EEA country; carrier is not allowed to operate regular air transport services unless it has • civil aircraft wholly or part-owned by: received prior authorisation from the minister of transport either through • Belgians residing abroad who have elected to domicile in Belgium bilateral agreements or specific authorisation. Such bilateral treaties or for registration purposes; authorisation will set out specific conditions with which the airline has to • legal entities governed by Belgian law whose main shareholders, comply. Moreover, such airline may not be blacklisted by the European managing shareholders, directors or agents are not nationals of an Commission pursuant to EC Regulation No. 2111/2005 as an unsafe airline. EU member state or of an EEA country; Any carrier that has a trading activity in Belgium must also be regis- • legal entities of an EU member state or of an EEA country that tered in the commercial register and obtain a value added tax number. If have a place of business, an agency or an office in Belgium; such air carrier opens a branch office in Belgium it must also fulfil the -for • foreign nationals of a country that is not a member of the EU or malities for the opening of a branch office in Belgium as stipulated in the the EEA who have resided in Belgium for at least one year or who Belgian Company Code. have maintained for at least one year an office, place of business or agency in Belgium; 10 Are there specific rules in place to ensure aviation services • civil aircraft that have been leased under a finance lease to any of the are offered to remote destinations when vital for the local persons listed above; or economy? • civil aircraft operated by any of the persons listed above under a lease A distinction has to be made between intra-Community operations and for at least six months. operations with third countries. As to intra-Community operations, see EC Regulation No. 1008/2008. As to operations with third countries, see the 14 Is there a register of aircraft mortgages or charges and, if so, criteria set out in question 6. how does it function? Belgium ratified the Geneva Convention on the International Recognition 11 Are charter services specially regulated? of Rights in Aircraft on 22 October 1993, but failed up to recently to imple- The EU regulatory framework makes no distinction between regular ser- ment a law recording of security interests on aircraft in a public register. A vices or chartered services. The Royal Decree of 15 March 1954 provides, in new law dated 11 July 2013 on security interest on mobile goods introduces article 47, specific licence requirements for charter services and specifies for the first time a national register for all security interests on mobile that non-scheduled flights or series of non-scheduled flights are subject to goods, including aircraft pledges which will record any security interest the specific authorisation of the minister. Non-scheduled air services are created over such mobile good. This law will enter into force at the lat- considered on a case-by-case basis within the framework of the bilateral est on 1 January 2017. The law on security interests on mobile goods has treaties. introduced a dual regime for pledges, namely a possessory and non-possessory pledge. In the case of a registered pledge, the pledge will function 12 Are airfares regulated and, if so, how? as a mortgage. This means that the pledgor can remain in possession of See EC Regulation No. 2409/92, which liberalised airfares and is now the aircraft. The perfection of the pledge towards third parties is achieved replaced by EC Regulation No. 1008/2008. With respect to flights to third through the registration in the national register. For non-registered aircraft countries, restrictions or information requirements on airfares can be pledges, the perfection is only achieved through dispossession either by contained in the bilateral treaties. The airfares are further subject to EC way of the appointment of a third-party pledge holder or by delivering pos- Regulation 868/2004 and to the Belgian trade practice regulations. They session to the pledgee. The date of registration will determine the ranking. may be further limited by the competition regulations. Trade practices The register is a public register and will relate to all mobile goods and not are regulated in Belgium by the Code of Economical Law, Book VI, Trade only aircraft. Practices and Consumer Protection, which entered into force on 31 May Until the entry into force of the new law and the creation of the new 2014 and replaced the former Trade Practices Law of 6 April 2010. It speci- national register, the existing laws apply. Airlines and financiers can use fies how prices (including airfares) have to be published, how price reduc- basically two security structures, namely aircraft pledges and retention of tions can be provided, it allows comparative publicity provided it is not title. This retention of title or aircraft pledge cannot be recorded. An air- misleading and complies with the strict fairness criteria laid down in the craft pledge creates a security right in rem over an aircraft, which gives the law, and allows combined services insofar as they do not relate in princi- pledgee rights similar to those of a mortgagee, namely a right to request a ple to financial services. The Law contains strict rules on distance selling, court, in the event of default by the debtor, to order the sale of the aircraft www.gettingthedealthrough.com 29

© Law Business Research Ltd 2015 BELGIUM Monard Law and a preferential right to the sale proceeds. Compared with a mortgage, The current licence contains no fixed fees except for landing rights, however, an aircraft pledge has a major disadvantage: under Belgian law, but it does contain detailed guidelines and consultancy procedures with an aircraft is considered a moveable asset and a pledge of such an asset can respect to airport taxes. Part of the activities of the airport that relate to only be perfected if the pledgor is not in possession of the asset. public services are furthermore subsidised by the Belgian state. This means that at present an airline that wishes to finance the purchase of an aircraft by way of a loan secured by a pledge can never actually 20 Are there laws or rules restricting or qualifying access to own the aircraft. When such security is created in an aircraft, the airline airports? usually acts as operator and third-party pledge holder, with ownership of The operating licence sets out which type of aircraft may land at the air- the aircraft being vested in the lessor or a special purpose vehicle. Thus, an port and when. There are specific noise restrictions relating to the type of aircraft pledge can now only be perfected by continued dispossession by aircraft, its weight and the time of landing. These restrictions are different the owner-pledgor and possession by either the third-party pledge holder, for each airport. The landing fees are calculated based on parameters of as operator, or direct possession by the pledgee. But hopefully the national weight, noise and the time of landing. register will be created soon, so that this issue is finally solved. Further noise restrictions for aircraft are laid down in the Royal Decree of 25 September 2003 setting out operating restrictions at Brussels Airport 15 What rights are there to detain aircraft, in respect of unpaid and by the Ministerial Decree of 3 May 2004. See also restrictions for airport or air navigation charges, or other unpaid debts? Chapter 2 aircraft laid down in Council Directive 92/14/EC. More restric- There are three types of liens under Belgian law: liens such as repairmen’s tions are contained in the Royal Decree of 16 December 2005 (implement- liens, statutory liens or liens with respect to salvage and conservation costs ing EC Directive 2004/36) with respect to the safety of aircraft of third (see Geneva Convention); temporary seizure; and forced sale. countries wishing to land at a Belgian airport. Temporary seizures are regulated by article 1413 et seq of the Judicial Code and are limited by the Convention of Rome on Precautionary Arrest. 21 How are slots allocated at congested airports? The exercise of this right is conditional on there being urgency and a mani- EC Regulation No. 95/93 has been implemented in Belgium by the Royal fest undisputed claim that is certain, due and liquid. Decree of 23 September 2003 with respect to slot coordination at Brussels The seizure for forced sale is regulated by article 1494 et seq of the Airport. The royal decree has put in place a slot coordinator who, in case Judicial Code and by the Geneva Convention. A forced sale requires an of congestion, allocates slots in accordance with their noise efficiency. The enforceable title (such as a judgment) and a manifest undisputed claim slot coordinator also has the general task of slot management in accord- that is certain, due and liquid. No self-help is possible under Belgian law. ance with EC Regulation No. 95/93 as amended by EC Regulation No. No specific measures have been implemented in Belgium with respect 793/2004. to the rights of Eurocontrol pursuant to Annex 4 to the protocol to the Eurocontrol Convention of 27 June 1997. 22 Are there any laws or rules specifically relating to ground handling? 16 Do specific rules regulate the maintenance of aircraft? Ground handling is regulated by the Royal Decree of 12 November 1998. See question 2. The royal decree allows only two ground handlers for each of the following activities: baggage handling, cargo handling, fuel supply and platform Airports handling. At least one of them may not be directly or indirectly owned for 17 Who owns the airports? more than 25 per cent by the airport or any of its users. The selection must be based on objective, transparent and non-discriminatory criteria. Brussels Airport, which is the main airport in Belgium, is owned by a private limited company. Although the state still owns 25 per cent of the 23 Who provides air traffic control services? And how are they shares, the other 75 per cent are privately owned. regulated? Belgocontrol manages the safety and the policing at the airport and the air traffic control and civil air navigation services. Air traffic control is carried out by Belgocontrol in accordance with the The other airports in Belgium are Liège Airport at Bierset, close to Law of 19 December 1997. In the context of the Single European Sky, the Liège, the Brussels South Charleroi Airport in Charleroi, the Ostend- Belgian Supervising Authority for the Air Navigation Service has been cre- Bruges International Airport and Antwerp Airport in Deurne. Both ated by the Royal Decree of 14 February 2006. Ostend-Bruges International Airport and the Antwerp Airport are owned The tasks of Belgocontrol are set out in its management contract with by the Flemish Region with respect to the infrastructure, but the manage- the Belgian state, including the tariffs to be charged by Belgocontrol. ment of both airports has been granted to a privately held company named EGIS Projects NV. Liège Airport is owned for 50 per cent by the Société de Liability and accidents Leasing et de Financement, 25 per cent by the Walloon Region (Sowaer – 24 Are there any special rules in respect of death of, or injury to, Société Wallonne des aéroports SA, established in 2001 by Decree of 6 May passengers or loss or damage to baggage or cargo in respect of 1999) and 25 per cent by the Aéroports de Paris Management. The Brussels domestic carriage? South Charleroi Airport is owned by Sambrinvest – a private investment Air carrier liability for passengers and their baggage and cargo is gov- vehicle of the Walloon Region. erned by the Montreal Convention as implemented by EC Regulation No. 889/2002 amending Regulation No. 2027/97 and by the Belgian Law of 13 18 What system is there for the licensing of airports? May 2003, which also applies to domestic carriage. Brussels Airport is regulated by the Law of 19 December 1997 and by the Royal Decree of 27 May 2004. The Walloon airports are regulated by the 25 Are there any special rules about the liability of aircraft Decree of 23 June 1994. There is no separate decree in Flanders where the operators for surface damage? airports fall under the general environmental legislation as to their licence. The Royal Decree of 3 May 1991 sets out the safety measures for civil aviation. It contains specific safety measures that must be complied with by the 19 Is there a system of economic regulation of airports and, if so, air carriers. Belgocontrol is also responsible for safety on the runways. Any how does it function? accidents on the runways as a result of any breach of the applicable police As set out in question 17, the licence and thus the operating conditions of rules can be subject to administrative sanctions. Otherwise, general civil the airports are regulated at regional level, except for Brussels Airport, liability rules apply. which is regulated at national level. The licence for Brussels Airport, for example, is contained in the Royal 26 What system and procedures are in place for the investigation Decree of 21 June 2004. The licence not only sets out environmental condi- of air accidents? tions, but also regulates landing rights of aircraft, cargo and mail, security, Pursuant to the Royal Decree of 9 December 1998, an independent unit and infrastructure of the aircraft, and how Brussels Airport can charge fees has been created within the Ministry of Transport, namely the accidents for such services. and incidents investigation unit. The unit is responsible for the independent investigation of any accident or incident and is especially independent

30 Getting the Deal Through – Air Transport 2016

pilot, commander on board in accordance with the Ministerial Decree of Update and trends 13 February 1970 relating to technical measures for the operation of aircraft having a weight exceeding 5,700kg and the Royal Decree of 9 January 2005. There are many ongoing discussions in Belgium as to the commercial use of drones (remotely piloted aircraft systems, RPAS) Competition law for example, for monitoring performance of windmills or for the purpose of satellite pictures or films, wharf inspections. RPPAS, as 28 Do sector-specific competition rules apply to aviation? If not, they are only remotely piloted, do not fulfil the requirements for do the general competition law rules apply? registration of aircraft under Belgian law and falls as such outside of the scope of the existing regulations. At present only the use of As to Belgian law competition rules, the general competition rules apply. model aircraft of more than 1kg and less than 150g that are not used for commercial purposes is regulated by a circular letter number 29 Is there a sector-specific regulator or are competition rules CIR/GDF-01 dated 28 July 2013. The Civil Aviation Authority applied by the general competition authority? can allow derogations from these provisions possibly linked to operational limitations. BCAA has provided derogations following Competition rules are applied by the Competition Council. review of qualifications of the RPAS pilots, and the operating and safety manuals, insurance covering civil liability, authorisation of the 30 How is the relevant market for the purposes of a competition mayor and the landlord, description of the flights to be performed assessment in the aviation sector defined by the competition etc, for example, for testing purposes scientific research. The authorities? government is at present working on a new royal decree allowing the On 24 December 2004, the Competition Council made a pronouncement commercial use of such drones. The Belgian army uses 13 drones. on the merger between Delta Air Transport and Virgin Express at holding The use of military drones, of course, falls outside the regulations on civil aviation. level. The Competition Council considered that the relevant market had to be analysed based on the method place of origin and place of destination. Each combination of place of origin and place of destination can as such be considered as a separate market. But for the purposes of defining the mar- from the Civil Aviation Authority, which is responsible among other things ket, any alternative airport in the same region and any alternative means for the control on the airworthiness of the aircraft. of transport must be considered as well as any direct and indirect flights. The accident and incident investigation unit will, following any accident or incident, carry out a full investigation and draft a report within 12 31 What are the main standards for assessing the competitive months to be available on a database for those responsible for safety in effect of a transaction? aerospace. Such report is furthermore communicated to the companies involved, the Civil Aviation Authority, the European Commission and In the above-mentioned decision, the Competition Council, although there the international civil aviation organisations. The investigators have free was a concentration on two routes, took into consideration the availability access to all data relating to the aircraft and accident or incident. of slots in the relevant airports and that the absence of such a merger might Following an accident, no repair can be carried out without prior lead to the disappearance of both airlines and that one larger airline might approval of the Civil Aviation Authority, unless such repair is carried instead lead to a more competitive environment. out in accordance with the manufacturer’s manuals and maintenance programme. 32 What types of remedies have been imposed to remedy Belgocontrol is also responsible for safety in the air and on the ground. concerns identified by the competition authorities? In the above-mentioned case, no remedies were imposed. 27 Is there a mandatory accident and incident reporting system and, if so, how does it operate? Financial support and state aid The Royal Decree of 22 April 2005 sets out the reporting requirement to 33 Are there sector-specific rules regulating direct or indirect the accident and incidents investigation unit. Only those accidents or inci- financial support to companies by the government or dents that could have endangered the life of passengers or third parties or government-controlled agencies or companies (state aid) in the aeroplane need to be reported. A list of those accidents and incidents is the aviation sector? If not, do general state aid rules apply? attached to the above-mentioned royal decree. The airline or the pilot must notify the inspection unit within 72 There are no state-owned airlines in Belgium. General EU state aid rules hours of the accident or incident. (The royal decree extends this notifica- apply in the aviation sector. There are no national specific rules in the tion requirement to, among others, the maintenance providers, handling aviation sector. agents, Belgocontrol or similar agencies abroad, and the Civil Aviation Authority.) 34 What are the main principles of the state aid rules applicable Any accident or incident also needs to be reported to Belgocontrol, the to the aviation sector? Civil Aviation Authority and the local competent authorities if the accident See question 33. or incident has occurred abroad. This is an obligation incumbent on the

Monard Law

Birgitta Van Itterbeek [email protected]

Avenue de Tervueren 270 Tel: +32 2 234 67 10 1150 Brussels Fax: +32 2 280 47 79 Belgium www.monardlaw.be

www.gettingthedealthrough.com 31

35 Are there exemptions from the state aid rules or situations in 40 Are there mandatory insurance requirements for the which they do not apply? operators of aircraft? See question 33. EC Regulation No. 785/2004 entered into force on 1 May 2005 and is directly applicable in Belgium. 36 Must clearance from the competition authorities be obtained before state aid may be granted? 41 What legal requirements are there with regard to aviation See question 33. security? The general safety requirements are laid down in Royal Decree of 3 May 37 If so, what are the main procedural steps to obtain clearance? 1991. See question 33. The licence for Brussels Airport contains further detailed safety rules that the airport must implement and respect. 38 If no clearance is obtained, what procedures apply to recover unlawfully granted state aid? 42 What serious crimes exist with regard to aviation? See question 33. Criminal sanctions are set out in the Law of 27 April 1934 and depend on the offence committed. The criminal sanctions vary from one day’s to one Miscellaneous year’s imprisonment and monetary fines. This law applies to almost all applicable royal and ministerial decrees regulating aviation in Belgium. 39 Is there any aviation-specific passenger protection Other sanctions are included in international conventions such the legislation? Hague Convention, especially with respect to hijacking and offences com- EC Regulation No. 261/2004 is directly applicable in Belgium as well as EC mitted on board aircraft. Regulation No. 1008/2008. No separate national legislation exists, other than with respect to airfares the Law of 6 April 2010 on fair trade practices, as set out in question 12.

32 Getting the Deal Through – Air Transport 2016

Brazil

Renata Iezzi Basch & Rameh Advogados Associados

General 3 What safety regulation is provided for air operations that do not constitute public or commercial transport and how is the 1 Which bodies regulate aviation in your country, under what distinction made? basic laws? Private operators are subject to regulations that in most respects are identi- Aviation in Brazil is regulated by the National Agency for Civil Aviation cal to the regulations applicable to airlines. (ANAC). The basic laws are: • the Brazilian Aeronautical Code, Law No. 7,565/86 (CBA); 4 Is access to the market for the provision of air transport • Law No. 7,183/84, governing the activities of pilots and technical services regulated and, if so, how? crews; Access to the market for the provision of air transport services is regulated. • Law No. 11,182/05 (which created the ANAC); A company wishing to engage in air transport services must first obtain a • Law No. 5,862/72, which created the governmental entity responsible concessionary licence to operate as an airline. Such licences are issued by for the airport operations and regulations (INFRAERO); the ANAC for cargo and regularly scheduled passenger and non-scheduled • Law No. 12,462/2011, which created the Ministry of Civil Aviation and passenger services. changed the ANAC and INFRAERO subordination from the Ministry of Defence to the Secretariat of Civil Aviation (SAC); and 5 What requirements apply in the areas of financial fitness and • Ordinance No. 44/DGCEA/2011, which established rules about air- nationality of ownership regarding control of air carriers? port or air navigation charges. To obtain an air operator’s certificate from the ANAC, an applicant must Brazil is a signatory to the following international conventions: demonstrate its financial and technical capacity to sustain operations. • the Warsaw Convention of 1929 (modified by the Hague Convention There is no pre-set minimum capital; however, the ANAC will examine an of 1955); applicant’s financial capacity to carry out its business plan. The CBA refers • the Chicago Convention of 1944; to the following criteria: financial capacity, technical capacity, feasibility of the business plan (services proposed to be rendered), appropriate aircraft • the Geneva Convention of 1948; types and qualified staff, and adequate insurance. • the Rome Convention of 1952; Up to 20 per cent of the voting shares of a Brazilian airline can be • the Tokyo Convention of 1963; owned by non-Brazilians. Up to 50 per cent of a Brazilian company’s equity • the Montreal Convention of 1999; and can be issued in non-voting shares. Thus, foreign interests can own up to • the Cape Town Convention and Aircraft Protocol. 60 per cent of an airline (100 per cent of non-voting shares and 20 per cent of voting shares). An airline’s board of directors must be composed of The Cape Town Convention and Aircraft Protocol became effective in Brazilian nationals. Brazil on 1 March 2012 but it was formally implemented in Brazil in May 2013. 6 What procedures are there to obtain licences or other rights to operate particular routes? Regulation of aviation operations Airlines submit fleet and route plans to the ANAC and the ANAC approves 2 How is air transport regulated in terms of safety? such plans in accordance with national planning criteria. If more than one Airlines are subject to federal government regulation through the Ministry airline applies for the same route, the ANAC will perform an auction to of Civil Aviation. The Ministry acts through the ANAC, which has the legal grant such authorisation. The ANAC also has the authority to redistribute power to determine the rules for such operation. The ANAC also has the slots and route rights in exceptional circumstances (eg, to ensure uninter- power to grant and revoke air operators’ certificates. rupted services). The ANAC has several technical departments, each of which is responsible for a specific area such as pilot certification, cabin crew certifica- 7 What procedures are there for hearing or deciding contested tion and maintenance. Air traffic control is controlled by the Air Control applications for licences or other rights to operate particular Department (DECEA) and is performed by a mix of military and civil air routes? traffic controllers under military supervision. After a mid-air collision in Airlines can contest ANAC decisions through administrative proceedings September 2006 and a major accident at Congonhas airport in São Paulo in within the ANAC and then in the SAC. Once administrative remedies have July 2007, Brazil’s air traffic controllers and airport infrastructure attracted been exhausted, an airline can seek judicial review of ANAC decisions. considerable public attention. After the 2007 accident new rules restrict- Sometimes, in exceptional circumstances, administrative remedies do ing the use of Congonhas Airport in São Paulo were promulgated to relieve not need to be exhausted. For example, in the judicial recuperation (bank- that airport of serious congestion; however, some of the measures were ruptcy restructuring) of Varig airlines during 2005 and 2006, a Rio de subsequently relaxed. Brazil hosted the Football Confederations Cup in Janeiro bankruptcy judge issued injunctions against the ANAC to preserve 2013 and the FIFA World Cup 2014. During the World Cup, Brazilian air- Varig’s route rights and slots, even though Varig was not using them. ports received more than 16 million passengers. Brazil is now preparing to host the 2016 Olympic Games in Rio de Janeiro. The country’s airports still 8 Is there a declared policy on airline access or competition and, need improvements prior to the 2016 Olympic Games. Because of these if so, what is it? major international events Brazil created a specific ministry, the SAC, to The purported policy is that there be free competition and open access regulate air transport. (subject to approved ANAC plans) among the airlines. In practice, there www.gettingthedealthrough.com 33

© Law Business Research Ltd 2015 BRAZIL Basch & Rameh Advogados Associados have been times when competition appeared to be symbolic and fares mortgages at the RAB. In relation to engines, the RAB issues certificates were increased, while at other times competition has been fierce and some confirming the ‘notation’ of the documents filed (ie, an engine lease). Such airlines have virtually dumped capacity to gain market share. In addition notation certificates are not equivalent to title certificates available for to the ANAC there is a federal agency charged with protecting competi- aircraft. tion (CADE). Most of CADE’s work relates to examination of mergers and acquisitions. The Brazilian Antitrust Law reflects a pre-merger review sys- 14 Is there a register of aircraft mortgages or charges and, if so, tem by which a transaction must be submitted to CADE before it is com- how does it function? pleted. CADE’s approval is therefore a condition to the implementation of The RAB is a specific centralised registry for aircraft in Brazil. There is any transaction submitted to CADE. no separate register for aircraft mortgages or charges in Brazil. The RAB CADE has three different sub-departments: the Administrative registers liens and encumbrances over aircraft and issues certificates Tribunal, a General Directorate, and the Department of Economic Studies. confirming registration, title and registered liens. The RAB organises the Both CADE and the ANAC are supposed to prohibit market manipulation, register by aircraft. The method for recording documents at the RAB is dumping and other unfair trade practices. by filing originals or, in some cases, certified copies, together with sworn translations into Portuguese when documents have been executed in other 9 What requirements must a foreign air carrier satisfy in order languages. A ‘sworn’ translation is a translation prepared by a licensed to operate to or from your country? Brazilian translator. To establish a mortgage over an aircraft the mortgage The CBA determines specific requirements in its articles 205 to 213. The must be registered with the RAB. foreign air carrier is subject to the following rules: it must be appointed by In addition to the RAB mortgages, other documents related to aircraft, the government of its own country to operate in Brazil; it needs to obtain for purposes of admissibility, should be recorded in a general notarial the ANAC’s authorisation to establish operations in Brazil; and it needs to office known as an RTD or Registry of Titles and Documents. RTDs are not obtain the ANAC’s authorisation to provide aviation services in Brazil. specific to aircraft and there are many RTDs scattered around Brazil, while Among the requirements to establish operations in Brazil, the foreign there is only one RAB. air carrier must appoint a permanent legal representative in Brazil and provide proof of its constitution by submitting its by-laws, for instance. 15 What rights are there to detain aircraft, in respect of unpaid Furthermore, to be able to provide aviation services in Brazil the foreign air airport or air navigation charges, or other unpaid debts? carrier needs to submit to the ANAC its technical and operational plan; the There is some controversy in Brazil in relation to this issue. Generally air- airfares it intends to charge, the cities where it plans to stop in Brazil and port taxes, customs duties, air navigation charges, landing charges, crew its further stops outside Brazil; and the specific hours it plans to fly to and wages and mechanic charges are all considered in personam rights and from the country. therefore should not form the basis for liens over aircraft. Occasionally, INFRAERO has sought to impose liens on aircraft due to 10 Are there specific rules in place to ensure aviation services the non-payment of airport fees by airline lessees. In the past, INFRAERO are offered to remote destinations when vital for the local has also tried to delay deregistration of aircraft on this basis; however, economy? this trend has decreased recently. Since 2014 when authorities started to The ANAC sometimes offers special conditions to induce airlines to des- accept de-registration requests through irrevocable deregistration and tinations with thinner demand. Government policies to ensure services in export authorisations (IDERAs) issued in accordance with the Cape Town remote locations were more common several years ago than today. There Convention, there have been a few instances where non-Brazilian owners is a public programme called the Regional Aviation Plan, created in 2012 by have deregistered aircraft and the authorities did not seek to collect unpaid the SAC, which not yet been implemented. One of the programme’s pur- airport or air navigation charges in those cases. poses is to enable flight routes to small Brazilian cities through the creation and improvement of airports by public subsidies. 16 Do specific rules regulate the maintenance of aircraft? The ANAC issues specific rules (eg, the Brazilian Regulation of 11 Are charter services specially regulated? Aeronautical Certification – RBAC 121, which is similar to FAA Part 121) in Charter services are regulated by the ANAC. Charter operators must fol- relation to the maintenance of Brazilian-registered aircraft. Such mainte- low the same licensing procedures and rules as scheduled airlines in terms nance can be performed only by maintenance facilities (national or inter- of financial capacity, Brazilian management, pilot certification, insurance national) approved by the ANAC. The Brazilian regulations in relation to and maintenance. maintenance and flight safety follow the standard norms of the Chicago Convention of 1944. Failure of an operator to observe all maintenance 12 Are airfares regulated and, if so, how? requirements and the pre-approved maintenance manual can lead to can- Domestic airfares are not regulated; however, the ANAC can (and occa- cellation of an airworthiness certificate of an aircraft. sionally does) intervene to prohibit fares if they seem manipulative. The regulation of international airfares has also started to take effect. Some Airports months before the World Cup started in 2014, some airlines substantially 17 Who owns the airports? increased the airfares for domestic routes to and from host cities. The The federal government owns most of Brazil’s major airports. INFRAERO Brazilian authorities monitored the situation closely but did not intervene. (see questions 1 and 15) is the entity through which the government controls and administers the airports. In preparation for the 2014 World Cup and the Aircraft 2016 Olympic Games and in response to some public demands the federal 13 Who is entitled to be mentioned in the aircraft register? Do government privatised three major airports in Brazil in 2012: Cumbica (the requirements or limitations apply to the ownership of an main airport for the City of São Paulo, located in neighbouring Guarulhos) aircraft listed on your country’s register? – sold to a pool of investors called Invepar (Investimentos e Participações There are no nationality or other restrictions in relation to the ownership of em Infraestrutura SA) and South African Airports Company South Africa; aircraft registered in Brazil with the Brazilian Aeronautical Registry (RAB). Viracopos (located approximately 90km from the City of São Paulo) – Non-Brazilian entities or individuals can be registered owners, lessors and sold to a pool of investors called Aeroportos Brasil; and Brasilia – sold to a mortgagees of aircraft. Restrictions apply to operation, as mentioned in pool of investors called Inframérica, a joint venture composed by Infravix question 5. Participações SA and Corporacion America AS. In 2013, the international Many aircraft have several parties registered at the RAB, such as an airports in Rio de Janeiro (Galeao) and in Belo Horizonte (Confins) were owner, a lessor, a lessee or operator and the holder of mortgage liens. also sold, respectively, to a pool of investors called Aeroportos do Futuro, a Interests must be registered in the RAB as a condition to the recognition joint venture composed by Odebrecht Construtora (Brazilian) and Changi and validity of their rights under Brazilian law and effectiveness against (Singaporean), and to a pool of investors called ‘Aerobrasil’, a joint venture third parties. composed of CCR (Brazilian) and Flughafen Zurich AG (Swiss). With this There is no specific registration of engines and their ownership at the new concept these airports will start to be managed by private companies RAB; however, the RAB also allows for registration of engine leases and in partnership with INFRAERO, which will retain an interest in the privatised airports. The next airports scheduled to be privatised are the airports

34 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Basch & Rameh Advogados Associados BRAZIL from Porto Alegre (Rio Grande do Sul), Florianópolis (Santa Catarina) The CBA includes statutory limits of an operator’s liability. The limits and Salvador (Bahia) according to the official information provided by the are expressed in OTNs, which are government bonds that ceased to exist in Minister of the SAC in March 2015. 1989. Based on successive regulations, it is possible to determine the current value of the extinct OTN for the purpose of setting liability limits. The 18 What system is there for the licensing of airports? current liability limits with OTN values converted to US dollar equivalents According to INFRAERO’s website, there are 67 airports in addition to are: 62,195 reais per passenger in cases of death or injury; 2,665 reais in 34 cargo terminals and 51 air navigation units managed by INFRAERO. cases of delays and losses or damage to baggage; and 53 reais per kilogram These numbers represent 97 per cent of the air transport traffic in Brazil in cases of damages to cargo. In addition, the limits do not apply in cases and over 155 million passengers being transported every year, so there is where injuries or damages are the result of an operator’s wilful misconduct no substantial system for licensing airports as almost all major airports are or gross negligence. There has been litigation in Brazil concerning possible owned and administered by the federal government through INFRAERO. conflicts between these limits established in the CBA and general liability However, INFRAERO issues licences for commercial use of airport space, principles set forth in the Civil Code. Brazil also has a Consumer Defence in particular for retail vendors and facility operators (eg, parking opera- Code that ratifies the CBA provisions but contains exceptions. Considering tors), and the ANAC is responsible for implementing the concessions and these various statutes, carriers cannot assume that the CBA’s limits will for monitoring the state divestment process concerning the five airports apply in all cases. referred to in question 17 under the supervision of the SAC, following the rules of a government plan called the National Privatisation Plan. In rela- 25 Are there any special rules about the liability of aircraft tion to the five privatised airports mentioned in question 17, concession operators for surface damage? contracts were signed in 2012 and in 2013. During the first six months fol- The CBA is also applied in relation to surface damages. The carrier is pre- lowing privatisation there is a transition period during which the new oper- sumed liable (strict liability) for surface damages, unless the aircraft is not ators and INFRAERO jointly manage privatised airports. After this period the cause of the damages, the damages arise from air traffic control errors, the private companies manage these airports alone. the aircraft was operated by a third party at the time the damage was caused or the damaged party was exclusively to blame. 19 Is there a system of economic regulation of airports and, if so, The statutory liability limits are 62,195 reais for aircraft with maxi- how does it function? mum take-off weights of 1,000kg; and, for aircraft with maximum take-off INFRAERO determines the costs and fees for all airport activities such as weights greater than 1,000kg, 62,195 plus 1.77 reais per kg over 1,000. As airline operations, cargo, ground handling, maintenance and also passen- mentioned in question 24, these US dollar figures are illustrative only and ger terminal stores. INFRAERO is authorised to waive fees when in the pub- fluctuate with currency rate changes. The statutory amounts are expressed lic interest. Navigation, radio, hangar and landing fees are also regulated in OTNs and not US dollars. and charged by DECEA. Considering the privatisation of the three airports Also, as with damages to passengers and baggage, an operator’s strict and considering the current transition period there may be further changes liability does not apply if the damages result from the operator’s (including in regulation of the privatised airports as well as those yet to be privatised. its employees’) wilful misconduct or gross negligence, were caused while the aircraft was on the ground and its engines were not in operation or were 20 Are there laws or rules restricting or qualifying access to caused by persons illegally operating the aircraft. airports? 26 What system and procedures are in place for the investigation INFRAERO regulates access to different airports and airport areas of air accidents? depending on the type of activities and each airport’s capacity. Access can be obtained only through INFRAERO. Considering the privatisation of the There is a system for accident investigation that uses the acronym SIPAER. three airports and considering the current transition period there may be SIPAER’s central organisation is called CENIPA and is located in Brazil. further changes to the laws and regulations restricting or qualifying access CENIPA is supposed to be an independent agency reporting directly to the to these airports. Brazilian Air Force Command. The members of CENIPA supervise all aircraft accident and incident investigations in Brazil. After an accident that 21 How are slots allocated at congested airports? occurred on 17 July 2007 involving an Airbus A320, CENIPA investigators were pressed by members of the Brazilian congress to disclose information The ANAC allocates slots based on an operator’s approved business plans. concerning the accident, in particular black box voice recordings, fairly For disputed slots at congested airports auctions are held. The ANAC also soon after the accident occurred. After some resistance, the CENIPA chief holds as much as 20 per cent of slots for new entrants. investigator made the public disclosure. Through this incident CENIPA’s independence suffered possible compromise through pressure from 22 Are there any laws or rules specifically relating to ground Congress. The congressional role in the A320 investigation is controversial handling? and may not be indicative of Congress’s role in future accident investiga- The ANAC regulates ground-handling operations through a published set tions. In May 2009 an Air France A330 in flight from Rio de Janeiro to Paris of regulations. Access to ground-handling services is free subject to com- crashed into international waters in the Atlantic Ocean. Brazil (through pliance with the ANAC rules mentioned above. Frequently, only one ser- CENIPA) and France cooperated in the investigation, with French authori- vice provider qualifies at particular airports, in which case competition is ties taking the lead. The final results of that investigation were released in limited. July 2012. At present CENIPA’s role as Brazil’s primary investigation agency remains unchanged. 23 Who provides air traffic control services? And how are they Investigation procedures are set forth in a published set of rules that regulated? follow the international standards of Annex 13 to the Chicago Convention. Air traffic control is controlled by DECEA, a department subordinate to the Ministry of Defence, and is performed by a mix of military and civil air traf- 27 Is there a mandatory accident and incident reporting system fic controllers under military supervision. See question 2 for more details. and, if so, how does it operate? Any person who witnesses or is involved in an aeronautical accident or Liability and accidents incident must immediately contact the ANAC or CENIPA directly. If contact is made via the ANAC, CENIPA is then informed and an accident 24 Are there any special rules in respect of death of, or injury to, report begins to be generated. CENIPA eventually issues a final report and passengers or loss or damage to baggage or cargo in respect of can issue safety recommendations. domestic carriage? The CBA provides that the operator is responsible for death or injury to Competition law passengers and for losses or damages to baggage and cargo. An operator is not liable if the death or injury results from the passenger’s pre-existing 28 Do sector-specific competition rules apply to aviation? If not, health or if the accident or damages arise from the passenger’s exclusive do the general competition law rules apply? fault. General principles of competition apply to the aviation sector just as they apply to other sectors such as retail and manufacturing; however, there are www.gettingthedealthrough.com 35

© Law Business Research Ltd 2015 BRAZIL Basch & Rameh Advogados Associados a few aviation-specific rules provided by the ANAC as well. ANAC rules Financial support and state aid regulate landing rights and fares charged. In addition, CADE and the 33 Are there sector-specific rules regulating direct or indirect ANAC also enacted a convention on mutual assistance and cooperation financial support to companies by the government or for competition matters in aviation. See question 8 for more details about government-controlled agencies or companies (state aid) in CADE. the aviation sector? If not, do general state aid rules apply? 29 Is there a sector-specific regulator or are competition rules Other than some tax benefits on the import of aircraft and parts (for applied by the general competition authority? instance, lower VAT in some states), there are no specific rules regulating financial support for airlines or other carriers. In the past, regional carri- The ANAC is a sector-specific regulator. Competition rules are also applied ers received incentives to service locations with poor demand. Brazil has by CADE. See question 8 for more details. a national development bank, the BNDES, which is active in financing infrastructure projects in Brazil, which can include aviation projects such 30 How is the relevant market for the purposes of a competition as maintenance facilities. The BNDES also acts as Brazil’s export credit assessment in the aviation sector defined by the competition agency for export of aircraft manufactured in Brazil. authorities? The relevant market is defined on a case-by-case basis by product dimen- 34 What are the main principles of the state aid rules applicable sion (eg, air transport of passengers, services; number of booked seats, to the aviation sector? fares) and by geographic dimensions (routes, airport pairs, available alter- There are no special state aid rules applicable to the aviation sector. natives for the service). In the past, guidelines issued by Brazilian antitrust authorities have indicated, among other possible methods, a hypothetical 35 Are there exemptions from the state aid rules or situations in monopoly test. Different sub-markets may also be defined by the authori- which they do not apply? ties, as for the Lan Chile–TAM merger, in which the authorities determined the sale of time slots on the São Paulo/Santiago route, as a high level of Not applicable. concentration would occur on such route. 36 Must clearance from the competition authorities be obtained 31 What are the main standards for assessing the competitive before state aid may be granted? effect of a transaction? Not applicable. For the purpose of assessing the occurrence of an infraction of competition laws, the Brazilian Antitrust Law (Federal Law No. 12,529/2011) prescribes 37 If so, what are the main procedural steps to obtain clearance? a legal presumption of market power when a group of companies, one sin- Not applicable. gle company unilaterally or a group of companies in coordination has an impact on the relevant market conditions or has more than 20 per cent of 38 If no clearance is obtained, what procedures apply to recover the relevant market share; however, such percentage may be changed by unlawfully granted state aid? CADE for different sectors. Not applicable. With regard to merger review, the currently valid Antitrust Law extinguished the market share threshold and established new turnover Miscellaneous thresholds to define whether a transaction must be notified to CADE. In accordance with the Antitrust Law and applicable regulations, a transac- 39 Is there any aviation-specific passenger protection tion must be notified if: legislation? • one of the economic groups to a transaction had a gross revenue or There are four basic sources of rules to protect passengers in case of can- total volume of businesses in Brazil of at least 750 million reais; and cellations and delays. First, the CBA provides some protection. Second, • any other economic group had a gross revenue or total volume of busi- there are published regulations from the Aeronautical Command and from nesses in Brazil of at least 75 million reais in the year preceding the the ANAC. Third, the Brazilian Consumer Defence Code also contains sev- relevant transaction according to their latest financial statements. eral provisions to protect passengers. Generally, passengers are entitled to compensation for cancellations or delays in excess of four hours. Fourth, In reviewing the transactions, the competition authorities evaluate Brazil is a signatory to the Montreal Convention of 1999, which contains whether a transaction results in this level of power and how a market may rules relating to damages caused during the performance of contracts of be affected by concentration of market share. The authorities consider bar- carriage, delay and indemnification to passengers in case of death or injury. riers to entry into a market, structure of the market and competition in the Compensation should always include accommodation and meals and market. The authorities may still approve a transaction that falls foul of may also include additional compensation. Carriers are not responsible for these criteria if the transaction would result in greater efficiencies, and the delays caused by weather and air traffic delays (which have been the cause benefit of such outweighs the damage to consumers. of most of the country’s more notorious delays), as long as the carriers can objectively demonstrate that the weather and air traffic were the cause of 32 What types of remedies have been imposed to remedy the delay. A few courts, however, have held that airlines are responsible concerns identified by the competition authorities? for compensation to passengers for delays even when the delays have been The competition authorities have wide discretion in relation to remedies. caused by weather. This position is not universal but is emerging. The usual remedies for entities and persons involved in anti-competitive There are some draft laws under consideration in the Brazilian con- behaviour are fines, which may vary (i) from 0.1 to 20 per cent of the gross gress that may change some of particulars in relation to overbooking turnover of the relevant companies or groups in the year preceding the which, if ratified, will favour passenger rights. commencement of the administrative procedure; and (ii) from 50,000 to 2 billion reais in case of natural persons or when the turnover criterion is 40 Are there mandatory insurance requirements for the not applicable. operators of aircraft? In the case of a merger review, the authorities may apply structural remedies such as mandatory divestment, sale of brands and sale of times The CBA imposes certain mandatory insurance requirements that apply to slots, termination of agreements with other competitors and routes to all aircraft registered in Brazil. Such requirements are commonly referred competitors. Generally, there is a preference for structural remedies as to as RETA requirements. The RETA requirements tend to be light and they require less ongoing monitoring. well under the requirements imposed by market-standard leases. RETA requires cover for injuries or death of passengers and third parties in an amount that is under the equivalent of 58,700 reais per person (note, as mentioned in question 25, the CBA limits are not expressed in US dollars and the dollar amounts used in this chapter are indicative only). RETA does not include any hull insurance.

36 Getting the Deal Through – Air Transport 2016

41 What legal requirements are there with regard to aviation security? Update and trends The ANAC has issued a written set of instructions with regard to aviation There is an additional tax on imports called COFINS, which was not security. For international flights, Brazil’s airports tend to follow interna- applicable to aircraft imports in previous years. Based on a change in tional trends in relation to security. Domestic flights are subject to slightly law that occurred in 2013 the Brazilian tax authorities began to assess lighter standards. the COFINS tax on aircraft imports beginning in the last quarter of 2014. Airlines have been challenging the assessment of the COFINS tax on the importation of commercial aircraft under lease 42 What serious crimes exist with regard to aviation? agreement. To date most airlines have been able to avoid paying it, The Brazilian Criminal Code, the National Security Law and the Criminal however, this has been based on interim judicial rulings and not final Contravention Law include the following aviation-specific crimes: decisions on the merits of the applicability of the COFINS tax. If and • attacks against the safety of air transport or exposing personal or when applicable, the COFINS tax would be 1 per cent of the value of third-party aircraft to danger or practices preventing or inhibiting air an aircraft at the time of importation. navigation; • sabotage against military units, media and transport facilities (including airports and ports); • acts that place or cause to be placed on an aircraft in service a device or • unauthorised operation of aircraft; and substance that is likely to destroy or damage the aircraft; • abusive aviation conduct (eg, acrobatics, flights outside permitted • acts that destroy or damage air navigation facilities or interfere with zones, landing aircraft outside permitted areas). their operation; or • communication of false information that endangers the safety of an Brazil is also a signatory to the Montreal Convention of 1973 (Convention aircraft in flight. for the Suppression of Unlawful Acts Against the Safety of Civil Aviation), which deems the following acts crimes: In addition, although not classified as a crime, misusing AEP codes issued • performance of an act of violence against persons on board an aircraft by the RAB in order to transmit information to the International Registry in flight if the act is likely to endanger the safety of the aircraft; is subject to civil and criminal penalties according to ANAC Resolution No. • destruction of an aircraft in service or causing damage to an aircraft 309/2014. that renders it incapable of flight or that is likely to endanger its safety in flight;

Renata Iezzi [email protected]

Rua da Consolação No. 3741, 13th Floor Tel: +55 11 3065 4455 01416-001 São Paulo, SP Fax: +55 11 3064 6049 Brazil www.baschrameh.com.br

www.gettingthedealthrough.com 37

Canada

Laura M Safran QC and Prasad Taksal DLA Piper (Canada) LLP

General 3 What safety regulation is provided for air operations that do not constitute public or commercial transport and how is the 1 Which bodies regulate aviation in your country, under what distinction made? basic laws? Transport Canada is responsible for regulating aviation safety and air- Under the Canadian Constitution Act 1867 aviation is a federal area of worthiness requirements for all civilian aircraft in Canada. Airworthiness responsibility. Transport Canada is a department of the government of requirements and the applicable standards are described in Part V of the Canada under the federal Minister of Transport. It is responsible for the CARs. The requirements include obtaining an airworthiness certificate issuance of operating authorities and safety oversight. The principal leg- and submission of an annual airworthiness report (except in the case of islation administered by Transport Canada is the Aeronautics Act. Under an ultralight aeroplane). Operators of unmanned air vehicles are required the authority of that statute, the Canadian Aviation Regulations (CARs) to obtain a special flight operations certificate, unless they are entitled to and more detailed standards respecting aviation have been promulgated. prescribed exemptions on the basis of nature of the operations and/or the The Canadian Transportation Agency (CTA), formed under the Canada weight of the unmanned air vehicles. The Aeronautics Act defines ‘com- Transportation Act, is an independent, quasi-judicial agency, that makes mercial air service’ as any use of an aircraft for hire or reward, that is in decisions concerning air, rail and marine matters and whose jurisdiction consideration of any payment or receipt of any benefit. In addition to the extends to economic regulation and consumer protection. With respect airworthiness requirements prescribed in Part V of the CARs, any use of an to aviation, the CTA issues licences and permits, has authority to disallow aircraft for a commercial air service is subject to the certification scheme tariffs and imposes rules relating to the accessibility of air services. The created by the Aeronautics Act and associated regulations. For aerial work Carriage by Air Act implements, among other matters, the provisions of the (consisting of helicopter external loads, towing or dispersal of products Montreal Convention as part of domestic law in Canada. The Canadian Air and involving the carriage of persons other than crew members) an opera- Transport Security Act establishes and defines the authority and the pow- tor certificate is required, subject to limited exceptions. ers of the Canadian Air Transport Security Authority, the agency responsi- Private operators that provide passenger transport using large or ble for aviation security in Canada. The Transportation Safety Board (TSB) turbine-powered pressurised aircraft are governed by subpart 4 of is an independent agency established under the Canadian Transportation Part VI of the CARs. Until March 2011, the Canadian Business Aviation Accident Investigation and Safety Board Act. The TSB is responsible for Association, a non-profit association, was authorised to issue private conducting independent investigations into aviation incidents and publicly operator certificates to private operators of business aircraft and monitor reporting its findings, identifying safety deficiencies and making recom- their operations. However, subpart 4 of Part VI was suspended and, pending mendations for eliminating such deficiencies. Civil air navigation services the introduction of new regulations by Transport Canada and by Interim are provided by NAV Canada, a private sector corporation established Order No. 10 Respecting Private Operators, the certification and oversight under the Civil Air Navigation Services Commercialization Act (CANSCA). responsibilities have been transferred back to Transport Canada. In June 2014, Transport Canada introduced revised regulations under subpart 4 Regulation of aviation operations of Part VI of the CARs. Operators that held a Temporary Private Operator 2 How is air transport regulated in terms of safety? Certificate on 28 May 2014 are automatically provided with replacement documents that comply with the revised Regulations, including a Private The CARs and the associated standards form a comprehensive code for Operator Registration Document and Special Authorization(s). Private the regulation of aviation safety. The standards required of commercial operators holding a Temporary Private Operator Certificate on 28 May operators are found in Part VII of the CARs, which divides commercial air 2014 have also been given a 24-month transition period during which a operations into six classes: general exemption will be available for most requirements, subject to cer- • foreign air operations, (subpart 1); tain conditions. • aerial operations (subpart 2); • air taxi operations (subpart 3); 4 Is access to the market for the provision of air transport • commuter operations (subpart 4); services regulated and, if so, how? • airline operations (subpart 5); and • aircraft maintenance by aircraft operators and unmanned air vehicles Financial and nationality requirements apply and there are limited exit (subpart 6). controls. Those requirements and Canadian competition law requirements are dealt with in more detail in the following questions; otherwise there are Airworthiness and maintenance are addressed in Part V, which also no limitations on access to the domestic market. Access to the market for addresses associated detailed standards. General operating and flight international air services is governed by bilateral air service agreements rules are found in Part VI. Regulations respecting aerodromes and airports between Canada and various foreign states. In negotiating the terms of are in Part III and air navigation services are addressed in Part VIII. The those bilateral air service agreements, the government of Canada follows, operation of unmanned air vehicles, including commercial operations, is among other matters, the principles outlined in Canada’s international air regulated under Special Flight Operations Certificates issued under Part policy, entitled ‘Blue Sky’. Those bilateral air service agreements range VI of the CARs. from liberal open skies agreements to agreements involving market access, tariff filing and capacity limitations. Under the Blue Sky Policy, Canada will generally seek to negotiate an open sky agreement if it is deemed to be in Canada’s overall interest; however, the Blue Sky Policy precludes any possibility of a foreign airline being granted the rights to carry domestic traffic in Canada.

38 Getting the Deal Through – Air Transport 2016

Generally, all foreign air operators wishing to operate commercial air some constraints regarding air services between each other’s territory and services to and from Canada are required to obtain a Canadian foreign third countries. Cabotage is still off the table. air operator certificate under subpart 1 of Part VII of the CARs and be in receipt of applicable licences or permits issued by the CTA. 9 What requirements must a foreign air carrier satisfy in order to operate to or from your country? 5 What requirements apply in the areas of financial fitness and The licensing procedures for foreign air carriers are set out in question 6. nationality of ownership regarding control of air carriers? In order to be eligible for a licence to operate a scheduled international ser- With respect to international air services, the nationality requirements are vice, a foreign air carrier must obtain the appropriate Canadian aviation those of the Chicago Convention and the applicable bilateral air service document, have the prescribed liability insurance coverage in place, meet agreements to which Canada is a party. Subject to very limited exceptions, the prescribed eligibility conditions and satisfy the CTA that the foreign air in order to operate a domestic air service in Canada, the operator must be carrier has not contravened the provisions of the Canada Transportation ‘Canadian’ as that term is defined in Part II of the Canada Transportation Act relating to sale of air services in Canada without an appropriate licence. Act. For an individual, this means being a Canadian citizen or permanent In order to satisfy the eligibility conditions, the foreign air operator should resident. For a corporation, it means that at least 75 per cent of voting be designated by a foreign government to operate an air service in terms interests must be owned and controlled by Canadians. In addition, a cor- of a bilateral air service agreement between that country and Canada poration must pass a ‘control in fact’ test. There is ministerial discretion to and must hold a scheduled international licence issued by that foreign dispense with such requirement. It is used sparingly to authorise special government. operations. In 2009, legislation was enacted that would permit up to 49 It is important to note that in order to obtain a foreign air operator cer- per cent foreign ownership in Canadian carriers, but that has not yet come tificate, a foreign carrier may be required to pass a base inspection carried into force. out by Transport Canada. In undertaking the base inspection, Transport Start-up operations must pass a financial solvency test. They must Canada may attend at the foreign air carrier’s base to assess whether the demonstrate the ability to cover start-up costs and operating expenses for foreign air carrier meets its requirements on maintenance, security and the first 90 days of operations, without relying upon revenues from the operational issues. operation. 10 Are there specific rules in place to ensure aviation services 6 What procedures are there to obtain licences or other rights to are offered to remote destinations when vital for the local operate particular routes? economy? The licensing of air operators for the provision of domestic services and Such rules were once a mainstay of Canadian domestic regulation, but they scheduled and unscheduled international services is regulated by the pro- have been repealed. A vestige of the old regime is section 64 of the Canada visions of the Canada Transportation Act and the regulations made there- Transportation Act, which specifies which notices must be given when a under, and is administered by the CTA. To operate an air service which is carrier proposes to discontinue a domestic service or reduce it to less than publicly available, a licence must be obtained from the CTA. The licences one flight per week. If such discontinuance or reduction results in reducing available are domestic (small, medium, large and all-cargo aircraft) and the number of carriers providing weekly service to one or fewer, the carrier international. International licences are distinguished by aircraft size and proposing to discontinue or reduce services must give notice and enter into use (in the case of all-cargo). International licences are issued on a sched- discussions with local government officials. However, the carrier cannot be uled and non-scheduled basis. An applicant must establish that it holds prevented from discontinuing or reducing service. It can only be required an appropriate operating certificate, has liability insurance and meets the to suspend the planned change for a period of 30 or 120 days, depending financial fitness requirements discussed above. Licences for international on whether the service was in operation for at least one year before the scheduled services generally are issued pursuant to bilateral air service notice was given. The same rule applies to reduction of certain services if arrangements between Canada and foreign states and are route-specific, the reduction will reduce capacity by at least 50 per cent. in accordance with the commercial rights identified in these agreements. Extra-bilateral authority in the form of additional city pairs and fifth or sev- 11 Are charter services specially regulated? enth freedom rights can sometimes be obtained on application to the CTA. Charter services are regulated separately. The Air Transportation Regulations specify a stringent set of rules that nominally apply. However, 7 What procedures are there for hearing or deciding contested the impact of these rules is largely alleviated by the provisions of Canada’s applications for licences or other rights to operate particular International Cargo Charter Policy and International Passenger Charter routes? Policy, which were announced in May 1998 and April 2000 respectively. The CTA, of its own motion or on complaint, may determine that a licensee The CTA is in the process of amending the Air Transport Regulations to ceases to meet the conditions upon which the licence was granted. In this conform but, in the interim, the CTA has been authorised to grant general case, the CTA will typically suspend the licence and give the licensee 90 exemptions from the application of those provisions of the Air Transport days to show cause why the licence should not be cancelled. Applications Regulations that conflict with the provisions of the policies. The most for extra-bilateral authority, for extended wet-lease charter operations and important restrictions that remain in place are those requiring a carrier to for all-cargo seventh freedoms are still contested on occasion, but with less provide financial guarantees in respect of advance payments received from frequency. In case of complaint, the CTA opens pleadings by inviting the tour operators. Carriers are also required to price charter contracts on the interested parties to state their cases in writing. A public hearing is possible basis of tariffs in effect on the date the contract is entered into. Those tariffs but rare in fact. An appeal from a decision of the CTA lies to the Federal must be maintained by the carrier, but need not be filed with the CTA. Court of Appeal, but only on questions of law or jurisdiction and only with leave. 12 Are airfares regulated and, if so, how? Airfares are subject to limited regulation in Canada. The most important 8 Is there a declared policy on airline access or competition and, statutory provision is section 66 of the Canada Transportation Act, which if so, what is it? applies to lightly serviced routes. On such routes, passengers and ship- In late 2006, the government of Canada announced its Blue Sky Policy, pers are given the right to complain to the CTA if they are of the view that which is intended to ‘further connect Canadians to each other and the the fare or rate offered is unreasonable or that the range of rates and fares world’. The policy is an attempt to pursue more liberalised bilateral agree- offered is inadequate. The CTA deals with a small number of individual ments with other states, contemplating fifth and sixth freedoms for pas- complaints each year and occasionally commissions more general studies senger services and seventh freedom for all-cargo services. Since the of the state of competition on lightly serviced routes. In dealing with an implementation of the Blue Sky Policy, Canada has negotiated new or individual complaint, the CTA will consider historical data, compare fares expanded air service agreements with over 20 states as well as with the 28 and rates on similar services and consider competition from other modes member states of the EU. of transport. The Air Transportation Regulations stipulate that carriers are Separate from the Blue Sky Policy, the Canada–United States Open to apply the fares set out in their tariffs, and only those fares. Skies Agreement was signed in 2007. This agreement reinforces the previ- Sections 86.1 and 86.2 of the Canada Transportation Act grant to the ous open regime for air services between the two countries by removing CTA the power to make regulations in relation to advertising of prices for www.gettingthedealthrough.com 39

© Law Business Research Ltd 2015 CANADA DLA Piper (Canada) LLP air services. In exercise of this power, the CTA has amended the ATRs (such as mechanic’s liens, unpaid airport fees, etc), or any legal hypothec by adding Part V.1 to the ATRs, which contains regulations governing under the laws of Quebec that is registered in the register of moveable advertisements in all media of airfares for all domestic air services and all property in Quebec. international air services originating in Canada. Part V.1 does not apply to Canada has made declarations under the Cape Town Convention advertisements for air cargo services; package travel services (ie, including adopting (i) alternative ‘A’ under article XI of the Protocol with respect to air services and accommodation, surface transport, entertainment, etc); insolvency proceedings having a waiting period of 60 days; (ii) article XIII and airfares that are not offered to the general public and are fixed through of the Protocol providing for deregistration and export request authorisa- negotiation. Part V.1 also does not apply to a person who provides another tion; (iii) article VIII of the Protocol relating to choice of law; and (iv) para- person with a medium to advertise prices for air services. graphs 3, 4, and 5 of article X of the Protocol relating to modification of Part V.1 of the ATRs requires any person who advertises the price of an provisions. air service on an interactive medium (such as a website), to include the total price of the air service payable by the consumer, inclusive of all applicable 15 What rights are there to detain aircraft, in respect of unpaid taxes, fees and charges (domestic and foreign) stated in Canadian dollars airport or air navigation charges, or other unpaid debts? (as well as any other currency in which such price may be expressed), pro- For the distinction between airports that are managed by private airport vide a description of all such third-party taxes, fees and charges as well as authorities and those that continue to be managed by the government of disclose any restrictions applicable to the airfares being advertised. It is Canada, see question 17. within the CTA’s authority to determine whether an advertiser has met the The Airports Act gives private airport authorities the right to detain requirements under Part V.1 of the ATR and it can impose fines and penal- aircraft in certain circumstances. CANSCA gives the same right to NAV ties for contravention or order necessary changes to conform to Part V.1. Canada, the entity that provides air navigation services to aircraft in Canadian airspace on a cost recovery basis. Aircraft ‘owned or operated’ by Aircraft an operator which is liable to pay charges, may be detained, but only when 13 Who is entitled to be mentioned in the aircraft register? Do a court order has been obtained. There is no right of sale, but the airport requirements or limitations apply to the ownership of an authority or NAV Canada is entitled to detain the aircraft until the charges aircraft listed on your country’s register? owed have been paid in full. Although motions judges have wide discretion on a court motion to authorise detention, it does not appear that the judges A person may not operate an aircraft (other than a hang-glider or a para- have the discretion to sanction any arrangement that requires the service chute) in Canada unless it is registered in Canada or in a foreign state that providers to accept less than full payment. is either a contracting state or has an agreement with Canada that allows In respect of airports that continue to be operated by the federal gov- aircraft registered in that foreign state to be operated in Canada. ernment, similar powers are granted by the Aeronautics Act. Any Canadian 16 years of age or older is qualified to be the registered While the foregoing are the major rules of general application, there owner of a Canadian aircraft. The definition of ‘Canadian’ is the same as is a wide range of circumstances in which aircraft may be subject to deten- that specified in question 5. Aircraft are registered as either state, com- tion and operators to penalties and fines. By way of example, the Canada mercial or private aircraft. With respect to private aircraft, the national- Border Services Agency has the authority to impose fines and detain air- ity requirement is relaxed. Private aircraft can be registered in the name craft operated in contravention of Canada’s customs laws. Air carriers are of a corporate entity which is not ‘Canadian’ as defined in the Canada subject to penalties for bringing into Canada persons who are not prop- Transportation Act. However, the corporate entity must be incorporated erly documented and, if such persons require medical treatment while in under Canadian federal or provincial law, must meet certain record- Canada, the cost of that treatment can be imposed on the carrier. Failure keeping and reporting requirements and the aircraft must be operated in to pay these penalties or costs can result in detention of aircraft, as can any Canada at least 60 per cent of the time. failure to satisfy a judgment debt. It should be noted that ‘ownership’ for the purposes of inclusion in the Canadian Civil Aircraft Register refers only to legal custody and control 16 Do specific rules regulate the maintenance of aircraft? and not to property rights in the aircraft. As discussed in question 14, there is no Canadian national registry for property interests in aircraft. The maintenance of aircraft is specifically regulated by the CARs, Part V, subparts 71 (aircraft maintenance requirements) and 73 (approved mainte- 14 Is there a register of aircraft mortgages or charges and, if so, nance organisations) and by detailed standards 571 and 573. Certain chap- how does it function? ters of the Airworthiness Manual are also relevant; in particular Chapter 566, which addresses the licensing and training standards that aircraft There is no national register of security interests in aircraft in Canada. maintenance engineers must meet. These regulations and standards Canada signed the Convention on International Interests in Mobile define the conditions under which different categories of work must be Equipment and the Protocol dealing with aircraft equipment on 31 March done, as well as documentation requirements. In the case of commercial 2004. The International Interests in Mobile Equipment (Aircraft Equipment) aircraft, all work must be done in accordance with a maintenance policy Act (Canada) was enacted in February 2005 and was fully proclaimed by the manual approved by Transport Canada. A matter of significant interest in federal government on 1 April 2013 after Canada ratified the Convention. Canada is the increasing reliance on a safety management system that is In Canada, the power to enter into treaties vests in the federal govern- intended to lighten Transport Canada’s enforcement role and increase ment, but the power to implement treaties is shared by the federal gov- corporate responsibility for compliance. ernment and the provincial and territorial governments. Therefore, the International Interests in Mobile Equipment (Aircraft Equipment) Act Airports was enacted at the federal government level to implement the Cape Town Convention in Canada and, thereafter, various provinces and territories 17 Who owns the airports? have adopted legislation to implement the Cape Town Convention as part Because of the immense geographical area that Canada covers, Transport of provincial or territorial law, subject to ratification by the federal govern- Canada has certified 726 airports. Nevertheless, nearly 95 per cent of ment. Currently, legislation implementing the Cape Town Convention has Canadian passengers and cargo are handled at the 26 airports that com- been adopted by all of the provinces and territories in Canada, with the prise the National Airport System (NAS). The NAS airports include the exception of New Brunswick. Section 6 of the International Interests in main airports in the national, provincial and territorial capitals and all Mobile Equipment (Aircraft Equipment) Act provides that with the excep- other airports handling 200,000 or more passengers annually. In accord- tion of certain legislation, the provisions of the Cape Town Convention ance with its National Airports Policy (NAP), the government of Canada prevail over any conflicting provision in any other law. Similarly, provincial retains the role of safety and security regulator and the ownership of the and territorial legislation also provides that the Cape Town Convention NAS airports, but has divested itself of the responsibility for financing, will prevail in case of conflicts with provincial laws. operating, managing and developing those airports by entering into long- In accordance with declarations made by Canada, a security interest term leases with Canadian airport authorities (CAAs). The latter are arm’s- in an aircraft object registered under the Cape Town Convention will have length, not-for-profit provincial corporations entrusted with the twin goals priority over other interests except in certain situations, such as an interest of providing the services required, while working toward economic self- created or existing before the ratification of the Cape Town Convention by sufficiency through earned revenue. Canada, any non-consensual right or interest created under Canadian law

40 Getting the Deal Through – Air Transport 2016

In addition to the 26 NAS airports, there are 71 regional and local air- 22 Are there any laws or rules specifically relating to ground ports, 31 small airports and eight Arctic airports. The vast majority have handling? already been transferred to CAAs, municipalities and, in the case of the There are no laws specifically relating to ground handling at airports and Arctic airports, to territorial governments. ground handling operators are not required to obtain or maintain a licence The balance of the airports certified by Transport Canada are very or consent from any governmental authority (save and except local busi- small, privately operated facilities, many of which are simply grass land- ness licences). However, a ground handling services provider is subject to ing strips. applicable statutes and regulations that govern airport operations. All competent operators are free to apply to an airport authority and any restric- 18 What system is there for the licensing of airports? tions on their ability to offer ground-handling services are determined by Transport Canada is charged with certifying non-military airports in space and capacity considerations. Competition issues are addressed by Canada under Part III of the CARs. Certification is granted following a legislation of general application and, in particular, the Competition Act. successful inspection by Transport Canada, establishing that the applicable standards are met and the publication of the airport data (verified by 23 Who provides air traffic control services? And how are they the regulator) in publications available to the public, such as the Canada regulated? Flight Supplement, which details the various facilities and services avail- The government of Canada transferred responsibility for all of the coun- able at each certified airport. There are two components to certification, try’s air navigation services network to NAV Canada, a private, non-share namely the airport certificate itself, which evidences compliance with the capital corporation. NAV Canada is statutorily obligated to provide navi- required Transport Canada standards, and the airport operations manual, gational services on a cost recovery basis in Canadian airspace. Service which details the precise specifications for airport facilities and services. charges are levied on air carriers and aircraft operators to recover costs Deviations from these specifications require the approval of Transport incurred by NAV Canada in providing the air navigation services. CANSCA Canada, which conducts regular inspections to ensure compliance. provides for a right to appeal NAV Canada charges to the CTA.

19 Is there a system of economic regulation of airports and, if so, Liability and accidents how does it function? 24 Are there any special rules in respect of death of, or injury to, As stated above, the majority of airports in Canada are private, but the passengers or loss or damage to baggage or cargo in respect of most significant facilities continue to be owned by the federal government, domestic carriage? although leased to and managed and operated by independent CAAs. The goal is to ensure the viability and self-sufficiency of those airports. Until very recently, there were no special rules with respect to death or As an integral component of the NAP, the federal government estab- injury to passengers and loss or damage to baggage or cargo for domestic lished the Airports Capital Assistance (ACA) programme in 1995. Eligible carriage. These claims were (and largely still are) resolved in accordance airport operators may apply for financial assistance for capital projects with principles of the common law of contract and negligence, as inter- relating to safety, asset protection and operating cost reductions. The preted by the courts of each province. The courts of Quebec apply civil assistance ranges from ‘first priority projects’, which include safety-related law principles and concepts, but the end result for an aviation claim in that airside projects, such as rehabilitation of runways, to ‘third priority pro- province is not likely to substantially differ from a similar case in a common jects’, including safety-related air terminal building and groundside pro- law province. Over the past couple of years, the CTA has intervened in a jects, such as sprinkler systems, asbestos removal and barrier-free access. number of cases to require air carriers to apply international liability rules. Airport authorities are often required to fund a portion of ACA projects. As of now, such intervention is limited to cases in which the claim is for A material issue in Canada is the cost of airport operations and, in damage to, loss of, or delay in the transport of baggage. particular, the rents that the federal government charges to the airport Under the Criminal Code, dangerous or negligent operation of an authorities. These are passed on to air carriers. Toronto and Vancouver are aircraft or knowingly sending an aircraft that is not airworthy on flight are often cited as expensive airports within which to operate and a number of criminal offences. Therefore, incidents that result in injury or death may economic studies have suggested that significant traffic has been diverted result in criminal investigation and possible criminal charges if the circum- from those cities to Buffalo, New York and Bellingham, Washington in the stances so warrant. United States. 25 Are there any special rules about the liability of aircraft 20 Are there laws or rules restricting or qualifying access to operators for surface damage? airports? Although there are no specific rules governing the liability of aircraft Domestic carriers have a prima facie right to serve any airport in Canada, operators for surface damage, the Airport Traffic Regulations, which were so long as they are licensed to operate by the CTA. Foreign carriers have enacted under the Government Property Traffic Act, prescribe rules for the the same requirement of licensing but, as part of the licensing process, they operation of motor vehicles, pedestrians and mobile equipment at airports, must be able to demonstrate that they have the requisite bilateral authority which may be of some interest to ground handlers. In addition, Part IV of to serve a particular destination. In a technical sense, access is governed by the Airport Traffic Regulations addresses requirements specific to the con- wide-ranging regulations covering, for example, departure and arrival pro- trol of aircraft on aprons. cedures, traffic circuits, noise abatement and aircraft separation. These are summarised in the Transport Canada Aeronautical Information Manual. 26 What system and procedures are in place for the investigation of air accidents? 21 How are slots allocated at congested airports? The TSB has statutory authority under the Canadian Transportation Slots are allocated by individual airport authorities and there is no uniform Accident Investigation and Safety Board Act to investigate civil aviation slot allotment policy or system applicable to all airports in Canada. Some incidents and accidents. Canadian airports have airport adviser status with IATA and participate in The powers of TSB investigators are extremely broad. They may biannual IATA schedules conferences, at which carriers, airports, coordi- search and seize, sometimes without warrant, and may compel sworn nators and industry experts discuss schedule adjustments. Upon negotiat- statements. Any person thought to have relevant information may be ing, trading or transferring slot times at the IATA schedules conferences, required to attend. carriers will then apply to the applicable airport for a slot. The airport will Operators and others with an interest in the investigation may seek ascertain the availability of the time as well as the logistical ability to pro- observer status. Disposition of such requests is in the discretion of the vide that time. If that time is not available or feasible, the airport will offer investigator in charge. another time and the carrier and the airport will engage in a scheduling The TSB has established criteria to determine the extent of any par- negotiation. Slot allocation at the Canadian airports using a slot clearance ticular investigation. In the case of a significant accident or incident, a request/reply system is regulated by the IATA Scheduling Guidelines. public inquiry is possible. Ultimately the TSB will issue a report to identify contributing factors and safety deficiencies. The TSB is barred from assigning blame and its role is limited to identifying deficiencies resulting in the incident or the accident. The TSB findings are also not binding on any party www.gettingthedealthrough.com 41

© Law Business Research Ltd 2015 CANADA DLA Piper (Canada) LLP in any legal proceedings and there are statutory protections for statements 30 How is the relevant market for the purposes of a competition given in the course of an investigation, but in most cases the ultimate use assessment in the aviation sector defined by the competition made of any confidential information obtained in the course of an investi- authorities? gation will lie within the discretion of a judge in civil proceedings. Definition of the relevant market is a key consideration because of the The provisions of the Canadian Transportation Accident Investigation importance of the concept of ‘market power’ when assessing competitive Safety Board Act reflect the provisions of ICAO Annex 13, which states that impact. The general issue relates to identification of the most limited air the sole objective of an accident investigation shall be to prevent accidents transport market in which a significant and non-transitory price increase and incidents and not the apportioning of blame. Accordingly, CVRs and may be imposed by carriers. In passenger transport, origin–destination transcripts of TSB investigation are not to be made available in legal pro- city pairs have often been accepted as defining the relevant geographical ceedings unless a court determines that disclosure outweighs the adverse market. However, in certain contexts it may be possible to define markets effect on future accident investigations. more broadly. In cases of suspected criminal activity, the local police and the Royal Canadian Mounted Police will be involved in the investigation and where 31 What are the main standards for assessing the competitive there have been fatalities, the coroner’s office will also be involved. effect of a transaction? The Bureau issued revised Merger Enforcement Guidelines in October 27 Is there a mandatory accident and incident reporting system 2011. This document is easily accessible on the internet and provides the and, if so, how does it operate? interested reader with the up-to-date thinking on the subject. Part 5 of the The Transportation Safety Board Regulations require reporting of aviation Guidelines deals with market shares and concentration thresholds. The accidents and incidents. Where a reportable incident occurs, an obligation basic question for the Bureau is whether a merger is likely to ‘prevent or to preserve evidence is triggered. lessen competition substantially’. The thresholds that the Bureau uses The Transportation of Dangerous Goods Act imposes reporting to distinguish between those mergers which are unlikely to have anti- requirements in certain cases of release of, or improper transport of, dan- competitive consequences and those which must be examined more gerous or hazardous goods. closely are set out in section 5.9. Generally, if the post-merger market share In addition, safety management systems referred to in Part V of the would be less than 35 per cent, the Bureau will not challenge on the basis CARs impose requirements on approved maintenance organisations to that the merged firm would be likely not to exercise market power unilat- report to Transport Canada certain service difficulties encountered in the erally. Furthermore, it will usually not challenge on the basis of potential course of maintaining an aircraft. coordinated exercise of market power if two conditions are met: the largest four firms in the post-merger market would have a market share of less Competition law than 65 per cent and the merged firm itself has a market share of less than 28 Do sector-specific competition rules apply to aviation? If not, 10 per cent. do the general competition law rules apply? The Bureau’s examination of competitive effects is not limited to an analysis of market share. Where the thresholds set out above are exceeded, General competition rules apply but there are also sector-specific rules. the Bureau will undertake a further assessment of the probable unilateral The Competition Act is the law of general application. In response to the and coordinated effects of the merger. It will consider whether competitors merger of Air Canada and Canadian Airlines in 1999, the government in the market are likely to be able to maintain competition and will con- of Canada passed the Regulations Respecting Anti-Competitive Acts of sider existing pricing strategies, distribution methods and service offer- Persons Operating a Domestic Service to define specific anti-competitive ings. An important factor in the analysis will be whether the merger is likely acts which would be subject to the abuse of dominance provisions of the to facilitate coordination of behaviour among remaining competitors. In act. It is generally conceded that these are no longer necessary because of that regard, the existence of barriers to entry would be a significant factor changes in the industry. that could lead to a finding of anti-competitive effects. There are also special provisions in the Canada Transportation Act that deal with mergers in the aviation sector. 32 What types of remedies have been imposed to remedy concerns identified by the competition authorities? 29 Is there a sector-specific regulator or are competition rules applied by the general competition authority? In August 2011 the Bureau released a summary of a merger remedies study (the full study is confidential) that reviews the effectiveness of the remedies The general regulator for competition matters in Canada is the Competition imposed in the period from 1995 to 2005. The intention of the Bureau is to Bureau (the Bureau), headed by the commissioner of competition. Except use the terms of the study to update the 2006 Remedies Bulletin, which as mentioned below, this is the source of competition regulation of the avi- is a comprehensive statement of the Bureau’s policy of merger remedies. ation industry. Certain proposed mergers and acquisitions must be notified The Bureau is empowered to apply to the Competition Tribunal to to the commissioner under section 114(1) of the Competition Act. All such challenge a merger under section 92 of the Competition Act or negotiate transactions must be simultaneously notified to the Minister of Transport remedies with the merging parties. The majority of cases result in consent and the CTA under section 53.1 of the Canada Transportation Act. The orders defining agreed remedies. minister is required to make a determination as to whether the proposed The Bureau’s classification of remedies is as follows: structural rem- transaction raises issues with respect to the public interest as it relates to edies, quasi-structural remedies, combination remedies and stand-alone national transport. If such determination is made, the Minister may direct behavioural remedies. Its preference is for structural remedies which gen- the CTA to examine those issues and submit a report. A proposed trans- erally involve divestiture of assets although, in the extreme case, it may action may not be completed unless it is approved by the Governor-in- require the prohibition of a merger of the dissolution of a merged entity. Council on the recommendation of the minister and the CTA determines Quasi-structural remedies include steps intended to reduce barriers to that the transaction would result in an undertaking that is Canadian. The entry and to provide competitors with access to infrastructure or technol- CTA is responsible for ensuring that the transaction does not result in the ogy (ie, allowing a competitor access to a customer loyalty programme). contravention of the nationality status required by the aeronautical legis- Combination remedies involve both structural divesture and measures lation. The Minister is also required to inform the commissioner of com- aimed at controlling behaviour. Behavioural remedies include such mat- petition of any national transport concerns that should be addressed. The ters as waiver of restrictive contract terms by the merged entity and codes parties to the transaction may be asked to give undertakings to address any of conduct that can be enforced by third parties. Stand-alone behavioural concerns identified. remedies are seldom acceptable to the Bureau. Transport Canada has issued Guidelines for Mergers and Acquisitions When Air Canada acquired Canadian Airlines in 1999 it was required, Involving Transportation Undertakings, which describes the informa- as a condition of approval of the transaction, to give a number of undertak- tion required to be provided to the Minister, together with the notification ings, including divestiture of certain regional carriers, surrender of slots at under section 53.1, as well as the decision-making process and the factors the slot-controlled Pearson International Airport at Toronto and limitation to be taken into consideration when making the decision as to whether the on its ability to offer discount operations in eastern Canada. proposed transaction triggers public interest issues.

42 Getting the Deal Through – Air Transport 2016

Financial support and state aid Miscellaneous 33 Are there sector-specific rules regulating direct or indirect 39 Is there any aviation-specific passenger protection financial support to companies by the government or legislation? government-controlled agencies or companies (state aid) in Legislation of the ‘passenger bill of rights’ sort was proposed in Canada but the aviation sector? If not, do general state aid rules apply? died in committee. No such legislation has yet been enacted. In response Financing support is provided in the aviation sector through Export to the public interest in the issue, a number of air carriers have filed spe- Development Canada (EDC), a crown corporation created by the Export cial ‘passenger rights’ provisions in their tariffs. The Air Transportation Development Act. EDC uses two separate accounts to support export Regulations require that charter carriers take steps to protect advance pay- transactions, commercial accounts and the Canada Account. The latter is ments and provincial legislation in several provinces regulates the way in authorised by section 23 of the Act and is used for transactions which EDC which travel wholesalers and agents carry on business with the objective will not support in the discharge of its normal mandate, but which the gov- of protecting passengers in the case of carrier insolvency. The Canadian ernment of Canada deems to be in the national interest. The government Computer Reservation Systems Regulations, passed pursuant to the of Canada assumes the risk of transactions on the Canada Account. In the Aeronautics Act, seek to ensure the fair and neutral presentation of avail- past 10 years there have been 17 transactions supported by the Canada able air services. Account, four of which supported sales by Bombardier Inc, the Canadian There are provisions in the Canada Transportation Act and the Air aerospace manufacturer. EDC also provided Air Canada with C$150 mil- Transportation Regulations that permit the CTA to reject a term or con- lion toward a C$600 million credit facility in 2009. dition of carriage filed by a carrier if the CTA finds the term or condition Aid is also granted on an ad hoc basis occasionally. For example, dur- to be unreasonable or unduly discriminatory. Furthermore, the CTA can ing the 2004 restructuring of Air Canada, the federal government pro- determine whether a carrier is applying its filed tariff terms and condi- vided a financial guarantee in favour of Air Canada for the purchase of 45 tions. The CTA has limited jurisdiction to award monetary compensation regional jets from Bombardier. Another example is the Canadian govern- but can require the carrier to apply its tariff-based terms and conditions. In ment’s decision to pay C$160 million to air carriers post-11 September June 2012, the CTA released five separate decisions on the reasonableness 2001. The government of Canada also provided liability insurance support of domestic and international tariff provisions of three major air carriers to carriers in the wake of the 9/11 terrorist attacks. in Canada relating to overbooking, cancellation, delay and rerouting of In addition, the government of Canada created the Strategic flights. The CTA directed the carriers to amend their respective tariffs to Aerospace and Defence Initiative (SADI) in 2007 to assist in aerospace comply with enhanced passenger rights. product research and development. The programme is administered by The CTA has introduced new baggage rules for international interline Industry Canada. Most government contributions under SADI take the carriage to and from Canada. The new rules apply to itineraries involving form of ‘repayable loans’. carriage by multiple carriers purchased on a single ticket, and provide that a single set of baggage rules must apply to the entire itinerary; and the appli- 34 What are the main principles of the state aid rules applicable cable rules must be disclosed to the passengers on the itinerary receipt or to the aviation sector? the electronic ticket. The CTA also requires that carriers participating in EDC is a crown corporation that operates at arm’s length from the govern- interline traffic to and from Canada file interline baggage rules with the ment. Its mandate is to support exporters without cost to the Canadian CTA and clearly state in their respective tariffs their policies concerning taxpayer. It is required to be economically self-sufficient and to operate on interline baggage. The CTA has also issued a ‘Reservation’ against IATA commercial principles, subject to the special considerations that apply to Resolution 302, modifying its application to travel to and from Canada. transactions on the Canada Account, as noted above. Canada is a member The new rules were introduced after extensive public and industry consul- of the Organisation for Economic Cooperation and Development (OECD) tation and are applicable to tickets issued on or after 1 October 2014. and support provided by EDC is supposed to be structured in accordance Part V of the Canada Transportation Act addresses the issue of acces- with OECD guidelines. sible transport for persons with disabilities. The CTA is very active in prom- SADI’s goals are to assist with research and development in aerospace ulgating standards and adjudicating disputes in that area. initiatives in order to foster Canadian competitiveness. Support through SADI loan transactions is generally limited to 30 per cent of the qualifying 40 Are there mandatory insurance requirements for the project cost. operators of aircraft? Canada is a participant in the new Aircraft Sector Understanding, In order to provide domestic or international services, air carriers are which took effect in February 2011 and was revised in September 2011. mandatorily required to carry liability insurance. Section 7 of the Air Transportation Regulations specifies minimum liability insurance require- 35 Are there exemptions from the state aid rules or situations in ments for commercial operators. These are C$300,000 per seat for pas- which they do not apply? senger liability. In respect of public liability, the mandatory coverage is The only applicable exemptions are as described above in respect of trans- a minimum of C$1 million for aircraft with maximum certified take-off actions on the Canada Account. weight of less than 7,500lbs, and minimum of C$2 million for aircraft with maximum certified take-off weight of more than 7,500lbs. In case of air- 36 Must clearance from the competition authorities be obtained craft with maximum certified take-off weight in excess of 18,000lbs, the before state aid may be granted? minimum amount of insurance is C$2 million, plus an amount equal to C$150 multiplied by the number of pounds that the weight of the aircraft Clearance from the Competition Bureau is not required. exceeds 18,000lbs. There are restrictions on insurance exclusions. Private operators of aircraft with a maximum certified take-off weight 37 If so, what are the main procedural steps to obtain clearance? of over 5,000lbs are required, subject to limited exceptions, to have pas- Not applicable. senger liability insurance of C$300,000 per seat. All private operators are required to carry public liability insurance, which is related to aircraft 38 If no clearance is obtained, what procedures apply to recover weight and the nature of the operations undertaken. unlawfully granted state aid? Recovery of state aid unlawfully granted is governed by the interna- 41 What legal requirements are there with regard to aviation tional agreements to which Canada is a party, in particular the OECD security? Arrangement on Officially Supported Export Credits, the World Trade The Canadian Aviation Security Regulations, issued under the author- Organization Agreement on Subsidies and Countervailing Measures and ity of the Aeronautics Act, provide the framework for legal requirements the 2011 OECD Aircraft Sector Understanding. imposed upon air carriers in respect of security. These regulations deal with screening of persons and things, controlled goods, carriage of persons in custody, identification and control of restricted areas and the response to threats and are supplemented by confidential memoranda distributed to carriers on a periodic basis to deal with particular procedures of a security nature. As in many jurisdictions, what is required of the carrier by way of www.gettingthedealthrough.com 43

Update and trends Legislative review the complainants and the airlines were void as a result of fundamental In June 2014, the government of Canada launched a statutory review mistakes in the contracts. The CTA found that the complainants of the Canada Transportation Act as part of its review of policies knew, or should have reasonably known, that the fares for first-class and regulations. The process involves a comprehensive review of travel between Yangon and Montreal were erroneous and that the the operation of the statute and certain other laws relating to the complainants attempted to take advantage of the mistake. economic regulation of the transportation sector, including increasing The CTA also set out certain expectations related to erroneous fares the competitiveness of the aviation sector. The review panel will take in light of the fact that mistaken fares are an ongoing issue. The CTA into consideration submissions made by interested parties and public stated that it expects carriers to notify the passengers of cancellations consultations when making its recommendations to the Minister of owing to erroneous fares within 72 hours of becoming aware of the Transport. mistake or at least 24 hours prior to departure if the ticket was purchased within 72 hours prior to departure, and further, carriers are to provide Erroneous fares refunds to passengers of the total costs of the tickets purchased by them. In May 2014, the CTA dismissed complaints filed against certain airlines In cases concerning interline itineraries, the CTA expects airlines to by complainants who had purchased tickets for first class travel between coordinate among themselves and decide which carrier will notify the Yangon, Myanmar and Montreal, Canada for erroneous fares that were passengers and provide the refunds. highly discounted. The CTA held that the contracts of carriage between

collection and distribution of information is in a state of flux, with numer- 42 What serious crimes exist with regard to aviation? ous authorities making separate and sometimes conflicting demands. Section 7 of the Criminal Code creates a territorial extension of the jurisdic- Overall responsibility for implementing security measures, such as the tion of Canadian courts in respect of certain acts committed on an aircraft screening of passengers and bags, rests with the Canadian Air Transport in flight. The principal serious crimes specifically related to aeronautics Security Authority. are found in sections 76, 77 and 78 of the Criminal Code. Hijacking is an The Public Safety Act received royal assent in May 2004. This legisla- indictable offence and is punishable by life imprisonment. Various acts of tion allows the collection and use of passenger information for the purpose violence on board aircraft or in an airport that are likely to endanger the of security. It also provides the minister of transport with the authority to safety of the aircraft or airport are also punishable by life imprisonment. issue interim orders in emergency situations. Carrying an offensive weapon or explosive on board, without the consent of the operator of the aircraft, is an indictable offence punishable by a term of imprisonment not exceeding 14 years.

Laura M Safran QC [email protected] Prasad Taksal [email protected]

Suite 1000, Livingston Place West Tel: +1 403 698 8778 / 8796 250 2nd Street SW Fax: +1 403 697 6625 Calgary www.dlapiper.com Alberta T2P 0C1 Canada

44 Getting the Deal Through – Air Transport 2016

Cayman Islands

Louise Groom and Ellie Crespi-McCarthy Harneys

General air transport) for which an aircraft is flown if valuable consideration is given or promised in respect of the flight or the purpose of the flight, but 1 Which bodies regulate aviation in your country, under what not for remuneration of the services of the pilot of the flight (article 126). basic laws? Private flight is a flight that is not aerial work or commercial air transport. Responsibility for regulation of the aviation industry in the Cayman Islands Corporate operations do not fall under commercial air transport (article is split between: the Civil Aviation Authority (CAACI), which is responsible 195), but are likely to be deemed private flight instead. for regulating aviation (including the registration of aircraft, safety, air nav- Aerial work operations have more stringent safety regulations that are igation, air traffic and licensing) pursuant to the Civil Aviation Authority not applicable to private flights. Law (2015 Revision) (the CAA Law); and the Airports Authority (CIAA) Specifically, risk assessment and development of appropriate operat- which has responsibility for managing, developing and controlling airports ing procedures are required before the commencement of any aerial work pursuant to the Airports Authority Law (2005 Revision) (the AA Law). operation is allowed (article 127). Private flights are regulated depending on the class and type of aircraft Regulation of aviation operations used. Aircraft or aircraft operation of the classes or cases specified under article 132 fall under general aviation, and must comply with the require- 2 How is air transport regulated in terms of safety? ment and conditions for approval (articles 133 and 134) as well as OTAR CAACI is responsible for aviation safety oversight throughout the Cayman Part 125 on Complex General Aviation including Corporate Operations. Islands. The legislation regulating aviation safety in the Cayman Islands The AN(OT)O also contains safety regulations for flying displays (arti- is primarily found in the Air Navigation (Overseas Territories) Order 2013 cle 69), balloons (article 70), gliders, kites and parascending parachutes (AN(OT)O). It sets out the procedures and technical requirements with (article 71), airships (article 72) and small unmanned aircraft (article 73). regards to a range of factors such as aircraft registration, airworthiness and equipment of aircraft, personnel (including crew and air traffic control- 4 Is access to the market for the provision of air transport lers), operation, aerodromes and prohibited behaviours. All aircraft must services regulated, and if so how? comply with flight crew licence requirements (articles 44 and 45) and air- There are different sets of regulations and procedures depending on the craft operation requirements (article 74) to operate in or over the Cayman country where the aircraft is registered, although all operators must obtain Islands. As the United Kingdom is a signatory to the Chicago Convention, an operating permit issued by CAACI to operate commercial air transport it, and by extension the Cayman Islands as an ‘Overseas Territory’, is services. bound by the International Civil Aviation Organization (ICAO) Standards Operators with aircraft registered in the Cayman Islands must obtain and Recommended Practices (SARPs). Compliance with the AN(OT)O an air operator’s certificate (AOC) from the Director-General of CAACI in and the ICAO’s SARPs is achieved through the publication by Air Safety order to operate a commercial air transport service (article 94). The AOC Support International (ASSI) of the overseas territory aviation require- must be issued under OTAR Part 121 or Part 135 for commercial operation ments (OTARs), which are then gazetted in the Cayman Islands. At pre- as aircraft registered under ‘Private Category’ are not allowed to be used sent, CAACI has gazetted 27 OTARs. Practical guidance on the application commercially or for the purpose of ‘hire and reward’. of the OTARs can be found in the overseas territories aviation circulars An operator with an aircraft which is not registered in the United (OTACs). Kingdom or any of the Overseas Territories must obtain a Foreign Operator Additionally, the AA Law permits the CIAA, with the approval of the Permission from the Secretary of State in the United Kingdom in order Governor of the Cayman Islands (the Governor), to make additional regu- to operate a commercial air transport service with those aircraft in the lations securing the safety of aircraft, vehicles and persons using Cayman Cayman Islands. Permission is only required for taking on board or dis- Islands airports. charging of passenger or cargo where valuable consideration is given or promised in respect of the carriage of such persons or cargo (article 135). 3 What safety regulation is provided for air operations that do The issuance of Foreign Operator Permissions in the Cayman Islands has not constitute public or commercial transport, and how is the been delegated by the Governor and thereby to the Director-General of distinction made? CAACI. Any aircraft in flight operating outside the general rules set out in article The AN(OT)O does not specify the exact procedures for operators 195 of the AN(OT)O or under the exceptions set out in articles 196 to 202 based in other Overseas Territories or the United Kingdom to commence is deemed non-commercial air transport. Non-commercial air transport operation in the Cayman Islands. Pursuant to the AN(OT)O, there is must still comply with the flight crew licence requirements (articles 44 mutual recognition of AOCs between the overseas territories. As the AOC and 45) and aircraft operation requirements (article 74) irrespective of its and foreign operator permission are both inapplicable to aircraft registered purpose. in the United Kingdom, there is no requirement or regulation for their There are specific provisions for non-commercial air-transport in access to the Cayman Islands market. general within the AN(OT)O which limits low visibility and low altitude Note that if the air transport services provided do not fall within the operation (article 75), requires additional survival equipment as reasonably scope of commercial air transport within article 195(1) or is under one of considered necessary by the pilot-in-command (article 80) and mandates the exceptions to commercial air transport services in articles 196 to 202, the use of oxygen in flights with cabin pressure exceeding 10,000 feet dur- the regulations specified above will not be applicable. ing the flight (article 81). Non-commercial aviation is further separated into aerial work and private flight. Aerial work means any purpose (other than commercial www.gettingthedealthrough.com 45

5 What requirements apply in the areas of financial fitness and with the law of an EEA State. Accordingly, Cayman aircraft tend to be reg- nationality of ownership regarding control of air carriers? istered by Cayman Islands and British Virgin Islands owners. The AN(OT) The Local Companies (Control) Law (2015 Revision) (the LCC Law) may O also provides that if an aircraft is chartered by demise to a qualified per- be applicable to a foreign entity that is looking to gain control of or start an son (as above) then it may be possible to register the aircraft in Cayman air carrier deemed to ‘carry on business in the Cayman Islands’ within in in the name of the charterer by demise notwithstanding that the owner of the meaning of the LCC Law. If beneficial ownership and control (whether the aircraft is not a qualified person provided that all other conditions to effective control, by shares, or through director control) of the air carrier registration are met. is less than 60 per cent Caymanian, the air carrier may need to apply for a local companies (control) licence. These licences are granted by the Trade 14 Is there a register of aircraft mortgages or charges, and if so & Business Licensing Board taking into account a range of matters set out how does it function? in, but not limited to, section 11 of the LCC Law. CAACI maintains a ‘Register of Aircraft Mortgages’. Registration can be The finances of the company and the economic feasibility of its plans made in respect of any aircraft mortgage (Cayman or foreign law gov- are one of the factors within the LCC Law to be taken into consideration erned) and registration in the Register of Aircraft Mortgages confers statu- when deciding on applications for a licence. tory priority on the charge holder. It is also possible to file a priority notice ahead of an aircraft mortgage being taken; a mortgage registered within 6 What procedures are there to obtain licences or other rights to 14 days shall be deemed to have priority from the time when the priority operate particular routes? notice was registered. In addition, any Cayman company that owns an Depending on where the aircraft is registered, the operator may need to aircraft and creates a security interest over it has a statutory obligation to obtain either an AOC or foreign operator permission from the Director- update its internal register of mortgages and charges. General of CAACI to operate commercial routes with that aircraft. An operating permit issued by the CAACI is required to operate air transport 15 What rights are there to detain aircraft, in respect of unpaid operations. airport or air navigation charges, or other unpaid debts? The operator must comply with all of the technical standards set The CIAA and CAACI each have a statutory lien on every aircraft for the out in AN(OT)O and any OTARs that have been gazetted in the Cayman recovery of airport dues, fees or other charges imposed for the perfor- Islands. The non-gazetted OTARs are not in themselves law, although they mance of functions exercised under the AA Law, the CAA Law or any of repeat or reproduce many provisions of AN(OT)O so failure to comply may their respective regulations. In addition, the CAA Law allows CAACI to constitute a breach of one or more provisions of the AN(OT)O. enter, take control of and arrest any aircraft over which it has a lien. An operator may need to obtain a trade and business licence and, if applicable, a local companies (control) licence to operate within the 16 Do specific rules regulate the maintenance of aircraft? Cayman Islands. Yes, CAACI issues guidance identifying all of the maintenance requirements for commercial and noncommercial aircraft, which are set out on 7 What procedures are there for hearing or deciding contested the AN(OT)O, the OTARs and the ICAOs. applications for licences or other rights to operate particular routes? Airports There are no specified mechanisms for dealing with contested applications. 17 Who owns the airports? 8 Is there a declared policy on airline access or competition, and There are three airports located within the Cayman Islands. Owen if so what is it? Roberts International Airport in Grand Cayman and Charles Kirkconnell International Airport in Cayman Brac are owned and operated by the There is no declared policy on airline access or competition. CIAA. The third airport, the Edward Bodden Airfield in Little Cayman, is a private, uncertified aerodrome. 9 What requirements must a foreign air carrier satisfy in order to operate to or from your country? 18 What system is there for the licensing of airports? A foreign air carrier must obtain a foreign operator permission, a trade and The Air Navigation Services division of CAACI is responsible for the cer- business licence and LCC Law (if applicable) in order to operate to or from tification and licensing of airports in the Cayman Islands including Owen Cayman Islands. There are further requirements for other certificates, Roberts International Airport, the Charles Kirkconnell International documents and forms to be filed with CAACI. Airport in Cayman Brac and the Edward Bodden Airstrip (unlicensed aerodrome) in Little Cayman. 10 Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local 19 Is there a system of economic regulation of airports, and, if so, economy? how does it function? There is no specific public service obligation with regard to air The Commercial Affairs Regulation and Administration division of CAACI transportation. oversee the economic regulation of the Cayman Islands aviation industry. The primary responsibility is to establish principles in accordance with the 11 Are charter services specially regulated? ICAOs for economic policy (including non-discrimination, cost-related Special arrangements are available for companies that supply more than policy, transparency and consultation with users) to regulate air trans- one-off ad hoc charters or those who provide air ambulance services port services, service providers and facilities. CAACI are also responsi- through the issuance of blanket permits and verification letters by CAACI. ble for licensing scheduled and non-scheduled air transport operators in accordance with the AN(OT)O with an aim to ensure all operators are duly 12 Are airfares regulated, and if so, how? licensed and providing the highest standards of safety for the travelling Airfares are not regulated in the Cayman Islands. public. CAACI carries out an audit and inspection programme in order to review compliance with regulations. Aircraft 20 Are there laws or rules restricting or qualifying access to 13 Who is entitled to be mentioned in the aircraft register? Do airports? requirements or limitations apply to the ownership of an aircraft listed on your country’s register? The Airport Regulations (1995 Revision) prohibit various acts including accessing or leaving the airport otherwise than through designated points Nationality limitations are specified by the AN(OT)O which provides that of entry and entering parts of the airport that are not designated for pub- the following ‘qualified persons’ may register an aircraft on the Cayman lic access without leave of an authorised officer. The Airports (Straying register as owner: the Crown, UK nationals, Commonwealth citizens, Animals) Regulations (1997 Revision) empower authorised officers at nationals of any European Economic Area state, bodies incorporated in airports to remove any animals from any areas of the airport where they any part of the Commonwealth and undertakings formed in accordance might constitute a hazard to the aircraft.

46 Getting the Deal Through – Air Transport 2016

21 How are slots allocated at congested airports? possible and in a manner he thinks fit. The Governor shall communicate There are no guidelines or regulations which determine how slots are allo- the report and its safety recommendations to undertakings or national cated at congested airports. The IATA Worldwide Scheduling Guidelines aviation authorities. do not apply to the Cayman Islands. Competition law 22 Are there any laws or rules specifically relating to ground 28 Do sector-specific competition rules apply to aviation? If not, handling? do the general competition law rules apply? Section 64(1) of the CAA Law places an obligation on CAACI to keep under There are no sector-specific competition rules for aviation or general com- review the provision of airport operation services in the United Kingdom petition law. and elsewhere with a view to facilitating the carrying out of its functions in relation to competition. Currently, Air Agencies Limited is the leading 29 Is there a sector-specific regulator or are competition rules provider of aviation ground services in the Cayman Islands. applied by the general competition authority? There is no sector-specific regulator or general competition authority. 23 Who provides air traffic control services? And how are they regulated? 30 How is the relevant market for the purposes of a competition The CIAA is responsible for the provision of air traffic services for the assessment in the aviation sector defined by the competition entire territory of the Cayman Islands. Under the AN(OT)O, CAACI is authorities? responsible for the regulatory safety oversight of the air traffic services There is no sector-specific regulator or general competition authority. unit. Oversight of the training and competence of air traffic services personnel is part of CAACI’s role. Air traffic control services are regulated 31 What are the main standards for assessing the competitive under the following OTARs: effect of a transaction? • OTAR 172 (Air Traffic Services Approval); OTAR 173 (Flight Checking Organization Approval); There is no sector-specific regulator or general competition authority. • OTAR 77 (Activities Affecting Airspace); and • OTAR 65 (Air Traffic Service Personnel Licenses and Ratings). 32 What types of remedies have been imposed to remedy concerns identified by the competition authorities? Liability and accidents There is no sector-specific regulator or general competition authority. 24 Are there any special rules in respect of death of, or injury to, Financial support and state aid passengers or loss or damage to baggage or cargo in respect of domestic carriage? 33 Are there sector-specific rules regulating direct or indirect There are no special rules in the Cayman Islands that deal with death of, or financial support to companies by the government or injury to, passengers or loss or damage to baggage or cargo. However, sec- government-controlled agencies or companies (state aid) in tion 35 of the CAA Law provides that if any article is entrusted to the care the aviation sector? If not, do general state aid rules apply? of the CIAA, the CIAA will not be liable for any loss or damage occasioned There are no specific rules regulating financial support to companies by the unless such loss or damage is due to its wilful neglect or default. This is also government-controlled agencies or companies in the aviation sector. the case for the CAACI. There are no applicable general state aid rules.

25 Are there any special rules about the liability of aircraft 34 What are the main principles of the state aid rules applicable operators for surface damage? to the aviation sector? There are no special rules about the liability of aircraft operators for Not applicable. surface damage in the Cayman Islands. 35 Are there exemptions from the state aid rules or situations in 26 What system and procedures are in place for the investigation which they do not apply? of air accidents? Not applicable. CAACI is specifically not responsible for the enforcement of laws relating to the investigation of accidents. The CAA Law delegates this responsibil- 36 Must clearance from the competition authorities be obtained ity to the Governor or his delegates. The Civil Aviation (Investigation of before state aid may be granted? Air Accidents and Incidents) Regulations, 2007 lays down the system and Not applicable. procedures for the investigation of air accidents. An investigation is required of either the relevant person or the aero- 37 If so, what are the main procedural steps to obtain clearance? drome authority to give notice to the Governor. The notice must include Not applicable. the information listed under section 5(3) of the legislation. The Governor may then, at any time, publish information relating to the accident. The Governor can appoint inspectors to carry out investigation of the accident 38 If no clearance is obtained, what procedures apply to recover and to draw air safety lessons from it. The extent and the procedure of the unlawfully granted state aid? investigation are determined by the Governor, and are likely to be case Not applicable. specific. Miscellaneous 27 Is there a mandatory accident and incident reporting system, 39 Is there any aviation-specific passenger protection and if so, how does it operate? legislation? After the completion of the investigation, the appointed inspector is to Other than requirements in the AN(OT)O which provide for a certain num- immediately submit a report to the Governor. The report shall state the ber of cabin crew per passenger seats installed on the aircraft, safety belts objective of the investigation, and where appropriate contain safety recom- and safety briefings for passengers and prohibit the carriage of dangerous mendations. The persons involved in the incident will remain anonymous goods there is no aviation-specific passenger protection legislation. in the report. The report of the investigation will then be circulated by the inspector to parties likely to benefit from its findings with regard to safety. 40 Are there mandatory insurance requirements for the The report will not be published if it is likely to adversely affect the operators of aircraft? reputation of any person, until the inspector has served a notice upon the person and made the necessary changes as indicted in section 12(1) of the There are no mandatory insurance requirements for aircraft registered in Civil Aviation (Investigation of Air Accidents and Incidents) Regulations, the Cayman Islands (ie, private aircraft). Insurance is required for aircraft 2007. The Governor shall make the report public in the shortest time www.gettingthedealthrough.com 47

• an operator of an aircraft to which this article applies must establish, Update and trends implement and maintain a security programme that meets the specified requirements for security for commercial air transport aircraft; The UK government is set to ratify the Convention on International • the person in charge of the provision of an air traffic control service in Interests in Mobile Equipment and the Protocol thereto on matters a Cayman Islands, other than at a military aerodrome, must establish, specific to Aircraft Equipment (the Cape Town Convention). Once ratified, the Cape Town Convention can be extended to the Cayman implement and maintain a security programme that meets the speci- Islands, with Cayman gaining the status of a territorial unit of a fied requirements for security for an air traffic control service; Convention State. In the meantime, the Cayman Islands authorities • the person in charge of an aeronautical telecommunications service have been busy preparing all necessary enabling legislation to must establish, implement and maintain a security programme that bring the Cape Town Convention into force so that it interacts meets the specified requirements for security for the equipment or harmoniously with existing Cayman registration regimes. The key apparatus operated by that person for such a service; and new statute is the International Interests in Mobile Equipment (Cape • an applicant wishing to operate an aerodrome must have established Town Convention) Law, 2015. a security programme that meets the specified requirements for security for aerodromes and must implement and maintain such security programme. operating commercially and proof of insurance is required for aircraft requesting permission to fly into the Cayman Islands. 42 What serious crimes exist with regard to aviation? A number of serious aviation-related crimes exist including negligently 41 What legal requirements are there with regard to aviation endangering safety and human life on an aircraft, wilfully destructing an security? aircraft or being riotously assembled, unlawfully and with force prevent, The National Aviation Security Committee was established in the Cayman hinder or obstruct the loading or unloading of any aircraft or, unlawfully Islands in 1993 to advise and assist with the development and implemen- or with force board any aircraft with intention so to do, drunkenness on an tation of security measures and procedures at all airports adequate to the aircraft, smoking on an aircraft, acting in a disruptive manner. There is no requirements of international civil aviation. The National Aviation Security separate aviation crimes legislation in the Cayman Islands. Crimes related Committee derives its powers under the AA Law. In addition, under the to aviation are prosecuted under the Penal Code (2013 Revision) or the AN(OT)O: article 22 (Prohibited Behaviour, Offences and Penalties) of the AN(OT)O.

Louise Groom [email protected] Ellie Crespi-McCarthy [email protected]

Harbour Place Tel: +1 345 815 2933 103 S Church St Fax: +1 345 949 4451 PO Box 10240 George Town www.harneys.com Grand Cayman Cayman Islands

48 Getting the Deal Through – Air Transport 2016

Denmark

Henrik Kleis and Rune Hamborg Delacour Law Firm

General Access to the EU market is regulated by Regulation (EC) 1008/2008 on common rules for operation of air services in the Community. Hence, 1 Which bodies regulate aviation in your country, under what Community carriers may carry out air transport services to and from basic laws? Denmark provided that they have an EU licence granted by a competent The Danish Ministry of Transport has authorised the Danish Transport member state licensing authority. Authority (CAA-DK) to regulate aviation within the Danish territory. In Denmark, the CAA-DK is the competent EU licensing authority. The framework regulation is the Danish Air Navigation Act. The act Applicants must comply with specific rules and fill in specific forms when authorises the Minister for Transport, whose competence by order has applying for an EU licence. been delegated to the CAA-DK, to issue regulations and orders necessary To obtain the EU licence the applying air carrier must comply with to implement EU directives and regulations. certain requirements regarding financial fitness and nationality of owner- The various regulations issued by CAA-DK are in the form of ship (see question 5) under Regulation (EC) 1008/2008. The applying air Regulations on Civil Aviation (BL). carrier must also hold a valid air operator’s certificate (AOC) issued by the same licensing authority responsible for refusing, revoking or suspending Regulation of aviation operations the EU licence and the air carrier must have one or more aircraft at its disposal through ownership or dry-lease arrangements and have air operation 2 How is air transport regulated in terms of safety? services as its main occupation. Furthermore, the applying air carrier must Air transport safety is regulated by the Danish Air Navigation Act and the comply with specific insurance requirements and comply with rules on the various Regulations on Civil Aviation (BL). There are 11 different series of proof of good repute. BLs covering the different kinds of safety aspects of the aviation system. The Regulations on Civil Aviation are an implementation of the gen- 5 What requirements apply in the areas of financial fitness and eral provisions of Regulation (EC) 216/2008 on the common rules in the nationality of ownership regarding control of air carriers? field of civil aviation safety. The provisions apply to all aspects of aeronau- An air carrier must, inter alia, comply with the requirements regarding tical services, aircraft operations and the personnel and organisations deal- financial fitness and nationality of ownership regulated by Regulation (EC) ing with the services and operations. 1008/2008 in order to obtain an EU licence from the CAA-DK. The CAA-DK is in charge of the majority of the legislative operations Air carriers that have an EU licence issued for the first time must fully and the enforcement of aviation rules in Denmark. Within commercial avi- document that they can at any time fulfil their actual and potential obliga- ation the European Commission (the Commission) and European Aviation tions made up on a realistic basis for a period of 24 months from the com- Safety Agency (EASA) are the main bodies responsible for air transport mencement of operations, and that they can cover the fixed and variable safety. The main functions of EASA are to develop new legislation and pro- costs pursuant to the business plan of the company made up on a realistic vide the Commission and the CAA-DK with technical assistance within the basis for a period of three months from the commencement of the opera- framework of Regulation (EC) 216/2008. tion without taking into account the operating income. Companies with an EU licence for commercial air transport shall 3 What safety regulation is provided for air operations that do furthermore upon each new financial year submit a ‘financial accounting not constitute public or commercial transport and how is the statement’ together with the most recent annual accounts to the CAA-DK. distinction made? The CAA-DK will go through the documents and a financial analysis The safety of non-commercial and non-public air operations are regu- of the company will be made. If there are evident signs showing that an lated by the CAA-DK through specific BLs, stating that special licences are air carrier has financial problems, the CAA-DK can at any point in time required for specific types of aerial work, inter alia, agricultural aviation, address the air carrier’s financial results for evaluation and can suspend or aerial target towing, aerial target flights and aerial advertisement flights. revoke the EU licence if it cannot be established that the company can fulfil Such licences to carry out aerial work are issued by the CAA-DK. its actual and potential obligations for a period of 12 months. The CAA-DK All aspects of the transport of passengers and cargo naturally fall also has the possibility of issuing a temporary EU licence until a financial within commercial air transport. As for other air operations the distinc- reconstruction of the air carrier has taken place, provided there are no tion between public and commercial air transport and non-public and safety risks involved. non-commercial air transport is primarily based on whether a payment is Regarding requirements of nationality of ownership, the air carrier obtained for the performed flight in question. must be more than 50 per cent owned or effectively controlled either Public and commercial air transport requires permission from the directly or indirectly by member states or nationals of member states CAA-DK. in order to obtain an EU licence in accordance with Regulation (EC) Private operations are subject to general requirements and must com- 1008/2008. ply with many of the same rules governing commercial flights. 6 What procedures are there to obtain licences or other rights to 4 Is access to the market for the provision of air transport operate particular routes? services regulated and, if so, how? A Community air carrier (that holds a valid EU licence issued in a mem- An air carrier must obtain authorisation to carry out air transport services ber state) is, in principle, entitled to operate freely on routes within the to and from Denmark in accordance with section 75 of the Danish Air Community, including routes to and from Denmark in accordance with EU Navigation Act. rules on intra-Community air services, provided that slots are available in the airport. www.gettingthedealthrough.com 49

For a non-Community air carrier, the right to operate routes to, from 12 Are airfares regulated and, if so, how? and within Danish territory is governed by bilateral agreement between Airfares in Denmark for intra-Community air traffic may be set freely Denmark and the non-Community state. In the event that no bilateral in accordance the principles of pricing freedom in Regulation (EC) agreement exists between Denmark and the non-Community state, the 1008/2008. However, the CAA-DK regulates the airfares to and from the non-Community air carrier must apply to the CAA-DK for such air traffic Faroe Islands and Greenland. rights. Regulation (EC) 1008/2008 furthermore prohibits Denmark, as a member state, from discriminating on grounds of nationality or identity 7 What procedures are there for hearing or deciding contested of air carriers with respect to airfares between a member state and third applications for licences or other rights to operate particular countries. routes? Issues related to applications to obtain EU licences are decided by the Aircraft CAA-DK. Refusals cannot be appealed. 13 Who is entitled to be mentioned in the aircraft register? Do Any EU licence granted may be revoked, suspended or amended by requirements or limitations apply to the ownership of an the CAA-DK. aircraft listed on your country’s register? Issues related to applications from non-Community air carriers to operate particular routes to, from and within Denmark are also decided by The Danish Civil Aircraft Register is a register of owners and contains all the CAA-DK. Refusals can be appealed to the Minister for Transport. civil aircraft registered in Denmark. An aircraft is considered registered in the register once either a temporary certificate of registry or a final certifi- 8 Is there a declared policy on airline access or competition and, cate of registry has been issued. Hence, aircraft pending initial case han- if so, what is it? dling are usually not considered registered. An aircraft can only be registered in Denmark: The relevant Danish authorities have no declared policy on airline ac- • when the owner is Danish and the owner is domiciled or resident in cess or competition within the air transport sector. Denmark or in a state where the person, because of his nationality, The Danish authorities support the common EU air transport policies. cannot be a registered owner of an aircraft; Those are, inter alia, to secure route access and provide sufficient capacity. • when the aircraft is owned by an EU or EEA national or EU or EEA Both the Danish and, insofar as it may affect trade between member companies, etc (legal entities) to the extent such are comprised by the states, the EU competition rules apply in general to the Danish aviation EU regulations; or sector. • when the aircraft is owned by a person who is permanently residing in Denmark and the aircraft is used with Denmark as place of departure. 9 What requirements must a foreign air carrier satisfy in order to operate to or from your country? Furthermore, an aircraft can only become registered in the Danish Civil The requirements for a foreign air carrier wishing to operate in Denmark Aircraft Register when it has obtained an airworthiness certificate issued will very much depend on to which extent the foreign air carrier is from or approved by the CAA-DK, and when it fulfils the requirements deter- within or outside the Community. mined by the CAA-DK in respect of remedying noise and other inconven- If from within the Community, it is required that a valid EU licence be iences and disadvantages for persons outside the aircraft. obtained and the air carrier must be in possession of a valid AOC. The air carrier also must comply with rules on security, air safety and the specific 14 Is there a register of aircraft mortgages or charges and, if so, aircraft used must, inter alia, comply with rules on registration, insurance how does it function? and airworthiness. Mortgages, charges or other rights in aircraft shall be registered in order For non-Community air carriers, requirements on the air carrier meet- to obtain security against agreements concerning the aircraft and against ing ICAO requirements which set the standards for crew, the aircraft in legal proceedings. Registration takes place by becoming registered in use, inter alia, must also be satisfied. Flying in Denmark may also require a public mutual register of rights, The Danish Register of Rights over the non-Community air carrier to comply with relevant bilateral or multi- Aircraft, which is maintained by the CAA-DK. lateral aviation agreements with Denmark. Rights in aircraft can only be registered if the aircraft in question is As of 1 July 2013, all air carriers departing from Danish airports have to registered in the Danish Civil Aircraft Register (see question 13). pay a safety contribution fee of 6.00 kroner per passenger. A request for registration is entered into a logbook on the day of application including information on: 10 Are there specific rules in place to ensure aviation services • the aircraft in question, including its registration mark; are offered to remote destinations when vital for the local • type of right; and economy? • name and address of the applicant. In accordance with Regulation (EC) 1008/2008, the Danish government may impose public service obligations in respect of scheduled air services The CAA-DK will reject documents that do not meet the requirements for between an airport in Denmark and an airport at a remote destination in becoming registered. The document shall be endorsed with information the Danish territory with little or low traffic if such route is considered vital on date of entry in the logbook. for the economic or social development of the remote region by the Danish Upon entry in the logbook it is established to which extent the docu- government. ment can be registered. If the document concerns a right which pursuant The Danish government has currently not imposed such public service to the Act on Aircraft Registration cannot be registered, or the applicant obligations relating to scheduled air services. has not presented the necessary proofs of his right in order to claim registration, it is rejected from the register and deleted from the logbook. The 11 Are charter services specially regulated? CAA-DK may determine a deadline for presenting proof, so that a rejection Community air carriers may operate within the Community without per- does not take place before expiry of such deadline. The document will then mission from the CAA-DK in accordance with Regulation (EEC) 2408/92 be registered in the register stating the fixed deadline. on access for Community air carriers to intra-Community air routes, A fee is payable upon application of rights to the CAA-DK and a regis- including charter services operations. tration fee is payable to the Danish tax authorities. The transfer of owner- Community air carriers operating outside the Community and non- ship rights from the Danish Civil Aircraft Register to the Danish Register of Community air carriers shall, according to BL 10-1 (Regulations on char- Rights over Aircraft is free of charge. ter flights and taxi flights to and from Denmark) submit an application to the CAA-DK no later than 48 hours in advance of the intended landing, if 15 What rights are there to detain aircraft, in respect of unpaid the air carrier intends to carry out up to a maximum of four charter flights airport or air navigation charges, or other unpaid debts? within two months to Denmark. In accordance with section 146 of the Danish Air Navigation Act, a Danish For air carriers intending to operate more than four charter flights airport is entitled to detain an aircraft intended for commercial flights in within two months to Denmark, the time limit is 30 days in advance of the the event of unpaid airport charges accrued in connection with the air- intended landing or the effective date of the traffic programme. craft’s landing and stay in the airport. The airport is entitled to detain the

50 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Delacour Law Firm DENMARK aircraft until the airport charge is paid or equivalent collateral has been persons with access to the enclosed airport space, Order No. 933/1997 made. on ground handling and Order No. 1339/2007 (revised by Order No. 1167/2010) on airport security. 16 Do specific rules regulate the maintenance of aircraft? CAA-DK is responsible for issuing most of the specific rules in respect Maintenance of aircraft in Denmark is governed by different EU regula- of aircraft’s access to the Danish airports. The BL 1 series, inter alia, sets tions enforced by EASA and through BLs issued by the CAA-DK. out specific rules and conditions to aircraft and aircraft material. Furthermore, the CAA-DK supervises workshops that maintain and carry out repairs of aircraft. Such workshops must be licensed by CAA-DK 21 How are slots allocated at congested airports? to carry out the specific maintenance or repairs. The allocation of slots at Danish airports is carried out in accordance with Regulation (EEC) 95/93 on common rules on the allocation of slots at Airports Community airports as amended by Regulation (EC) 793/2004. Allocation and coordination of slots outside EU member states is car- 17 Who owns the airports? ried out in accordance with the IATA Worldwide Scheduling Guidelines Denmark has a number of both private and publicly owned airports. In and IATA Worldwide Slot Guidelines. relation to the transport of freight and passengers, Copenhagen Airport In Denmark, Airport Coordination Denmark A/S (ACD) is responsible and Billund Airport are the two largest and considered to be the most for slot allocation, schedules facilitation and schedule data collection at important airports. larger airports. At present ACD has been appointed to provide coordina- The ownership of the airports varies. In Denmark there are examples tion services to Copenhagen Airport and Billund Airport. of state ownership, private ownership, ownership by local municipalities or a combination of these. 22 Are there any laws or rules specifically relating to ground Copenhagen Airport together with Roskilde Airport is owned by the handling? privatised company Copenhagen Airports A/S. The shareholders as per Access to the ground-handling market in the large Danish airports is 31 December 2014 are: Copenhagen Airports Denmark ApS (Ontario regulated by Order No. 933 of 9 December 1997 on access to the ground- Teachers’ Pension Plan and Macquarie European Infrastructure Fund III) handling market in Danish airports. The order is an implementation of – 57.7 per cent; the Danish state – 39.2 per cent; foreign, private and institu- Directive 96/67/EC. tional investors – 1.3 per cent; and Danish, private and institutional inves- According to the rules set out in Order No. 933, the obligation to secure tors – 1.8 per cent. free access to the ground-handling market applies to airports with com- Billund Airport is owned by the company Billund Lufthavn A/S. The mercial traffic of more than 2 million passenger movements or 50,000 shareholders of the company are eight different municipalities. tonnes of freight. In Denmark, only Copenhagen Airport and Billund Airport exceed these thresholds. 18 What system is there for the licensing of airports? The general rules on the licensing of airports are listed in sections 55 to 60 23 Who provides air traffic control services? And how are they of the Danish Air Navigation Act. In order to establish and operate a public regulated? airport the company is obligated to obtain permission from the CAA-DK. Within the framework of the relevant EU legislation Eurocontrol is respon- Furthermore, the company is obligated to comply with the special rules in sible for both the development of licensing policy for air traffic controllers the Regulations on Civil Aviation (BL), especially the BL 3 series. and also the standards for licensing set out by national authorities. If the airport is considered to be of vital importance for Denmark’s Naviair, which as from 27 October 2010 was reorganised into an inde- national and international air traffic connections the company is required pendent public corporation, has been granted a licence to operate and is to obtain special permission from the CAA-DK. The special permission the principal provider of air traffic control (en route) in Denmark. Naviair requires the company to comply with a number of conditions set out in the is regulated by Act No. 529 of 26 May 2010 on Naviair. Special and general permission and in accordance with section 57 of the Danish Air Navigation rules on air traffic control can be found in the Regulations on Civil Aviation Act. (BL). At present Copenhagen Airport is the only airport considered to be of As per 1 July 2012, Nordic Unified Air Traffic Control (NUAC), a -com vital importance for the national and international air traffic connections pany owned by Naviair and the Swedish Luftfartsverket (LFV), was fully of Denmark. certified to deliver air navigation services in the Danish–Swedish area. The general rules for the licensing of airports not considered to be NUAC is responsible for the control centres in Copenhagen, Malmö and public airports are listed in section 59 of the Danish Air Navigation Act. Stockholm. 19 Is there a system of economic regulation of airports and, if so, Liability and accidents how does it function? At EU level the Commission has issued Directive 2009/12/EC with rules 24 Are there any special rules in respect of death of, or injury to, and principles regarding the airport operators’ right to levy airport charges passengers or loss or damage to baggage or cargo in respect of from its users. domestic carriage? Directive 2009/12/EC on airport charges, eg, aircraft landing charges, Sections 106–119 of the Danish Air Navigation Act regulate conditions con- passenger charges, freight and other charges has been implemented into cerning the air carrier’s liability in connection with domestic carriage. Danish aviation law via the BL 9-15 on airport charges, as amended by BL If a passenger is killed or suffers any bodily injuries or whose health 9-15A. suffers as a consequence of an accident occurring on board an aircraft or BL 9-15 only applies to airports with an annual number of passengers in connection with boarding or disembarking, the air carrier is held liable, above 5 million. Copenhagen Airport is the only Danish airport exceeding see section 106 of the Danish Air Navigation Act. The air carrier’s liability 5 million annual passengers. also comprises loss of dependency in case of death. The air carrier’s liabil- Some of the main principles in BL 9-15 are non-discrimination of users, ity cannot be removed or limited to less than 113,000 SDR per passenger. transparency in assessing the specific airport charges, the airport’s consulta- However, the compensation is annulled or lowered, provided the air carrier tion with users and the existence of an independent authority, the CAA-DK. can prove that the entitled has contributed to the damage. The air carrier is not liable for damage exceeding 113,000 SDR per passenger if the air car- 20 Are there laws or rules restricting or qualifying access to rier can prove that the damage is not due to a deliberate or negligent action airports? or omission from the part of the air carrier or its employees. Danish rules restricting or giving access and permission to operate within The air carrier is similarly liable for damage if checked-in luggage is the Danish airports are mainly rules implementing common EU legisla- lost or damaged as a consequence of a circumstance occurred on board tion. A main principle under Regulation (EC) 1008/2008 is the right of an aircraft or within the time the checked-in luggage is in the air carrier’s registered EU air carriers to provide air transport services on all EU routes. custody, see section 107 of the Danish Air Navigation Act. However, the As to the general rules on access to airports there is, inter alia, Order No. air carrier is not liable to the extent the damage is caused by mistakes or 979/2004 (revised by Order No. 1105/2014) on approval by the police of defects in the checked-in luggage or its condition. The air carrier’s liability www.gettingthedealthrough.com 51

© Law Business Research Ltd 2015 DENMARK Delacour Law Firm for damage as a consequence of luggage being lost, damaged or delayed is 27 Is there a mandatory accident and incident reporting system generally limited to 1,131 SDR per passenger. and, if so, how does it operate? Similarly the air carrier is responsible for damage when cargo is lost Upon the occurrence of an accident or an incident over or on Danish terri- or damaged as a consequence of circumstances occurring during the time tory or with a Danish-registered, civil aircraft the AIB must be notified as where the cargo is in the air carrier’s custody, see section 108 of the Danish soon as possible. Air Navigation Act. However, the air carrier is not liable to the extent the The notification duty rests with the head of the aircraft and the person damage is caused by defects in the cargo or its condition, insufficient pack- serving as air traffic controller, or the person serving in another position of ing, etc. The air carrier’s liability for damage as a consequence of cargo importance for the air traffic safety, provided this person has provided air being lost, damaged or delayed is generally limited to 19 SDR per kilo. traffic service which has or could have importance to the accident or inci- The air carrier’s liability is also regulated by Regulation (EC) 2017/97 dent. In respect of aeronautical equipment on the ground the notification on air carriers’ liability in case of accidents, amended by Regulation (EC) duty rests with the person responsible for the equipment. 889/2002. Likewise there is an obligation to notify air traffic incidents which did not result in an accident. Such notification shall be given as a preliminary 25 Are there any special rules about the liability of aircraft notification over the radio to the nearest air traffic safety unit and must as operators for surface damage? soon as possible upon landing be followed up on by handing in the stand- Sections 127–130(a) of the Danish Air Navigation Act regulate conditions ard-form Air Traffic Incident Report to the air traffic service. concerning damage to objects or persons outside the aircraft. The form ‘Air Traffic Incident Report’ is published in Aeronautical If damage occurs to a person or object outside the aircraft as a conse- Information Circular A (AIC A). quence of using an aircraft for air carriage, the owner is obliged to com- The rules are regulated by section 137 of the Danish Air Navigation Act pensate the damage. If the owner has left the usage of the aircraft to an and section 7 of Order No. 301 of 1997 on notification duty in respect of independent user who has taken on full responsibility of the aircraft’s aircraft accidents and aviation incidents. operation and maintenance, this obligation rests with the user instead. However, it should be noted that the owner is responsible for insurance of Competition law the aircraft, and if the owner has not observed this obligation he may be 28 Do sector-specific competition rules apply to aviation? If not, held liable although the aircraft is operated by an independent user. do the general competition law rules apply? In addition, the manufacturer and the owner of an aircraft are liable pursuant to the Danish Product Liability Act, which is based on Directive The Danish competition rules contain no sector-specific competition rules 85/374/EEC. applying to the aviation sector. Pursuant to the Danish Product Liability Act, the manufacturer and Competition within the Danish aviation sector is regulated by the rules even intermediaries are liable for damage caused by defects to the prod- in the Danish Competition Act (DCA) No. 700 of 18 June 2013. uct. The owner of an aircraft who leases the aircraft to an independent user In so far as the restrictive behaviour will affect trade between member will, according to the Danish Product Liability Act, be considered an inter- states EU competition rules shall be applied concurrently with the Danish mediary, and thus have joint and several liability together with the manu- competition rules. facturer for damages as a consequence of defects to the aircraft. However, Competition rules of importance are: restrictive agreements (DCA sec- it should be noted that the owner will normally be able to claim recourse tion 6 and TFEU article 101), abuse of dominant position (DCA section 11 and against the manufacturer. TFEU article 102), merger control (DCA sections 12-12h and Regulation (EC) 139/2004), state aid (DCA section 11a and TFEU articles 107 to 109) and the 26 What system and procedures are in place for the investigation general block exemptions from application of TFEU article 101. of air accidents? In general the rules shall be interpreted and applied in accordance with EU case law. The Accident Investigation Board (AIB) in Denmark investigates accidents and incidents concerning air transport in Denmark, Greenland and the 29 Is there a sector-specific regulator or are competition rules Faroe Islands. applied by the general competition authority? On the basis of impartial investigations the AIB shall present recommendations in order to prevent breakdowns and accidents. The AIB’s Denmark has no sector-specific regulator concerning the application of investigations do not determine blame or liability – the purpose is only to Danish and EU competition law in the aviation sector. prevent breakdowns and accidents. As a consequence, the Danish Competition and Consumer Authority The AIB determines the number of investigations to be carried out in (DCCA) is also competent to apply and enforce the Danish competition consequence of an accident or incident; and the aircraft, parts or contents rules within the aviation sector. or any leads may thus not be removed or touched before the AIB has finalised its investigations, unless the police with permission from the board 30 How is the relevant market for the purposes of a competition gives permission to do so. The AIB has without a court order access to per- assessment in the aviation sector defined by the competition form investigation of the aircraft or its parts, regardless of whether it is situ- authorities? ated on private premises. There is no sector-specific definition of the relevant market for the purpose The AIB shall keep the CAA-DK informed about findings and inci- of a competition assessment in the aviation sector. dents concerning an investigation which are considered to have substantial As a consequence defining the relevant market (the relevant product importance to air traffic safety, and must as soon as possible inform the and geographic market) shall be done in accordance with section 5a of the CAA-DK about such findings. When the AIB has finalised its investigation, DCA and the Commission notice on the definition of the relevant market it must prepare a draft report concerning the results of the investigation for the purposes of Community competition law. and the board’s recommendation in respect to any measures for prevent- In general, market definitions are issued on a case-by-case basis. ing accidents or incidents of the same or similar type. The draft is sent for an opinion to the owner or user of the aircraft or airport or aeronautical 31 What are the main standards for assessing the competitive equipment to whom the investigation in the opinion of the board will have effect of a transaction? importance. On this basis the parties concerned can present their request The general rules on how to assess the competitive effects of a transac- for further investigations. tion in the aviation sector are regulated by the rules on merger control in The final report and recommendations are sent to the relevant section 12-12h of the DCA. In order to apply the Danish merger rules the authorities which in Denmark will typically be the CAA-DK and the EASA, turnover of the companies concerned must exceed specific thresholds set which in some areas maintain a common European role as authorities. out in section 12. The CAA-DK publishes the report unless this is unfavourable on decisive The test relating to the assessment of the competitive effect of a grounds. transaction under the DCA is concurrent to the test under the EU Merger The AIB’s tasks concerning investigations of accidents and break- Regulation (EC) 139/2004. downs are determined in sections 134–144(b) of the Danish Air Navigation The overall question is whether the transaction could raise any compe- Act and Order No. 301 of 1997 on notification duty in respect of aircraft tition concerns by means of impeding effective competition in particular as accidents and aviation incidents.

52 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Delacour Law Firm DENMARK a result of the creation or strengthening of a dominant position. If so, the The rules on the procedure for the approval of state aid and the rem- question is whether the verifiable efficiencies of the transaction by certain edies of the Commission in cases where a member state has granted criteria will be passed on to consumers. unlawful state aid to a company in violation of TFEU article 107(1) are regulated in TFEU article 108 and the general procedure rules (Procedural 32 What types of remedies have been imposed to remedy Regulation (EC) 659/1999). concerns identified by the competition authorities? The specific rules on remedies in transactions are regulated by section 12e 37 If so, what are the main procedural steps to obtain clearance? of the DCA. According to the Procedural Regulation (EC) 659/1999 a member In competition cases involving a transaction within the Danish avia- state granting state aid is obliged to notify the state aid measures to the tion sector there are no examples of the need to impose remedies on the Commission. If the state aid gives rise to serious concerns the Commission companies involved to remedy the concerns of the DCCA. will have to open a formal investigation that involves the opportunity for the member state and other interested parties to comment on and justify Financial support and state aid the specific measures. Depending on the outcome of the investigation the Commission will either approve or prohibit the implementation of the state 33 Are there sector-specific rules regulating direct or indirect aid. financial support to companies by the government or government-controlled agencies or companies (state aid) in 38 If no clearance is obtained, what procedures apply to recover the aviation sector? If not, do general state aid rules apply? unlawfully granted state aid? There are no sector-specific rules regulating the provision of state aid According to section 11a of the DCA, the DCCA is competent to either pro- within the Danish aviation sector. hibit further financial support or require of the company to return unlawful In Denmark the provision of state aid is regulated by section 11a of the granted state aid including interest. The demand of return is time-barred DCA. Provided that trade between member states is affected the provision to five years from the date the state aid was provided. of state aid also has to comply with the principal EU state aid rules in TFEU articles 107 and 108. Miscellaneous TFEU article 107 contains a general prohibition against state aid, examples on what constitutes state aid and possible exemptions from the 39 Is there any aviation-specific passenger protection general prohibition. TFEU article 108 contains rules on procedure for the legislation? approval of state aid and the remedies of the Commission in cases where a Denmark has adopted Directive 90/314/EEC on package travel, pack- member state has granted unlawful state aid to a company. age holidays and package tours into special legislation, the Act on Travel The Commission has published Community guidelines on State aid to Guarantee Fund that ensures compensation to passengers that have airports and airlines (20014/C 99/03). bought airline tickets as part of a package holiday, in the event of the airline’s bankruptcy. 34 What are the main principles of the state aid rules applicable A package holiday is covered by the Danish Travel Guarantee Fund, to the aviation sector? provided that: As previously noted there are no sector-specific state aid rules regulating • the passenger has entered into an agreement on a package holiday; state aid within the Danish aviation sector. • the passenger has paid for the holiday; and The Danish rules on state aid are regulated in section 11a of the DCA. • the agreement between the passenger and the holiday provider has One of the main principles in the Danish state aid rules are that state aid been registered by the Travel Guarantee Fund. with a direct or indirect object or consequence to restrict competition shall be prohibited. Providers of flight tickets (travel agencies and airlines) registered in In most cases EU state aid rules will apply and therefore also the prin- Denmark must register with the Danish Travel Guarantee Fund. It is condi- ciples related to those rules. tional for registration in the fund that the holiday provider provides a guar- The general EU principles relating to state aid are the ‘market econ- antee towards the fund. The size of the guarantee depends on the turnover omy investor principle’ (whether the conditions related to a public invest- of the holiday provider. ment would be acceptable to a long-term private investor under normal The right to compensation and assistance to passengers in the event marked conditions), the ‘proportionality principle’ (aid must be propor- of denied boarding, cancellation and delay in Denmark is governed by tionate to the purpose of the investment), the ‘one time, last time principle’ Regulation (EC) 261/2004. (contributions with the purpose to rescue or restructure the same company Disabled passengers and passengers with reduced mobility are pro- can only be granted once every 10 years) and the ‘neutrality of property tected by Regulation (EC) 1107/2006 when travelling by air. ownership principle’ (the member state’s right to establish public under- The code of conduct for computerised reservation system in Denmark takings, acquire shareholdings and to nationalise existing undertakings on is governed by Regulation (EC) 80/2009, which also applies directly in conditions from the ‘market economy investor principle’). Denmark.

35 Are there exemptions from the state aid rules or situations in 40 Are there mandatory insurance requirements for the which they do not apply? operators of aircraft? The specific Danish state aid rules contain no de minimis regulation that An owner of an aircraft is obliged to take out liability insurance (unless the exempts financial support below a certain threshold. State aid not restric- owner is the state), provided the aircraft is intended for aerial work within tive of competition and provided in accordance with other Danish legisla- Danish territory or for test aviation, see section 130 of the Danish Air tion may be exempted from the general prohibition. Navigation Act. The insurance must cover claims which may arise against EU legislation contains general exemptions to the prohibition in TFEU the owner or against the user for damage as a consequence of the air trans- article 107(1). These are TFEU article 107(2) and (3) and the general Block port on a person or object outside the aircraft. Exemption Regulation (EU) 651/2014, which are all applicable within the Regulation (EC) 785/2004 (amended by Regulation (EC) 1137/2008 aviation sector. and Regulation (EC) 285/2010) on insurance requirements for air carriers The Commission has published Community guidelines on State aid to and aircraft operators establishing minimum insurance requirements for airports and airlines (2014/C 99/03). both commercial and private flights applies in Denmark.

36 Must clearance from the competition authorities be obtained 41 What legal requirements are there with regard to aviation before state aid may be granted? security? The Danish state aid rules in section 11a of the DCA do not require the rel- Security within the Danish aviation sector is primarily regulated by Order evant authorities to obtain a clearance from the DCCA before state aid is No. 1339 of 3 December 2007 (Order on Security) (revised by Order No. granted. 1167/2010) and Regulation (EC) 300/2008 on common rules in the field of civil aviation security. www.gettingthedealthrough.com 53

The most important requirements is that both licensed airport opera- life imprisonment. This provision does not only concern occasions where tors and Danish aircraft operators are obliged to submit a security plan, to the perpetrator is on board the aircraft but also occasions where the perpe- appoint a security manager and to obtain a quality control programme. trator in other ways, eg, by forcing entry into a control centre and without The security plan must comply with the rules in Order No. 1339/2007 justification takes over control of the aircraft. and the provisions in the overall security plan ‘The Model Security Plan’. On the part of airlines serious crimes according to the Danish Air The latter are prepared by the CAA-DK in cooperation with the police. All Navigation Act are, for example: security plans are confidential. • serving alcohol or attempting to do so on board an aircraft after excessive intake; 42 What serious crimes exist with regard to aviation? • continuing to supply services on board an aircraft after the right to do By examining to what extent a serious crime has been committed, only so has been withdrawn; crimes with a maximum penalty of at least two years’ imprisonment have • lack of surveillance of the airworthiness of an aircraft; been taken into consideration in the following. • incompetent aircraft crew; On the part of passengers there is terrorism, which pursuant to section • lack of a certificate issued or approved by the CAA-DK; and 114 of the Danish Criminal Code may result in life imprisonment. • carrying explosives, weapons or ammunition without permission from In the same category there is also hijacking, which pursuant to sec- proper authorities. tion 183a of the Danish Criminal Code has the same maximum penalty,

Henrik Kleis [email protected] Rune Hamborg [email protected]

Langebrogade 4 Tel: +45 70 11 11 22 1411 Copenhagen K Fax: +45 70 11 11 33 Denmark www.delacour.dk

54 Getting the Deal Through – Air Transport 2016

Dominican Republic

Rodolfo Mesa Chavez Mesa & Mesa Abogados

General Surveillance and air traffic control rules accord with ICAO rules, while safety rules accord with provisions set out in the Chicago Convention and 1 Which bodies regulate aviation in your country, under what its appendices. basic laws? Commercial and civil aviation in the Dominican Republic is governed by 3 What safety regulation is provided for air operations that do the Civil Aviation Board (JAC), the Civil Aviation Institute (IDAC) and the not constitute public or commercial transport and how is the Specialised Body of Airports and Civil Aviation Security (CESAC). distinction made? JAC is the consulting body for government authorities concerning air Article 184 et seq of LAC defines aerial works by differentiating them from transport policies and the ruling and executive body for economic matters. civil and commercial operations. Aerial work means all commercial activi- IDAC is a specialised independent and technical body in charge of ties different from air transport. aviation safety. It supervises and controls civil aviation, particularly the Aerial work operators cannot perform civil and commercial air enforcement of relevant rules and regulations. activities. CESAC is the authority for civil aviation security, and the body respon- Aerial work operators must have an aerial work certification issued by sible for enforcement and compliance with the National Programme of IDAC. Initially only Dominican citizens are authorised to undertake aerial Civil Aviation Security. work. Occasionally, IDAC will authorise companies and foreign staff to The basic legal framework includes the following laws: undertake such work. • Law No. 491-06, dated 28 December 2006, on Dominican Republic RAD 137 governs the safety rules for aeronautical service of aerial Civil Aviation (LAC); work. • Law No. 188-11, dated 22 July 2011, on Airport and Civil Aviation Article 4 of LAC provides that it is not applicable to aircraft owned by Security; and the Dominican state, save in specific cases and by particular reference to • Law No. 8-78, dated 17 November 1978, on Airport Commission. such specific aircraft. The following international conventions are applicable to Dominican civil 4 Is access to the market for the provision of air transport aviation: services regulated and, if so, how? • Warsaw Convention 1929; • Chicago Convention 1944; Access to the market is regulated. National air operators must obtain an • Montreal Protocol 1947; economic authorisation certificate (CAE), issued by JAC, and they must • Montreal Protocol 1954; also obtain an air operator’s certificate (AOC), issued by IDAC. • Hague Protocol 1955; Foreign air operators need an operation permission issued by the • Tokyo Convention 1963; JAC, which shall be issued after confirming that they comply with safety • Hague Convention 1970; specifications provided by IDAC and the security aviation rules provided • Montreal Convention 1971 and its supplementary protocol; by CESAC. • London Convention 1972 (on regulation to prevent collisions at sea) JAC could refuse to issue permissions or authorisations for certain and its appendices; routes, if it considers traffic needs are satisfied. • Montreal Convention 1991; • Montreal Protocol 1988; and 5 What requirements apply in the areas of financial fitness and • Montreal Convention 1999. nationality of ownership regarding control of air carriers? Article 220 of LAC provides that air transport services are reserved to The Dominican Republic has entered into bilateral agreements with 40 national air operators, but they could be granted to foreign air operators countries for opening commercial airlines routes. from countries that have entered into agreements or treaties with the Dominican Republic. Regulation of aviation operations To determine and guarantee the capacity and economic and financial suitability of national air operators they must apply for an economic 2 How is air transport regulated in terms of safety? authorisation certificate from JAC. IDAC is responsible for air navigation safety and takes all measures and Foreign air operators prove their financial and economical capacity regulations to guarantee aviation safety. by submitting the permissions issued by the relevant authorities in their IDAC supervises the fulfilment of the safety rules set out in appendices countries. 1, 2, 11, 14 and 68 of the Chicago Convention. On 24 April 2013, the Dominican Republic enacted Law 67-13, which The main safety rules are contained in LAC and the Dominican amended certain aspects of the Civil Aviation Law (Law 491-06). Aeronautical Rules (RAD) Nos. 2, 61 and 110. The main goal of this amendment is to change the requirements for IDAC has the authority to check the fulfilment of flight rules and a national air operator. Pursuant to this new law a company with foreign inspect mechanical conditions and aircraft airworthiness. capital in full (100 per cent) can be considered as a national air operator, According to the LAC, the pilot shall have final authority concerning provided, however, that the investment is coming from an internationally all matters related to the aircraft while he or she is in charge of the aircraft. known airline. IDAC is authorised to validate licences issued by other member countries of the International Civil Aviation Organization (ICAO) to pilots, crew and mechanics that are going to support or operate Dominican aircraft. www.gettingthedealthrough.com 55

Nowadays most operating airlines are from abroad. Dominican 11 Are charter services specially regulated? authorities have an open and flexible policy to allow the entry of new for- Charter flights are regulated by LAC, RAD 121 and Decree 832-09, which eign air operators into the market. states any foreign air operator not having an operation licence shall apply for a charter flights authorisation through a foreign air operator aircraft by 6 What procedures are there to obtain licences or other rights to a consignee in charter flights. operate particular routes? The requirements to obtain a charter flights authorisation are less Licensing and permissions are ruled by the LAC. than those required for regular flights, therefore it is a quicker and easier To operate a route, national air operators need a CAE issued by JAC, proceeding. and an AOC issued by IDAC. National air operator applicants must prove to JAC that they comply 12 Are airfares regulated and, if so, how? with nationality requirement in connection with company ownership and Airfares shall be approved by the JAC. Airfares are typically ruled by air control, as set out in question 5. transport agreements entered into by the Dominican Republic and other Furthermore, the national air operator must prove compliance with countries. the National Civil Aviation Security Programme as set forth by CESAC, which has been drafted in accordance with Appendix 17 of the Chicago Aircraft Convention, as well as financial and economic supporting information, feasibility studies, etc. 13 Who is entitled to be mentioned in the aircraft register? Do Licences for foreign companies are issued according to reciprocity requirements or limitations apply to the ownership of an agreements entered into by the Dominican Republic and the operator’s aircraft listed on your country’s register? country. However, the JAC is authorised to issue an operation licence with- The LAC regulates any matters related to aircraft registration. To that end out an agreement or reciprocity statement. the Nation Aircraft Registry was created by IDAC. An aircraft could be Operation licences are issued for a 10-year maximum term. registered by Dominicans and foreign citizens who are domiciled in the Dominican Republic. 7 What procedures are there for hearing or deciding contested Before an aircraft is registered in the Dominican Republic, the previ- applications for licences or other rights to operate particular ous registration must to be cancelled. routes? Those aircraft owners who comply with the legal requirements could Once the licence application is submitted and the applicant has proved apply for a definitive registration. compliance with requirements, JAC shall hold a public hearing in relation to the application. Any interested party that considers itself affected can 14 Is there a register of aircraft mortgages or charges and, if so, appear at the hearing and oppose the licensing. how does it function? When the hearing is over, JAC shall pass a resolution approving or Mortgages and charges on Dominican Republic aircraft can be recorded in refusing the licence. the National Aircraft Registry. Mortgages are recorded by notarised docu- JAC decisions are appealable before the Administrative Litigious ments, in accordance with Civil Code provisions. Court. The appeal can be filed within 15 days. 15 What rights are there to detain aircraft, in respect of unpaid 8 Is there a declared policy on airline access or competition and, airport or air navigation charges, or other unpaid debts? if so, what is it? According to the LAC, an aircraft can be detained only with the relevant There is no specific access and competition policy in the transport field. In court authorisation, based on debts derived from airport and air navigation the Dominican Republic there is a very flexible licensing and permission services rendered. granting system, which is based on reciprocity criteria and open skies treaties and conventions that have been entered into with several countries. 16 Do specific rules regulate the maintenance of aircraft? JAC authorities could refuse to issue licences or authorisations for cer- Aircraft maintenance is regulated by the LAC and RAD No. 43. These regu- tain routes if air traffic necessities are completely satisfied. lations are applicable to aircraft with registration issued in the Dominican JAC authorities could refuse or cancel operation licences when air Republic. transport services without schedule or isolated frequency are an unfair IDAC must ensure the proper maintenance of aircraft registered in the competition to airlines established in the market. Dominican Republic. Likewise the law provides that an air operator must ensure that air- 9 What requirements must a foreign air carrier satisfy in order craft maintenance and operations are performed in the public interest to operate to or from your country? and according to LAC provisions, rules, regulations, directives and orders A foreign air carrier that desires to operate from and to the Dominican issued by IDAC. Republic must have an operation licence from JAC. It also has to comply When aircraft are registered overseas, IDAC is not directly involved with the guidelines on safety and airworthiness set forth by IDAC and the in their maintenance and it is just involved in control and ramp revisions. National Security Civil Aviation Programme (PNSAC), which supervises the CESAC. Airports To obtain an operation licence, a foreign air operator must prove to JAC the following: 17 Who owns the airports? • that it is suitable, willing and qualified to perform international com- In the Dominican Republic airports are both state and privately owned. mercial air transport and to comply with the legal provisions, rules and Those owned by the state are administrated by concessionnaire companies. regulations; • that it is qualified and it has been designated by its government to be 18 What system is there for the licensing of airports? engaged in international commercial air transport under the terms According to the LAC airports are classified as public, private and military. of an agreement entered into with the Dominican state or that such Public airport are intended for general air navigation use; private airports transport is in the public interest; and are those intended for particular use by a person or a company; military • that its government has granted or is able to grant reciprocity to airports are those intended to be exclusively used by Dominican Republic Dominican air transport companies. armed forces. To operate any public or private airport, an operator must have an 10 Are there specific rules in place to ensure aviation services authorisation issued by IDAC. When an airport is a public aerodrome, it are offered to remote destinations when vital for the local also requires previous authorisation from the president of the republic. economy? RAD 19 defines aerodrome guidelines and airport certification, while There are no legal provisions for aviation services to remote destinations. RAD 14 defines regulations related to their design and operation. Furthermore, the Airport Commission, an independent body created by Law No. 8-78, is involved in licensing and permission granting.

56 Getting the Deal Through – Air Transport 2016

19 Is there a system of economic regulation of airports and, if so, providing, however, that a convention or agreement has been entered into how does it function? by the Dominican Republic and the state where the accident occurred. By a presidential decree, the Dominican state sets the airport fees and CIAA must take all measures to prevent accidents happening again. charges. Both private airports and state airports operated under concession are subject to airport fees determined by the Dominican state. 27 Is there a mandatory accident and incident reporting system Airport services charges shall be paid directly by air transport opera- and, if so, how does it operate? tors to the airport administration. According to the LAC any authority having knowledge of an accident must report it to IDAC. Likewise, any owners, operators or crew members shall 20 Are there laws or rules restricting or qualifying access to report promptly to IDAC any accidents or incidents in aircraft under their airports? responsibility within Dominican territory and in Dominican-registered air- The LAC provides that any aircraft entering to or departing from craft abroad. Dominican territory shall comply with the airworthiness rules provided by IDAC. RAD 25 provides that IDAC shall accept the airworthiness cer- Competition law tificates issued by the European Safety Aviation Agency and the Federal 28 Do sector-specific competition rules apply to aviation? If not, Aviation Administration of the United States. Airports are bound to comply do the general competition law rules apply? with safety rules set by IDAC. There are no aviation sector-specific regulations in the Dominican Republic related to this matter, therefore the general guidelines provided 21 How are slots allocated at congested airports? in Law No. 42-08 on the defence of competition apply. There is no specific guideline for assigning a slot; airport operators usually assign the slots by arrival time order or as agreed with air operators. 29 Is there a sector-specific regulator or are competition rules applied by the general competition authority? 22 Are there any laws or rules specifically relating to ground There is no specific regulator for aviation competition. However, JAC regu- handling? lates some aspects of competition such as airfares, air traffic and frequen- The Airport Commission rules ground handling, which approves contracts cies. Regulations on competition are applied by the National Commission and services fees in all Dominican Republic airports. for the Defence of Competition (Pro-Competition), an independent body created under Law No. 42-08 for the defence of competition. However the 23 Who provides air traffic control services? And how are they application of this law has been put on hold until the appointment of the regulated? executive director. According to the LAC, IDAC has to offer, supervise and monitor air traffic control services and ensure they are performed at an optimum safety 30 How is the relevant market for the purposes of a competition level, as per ICAO rules. RAD 11 rules all matters related to air traffic con- assessment in the aviation sector defined by the competition trol services. authorities? There is no particular definition of a relevant market for aviation. Liability and accidents According to the general law on competition defence, the relevant 24 Are there any special rules in respect of death of, or injury to, market comprises the economic activity and a specific geographic zone, passengers or loss or damage to baggage or cargo in respect of in a scenario that includes all replaceable or interchangeable goods and domestic carriage? services, and all immediate competitors with whom customers could come into contact in the short term, without restriction or abuse, which should The LAC, Chapter X, Part I provides rules on civil liability of air operators cause a significant increase in prices. for national and international flights. Article 194 states that air operators are bound to compensate for damage arising from death or any injury suf- 31 What are the main standards for assessing the competitive fered by a passenger related to transport. effect of a transaction? Air operators shall also compensate for damage derived from loss, destruction, breakdown or cargo or baggage delay. The main object of regulation is to promote and defend competition to The Law provides that air operators shall have mandatory insurance, increase the economical efficiency in the market, to benefit consumers. which has to be in accordance with the Montreal Convention 1999 and The legal system recognises and protects the freedom to engage in guideline set by local aviation authorities. business, commercial and industrial activities. Regulations for the defence Dominican civil law provides for compensation not only for material of competition are in the public interest, which is binding and required of damages but also for damages for pain and suffering. any economic agent. When damage or loss occurs on international flights, the operator’s The law prevents and sanctions agreements and practices against liability shall be limited as provided in international treaties to which the competition and abuse of dominant position in connection with a relevant Dominican Republic is a party. market. Likewise, unfair competition is prevented and sanctioned by law.

25 Are there any special rules about the liability of aircraft 32 What types of remedies have been imposed to remedy operators for surface damage? concerns identified by the competition authorities? An air operator shall compensate any person suffering damage caused Pro-Competition can impose the following measures and sanctions: by something falling from or coming off an aircraft in flight over national • suspension and termination of factors or behaviour causing the dam- territory. age to competition; Occasionally the air operator shall not be liable if the damage is not a • fines from 30 to 3,000 minimum salaries depending on the breach of direct consequence of those facts from which they are derived. free completion; and • obligations against the economic agent or sanctioned person to cor- 26 What system and procedures are in place for the investigation rect the market distortion and recover the competition. of air accidents? The law provides for the absolute nullity of acts, anti-competition agree- The Aviation Accidents Investigation Commission (CIAA) was created to ments and agreed practices. conduct the technical investigation into any serious accident involving civil aircraft in Dominican Republic territory and in international waters when Dominican-registered aircraft are involved. CIAA is an independent body from IDAC and JAC and follows the guidelines set out in Appendix 13 of the Chicago Convention. In addition, CIAA has powers to investigate serious accidents occurred abroad where aircraft registered in the Dominican Republic are involved

www.gettingthedealthrough.com 57

Financial support and state aid 40 Are there mandatory insurance requirements for the operators of aircraft? 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or The LAC provides that any air operator shall contract an insurance policy government-controlled agencies or companies (state aid) in or auto-insurance plan. The term of an operation licence depends on fulfil- the aviation sector? If not, do general state aid rules apply? ment of this obligation. The amount and cover of the insurance policy must be in accordance The Dominican state does not provide any financial support to aviation with the guidelines in the Montreal Convention 1999. activities. The LAC provides tax exemptions for oil and fuel products, parts and 41 What legal requirements are there with regard to aviation engines. security? 34 What are the main principles of the state aid rules applicable Law No. 188-11 is the legal framework on which civil aviation security is to the aviation sector? based. These legal guidelines are based on provisions included in appendix 17 of the Chicago Convention. Not applicable. The main object of this law is to prevent and sanction the actions and unlawful interference against passengers, crew, ground staff and public 35 Are there exemptions from the state aid rules or situations in security. Aviation infrastructure services are included, as well as aircraft, which they do not apply? airports and aerodromes. Not applicable. This law reinforces and raises the legal status of CESAC, which has the responsibility to prepare, apply and enforce the national security 36 Must clearance from the competition authorities be obtained programme. before state aid may be granted? Not applicable. 42 What serious crimes exist with regard to aviation? Crimes and offences related to aviation are included and sanctioned by 37 If so, what are the main procedural steps to obtain clearance? Law No. 188-11. Within more serious crimes are included: Not applicable. • hijacking by violence and intimidation; • taking an aircraft hostage and hijacking; 38 If no clearance is obtained, what procedures apply to recover • intentional total or partial destruction of an aircraft, airport or com- unlawfully granted state aid? munications equipment that causes death and serious injury; and • spreading false information to jeopardise aviation, passenger and In any cases when state support had been rendered, the prosecutor’s office crew security at an airport or civil aviation installation and causing is empowered to recover funds by legal action and to sanction those liable, serious injury or death. when applicable. Other actions are defined as less serious offences and infringements, but Miscellaneous may also result in penal sanctions, including imprisonment. 39 Is there any aviation-specific passenger protection The Dominican Republic is a party to several conventions and treaties legislation? to prevent and sanction crimes and offences affecting aviation (see ques- The Dominican Republic has no special legislation for protecting tion 1). passengers. These rights are protected and regulated by Law No. 358-05, the Consumer Rights Protection Act. Authorities have the power to regulate fees according to air transport treaties to which the country is a signatory, which act as a protection mechanism for passenger in such matters. The Dominican Republic is signatory to the Warsaw Convention, which limits air carrier liability in connection with an accident causing injury or death to passengers. It also limits liability when loss or damage to baggage occurs.

Rodolfo Mesa Chavez [email protected]

Ave. Lope de Vega No. 13 Tel: +1 809 338 0444 Progreso Business Center, Suite 705 Fax: +1 809 381 1004 Naco www.mesalex.com Santo Domingo Dominican Republic

58 Getting the Deal Through – Air Transport 2016

European Union

Geert Goeteyn Shearman & Sterling LLP

General • Pricing: liberalisation of intra-EU airfares, setting and imposition of an obligation on air carriers to publish airfares in a clear and unambigu- 1 Which bodies regulate aviation in your country, under what ous way. basic laws? The European Commission (Commission) is the European Union regula- Competition tory body for aviation. Within the Commission, the Directorate General for EU competition law is fully applicable to the aviation sector. The Mobility and Transport (DG Move) is responsible for developing and imple- Commission has full powers to apply articles 101 (restrictive agreements menting EU transport policies. The Directorate General for Competition and concerted practices), 102 (abuse of dominance) and 107 to 109 (state (DG Comp) is responsible for the application of EU competition law in the aid) of the Treaty on the Functioning of the European Union (TFEU), as air transport sector, including state aid matters since 2010. well as the merger control provisions contained in Regulation 139/2004. The Commission is responsible for ensuring the implementation and, Regulation 487/2009 (replacing Regulation 3976/87) enables the where applicable, enforcement of EU law by the member states, national Commission to grant block exemptions to certain agreements and forms agencies and companies. If a member state fails to implement EU legis- of cooperation normally restricted by articles 101 and 102 TFEU. Block lation, the Commission may (after it has followed certain procedural exemptions were used in the past to exempt certain forms of revenue- warning steps) bring a case against it before the Court of Justice of the EU sharing and capacity coordination, computer reservation systems and (Court of Justice). ground handling as well as the International Air Transport Association EU air transport policy covers a wide variety of aspects of the air (IATA) slot and tariff coordination conferences. However, these block transport sector, including the liberalisation of air transport on intra-EU exemptions have been gradually phased out and no aviation-specific block routes and (subject to conditions and limitations) routes between the EU exemptions are currently in force. The Commission has so far expressed no and third countries, aviation safety, and air traffic control. Other impor- intention to issue any new block exemptions for the aviation sector. tant fields include slot allocation, ground handling services, computerised reservation systems, noise emissions, denied boarding, baggage controls, Aviation safety personnel licensing, accident investigation and occurrence reporting, The EU has adopted a regulatory framework in the field of aviation safety, airline passenger liability and aviation security. with the establishment of the European Aviation Safety Agency (EASA), The applicable legislation can be broken down into four broad cat- and of air traffic control with the Single European Sky (SES) initiative (see egories: market liberalisation, competition, aviation safety and relations question 23). between the EU (and its 28 member states) and third countries. External aviation relations Market liberalisation In the field of external aviation relations, the Court of Justice declared in Market liberalisation is one of the main objectives of EU regulation in the the 2002 Open Skies judgments that the Commission has exclusive com- aviation sector. The implementation of a single aviation market across the petence in certain limited areas previously covered by international bilat- EU has been carried out gradually through three liberalisation packages, eral agreements. More importantly, nationality clauses, which reserve the which have harmonised national laws for airfares, market (route) access right to operate services between contracting states to the carriers that are and capacity, and introduced the application of the EU competition rules. majority owned and effectively controlled by nationals of those states, The first package, adopted in 1987, initiated the relaxation of existing were held to infringe the principle of freedom of establishment enshrined national rules. For instance, it limited the rights of governments to object to in articles 49 to 54 TFEU. As a result, the existing bilateral agreements con- the setting of new fares and provided for limited liberalisation of capacity cluded between the member states and third countries had to be amended sharing. The second package, adopted in 1990, introduced further flexibil- or replaced. After these judgments, the Commission received a Council ity for the setting of airfares and capacity sharing. The third liberalisation mandate to negotiate horizontal agreements between the EU and third package established a single EU air transport market as of 1 January 1993. countries to rectify the situation and, with regard to the US, a transatlantic The third legislation package, initially consisting of Regulations 2407/92, open aviation area (OAA). 2408/92 and 2409/92, was subsequently consolidated into Regulation The negotiation of an EU–US air transport agreement took place in 1008/2008. two stages. A first-stage agreement came into force on 30 March 2008, and Regulation 1008/2008 covers the following areas: allowed for the liberalisation of air services between the EU and the US • Licensing of carriers: issuance, suspension and revocation of EU-wide in a number of important respects, although certain significant limitations air carrier operating licences. For an air carrier to obtain an operating continued to apply. The main provisions can be summarised as follows: licence, it must comply with the requirements set down in the regula- • any EU carrier has the right to fly between any point in the EU and tion, including ownership and control requirements, financial fitness any point in the US, without any restrictions on pricing, capacity or and insurance. frequency (although this right does not extend to flights within the • Market access: establishment of the basic principle of free access for US); EU air carriers to intra-EU air routes, according to which all EU air • EU and US carriers have the right to operate flights beyond the EU and carriers are granted unconditional access to all member states’ territo- the US to third countries; ries (including freedom to provide cabotage, ie, domestic air services • foreign investment (including EU) in US airlines remains capped at a within a member state). maximum of 25 per cent of voting capital; • all European airlines must be recognised as EU carriers by the US authorities, allowing for consolidation between EU airlines; www.gettingthedealthrough.com 59

• EU airlines are granted certain access rights to the US ‘Fly America’ • issue certificates under the regulation to European companies involved programme; in aircraft design and certify the aircraft used in Europe; and • convergence mechanisms were established concerning competition • issue certificates under the regulation to air carriers, maintenance law enforcement, state aid and security; organisations and training organisations located in third countries. • joint EU–US approaches in international organisations and in relations with third countries were developed; These tasks, which initially concerned only aircraft airworthiness and envi- • an EU–US technical cooperation was established in relation to climate ronmental certification, now include licensing flight crews and their train- change; ing, as well as the operation of aircraft within the EU and in third countries. • institutional mechanisms were put in place, including a dispute settle- Regulation 216/2008 is implemented through a number of other regu- ment procedure with arbitration provisions; and lations, including in particular: • provisions relating to franchising, branding, code-sharing and wet- • Regulation 748/2012 (as amended) laying down implementing rules leasing were included. for the airworthiness and environmental certification of aircraft and related products, parts and appliances, as well as for the certification The second-stage agreement, which was signed on 24 June 2010, had the of design and production organisations; following key outcomes: • Regulation 2042/2003 (as amended) on the continuing airworthiness • commitment from both the US and EU to aim to remove all remaining of aircraft and aeronautical products, parts and appliances, and on the access barriers, with an annual progress review; approval of organisations and personnel involved in these tasks, ie, • enhanced access for EU carriers to the US ‘Fly America’ programme; maintenance (see question 16); • relaxation of the 25 per cent limit on EU-owned voting rights in US air- • Regulation 1178/2011 (as amended) laying down technical require- lines (for the time being still in force), subject to legislative change; ments and administrative procedures related to civil aviation aircrew • provision that the EU will allow majority ownership of EU airlines by pursuant to Regulation (EC) No. 216/2008 of the European Parliament US nationals (for the time being still prohibited), subject to legislative and of the Council; change; • Regulation 965/2012 (as amended) laying down technical require- • link between the revision of the process for the introduction of noise- ments and administrative procedures related to air operations pursu- based airport restrictions in the EU and additional access rights for EU ant to Regulation (EC) No. 216/2008 of the European Parliament and carriers to fly between the US and non-European countries; of the Council; • relaxation of restrictions on EU and US investment in third-country • Regulation 452/2014 laying down technical requirements and admin- airlines; istrative procedures related to air operations of third country operators • enhancement of the EU–US cooperation on environmental matters; pursuant to Regulation (EC) No. 216/2008 of the European Parliament • inclusion of a dedicated article on the social dimension on EU–US and of the Council; aviation relations; and • Regulation 1034/2011 on safety oversight in air traffic management • enhancement of the EU–US regulatory cooperation. and air navigation services; • Regulation 805/2011 laying down detailed rules for air traffic However, with significant ownership restrictions and the prohibition for controllers; EU carriers to operate US domestic services (cabotage) remaining in place, • Regulation 1332/2011 laying down common airspace usage require- the second stage agreement failed to produce the OAA originally envis- ments and operating procedures for airborne collision avoidance; aged by the Commission. • Regulation 923/2012 laying down the common rules of the air and The Commission also has a mandate to negotiate at the EU level hori- operational provisions regarding services and procedures in air zontal agreements with third countries other than the US, with a view to navigation; bringing existing bilateral air services agreements in line with the Open • Regulation 319/2014 on the fees and charges levied by the European Skies judgments (replacing in particular national ownership and control Aviation Safety Agency, and repealing Regulation (EC) No. 593/2007; provisions with an EU air carrier clause). Many EU horizontal agreements and have been signed and others are being negotiated. Member states can con- • Regulation 3922/91 (as amended) on the harmonisation of techni- tinue negotiating certain aspects of the agreements, as long as they do not cal requirements and administrative procedures in the field of civil deviate from certain standard clauses developed by the Commission. aviation. Another important pillar of the EU’s external aviation policy relates to the creation of a European Common Aviation Area (ECAA) between the A complete set of relevant regulations, organised by subject matter, can be EU and its partners from southern and eastern Europe as well as Iceland found on the website of the EASA. and Norway. The aim of the ECAA is to open up new commercial oppor- Member states must recognise certificates of compliance issued in tunities for the European aviation industry. The agreement ensures a high accordance with Regulation 216/2008 without further technical require- level of uniformity (including with regard to competition rules) and safety. ments or evaluation conditions. However, a member state may take imme- The ECAA was originally expected to be fully implemented by 2010, but diate appropriate measures in the event of a safety problem, provided that the process has not yet been completed. The Commission expressed con- it notifies EASA, the Commission and the other member states. cerns that certain member states had not yet ratified the ECAA Agreement EU regulations applicable in the field of airports and air traffic -con and threatened to take the matter to the Court of Justice if it is not resolved. trol also contain certain provisions relating to safety. Furthermore, the Commission has adopted measures relating to the safety of operations Regulation of aviation operations by third-country carriers to and from EU airports. In January 2007, the Commission adopted a three-pillar airport package, applicable to major 2 How is air transport regulated in terms of safety? European airports. One of the three pillars is the Commission’s communi- Air transport safety is principally governed by Regulation 216/2008 on the cation on an action plan for airport capacity, efficiency and safety in Europe. common rules in the field of civil aviation (as amended by Regulations In addition, to address a possible ‘capacity crunch’ at Europe’s busy 620/2009, 1108/2009, 6/2013, 800/2013 and 71/2014). Regulation main airports, the Commission proposed a number of measures, consist- 216/2008 applies to the design, production, maintenance and operation of ent with its approach to enhance air safety at airports as increased traffic aeronautical products, parts and appliances, as well as to personnel and levels require improved safety measures throughout Europe. Measures organisations involved in these activities. It also applies to personnel and include the extension of EASA’s responsibilities to cover airport safety organisations handling aircraft operation. regulation, the use of global navigation satellite systems, and the devel- The main body responsible for air transport safety is the European Air opment and implementation of technological solutions to help improve Safety Agency (EASA). Under Regulation 216/2008, EASA’s main func- airport safety and efficiency, such as advanced-surface movement guid- tions are to: ance and control systems for controlling air traffic movements under all • assist the Commission to develop common rules in the field of civil weather conditions. Moreover, one of the major targets of the airport pack- aviation and to provide it with technical, scientific and administrative age, namely the adoption of an EU-wide regime on airport charges, was support to carry out its tasks; achieved in March 2009, when the directive on airport charges entered • conduct standardisation inspections to ensure that these rules are into force (see question 19). correctly applied within the member states;

60 Getting the Deal Through – Air Transport 2016

In December 2014, the Commission announced in its work pro- Financial fitness gramme for 2015 the adoption of an Aviation Package set to include a Regulation 1008/2008 specifies that, inter alia, applicants for an operating Communication on aviation competitiveness and a revision of Regulation licence must satisfy detailed requirements with regard to their financial fit- 216/2008. The Aviation Package is expected to be adopted by the ness. Less stringent provisions apply to smaller carriers and existing opera- Commission by the end of 2015. tors. An applicant for a licence must be able to demonstrate that: In relation to air traffic control, the Single European Sky I (SES I) pack- • it will be able at any time to meet its actual and potential obligations age (see question 23) included four regulations with the aim to promote a under realistic assumptions for a period of 24 months from the start of more rational organisation of European airspace, increasing capacity and operations; and ensuring uniformly high safety standards. In June 2008, the Commission • it can cover its fixed and operational costs for at least three months published a communication setting out the shortcomings of the imple- without taking into account its operating income. To facilitate assess- mentation of the SES legislation, such as the continued fragmentation ment of these conditions, applicants must submit a business plan for at of European airspace. To improve the performance and sustainability least the first three years of operation, and provide a thorough financial of the European aviation system in key areas such as safety, capacity, as assessment (as detailed in Annex 1 of Regulation 1008/2008) demon- well as flight and cost efficiency, Regulation 1070/2009 was adopted as strating compliance. part of the SES II initiative (amending the SES I package). In June 2013, the Commission sought to accelerate the implementation of the SES pro- Once a licence has been granted, there are continuing financial report- gramme. To this end, it published a communication and proposed fur- ing obligations on the licence holder, including the obligation to provide ther measures (SES2+) to build on previous reforms. The proposal aims audited accounts on a regular basis and details of any substantial changes to update the SES package and amend the rules governing the EASA and in activities, and planned increases or reductions of fleet. The licensing focuses on the improvement of the oversight of air traffic control organisa- authorities may at any time assess the financial performance of an under- tions, the strengthening of air traffic management performance, the crea- taking, and must in any case do so two years after the granting of a new tion of new business opportunities in support services and the enabling of licence. The licensing authorities are also obliged to undertake an in-depth industrial partnerships. assessment of the financial situation of a licence holder if there are clear Furthermore, in accordance with Regulation 768/2006, the EASA is indications that financial problems exist or when insolvency proceedings also entrusted with the tasks related to the Safety Assessment for Foreign are opened. Finally, if the undertaking is unable to meet its financial obli- Aircraft programme, which implemented Directive 2004/36 regarding the gations for a 12-month period, they must suspend an operating licence, collection and exchange of information on the safety of aircraft using EU although a temporary licence may be granted. airports and the management of the information system. The directive introduced a uniform approach to enforcement of international safety Nationality standards within the EU, by harmonising the rules and procedures oper- In order to qualify for an EU operating licence, inter alia, an undertak- ated by the Joint Aviation Authorities for ramp inspections of third-country ing’s principal place of business must be located in the member state in aircraft landing at airports in the member states. As Regulation 216/2008 which the operating licence is granted (ie, its principal place of business establishes a complete framework for the safety of third-country aircraft, must be within the EU). Other than where specific agreements are in place Directive 2004/36 has been repealed, but without prejudice to the imple- (for example with the US), the undertaking must also be majority owned menting measures on collection and exchange of information and ramp and effectively controlled by a member state or EU nationals (article 4, inspection. Regulation 1008/2008). Finally, based on Regulation 2111/2005, the Commission has prepared and updated an EU blacklist of unsafe airlines since 2006. The most 6 What procedures are there to obtain licences or other rights to recent version of this list was adopted by the Commission on 25 June 2015 operate particular routes? (Implementing Regulation 2015/1014). EU carriers require operating licences under Regulation 1008/2008, which are granted by the competent authorities of the member states. 3 What safety regulation is provided for air operations that do Accordingly, the procedural requirements for obtaining an operating not constitute public or commercial transport and how is the licence are a matter of member state national law (see national chapters). distinction made? However, Regulation 1008/2008 does specify that member states must Regulation 216/2008 (as amended by Regulation 1108/2009) (see question make these procedures public and decide on applications no later than 2) applies to all aircraft except: three months after receiving all the necessary information. As discussed in • those with certain historic or scientific value; question 5, once a carrier has obtained an operating licence in one member • aircraft built by amateurs; state, it is free to operate on any intra-EU route, although separate licences • military aircraft; may be needed in order for it to operate routes to and from certain third • emergency service aircraft; and countries. • very small aircraft. 7 What procedures are there for hearing or deciding contested Safety requirements for these aircraft fall under the scope of individual applications for licences or other rights to operate particular member states’ national law and are not governed at the EU level (see routes? national chapters). As mentioned in response to question 6, the procedural requirements for obtaining an operating licence are a matter of member state national 4 Is access to the market for the provision of air transport law and as such Regulation 1008/2008 contains no specific provisions services regulated and, if so, how? on appeal procedures in the event that a licence application is rejected Market access within the EU has been liberalised, and the operation of or an operating licence is suspended or revoked. Article 14 of Regulation EU air services and access to the EU market is governed by Regulation 1008/2008 does provide that the air carrier must be given the opportunity 1008/2008 (see question 1). to be heard and requires national authorities to inform the Commission if an operating licence is suspended or revoked. Under article 15(3) of 5 What requirements apply in the areas of financial fitness and Regulation 1008/2008, the Commission has the authority to ‘take the nationality of ownership regarding control of air carriers? appropriate corrective measures or to suspend or revoke the operating Financial fitness and nationality requirements regarding control of air car- licence’. riers are governed by Regulation 1008/2008 (see question 1). In order to carry passengers, mail or cargo for remuneration within the EU, article 3 8 Is there a declared policy on airline access or competition and, of Regulation 1008/2008 requires an air carrier to have an EU operating if so, what is it? licence granted by a competent member state licensing authority. There is a common EU air transport policy. One of its main objectives is to eliminate national barriers between the member states and establish a single aviation market in the EU. To this end, EU-wide measures are in place liberalising airfares, market (route) access and capacity. The EU www.gettingthedealthrough.com 61

© Law Business Research Ltd 2015 EUROPEAN UNION Shearman & Sterling LLP competition rules apply fully to air transport services within the EU and on 16 Do specific rules regulate the maintenance of aircraft? routes to and from the EU (see questions 28 to 38). Aircraft maintenance is governed by Regulation 2042/2003 (as amended), which is enforced by the European Aviation Safety Agency (EASA) (see 9 What requirements must a foreign air carrier satisfy in order question 2). to operate to or from your country? Owners of aircraft have to ensure the continued airworthiness and safe This is a matter for member state national law (see national chapters). operation of their aircraft and are subject to inspections by the competent However, the Commission, in conjunction with the competent national national authority. Any maintenance must be carried out by a maintenance agencies of the member states, publishes a blacklist of airlines that are organisation approved by EASA. This may either be the operator or an prohibited from operating within the EU airspace (see question 2). external approved organisation, which would issue a certificate of release to service to the operator. Annex II to Regulation 2042/2003 describes the 10 Are there specific rules in place to ensure aviation services requirements to qualify as an approved maintenance organisation. are offered to remote destinations when vital for the local economy? Airports A member state may impose a public service obligation (PSO) in respect 17 Who owns the airports? of scheduled air services between an airport in the EU and an airport serv- In the EU, there are state-owned airports and privately owned airports. ing a peripheral or development region in its territory. A PSO may also be The control of many airports has been transferred from state to regional imposed on a ‘thin’ route to any airport on its territory if the route is consid- authorities (in some cases to be operated by public companies), while oth- ered vital for the economic and social development of the outlying region. ers have been privatised. A PSO can only be imposed to the extent necessary to ensure the minimum provision of fixed standards of continuity, regularity, pricing or minimum 18 What system is there for the licensing of airports? capacity, which air carriers would not assume if they were solely considering their commercial interest. This is a matter for member state national law (see national chapters). A PSO must be imposed in accordance with the provisions laid down in Regulation 1008/2008. The member state first determines the condi- 19 Is there a system of economic regulation of airports and, if so, tions of the planned PSO in terms of the routes concerned, date of entry, how does it function? capacity, flight frequency, fares and other parameters. It then communi- In general, this is a matter for member state national law (see national cates a description of the proposed PSO to the Commission, other member chapters). The Commission issued Directive 2009/12 with regard to air- states and airports concerned as well as any carriers operating the route in port charges, ie, aircraft landing charges, charges for the processing of question. The Commission publishes an information notice setting out the passengers and freight and other charges related to the use of airport infra- details of the PSO. structure which has been implemented into most of the respective mem- If no carrier has started operations or plans to do so, the member state ber states’ national law. may then restrict access to the route or routes covered by the PSO to a sin- The Directive does not impose a particular calculation method of gle carrier for a maximum period of five years and may grant that carrier charges, but aims at harmonising the rules applicable to the setting of air- financial compensation in exchange for compliance with these obligations. port charges by member states’ competent authorities. In that case, the carrier operating the service must be selected through a The Directive applies to EU airports with an annual passenger volume public tender procedure as specified in article 17 of Regulation 1008/2008. of 5 million or, if none of the airports in a given member state reaches this DG Move of the Commission publishes a list of PSO routes on its threshold, to the airport with the highest passenger volume in that member website. state. The Directive allows for the differentiation of services according to the needs of individual airlines (‘tailored services’), but requires member 11 Are charter services specially regulated? states to apply specific principles when determining airport charges, in No. The EU regulatory framework applies to all charter and scheduled ser- particular ‘non-discrimination’, and ‘transparency’. Moreover, Directive vices within the EU, including air taxi and general aviation services for the 2009/12 obliges member states to put in place consultation procedures transport of passengers, cargo and mail for remuneration. The EU regula- between airport managing bodies and airport users with respect to the tory framework is therefore general in scope, applying to all commercial air system and the level of airport charges. An independent supervisory entity services (including charter). must be set up to resolve disagreements between airport users and the airport managing body. 12 Are airfares regulated and, if so, how? In May 2014, the Commission published a report on the application of Directive 2009/12. In this report, the Commission identified improved No. According to Regulation 1008/2008, EU carriers set airfares freely for consultation and transparency of airport charges, but found that consist- intra-EU air services, although certain restrictions may apply in the case ency of application of the Directive could be improved. The Commission of PSOs (see question 10). Equally, air carriers of third countries can set has also set up a new expert group, the Thessaloniki Forum of Airport their fares freely for intra-EU services subject to reciprocity. With respect Charges Regulators, to discuss issues related to the implementation of the to fares between member states and third countries, member states may Directive. not discriminate on the grounds of nationality or identity of air carriers. In addition, in February 2014, the Commission issued guidelines on Regulation 1008/2008 also imposes certain obligations to ensure transpar- state aid to airports and airlines. These guidelines consolidate and replace ency of passenger fares (see question 39). the 1994 guidelines on state aid to the aviation sector and the 2005 guidelines on the financing of airports and start up aid to airlines departing from Aircraft regional airports (see question 33). 13 Who is entitled to be mentioned in the aircraft register? Do requirements or limitations apply to the ownership of an 20 Are there laws or rules restricting or qualifying access to aircraft listed on your country’s register? airports? This is a matter for member state national law (see national chapters). Under Regulation 1008/2008, EU air carriers enjoy the general right to provide air transport services on all routes within the EU. Member states 14 Is there a register of aircraft mortgages or charges and, if so, may impose PSOs in respect of scheduled air services to specified regions how does it function? or on vital routes for the economic development of certain regions (see This is a matter for member state national law (see national chapters). question 10).

15 What rights are there to detain aircraft, in respect of unpaid 21 How are slots allocated at congested airports? airport or air navigation charges, or other unpaid debts? Slot allocation at congested airports is governed by Regulation 95/93 as This is a matter for member state national law (see national chapters). amended by Regulation 793/2004, known as the ‘Slot Regulation’. Under the Slot Regulation, the definition of slots also includes the use of the airport infrastructure.

62 Getting the Deal Through – Air Transport 2016

The Slot Regulation applies to congested airports, which fall into two state national law. The Directive applies to all types of airside and land- differently regulated categories: side ground handling services, such as passenger and baggage handling, • ‘schedule-facilitated’ airports, where there is potential for congestion aircraft services and aircraft maintenance, fuel and oil handling and cater- at some periods of the day, week or year and a facilitator has been ing services at all EU airports open to commercial traffic with annual traffic appointed to assist the operating carriers in regard to slot availability; over 2 million passenger movements or 50,000 tonnes of cargo. and The main aim of Directive 96/67 was to open up the ground handling • ‘slot coordinated’ airports, where more serious congestion problems market to competition. For example, it prescribes that for certain services occur and a coordinator has been appointed to actively allocate take- the number of suppliers may be no fewer than two for each category of off and landing slots to applying carriers. service. It also governs self-handling, access to installations, selection procedures for suppliers and the separation of accounts for ground handling The Slot Regulation is not applicable to airports not falling into either of services from other activities. these two categories. On 1 December 2011, the Commission announced its Better Airports A slot facilitator is not responsible for the actual slot allocation but Package, comprising legislative proposals on slots, ground handling and rather advises and recommends air carriers on alternative take-off and noise as well as a communication. The Commission had proposed the landing times, when congestion is likely to occur. A slot coordinator, on the replacement of Directive 96/97 with a ground handling regulation which other hand, is fully responsible for the allocation of slots. The coordinator would aim at liberalising further the European ground handling market, allocates a series of slots from the pool to the applicant carriers allowing providing more control to airports over ground handling services at the the use of the airport infrastructure for the purposes of take-off and land- airport and giving extra protection to ground handling workers in particu- ing at the time and for the season for which they were requested. Once it lar by providing for their transfer when the contract for ground handling has been determined that an airport must be schedule-facilitated or slot- services transfers from one provider to another. However, in early 2015 the coordinated, member states must appoint a knowledgeable natural or legal Commission announced the withdrawal the regulation proposal, stating person as the airport’s schedule facilitator or slot coordinator. The facilita- that there was ‘no foreseeable agreement’. tor or coordinator must be truly independent and must have the necessary financial esourcesr to accomplish its tasks. It must act in a neutral, non- 23 Who provides air traffic control services? And how are they discriminatory and transparent way. regulated? Under the Slot Regulation, a carrier has the right to retain slots allo- In the EU, air traffic control and management services are principally pro- cated to it for the next corresponding season, provided it can satisfactorily vided by the national control units. As mentioned above (see question 2), demonstrate to the coordinator that it has operated such slots for at least a long-term overhaul of the European air traffic management is currently 80 per cent of the time. If this is not the case, slots must be returned to the under way, the SES programme (in its various iterations), with the aim to pool (the ‘use it or lose it’ principle). The rights of a carrier to retain already create a truly pan-European air traffic management system, a central ele- held and used slots are called grandfather rights. The Commission has in ment of which being the nine ‘functional airspace blocks’ (FABs) covering certain extraordinary circumstances (eg, the terror attacks of 11 September the EU airspace. 2001 and the SARS outbreak of 2003) made exceptions to the 80 per cent The SES programme covers not just the EU member states but most usage rule. A similar amendment to the 80 per cent usage rule entered into European countries. It is being developed and regulated by Eurocontrol, an force in June 2009 with respect to the 2010 summer scheduling period intergovernmental body made up of the SES member states and, in paral- in response to the severe economic downturn which led to a substantial lel, the EU. decline in air traffic. The SES I package consisted of: The Slot Regulation further provides that 50 per cent of the slots in the • a framework regulation (Regulation 549/2004) (the Framework slot pool at a given airport must be provided to new entrants. In situations Regulation), which established the Commission as the regulator for where requests cannot be all accommodated, preference is to be given the civil sector and the Single Sky Committee to assist it in its regula- to commercial air services, scheduled services and programmed non- tory activities; scheduled air services. In cases of competing requests under the same • the Airspace Regulation (Regulation 551/2004), which will establish a category, priority will be given to year-round operations. Slots may be single European Upper Information Region and within it organise air- transferred between air carriers that hold a slot for an alternative route or space into functional airspace blocks; between parent and subsidiary companies. • the Service Provision Regulation (Regulation 550/2004), which estab- Secondary slot trading is the process whereby slots are exchanged in lishes a common licensing system for civil ATM providers; and return for monetary or other compensation. Following a 2008 Commission • the Interoperability Regulation (Regulation 552/2004), which aims to communication, this practice is considered compatible with, but not man- ensure that systems, equipment and procedures operate seamlessly. dated by, the Slot Regulation, provided it takes place in a transparent manner, and it respects all the other administrative requirements for the In 2009, a significant reform of the SES I took place based on five key and allocation of slots. interrelated pillars (SES II): On 1 December 2011, the Commission announced its Better Airports • safety; Package, comprising legislative proposals on slots, ground handling and • environment (including decarbonisation of the sky); noise as well as a communication. As concerns the proposed amendments • capacity and cost-efficiency; to the Slot Regulation, key proposals include an express permission for sec- • performance monitoring; and ondary slot trading and stricter ‘use it or lose it’ rules including increasing • incentive mechanisms. the slot utilisation threshold from 80 to 85 per cent. A ‘General Approach’ was agreed upon by the Council in October 2012, however, the text, which As part of this reform, the Framework Regulation and the three technical has also been reviewed by the Parliament, deviated from the Commission’s regulations have all been amended by Regulation 1070/2009. The SES II proposal significantly and does not include the Commission’s proposal to package of legislation now also comprises: increase the ‘use it or lose it’ threshold. In December 2012, the Parliament • Commission Regulation 691/2010 laying down a performance voted to maintain the current slot utilisation rules (80 per cent ‘use it scheme for navigation services and network functions and amending or lose it’ rule), as well as the current slot series length. The Parliament Regulation 2096/2005 (see below); instead favoured strengthening the penalty system in order to dissuade air • Regulation 1191/2010 amending Regulation 1794/2006 laying down a carriers from holding slots without using them or taking too long to return common charging scheme for air navigation services; them to the pool. The Parliament did support the Commission’s proposals • Regulation 977/2011 laying down detailed rules for the implemen- expressly to permit secondary trading of slots. At the time of writing, the tation of air traffic management network functions and amending legislative process is still ongoing. Regulation 691/2010; • Regulation 677/2011 laying down detailed rules for the implementa- 22 Are there any laws or rules specifically relating to ground tion of air traffic management network functions amending Regulation handling? 691/2010; and Directive 96/67 provides the regulatory framework with respect to ground • 2011 Commission Decision on the nomination of the network man- handling services at EU airports, and has been transposed into member ager for air traffic management network functions of the SES. www.gettingthedealthrough.com 63

Also relevant is the legislation on airport safety (see question 2). 25 Are there any special rules about the liability of aircraft The aim of the SES II reform is to improve aviation performance, to operators for surface damage? adapt the legislation to changes having arisen since SES I, and to succeed Regulation 785/2004 (as amended by Regulations 1137/2008 and in creating a truly unified European airspace. In June 2013, the Commission 285/2010) establishes that an air carrier must also be insured towards third attempted to accelerate the implementation of SES. To this end, it issued parties to cover liability in case of accidents. The regulation further speci- a communication and proposed further measures (SES2+) to build on fies the minimum insurance cover, which varies depending on the maxi- the previous reforms. The proposal aims to update the SES package and mum take-off mass of the aircraft (ie, a certified amount which is specific amends the rules governing the EASA and focuses on the improvement of to all aircraft types, and is stated in the aircraft’s airworthiness certificate). the oversight of air traffic control organisations, the strengthening of air traffic management performance, the creation of new business oppor- 26 What system and procedures are in place for the investigation tunities in support services and the enabling of industrial partnerships. of air accidents? However, the SES+ package has faced resistance from certain stakehold- The fundamental principles governing the investigation of civil aviation ers, including some unions. In March 2014, the European Parliament pre- accidents and serious incidents are set out in Regulation 996/2010 (as liminarily approved the SES2+ proposals. However, at the time of writing amended) and replacing and repealing Directive 94/56). Article 5 of the the legislative process is still ongoing. regulation requires that (subject to limited exceptions relating to the type In July 2014 the Commission formally requested 18 member states, of aircraft involved) every accident or serious incident which has occurred members of six different FABs, to make a decisive move towards common within EU territory or involves aircraft registered in a member state or airspace management by implementing their FABs. operated by an undertaking established in a member state is reported and Licensing of air traffic controllers is carried out at a national level, but subject to a safety investigation. Eurocontrol is responsible for the development of a harmonised licensing Usually, the safety investigation will take place in the member state policy for air traffic controllers employed within the European civil aviation in which the accident or serious incident occurred. Article 4 of the regula- countries. The Framework Regulation also sets the licence standards to be tion states that safety investigations are to be conducted or supervised by a applied by national authorities. permanent civil aviation safety investigatory authority capable of carrying Within the framework of European air traffic control, five further legis- out a full safety investigation, either on its own or through agreements with lative instruments are of importance, namely: other safety authorities. The sole objective of the safety investigation is to • Regulation 2150/2005 on the flexible use of airspace, which establishes prevent further accidents, not apportion blame. They are intended to com- rules and procedures between civil and military authorities responsi- plement any judicial or administrative investigation which may take place ble for air traffic management; under member state national law (article 5(5)). • Regulation 1035/2011 requirements, against which air navigation Each safety investigation shall be concluded with a report and shall service providers will be certified in the EU. In the area of safety, contain, where appropriate, safety recommendations. The report should the regulation also incorporates the Eurocontrol Safety Regulatory be made public within 12 months of the date of the accident or serious inci- Requirements; dent. If that is not possible, the authority shall release an interim statement • Regulation 1315/2007 on safety oversight in air traffic management at least every anniversary of the accident or serious incident (article 16). states that national supervisory authorities are to exercise a safety The safety investigation authority may also make safety recommendations oversight function to complete the common requirements; at any stage of its investigation (article 17). • Directive 2006/23, which establishes high-level competence require- Regulation 996/2010 also mandates that member states shall estab- ments for air traffic controllers under the EU air traffic controller lish between themselves a European Network of Civil Aviation Safety licence regime; and Investigation Authorities with a view to raising standards of safety inves- • Regulation 730/2006 on airspace classification and access of flights tigations (article 7). operated under visual flight rules above flight level 195. 27 Is there a mandatory accident and incident reporting system Liability and accidents and, if so, how does it operate? 24 Are there any special rules in respect of death of, or injury to, EU law provides for a mandatory accident or incident reporting sys- passengers or loss or damage to baggage or cargo in respect of tem. According to Regulation 996/2010, any person who has knowledge domestic carriage? of the occurrence of an accident or serious incident shall notify without There are currently three regulations setting out the obligations arising in delay the competent safety investigation authority in the state of occur- cases of death or injury of air passengers, for the loss or damage of their rence. The safety investigation authority will then notify without delay baggage, and accidents regarding mail. the Commission, the European Air Safety Agency (EASA), the ICAO and Regulation 889/2002 (amending Regulation 2027/97 on air carrier appropriate member states and third countries (article 9). liability in the event of accidents) aligns EU law with the provisions of the The regulation also provides for the exchange of information between Montreal Convention of 18 May 1999 for the unification of certain rules for the EASA and member state authorities on occurrences. international carriage by air, establishing a regime of unlimited liability in In addition, Regulation 376/2014 of the European Parliament on the the case of death or injury of air passengers, and creating a uniform system reporting, analysis and follow-up of occurrences in civil aviation, will, of liability for international air transport. Regulation 889/2002 thus imple- effective as of November 2015, repeal Directive 2003/42/EC and amend ments the relevant provisions of the Montreal Convention, while laying Regulation 996/2010. As of November 2015, pilots and other professional down certain supplementary provisions, and extending its application to staff – be they employees or contract workers – will be able to report safety carriage by air within a single member state. occurrences. Regulation 376/2014 provides for the establishment of a Regulation 785/2004 on insurance requirements for air carriers and safety management system aimed at preventing air accidents. It also aims aircraft operators amended by Regulations 1137/2008 and 285/2010 con- to set in place provisions against the inappropriate use of safety informa- tains the corresponding insurance requirements for all air carriers and tion and provide for stricter protection of the reporter of a safety occur- aircraft operators flying within, into, out of or over the territory of a mem- rence. In addition, the regulation also mandates the setting-up of an ber state, and defines the minimum insurance requirements for liabilities ‘appeal body’ at a national level. linked to passengers, baggage, cargo and third parties. Moreover, the regulation specifies the minimum insurance coverage for non-commercial Competition law operations and the liability in respect of baggage and cargo and third par- 28 Do sector-specific competition rules apply to aviation? If not, ties. Member states have the possibility to introduce rules establishing do the general competition law rules apply? adequate insurance on points that are not covered by the regulation. Finally, according to Regulation 1008/2008 (article 11), air carriers The general EU competition rules have applied in full to the aviation sec- should be insured so as to cover liability arising from accidents with respect tor since 2004, when the previous sector-specific regime of Regulation to mail. 3975/87 was abolished. Accordingly, articles 101 TFEU (prohibiting and making void anti-competitive agreements and concerted practices) and 102 TFEU (prohibiting the abuse of a dominant position) apply fully to all agreements and behaviour concerning air transport services that may

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© Law Business Research Ltd 2015 Shearman & Sterling LLP EUROPEAN UNION affect trade between member states, including those relating to routes to prevent the parties from obtaining incremental market power as a result between the EU and third countries. The Commission has full enforcement of the transaction. The Commission also takes into account competitive powers under Regulation 1/2003 when applying EU competition rules in constraints exercised by potential entrants in the relevant market and, cases concerning the air transport sector. Likewise, the EU merger control where appropriate, alternative possibilities (such as indirect flights or other rules under Regulation 139/2004 (EUMR), and the EU state aid rules under modes of transport) on the city-pair. articles 107 to 109 TFEU apply fully to the aviation sector (regarding state With regard to potential competition, a carrier will only be considered aid, see questions 33 et seq). as a potential competitor on a specific O&D city-pair, if that city-pair’s traf- Previous block exemptions from the application of article 101 TFEU fic size is such (taking into account both local and connecting flights) so as (covering, for instance, IATA passenger tariff consultations and slot allo- to allow for and justify the offering of a competing service. cation conferences) implementing the (now defunct) Regulation 3976/87 Furthermore, entry of a specific carrier must be reasonably expected on the application of article 101(3) TFEU to certain categories of agree- in the sense that it must be in line with that carrier’s operational and stra- ments and concerted practices in the air transport sector have been abol- tegic business plans. In assessing the likelihood of potential entry, the ished. With respect to the IATA airport slot allocation conferences, the Commission uses as a benchmark whether the carrier in question: Commission has expressly stated that they do not restrict competition, • operates services on other O&D city-pairs of similar size and and thus a block exemption is unnecessary. Finally, while the Commission characteristics; retains the power to adopt block exemptions under Regulation 487/2009 • already has a local market presence, in particular through the opera- currently in force, it has so far expressed no intention to exercise this tion of a hub or a base at either end of the O&D city-pair; and power. • has appropriate aircraft that could be deployed on the relevant O&D city-pairs. 29 Is there a sector-specific regulator or are competition rules applied by the general competition authority? The Commission recognises verifiable efficiencies created by airline alli- There is no EU-level sector-specific regulator concerning the application ances and mergers which are found to have some anti-competitive effects of competition law in the air transport sector. Within the Commission, DG on the relevant market(s), provided that such efficiencies are passed on Comp enforces the EU competition rules, including (since 2010) EU state to the consumer, and the consumer benefits outweigh, or at least equal, aid rules. Member state authorities and courts have concurrent but subsidi- the identified competition concerns. The Commission conducts a sepa- ary powers to apply articles 101 and 102 TFEU (but not the EUMR). rate assessment of the efficiencies for each of the affected O&D city-pairs. In more recent alliance cases, the Commission has (subject to important 30 How is the relevant market for the purposes of a competition restrictions) also indicated a willingness to accept ‘out-of-market’ efficien- assessment in the aviation sector defined by the competition cies, ie, efficiencies created not on the overlap routes in question, but on authorities? other routes in the network where the alliance leads to consumer benefits (eg, better/more frequent services and connections). When defining the relevant product and geographic market in the context Finally, where the parties’ arguments concerning the existence of effi- of a competition assessment in the aviation sector, the general market deficiencies sufficient to offset potential competition concerns are not (fully) nition principles under EU competition law apply. confirmed by the investigation, remedies will be required to enable entry The starting point when defining the relevant product market is to by competitors on ‘problem’ city-pairs (see question 32). assess whether two products can be considered as substitutes from a demand-side perspective. In mergers and alliance agreements between 32 What types of remedies have been imposed to remedy airlines, the well-established approach to relevant market definition in concerns identified by the competition authorities? passenger services is the origin/destination (O&D) city-pair. Accordingly, the relevant product market includes all relevant services on the O&D Remedies typically offered by parties in airline mergers or alliances to city-pair in question. The relevant market may, where relevant, be further remove competition concerns include: segmented between the market for premium/time-sensitive (mainly busi- • slot divestitures at congested (hub) airports at one or both ends of ness) passengers, and the market for non-premium/non-time-sensitive the ‘problem’ city-pairs, primarily designed to encourage entry by (mainly leisure) passengers. new competitors. This is by far the most important element of the Only in exceptional circumstances will the possibility of indirect Commission’s current remedy policy in aviation cases; services be seen as exercising a significant competitive restraint on non- • code share, interlining obligations, special pro-rate agreements and stop short-haul services (ie, when a one-day round trip is not possible on fare combinability arrangements; and non-stop services of indirect services account for a significant share of • remedies relating to access to joint frequent-flyer programmes and passengers). On long-haul services, the Commission has traditionally CRS displays. included only indirect services that are seen as credible alternatives taking into account connection and overall journey time. Recently, however, the In some older cases, the Commission imposed pricing constraints, used to Commission has suggested a more flexible approach at least as concerns address concerns of potential predation, and frequency freezes. However, long-haul routes, including all one-stop bookings in the market definition such measures have not been included in more recent cases, and it is stating that if one-stop services are not a credible alternative then they will doubtful whether they still form part of the Commission’s remedy policy. only account for a very small share of passengers anyway. The Commission has also requested member states to relax the fifth and The city-pair approach means that the relevant market may include sixth freedom rights restrictions on ‘problem’ city-pairs to further encour- competing flights from neighbouring airports, if there are significant over- age entry in such O&D city-pairs. laps between the catchment areas of the relevant airports. Likewise, ser- Moreover, following an inquiry in 2008 into the effectiveness of rem- vices by other modes of transport such as high-speed trains may also form edies in the airline sector, the Commission has also required measures part of the same relevant market. These are fact-specific questions that the designed to enhance the likelihood that slot commitments are taken up Commission will assess on a case-by-case basis. These broader market def- by new entrants and in particular carriers envisaging to operate services initions are generally more likely to be valid options for non-premium or on several of the routes where slot remedies are required. These include, non-time-sensitive rather than for premium or time-sensitive passengers. for instance, measures facilitating the grandfathering of slots acquired as a result of the remedies, preference given to carriers able to start new ser- 31 What are the main standards for assessing the competitive vices on several problem routes, and (where the concerns relate to short- effect of a transaction? haul routes) measures designed to facilitate the establishment of a base operation by the new entrant at one of more of the airports concerned. To assess the competitive impact of a transaction in the air transport sector Finally, the Commission has also sought to facilitate the new entrant’s (eg, an airline merger or an alliance), the Commission examines whether access to behind and beyond routes through the conclusion of special pro- the transaction raises concerns on those O&D city-pairs where the parties’ rate agreements and fare combinability arrangements with the parties. services overlap, or could potentially overlap (ie, where, in the absence of the agreement, the parties would be actual or potential competitors). The Commission pays particular attention to overlaps on hub-to-hub routes. The Commission assesses whether a sufficient number of actual competitors would remain active in the relevant market post-transaction so as www.gettingthedealthrough.com 65

Financial support and state aid 34 What are the main principles of the state aid rules applicable to the aviation sector? 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or The general EU principles relating to state aid, namely, the ‘market econ- government-controlled agencies or companies (state aid) in omy operator principle’, the ‘proportionality principle’, the ‘one time, last the aviation sector? If not, do general state aid rules apply? time principle’, and the ‘principle of neutrality of property ownership’ also apply to the aviation sector. Both general and aviation-specific state aid rules apply to the provision of In particular, the ‘market economy operator principle’ is used to assess direct or indirect financial support to companies active in the air transport whether a public investment in an undertaking is made under conditions sector. that would be acceptable to a long term private investor operating under The general state aid rules applicable to the aviation sector are: normal market conditions. If this is the case, a member state’s interven- • article 107 TFEU containing the general prohibition of the unlawful tion is regarded as economically rational and therefore does not constitute grant of state aid, specifying generally what constitutes state aid, and state aid within the meaning of article 107 TFEU. Depending on the type granting exemptions; of the relevant transaction, variations of this principle such as the ‘market • article 108 TFEU creating a standstill obligation; economy lender principle’, the ‘market economy creditor principle’, and • article 106(2) TFEU on undertakings entrusted with services of gen- the ‘market economy guarantor principle’ apply on the same basis. eral economic interest (SGEIs); The ‘proportionality principle’ must also be observed by member • Regulation 659/1999 (as amended) (Procedural Regulation), laying states when granting aid under the exemptions of article 107(3) TFEU, down rules for the application of article 107 TFEU; meaning that only aid that is proportionate to its objective (eg, the restruc- • Regulation 794/2004 (as amended), setting out detailed provisions turing programme under consideration) may be exempted under article on notifications and annual reports referred to in the Procedural 107(3)(c) TFEU. Regulation; Under the ‘one time, last time principle’, member states may contrib- • Directive 2006/111 laying down rules on the transparency of financial ute to the rescue or restructuring of one and the same undertaking under relations between member states and public undertakings, where an the exemption of article 107(3)(c) TFEU only once every 10 years. This air carrier is a state-controlled undertaking; principle is explained in the Commission guidelines for rescue and restruc- • Regulation 651/2014 (General Block Exemption Regulation) declaring turing of non-financial undertakings in difficulty. certain categories of aid compatible with the internal market in appli- The ‘principle of neutrality of property ownership’ also applies in this cation of articles 107 and 108 TFEU; sector, allowing member states to set up public undertakings, to acquire • 2014 Guidelines on state aid for rescuing and restructuring non-finan- shareholdings, and to nationalise existing undertakings which operate in cial undertakings in difficulty; all sectors of the economy, provided, however, that the conditions set by • 2008 Notice on the application of articles 107 and 108 TFEU to state the market economy investor principle are met. aid in the form of guarantees; Consistent with the Commission’s communication on state aid mod- • The Commission’s SGEI package comprising: a 2011 communica- ernisation, the 2014 aviation state aid guidelines state that in order to be tion on the application of state aid rules to compensation granted for considered compatible with the internal market: the provision of SGEIs; Decision 2012/21 on the application of article • a state aid measure in the aviation sector must contribute to a well- 106(2) TFEU to state aid in the form of public service compensation defined common interest objective; granted to certain undertakings entrusted with the operation of SGEIs • state intervention must be necessary (eg, addressing a market failure (the SGEI Decision); a 2011 Communication on the EU framework for or an equity or cohesion concern); state aid in the form of public service compensation; and Regulation • state aid must be an appropriate policy instrument; 360/2012 on the application of articles 107 and 108 TFEU to de mini- • the aid must have an appropriate ‘incentive effect’ on the undertaking mis aid granted to undertakings providing SGEIs; and concerned; • Regulation 1407/2013 on the application of articles 107 and 108 TFEU • the aid must be proportionate (ie, limited to a minimum); to de minimis aid (the De Minimis Regulation) (see question 35). • the aid must not have undue negative effects on competition and trade between member states; and In addition, in February 2014 the Commission issued the 2014 aviation • transparency of the aid such that all relevant stakeholders can have state aid guidelines. These guidelines consolidate and replace the 1994 access to all pertinent information and documents concerning the aid. guidelines on state aid to the aviation sector and the 2005 guidelines on the financing of airports and start up aid to airlines departing from regional 35 Are there exemptions from the state aid rules or situations in airports and have been in force since April 2014. Under the new guidelines: which they do not apply? • smaller airports (ie airports with fewer than 3 million passengers per year) may be permitted to receive a limited amount of aid for operat- The general exemptions to the prohibition of article 107(1) TFEU con- ing purposes for a transitional period of 10 years (starting from 4 April tained in article 107(2) and (3) TFEU, and the General Block Exemption 2014). Airports receiving operating aid must demonstrate that they Regulation are fully applicable to the aviation sector. The 2014 aviation will be capable of fully covering their operating costs by the end of the state aid guidelines provide a sector-specific framework for a state aid 10-year transitional period; analysis. In principle, the generally applicable rules do not exempt operat- • unless there are ‘very exceptional circumstances’, aid to finance infra- ing aid. However, the 2014 aviation state aid guidelines do contain a lim- structure investments is allowed only for airports with fewer than 5 ited exemption for certain categories of operating aid (see question 33). million passengers per year. Below that threshold, there are different Aid granted to allow for the restructuring and privatisation of a state- bands of permissible intensities depending on the number of passen- owned company is usually assessed under article 107(3)(c) TFEU. Such gers per year (the smaller the airport, the higher the permissible inten- a restructuring will be tested against the conditions described in the sity). According to the guidelines, state aid for investment purposes Commission’s rescue and restructuring guidelines. With regard to the must have satisfactory medium term prospects; and privatisation process as such aid is generally excluded, and therefore noti- • airlines launching a new route with the aim of increasing connectivity fication is generally not required under article 108(3) TFEU, if, upon priva- of a region may be permitted to receive ‘start-up’ state aid. In order to tisation, the following conditions are fulfilled: qualify for the aid airlines must either present a business plan showing • the participation of the private entity is made by way of an uncon- that the route in respect of which aid is being received has prospects of ditional public tender process on the basis of transparent and non- becoming profitable without public funding after three years or give an discriminatory terms; irrevocable commitment to the relevant airport(s) to operate the route • the participation is granted to the highest bidder; and for a period at least equal to the period of state aid funding. • the interested parties are given sufficient time to prepare their offer and receive all the necessary information to undertake a proper The Commission’s SGEI decision also contains specific provisions on air- evaluation. ports providing SGEIs. In April 2012 the Commission adopted, as the final pillar of the package, the De Minimis Regulation for the field of SGEI. In addition, privatisations by flotation or competitive tender on the above conditions generally need not be notified to the Commission in advance

66 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Shearman & Sterling LLP EUROPEAN UNION for examination of aid implications, but member states may notify, if they parties to submit comments. Other member states and interested parties desire greater legal certainty. may submit their comments within one month from the day the decision Regulation 1407/2013 on De Minimis Aid, which also applies to the air is published in the Official Journal. If the notifying member state wishes to transport sector, provides for an exemption to article 107(1) TFEU, when make oral submissions to the Commission, meetings for this purpose must the aid does not exceed €200,000 over any three-year period. Loans may be held within three months, at the latest, upon receipt of the letter stating also be covered by the exemption if they are secured by collateral covering that the procedure has been initiated. at least 50 per cent of the loan and the loan does not exceed either €1 mil- The formal investigation procedure is concluded by a Commission lion and a duration of five years or €500,000 and a duration of 10 years. decision, which should normally be adopted within 18 months of the Loan guarantees may be covered by the exemption to the extent that the opening of the Phase II procedure, and may be either a positive decision guarantee does not exceed 80 per cent of the underlying loan and either allowing the implementation of the aid, possibly subject to conditions, or a the guaranteed part of the loan does not exceed €1.5 million and the dura- negative decision prohibiting the implementation of the aid. tion of the guarantee does not exceed five years or the guaranteed part of the loan does not exceed €750,000 and the duration of the guarantee does 38 If no clearance is obtained, what procedures apply to recover not exceed 10 years. In order to avoid abuses, forms of aid the inherent unlawfully granted state aid? aid amount of which cannot be calculated precisely in advance (ie, non- Where the Commission finds that the notified aid is not compatible transparent aid), and aid to firms in difficulty are excluded from the de with the internal market, the aid cannot be put into effect (article 7(5) minimis exemption. Rules on cumulation of aid apply. Procedural Regulation). Finally, in accordance with Commission Decision 2012/21 on the Where the Commission finds that granted aid is incompatible with the application of article 106(2) TFEU to state aid in the form of public service internal market, the aid must be recovered from the beneficiary by means compensation granted to certain undertakings entrusted with the opera- of a recovery decision (article 14 Procedural Regulation). Member states tion of SGEIs provides that member states are exempted from the obliga- must take all necessary measures to recover the aid, except if such recovery tion to notify compensation for the provision of SGEIs by airports with is contrary to a general principle of EU law. Recovery takes place in accord- 200,000 or fewer passengers per year. ance with the national procedural rules of the member state concerned. In addition, the aid to be recovered must include interest at market rate, to 36 Must clearance from the competition authorities be obtained be calculated from the date on which the unlawful aid was at the disposal before state aid may be granted? of the beneficiary until the date of its recovery. The interest rate is to be Yes, unless the block exemption de minimis rule or SGEI exception applies applied on a compound basis. The Commission updates the interest rates (see question 35). applicable in recovery cases regularly. As set out in article 108(3) TFEU, the Commission’s supervision A negative Commission decision is final and fully binding upon the of state aid is based on a system of ex ante authorisation (see also the member state concerned, which has the right to seek its annulment by the Procedural Regulation). Member states are thus required to inform the EU courts. In principle, appealing a Commission decision does not sus- Commission upfront of any plan to grant or alter state aid (which is not pend the challenged decision’s enforcement, unless the EU court orders covered by the General Block Exemption Regulation), and they may not the grant of interim measures following application by the member state grant such aid prior to Commission approval (‘standstill obligation’ – see concerned. The only occasion where a member state is justified not to article 108(3) TFEU and article 3 Procedural Regulation). State aid granted recover the aid is where there is absolute impossibility to do so, as provided without such formal approval is automatically ‘unlawful’, and the member for in the relevant case law. state involved may be required by the Commission to recover it from the recipient. Miscellaneous Member states may, and are in fact generally encouraged to, notify 39 Is there any aviation-specific passenger protection (national) aid schemes, rather than individual measures (see, eg, 2014 legislation? guidelines on state aid to airports and airlines). EU law contains aviation-specific passenger protection legislation relat- 37 If so, what are the main procedural steps to obtain clearance? ing, in particular, to the following issues, each of which is briefly described below: The main procedural steps to obtain clearance of state aid are provided by • compensation for denied boarding, cancellation and long delays; the Procedural Regulation, and can be distinguished in two distinct phases: • package holidays; • disabled passengers; Phase I • computerised reservation systems (CRSs); and The member state concerned must notify planned aid measures to the • airfares. Commission. The Commission’s preliminary (Phase I) examination can result in either of the following types of decisions: Compensation for denied boarding, cancellation and long delays • a clearance decision, on the basis that the notified measure does not Regulation 261/2004 establishes common rules on compensation and qualify as aid within the meaning of article 107(1) TFEU; assistance to passengers in the event of denied boarding, cancellation or • a clearance decision, on the basis that, although the notified meas- the long delay of flights. It applies to passengers departing from an airport ure qualifies as aid, it is compatible with the internal market. In this in the territory of a member state as well as to passengers departing from case, the Commission shall specify which exemption provision it has an airport in a third country to an airport in the territory of a member state, applied (the Commission cannot attach conditions to a positive deci- on condition that the passengers have a confirmed reservation on the flight sion in Phase I); or concerned, and presented themselves for check-in at the indicated time • the opening of formal (Phase II) investigation, on the basis that the or, if no time is indicated, no later than 45 minutes before the published notified measure qualifies as aid that raises serious concerns with departure time. The regulation does not apply to passengers travelling free regard to its compatibility with the internal market. of charge or at a reduced fare not available directly or indirectly to the public and only applies to motorised fixed-wing aircraft. The Commission must adopt a Phase I decision within two months follow- Under the regulation, air carriers must compensate passengers for ing the receipt of a complete notification. denying them boarding against their will. In that event, the passengers concerned have a right to reimbursement of the cost of the ticket (within Phase II seven days), or a return flight to the first point of departure or rerouting to Where the Commission has serious concerns, it adopts a decision declar- their final destination. They also have a right to care (refreshments, meals, ing the commencement of a formal investigation (article 6(1) Procedural hotel accommodation, transport between the airport and place of accom- Regulation). The decision contains a summary of the relevant issues of modation, two free telephone calls, telex or fax messages, or e-mails) and fact and law, and a preliminary assessment of the proposed aid, identify- to compensation of €250 for all flights of 1,500km or less; €400 for all ing the Commission’s serious doubts as to the compatibility of the aid with intra-EU flights of more than 1,500km and non intra-EU flights between the internal market. The member state concerned must submit its com- 1,500 and 3,500km; and €600 for all other flights. Compensation can be ments within one month from the day on which the decision was commu- reduced where the passenger is offered a rerouting alternative which does nicated to it. The Commission also invites member states and interested www.gettingthedealthrough.com 67

© Law Business Research Ltd 2015 EUROPEAN UNION Shearman & Sterling LLP not exceed the time of arrival of the original flight by a certain number of Computerised reservation systems (CRSs) hours (depending on flight distance). In the case of flight cancellations, The revised and restated CRS Code of Conduct (Regulation 80/2009) passengers are entitled to claim reimbursement or rerouting as well as sim- applies to the offering of air transport products (and rail transport products ilar types of care and compensation (unless the passenger was informed when offered in combination with air transport products) by CRS providers of the cancellation at least two weeks in advance or was given rerouting within the EU. Despite being commonly referred to as a Code of Conduct, alternatives which do not exceed the time of arrival of the original flight by the regulation contains binding rights and obligations, including: a certain number of hours; or the cancellation was the result of extraordi- • non-discriminatory access to and participation of transport providers nary and unavoidable circumstances). In the case of delays, the passenger in the CRS; is entitled to care and (when the delay is at least five hours) reimbursement • non-discrimination with respect to data handling and distribution or rerouting, but not compensation. facilities; In July 2010, the Commission published a report following a pub- • neutral, non-discriminatory and comprehensive display of schedule lic consultation on the regulation of air passenger rights. It found that, information; although some progress has been made since the introduction of the regu- • right of subscribers (ie, travel agents) to participate in other CRSs; lation, further important steps should be taken to ensure that airlines apply • supply of marketing, booking and sales data to participating carriers the rules more consistently, and that member states enforce them more rig- on a non-discriminatory basis; and orously. Between December 2011 and March 2012, the Commission carried • non-discrimination by parent carriers against competing CRSs. out a public consultation on possible revisions to Regulation 261/2004 and a report of responses has been published on the DG Move website. The revised CRS Code of Conduct obliges participating carriers to ensure In March 2013, the Commission announced a package of measures to that data submitted by them to a CRS is accurate, and contains provisions strengthen air passengers’ rights to information, care and rerouting when reinforcing the protection of personal data (processing, access and storage). they are stranded at an airport, to improve complaint procedures and The Commission has clearly defined powers of investigation in case of clarify grey areas in respect of, inter alia, delays and cancellations, extraor- infringements of the CRS Code of Conduct, and may impose fines of up to dinary circumstances and contingency planning. The proposal aims to 10 per cent of the total turnover in the preceding business year. However, provide for better complaint procedures and enforcement measures. In few fines have so far been imposed for breach of either incarnation of the February 2014, the European Parliament backed the Commission’s pro- CRS Code of Conduct and none has been anywhere near the 10 per cent posal, but at the time of writing procedure is still ongoing. cap. In March 2009, the Commission published an explanatory note on the Package holidays meaning of ‘parent carrier’ for the purposes of the CRS Code of Conduct. Directive 90/314 determines the minimum standards concerning the pro- In summer 2011, DG Move commissioned a mid-term evaluation of and tection of passengers that have purchased a package holiday. In particular, stakeholder consultation on the CRS Code of Conduct. The final report the directive covers matters in relation to: was issued in September 2012. The final report considered that continued • the information to be provided to the consumer; regulation of the area was necessary and did not recommend any funda- • the formal requirements for package travel contracts; mental changes to the regime. • the compulsory rules applicable to contractual obligations (cancellation, modification, the civil liability of package tour organisers or Airfares retailers, etc); and Regulation 1008/2008 imposes certain obligations to ensure transparency • the protection of consumers in the case of the package tour organiser’s of passenger fares offered from an airport in an EU member state. In par- insolvency. The directive has been implemented by all member states ticular, the final price to be paid for any offer (published on the internet or (see national chapters). elsewhere) must always be indicated and specify the fare, the applicable tax, charges, surcharges and fees which are unavoidable and foreseeable In July 2013, the Commission proposed a reform of the Package Travel at the time of the publication. Optional price elements have to be commu- Directive to cover the traditional pre-arranged packages (and also those nicated clearly, and customers must be able to accept them on an opt-in that are combined at the consumers’ requests) and clarify legal grey areas (rather than opt-out) basis. The regulation also prohibits price discrimi- in respect of consumer protection. The aim is to make consumers better nation between passengers solely on the basis of their nationality or their informed; to provide for fairer and more predictable prices, enhanced place of residence within the EU. protection for travellers and savings and to facilitate cross-border trade for businesses. The European Council approved a revised Package Travel 40 Are there mandatory insurance requirements for the Directive in May 2015 and, at the time of writing, the new rules are expected operators of aircraft? to enter into force in autumn 2015. Regulation 785/2004 (as amended) on insurance requirements for air carriers and aircraft operators establishes minimum insurance requirements for Disabled passengers air carriers and aircraft operators, for both commercial and private flights. The rights of disabled passengers are set out in Regulation 1107/2006 con- It requires air carriers and aircraft operators to be insured, in particular with cerning the rights of disabled persons and persons with reduced mobility respect to passengers, baggage, cargo and third parties, covering the risks when travelling by air. According to the regulation, disabled persons or associated with aviation-specific liability (including acts of war, terrorism, persons with reduced mobility cannot be refused air transport on grounds hijacking, sabotage, unlawful seizure of aircraft and civil commotion). The of their disability, except for justified safety reasons or physical impossi- coverage levels do not apply to flights over the territory of a member state bility. Designated points of arrival and departure should be established to carried out by non-EU air carriers and by aircraft operators using aircraft allow the disabled persons or persons with reduced mobility to announce, registered outside the EU, which do not involve landing in, or take off from, with ease, their arrival at the airport and request assistance. They should that territory. There are also minimum insurance requirements for liability be given assistance at airports and on board after advance notice of their in respect of third parties per accident and per aircraft. specific needs. The managing bodies of the airports have the over- The Commission’s public consultation on the operation of Regulation all responsibility for providing such assistance (Annex I Regulation 785/2004 was concluded on in April 2008. The Commission’s general con- 1107/2006), and the airlines will be responsible for the assistance on clusion was that the regulation effectively fulfilled its objective of ensur- board (Annex II Regulation 1107/2006). Disabled persons or persons with ing appropriate insurance coverage and that, despite the claim of certain reduced mobility are entitled to receive assistance at no additional charge, stakeholders that the established requirements are inappropriately high for although airports may levy a specific non-discriminatory charge on airport some categories, the minimum requirements have not caused any substan- users to fund this assistance. In addition, the regulation sets out a number tial problems in the majority of member states. Along with other internal of requirements in relation to the provision of air transport services to disa- aviation market legislation, the regulation also underwent a ‘fitness check’, bled passengers, including matters such as the transmission of informa- the final report on which was issued in September 2012. tion, the quality standard for the assistance, the training of personnel, and the available complaint procedures. In June 2012, the Commission supplemented Regulation 1107/2006 by publishing Interpretative Guidelines on the application of this regulation.

68 Getting the Deal Through – Air Transport 2016

Update and trends Ownership and control of airlines Antitrust and mergers The Commission has opened a number of investigations into non-EU The Commission’s long-running investigation on the transatlantic minority holdings in European airlines to verify compliance with the cooperation by certain Skyteam alliance members finally came to an foreign ownership and control of EU airline requirements of Regulation end in May 2015, with a commitments decision. Investigations into 1008/2008 (see question 5). It seems that the Commission’s main concern transatlantic cooperation by certain oneworld and Star alliance carriers is not the shareholdings as such, but to whether they, in combination were concluded in 2010 and 2013, respectively, also by commitments with other factors, grant effective control to non-EU shareholders over decisions. Thus the Commission’s investigations into deeply integrated EU airlines. Primary responsibility for monitoring and approving such aviation alliances seem to have reached the end of a cycle. shareholdings lies with competent national authorities, so presumably In July, 2015 the Commission cleared the proposed acquisition of the Commission is investigating the proper application of Regulation Aer Lingus by International Airlines Group, parent of British Airways, 1008/2008 by the member states. However, it is worth noting that under Iberia and Vueling. The package of remedies offered included familiar article 15(3) of that regulation, as an ultimate measure, the Commission has slot commitments at London Gatwick airport. More noteworthy, the authority to ‘take the appropriate corrective measures or to suspend or however, was a commitment for Aer Lingus to continue to provide revoke the operating licence’ of airlines in case of non-compliance. services for connecting passengers of other competing airlines taking the long-haul flights out of London-Heathrow, London-Gatwick, Legislation Manchester, Amsterdam, Shannon and Dublin. These commitments In addition to the guidelines issued by the Commission on state aid appear to seek to preserve Aer Lingus’ hitherto role as a non-aligned to airports and airlines, in force since April 2014, there are a number carrier, carrying feeder traffic for various airlines. of ongoing aviation related legislative initiatives still in progress. The Commission’s package of legislative proposals aiming to help improve Organisation the competitiveness of the European aviation sector is expected to be After the recent re-organisation of the Commission top administration issued by the end of 2015. The reform of the Package Travel Directive, in November 2014, when Violeta Bulc and Margrethe Vestager took which mainly addresses consumer protection issues, is also expected to office as Commissioners of the DG Move and DG Comp, respectively, be formally approved by the end of 2015. the Commission is also now reshuffling its most senior civil servants. From autumn 2015, Henrik Hololei becomes Director-General of the State aid DG Move and Johannes Laitenberger becomes Director-General of the Soon after the entry into force of the Commission’s new guidelines on DG Comp, a position currently occupied by Alexander Italianer who will state aid to airports and airlines, the Commission approved, in April become Secretary-General, the Commission’s most senior 2015, three aid schemes to be granted to certain French airports and civil servant. airlines. The Commission approved, inter alia, certain operating aid to airports. This decision illustrates that operating aid being found compatible with the EU state aid rules is not just a theoretical possibility.

41 What legal requirements are there with regard to aviation planning requirements, access control and security checks), passengers security? and cabin baggage (screening, etc), hold baggage, cargo and mail, in-flight Aviation security has largely been addressed on a national and intergov- security measures and staff recruitment and training. Member states retain ernmental basis by Regulation 185/2010 (as amended), which replaced the power to apply more stringent measures provided they are relevant, Regulation 820/2008 (as amended) as of 29 April 2010 (see national objective, non-discriminatory and proportional to the addressed risk. They chapters). must also implement a national civil aviation security programme (NSP), At the EU level, a common security policy has been adopted to namely a national quality control programme which ensures and monitors give legal force to the rules and mechanisms for cooperation through compliance with the regulation. Similarly, airport operators and air carriers Regulation 300/2008 on common rules in the field of civil aviation secu- must implement security programmes, including internal quality control rity, which has been in full effect since April 2010, repealing Regulation provisions, indicating how they will comply with the regulation and the 2320/2002 (adopted as a consequence of the 11 September attacks in the NSP. Regulation 300/2008 also empowers the Commission to conduct – in United States). Regulation 300/2008 is supplemented by Regulations cooperation with the competent national authority – inspections (including 272/2009 (as amended), 1254/2009 and 18/2010, and it is implemented by unannounced inspections) and to adopt general measures amending non- Regulations 72/2010 and 185/2010 (as amended). essential elements of the common basic standards. Regulation 72/2010 Regulation 300/2008 aims at safeguarding civil aviation against acts of establishes the applicable procedures for conducting Commission inspec- unlawful interference, by setting out common rules and basic standards on tions in the field of aviation safety. Finally, the member states are in charge aviation security, and mechanisms for monitoring compliance. Common of determining the entity bearing the costs of security measures (eg, the basic standards relate, inter alia, to airport and aircraft security (such as state, the airport operators, airlines or users), and the penalties applicable to infringements of the regulation.

Geert Goeteyn [email protected]

Avenue des Arts 56 Tel: +32 2 500 9800 1000 Brussels Fax: +32 2 500 9801 Belgium www.shearman.com

www.gettingthedealthrough.com 69

At an international level, the EU and the US reached two agreements names, contact data, payment details, and itinerary information. In the lat- on forms of data-sharing in June 2007. These agreements were triggered ter agreement, the US agreed to restrict use of any data received from the by two Court of Justice judgments annulling two Commission decisions banking consortium SWIFT exclusively for counter-terrorism purposes, regarding US legislation requiring airlines carrying passengers to, from or and to retain the data for a maximum of up to five years. In addition, the across the US to grant US authorities electronic access to passenger name Commission agreed to appoint an ‘eminent European’ to monitor the US records (PNRs). One decision concerned the processing and transfer of use of SWIFT data (French Judge Jean-Louis Bruguière). PNR data by air carriers to the US authorities, while the other related to Furthermore, article 9 of the first-stage air transport agreement the adequate level of the protection of personal data contained in the PNR between the EU and US and the second-stage agreement (see question data transferred to the US authorities. The Commission held that the US 1) both provide for regulatory convergence mechanisms in security which authorities offered a sufficient level of protection for personal data trans- are key for the creation of a ‘one-stop security’ approach (checking passen- ferred from the EU. The Court of Justice found that neither of the deci- gers and luggage only at the start of their journey and not again at every sions had an appropriate legal basis, and that the decision on adequacy transfer). The ‘one-stop security’ approach is also explicitly advanced in was adopted ultra vires and infringed fundamental rights. The Court of Regulation 300/2008. Justice therefore did not have to assess the validity of the substance of the Commission decisions. The resulting agreements concerned PNRs and 42 What serious crimes exist with regard to aviation? consumers’ financial data. The former agreement reduces the amount of This is a matter for member state national law (see national chapters). passenger data now collected by US authorities but includes, inter alia,

70 Getting the Deal Through – Air Transport 2016

France Vonnick Le Guillou, Edouard Sarrazin, Marie Bresson, Jonathan Rubinstein and Guilhem Argueyrolles* DLA Piper France

General Air traffic control is regulated by various EU and domestic texts (see question 23). 1 Which bodies regulate aviation in your country, under what basic laws? 3 What safety regulation is provided for air operations that do In France, aviation is mainly regulated by the European Commission, not constitute public or commercial transport, and how is the Council and Parliament, the European Aviation Safety Agency (EASA), the distinction made? French parliament and the General Directorate for Civil Aviation (DGAC). General aviation includes all non-commercial civil aviation activities, such EASA is the European Union Authority for aviation safety. Its main as sports and leisure aviation, aerial work and business aviation. It is gov- regulatory activities include implementing and monitoring safety rules, erned by specific domestic rules, in particular by Order of 24 July 1991 (as certifying and approving products, and organisations involved in design, amended), on the conditions of use of civil aircraft in general aviation. This manufacture and maintenance of aeronautical products, providing over- order provides technical requirements in terms of minimal aircraft equip- sight and support to member states in fields where EASA has shared ment, safety equipment, navigation, pilot qualifications, documentation competence (eg, air operations, air traffic management), authorisation of and maintenance. third-country (non-EU) operators. Public transport is defined as paid-for air carriage. The rules on public The DGAC is the national administration, within the Ministry for transport thus apply to all paid-for transport. They do not apply to trans- Ecology, Sustainable Development and Energy, comprising all entities in port free of charge or where transport is accessory (such as aerial work). charge of regulating and supervising air safety, air transport, air navigation services (DSNA) and any other activity related to civil aviation in general. 4 Is access to the market for the provision of air transport Its main regulatory activities include air traffic control, supporting research services regulated, and if so how? and development in the field of aircraft construction, and classification of aircraft (issuing of airworthiness certificates). The rules applying to market access are provided by Regulation EC No. Basic aviation rules are provided for in Regulations issued by the 1008/2008 of 24 September 2008 on common rules for the operation of air European Commission, Council and Parliament, and in the French services in the Community, replacing Regulation No. 2407/92. Transport Code and Civil Aviation Code. Three authorisations are required to operate public transport: an air operator certificate (AOC), an operating licence and an authorisation to Regulation of aviation operations operate air transport services. An AOC is granted when the operator demonstrates that it will be able 2 How is air transport regulated in terms of safety? to comply with all applicable technical regulations and the DGAC is satis- As a signatory of the Chicago Convention on International Civil Aviation fied that the technical guarantees are sufficient. of 7 December 1944 and a member state of the International Civil Aviation Operating licences in France are delivered by the DGAC on condition Organization (ICAO), France must comply with international safety stand- that the operator complies with legal and financial conditions: its princi- ards defined by ICAO. France is also widely governed by harmonised pal place of business must be in France, operation of air services must be European safety rules covering most operations from aircraft certification its main occupation. The operator must also comply with ownership and to crew licensing and maintenance. financial conditions (see question 5) and with insurance requirements (see Aircraft certification is governed by Commission Regulation (EU) No. question 40). 748/2012 (as amended), which lays down implementing rules for airworthiness and environmental certification of aircraft and related products, 5 What requirements apply in the areas of financial fitness and parts and appliances, as well as for certification of design and production nationality of ownership regarding control of air carriers? organisations (Part 21). Design organisations also have a duty to monitor Pursuant to Regulation 1008/2008, air carriers operating aircraft of more airworthiness of in-service aircraft. than 10 tonnes maximum take-off mass (MTOM) and/or more than 20 Commercial air operations are governed by Commission Regulation seats and applying for an operating licence for the first time must demon- (EU) No. 965/2012 (IR-OPS), which replaces Regulation (EC) 859/2008 strate that (i) they can meet at any time their actual and potential obliga- (EU-OPS). It has four sub-parts: Part OPS.ARO, OPS.ORO, OPS.CAT and tions established under realistic assumptions for a period of 24 months OPS.SPA. from the start of operations; and (ii) they can meet their fixed and opera- Flight crew licensing and training is governed by Commission tional costs incurred by operations for a period of three months from the Regulation (EU) No. 1178/2011 of 3 November 2011 (as subsequently start of operations, without taking into account any income from their amended) and Appendix (Part FCL). This Regulation was implemented operations. by a Decree of 5 April 2012 (NOR: DEVA1209952A), as modified by Order French air carriers must be majority held and effectively controlled by (Arrêté) of 2 April 2015. a national of an EU member state, whether directly or indirectly through Maintenance and continuing airworthiness of aircraft are governed intermediate undertakings. by Commission Regulation (EU) No. 1321/2014 (repealing Commission Regulation (EC) No. 2042/2003 of 20 October 2003) on the continuing air- 6 What procedures are there to obtain licences or other rights to worthiness of aircraft and aeronautical products, parts and appliances, and operate particular routes? on the approval of organisations and personnel involved in these tasks (as Once a carrier has obtained a French operating licence it is entitled to oper- subsequently amended) and its appendices (Part M, Part 145, Part 66 and ate intra-EU routes freely, subject to safety, environment and slot regula- Part 147, see question 16). tions and subject to prior notification of the DGAC. www.gettingthedealthrough.com 71

Operation of non-EU routes by a French carrier must be authorised owned by a legal entity incorporated under the laws of a EU or EEA mem- by the Minister responsible for Civil Aviation (article R330-6 of the French ber state and having its registered office or principal place of business in Civil Aviation Code). A favourable opinion from the Higher Council of France or in another EU or EEA member state, or operated by an air carrier Merchant Aviation is required for scheduled routes. whose licence was delivered in France. Derogations can be granted if these conditions are not fulfilled (article L6111-3 of the Transport Code). 7 What procedures are there for hearing or deciding contested Mortgages must be registered to be legally binding on third parties applications for licences or other rights to operate particular (article L6122-8 of the Transport Code). routes? Dry leases may also be registered. Although such registration is not French administrative courts have jurisdiction to hear disputes relating to mandatory, in its absence the owner is jointly and severally liable with the decisions by the Minister responsible for Civil Aviation granting or denying lessor for damage caused to third parties (article L6131-4 of the Transport licences or authorisations to operate air services. Code).

8 Is there a declared policy on airline access or competition, and 14 Is there a register of aircraft mortgages or charges, and if so if so what is it? how does it function? There is no policy aiming to restrict airline access in France. Airline compe- There is no specific register for aircraft mortgages or charges, but mort- tition is subject to common competition policy (questions 28 et seq.). gages must be registered on the Aircraft Registry (see question 13). Charges may not be registered. 9 What requirements must a foreign air carrier satisfy in order to operate to or from your country? 15 What rights are there to detain aircraft, in respect of unpaid airport or air navigation charges, or other unpaid debts? EU carriers operating to or from France do not require specific authorisation, as provided by Regulation No. 1008/2008. However, their operation Under article L6123-2 of the Transport Code, conservatory seizure of the programmes must be notified to the DGAC at least one month in advance aircraft can be authorised by the courts in the event of unpaid airport or air for scheduled flights (10 days for non-scheduled flights). navigation charges. The aircraft is released upon payment of the amounts Non-EU carriers require prior authorisation from the Minister respon- owed by the owner of the aircraft, or its operator. sible for Civil Aviation to operate scheduled and non-scheduled flights to Other creditors can also request conservatory seizure of aircraft or from France. although French or foreign aircraft used in state service or for public transport can only be seized in respect of amounts owed by the owner relating to 10 Are there specific rules in place to ensure aviation services the purchase of the aircraft or training or maintenance contracts related to are offered to remote destinations when vital for the local its operation (article L6123-2 of the Transport Code). economy? Aircraft may also be retained in respect of unpaid invoices, such as maintenance or ground handling services, by virtue of common retention As provided by Regulation No. 1008/2008 of 24 September 2008 on com- rules provided by the French Civil Code. Where applicable conditions are mon rules for the operation of air services in the Community, a public met, retention does not need to be authorised by a court order. service obligation may be imposed by the Minister responsible for Civil Aviation in respect of scheduled flights (R330-7 of the Civil Aviation Code). 16 Do specific rules regulate the maintenance of aircraft? If no EU air carrier has started to do so or indicated that it plans to do so then access to the scheduled air services on that route may be limited to Aircraft maintenance is governed by Commission Regulation (EU) No. only one EU air carrier for a period of up to four years, after which the situ- 1321/2014 of 26 November 2014 on the continuing airworthiness of aircraft ation shall be reviewed. and aeronautical products, parts and appliances, and on the approval of organisations and personnel involved in these tasks and its appendices (as 11 Are charter services specially regulated? amended): Part 145, Part 147, Part 66 and Part M. These texts include rules pertaining to technical requirements and administrative procedures for All charter and scheduled services within the EU (including air taxi and continuing airworthiness as well as rules for the approval of maintenance general aviation services for transport of passengers and cargo) are organisations by EASA. regulated by the same EU regulatory framework (EU Regulation No. Aircraft operators are responsible for compliance with these rules and 1008/2008). The only requirement is prior notification of the Minister all maintenance operations must be performed by an approved mainte- responsible for Civil Aviation. nance organisation. As far as non-scheduled routes outside the EU/EEA are concerned, they must be authorised by the Minister responsible for Civil Aviation. Airports 12 Are airfares regulated, and if so, how? 17 Who owns the airports? As a matter of principle, EU air carriers and air carriers from third countries In France, the Law 2005-357 of 20 April 2005 organised French airports can freely set air fares for intra-EU air services (article 22 of EU Regulation into three categories: No. 1008/2008). • Aéroports de Paris, a private company of which the state is the main In France, all air carriers (public or commercial) operating scheduled shareholder, owns and runs 14 airports in the ˆIle-de-France region; passenger flights within, from, or to France shall provide the Minister • major regional airports ‘of national interest’ that remain the property responsible for Civil Aviation with their general terms and conditions of of the state, however their management is progressively transferred to carriage, including customer benefits, if any (articles R330-8 to R330-10 of newly-created airport companies, the capital of which is owned by the the French Civil Aviation Code). state, local communities and Chambers of Commerce and Industry; Air carriers licensed by the EU/EEA, or under international carriage and conventions having the same effect, must obtain prior approval from the • other regional airports have been transferred by the state to the local Minister responsible for Civil Aviation for the general terms and conditions authorities (Law No. 2004-809 dated 13 August 2004). offered to the public for flights within Europe or to or from a country party to an international air carriage convention and the tariffs proposed to the 18 What system is there for the licensing of airports? passengers. Such a request for prior approval shall be made at least one day Article L6331-3 of the Transport Code provides that no one may operate before the tariffs and the general terms and conditions become effective. a civil airport with commercial traffic without an airport safety certificate obtained from the administrative authority. Aircraft Said certificate may be suspended or removed in case of breach of duty 13 Who is entitled to be mentioned in the aircraft register? Do (article L6331-3 Transport Code). When requesting said certificate, an air- requirements or limitations apply to the ownership of an port manual must be included with the request, describing the provisions aircraft listed on your country’s register? made to ensure security, and compliance with existing legislation and rules (articles R211-9 and R211-10 Civil Aviation Code). Aircraft can be registered on the French Aircraft Registry if owned by a French national or by a national of another EU or EEA member state, or

72 Getting the Deal Through – Air Transport 2016

19 Is there a system of economic regulation of airports, and, if so, 1070/2009, No. 1191/2010, No. 390/2013, Safety Regulatory Requirements how does it function? by Eurocontrol, articles R135-1 to R135-10 of the Civil Aviation Code). Public services provided by airport operators must be charged for in com- Commission Implementing Regulation (EU) No. 391/2013 lays down a pliance with specific regulated fees fixed by decree (articles L6325-1 of common charging scheme for air navigation services. Transport Code and L410-2 Commercial Code). Services concerned by said regulated fees are those provided to the Liability and accidents aircraft companies and their service suppliers when they use ground 24 Are there any special rules in respect of death of, or injury to, installations, premises, facilities, or airport equipment, so long as said passengers or loss or damage to baggage or cargo in respect of use is directly required, at the airport, by the business of air transporta- domestic carriage? tion services (article R224-1 Civil Aviation Code). The principle is that the Regarding injury to, or death of passengers, or loss or damage to baggage fees charged by the airports cannot exceed the cost of the services pro- or cargo, article L6421-3 of the French Transport Code provides that the vided (L6325-1 of Transport Code). Regulated fees instituted by decree provisions of Regulation (EC) No. 889/2002 of 13 May 2002 amending thus include, for example, landing fees, parking fees, or per passenger fees Regulation (EC) No. 2027/97 on air carrier liability in the event of acci- (article R224-1 Civil Aviation Code). dents, and the provisions of the Montreal Convention, apply to domestic For civil airports falling under the jurisdiction of the state, and carriage. Aéroports de Paris, a contract of five years at most must be concluded with Regarding carriage not governed by the Montreal Convention, such the state, determining evolution of the fee agreement based on a forecast as carriage free of charge, articles L6421-4 and L6422-2 to L6422-5 of the of costs, revenue and investments (article L6325-2 Transport Code). Transport Code provide that air carrier liability, even if the carriage is not For other civil airports, regulated fee amounts must be notified to a international, is subject to the provisions of the Warsaw Convention and representative of the state at least two months before they come into effect subsequent conventions that supplement it. The limit of liability per pas- (article R224-5 Civil Aviation Code). senger is, however, €114,336 according to L6421-4 of the Transport Code. Concerning specifically carriage free of charge, article L6421-4 pro- 20 Are there laws or rules restricting or qualifying access to vides that, unless otherwise stipulated, air carrier may be held liable only airports? if it is established that the damage was caused by a fault attributable to the A European Council Regulation (EEC) No. 1008/2008 states that mem- carrier or his agent. ber states cannot impose any permit or authorisation for services on Community air carriers, or restrict their freedom through bilateral agree- 25 Are there any special rules about the liability of aircraft ments with other member states. operators for surface damage? Restrictions may be imposed under bilateral agreements between a According to article L6131-2 of the Transport Code the operator of an air- member state and a third country if said restrictions do not limit competi- craft is strictly liable for surface damage caused by the aircraft. The operation, are non-discriminatory and are not more restrictive than necessary. tor’s liability cannot be totally or partially exonerated unless the victim is However, if an airport has insufficient capacity, access may be at fault or negligent. restricted to better manage air traffic. In case of surface damage to a moving aircraft by another moving air- According to a European Council Regulation (EEC) No. 95/93 authori- craft, then French civil liability laws apply (article L6131-2 of the Transport sation for take-off or landing may be limited to a precise time slot to ensure Code). that the available landing and take-off slots are used efficiently and distributed in an equitable, non-discriminatory and transparent way. 26 What system and procedures are in place for the investigation of air accidents? 21 How are slots allocated at congested airports? When an air accident occurs the Air Transport Gendarmerie (BGTA) car- In 1996, the Association for the Coordination of Schedules (named ries out an investigation to find the cause of the accident. COHOR) was appointed by the French authorities to allocate slots at the France, as a member state of the of the International Civil Aviation busiest French airports, pursuant to Council Regulation (EEC) No. 95/93 Organization (ICAO) and as signatory of the Chicago Convention on of 18 January 1993. International Civil Aviation of 7 December 1944, must comply with inter- The principle for the allocation of slots is that air carriers having oper- national safety standards defined by the ICAO. ated their allocated slots for at least 80 per cent of a scheduled period in Accidents or serious incidents that occur in France must, therefore, the previous year are entitled to the same slots in the equivalent scheduling be reported to the French investigation board (BEA). As provided by period of the following year. On the contrary, slots that were operated for Regulation (EU) No. 996-2010, the purpose of BEA technical investiga- less than 80 per cent are reallocated to other applying airlines. tions is to issue recommendations for safety improvement measures, and not to create a presumption of blame or liability for an accident, serious 22 Are there any laws or rules specifically relating to ground incident or incident. At the end of the investigation, the BEA issues a public handling? report. Articles R216-1 to R216-16 specifically relate to ground handling ser- When the accident results in bodily injury or death, a judicial investi- vices. Access is subject to obtaining authorisations issued by the prefec- gation will also be carried out by the BGTA and court experts appointed by ture (R216-4 and R216-14) and by the aerodrome manager (R261-9). The the investigating judge of the criminal court supervising the investigation. Minister responsible for Civil Aviation may, at the request of the aerodrome Only the judge and the parties to the judicial proceedings will have access manager (R216-5), and under certain conditions specified in article R216- to the findings of the investigations. 16, limit the number of companies operating ground handling services. 27 Is there a mandatory accident and incident reporting system, 23 Who provides air traffic control services? And how are they and if so, how does it operate? regulated? As of 15 November 2015, European Parliament and Council Directive All provision of air navigation services within the European Community is 2003/42/EC of 13 June 2003 on occurrence reporting in civil aviation will subject to certification by EU countries (EC Regulation No. 550/2004). In be replaced by Regulation No. 376/2014. France, air traffic control is operated by the Air Navigation Services Branch, These rules impose a duty on professionals in the civil aviation sector or DSNA (see Decree No. 2005–200). to report any occurrence (ie, safety-related event) regarding the organisa- To obtain or retain certification, air navigation services must comply tion the reporting person is working for (airline, manufacturer, mainte- with requirements relating to technical and operational competence and nance organisation, airport). These occurrences are then to be reported to suitability, systems and processes for safety and quality management, DGAC or EASA or both. reporting systems, quality of services, financial soundness, liability and European Parliament and Council Regulation (EU) No. 996-2010 of insurance cover, ownership and organisational structure (including pre- 2 October 2010 on the investigation and prevention of accidents and inci- vention of conflicts of interest), security, and human resources (see in par- dents in civil aviation and Regulation No. 376/2014 provide for a duty to ticular Regulation (EC) N0. 550/2004, No. 2096/2005, No. 1794/2006, No. report accidents or serious incidents. Operators, air navigation service providers, and aircraft, engine and equipment designers, manufacturers www.gettingthedealthrough.com 73

© Law Business Research Ltd 2015 FRANCE DLA Piper France and maintenance providers shall report any accident or serious incident Financial support and state aid to the BEA (articles R722-2 of the French Civil Aviation Code). Any natural 33 Are there sector-specific rules regulating direct or indirect or legal person involved in aeronautics not complying with this reporting financial support to companies by the government or requirement may be subject to criminal sanctions (L6222-8 and L6232-10 government-controlled agencies or companies (state aid) in of the Transport Code). the aviation sector? If not, do general state aid rules apply? Competition law There are no French state aid rules and reference shall therefore be made to both general and EU aviation-specific state aid rules, as listed in the 28 Do sector-specific competition rules apply to aviation? If not, European Union chapter. do the general competition law rules apply? No French sector-specific competition rules apply to the aviation sector. 34 What are the main principles of the state aid rules applicable French and European competition rules fully apply to the aviation sector, to the aviation sector? as to any other economic sector. In France, competition rules are set out in As EU law applies, reference shall be made to both general and EU aviation- section IV of the Commercial Code, and the French Competition Authority specific state aid principles, as described in the European Union chapter. in the same way as any other EU national competition authority, also has the power to apply Treaty on the Functioning of the European Union arti- 35 Are there exemptions from the state aid rules or situations in cles 101 (prohibiting anti-competitive agreements) and 102 (prohibiting which they do not apply? abuse of dominant position) to agreements or behaviours that may affect The general and sector specific exemptions set by EU rules apply. trade between member states. Merger control rules are set out by article L430-1 and seq of the French Commercial Code. 36 Must clearance from the competition authorities be obtained before state aid may be granted? 29 Is there a sector-specific regulator or are competition rules applied by the general competition authority? No clearance from the French Competition Authority is required as state aid control is an exclusive competence of the European Commission. There is no sector-specific competition regulator, the French Competition Authority is the authority in charge of enforcing French and European 37 If so, what are the main procedural steps to obtain clearance? competition laws irrespective of the economic sector concerned. The main procedural steps to obtain clearance of state aid from the 30 How is the relevant market for the purposes of a competition European Commission are provided under the procedural regulation, assessment in the aviation sector defined by the competition which is described in the European Union chapter. authorities? 38 If no clearance is obtained, what procedures apply to recover The general market definition principles set by EU competition law apply unlawfully granted state aid? when defining the relevant product and geographic markets in the context of an aviation sector merger control assessment. The starting point for the Where the Commission finds that aid has been granted illegally or is incom- purpose of defining the relevant product market is to assess whether the patible with the internal market, the aid must be recovered from the benefi- products are substitutable from a demand-side perspective. The French ciary by means of a recovery decision. France, like any other member state Competition Authority defines the relevant markets on a case-by-case must therefore take all necessary measures to recover the aid, unless such basis, by reference to its own decisional practice and European case law. In recovery is contrary to a general principle of EU law. Recovery takes place mergers and alliance agreements between airlines, the approach regarding in accordance with national procedural rules, before the national courts. passenger services, for example, is the usual origin or destination city pair. However, such markets may be further segmented where appropriate, for Miscellaneous example by type of customer (premium business passenger market or non- 39 Is there any aviation-specific passenger protection premium leisure passenger market). Following this approach, the relevant legislation? markets may also include competing flights from neighbouring airports or even other modes of transport such as high-speed trains. Regulation (EC) No. 261/2004 is directly applicable in France and sets out the rule for compensation and assistance of passengers in cases of denied 31 What are the main standards for assessing the competitive boarding, cancellation or long delay of flights (more than three hours). effect of a transaction? Passengers shall be compensated by airlines when flights are cancelled within two weeks of departure or arrive more than three hours late unless To assess the likely impact of a transaction, the French competition author- the airline can prove ‘extraordinary circumstances’. ity assesses whether the transaction is likely to raise concerns, notably in The rules set out in the Council Directive 90/314/EEC on package consideration of the respective market shares held by the parties and their travel, package holidays and package tours have been transposed into the competitors, market structure, actual or potential barriers to entry or expan- French Tourism Code. Package holiday organisers or retailers are obliged sion, to determine whether a sufficient number of actual and potential com- to provide evidence of sufficient security to refund money paid by the cus- petitors will remain active in the relevant markets post-transaction, so as to tomer and for their repatriation in the event of insolvency. Pursuant to countervail the market power of the post-merger entity. In assessing such article L211-16 of the Tourism Code, the tour package legislation applies market power, the French Competition Authority may take into account to any individual or legal entity that performs or participates in operations potential competition and where appropriate, alternative possibilities consisting of organisation or sale of individual or group travel or holidays, such as alternative routes or transports. The authority will not only assess services in the course of travel or holidays or tourism services, in particular the actual or potential overlaps between the parties’ activities but also, the the organisation of visits of museums or registered historic monuments. actual or potential vertical links and finally the conglomerate yet portfolio These persons are subject to strict liability with regard to the purchaser for effects of the transaction so as to assess the risks of foreclosure. Where the the full performance of their contractual obligations, whether the services anti-competitive effects are not countervailed by sufficient pro-competitive are to be performed by them or by another service provider, without preju- effects, the notifying party may be required to submit remedies. dice to their right of recourse against a provider and within the limits set out in international conventions. 32 What types of remedies have been imposed to remedy Regulation (EC) No. 1107/2006 concerning the rights of disabled per- concerns identified by the competition authorities? sons and persons with reduced mobility when travelling by air is directly In the context of merger control and in line with EU law principles, clear- applicable in France. Since 23 December 2010, France has been a party to ance of a transaction may be conditional on structural or behavioural the UN Convention on the Rights of Persons with Disabilities. remedies. The French Competition Authority has not yet, however, had Regulation (EC) No. 1008/2008 on common rules for the operation of the opportunity to authorise a transaction subject to remedies in the air air services in the Community sets the rules on passenger rights regard- transport sector. Reference shall therefore be made to the European ing airfares. As far as pricing is concerned passengers should be able to Commission’s decisional practice. effectively compare prices for air services of different airlines. This means that passengers should have the right to access all airfares and air rates

74 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 DLA Piper France FRANCE regardless of their nationality or their place of residence in the EU. The price paid by passengers for air services originating in the EU shall be inclu- Update and trends sive of all taxes, charges and fees. Regulation No. 2111/2005 compels airlines and any companies sell- Court of Cassation 4 March 2015, Case No. 13-17.392, Armavia ing flight tickets to advise passengers of the identity of the carrier actually The Court of Cassation for the first time took a position on the issue of whether the Warsaw Convention applies to third-party operating the flight. It also allows the European Commission to establish a actions brought by an aircraft manufacturer against an air carrier. list (blacklist) of airlines banned from operating in the EU. Article L6421- After an aircraft crash causing the death of all passengers, the air 2-1 Transport Code French contains a duty of information going beyond carrier Armavia settled with the passengers’ families, who then Regulation (EC) No. 2111/2005 as it provides that any person or entity sell- sued the aircraft manufacturer before the Paris Court of First ing a ticket for a flight operated by an operating air carrier appearing on the Instance. Said manufacturer then introduced a third-party action EU blacklist should unambiguously inform passengers of this situation and against Armavia before the same courts. Invoking article 29 of the invite them to seek alternatives. Failure to comply with this obligation is Warsaw Convention, Armavia argued the lack of jurisdiction of subject to an administrative penalty of €7,500 per ticket (or of €15,000 in the Paris court. The Paris Court of Appeal ruled that the Warsaw the event of renewed breaches) and may also be subject to criminal penal- Convention was applicable to the third-party action brought by the manufacturer against the air carrier, and consequently held that the ties pursuant to article 121-3 of the French Criminal Code. French courts lacked jurisdiction. The Court of Cassation quashed this decision, stating that ‘third-party actions brought by an aircraft 40 Are there mandatory insurance requirements for the manufacturer against an air carrier are not governed by the Warsaw operators of aircraft? Convention, hence are not governed by its jurisdiction under article EC Regulation No. 785/2004 establishes minimum insurance require- 28’. In consequence, the air carrier should not, in the context of a ments for air carriers and aircraft operators in respect of passengers, bag- third-party action by an aircraft manufacturer, be able to rely on the two-year time limitation, on the liability limits or on the jurisdictions gage, cargo and third parties. set out in the Warsaw Convention. Finally, it is very likely that this This applies to all air carriers and to all aircraft operators flying within, interpretation will also be applied to the Montreal Convention. into, out of, or over the territory of a member state of the European Union, except when operating model aircraft with an MTOM of less than 20kg, foot-launched flying machines, captive balloons, aircraft including glid- • screening of cargo and mail before being loaded on to aircraft; and ers with a MTOM of less than 500kg which are used for non-commercial • staff ecruitmentr and training. purposes, or are used for local flight instruction which does not entail the crossing of international borders. 42 What serious crimes exist with regard to aviation? For liability in respect of passengers, the minimum insurance cover shall be 250,000 SDRs per passenger. In respect of liability for third par- Concerning airlines, the Transport Code defines various criminal offences, ties, the minimum insurance cover per accident, for every aircraft, shall mainly relating to: be between 0.75 and 700 million SDRs depending on the MTOM of the • the fact of operating aircraft without the relevant documentation, such aircraft concerned. as an operator’s certificate, registration documents, airworthiness EC Regulation No. 785/2004 provides that insured risks shall include documents, or a limitation of nuisance certificate (L6232-6, L6142-4, acts of war, terrorism, hijacking, acts of sabotage, unlawful seizure of air- L6232-4, 1° and 2°), punishable by one year’s imprisonment and a fine craft and civil commotion. of up to €75,000; and • failure to comply with technical airworthiness requirements (L6232-4, 41 What legal requirements are there with regard to aviation 3°) or with conditions of use relating to aircraft equipment, composi- security? tion of crews (L6232-4, 4°), punishable by one year of imprisonment and a fine of up to €75,000; The main requirements regarding aviation safety are provided in Regulations (EC) No. 2320/2002, No. 300/2008, No. 272/2009, Concerning pilots, the French Transport Code defines various criminal Commission regulations (EU) No. 185/2010, No. 1147/2011, No. 1141/2011, offences, mainly relating to: No. 245/2016 in articles L6341-1 to L6342-4 of the Transport Code, and in • unlawfully flying over the territory of France, either wilfully (one articles R213-1 to R213-7 of the Civil Aviation Code. year’s imprisonment and fine of €45,000) or by carelessness (punish- These aviation security requirements mainly concern: able by six months’ imprisonment and a fine of €15,000, article L6232- • airport security (eg, controlled access to different areas of airports, 2; and staff screening and vehicle checking); • failure to comply with the obligation of landing at international air- • screening passengers and cabin baggage so as to stop prohibited arti- ports with regard to international flights (punishable by three years’ cles being carried on board aircraft; imprisonment and a fine up to €30,000, L6232-3). • aircraft security checks or searches before departure to ensure that no prohibited articles are on board;

Vonnick Le Guillou [email protected] Edouard Sarrazin [email protected] Marie Bresson [email protected] Jonathan Rubinstein [email protected] Guilhem Argueyrolles [email protected]

27, rue Laffitte Tel: +33 1 40 15 24 00 75009 Paris Fax: +33 1 40 15 24 01 France www.dlapiper.com

www.gettingthedealthrough.com 75

Concerning passengers, the Transport Code defines various criminal imprisonment and a fine of up to €75,000, article L6232-8); and offences, mainly relating to: • unlawfully using cameras, without special authorisation, above any • wilfully and unnecessarily throwing things which may cause damage forbidden zone (punishable by one year’s imprisonment and a fine of to persons or things on the ground from a flying aircraft (punishable by up to €75,000, article L6232-8). two years’ imprisonment and a fine up to €3,750, article L6142-8); • unlawfully carrying, without special authorisation, things such as * The authors gratefully acknowledge the help of Fayrouze Masmi-Dazi. explosives, weapons and munitions of war (punishable by one year’s

76 Getting the Deal Through – Air Transport 2016

Germany

P Nikolai Ehlers Ehlers, Ehlers & Partner

General • the operator must intend to run his or her business for an extended period of time; 1 Which bodies regulate aviation in your country, under what • the flights ustm be carried out against remuneration; and basic laws? • the operator must intend to generate profits. The main body regulating aviation in Germany is the Federal Aviation Agency (LBA). The supervising authority for the LBA is the Federal 4 Is access to the market for the provision of air transport Ministry of Transport and Digital Infrastructure. The LBA’s headquarters services regulated and, if so, how? are in Brunswick and it has branch offices at the main German airports. Air carriers with an operating licence granted under EU law (Community Other bodies regulating aviation are the Federal Ministry of Transport air carriers) – and to a certain extent EEA carriers – are entitled to operate and Digital Infrastructure, the Deutsche Flugsicherung GmbH (ATC), the any intra-EU air services unless certain exceptions apply (eg, in case of pub- Federal Ministry of the Interior, the federal police, agencies of the federal lic service obligations in respect of scheduled air services, with respect to states and entities with delegated authority, for example, in the field of air the distribution of traffic between certain airports or in case of environmen- traffic control and slot allocation. tal problems or emergencies). Scheduled air transport services offered by Aviation in Germany is regulated by a large number of treaties, laws German air carriers that are not licensed as Community air carriers are of no and regulations (international, European and domestic), but the primary practical relevance. Scheduled air transport services offered by Community piece of German legislation is the Aviation Act of 1 August 1922, with air carriers on routes other than those within the EU are subject to route numerous amendments. licensing under German law. The carrier is entitled to the respective licence unless the licence would be inconsistent with public interests (including Regulation of aviation operations designation rights under bilateral air transport agreements). The principle 2 How is air transport regulated in terms of safety? of non-discrimination applies to charter services offered by Community air carriers on routes other than those within the EU. Air transport undertakings and certain other operators generally need to be Air carriers that are domiciled outside of the EU need a licence under licensed under EU or German law. The European Aviation Safety Agency German law for scheduled air traffic on routes to and from Germany. For (EASA) plays a continually increasing role in safety matters. The opera- charter flights they need an entry permit (which will generally only be tor is responsible for the airworthiness of the aircraft and has to answer granted on the basis of reciprocity). in case of any liability regarding third parties. Aircraft are required to be certified as airworthy and the airworthiness of aircraft needs to be checked 5 What requirements apply in the areas of financial fitness and on a regular basis. Foreign aircraft are subject to ramp checks under the EU nationality of ownership regarding control of air carriers? Safety Assessment of Foreign Aircraft programme. If necessary for safety reasons, airworthiness directives can be issued with which the operator has The financial fitness of the applicant is a prerequisite both for an operat- to comply, or aircraft can be grounded. Technical and operational require- ing licence under Community law as well as for an operating licence under ments provide for the safety of the operations and certain commercial German law. The applicant must be able to demonstrate its financial fit- operations are required to maintain a quality control system. The crew ness to the competent authorities and must comply with certain continuing must have the necessary current pilot’s licences and the ratings required notice and filing obligations in this respect. for the respective aircraft and type of flight. Unsafe airlines are banned Direct or indirect ownership of more than 50 per cent of the under- under a blacklist that is regularly updated by the European Commission taking and effective control by EU member states or their nationals are (the Commission). Certain approval requirements apply with respect general requirements for an operating licence under EU law (subject to to maintenance organisations and their personnel. Air traffic control in agreements and conventions in force for the EU). Concerning scheduled Germany is carried out mainly by the ATC organisation DFS GmbH and non-Community air services, the conditions agreed upon in the respective for certain flights by Eurocontrol on the basis of international, European bilateral air services agreement will apply. and domestic ATC regulations. 6 What procedures are there to obtain licences or other rights to 3 What safety regulation is provided for air operations that do operate particular routes? not constitute public or commercial transport and how is the Applications for operating licences and route licences under both EU and distinction made? German law have to be filed with the respective German authorities (for Air operations that do not constitute public or commercial transport scheduled services in certain cases, through diplomatic channels). The operations do not need an operating licence (with the exception of non- operator has to submit certain manuals and documents to show that the commercial air transport of passengers, mail or freight against remunera- prerequisites for the licence are met. The authorities may involve third par- tion, unless these flights are only carried out to drop parachutists or flights ties if their interests are affected by the application. As regards operating with aircraft that are certified for no more than four occupants). Such oper- licences, the authority will carry out an inspection of the applicant. ations are subject, however, to the general safety regulations concerning the aircraft, the crew and the operations. 7 What procedures are there for hearing or deciding contested The following criteria are key in determining whether operations con- applications for licences or other rights to operate particular stitute commercial operations rather than private operations: routes? • the operator must run his or her own business at his or her own com- If an application is denied or if conditions or limitations are imposed, the mercial risk; applicant can commence proceedings in the respective administrative www.gettingthedealthrough.com 77

© Law Business Research Ltd 2015 GERMANY Ehlers, Ehlers & Partner court (sometimes an administrative review may be required first). The 12 Are airfares regulated and, if so, how? administrative court will determine whether the decision of the regulatory Under Regulation (EC) No. 1008/2008 of the European Parliament and authority (denying the application or imposing conditions, etc) was legal of the Council, Community air carriers and, on the basis of reciprocity, air and whether the regulatory authority abused any discretion it may have carriers of third countries are free to set airfares for intra-Community air exercised. To the extent that a regulation does not only serve the interest of services. Published fares for services from an airport in the EU shall indi- safety, but is intended to protect the interests of competitors, such compet- cate the final price to be paid and shall include all applicable taxes, charges, itors will have the standing to challenge decisions if they are detrimentally surcharges and fees that are unavoidable and foreseeable. In addition, affected. In cases where the issue of the interpretation of EU law arises, a details must be given of the different components of the price (fares, taxes, request for a preliminary ruling by the European Court of Justice can be airport charges and other costs). Discrimination in access to fares on the made by the administrative court. basis of the user’s nationality or place of residence or on the basis of the place of establishment of the air carrier’s agent or other ticket seller within 8 Is there a declared policy on airline access or competition and, the Community is prohibited. International non-Community air transport if so, what is it? services are subject to bilateral air transport agreements to which Germany The German government is working on a national policy paper on air trans- is a party. A filing requirement for the fares may apply. port policy in order to strengthen Germany’s position in the air transport sector. Currently the government is gathering comments from stakehold- Aircraft ers. It is expected that the policy paper will stress the need to further com- 13 Who is entitled to be mentioned in the aircraft register? Do petition, to liberalise the air transport sector and to create a level playing requirements or limitations apply to the ownership of an field internationally. aircraft listed on your country’s register? 9 What requirements must a foreign air carrier satisfy in order The owner and, if different, the operator of an aircraft are recorded in the to operate to or from your country? aircraft register. Aircraft that are not registered elsewhere and that are owned by German nationals or by companies that are owned and effec- Prior to commencing operations, a foreign air carrier (from a non-EEA tively controlled by German nationals can be registered in the German country) must apply for an operating permit (in case of scheduled services) aircraft register, as well as aircraft owned by citizens or companies of other or an entry permit (for charter flights or other commercial flights). The EU member states and other countries applying EU aviation law, provided documents the applicant must submit together with the application for an the owner is residing or domiciled in Germany or has a process agent in operating permit for scheduled services are certain corporate documents, a Germany. Aircraft owned by nationals or companies from other countries flight schedule, information on the fleet, an operating permit questionnaire and based in Germany can be registered in the German aircraft register in including proof of maintenance, insurance certificates, AOC, designation cases of leases of at least six months to a German air carrier. by the state of registry, estimate of the expected volume of traffic, aviation security plan and other documents the LBA may require. The tariffs 14 Is there a register of aircraft mortgages or charges and, if so, to be applied must be submitted to another governmental agency (Federal how does it function? Office for Goods Transport). For charter flights and other commercial flights similar documents need to be submitted (with the exception of the Aircraft mortgages need to be registered in the (separate) German air- designation by the state of registry and certain documents that are specific craft mortgage register, the public record maintained pursuant to the 1948 for scheduled operations). For fifth freedom flights and operations with Geneva Convention on the International Recognition of Rights in Aircraft. third-country aircraft the applicant must provide evidence that German air Only mortgages on aircraft registered in the German Aircraft Register carriers are not prepared or in a position to conduct the respective charter can be registered in the German Aircraft Mortgage Register. In case of a flight or flights (declaration of non-availability). This requirement has been default of the mortgagor, the mortgagee can enforce its rights through a held to be inconsistent with the principle of non-discrimination under EU forced sale by public auction. A registered aircraft mortgage takes prior- law for fifth freedom charter flights carried out by EU carriers in a prelimi- ity over any subsequently registered mortgage. A buyer of the aircraft will nary ruling on this issue by the European Court of Justice. acquire ownership subject to any prior registered mortgage and free of any A single EU-wide safety authorisation requirement for foreign airlines mortgage that was not registered when the purchase became effective. The flying to, from or within the EU was introduced in 2014. The authorisation Cape Town Convention has yet not been ratified by Germany. will be issued by EASA (TCO authorisation) and will be valid throughout the whole EU. The exercise of traffic rights is subject to operational rules 15 What rights are there to detain aircraft, in respect of unpaid relating to safety, security, the protection of the environment and the allo- airport or air navigation charges, or other unpaid debts? cation of slots. According to the majority view, there are no rights to detain aircraft in respect of unpaid airport or air navigation charges, or other unpaid debts. 10 Are there specific rules in place to ensure aviation services In such cases, the respective creditor has to obtain a judgment that can be are offered to remote destinations when vital for the local enforced against the aircraft or to attach the aircraft after having obtained economy? the necessary attachment order or attachment judgment (unless prohib- Under EU law, public service obligations (including standards of continu- ited under the 1933 Rome Convention on Precautionary Arrest). Under ity, regularity, capacity and pricing) may be imposed by a member state German law, repairmen do not have a lien in respect of aircraft. However, in respect of scheduled air services to an airport serving a peripheral or both airports and the providers of air navigation services can refuse to pro- development region in its territory or on a thin route to any airport on its vide their services in case of unpaid airport or air navigation charges (eg, territory, any such route being considered vital for the economic and social refuse to give the necessary clearance for the start-up of the engine, for development of the region which the airport serves. The right to operate taxiing or take-off or to provide any other necessary assistance) which in such services may be offered by public tender on an exclusive basis in cer- most cases has proven to be an efficient way to collect such unpaid charges. tain cases and the carrier may be reimbursed for adhering to the standards required by the public service obligation. 16 Do specific rules regulate the maintenance of aircraft? The owner, lessee or – in the case of commercial air transport – the opera- 11 Are charter services specially regulated? tor is responsible for maintaining the aircraft in an airworthy condition, Under German law, charter services (other than intra-Community services in accordance with the specific rules applicable (covering the approved by Community air carriers or EEA carriers) are subject to conditions that maintenance programme, the rectification of any defect, the accomplish- the respective authorities can impose. In certain cases the authorities can ment of airworthiness directives, the airworthiness records and other prohibit charter services too. The authorities have to determine whether documentation, the qualification of the maintenance organisation and its the respective services have a significant detrimental effect on public inter- facilities and personnel, etc). The continued airworthiness of an aircraft ests, for example, the interest that scheduled services will be maintained will be documented by an Airworthiness Review Certificate. EASA has and the objective of reciprocity in international relations. It is therefore been established to ensure, inter alia, uniformity in the application of com- common practice that certain standard conditions apply that regulate the mon technical requirements and administrative procedures in the field of various categories of charter services.

78 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Ehlers, Ehlers & Partner GERMANY continuing airworthiness. EASA therefore contributes to maintaining air- 22 Are there any laws or rules specifically relating to ground craft to the same high standards throughout the EU (and beyond). handling? For certain large airports, the market for ground-handling services has Airports been opened up by EU Council Directive No. 96/67 and the respective 17 Who owns the airports? German legislation, particularly the German Regulation on Ground- handling Services. Certain charges under this regulation have been held Most large German airports are state-owned; shares of state-owned air- to be inconsistent with EU Council Directive No. 96/67 by the European ports are mostly held by the state, by the federal state where the airport is Court of Justice. The European Commission’s ‘Better Airports Package’ located and by the city served by the airport. However, some of the large aims at improving the quality and efficiency of ground handling services airports have private shareholders too, such as the Hamburg, Düsseldorf or at airports. Frankfurt airports. The shares of the Frankfurt airport company (Fraport AG) are listed in the stock markets and Lufthansa is one of its largest 23 Who provides air traffic control services? And how are they shareholders. Smaller and special airports are owned by a variety of own- regulated? ers including flying clubs and aerospace manufacturers (eg, Airbus in Hamburg-Finkenwerder). Air traffic control services in Germany are provided by DFS GmbH (owned by the Federal Republic of Germany) since the former state agency BFS 18 What system is there for the licensing of airports? was incorporated as a GmbH (limited liability corporation) under German corporate law. The main legislation regulating air traffic control services All German airports need to be licensed under the German Aviation Act. in Germany are the EU Regulations establishing the Single European This licence is required for the construction and operation of an airport as Sky; section 27(c) and (d) of the German Aviation Act; and the German well as for any significant change. For a certain category of larger airports, Regulation on ATC Services. The plan to fully privatise DFS was not car- a more comprehensive regulatory approval is required under the Aviation ried out for constitutional reasons. Act in addition to the licence. When processing the application for this Certain air traffic control services for the north-west of Germany (and licence, the authority in charge will assess the effects of the airport pro- the Benelux countries) are provided by Eurocontrol through its Upper Area ject with respect to regional planning and development objectives, envi- Control Centre in Maastricht under the Eurocontrol Convention and other ronmental protection, noise, safety, etc. The planning approval comprises Eurocontrol instruments. all other necessary licences, approvals and permits required under other regulatory laws. Liability and accidents 19 Is there a system of economic regulation of airports and, if so, 24 Are there any special rules in respect of death of, or injury to, how does it function? passengers or loss or damage to baggage or cargo in respect of Larger airports are required to charge take-off and landing fees, park- domestic carriage? ing fees and certain other fees on the basis of a fee policy that needs to The Aviation Act contains special rules in respect of death of, or injury to be approved by the respective regulatory authority. The fee policy has to passengers and loss or damage to baggage for carriage that is not covered be published. Not all fees charged by airports are subject to this approval by international treaties or European law. Domestic carriage is covered by requirement. The fee policy is also an important tool to control noise those rules only to the extent that is not provided by carriers with a licence through surcharges for noisier aircraft. International law and European under Community law as the latter carriers are subject to the European law (to a certain extent ‘soft’ law) have great influence on the economic instruments in respect of domestic carriage too. However, said rules of regulation of airports, provide for airport charges to be transparent and the Aviation Act are identical to those of the Montreal Convention and the non-discriminatory and whether airport charges may be used to finance European instruments. certain extension projects or whether certain fee structures constitute ille- Domestic carriage of cargo by carriers that do not have a licence under gal state aid. Community law is governed by the German Commercial Code, which provides for a limit of liability of 8.33 special drawing rights (SDR) per kilo- 20 Are there laws or rules restricting or qualifying access to gram. This limit does not apply in the case of wilful misconduct. airports? Under Regulation (EC) No. 1008/2008 of the European Parliament and of 25 Are there any special rules about the liability of aircraft the Council, member states may regulate without discrimination among operators for surface damage? destinations inside the EU or on grounds of nationality or identity of the air The Aviation Act provides for no-fault liability of the aircraft operator in carrier the distribution of traffic between airports that serve the same city case of surface damage resulting from an accident during the operation of or urban area and satisfy certain conditions. Operational limitations will the aircraft. Someone who uses the aircraft without the operator’s permis- apply under the licence of the respective airport. sion will be liable instead of the operator. The liability for surface damage is limited (€600,000 per person and total limits based on the maximum 21 How are slots allocated at congested airports? take-off weight of the aircraft) and will only be reduced in case of con- Air carriers need to obtain slots to take-off and land at an airport that tributory negligence of the injured party. Germany has neither ratified the has been designated as fully coordinated. The German Minister of 1952 Rome Convention relating to surface damage nor the 2009 Ground Transport appoints the coordinator who is in charge of allocating slots, Damage Convention. assisted by a coordination committee. Slots are allocated on the basis of EU Council Regulation No. 95/93, as amended by EU Council Regulation 26 What system and procedures are in place for the investigation No. 793/2004, taking into consideration a list of criteria provided for by of air accidents? said regulation, such as the ‘use it or lose it’ rule, grandfather rights or the Aircraft accidents in Germany are investigated by the Federal Bureau interests of new entrants. The slot allocation duties are to be performed of Aircraft Accidents Investigation (BFU) on the basis of the Aircraft in an equitable, non-discriminatory and transparent way. Slots can also Accidents Investigation Act (FlUUG), which conforms to Regulation (EU) be exchanged or transferred subject to certain conditions. In April 2008, No. 996/2010 of the European Parliament and of the Council and Annex the Commission indicated in a communication that it accepts exchanges 13 to the Chicago Convention. The BFU is functionally independent. of slots with monetary and other consideration as long as all administra- Investigations are carried out by an investigator or a commission with the tive requirements for the allocation of slots in the applicable legislation necessary authority, particularly regarding access to the site of the acci- are respected. The ‘Better Airports Package’ adopted by the European dent, the taking of evidence and access to documents, etc. The exclusive Commission is supposed to introduce market-based mechanisms for the purpose of the aircraft accident investigation under the FlUUG is to deter- trading of slots between airlines (‘secondary trading’) in a transparent way, mine the cause of the accident or incident, but not to determine liability. as well as measures to ensure that existing capacity is used by airlines. The aircraft accident investigation report will contain the findings of the investigation. Certain interested parties will be given the opportunity to submit comments to the draft report. Safety recommendations can be

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© Law Business Research Ltd 2015 GERMANY Ehlers, Ehlers & Partner issued by the head of the BFU. If possible, the report should be released Financial support and state aid within 12 months of the accident or incident. 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or 27 Is there a mandatory accident and incident reporting system government-controlled agencies or companies (state aid) in and, if so, how does it operate? the aviation sector? If not, do general state aid rules apply? The pilot in command, another crew member or the operator is required The basic rules for state aid control are contained in the core articles 107 to report an accident or serious incident during the flight of certain air- and 108 of the Treaty on the Functioning of the European Union (TFEU), craft immediately to the BFU if it occurred in Germany or if the aircraft namely the definition of state aid that is incompatible with the internal concerned is registered in Germany or operated by a German operator. market, as well as a list of possible exemption clauses, procedural rules and Certain aviation authorities are also required to report accidents and seri- the legal basis for council regulations in the state aid field. Sector-specific ous incidents. The report can be made using a form provided by the BFU, rules are the 2014 Guidelines on state aid to airports and airlines (replacing but the BFU may require a more comprehensive report from the operator. the 1994 Guidelines for the application of articles 92 and 93 (now articles Similar reporting obligations apply in cases of accidents during the trans- 107 and 108 of the TFEU) and the 2005 Community Guidelines on financ- port of dangerous goods and bird strike. ing of airports and start-up aid to airlines departing from regional airports). Competition law 34 What are the main principles of the state aid rules applicable 28 Do sector-specific competition rules apply to aviation? If not, to the aviation sector? do the general competition law rules apply? The TFEU pronounces the general prohibition of state aid that distorts or The domestic competition law rules that apply to the aviation sector in threatens to distort competition if it affects trade between member states. Germany are those provided for by general competition law, such as The Commission applies the Market Economy Investor Principle and its the Act against Restraints of Competition and the Law against Unfair extensions to determine if illegal state aid is involved. The TFEU also Competition. provides for certain exemptions, that is, situations in which aid is or may be considered compatible with the internal market. Regulation (EC) No. 29 Is there a sector-specific regulator or are competition rules 1008/2008 of the European Parliament and of the Council allows mem- applied by the general competition authority? ber states to compensate air carriers for adhering to the standards required The domestic regulator in charge in Germany is the regular competition by a public service obligation, and the 2014 Guidelines on state aid to air- authority, the Federal Cartel Office. ports and airlines allow certain aid under accurate conditions set by the Commission. If state aid is approved under the Guidelines on state aid for 30 How is the relevant market for the purposes of a competition rescuing and restructuring, the proportionality principle shall be observed assessment in the aviation sector defined by the competition and the aid will be subject to certain conditions, first and foremost the authorities? general rule of ‘one time, last time’. The competition authorities distinguish between cargo and passenger air 35 Are there exemptions from the state aid rules or situations in transport services. The initial definition of the relevant geographic market which they do not apply? is based on the origin and destination city pairs. Adjacent airports with overlapping catchment areas will be considered and substitutable indirect Article 107(2) and (3) of the TFEU specify a number of cases in which state flights will be taken into account. On short-haul routes, competition may aid is compatible with the internal market or could be considered accept- also result from other modes of transport, for example, high-speed trains. able, such as aid to make good the damage caused by exceptional occur- On the demand side, a distinction between time-sensitive (business) and rences or certain regional aid. Specific requirements provided for by the non-time-sensitive (leisure) passengers will be taken into consideration as 2014 Guidelines on state aid to airports and airlines apply to these excep- well. The network effects may be significant particularly in merger control tions. Aid for rescuing and restructuring firms in difficulty can be allowed cases. in accordance with the respective guidelines. The De Minimis Regulation provides for an exemption from the notification requirement in article 31 What are the main standards for assessing the competitive 108(3) of the TFEU. effect of a transaction? 36 Must clearance from the competition authorities be obtained For the competition assessment non-stop/non-stop, non-stop/indirect and before state aid may be granted? indirect/indirect overlaps of services are taken into account in order to identify competition issues with respect to city pairs. Special attention is Under Council Regulation (EC) No. 659/1999 as amended by Council given to hub-to-hub routes. Market power, market entry conditions, regula- Regulation (EU) 734/2013 any plans to grant aid must be notified to the tory factors, network issues, the collective dominance of two or more firms European Commission (unless covered by an exemption) which will take a as well as positive welfare effects in the form of efficiencies that benefit decision as to the compatibility of the aid with the common market. Under consumers will be taken into consideration, too, when assessing the com- the standstill clause, any notifiable aid must not be put into effect before petitive impact of a transaction. the Commission has taken or is deemed to have taken a decision authoris- ing it. 32 What types of remedies have been imposed to remedy concerns identified by the competition authorities? 37 If so, what are the main procedural steps to obtain clearance? The remedies applied will vary depending on the competition analysis in The notification must be made in sufficient time by the member state an individual case. The following are examples of the types of aviation- concerned and must include all necessary information to enable the specific remedies that have been imposed in merger control cases: Commission to take a decision. The notifiable aid must be notified elec- • surrender of slots; tronically on the respective notification form. If necessary, the Commission • frequency freezes or reductions; will decide to initiate formal investigation proceedings. This decision will • pricing constraints; include a preliminary assessment of the proposed measure. The member • blocked-space agreements; state concerned and interested parties may submit comments. The formal • interlining and code share obligations; investigation proceedings will be closed by means of a decision as to the • access to frequent-flyer programmes; compatibility of the notified measure with the common market. • access to computerised reservation systems (CRS) displays; • sale of certain assets; and 38 If no clearance is obtained, what procedures apply to recover • intermodal agreements. unlawfully granted state aid? In case of unlawful aid, the Commission will decide that the member state concerned must take all necessary measures to recover the aid from the recipient. The recovery shall be effected without delay and in accordance with the procedures under the national law of the member state concerned.

80 Getting the Deal Through – Air Transport 2016

Update and trends Lufthansa Following the tragic Germanwings crash lawyers acting for In order to lower its labour cost base Lufthansa is shifting a great deal plaintiffs argue that the level of damages is too low in Europe and that of its European traffic to its low-cost subsidiary Eurowings. Eurowings they are close to commencing proceedings in the United States. is licensed in Austria and will operate outside Lufthansa’s existing collective labour agreements. Lufthansa’s CEO Carsten Spohr is Airports stressing that this is necessary in order to meet the strong competition The highest German court in administrative matters has confirmed Lufthansa is facing on two fronts: the low cost front on the one hand and a judgement upholding the planning permit for the third runway at the Gulf carriers on the other. In the context of Lufthansa’s concept the Munich Airport, which is final now. However, whether and when the entire Eurowings fleet will be upgraded from Canadair Regional Jets runway will actually be built is a political question now: The City of to A320s and more aircraft and pilots will be added. But this is not all: Munich, one of the shareholders of the Munich Airport company, Lufthansa has also developed a low-cost product for long-haul flights considers itself still bound by the outcome of a 2012 referendum which operated by Sun Express, a joint venture of Lufthansa and Turkish prohibited the extension. Airlines. The long-delayed opening of the new Berlin Airport was expected While the goal to lower its cost base is the main driving force behind for 2017, but is in jeopardy again because of the insolvency of a critical these changes, Lufthansa also seems to realise that it is hard to get the construction company. kind of support from the German government and in Brussels the air transport industry in Germany and elsewhere is demanding against Air passenger tax the competition from the Gulf carriers. The argument that high-level The very controversial air passenger tax, introduced by the German jobs are at stake if the airline industry does not get more governmental government in 2011, has generated a tax income of over €1 billion in support seems not to carry enough weight in comparison with the 2014. The German air transport sector maintains that the German air interest to keep the gates open to the Gulf markets for other industries. passenger tax distorts competition, curtails the development of the air The Eurowings concept has met with great opposition from the transport sector in Germany and reduces the other tax income from 5,400 Lufthansa pilots. They went on strike 10 times in 2014 alone, the German air carriers. Therefore the German air transport sector which cost Lufthansa about €250 million. continues to demand that the German air passenger tax be abolished.

The aid to be recovered shall include interest at an appropriate rate fixed by 40 Are there mandatory insurance requirements for the the Commission. The Commission would not require recovery of the aid if operators of aircraft? this were contrary to a general principle of EU law. Regulation (EC) No. 785/2004 (as amended) establishes minimum insurance requirements for air carriers and aircraft operators in respect of Miscellaneous passengers, baggage, cargo and third parties. It requires air carriers and 39 Is there any aviation-specific passenger protection aircraft operators to be insured, covering the risks associated with aviation- legislation? specific liability (including war and terrorism risks). Regulation (EC) No. 1008/2008 of the European Parliament and of the Council requires air car- Regulation (EC) No. 261/2004 provides for compensation and assistance riers to be insured also to cover liability in case of accidents with respect to passengers in the event of denied boarding and of cancellation or long to mail. delays (without prejudice to a passenger’s rights to further compensation). New provisions in the Aviation Act provide for the mediation of consumer 41 What legal requirements are there with regard to aviation claims in Germany. Detailed provisions on the rights of consumers and security? the duties of organisers and retailers of package holidays (including the obligation to provide security by means of insurance or bank guarantee The main legal requirements concerning aviation security are provided for the event of insolvency) are provided for by section 651(a) et seq of the for in the Aviation Security Act of 2005 (as amended), which conforms German Civil Code and by a German regulation requiring the organiser or to Regulation (EC) No. 300/2008 on common rules in the field of civil the retailer to provide the consumer with certain information before the aviation security, complying in particular with the requirement to adopt a contract is concluded. This legislation is based on Council Directive No. national civil aviation security programme. The Aviation Security Act con- 90/314/EEC (currently under review). Regulation (EC) No. 1107/2006 tains detailed requirements concerning airport and air carrier security proof the Parliament and of the Council aims at improving the opportuni- grammes, airport planning, access control, screening of staff, items carried ties for air travel of disabled persons and persons with reduced mobility. and vehicles, physical security and patrols, protection of aircraft, screening Computerised reservation systems (CRS) are subject to Council Regulation of passengers and baggage, separation of passengers, cargo, courier and (EU) No. 80/2009 on a code of conduct for CRSs. Regarding airfares, see express parcels, mail, air carrier catering, stores and supplies, general avia- question 12. tion, staff recruitment and training, equipment used in support of aviation security, prohibited articles, etc. The provision of the Aviation Security Act

P Nikolai Ehlers [email protected]

Widenmayerstrasse 29 Tel: +49 89 210 969 0 80538 Munich Fax: +49 89 210 969 99 Germany www.eep-law.de

www.gettingthedealthrough.com 81

© Law Business Research Ltd 2015 GERMANY Ehlers, Ehlers & Partner allowing the shooting down of civilian aircraft being used as a weapon is • sabotage acts against airports; unenforceable because it has been held unconstitutional by the Federal • flying aircraft while intoxicated; Constitutional Court. • carrying dangerous items; Many security issues (eg, the controversial transfer of passenger data) • dangerous violation of ATC instructions; and are dealt with elsewhere, for instance, in international agreements and • certain significant violations of regulatory requirements. conventions to combat terrorism, ICAO Annex 17, EU regulations and domestic law. When assessing criminal liability in the context of accidents and incidents the prosecuting authorities normally put great emphasis on the outcome of 42 What serious crimes exist with regard to aviation? the technical investigation by the BFU. Serious crimes with regard to aviation are: • hijacking aircraft and certain other acts of dangerous interference with air traffic;

82 Getting the Deal Through – Air Transport 2016

Greece

Betty Smyrniou and Konstantina Linardou Bahas, Gramatidis & Partners

General • member states or nationals of member states own more than 50 per cent of the undertaking and effectively control it, whether directly or 1 Which bodies regulate aviation in your country, under what indirectly, through one or more intermediate undertakings; and basic laws? • it meets specific financial conditions, insurance and solvency require- Aviation in Greece is regulated by the Hellenic Civil Aviation Authority ments specified in the above-mentioned Regulation. (HCAA), which constitutes a public authority and comes under the Ministry of Transport and Communication, pursuant to section 2 of Law Charter services, in addition to the above licence, require approval from 1340/1983 and the Air Law Code, as ratified by Law 1815/1988. aviation authorities, granted on the written request of the air carrier. In the case of individual charters, a notification of the competent authorities Regulation of aviation operations before flight is required instead of the approval. 2 How is air transport regulated in terms of safety? 5 What requirements apply in the areas of financial fitness and Air transport in terms of safety is regulated by the HCAA. More specifi- nationality of ownership regarding control of air carriers? cally, the HCAA Department of Airports Security is responsible for the To obtain an operating licence, an air transport company must satisfy cer- implementation of the National Civil Aviation Security Programme and tain requirements including financial fitness and nationality of ownership the coordination of activities of all agents involved in the safety of civil requirements. aviation. In particular, for an applicant to acquire an operating licence, financial Said Department takes all necessary steps to prevent and address to fitness must be demonstrated. The applicant must be able to meet, at any illegal acts against the safety of civil aviation in Greece and Greek avia- time, its current and future obligations as well as the fixed costs and operat- tion interests abroad. Moreover, it participates in many meetings arranged ing costs involved in these activities, in accordance with its business plan, by European and international institutions with the aim of forming the for three months from entry into the market without using any income. European and international legislation on aviation security. Applicants should submit all details and information required by Annex I to EC Regulation No. 1008/2008 and the above-mentioned HCAA 3 What safety regulation is provided for air operations that do Regulation, to demonstrate their financial fitness and economic potential not constitute public or commercial transport and how is the to meet the increased demands for aviation. distinction made? Regarding nationality of ownership, the mandatory conditions for Regarding safety regulation in the aviation sector, EC Regulation No. granting an operating licence to a company are that the principal place of 216/2008 and Ministerial Decision D2/1614/2008 apply to all aircraft business is located in Greece and member states, or nationals of member except for those with historic or scientific value, private and very light air- states, or both, own more than 50 per cent of the undertaking and effec- craft, very small aircraft, helicopters and military aircraft. More specific tively control it, whether directly or indirectly through one or more inter- legislation is provided for air operations that do not constitute public or mediate undertakings, except as provided for in an agreement with a third commercial transport, such as, for example, Presidential Decree 64/2012 country to which the European Community is a party. regarding safety regulation for helicopters. 6 What procedures are there to obtain licences or other rights to 4 Is access to the market for the provision of air transport operate particular routes? services regulated and, if so, how? The legal framework for granting licences to air carriers is defined in With the goal of liberalising transport and creating an internal market EC Regulation No. 1008/2008. Additionally, HCAA Regulation No. without frontiers, market access for air transport services is regulated by D1/D/30817/2180 applies to the parts of it that are not in conflict with EC EC Regulation No. 1008/2006 and HCAA Regulation D1/D/30817/2180. Regulation No. 1008/2008. For the granting of a licence to operate par- No undertaking established in the European Union may carry passengers, ticular routes, the following certificates, approvals or licences should have mail or cargo by air for a fee unless it has been granted the appropriate been acquired previously in the following order: operating licence certifying it as a suitable, willing and capable undertak- • written approval of the base airport; ing to provide the proposed operations and comply with the relevant rules. • approval of lease of the aircraft; The operating licence is granted by the HCAA to companies that are tech- • certificate of noise (if required); nically experienced, professionally capable, financially robust and reliable • certificate of flying capability; to provide air transport services without creating undue risk to consum- • certificate of registration; ers. The basic requirements for licensing an air transport company are the • licence of the aircraft’s station; and following: • AOC. • its principal place of business is located in a member state; • it holds a valid air operator’s certificate (AOC) issued by the HCAA; The aforementioned documents, a written application, any other docu- • it has one or more aircraft at its disposal either through ownership or ments mentioned in the above EC Regulation and HCAA Regulation (which through a dry lease agreement; show the ability of the air transporter to conduct scheduled operations • its main occupation is to operate air services solely or combined with satisfactorily between each regular or provisional airport and the destina- any other commercial operation of aircraft or the repair and mainte- tion) and that the services and facilities are available and adequate must nance of the aircraft; be brought by the applicant to the HCAA (Directorate of Civil Utilisation, part D). The HCAA must notify the applicant in writing within 20 calendar www.gettingthedealthrough.com 83

© Law Business Research Ltd 2015 GREECE Bahas, Gramatidis & Partners days from the day of their submission of any missing documents, which hours. As for individual flights, an exception is made and the only require- should be presented within 30 days. The HCAA shall analyse and evaluate ment is the notice before flight to the airport authorities and the airport the aforementioned documents and reply to the applicant within 120 days involved. from the submission of all documents required for the application. 12 Are airfares regulated and, if so, how? 7 What procedures are there for hearing or deciding contested Airfares were liberalised by EC Regulation No. 1008/2008. EC air carri- applications for licences or other rights to operate particular ers have been able to determine airfares at their discretion provided that routes? they do not violate the rules of free competition. The parties to a freight The HCAA is the authority responsible for examining applications from contract are free to agree the charter rates, freight rates and fares charged companies seeking the issue of air transport licences. Should a company’s by EU air carriers. application lack any of the required documentation, a 30-day deadline is Exceptions to the freedom of fares and rates may be established by set by the HCAA to the applicant to present it. If the applicant fails to do so public service obligations, in accordance with EC Regulation No. 2408/92. without informing the HCAA, or to provide the information and the explanations requested in writing, the application is rejected and further work Aircraft ceases. The decision to deny a grant of an air transport licence must be in 13 Who is entitled to be mentioned in the aircraft register? Do writing and be fully and objectively justified by the HCAA. Re-examination requirements or limitations apply to the ownership of an of the application is allowed only after the submission of a new application aircraft listed on your country’s register? and the deposit of a new fee. Moreover, if the application is rejected by the HCAA even though the According to article 3 of the Air Law Code, all aircraft operating in Greek requested documents are complete in the applicant’s opinion, the appli- airspace must be entered in the aircraft register and hold a certificate of cant may challenge the HCAA’s decision by taking legal action before the airworthiness. administrative courts. To be included in the Greek aircraft register, an application by the aircraft owner is required. If the aircraft owner is a natural person, he or she 8 Is there a declared policy on airline access or competition and, must be a citizen of a member state of the European Economic Area. If if so, what is it? the aircraft owner is a corporate entity, it must comply with the following, depending on its legal form (article 18 of the Air Law Code): Presidential Decree 276/1991 repealed the monopolistic status of Olympic • unlimited partnerships: all partners must be natural persons with Airways in air transport in Greece and the gradual liberation of air trans- citizenship of an EEA member state; port has begun, following the common policy of the European Union. • limited partnerships: all partners must be natural persons with citizen- Thus, the EU policy of protecting and maintaining open, competitive mar- ship of an EEA member state and two-thirds of the partnership capital kets applies to aviation in Greece. In the framework of the common rules of must have been paid by natural persons having citizenship of an EEA competition, the Greek legislation has adopted the liberalisation measures member state; introduced by the European Union, for example, the liberalisation of air- • limited liability companies: the managers and three-quarters of the fares, market access and capacity. partners should have citizenship of an EEA member state and three- quarters of the capital belong to natural persons with EEA member 9 What requirements must a foreign air carrier satisfy in order state citizenship; to operate to or from your country? • sociétés anonymes: all the shares to be registered and owned in absolute EC Regulation 1008/2008 regulates aviation in the European Union and majority by natural persons with citizenship of EEA member states sets the basic requirements that an air carrier must satisfy to operate an air and two-thirds of the board members, as well as the president, CEO service between two airports in the European Union. International aviation and legal representatives to be natural persons with an EEA member in Greece is regulated by Law 3006/2002, which has ratified the Montreal state citizenship; and Convention and by air transport agreements between the European Union • cooperatives or associations: two-thirds of the members and all mem- and third countries. The abovementioned agreements provide that for the bers of the management and supervisory boards must have citizenship operation of air transport services from or to third countries an operating of EEA member states. licence from the responsible authorities (HCAA) is absolutely necessary. The prerequisites of this operating licence are provided separately in each In the case of a leased aircraft owned by non-Greek entities or natural per- agreement. However, each air carrier at its entry, stay and exit from the sons and hired by EU nationals, member states or legal persons that meet territory of a party state must comply with the legislation of its party state. the above requirements (article 18(2)), the aircraft can be used by the lessee only if it has been registered in the foreign aircraft register held by the 10 Are there specific rules in place to ensure aviation services HCAA (article 17(1)(c)). are offered to remote destinations when vital for the local For the registration in the aircraft register, a certificate of airworthi- economy? ness is required (article 20 of the Aviation Law Code) together with a tech- EC Regulation No. 1008/2008, which replaced EC Regulation No. 2408/92 nical inspection conducted by the CAA, which issues the airworthiness and has an immediate effect on Greek legislation, provides that a mem- certificate for the aircraft. ber state may impose public service obligations on scheduled airlines that For a foreign-owned aircraft to be registered in Greece, it should first serve regional, yet vital, areas to strengthen their economic development. be deleted from the prior register (article 24). Thus, the service of these areas with sufficient regular flights, satisfying fixed standards of continuity, regularity, pricing or minimum capacity 14 Is there a register of aircraft mortgages or charges and, if so, should be ensured. If no air carrier is willing to demonstrate that it is about how does it function? to commence sustainable scheduled air services on a route in accordance Pursuant to the provisions of article 17 of the Aviation Law Code, the CAA with the public service obligation that has been imposed on the route (with shall keep (in addition to the Greek aircraft register) the Greek aircraft a compromise of its commercial gain), the state may limit access to the engines’ register and the foreign aircraft register: a mortgage record, a scheduled air services on that route to only one air carrier chosen by public confiscation record, a claims record and a leases record. tender for up to four years. This period may be up to five years if the public However, in practice, only the mortgage and confiscation records are kept. service obligation is imposed on a route to an airport serving an outermost The following elements are necessary for a mortgage to be registered in region. the relevant record (article 55 of the Air Law Code and articles 1305–1307 of Civil Code): 11 Are charter services specially regulated? • an application form which can be submitted either by the creditor or Charter services are regulated by HCAA Regulation D1/D/30817/2180. It by the debtor, or by the third party consenting to the mortgage or by is obligatory that a previous written approval from aviation authorities is anyone having a legal interest; granted, under the prerequisites of said Regulation. Such approval is valid • a title of registration; and for the specific purpose, airport, date and time it has been issued for, while • two summaries of the title which should contain the names, last charter flights should be carried out without violating airport operating names, residences and professions of the creditor and the debtor,

84 Getting the Deal Through – Air Transport 2016

the date and the type of the above-mentioned title, the amount due, 18 What system is there for the licensing of airports? the repayment date of the debt, the description of the aircraft or the Ministerial Decision D3/A/20357/2002 approves the Basic Regulation engine and the process agent that has been appointed. for Airport Licensing, Functioning and Operating. Its purpose is to establish the criteria and procedures under which the Hellenic Civil Aviation The registrar of mortgages ought to record all the elements included in the Authority certifies Greek airports serving international flights. Regardless summaries and note down the date that the application form is submitted of their ownership, operation and supervision regime, the Hellenic Civil for registration (article 55 of the Air Law Code and articles 1315, 1337 of the Aviation Authority must certify that they provide the necessary level of Civil Code). From the moment of its registration in the mortgage record, safety, regularity and efficiency. the mortgage is considered valid. An airport certificate is required for all Greek airports serving flights to Moreover, the contracts for leases and subleases, which are prepared and from abroad. The airport licence applicant must submit a form to the in written form, are registered in the above-mentioned registers, as no Hellenic Civil Aviation Authority enclosing the airport manual. Before the separate record of leases is kept. The registration of a lease and sublease certificate is issued, the HCAA controls and ensures that the airport meets, contract in the above-mentioned registers is a constituent element of the inter alia, the following conditions: the applicant and staff have the nec- contract (article 80 of the Air Law Code). essary competence and experience to properly operate and maintain the airport; and an acceptable safety management system is in place. 15 What rights are there to detain aircraft, in respect of unpaid The airport certificate licensing regime obliges the airport operator airport or air navigation charges, or other unpaid debts? to ensure safe, regular and efficient operation of the airport and to allow Article 189 of the Air Law Code provides that any aircraft flying over Greek access of the authorised personnel of the CAA to the airport to conduct territory or landing at Greek airports, or accepting any kind of airport ser- security audits, inspections and tests. vices, is subject to payment of rights, dues and other charges related to The airport certification process includes: aviation, landing and using Greek airports. In case of non-payment, the • preparation and expression of interest from the applicant for the creditor can request that the airport authority prohibits the take-off of the certificate; aircraft and the provision of services to that aircraft or any other aircraft • submission of the official application including the airport manual; that the debtor owns or operates. • providing the necessary facilities, equipment, service and airport If the total debt exceeds the minimum amount determined operating procedures; by the Minister of Finance and the Minister of Transportation and • the act itself of issuance or denial of the airport certificate; and Telecommunications, the airport authority must satisfy the request of the • notification of the certified status of the airport and the publication of creditor and detain the aircraft, drafting a relevant report. related details in the Greek Aeronautical Information Manual. The airport authority detaining the aircraft must enable its take-off in the following cases: 19 Is there a system of economic regulation of airports and, if so, • if the owner or administrator of the aircraft deposits a letter of guaran- how does it function? tee from a bank operating legally in Greece, equal to the total debt; and Chapter I of Ministerial Decision D3/A/20357/2002, which approves the • if the creditor does not submit to the relevant airport authority a Basic Regulation for Airport Licensing, Functioning and Operating, and request of aircraft provisional arrest within four days of its detention. article 189 of the Air Law Code provide that the operator (the state operates all airports in Greece, with the exception of the Eleftherios Venizelos 16 Do specific rules regulate the maintenance of aircraft? International Airport) may establish charges for all airport users. The basic Aircraft maintenance in Greece is governed by EC Regulation No. principles for the determination of airport charges are the following: 2042/2003 as amended by EC Regulation No. 376/2007 and deci- • the maintenance of a high level of services to support the airport’s eco- sion of the administrator of civil aviation at the Civil Aviation Ministry nomic efficiency and competitiveness; D2/46777/13556, which adopts Annex 6, Part II of the International Civil • the existence of incentives for the efficient and economically effective Aviation Organization regarding International General Aviation – aero- use of the existing infrastructure; planes issued under the Chicago Convention. According to the above- • the prevention of abuse of dominant position; mentioned, the owner or the leaseholder, in the case of a leased aircraft, • the assurance of necessary funding to meet future demand; is responsible for the constant airworthiness of the aircraft and the assign- • the achievement of local and regional economic development objec- ment of the aircraft’s mechanical controls to an approved maintenance tives; and organisation. • the assurance of transparency and direct presentation of all necessary Moreover, the Civil Aviation Department inspects the maintenance financial assets. programme and conducts audits to verify the airworthiness of aircraft, to ensure that: 20 Are there laws or rules restricting or qualifying access to • the aircraft is maintained in a status of airworthiness; airports? • the operational equipment and emergency equipment, necessary for EC Regulation No. 1008/2008 and HCAA Regulation D1/D30817/2180 the planned flight, are in use; provide a general right of air carriers with an operating licence to provide • the airworthiness certificate of the aircraft remains active; and air transport services on domestic routes and on routes in the European • the maintenance of the aircraft is conducted according to the regula- Union. There are also restrictions to the free access in the market of air tions of civil aircraft maintenance EASA, part 145 that are in force and transport services, when the state imposes public service obligations on approved by the CAA. scheduled airlines that serve regional yet vital areas to strengthen economic development. Thus, it is possible to limit access to route to an exclu- Airports sive carrier, selected by a public tender. Moreover, the state can limit access 17 Who owns the airports? through the allocation of slots to reduce air traffic congestion and delay. All airports in Greece are owned and operated by the state, with the excep- 21 How are slots allocated at congested airports? tion of Athens International Airport. Said airport is operated by Athens International SA, which has the exclusive right and obligation to conduct The allocation of slots in Greece is regulated by EC Regulation No. the financing, construction, completion, operation, development and 541/2009, which defines slot capacity available for allocation, the process management of the airport, and the Greek state retains control of, and of allocation and monitoring of the correct use of slots. ‘Slot’ shall mean supervision over, these activities. the permission given by a coordinator to use the full range of airport infra- Moreover, pursuant to Law 3913/2011 and by virtue of a decision structure necessary to operate an air service at a coordinated airport on a of the competent Intra-Ministerial Committee of Restructuring and specific date and time for the purpose of landing or take-off as allocated by Privatization, relevant société anonyme companies (SAAAs) may be estab- a coordinator. Also slot allocation should be considered as giving air carri- lished for the administration and operation of all or certain Greek regional ers permission to access the airport facilities for landing and taking-off at airports. specific dates and times for the duration of the period for which the permission is granted. The sole person responsible for the allocation of slots shall be the coordinator. He or she shall allocate the slots in accordance with the www.gettingthedealthrough.com 85

© Law Business Research Ltd 2015 GREECE Bahas, Gramatidis & Partners provisions of the above-mentioned Regulation and shall make provision so According to article 110 of the Air Law Code, the carrier’s obligation that, in an emergency, slots can also be allocated outside office hours. for damages cannot exceed €12,000 per passenger, unless the damage is In Greece, Law 3534/2007 provides for the establishment of the due to fault of the carrier or person acting on its behalf. In this case the Authority of the Coordination of Flights for the Allocation of Slots at Greek liability becomes unlimited (article 111 of the Air Law Code). airports. In a situation where all slot requests cannot be accommodated to Regarding the transport of goods and luggage, article 107 of the Air the satisfaction of the air carriers concerned, preference shall be given to Law Code provides that the carrier must pay compensation for total or commercial air services and in particular to scheduled services and pro- partial loss, destruction, or deterioration of the transported goods and lug- grammed non-scheduled air services. In the case of competing requests gage, from the time of receipt until delivery. The compensation for damage within the same category of services, priority shall be given for year-round amounts to €6 per kilogram in case of transport of cargo and €12 per kilo- operations. Finally, slots may be: gram in the case of transport of registered luggage. • transferred by an air carrier from one route or type of service to The carrier can be exempted of liability, if it proves that all necessary another route or type of service operated by that same air carrier: measures to prevent damage were taken and that the damage is due to fault • between parent and subsidiary companies and between subsidiar- by those afflicted or their employees. ies of the same parent company, as part of the acquisition of con- Finally, if the dispatcher of cargo and registered luggage declared their trol over the capital of an air carrier; value in writing and paid an additional fare, the carrier is liable up to the • in the case of a total or partial takeover when the slots are directly value declared, unless it is proven that the declared value is higher than the related to the air carrier taken over; or actual value at the destination. • exchanged, one by one, between air carriers. 25 Are there any special rules about the liability of aircraft 22 Are there any laws or rules specifically relating to ground operators for surface damage? handling? Articles 117–120 of the Air Law Code regulate liabilities for third-party Ground handling is typically regulated by Presidential Decree 285/1998, damages on the surface, caused by aircraft in flight, under the International Law 3913/2011 (articles 23 and 24) and the Basic Regulation of Land Convention of Rome 1952. A strict liability is entirely established both to Service of the Ministry of Transportations and Communications the aircraft owner and the person that exploits it, for third-party damage on (D3/B/16067/3831, Government Gazette B’ 1138/2011). Due to the provi- the surface, caused by aircraft in flight, or by a person, or object, dropped sions of this Regulation, the ground service agents have the right to access from it (article 117). The liability of the aircraft owner and the person that freely the market services of the ground service in all the Greek airports exploits it can be raised or reduced, if the damage was caused by those which are open to trade traffic, if they are located in the European Union. injured or by persons acting for them (article 118). Some cases render it impossible to open a market in ground services, Regarding the amount of compensation, there is a relative obligation when specific constraints with regard to the available space or the capacity for the person that exploits the aircraft – this cannot exceed three times exist in the airport. In these cases, the ground service agents are selected the value of the aircraft if it was new on the day of the incident; and for through a competition process and only if they fulfil specific criteria. After the aircraft owner – it is the real value of the aircraft on the same day of that selection, they are obliged to comply with the safety and security rules, the incident. which are provided in the above-mentioned Regulation. When the demands of the third parties exceed these limits, half of The use of particular ground service agents at Greek airports depends the amount is allocated to claims, preferably, involving a person’s death or on the approval provided by the decision of the Minister of Transportation injury. The remainder is distributed, in proportion, to meet property dam- and Communications in response to requests by the relevant aeronautical age claims, and partly for not satisfied claims of death or injury (article 119, authority that precede the commencement of the activities in question. paragraph 2). The activities of the ground service agents are divided into the follow- The above-mentioned liability limits do not apply, if it is proven that ing categories: the damage is due to guile or gross negligence of the person that exploits • baggage handling; the aircraft or the owner or the persons that were at their services (article • ramp handling; 111 paragraph 5 of the Air Law Code). • fuel and oil handling; and • freight and mail handling. 26 What system and procedures are in place for the investigation of air accidents? 23 Who provides air traffic control services? And how are they Pursuant to the provisions of articles 141–150 of the Air Law Code, in the regulated? case of an aircraft’s accident in Greek territory or of a Greek aircraft’s In Greece, air traffic control services are provided by the General Air accident abroad, the Hellenic Civil Aviation Authority is responsible for Navigation’s Department, according to the provisions of Law 3913/2011. investigating accidents involving civil aircraft, after informing the respon- Especially, air traffic control services are provided: sible minister. During the preliminary investigation technical consultants, • to all flights flown according to instrument flight rules (IFR) in a mainly civil aviation pilots or engineers specialised in aeronautics, can be restricted aerial space (air corridors, terminals, etc); examined. Those having legitimate interest in the case may also be present • to all flights flown in the control zone of the airport when the necessary or represented by a special attorney. visual conditions are unavailable (Special Visual Flight Rules (VSR) When the preliminary investigation is completed, the case file and the Flights); and examiner’s report are submitted to the minister. Then the minister turns • in the whole airports’ traffic zone in the controlled aerodromes of the the file over to the Investigative Air Accident Board. The board may make country. further investigation if the evidence is judged insufficient. Based on the evidence gathered, the board completes a justified report for the causes Liability and accidents and the circumstances of the accident. Copies of the finding, which is not binding for the judge, is evaluated independently along with the rest of the 24 Are there any special rules in respect of death of, or injury to, evidence, as well as the file are submitted to the minister. passengers or loss or damage to baggage or cargo in respect of In the case of death or serious injury of a crew member, a passenger or domestic carriage? a third person on the surface, the file and the finding are transmitted to the Pursuant to article 106 of the Air Law Code, in the case of transfer of per- public prosecutor of the magistrates’ court with jurisdiction. sons, the carrier must compensate the passengers, or those who are enti- The preliminary investigation is completed within six months of the tled to damages, according to the Civil Law, for passengers’ personal injury accident, while the process of the board is completed within three months or death by incident which occurred while the passenger was in the aircraft of the receipt of the file. The minister may extend these time limits up to six or during boarding or disembarking. This is a strict liability. The carrier is months. The HCAA is not responsible for prosecuting criminal behaviour exempted from this if the death or injury occurred exclusively as a result or assigning blame. of the passenger’s health (article 106). The carrier’s liability can also be raised or reduced if the damage is exacerbated by the fault of those injured or persons acting for the carrier.

86 Getting the Deal Through – Air Transport 2016

27 Is there a mandatory accident and incident reporting system • the anti-competitive imposition of unequal conditions on trade or the and, if so, how does it operate? provision services, especially the unjustifiable refusal to sell, buy or The provisions of article 140 of the Air Law Code require that aircraft oper- provide services or other transactions; ators report all accidents and certain incidents to the nearest airport, police • the application of unequal terms to equal transactions on trade and or other authority responsible. According to Law No. 2912/2001, the Air services, in a way that restrains competition, especially the unjustifi- Safety and Accident Investigation Committee keeps a mandatory accident able refusal to sell, purchase or provide services or other transactions; or and incident reporting system. The committee is also charged with inves- • the dependence of contracts on the acceptance (by the parties tigating accidents and serious incidents regarding civil aviation aircraft. involved) of additional terms that are, by their nature or according to It is under the purview of the Ministry of Transport and Communications commercial usage, unrelated to the subject of those contracts. and it is assisted by the Air Accidents and Incidents Investigation Unit. The investigation process and techniques must comply with Annex 13 to the On the contrary, the Competition Authority may consider an anti-competi- Chicago Convention and the manuals of the International Civil Aviation tive transaction permissible, if the following thresholds are met: Organization. When the investigation is complete, the Committee’s find- • the transaction contributes to the improvement of production or distri- ings are summarised and published in two daily newspapers with the larg- bution or to economic development; est sales, issued in Athens, and in a local newspaper published in the area • the transaction ensures a benefit to consumers; covered by the court of first instance with jurisdiction for the case where • the permissible constraints of competition must be absolutely neces- the incident occurred. sary for the achievement of positive results; and • the competition in a significant part of products or services is not Competition law abolished.

28 Do sector-specific competition rules apply to aviation? If not, 32 What types of remedies have been imposed to remedy do the general competition law rules apply? concerns identified by the competition authorities? There are no sector-specific competition rules applied to aviation. In Both civil and criminal penalties can be imposed by the Competition Greece, the general provisions of Competition Law 3959/2011 as well as Authority for competition violations. Criminal penalties are imposed, EU competition rules apply to air transport. under article 44 of Law 3959/2011, on individuals responsible for compliance with the competition rules and can be differentiated regarding the 29 Is there a sector-specific regulator or are competition rules type of violation. In addition, individuals can be imprisoned for criminal applied by the general competition authority? violations, according to article 44(2) of Law 3959/2011. There is no specific competition regulator for the aviation sector. The com- To determine the amount of the civil penalties or fines, the Competition petition rules introduced by the Law 3959/2011 apply for the aviation sector Authority takes into account the duration and severity of the offence. under the supervision of the Greek Competition Authority. The Competition Authority has four main areas of regulatory authority: the discretionary Financial support and state aid authority to opine on competition issues, the authority to supervise compli- 33 Are there sector-specific rules regulating direct or indirect ance with competition rules, the authority to issue individual administrative financial support to companies by the government or acts and the authority to enforce sanctions in cases of the breaking of com- government-controlled agencies or companies (state aid) in petition rules (recommendations, fines, licence revocation). the aviation sector? If not, do general state aid rules apply? 30 How is the relevant market for the purposes of a competition In the aviation sector, general state aid rules apply according to the direct assessment in the aviation sector defined by the competition or indirect financial support to individual companies by the government authorities? or government-controlled agencies or companies. In particular and in the scope of European Union law, articles 107 and 108 of the TFEU, EC The evaluation of competition in the aviation sector is focused on the rel- Regulations No. 659/1999 as amended, 794/2004 as amended and evant geographical market and the relevant product or service market. 800/2008 and Community Guidelines C312 of 9 December 2005 on The liberalisation of the air transport services market aims to ensure a con- financing airports and start-up aid to airlines departing from regional air- stantly growing healthy competition between air transport companies, as ports are applicable. well as other means of public transportation, which is fulfilled through a At a national level, except for the abovementioned European Union variety of transportation options available at passengers’ disposal. The city texts that have direct application to the Greek legislation, Ministerial pair (origin and destination), the passenger’s demand and the transport Decisions 2007892/1982 and 2/2000 for the recovery of illegal state aid cost determine the configuration and supply of the alternative means of and Circulars 39729/2005 and 16825/2006 of the Ministry of Finance/ transportation. General Directorate for Economic Policy/ Directorate of European Union The healthy competition in Greece between aviation companies regarding the organisation and management of the state aid system elec- that operate to and from big cities, either within the country or abroad, is tronic notification system also apply. proven by the configuration of ticket pricing, in contrast with the pricing for remote and arid areas. 34 What are the main principles of the state aid rules applicable In such cases, where the state assigns the service of these areas to a to the aviation sector? single carrier after public contest, maintaining quality standards, regularity, non-discrimination and affordable prices, compliance with the established Financial support in a company is considered state aid when the following competition rules is not compulsory. criteria are met: • there is state intervention that can take various forms (eg, grants, 31 What are the main standards for assessing the competitive interest subsidies, the provision of goods or services on preferential effect of a transaction? terms, etc); • the intervention affects trade between member states; Article 1 of Law 3959/2011 prohibits all business transactions whose pur- • the intervention provides benefits to the recipient on a selective basis; pose or effect is the impeding, the constraint or the distortion of competi- and tion. The standards for assessing the competitive effect of a transaction, as • competition is or could be distorted. used by the Competition Authority, are whether through these agreements the companies lead to: Among the basic principles of the state aid rules applicable to the aviation • the direct or indirect fixing of market prices, sales prices or other trans- sector, are the following: action terms; • the proportionality principle: the aid granted must be proportional to • the restriction or the control of production, distribution, technological its objective for an exemption under article 87(3) of the EC Treaty to be development or investments; granted; • the distribution of markets or supply sources; • the principle of non-discrimination: the aid must be granted on equal terms for public and private companies; • the principle of transparency, between states and companies that are www.gettingthedealthrough.com 87

granted state aid; 38 If no clearance is obtained, what procedures apply to recover • the principle of the compliance of state aid with the European unlawfully granted state aid? Community rules on state aid; and According to the provisions of article 14 of the EU Regulation No. 659/1999, • the principle that the aid must not adversely affect the development of in the case of the Commission’s negative decisions regarding unlawful trade and the other transportation services in the EU. state aid due to incompatibility with the common market and competition rules, the Commission adopts a decision in order for the member state to 35 Are there exemptions from the state aid rules or situations in take all necessary measures to recover the aid from the beneficiary. which they do not apply? In Greece the recovery of illegal aid takes place under Ministerial The exceptions from state aid prohibition, as defined in article 107(2) and Decisions 2007892/1998 and 2/2000 of the Ministry of Finance. The (3) of the TFEU and in Regulation No. 800/2008, also apply in the aviation Commission, to implement the above-mentioned decision, composes an sector. Particularly, for air transport, member states may grant a temporary audit report, which is announced to the concerned party, with a notice to licence through an open public competition (that is considered a case of object within 30 days from notification. If this deadline is missed, or the state aid) to ensure regular provision of service to specific air routes that objections of the interested party are unjustified, the Commission issues a the market does not supply with adequate services. Another case is start-up charging practice, which is notified to the concerned party, obliging them aid, according to Community Guidelines C-312/2005. to pay the amount charged to any Tax Office within one month. State aid Start-up aid granted to airlines operating from regional airports is a is surcharged by default interest, calculated from the day of illegal aid’s way of attracting airlines to new destinations. Aid operations of this kind disposal up to its actual recovery. In Greece, according to the Authority must be justifiable, temporary and only given in the case of small airports. decision (C179/7 of 1 August 2009), the current rate of state aid recovery In addition, the aid must provide airlines with the necessary incentive to amounts to 1.77 per cent. If the state does not comply with that decision, create new routes or new schedules operated from the regional airports in the Commission or any interested state may take legal action to the ECJ. question. This state aid and encouragement of regional airport develop- A typical case is the one involving Olympic Airways and Olympic ment will help decongest air traffic in Europe and provide scope for eco- Airlines, against which the Commission proceeded to issue four convic- nomic development in the regions concerned. The Commission considers tions, describing some of the companies’ debts to third parties (govern- that start-up aid for the operation of new routes should be allowed for a ment, social security funds, airport fees, etc) as illegal state aid. maximum of three years (or five years in the case of the outermost regions), and shall oppose the rules of free competition, the principle of proportion- Miscellaneous ality and the principle of transparency. 39 Is there any aviation-specific passenger protection legislation? 36 Must clearance from the competition authorities be obtained before state aid may be granted? In Greece, within the framework of ensuring a high level of protection of passengers, the following are applied: Article 108 of the TFEU establishes the European Commission’s compe- • EC Regulation No. 261/2004 with regard to the refusal of boarding, tence at community level to constantly control the state-aid schemes and the cancellation or delay of flight; monitor the plans of member states intending to adopt or amend the exist- • Presidential Decree 339/1996, which has incorporated the European ing aid in advance. Directive 90/314 and relates to travel packages; The concerned member state cannot apply state aid measures without • EC Regulation No. 1107/2006 for disabled people; and notifying the Commission and before its final decision is reached. Any aid • EC Regulation No. 1008/2008 and Law 2251/1994 with regard to that is granted without Commission approval is automatically classified as airfares. unlawful aid. In particular, EC Regulation No. 261/2004 defines the issues of passen- 37 If so, what are the main procedural steps to obtain clearance? gers’ reimbursement and aid in the case of refusal of boarding, cancella- Any plans to grant new aid are to be notified to the Commission and should tion and delay of flight. In the case of refusal of boarding to passengers not be put into effect before the Commission has authorised it. The main due to excessive reservations or cancellation of a flight, the carrier must procedural steps that the Commission follows for the rejection or approval reimburse them according to the specific guidelines of the Regulation. In of the above-mentioned plans are divided into two stages: addition, passengers in the aforementioned cases and in the case of a considerable flight delay have the right of: The preliminary examination • reimbursement of the cost of the ticket within seven days, a return Any plans to grant new aid shall be notified to the Commission in suf- flight to the first point of the departure or re-routing to their final desti- ficient time, through the Directorate-General for Economic Policy of the nation; and Directorate of European Union, providing the Commission with all infor- • care, such as free meals and refreshments, hotel accommodation, mation necessary to reach a decision. The notification’s receipt marks the transport between the airport and place of accommodation and two two-month deadline for a Commission decision. Where the Commission free telephone calls, telex, fax messages or e-mails. finds that the notified measure does not constitute aid, it shall record that finding by way of a decision. Where the Commission finds that no doubts With regard to travel packages (Presidential Decree 339/96), the tour are raised as to compatibility with the common market and competition operator bears responsibility for the proper fulfilment of obligations which rules of a notified measure, it shall decide that the measure is compatible derive from the contract signed by the consumer and the tour operators, with the common market. Where the Commission finds that doubts are regardless of whether these obligations would be executed by a particular raised as to the compatibility with the common market and competition tour operator or the providers of other tourism services, since these ser- rules of a notified measure, it shall decide to initiate the formal investiga- vices constitute a part of the contract. With regard to the damages which tion procedure. the consumer suffers owing to non-execution or improper execution of the transportation contract, the tour operator bears the responsibility, except The formal investigation procedure if non-execution or improper execution is due to neither its fault nor that The Commission, through its decision to initiate the formal investigation of other service providers, but is the exclusive fault of the consumer or procedure, shall call upon the state concerned and upon other interested a third party, unrelated to the services offered in the contract or it is due parties to submit comments within a prescribed period which shall nor- to greater forces. In cases of non-execution or improper execution of the mally not exceed one month. After having considered the above-men- agreed transport service by a carrier, the consumer may turn against the tioned comments, within 18 months from the commencement of this tour operator, which in turn may sue the carrier in question (article 5, para- proceeding the Commission should conclude its examination by means of graph 1, Presidential Decree 339/1996 ). a final decision that rejects or approves the notified measure or imposes Also, under the aforementioned Regulation No. 1107/2006, a num- additional terms. Once the above-mentioned time limit has expired, the ber of facilities for disabled people are defined, which ensure their right to Commission shall within two months make a decision on the basis of the travel in the air without problems. The relevant regulations are specified in information available, upon request by the state concerned. detail in the chapter about the European Union.

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Finally, EC Regulation No. 1008/2008 prohibits all price discrimina- Among these practices of airport and aircraft security, the following tions based on the customer’s residence or nationality or the travel agent’s are basic: location. It also provides the following consumer rights regarding the • an identity check of passengers; prices of tickets offered or even published online. • security control of passengers either by hand or through a metal detec- There must be a clear indication of the total price. Additional charges tor portal; such as airport taxes, fuel surcharges, booking fees or credit card charges • security control of hand luggage; must be stated from the beginning in the ticket price published, rather than • controls on hold baggage; and be added at a later stage in the overall reservation price. Many airlines do • prohibiting passengers from carrying items hazardous to safety into not include various charges such as airport fees or surcharges in their final security restricted areas and the aircraft cabin. prices to make them attractive to consumers. This practice is illegal and the Commissioner for Consumer Affairs, Menglena Cuneva, has sent a strict 42 What serious crimes exist with regard to aviation? warning to companies that mislead consumers. The provisions of articles 162 to 184 of the Air Law Code contain various crimes that are either felonies or misdemeanours. These crimes include, 40 Are there mandatory insurance requirements for the among other things: operators of aircraft? • aircraft operation without the appropriate licence; Pursuant to article 137 of the Air Law Code, a carrier must have insurance • violation of pilot’s official duties and violation of air traffic regulations; coverage for damages deriving from the transportation contract of pas- • breach of obligations of the exploited aircraft; sengers, items or luggage. Civil responsibility insurance for the carrier and • aircraft’s clearance to foreigners; for third-party damage on the surface is among the obligations of the car- • omission of aircraft insurance; rier, as defined by Regulation D1/D/30817/2180 as well as a prerequisite • illegal loading or transport; for granting an operating licence. In obligatory insurance ceases, the Air • breaches of orders; Law Code states that the validity of the operating licence may be revoked. • violation of the pilot’s instructions and orders; Moreover, the aircraft operator must have insurance covered for harm or • jeopardising the safety of aircraft during the flight by passengers or damage caused by crew members of crew or others embarking the aircraft crew members; for the service of the flight, as well as for third parties on the surface. • transaction of stunt flights without the appropriate licence; Additionally, EC Regulation No. 785/2004 applies in fixing the mini- • flight in a estrictedr area; mum insurance claims of carriers and aircraft operating companies. The • omission of an accident’s announcement or provision of help insurance is defined per accident for each aircraft, proportionately with its • violations by the crew in case of emergency; MTOM(kg) classification and the risks that are covered include damage • despoilment or depredation; due to the carrier as well as risks deriving from acts of war, hijacking and • air piracy; terrorist acts. • destruction or damages to the aircraft or survival tools; • carrying weapons or explosives on the plane; 41 What legal requirements are there with regard to aviation • destruction or damages to facilities; and security? • spreading false rumours. The security of airports and air safety in general is based on EC Regulation No. 300/2008 and the National Civil Aviation Security Regulation. The * The information in this chapter was correct as of September 2014. CAA is responsible for planning, development, implementation, monitoring and maintenance of the National Civil Aviation Security Programme as well as coordinating all the activities of those involved in the safety of civil aviation. The purpose of the National Civil Aviation Security Programme is to set aviation security standards, procedures and practices for preventing and suppressing acts of unlawful interference against civil aviation that are committed on the ground and in flight.

Betty Smyrniou [email protected] Konstantina Linardou [email protected]

6 Filellinon Street Tel: +30 210 331 8170 10558 Athens Fax: +30 210 331 8171 Greece www.bahagram.com

www.gettingthedealthrough.com 89

Iceland

Erlendur Gíslason Logos Legal Services

General apply to Iceland) also make a distinction between commercial and non- commercial air transport. Under the standards developed by the former 1 Which bodies regulate aviation in your country, under what JAA (joint aviation requirements) and applied by the EASA, commercial air basic laws? transportation does not cover aerial work and corporate aviation. Aviation in Iceland is mainly regulated by the Icelandic Transport Authority (ICETRA), an independent administrative body that reports to 4 Is access to the market for the provision of air transport the Ministry of the Interior, and Isavia, a state-owned public limited com- services regulated and, if so, how? pany responsible for air traffic control services and public airport opera- Yes, pursuant to Chapter IX of the Act on Aviation, an air carrier requires tions. The ICETRA is a recently established government corporate entity an air operator’s certificate and an operating licence from the ICETRA that became operational on 1 July 2013. It combines all administrative and in order to provide commercial air transport services. With respect to oversight tasks in the field of air, land and water transport that were for- applicants falling within the scope of EC Regulation No. 1008/2008, the merly conducted by the Icelandic Civil Aviation Administration (ICAA) requirements set forth therein apply. and the Road Traffic Directorate, as well as all administrative and monitoring tasks of the Icelandic Maritime Administration and the Icelandic Road 5 What requirements apply in the areas of financial fitness and Administration. The main Icelandic legislative instruments applicable to nationality of ownership regarding control of air carriers? aviation are the Act on Aviation, No. 60 of 10 June 1998, Act No. 119 of 30 November 2012 on the establishment of the Icelandic Transport Authority Regulation (EC) No. 1008/2008 was formally implemented into Icelandic and Act No. 102 of 13 June 2006 on the establishment of Flugstodir ohf law by Icelandic Regulation No. 48/2012 of 11 January 2012, whereas the (now known as Isavia ohf). CAA (the predecessor of the ICETRA) had applied the substantive provisions of the EC Regulation since 2010 by its Decision No. 2/2010. Pursuant Regulation of aviation operations to the said regulation, the ICETRA shall assess whether an air carrier (applying for the first time for an operating licence) can meet its actual and 2 How is air transport regulated in terms of safety? potential obligations for a period of 24 months from the start of operations, In terms of safety, air transport legislation in Iceland is based on rules and its fixed and operational costs incurred by operations (as per the air developed at international level, through the Chicago Convention and carrier’s business plan) for three months from the start of operations, not the instruments based thereon, and at European level, through several EC taking into account any income from its operations. regulations and EC directives on safety issues, which are – to the extent According to the Act on Foreign Investment in Commercial necessary – implemented in national legislation in accordance with the Enterprises, the aggregate shareholding of foreign entities in an Icelandic provisions of the EEA Agreement. airline may not at any given time exceed 49 per cent, while individuals resi- The safety standards issued by the European Aviation Safety Agency dent in member states of the European Economic Area (EEA) or the Faroe (EASA), which are derived from standards developed by the former joint Islands as well as legal persons domiciled in member states of the EEA or aviation authorities (JAA), apply. The Act on Aviation contains basic pro- the Faroe Islands are exempt from this restriction. visions regarding safety, which are further implemented through several ministerial regulations and other implementing instruments. 6 What procedures are there to obtain licences or other rights to Regulation (EC) No. 216/2008 on common rules in the field of civil operate particular routes? aviation and establishing a European Aviation Safety Agency was imple- Pursuant to Regulation 904/2005 on international air traffic through mented into Icelandic law in Iceland by way of regulation in 2012 and Icelandic airspace, a permit from the ICETRA is required to operate air- Commission Regulation (EU) No. 965/2012 laying down technical require- craft to, from or through Icelandic airspace with the following exceptions: ments and administrative procedures related to air operations pursuant to • Air carriers that have a valid operating licence from an EEA member Regulation (EC) No. 216/2008 was implemented in 2014. state are in principle permitted to operate routes to, from or through Icelandic airspace without any additional permits or authorisations 3 What safety regulation is provided for air operations that do being required. Furthermore, bilateral agreements between the not constitute public or commercial transport and how is the European Union (applicable to Iceland as an EEA member state) and distinction made? non-EEA states (eg, the EU–US Open Skies Agreement) may deter- In general, the safety requirements that apply to commercial air transport mine under which conditions routes to or from such states may be apply also to private operations. Iceland has implemented Commission operated. Regulation (EC) 2042/2003 of 20 November 2003 on the continuing air- • Flight operations by air carriers wishing to operate flights to and worthiness of aircraft and aeronautical products, parts and appliances, and from destinations outside the EEA designated by the Minister of on the approval of organisations and personnel involved in these tasks. The the Interior under the applicable (bilateral) air transport agreement safety requirements laid down in this regulation apply to all aircraft regis- between Iceland and the state of that particular destination. Bilateral tered in Iceland or subject to the ICETRA’s oversight, whether constitut- air transport agreements typically focus on scheduled services and ing public or commercial transport or private non-commercial operations. consequently charter flights and ad hoc operations usually fall outside However, the Act on Aviation and several executive decrees and regula- the scope of the bilateral regime. Requests to operate charter flights tions make a distinction between commercial flights and non-commercial on particular routes are considered on a case-by-case basis within the flights. rieflyB put, commercial flights concern air transportation for remu- framework of the existing bilateral aero-political relationship. neration. The instruments adopted by the former JAA and the EASA (which

90 Getting the Deal Through – Air Transport 2016

• International obligations of Iceland in relation to other states permit 12 Are airfares regulated and, if so, how? the air operation provided the foreign operator is acknowledged and Airfares are not regulated in Iceland, either on domestic or international designated by its home state. routes.

An application to operate scheduled air services shall be filed 30 days in Aircraft advance of the start of operations. Non-scheduled commercial operations are subject to the ICETRA’s 13 Who is entitled to be mentioned in the aircraft register? Do approval except for entities listed above. Non-scheduled non-commercial requirements or limitations apply to the ownership of an operations as well as private operations are permitted except for entities aircraft listed on your country’s register? from states not signed up to the Chicago Convention, which need to apply The aircraft register is a title register such that the owner of an aircraft for the ICETRA’s permit for flying in Icelandic airspace. is primarily entitled to be mentioned in the aircraft register. The aircraft operator or holder is also mentioned as such. 7 What procedures are there for hearing or deciding contested Ownership of an aircraft on the Icelandic nationality register is applications for licences or other rights to operate particular restricted to: routes? (i) Icelandic nationals and Icelandic legal persons; and As a public administrative body, the ICETRA is subject to the Act on (ii) nationals or legal persons, citizens and domiciled in states with which Administrative Procedures No. 37/1993 and must abide by the principles Iceland has entered an agreement to this effect, provided the aircraft of full disclosure and investigation of facts, fair hearing and party contesta- is operated by an Icelandic air operator. tion, proportionality and other administrative principles laid down in said Act. The rejection by the ICETRA of an application for licences or opera- The latter applies to aircraft owned by natural and legal persons from tion of routes can be appealed to the Ministry of the Interior. An appeal within EEA member states. Aircraft owned by entities falling outside cat- against the decision of the Ministry regarding the objection can be lodged egories (i) and (ii) may be registered with the ICETRA’s permit provided with a district court. An appeal against the judgment of the district court the aircraft is subject to adequate supervision and specific reasons speak can be entered with the Supreme Court of Iceland. in favour of the registration, in particular that the aircraft is on the fleet of an Icelandic operator through a lease arrangement with the foreign owner. 8 Is there a declared policy on airline access or competition and, if so, what is it? 14 Is there a register of aircraft mortgages or charges and, if so, how does it function? There is no official policy on airline access or competition. Competition matters are assessed on a case-by-case basis by the Icelandic Competition There is a register for the recording of mortgages and other rights on air- Authority with regard to the objectives of the Icelandic Competition Act craft in Iceland (the Register of Rights in Aircraft). The Register of Rights is No. 44/2005, which is to promote effective competition and thereby maintained pursuant to the 1948 Geneva Convention on the International increase production efficiency. Recognition of Rights in Aircraft and the Icelandic Implementation Act No. 21 of 1966 creating the Register of Rights. Pursuant to the Register of 9 What requirements must a foreign air carrier satisfy in order Rights Act 1966, an aircraft can be registered with the Register of Rights if to operate to or from your country? the aircraft is registered with the Icelandic nationality register. The following rights can be registered with the Register of Rights: To operate commercial flights a foreign air carrier which has its principal • ownership rights, whether unconditional or subject to the payment of place of business in an EEA member state requires an operating licence a purchase price (purchase option) or other conditions; issued by the relevant member state. Air carriers from countries outside • mortgages and similar security interests intended to secure the pay- the EEA require a designation pursuant to the applicable bilateral agreement of debt; and ment between Iceland and that other country. • rights arising from a lease agreement for a lease term of six months or Furthermore, the foreign air carrier requires an air operator’s certifi- more. cate (AOC) to operate the flights. While operating the flights, the applicable rules in respect of insurance, airworthiness, traffic control, etc, have to be 15 What rights are there to detain aircraft, in respect of unpaid complied with. airport or air navigation charges, or other unpaid debts? 10 Are there specific rules in place to ensure aviation services According to article 136 of the Act on Aviation, the ICETRA and an opera- are offered to remote destinations when vital for the local tor of an airport or air traffic control services may prevent the departure of economy? an aircraft from an airport until charges are paid or security placed for the payment of charges with respect to the relevant aircraft or other operation The Ministry of the Interior can decide to make certain domestic routes in of the relevant owner or operator of the aircraft. Iceland subject to public service obligations for being considered as a part Further, the general Icelandic rules on pre-judgment seizure of prop- of the basic transportation net. If there are no airline companies willing to erty (Act on Pre-judgment Attachment and Injunction) apply in respect of offer their services on general market conditions on each route, the govern- unpaid charges or other debts. ment offers state aid in an open tender bid to those companies willing to By an agreement between the Icelandic and British governments in provide services. 1974, the UK CAA bills and collects air navigation charges imposed by Iceland on the North Atlantic route. Under English legislation, it is possible 11 Are charter services specially regulated? for aircraft to be detained in certain UK airports for the non-payment of Charter services are regulated as follows: these Icelandic air navigation charges. Non-commercial charter services may be operated to and from Iceland and through Icelandic airspace by operators from member states of 16 Do specific rules regulate the maintenance of aircraft? the Chicago Convention without specific permission, while operators from In Iceland, there is specific legislation regarding the maintenance of air- states not members to the Chicago Convention require a permit from the craft. The Act on Aviation, and certain regulations implementing EU regu- ICETRA which needs to be applied for at least 48 hours prior to the aircraft lations in this field pursuant to the obligations of Iceland under the EEA entering Icelandic airspace. Agreement contain provisions regarding maintenance. The standards Commercial charter services may be operated to and from Iceland imposed by EASA (which are based on standards developed by the former and through Icelandic airspace without specific permission by operators JAA) apply. The main provisions regard the responsibility of the operator that are: to develop a maintenance programme, periodical maintenance operations • issued with an operating licence in an EEA member state; and research and notification of defects, as well as licensing requirements • designated by a contracting state pursuant to a bilateral air services applicable to maintenance services providers. agreement between Iceland and a third state; and Through Regulation No. 206/2007 (as subsequently amended) • where the international obligations of Iceland in relation to other Iceland has implemented Commission Regulation (EC) No. 2042/2003 states permit the air operation provided the foreign operator is of 20 November 2003 (as subsequently amended) on the continuing acknowledged and designated by its home state. www.gettingthedealthrough.com 91

© Law Business Research Ltd 2015 ICELAND Logos Legal Services airworthiness of aircraft and aeronautical products, parts and appliances 23 Who provides air traffic control services? And how are they and on the approval of organisations and personnel involved in these tasks. regulated? The safety requirements laid down in this regulation apply to all aircraft Air traffic control services are subject to official regulation by the ICETRA registered in Iceland or subject to the ICETRA’s oversight, whether consti- and may be conducted by a public entity, institution or private company tuting public/commercial transport or private non-commercial operations. which is issued with a licence by the ICETRA for operating air traffic control services. Currently, only the state-owned public limited company Airports Isavia provides air traffic control services. Isavia is an independent govern- 17 Who owns the airports? ing body existing under its constitutive legislative Act No. 102 of 13 June 2006. The Act contains provisions with respect to the statutory tasks and All public airports in Iceland are owned by the Icelandic state. organisation of Isavia, its financial means and financial structure, and the tariffs to be charged by Isavia. In respect of the latter, reference is also 18 What system is there for the licensing of airports? made to Regulation No. 1020/2008 on a common tariff system for air navi- Pursuant to the Act on Aviation, anyone desiring to operate an airport for gation services, which implements EC Regulation on common tariffs No. public aviation shall apply for a licence from the ICETRA at least three 1794/2006 of 6 December 2006. Regulation No. 870/2007 on Air Traffic months in advance of the proposed opening of the airport. Written obser- Services in the Single European Sky (SES) implemented into Icelandic law vations from the relevant local government shall accompany the applica- the four main EC Regulations of the SES on 10 March 2004, namely, the tion. Upon satisfaction of the applicable requirements, the ICETRA shall SES Framework Regulation, the Service Provision Regulation, the Airspace issue the operating licence. There are no further provisions on the licensing Regulation and the Interoperability Regulation. The substantive provisions system. of commission regulation (EC) No. 2096/2005 of 20 December 2005 on common requirements for the provision of air navigation services apply in 19 Is there a system of economic regulation of airports and, if so, Iceland. how does it function? Apart from licensing requirements as described in the preceding paragraph, Liability and accidents which apply equally to the operation of airports and airport terminals, 24 Are there any special rules in respect of death of, or injury to, no further system of economic regulation exists specifically for airports. passengers or loss or damage to baggage or cargo in respect of Considering competition regulation as a type of economic regulation, the domestic carriage? general competition laws apply to airports but no specific competition regulations are tailored for airports only. Airports in Iceland are operated as Chapter X of the Act on Aviation contains rules with respect to air carrier two separate airport networks, one comprising only Keflavik International liability. These rules are based on and comply with the rules laid down in Airport and the other one all other airports in the country. Only Keflavik the Montreal Convention (in particular Annex 13) and apply to domestic Airport is of such size as to be subject to Directive 2009/12/EC on airport carriage. charges which provides for the transparency of charges, consultation with In principle, air carriers are liable for damage sustained in case of airport users and non-discrimination among airport users. The main prin- death or bodily injury of a passenger only upon the condition that the acci- ciple of the economic regulation of airports is that they shall be financed by dent which caused the death or injury took place on board the aircraft or way of user charges rather than tax revenue. However, the operation and in the course of any of the operations of embarking or disembarking. With maintenance of airports other than Keflavik Airport is not sustainable on respect to checked baggage, the air carrier is liable for damage sustained by user charges only, so they rely also on government contributions. an event that took place on board the aircraft or during any period within which the checked baggage was in the charge of the carrier, unless the 20 Are there laws or rules restricting or qualifying access to damage resulted from the inherent defect, quality or flaw of the baggage. airports? With respect to unchecked baggage, fault liability applies. The liability of the air carrier in respect of personal injury or death of Apart from the specific rules governing the allocation of slots and access to passengers will be limited for each passenger to a maximum of 100,000 ground handling services as described below, no further rules apply as to special drawing rights (SDR, defined by the International Monetary Fund) restricting or qualifying access to airports. Furthermore, general competi- if the air carrier proves that such damage was not due to the negligence or tion rules apply in this respect, among other things on the prohibition of other wrongful act or omission of the air carrier or its servants or agents, abuse of a dominant position. or such damage was solely due to the negligence or other wrongful act or omission of a third party. Air carriers cannot contractually limit their liabil- 21 How are slots allocated at congested airports? ity under the amount of 100,000 SDR. With respect to liability to loss or Slots are allocated in accordance with Regulation No. 1050/2008 on the damage to baggage, in principle a maximum liability of 1,000 SDR applies. Allocation of Airport Slots. According to this Regulation airports can be categorised as either coordinated airports or schedule-facilitated airports, 25 Are there any special rules about the liability of aircraft in which case a coordinator is designated for the coordination of slots allo- operators for surface damage? cation on the basis of the principles of independence, impartiality, clar- Chapter XI of the Act on Aviation provides for the liability of the aircraft ity, transparency and equality and by safeguarding the interests of new owner or the operator as the case may be for damage caused by the use of entrants. Currently, only one airport, Keflavik International Airport, is cat- the aircraft to individuals or property located outside of the aircraft, except egorised as a fully coordinated airport, with an independent Danish entity, within the limits of an airport. The owner and operator may exonerate Airport Coordination Denmark appointed as coordinator. themselves of liability if they prove that the injured caused the damage wilfully or by gross negligence. 22 Are there any laws or rules specifically relating to ground handling? 26 What system and procedures are in place for the investigation The Act on Aviation and implementing regulations govern the access to of air accidents? third-party ground handling and self-handling at airports open to commer- The investigations of civil aviation accidents and serious incidents are car- cial aviation. The rules provide certain threshold passenger volumes which, ried out by an independent seven-member committee, the Transportation if exceeded, may justify the imposition of access restrictions, mandatory Accident Investigation Committee (TAIC). Upon the receipt of a notifica- use of airport infrastructure and ownership and control requirements on tion of an accident or an investigation request, the TAIC will verify whether service providers. The rules further govern the selection of service provid- an investigation is required. The results of investigations by the AAIC are ers, invitation to tenders, restriction to certain services etc, while ensuring published in a report. Before the final report is published, parties with a respect for fair competition principles. vested interest are entitled to review the draft report and submit their comments. The legislative Act on Transport Accident Investigations was designed to attain the objectives of Annex 13 to the Chicago Convention and the investigations by the TAIC are carried out in accordance with said Annex 13.

92 Getting the Deal Through – Air Transport 2016

27 Is there a mandatory accident and incident reporting system 32 What types of remedies have been imposed to remedy and, if so, how does it operate? concerns identified by the competition authorities? The Act on Transport Accident Investigation No. 18 of 6 March 2013 places The Competition Authority may impose structural or behavioural rem- a universal reporting obligation on anyone who obtains knowledge of the edies in merger cases as well as infringement cases. Remedies in aviation occurrence of an air accident or serious incident. A specific reporting duty matters have mainly been imposed in merger cases and are generally of a is placed on the ICETRA, air traffic control and air navigation service pro- behavioural nature. Although divestiture measures have become more fre- viders, aircraft operators, holders of air operator’s certificates as well as quent, such remedies have not yet been imposed in airline matters. emergency call centres. The most common remedies in merger cases involve the requirement Notifications shall be sent to the TAIC. The TAIC decides in its discre- to appoint a board member of a target company which is not a board mem- tion whether or not to open an investigation on the basis of a notification. ber or employee of the takeover company. Another common remedy is the EC Directive 2003/42 has been implemented by Act No. 18/2013. obligation to ensure the legal and operational separation of two entities Pursuant to the Act, certain occurrences which have or may have affected that belong to the same group of companies, in other words, a prohibition flight safety and that have not resulted in an accident or serious incident of a full merger. Other remedies that have been imposed in aviation cases must be notified to the TAIC. are a prohibition of cooperation between the target company and takeover company in relation to any business agreements; a prohibition on sensitive Competition law information disclosure between the merging companies; a prohibition on price discrimination; a prohibition on the tying and bundling of products; 28 Do sector-specific competition rules apply to aviation? If not, an obligation to sell or offer a certain amount of the supply to parties out- do the general competition law rules apply? side of the merging parties group; and an obligation to purchase certain There are no official sector-specific competition rules that apply to avia- services from a party outside of the merging parties group. tion. The Icelandic Competition Act No. 44/2005 applies to aviation. Articles 10 and 12 of the Competition Act prohibit anti-competitive agree- Financial support and state aid ments and concerted practices. Article 11 of the Act prohibits a dominant undertaking from abusing its position on the relevant market. 33 Are there sector-specific rules regulating direct or indirect It should be noted that the Competition Authority is of the opinion financial support to companies by the government or that predatory pricing matters in relation to aviation should be assessed government-controlled agencies or companies (state aid) in with regards to the specific cost nature of the airline industry. Instead of the aviation sector? If not, do general state aid rules apply? applying the standard average variable cost/average total cost test, the General state aid rules under the EEA Agreement apply to aviation in Competition Authority uses a cost benchmark referred to as long-term Iceland. According to paragraph 1, article 61 of the EEA Agreement, state fully allocated cost. aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods insofar as it affects trade 29 Is there a sector-specific regulator or are competition rules between the states that are parties to the EEA Agreement is generally pro- applied by the general competition authority? hibited unless exemptions under paragraphs 2 and 3, article 61 of the EEA There is no sector-specific regulator for aviation. General competition Agreement apply. Currently the Icelandic government provides state aid to rules are applied by the Competition Authority in aviation matters. air services on six routes in Iceland that are considered of specific importance from a socio-demographic perspective. 30 How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition 34 What are the main principles of the state aid rules applicable authorities? to the aviation sector? The relevant market is generally defined on a case-by-case basis and the See question 33. Competition Authority reserves the right to define the market in each case based on the matter at hand. Markets for airlines are generally divided into 35 Are there exemptions from the state aid rules or situations in markets for international flights on the one hand and domestic flights on which they do not apply? the other hand. Each market is then divided into passenger travel and the Yes. According to paragraph 2, article 6 of the EEA Agreement, aid that has transport of goods. The passenger market is further divided into scheduled a social character; aid that is granted to individual consumers, provided flights and charter flights. that such aid is granted without discrimination; aid related to the origin of The Competition Authority has generally applied point of origin – the products concerned; and aid that is intended to make good the damage point of destination (O&D) definitions in scheduled passenger flights. The caused by natural disasters or exceptional occurrences is exempt from the Competition Authority has argued in one case that the relevant market in state aid rules. passenger flight should be defined with respect to the passengers’ needs, Furthermore, pursuant to paragraph 3, article 61 of the EEA namely, a market for business (time-sensitive) passengers on the one hand Agreement, state aid can be considered lawful if: and leisure (non-time sensitive) passengers on the other. The Competition • it is used to promote the economic development of areas where Appeal Committee rejected the approach and stated that the O&D market the standard of living is abnormally low or where there is serious definition is the appropriate market. underemployment; • it is used to promote the execution of an important project of common 31 What are the main standards for assessing the competitive European interest or to remedy a serious disturbance in the economy effect of a transaction? of an EU member state or an EFTA state; A transaction may be assessed in three separate ways depending on the • it is used to facilitate the development of certain economic activities nature of the agreement. When assessing whether a transaction falls foul or of certain economic areas, where such aid does not adversely affect of article 10 or 12 (anti-competitive actions of two or more companies) of trading conditions to an extent contrary to the common interest; or the Competition Act, the Competition Authority examines whether the • it falls within the ambit of such other categories of aid as may be speci- transaction has the object or effect of prevention, restriction or distortion fied by the EEA Joint Committee. of competition. In order to assess whether a transaction constitutes an abuse of a dom- 36 Must clearance from the competition authorities be obtained inant position under article 11 of the Competition Act, the Competition before state aid may be granted? Authority focuses on whether the transaction has or is likely to have Yes, a clearance from the EFTA Surveillance Authority must be obtained. an exclusionary effect or exploitative effect and thereby be harmful to competition. 37 If so, what are the main procedural steps to obtain clearance? When a transaction involves a merger, the Competition Authority The state must notify the EFTA Surveillance Authority (ESA) of the state investigates the transaction in order to assess whether it results in distor- aid and the authority must within two months decide whether the state tion of competition by the creation or strengthening of a dominant position aid is compatible with the EEA Agreement. If the state aid is considered or whether it significantly impedes effective competition. incompatible with the EEA Agreement, the ESA will commence a formal www.gettingthedealthrough.com 93

© Law Business Research Ltd 2015 ICELAND Logos Legal Services investigation procedure and ask third parties to comment on the matter A dispute resolution committee with respect to complaints by passen- before a final decision is reached. The ESA decision may be appealed to gers is in place based on an agreement between the association of compa- the EFTA Court. nies in the travel and tourism sector and the consumer organisation. The committee can order the payment of damages and its decisions are binding 38 If no clearance is obtained, what procedures apply to recover unless the relevant travel organisation refers the matter to the courts within unlawfully granted state aid? four weeks of the decision. This complaint mechanism aims to provide If no clearance is obtained the party which received the aid must repay passengers with a low-threshold, quick and inexpensive manner through the aid with interest. The Icelandic state is responsible for recovering the which to resolve their conflicts with airlines and other travel organisations. state aid from the recipient within four months from the date of the ESA decision ordering the repayment of the aid. The rate of interest is fixed by 40 Are there mandatory insurance requirements for the the ESA. operators of aircraft? Yes, EC Regulation 785/2004, which applies in Iceland pursuant to imple- Miscellaneous menting Regulation No. 78/2006 on mandatory aviation insurance, establishes minimum insurance requirements for air carriers and aircraft 39 Is there any aviation-specific passenger protection operators in respect of passengers, baggage, cargo and third parties. legislation? The following aviation-specific legislation on passenger protection is in 41 What legal requirements are there with regard to aviation force in Iceland: security? Regulation No. 1048/2012, replacing Regulation No. 574/2005, imple- Regulation No. 985/2011 on Aviation Security provides for rules regarding mented into Icelandic law the provisions of EC Regulation 261/2004 on security officers, airport operators’ aviation security programmes, airport compensation and assistance to passengers in the event of denied board- access restrictions and other security measures for airports, passenger and ing and of cancellation or long delay of flights. Thus, the same regime baggage control and the control of goods and airport service providers. The applies in this respect in Iceland as in European Union member states. Aviation Security Regulation implements into Icelandic law a number of Flights from, to or passing through an airport within the EEA operated EU regulations on aviation security as a part of Iceland’s obligations under by airlines with a licence granted by an EEA member state are subject to the EEA Agreement. Regulation No. 475/2008 on the rights of disabled persons and individuals with reduced mobility travelling by air, which implemented into Icelandic 42 What serious crimes exist with regard to aviation? law the provisions of EC Regulation 1107/2006. Act No. 80 of 19 May 1994 on Package Tours provides protection to The Act on Aviation and implementation regulations primarily contain passengers purchasing a package comprised of at least two of the three provisions that declare non-compliance with or breach of certain rules as components of travel, accommodation and another service constitut- regulatory offences, but not as criminal offences. ing a significant part of the tour. This Act implemented the provisions On the other hand, the Icelandic General Penal Code identifies spe- of EEC Directive No. 90/314/EBE and provides consumer protection to cific criminal offences related to aviation such as terrorism by way of passengers in case of cancellation and changes to package tours by either hijacking aircraft and the causing of aircraft accidents. the passenger or tour operator. Further, Act No. 73 of 24 May 2005 on the In addition to these provisions, Iceland is also party to certain inter- Organisation of the Travel Industry provides for the obligation of compre- national instruments providing for rules against the hijacking of aircraft, hensive tour operators as a condition to their operating licence to place a offences and crimes committed on board an aircraft and sabotage, such as guarantee for the repayment of passengers’ instalments on package tours the Tokyo Convention 1963, the Hague Convention 1970 and the Montreal and repatriation from abroad in case of the tour operator’s bankruptcy or Convention 1971. Offences against the Montreal Convention are subject to cessation of operations. prosecution in Iceland regardless of where they were committed.

Erlendur Gíslason [email protected]

Efstaleiti 5 Tel: +354 5 400 300 103 Reykjavik Fax: +354 5 400 301 Iceland www.logos.is

94 Getting the Deal Through – Air Transport 2016

India

Amir Singh Pasrich and Mohana Malhotra I.L.A. Pasrich & Company

General civil aviation infrastructure. The AAI is charged with construction, modification and management of passenger terminals, development and man- 1 Which bodies regulate aviation in your country, under what agement of cargo terminals, development and maintenance of apron basic laws? infrastructure including runways, taxiways etc, provisions for communi- The principal regulatory body in the field of civil aviation in India is the cation, navigation and surveillance, air traffic control, passenger facilities Directorate General of Civil Aviation (DGCA), headed by the director gen- and related amenities. eral under the supervision of the Ministry of Civil Aviation (MoCA). The The AERA was constituted under the Airports Economic Regulatory DGCA is responsible for air transport regulation, air safety and airworthi- Authority of India Act, 2008 and established in 2009. The AERA deter- ness. It issues licences to aerodromes and air carriers; monitors licensing mines tariffs for aeronautical services, the amount of development fees in of personnel (cabin crew, flight despatchers, aircraft maintenance engi- respect of major airports and passenger service fees, and monitors stand- neers, etc); renders advice to the government of India on civil aviation; ards relating to quality, continuity and reliability of services, etc. Since its investigates air accidents or incidents; and provides technical assistance establishment in 2009, the AERA has decided tariffs, charges for aeronau- to the courts and committees of inquiry. The DGCA coordinates regula- tical services and it has issued appropriate directions under the Act from tory functions with the International Civil Aviation Organization (ICAO). It time to time. oversees regulation of air transport, airworthiness, air safety, training and licensing, aerodrome standards, flight training, flight inspection, research Regulation of aviation operations and development. The DGCA issues civil aviation requirements (CARs), air transport 2 How is air transport regulated in terms of safety? advisory circulars (ATACs), aeronautical information circulars (AICs) and The DGCA is responsible for the safety regulation of civil aviation and is other circulars, which are binding upon carriers and in some cases other recognised in the Aircraft Act, 1934 and the Aircraft Rules, 1937 as the rel- parties involved (such as travel agents) under the provisions of rule 133A of evant regulatory authority for civil aviation. Section 4A of the Aircraft Act, the Aircraft Rules, 1937 (updated in 2015). There are 14 regional airworthi- 1934 empowers the director general or any other officer specially empow- ness offices and five regional air safety offices of the DGCA. ered to perform safety oversight functions in respect of matters specified in Air transport is a federal subject falling within the legislative compe- the Act or the rules. The director general also has special powers pursuant tence of India’s parliament. The following laws regulate aviation: to section 5A of the Act to issue directions. • The Aircraft Act, 1934. The DGCA prescribes the necessary safety requirements and is • The Aircraft Rules, 1937 (as amended from time to time and recently responsible for their oversight. The Aircraft Rules, 1937 in Part III deal with updated in 2015). general safety conditions, and under rule 133A, the director general can • The Indian Aircraft Rules, 1920 (Part IX). issue CARs relating to the operation, use, possession, maintenance or navi- • The Aircraft (Public Health) Rules, 1954 along with its notifications. gation of aircraft flying in or over India or of aircraft registered in India. • The International Airports Authority Act, 1971. The DGCA is also responsible for the safety oversight of foreign aircraft • The Carriage by Air Act, 1972. operating in India. The Aircraft Rules, 1937 contain conditions for opera- • The Tokyo Convention Act, 1975. tors, crews, airworthiness, flights, etc. The DGCA does not grant a carrier • The Anti-Hijacking Act, 1982 and the Anti-Hijacking (Amendment) an operating permit (licence) until the carrier or the operator has had its Act, 1994. safety manual approved with appropriate trained personnel available for • The National Airports Authority Act, 1985. safety purposes and an appropriate insurance policy in place for crew pas- • The Suppression of Unlawful Acts against Safety of Civil Aviation Act, sengers and property to be transported by air. Each aircraft receives a cer- 1982 along with the Suppression of Unlawful Acts against Safety of tificate of airworthiness and the DGCA regulates air safety in conjunction Civil Aviation (Amendment) Act, 1994. with the BCAS. Although the two regulators function under the MoCA, • The Airports Authority of India Act, 1994. they are housed at different locations in Delhi and operate fairly indepen- • The Air Corporations (Transfer of Undertakings and Repeal) Act, dently. India follows the ICAO guidelines on safety and has a state safety 1994. programme under the Chicago Convention (ICAO 9859). The safety rules • The Aircraft (Demolition of Obstructions caused by Buildings and have been increasingly revised and refined from 1980 and are now updated Trees etc.) Rules, 1994. quite regularly. In 2011, the Aircraft Rules were amended to ensure that all • The Aircraft (Carriage of Dangerous Goods) Rules, 2003. aircraft operators and aerodrome operators, air traffic service providers, • The Airports Economic Regulatory Authority of India Act, 2008. the personnel involved in training, aviation personnel, etc were mandatorily required to establish and maintain a safety management system (SMS) Matters pertaining to aviation fall under the MoCA and its connected and SMS manual. The rules now provide for the DGCA’s officers to moni- organisations: the DGCA, the Bureau of Civil Aviation Security (BCAS), the tor and inspect not only the SMS but also its implementation. An old 1996 Airports Authority of India (AAI) and the Airports Economic Regulatory CAR (revised 17 April 2009) on ‘Flight Safety Awareness and Accident/ Authority of India (AERA), etc. The MoCA is the ministry responsible for Incident Prevention Programme’ requires all operators to prepare a flight policy formulation and regulation of civil aviation in India. The BCAS regu- safety manual and obtain approval from the director of air safety of the lates civil aviation security in India. It lays down standards and measures DGCA. This CAR further provides that the flight safety manual shall for security of civil flights at international and domestic airports. clearly lay down the company’s safety policies, flight safety awareness and Under the Airports Authority of India Act, 1994, the AAI was entrusted accident/incident prevention programme. Appendix A to the CAR con- with the responsibility of creating, upgrading, maintaining and managing tains ‘Guidance Material for Preparation of Flight Safety Manual’. www.gettingthedealthrough.com 95

The ICAO places responsibility on contracting states to formulate a XIIIA and with the safety requirements in respect of air routes, aircraft and state safety programme (SSP). The SSP is an integrated set of regulations air crew, as may be specified by the director general’. and activities aimed at improving safety. The SSP provides the means to As the above rules are made equally applicable, it would appear that no combine prescriptive and performance-based approaches to safety rule- distinction is made between scheduled and non-scheduled operations or making, policy development and oversight by the DGCA in India. To man- in aerial work in respect of applicable safety regulations. age the SSP and ensure implementation of requirements of SMSs, an SSP/ There is a CAR dated 25 November 2014 on Issue/Validation and SMS Division was established in the DGCA in 2010. After introduction of Suspension of Certificate of Airworthiness which talks about issuance of a the SSP and SMS, a regulatory framework was also established. The Safety Certificate of Airworthiness and contains reference to the application pro- Management Systems are established in terms of rule 29D of the Aircraft cedure, documentation and other conditions. Rules, 1937. The DGCA, through relevant officers, carries out station facility 4 Is access to the market for the provision of air transport inspection, cockpit en-route inspection, cabin inspection, air operator pilot services regulated and, if so, how? proficiency checks, main base inspection and air operator ramp inspection Access to the market for the provision of air transport services is regulated apart from checking the airworthiness of each aircraft. under Parts XIIB and XIII of the Aircraft Rules, 1937. Rule 134 introduces Various statutory/regulatory provisions starting with the Aircraft Act requirements for an operating permit to be issued by the central govern- 1934, the Aircraft Rules 1937, CARs, ATACs, and AICs, etc (explained ment in relation to a scheduled air transport service from, to, in, or across above) stipulate the safety and operational requirements applicable to dif- India. Similarly, under rule 134A(4), an application may be made for grant ferent types of operations. CARs are divided into 11 sections. Section 5 of of a non-scheduled operator’s permit valid for up to two years. Access to the CARs issued by the DGCA deals with air safety. the Indian market may be considered regulated by reference to the pro- All flight crew members are now required to necessarily undergo peri- visions of Schedule XI to the Aircraft Rules setting out the requirements odic refresher and flight safety courses as stipulated. Aircraft operators for a scheduled air transport service. These provisions confer some degree are required to have trained and qualified, DGCA-approved, load and trim of discretion on the DGCA, but also contain rigorous disclosure require- sheet personnel at each airport for the type of aircraft operated. All crew ments that must be met in terms of experience and financial resources, members, cargo handling personnel, etc must be DGCA-approved before satisfactory equipment, organisational strength, staffing arrangements, they receive BCAS airport entry permits. If the operator intends to employ general competence based on track record, ability to meet liabilities aris- foreign pilots and engineers for a specified period, specific approval of the ing from loss or damage to persons or property, existing/potential need or competent authority must be obtained. demand for the relevant service, adequacy of other air transport services Every operator must have a chief of flight safety responsible to the and the possibility of wasteful duplication or material diversion of traffic, DGCA for ensuring compliance of all operational requirements and capital expenditure involved and objections or representations made (by responsible for implementation of policies laid down in the flight safety any person including a third party). The permit follows a recommendation manuals and all other safety measures required by law. All operators are from the civil aviation authority of the international airline’s home coun- also required to have a safety audit team. The DGCA has safety audit teams try recommending the operator in accordance with a bilateral agreement to carry out safety audits of the operators periodically. In April 2015, India’s between the two governments. Clarifications are provided by this author- aviation rating was elevated back to ICAO Category 1 standards. India took ity. The bilateral agreement (or air services agreement) finds reference in corrective action to address the FAA’s concerns after the US regulator’s rule 134(2). The permit itself does not generally contain conditions, but the downgrade that had cited a lack of safety oversight. India had an excellent application sets out the operator’s intended frequencies. prior record with an uninterrupted Category 1 rating from 1997 to 2014. The DGCA issued a CAR on 1 March 1994 (updated several times The AAI also has its own Directorate of Aviation Safety. This up to 9 April 2014), which sets out minimum requirements for grant of Directorate monitors aerodrome operations, air navigation operations. It a permit to operate a scheduled passenger air transport service. The rel- detects safety hazards and points them out to the concerned directorates; evant CAR specifies minimum capitalisation, requirement of a minimum assists all the directorates with establishing their SMS; coordinates safety number of aircraft, maintenance engineers, flight crew and cabin require- matters of the AAI with the DGCA, ICAO and other stakeholders; pro- ments, etc and also refers to various permissions needed before an initial motes the safety of aerodromes and air navigation services; presents safety no-objection certificate is granted, actions to be completed before acquisi- reports to the Safety Review Board (SRB) and implements the directions tion of aircraft and airworthiness requirements, operational requirements, given by it and effective safety programmes. etc. As per the applicable CAR, full equity as required shall be available with the company even at the initial stage so as to demonstrate commit- 3 What safety regulation is provided for air operations that do ment. The CAR expressly provides that the requirements are complemen- not constitute public or commercial transport and how is the tary to ICAO Annex 6 Part I. As explained in response to question 5, foreign distinction made? equity participation of up to 49 per cent is now (as of March 2013) permit- Rule 134A of the Aircraft Rules, 1937 provides that for operation of an air ted to be made by a foreign airline. There is also a circular AIC No. 12/2013 transport service (other than a scheduled air transport service) by an air dated 1 October 2013 which in paragraph 3 lists the policy for foreign direct transport undertaking located outside India, special permission from the investment (FDI) in the civil aviation sector. central government is required. For operation of an air transport service It is possible to see some of the CAR requirements and the discretion (other than a scheduled air transport service) by an Indian air transport granted to the DGCA with regard to the above-mentioned factors operat- undertaking, a non-scheduled operator’s permit granted by the central ing as non-tariff barriers that could limit access to the market, but India government is required. A non-scheduled operator’s permit is valid for two has not made specific World Trade Organization commitments for air years and may be renewed for another two years upon application. Rule transport services and there are no known reports of limited access due to 3(49) defines a ‘scheduled air transport service’ as an ‘air transport service these factors or discriminatory treatment arising from the exercise of dis- undertaken between the same two or more places and operated accord- cretion in this regard even though some measure of protectionism is inher- ing to a published timetable or with flights so regular or frequent that they ent in the continued state ownership of the national carrier. The nationality constitute a recognisably systematic series, each flight being open to use by requirements mentioned in reply to question 5 are also relevant here, as members of the public’. This definition results in the distinction between is our response to question 7 covering the procedures for deciding appli- scheduled and non-scheduled air transport. cations (these applications are now decided by a standing committee on Rule 134B of the Aircraft Rules, 1937 provides that no operator shall behalf of the DGCA). undertake any aerial work unless it holds a valid non-scheduled operator’s permit granted under sub-rule (2) of rule 134A. Aerial work is defined in 5 What requirements apply in the areas of financial fitness and rule 3(1A) as ‘any aircraft operation undertaken for an industrial or com- nationality of ownership regarding control of air carriers? mercial purpose or any other remunerative purpose, but does not include As per the updated CAR dated 1 March 1994 (revised 9 April 2014) under operation of an air transport service’. section 3 – Air Transport (series ‘C’, part II), a scheduled operator’s permit Rule 140 lists the minimum requirements to be complied with by oper- can be granted only to: ators and provides that ‘all aircraft owners and operators shall comply with • a citizen of India; or the engineering, inspection and manual requirements contained in Part • a company or a body corporate provided that: • it is registered and has its principal place of business within India;

96 Getting the Deal Through – Air Transport 2016

• its chairman and at least two-thirds of its directors are citizens of with the requirements stipulated for grant of the permit sought by the India; and applicant. • its substantial ownership and effective control are vested in Indian nationals. The committee can seek clarifications and it only recommends (to the MoCA) grant of the initial NOC after security clearance, if the require- Schedule XI to the Aircraft Rules, 1937 pertains to ‘Grant of permission to ments are satisfied and subject to such ‘conditions as may be considered operate schedule air transport services’. A similar CAR dated 1 June 2010 necessary’. contains the requirements for a non-scheduled operator’s permit. It is possible for all government decisions to be challenged under the Clause 3.2 of the CAR dated 1 March 1994 provides that before the Constitution of India (article 226), but it is more common for the MoCA to scheduled operator’s permit is issued, an applicant shall have paid-up capi- arrive at conditions that are realistic and achievable, to discuss the same tal of: with the affected party and then direct compliance accordingly. It is not • 500 million rupees for airlines operating aircraft with a take-off mass common for a third party to claim that a proposed licence may be preju- equal to or exceeding 40,000 kilograms (up to five aircraft) and for dicial to its existing routes or interests and the regulator would probably each addition of up to five aircraft, additional equity investment of 200 only allow such objections to be tested by market forces. There have been million rupees; and instances in the past of the government exercising protectionism with • 200 million rupees for airlines operating aircraft with a take-off mass regard to the national carrier and its routes, but the tendency has generally not exceeding 40,000 kilograms (up to five aircraft) and for each addi- been resisted in the past few years by successive governments and this has tion of up to five aircraft, additional equity investment of 100 million noticeably affected the financial health of the carrier. Where permissions rupees. are withheld due to a particular route, the route dispersal guidelines discussed in question 10 are relevant. Scheduled and non-scheduled air transport undertakings are each now allowed FDI of up to 49 per cent by foreign airlines; the March 2013 policy 8 Is there a declared policy on airline access or competition and, further enables the government to approve up to 74 per cent FDI in non- if so, what is it? scheduled airlines and chartered airlines. There is no newly declared policy on airline access or competition but the The DGCA has regulated non-scheduled air transport services through Government of India has pursued an open skies policy since 1994 when another CAR dated 1 June 2010 (revised on 17 November 2014) setting out the two state airlines were required to compete against private carriers. the same minimum nationality requirements as listed above. Guidelines Air India and Indian Airlines have merged since then. Various bilateral in the (2014 amended) CAR permit FDI of up to 74 per cent (as against air service agreements were signed pursuant to the open skies policy and the current 49 per cent for scheduled operators), but again the majority of although some air service agreements still have seat restrictions, the gen- directors on the board are required to be Indian citizens and if the positions eral trend has been to allow greater access from points in India to points of chairman, managing director, CEO or CFO are held by foreign nationals in the other country. India’s improved pro-competition and free market they must be security vetted. access approach has also been bolstered by the new Competition Act that came into force in 2009 and a Competition Commission that has been 6 What procedures are there to obtain licences or other rights to increasingly active since then. Despite the anti-merger provisions of the operate particular routes? Competition Act, 2002 there have been several permitted or accepted air- As explained above, rules 134 and 134A of the Aircraft Rules, 1937 provide line mergers such as the Jet-Sahara acquisition and, earlier on, Kingfisher’s that permission of the central government is required to operate scheduled acquisition of Deccan Airways. No particular control has been exercised and non-scheduled air transport services. Rule 134B also requires a valid by the DGCA or the Competition Commission of India in relation to for- non-scheduled operator’s permit for any aerial work. Application fees are eign mergers such as Delta’s acquisition of North-West, the Air France and prescribed for scheduled and non-scheduled operator permits. For this pur- KLM integration and various code-share agreements but the DGCA has pose, the DGCA has issued various CARs. CAR dated 1 March 1994 under been involved in various airline company investments in 2013–14 such as section 3 – Air Transport’ series ‘C’ part II lists out the minimum require- the Etihad acquisition of equity in Jet Airways. Despite many liberalisations ments for grant of a permit to operate scheduled passenger air transport in the law, rule 135(4) still empowers the DGCA to issue directions to an air services. CAR dated 1 June 2010 under section 3 – Air Transport, series ‘C’ transport undertaking that ‘has established excessive or predatory tariff’ part III, issue II lists the minimum requirements for grant of a permit to or ‘has indulged in oligopolistic practice’. Some vestiges of the old protec- operate non-scheduled air transport services. CAR dated 26 August 1997 tionist provisions survive such as AIC No. 8 of 2009, section 3.6 of which (revised 21 May 2009) under section 3 – Air Transport, series ‘C’ part IV provides that operational plans submitted by the national carrier would be lists the minimum requirements for grant of a permit and operation of air considered before allocation of traffic rights to other eligible applicants. It transport cargo services. The relevant operating permits are the equivalent is usually hoped that undue priority will not be given to the national carrier, of the air operator’s certificate referred to in ICAO documents. but this laudable objective is not necessarily uniformly applied. That the As per CAP 3100 - Air Operator Certification Manual – the application government is perfectly conscious of the need for free access to the market for the issue of an Air Operator’s Permit (AOP) must be prepared in accord- can be seen from a June 2012 report of the committee constituted to report ance with requirements prescribed in Appendix A of the manual. The on the competitive framework for civil aviation in India. The committee manual has separate chapters on ‘Initial Issue of an AOP’ and ‘Certification has recommended: Process’. The regulator may consider abandoning preferential international 7 What procedures are there for hearing or deciding contested route assignments to the national carrier, which would allow private applications for licences or other rights to operate particular carriers to compete with Air India. Taking away Air India’s right to routes? priority route assignments will also help other Indian international The above-mentioned CARs set out the procedure for applications for the carriers expand service to additional international destinations, lead- necessary permits. As per CAP 3100, for applicants of scheduled air opera- ing to expansion in the range of choices for consumers. tors permit, the permission is subject to obtaining in-principle approval from the MoCA. The applications are now reviewed by a standing commit- The committee did accept an expert researcher’s report, but interestingly tee constituted by the MoCA. This committee recommends grant of the was itself composed mostly of government of India officers. It was chaired initial National Occupational Classification (NOC), but it may also direct by the secretary of the MoCA with the DGCA as a member. compliance with any unfulfilled requirements. The committee examines various aspects, such as the: 9 What requirements must a foreign air carrier satisfy in order to operate to or from your country? need for the services in the proposed area keeping in view the existing The DGCA has issued AIC No. 8 dated 1 December 2010 on the services, airport capacity and constraints at the main base and night ‘Requirements for grant of Operating Authorisation to Foreign Airlines stop station, suitability of the proposed aircraft type keeping in view under Bilateral Air Services Agreements’. The AIC requires designation of the airworthiness and safety regulations, satisfactory plan of human the foreign airline subject to the following conditions: resource development, maintenance arrangements and compliance www.gettingthedealthrough.com 97

• substantial ownership and effective control of that airline vested in the In a recent development, IndiGo, Jet Airways, SpiceJet and GoAir asked party designating the airline or its nationals; the aviation regulator to deny an airline permit to Tata SIA Airlines Ltd, a • the designated airline must be qualified to meet conditions prescribed joint venture between the Tata group and Singapore Airlines, complaining under the laws and regulations normally applied to operation of inter- that substantive and effective control (of Tata SIA) did not vest in Indian national air services; hands, that the mandate of Schedule XI to the Aircraft Rules, 1937 (related • the party designating the airline must maintain and administer the to minimum airworthiness, operations and other general requirements for standards with regard to safety and aviation security set forth in the grant of air permit) was not being satisfied and that foreign airlines are not bilateral air services agreement; and entitled to use sensitive airports. The DGCA eventually approved the Tata • all the other provisions of the bilateral air services must be complied SIA proposal after imposing conditions and upon being satisfied that con- with along with other requirements set out in the AIC. trol remains with the Tatas and that other requirements were met.

The airline must be officially designated by the government of the country 10 Are there specific rules in place to ensure aviation services of the airline by reference to the air services agreement. Information and are offered to remote destinations when vital for the local documentation must be provided as per appendices A and B of the AIC. economy? The operating permit can be revoked or suspended, or made subject to With a view to achieving better regulation of air transport services and tak- additional conditions or limitations, in any case where: ing into account the need for air transport services for different regions in • substantial ownership and effective control of the designated airline the country, the central government through the DGCA on 1 March 1994 are not vested in the government of the country designating the airline laid down the Route Dispersal Guidelines. According to these Guidelines, or its nationals; all routes were divided into three categories. Route categorisation was • the designated airline has failed to comply with Indian laws and regu- based on traditionally surplus generating routes (Category I), loss-making lations; and routes (Category II) and the remaining routes (Category III). Category • standards in relation to safety or aviation security are not being prop- IIA was mandated as a category within Category II, to cover specifically erly maintained and administered by the country of the airline. the states of Jammu and Kashmir, Andaman and Nicobar Islands, and the Lakshadweep Islands. For code-share arrangements that are recognised in the relevant air service It was obligatory on the part of scheduled airlines to deploy a specified agreement, one of the designated airlines performs the agreed services as percentage of capacity on Category II, IIA and III routes, as per the follow- the operating carrier while the other airline operates as a marketing air- ing requirements: line. Pursuant to the AIC, both the operating and marketing airlines are • on Category II routes, at least 10 per cent of the capacity deployed on required to obtain operating authorisation under the respective air ser- Category I routes; vice agreement and furnish the necessary information and documents. • on Category IIA routes, at least 10 per cent of the capacity deployed on Marketing airlines are only exempt from providing the operational manual, Category II routes; and fleet details and approval of the security programme. The AIC also calls • on Category III routes, at least 50 per cent of the capacity deployed on for coordination of slots, filing of schedules and general compliance with Category I routes. the conditions of the operating authorisation and the bilateral agreement terms. The information sought under appendix A and the documents The guidelines have been strengthened by the inclusion of 10 to 12 air- required under appendix B are similar to those required by the earlier AIC ports from Category III into Category I making Category II, IIA and III No. 3 of 2000. requirements more rigorous. To ensure that aviation services are offered The airline must be formally designated through diplomatic chan- to remote destinations, an Essential Air Services Fund (EASF) has been nels or by the aeronautical authorities of its home country (ie, the country recommended to be created by the MoCA with the help of the central gov- whose government has signed the relevant air services agreement with the ernment, state governments and airport operators for the development of government of India). Several documents must be filed before an operat- low-cost airports and to improve connectivity to remote cities of the coun- ing permit can be granted and these include incorporation documents of try. The funds collected can be used on routes that are commercially unvi- the airline, details of the board of directors, copies of other air operator able for three to five years until they reach a level of maturity. To improve certificates or equivalent document issued by the state where the opera- air connectivity to remote areas of India new initiatives are required such tor is already operating, an operations manual approved by the competent as the underwriting of some seats by state governments, a reduction in authorities of the home state, details of the fleet, a detailed security pro- sales tax on air transport finance, and routes that have a passenger load gramme, undertaking by the CEO of the airline that Indian laws, rules, reg- factor of less than 50 per cent and certain others should be given assistance ulations and requirements shall be complied with by the designated airline, from the EASF. etc. Once the application is submitted, approval of the competent authori- The MoCA recently issued an Order No. AV1303/34/2012-DT dated 4 ties involved in respect of airline level requirements must be submitted March 2014, which provides for the requirements under which services are (this includes any arrangements with the Airports Authority, Reserve Bank to be operated in different regions and remote areas of the country. As per of India permissions, etc). The slots are coordinated with the AAI and the the said order it is mandatory for all scheduled airlines to operate at least schedule is to be filed at least 30 days prior to commencement of services. six per cent of their total domestic operating capacity to airports in remote After the above process is completed, a carrier engaged in interna- or strategic areas. Further, for all airports in the north-eastern Region tional operations must ensure that all its employees comply with the laws, (with the exception of Guwahati and Bagdogra), all airports in the Jammu regulations and procedures pertinent to performance of their duties. The and Kashmir region (with the exception of Jammu) and all airports in the operator must have all necessary operational documents and publications Andaman and Nicobar islands and Lakshadweep, it is now mandatory for such as an operations manual, CARs, AICs, NOTAMs, aeronautical maps all India-based airlines to assign at least one per cent of their total operat- and charts, operational circulars, etc, for reference. The carrier is required ing capacity for compliance with the MoCA Order. For the purpose of this to have and must follow an approved flight safety manual laying down calculation and for internal connectivity, operations to and from Guwahati, the policies and procedures for ensuring safety of operations, computer- Bagdogra, Jammu and within Andaman & Nicobar are also to be included. ised systems to analyse digital flight data recorders, solid state flight data On 25 August 2014, MoCA issued a ‘Draft for Discussion on Revised recorders to record data of all flights to determine exceedance in flight Policy on Regional and Remote Area Air Connectivity’ inviting comments operations and to ensure compliance with operating procedures, investiga- by 4 September 2014, but it appears that a new policy has not yet been tion of occurrences, implementation of safety recommendations, accident notified. or incident prevention programmes and safety enhancement measures as per the requirements laid down by the DGCA and the BCAS. 11 Are charter services specially regulated? Scheduled operations must be conducted from approved operational A CAR dated 12 October 2010 (revised on 9 May 2013) issued under sec- bases and the operator is required to ensure that operations are conducted tion 3 – Air Transport, series ‘F’, part I deals with the issue of non-sched- only to and from airports suitable for the type of aircraft. The carrier must uled flight clearances to foreign-registered aircraft including cargo flights, ensure that all security requirements stipulated by the BCAS are strictly inclusive tour package (ITP) charter flights, aerial photography and geo- followed in respect of their operations at all airports. physical survey and cloud seeding operations, non-scheduled flights by Indian operators to foreign destinations and for becoming enrolled as a

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© Law Business Research Ltd 2015 I.L.A. Pasrich & Company INDIA flight clearance agency. The CAR contains general requirements, mini- 14 Is there a register of aircraft mortgages or charges and, if so, mum notice periods, application procedures, special permissions (long how does it function? stays for aircraft, non-ICAO member flights, air-dropping and non-ITP In the CAR dated 10 September 1998 (revised 27 April 2015) under section passenger flights), provisions for changes in flight clearance, landing at 2 – Airworthiness, series ‘F’ part I, on ‘Procedures Relating to Registration/ defence airfields, etc. ITP charter flights remain under regulations covered Deregistration of Aircraft’, it is provided that an owner or his authorised by an earlier AIC (No. 12 of 2008 dated 6 October 2008). The Circular sets representative may apply for registration of an aircraft in the prescribed out the application procedure, the conditions for operation of ITP charter form complete with the requiste documents at least five working days for flights (including a provision for the DGCA to impose additional condi- aircraft on outright purchase and 10 working days for aircraft on lease, tions) and the applicable ‘safeguards and penalties’ (ie, applicable penal- before the expected date of issue of Certificate of Registration. Where the ties for non-compliance). aircraft has been mortgaged or hypothecated, the owner or operator shall submit his consent for the same and the papers to this effect. Such a mort- 12 Are airfares regulated and, if so, how? gage or hypothecation shall be endorsed on the certificate of registration. Rule 135 of the Aircraft Rules, 1937 deals with tariffs and how they are Part V of the Companies Act, 1956 deals with registration of charges. to be first established and then published. Under sub-rule (3), every air The Companies Act, 1956 has been repealed by the Companies Act, 2013 transport undertaking is required to maintain all records relating to tar- and the corresponding sections are shown in brackets. Section 124 [sec- iffs established by it in such manner and form as specified by the DGCA. tion 2(16) of the 2013 Act] thereof provides that ‘charge’ includes a mort- Although filing and approval of tariffs is no longer required, the DGCA has gage. Section 125 [section 77 of the 2013 Act] provides that every company the power under sub-rule (4) to intervene in cases where it is satisfied that is required to file the particulars of the charge created, together with the the operator has established excessive or predatory tariffs or has indulged instrument by which the charge is created, with the registrar for registra- in an oligopolistic practice. Rule 135 has been amended by the DGCA by tion as required by the Companies Act within 30 days of the date of creation Circular No. 9/9/2009-IR dated 11 May 2009 referring to a MoCA Gazette of the said charge. Section 130 [section 81 of the 2013 Act] provides that the notification dated 16 April 2009. This notification provides that all airlines registrar shall keep a register containing the particulars of all the charges operating scheduled air services (domestic as well as international) to, requiring registration under this part. The particulars of the charges to be from or within India are required to advise passengers of the consolidated entered are the date of creation of the charge, the date of the acquisition fare as well as a complete breakdown thereof and also show the fare on the of the property (where the charge exists on property acquired by the com- ticket in the same manner. Another example of the government’s regula- pany), the amount secured by the charge, the short particulars of the prop- tion of tariffs can be seen in a Circular dated 17 December 2012, whereby it erty charged and the persons entitled to the charge. Section 136 [section was directed that ‘all Indian and foreign air carriers’ were prohibited from 85 of the 2013 Act] of the Companies Act, 1956 requires every company to charging transaction fees in violation of rule 135 of the Aircraft Rules as keep a copy of every instrument creating a charge requiring registration at part of the airfare. This Circular became part of the subject of a Supreme its registered office. Section 142 [section 86 of the 2013 Act] provides for Court of India case and resulted in directions of the Supreme Court in penalties, in case of default. February 2013. This eventually resulted in a further government order dated 16 September 2013, which provides that the terms ‘Commission’, 15 What rights are there to detain aircraft, in respect of unpaid ‘Transaction Fees’, ‘Convenience Fees’ or any other similar terms are to be airport or air navigation charges, or other unpaid debts? treated as ‘Commission’ mentioned in rule 135 of Aircraft Rules, 1937 as a Section 8 of the Aircraft Act, 1934 empowers an authority authorised by the part of the tariff to be determined by the airlines and that no amount will be central government to detain any aircraft if in its opinion: collected from the consumers over and above this. • the flight of such aircraft would endanger persons in the aircraft or any other persons or property; or Aircraft • such detention is necessary to secure compliance with the provisions 13 Who is entitled to be mentioned in the aircraft register? Do of the Aircraft Act or the rules applicable to such aircraft, or such requirements or limitations apply to the ownership of an detention is necessary to prevent a contravention of section 5(2h) (the aircraft listed on your country’s register? air routes by which and, the conditions under which aircraft may enter or leave India, or may fly over India, and the places at which the air- The owner of the aircraft, and in the case of leased aircraft the lessor and craft shall land) and section 5(2i) (the prohibition of flight by aircraft the lessee are to be mentioned in the aircraft register. over any specified area, either absolutely or at specified times, or sub- Rule 30(2) of the Aircraft Rules, 1937 provides that an aircraft may be ject to specified conditions and exceptions) of the Aircraft Act, or to registered in India in either of the following two categories: implement any order made by any court. • Category A, where the aircraft is wholly-owned either: (i) by citizens of India; With respect to unpaid debts, in the CAR dated 10 September 1998 (ii) by a company or corporation registered and having its principal (revised 27 April 2015) under section 2 – Airworthiness, series ‘F’ part I, on place of business within India; ‘Procedures Relating to Registration/Deregistration of Aircraft’, it is pro- (iii) by the central government or any state government or any com- vided in clause 9.1 that the registration of an aircraft registered in India pany or corporation owned or controlled by either of the said gov- may be cancelled at any time by the DGCA, if it is satisfied that: ernments; or • such registration is not in conformity with paragraph 3.1 of this CAR; (iv) by a company or corporation registered elsewhere than in India, • the registration has been obtained by furnishing false information; provided that such company or corporation has given the said air- • the aircraft could more suitably be registered in another country; craft on lease to any person mentioned in (i), (ii) or (iii) above; or • the aircraft has been destroyed or permanently withdrawn from use; • Category B, where the aircraft is wholly owned either: • it is inexpedient in the public interest that the aircraft should remain • by persons resident in or carrying on business in India; who are registered in India; not citizens of India, or • the lease in respect of the aircraft registered pursuant to paragraph • by a company or corporation registered elsewhere than in India 3.1(iv) has expired, has been terminated by mutual agreement between and carrying on business in India. the lessor and the lessee, or has been otherwise terminated in accordance with the provisions of the lease agreement; or Rule 30(3) provides that aircraft for which the conditions mentioned in • the certificate of airworthiness in respect of the aircraft expired five or rule 30(2) are not satisfied or that are already validly registered in another more years ago. country shall not be registered in India. Rule 30(4) provides that where the usual station of an aircraft and its ordinary area of operation are not situ- In the case of a dispute regarding termination of an aircraft lease agree- ated in India, the central government may refuse an application for regis- ment, action can be taken under section 8(1)(b) of the Aircraft Act, 1934 for tration of the aircraft in India or to permit an aircraft to remain registered detention to implement a court order. in India, if, in its opinion, the aircraft could more suitably be registered in another country. Rule 33 provides for change in the ownership of a registered aircraft.

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16 Do specific rules regulate the maintenance of aircraft? part as may be prescribed by the DGCA, shall be made available by the Rule 60(2)(a) of the Aircraft Rules, 1937 provides that the DGCA may licensee to all units of the aerodrome. Rule 82 deals with inspection and specify standards and conditions for the maintenance of an aircraft, air- rule 83 talks about the conditions governing the grant of a licence. As per craft component and item of equipment. As per rule 60(1), maintenance rule 84, an aerodrome licence may be granted for a period not exceeding refers to performance of all work necessary for the purpose of ensuring two years and the same time frame is prescribed for renewals. Rule 86 sets that the aircraft is airworthy and safe including servicing of the aircraft and out tariff charges and rule 87 provides for the fee that is chargeable for the all modifications, repairs, replacements, overhauls, processes, treatment, grant of a licence for an aerodrome. The licensee is entitled to collect pas- tests, operations and inspection of the aircraft, aircraft components and senger service fees under rule 88 and user development fees under rule 89. items of equipment required for that purpose. Maintenance is also defined As per rule 88A, the central government, or any authority designated by it, in rule 3(33C) of the Aircraft Rules, 1937. may levy and collect aviation security fees on embarking passengers, cargo Part XIIIA of the Aircraft Rules, 1937 deals with engineering, inspec- transported out of an airport, departing general aviation private aircraft, tion and manual requirements for owners or operators. As per rule 154, (i) chartered aircraft operations and any other dedicated civil aviation opera- ‘engineering and inspection’ refers to the performance of all work necessary tions. The relevant fees are treated as a tariff for aeronautical services regu- for ensuring airworthiness and safety of the aircraft, including overhaul, lated as explained in reply to question 19. An Aerodrome Advisory Circular maintenance, modification, repair, replacement, manufacture, assembly, dated 14 September 2006 contains ‘Guidelines for preparation and main- testing, treatment, inspection and certification; and (ii) ‘manual’ refers to tenance of an Aerodrome Manual’. ‘operators’ maintenance system manual’ or ‘operators’ quality control manual’ or any other manual covering such requirements as the case may be. 19 Is there a system of economic regulation of airports and, if so, Specific CARs regarding maintenance of aircraft regulate the mini- how does it function? mum maintenance standards, periodic inspections, etc. Series D under Since 2010 there has been an independent economic regulator – the section 2 (Airworthiness) deals with aircraft maintenance programmes. Airports Economic Regulatory Authority of India (AERA) – to regulate Rule 133B specifies the conditions for approval of an organisation. tariffs and other charges for ‘aeronautical services’ and to monitor performance standards at airports. The Airports Economic Regulatory Authority Airports of India Act, 2008 applies to all airports where air transport services are operated or are intended to be operated (other than airports and airfields 17 Who owns the airports? belonging to or subject to the control of the armed forces or paramili- The International Airports Authority of India (IAAI) was constituted as an tary forces of the Union of India), all private and leased airports, all civil autonomous body under the International Airports Authority Act, 1971. enclaves and all major airports [section 1(3)]. As per section 2(i) of the Act, Four international airports – Delhi, Bombay, Madras and Calcutta – were ‘major airport’ means any airport that has, or is designated to have, annual transferred to the IAAI with effect from 1 April 1972; later Trivandrum passenger traffic in excess of 1.5 million or such other airport as the central Airport was also transferred to IAAI. In 1985, a similar need was felt for government may, by notification, specify as such. Section 13 of the Act sets domestic airports and air traffic control and related services. Consequently, out the functions of AERA in respect of major airports: the National Airports Authority (NAA) was constituted under the National • to determine the tariff for aeronautical services; Airports Authority Act, 1985. Eventually IAAI and NAA came to be merged • to determine the amount of the development fees; into what is called the Airports Authority of India (AAI). • to determine the amount of the passenger service fees; The AAI is a body corporate having perpetual succession and a com- • to monitor set performance standards relating to quality, continuity mon seal, with the power, to acquire, hold and dispose of property. The AAI and reliability of service as specified by the central government or an may lease the premises of an airport. authority specified by it; About one-third of India’s domestic air travel originates from either • to call for such information as may be necessary to determine tariff; Delhi or Mumbai, and these cities account for more than 60 per cent of and international traffic to and from India. As a result, in 2006 the AAI entered • to perform such other functions relating to tariffs as may be necessary. into two separate operation, management and development agreements for Delhi and Mumbai respectively. Both airports were expanded and mod- As per section 13(2), tariffs are to be determined once every five years but a ernised and are now managed by Delhi International Airport Pvt Limited set tariff may be amended during this period if ‘considered appropriate and (DIAL) and Mumbai International Airport Pvt Limited (MIAL), but the AAI in public interest’. Section 17 provides for the establishment and powers of retains a 26 per cent stake in both these companies which are financed and the AERA Appellate Tribunal to adjudicate disputes and dispose of appeals largely run by private interests (ie, the GMR group for Delhi and the GVK (the Tribunal was also established in early 2010). group for Mumbai). 20 Are there laws or rules restricting or qualifying access to 18 What system is there for the licensing of airports? airports? ‘Airport’ is defined in section 2(b) of the Airports Authority of India Act, Rule 11 of the Aircraft Rules, 1937 deals with aerodromes and provides that 1994 and includes ‘aerodrome’ as defined in section 2(2) of the Aircraft Act, no person other than the occupant of an aircraft manoeuvring in accord- 1934. Part XI of the Aircraft Rules, 1937 deals with aerodromes and ‘aero- ance with the rules may enter upon the landing area of an approved or drome’ is also defined in rule 3(2) as any definite or limited ground or water licensed aerodrome without the consent of the person in charge of the area intended to be used, either wholly or in part, for the landing or depar- aerodrome (the definition of ‘airport’ includes ‘aerodrome’ – see question ture of aircraft, and includes all buildings, sheds, vessels, piers and other 18). Rule 90 provides that for entry to a government aerodrome or a pub- structures thereon or appertaining thereto. Rule 78 provides for licensing of lic aerodrome or a part of such aerodrome or any other area in such aero- aerodromes. An aerodrome should have a licence approved by the DGCA drome, an admission ticket issued by the aerodrome operator or an entry for such purpose. Sub-rule (2) provides that an aerodrome shall be licensed pass issued by the commissioner of security (civil aviation) or any person by the central government for public and private use. Rule 79 provides that authorised by the central government is mandatory. Sub-rule (2) provides a licence for an aerodrome shall be granted only to: (i) a citizen of India; that no person, without permission in writing, by general or special order, (ii) a company or body corporate, provided that (a) it is registered and has of the central government or any authorised officer, shall (i) enter or its principal place of business in India and (b) it meets the equity holding remain or cause any other person to enter or remain in the movement area; criteria specified by the central government from time to time; (iii) the cen- (ii) leave or throw or cause to be thrown any animal, bird or property or tral government or a state government or any company or any corporation object of any nature whatsoever in the movement area; (iii) permit any ani- owned or controlled by either of them; or (iv) a society registered under the mal under his possession or control or otherwise to stray in the movement Societies Registration Act, 1860. Rule 80 provides that an application for area; and (iv) operate any vehicle in the movement area. As per rule 3(35A), the grant of a licence for an aerodrome shall be made to the DGCA along ‘movement area’ means the area of an aerodrome intended for the surface with the aerodrome manual (rule 81 provides that an aerodrome manual movement of an aircraft and includes the manoeuvring area and aprons. shall be maintained by a licensee in the specified form and it shall contain Sub-rule (3) provides that sub-rules (1) and (2) shall not apply to any pas- the particulars as per sub-rule (2) thereof) in the form as specified by the senger embarking, disembarking or in transit who holds an air ticket or any DGCA. Additional information or evidence may also be requested by the person who is engaged on regular duty at an aerodrome and holds a photo DGCA. Rule 81(3) provides that a copy of the aerodrome manual, or such identity card issued by the commissioner of security (civil aviation) or any

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© Law Business Research Ltd 2015 I.L.A. Pasrich & Company INDIA person authorised by the central government in this behalf. Rule 90(4) Regulation 3 provides that: provides that the officer-in-charge of an aerodrome or any person authorised by the central government in this behalf, may if he is satisfied that it is […] a carrier may carry out ground handling services at metropoli- necessary or expedient so to do for maintaining proper order or decorum, tan airports, that is, the airports located at Delhi, Mumbai, Chennai, refuse admission to any person into the terminal building or the movement Kolkata, Bangalore and Hyderabad, by engaging the services of (i) area or require any person in such building or such area to leave the same. AAI or its Joint Venture Company (ii) subsidiary companies of the national carrier ie, NACIL or its joint ventures specialised in ground 21 How are slots allocated at congested airports? handling services […] (iii) any other ground handling service provider As per guidelines (revised in May 2013) issued by the MoCA, a ‘slot’ is a selected through competitive bidding […] permission given by a coordinator for a planned operation to use the full range of airport infrastructure necessary to arrive or depart at a Level 3 air- These regulations were similar to DGCA Circular No. 7/2007 dated 28 port on a specific date and time. For the purpose of slot allocation, airports September 2007 whose implementation date had been extended from are generally categorised according to the following levels of congestion: time to time. The Ground Handling Regulations, 2007 supersede the • Level 1: where the capacity of the airport infrastructure is generally Airports Authority of India (General Management, Entry for Ground adequate to meet the demands of airport users at all times. Handling Services) Regulations, 2000. • Level 2: where there is potential for congestion during some periods of The BCAS has also issued an AVSEC Order No. 3/2009 dated 21 August the day, week, or season which can be resolved by voluntary coopera- 2009 which specifically provides that the aircraft operators’ aviation secu- tion between airlines. rity functions listed therein ‘cannot be mixed-up with other ground han- • Level 3: where capacity is constrained due to lack of sufficient dling activities, and these AVSEC functions shall not be allowed by an infrastructure. aircraft operator/airport operator to be undertaken by a Ground Handling Agency’. For Level 3 airports, a coordinator is required to be designated to allocate slots to airlines and other aircraft operators using or planning to use the 23 Who provides air traffic control services? And how are they airport as a means of managing available capacity. regulated? Guidelines have been formulated to reflect international best practice ‘Air traffic service’ as per rule 3(1F) of the Aircraft Rules, 1937 means the and are in accordance with the recommendations of the IATA Worldwide flight information service, alerting service and air traffic advisory service Slot Guidelines (WSG), as amended twice yearly. The WSG is the globally and air traffic control service (area control service, approach control ser- adopted standard for efficient slot allocation to optimise the use of severely vice or aerodrome control service). Part XII of the Rules deals with person- congested airport infrastructure worldwide. nel of air traffic services. Rule 93(1) provides that only a person who holds a After leasing of the Delhi and Mumbai Airports to JVCs, and after valid air traffic controller’s licence shall engage himself in the provision of setting up greenfield airports at Hyderabad and Bangalore, the MoCA air traffic services in the Indian airspace or in any airspace outside Indian reviewed the slots allocation procedure and issued a revised procedure territory for which India has, pursuant to any international arrangement, in its letter dated 10 September, 2007. This revised procedure allows the undertaken to provide air traffic services. Rule 93(2) provides that the des- respective JV airport operators of Delhi and Mumbai to allocate slots for ignated military authority may provide air traffic services to civil aircraft in these airports, and the AAI for the other airports. Later, the revised pro- the airspace designated for military use in accordance with the provisions cedures were also made applicable to the other JVCs at Hyderabad and of Part XII and subject to the conditions specified by the DGCA. Rule 95 Bangalore. provides for grant or renewal of the licences by the licensing authority and Part VII of the Guidelines deals with slot allocation. the conditions for grant or renewal of the same. The DGCA’s CAR dated Airlines are required to file their slot requests for initial allocation 8 January 2010 (revised 28 November 2013) regulates airspace and air traf- twice each year for the summer and winter seasons with the concerned fic management. coordinator for Level 3 airports. The actual deadline for filing this request ‘Air traffic service’ is also defined in section 2(d) of the Airports is as provided for in the IATA WSG Coordination Calendar. As per CAR Authority of India Act, 1994. Section 22 provides that the AAI may, with dated 1 March 1994, the operator shall inform about slots and/or flights not the previous approval of the central government, charge fees or rent for operated for a considerable period to DGCA and all concerned agencies providing air traffic services, etc. There is a Manual of Air Traffic Services every month. issued by the AAI. Chapter 4 of this manual deals with air traffic services – its objectives, divisions, classification of airspaces, responsibility for 22 Are there any laws or rules specifically relating to ground control etc. A Department of Air Traffic Management under the AAI pro- handling? vides air traffic services to all arriving, departing and en-route aircraft over Rule 92 of the Aircraft Rules, 1937 provides that the licensee of an aero- Indian airspace, establishment of air routes, realignment of existing air drome shall, while providing ground handling service by itself, ensure a routes in consultation with user airlines and international bodies such as competitive environment by allowing the airline operator at the airport to IATA and ICAO, manpower planning, training and award of ratings to air engage, without any restriction, any ground handling service provider per- traffic controllers in conformity with ICAO rules and regulations as stated mitted by the central government to provide such service. This is subject to in Annex I (Personnel Licensing), monitoring of standards and procedures a proviso that such ground handling service provider should have security in the provision of Air Traffic Services, etc. clearance. The AAI has drawn up plans to upgrade the air traffic management The DGCA has issued AIC No. 03/2010 dated 2 June 2010 on the infrastructure in the country both in terms of conditional provision of subject of ‘Grant of permission for providing ground handling services automation systems and upgrading of technology which also involves at airports other than those belonging to the Airports Authority of India’. shifting from ground-based navigation to satellite-based navigation. A Clause 1.2 of this Circular provides that in accordance with the Airports Communication, Navigation and Surveillance (CNS) Planning Department Authority of India (General Management, Entry for Ground Handling deals with planning, procurement and commissioning of CNS facilities Services) Regulations, 2000, an airline operator may carry out ground and support systems for air navigation. handling services at an airport either by itself or engage the services of any of the following, namely: AAI; Air India or Indian Airlines and (any other Liability and accidents agency licensed by the AAI. Other circulars and guidelines such as the 24 Are there any special rules in respect of death of, or injury to, BCAS Circular No. 4/2007 dated 19 February 2007 contain instructions on passengers or loss or damage to baggage or cargo in respect of deployment of ground handling agencies at the airports. domestic carriage? On 18 October 2007, the AAI in exercise of powers conferred by sec- The relevant statute is the Carriage by Air Act 1972, which in section 8 tion 42 of the Airports Authority of India Act, 1994 formulated the Airports provides that the central government may, by notification in the Official Authority of India (General Management, Entry for Ground Handling Gazette, apply the rules contained in the Schedules to the Act to such car- Services) Regulations, 2007. Regulation 1.3 thereof provides that these riage by air, not being international carriage by air, subject to such excep- Regulations shall apply to all airports and civil enclaves managed by the tions, adaptations and modifications as may be specified. Pursuant to the AAI, provided that they shall not apply to defence installations or enclaves said section, the DGCA has issued an AIC No. 2/2014 dated 14 February or enclosures at the airports. www.gettingthedealthrough.com 101

2014 which refers to a MoCA notification of 17 January 2014 which pro- inquiry officer has the same powers as an aircraft accident investigator vides that from the date of publication of the notification, the provisions under rule 10 and shall make a report to the DGCA in the format specified of Section 5 of the 1972 Act and the rules contained in the Third Schedule by the Bureau. The DGCA shall forward the report of the inquiry officer to to the said Act shall apply to all carriage by air not being international car- the central government. riage subject to the exceptions, adaptations and modifications mentioned The AAI has also issued an Air Traffic Management Circular No. 7 therein. For death or bodily injury, the carrier’s liability cannot exceed of 2012 on the ‘Procedure to be followed in case of Aircraft Accidents & 2 million rupees. In case of damage caused by delay, liability is limited Serious Incidents’. Clause 2.1 provides that the purpose of this circular is to to 80,000 rupees. For the carriage of baggage, the liability for destruc- make air traffic controllers (ATCOs) aware of the procedure to be followed tion, loss, damage or delay is limited to 20,000 rupees unless there is a in case of aircraft accidents and serious incidents and the role of ATCOs special declaration, and for the carriage of cargo, the liability for destruc- regarding notification of accidents and serious incidents along with pres- tion, loss, damage or delay is limited to 350 rupees per kg unless there is ervation of air traffic service records. a special declaration in place. As per rule 24, these units of liability are to The DGCA CARs under section 5 – Air Safety on the ‘Procedure for be reviewed by the central government every five years based on the cost Accident/ Incident Investigation’ (series ‘C’) and ‘Prevention of Accidents/ inflation index as notified by the central government. In the 2011 case of Incidents’ (series ‘F’) cover aircraft accidents and serious incidents and S Abdul Salam v Union of India (the Union), the Union (and their insurers) also provide for investigation, protection and preservation of the wreckage, attempted to pay about 3 million rupees instead of at least 100,000 SDR to evidence, disclosure of records, and submission of reports. the family of a passenger killed in an Air India crash at Mangalore. This was considered discriminatory by the Kerala High Court, which directed full 27 Is there a mandatory accident and incident reporting system payment as per the Montreal Convention. The judgment is under appeal and, if so, how does it operate? in the Supreme Court of India. The 1972 Act, as amended, enforces the Rule 18 of the Aircraft (Investigation of Accidents and Incidents) Rules, 1929 Warsaw Convention (first schedule), the 1955 Hague Protocol (sec- 2012 provides for a mandatory incident reporting system. This system ond schedule) and the 1999 Montreal Convention (third schedule), which requires the relevant persons, service providers and stakeholders to notify practically applies for most international carriage by air. Chapter III deals all accidents and incidents by the most suitable and quickest means to the with the liability of a carrier. As per rule 17 of all three schedules, a carrier Aircraft Accident Investigation Bureau and the DGCA, but in any case not is liable for damage sustained in the event of the death or wounding of a later than 24 hours. The DGCA is required to notify the Bureau immedi- passenger or any other bodily injury suffered by a passenger, if the accident ately about the accidents and incidents containing information as specified that caused the damage sustained took place on board the aircraft or in the in rule 4(2). Rule 18(4) outlines who is included in ‘relevant persons, service course of any of the operations of embarking or disembarking. Rule 18 (of providers and stakeholders’. There is also a voluntary incident reporting all three schedules) provides that a carrier is liable for damage sustained in system provided for in rule 19. the event of the destruction or loss of, or of damage to, any registered luggage/baggage or any goods/cargo, if the occurrence that caused the dam- Competition law age sustained took place during the carriage by air. Unfortunately there is still a dearth of case law on the clear exception in rule 17 limiting remedies 28 Do sector-specific competition rules apply to aviation? If not, to physical injury (lésion corporelle) and the consumer fora in India still tend do the general competition law rules apply? to award compensation for mental agony and inconvenience. In Interglobe There are no specific competition rules (although rule 135 of the Aircraft Aviation limited v N Satchidanand (2011) 7 SCC 463 the Hon’ble Supreme Rules, 1937 does prohibit an ‘oligopolistic’ or anti-competitive practice) for Court held: aviation. The Competition Act, 2002 (notified in 2009) applies and prohibits anti-competitive agreements (section 3), prohibits abuse of domi- What is relevant is whether there was any cause of action for claim- nance (section 4) and regulates combinations including mergers (sections ing damages, that is, whether there was any deficiency in service or 5 and 6). whether there was any negligence in providing facilitation. If the delay An anti-competitive agreement case filed by travel agents against sev- was due to reasons beyond the control of the airline and if the appel- eral airlines was dismissed by the Competition Commission of India (CCI) lant and its crew have acted reasonably and in a bona fide manner, the in 2011 along with their appeal to the Competition Appellate Tribunal in appellant cannot be made liable to pay damages even if there has been 2012. A planned acquisition of 24 per cent of Jet Airways by Etihad was some inconvenience or hardship to a passenger on account of the delay. approved by the CCI in 2013. The CCI can approve such combinations if the same have no appreciable adverse affect on competition. If the CCI 25 Are there any special rules about the liability of aircraft fails to accord approval within 210 days, or if it does not pass any order or operators for surface damage? issue any directions, then the combination is deemed to be approved. The The Rome Convention, 1952 has been enacted to ensure adequate com- Competition Appellate Tribunal in March 2014 dismissed an appeal chal- pensation for persons who suffer damage caused on the surface by foreign lenging the CCI’s approval for the 20.6 billion rupee Jet-Etihad deal, stat- aircraft, while limiting in a reasonable manner the extent of the liabilities ing the appellant did not have locus standi to file the appeal. A former Air incurred for such damage so as not to hinder the development of interna- India executive director Jitendra Bhargava had filed the appeal questioning tional civil air transport. Chapter II deals with the extent of liability. India the decision of the CCI to approve the Jet-Etihad deal without carrying out signed the convention in 1955 but has still not ratified it. a detailed assessment. The CCI majority order, passed by its Chairman Mr Ashok Chawla and four members, had held that the Jet-Etihad combina- 26 What system and procedures are in place for the investigation tion was not likely to have an appreciable adverse effect on competition. of air accidents? Apart from the above matter relating to a combination, there have been a few cases that have come up for adjudication before the CCI in rela- Section 7 of the Aircraft Act, 1934 outlines the power of the central gov- tion to both abuse of dominance and anti-competitive agreements. In a ernment to make rules for investigation of accidents or incidents arising 2011 case (Uniglobe v Travel Agents’ Association of India or TAAI and others), out of or in the course of the navigation in or over India of any aircraft, the CCI penalised three travel agent associations for indulging in the anti- or anywhere of aircraft registered in India. Accordingly, the Aircraft competitive practice of boycotting airlines that had shifted to zero per cent (Investigation of Accidents and Incidents) Rules, 2012 have been notified. commission; the CCI also passed cease-and-desist orders on the practice. Rule 8 provides for the setting up of an Aircraft Accident Investigation In M/s FCM Travel Solutions (India) Limited vs Travel Agents Federation of Bureau of India (the Bureau) for the purposes of carrying out investigation India (TAFI) 2012 CompLR 47 (CCI), the issue in question was whether the into accidents, serious incidents and incidents referred to in rule 5(1), (2) actions of the opposite parties to boycott selling of tickets of Singapore and and (4). Rule 9 provides for a preliminary investigation and rule 12 pro- Silk Airlines and divert bookings to other airlines contravened the provi- vides the details for a formal investigation for which the central govern- sions of the Competition Act and warranted imposition of a penalty. The ment shall appoint a competent person referred to as the court who shall actions of the TAFI were found to be anti-competitive and in the light of have, for the purposes of investigation, all the powers of a civil court under a similar order passed in October 2011 it was held that the conduct of the the Code of Civil Procedure, 1908. As per rule 13, the DGCA may order opposite parties/TAFI in boycotting the sale of tickets of Singapore Airlines investigation of any incident or serious incident involving an aircraft cov- fell foul of section 3(3)(b) read with section 1 of the Competition Act, 2002. ered under rule 5(1)(c) and may appoint a competent and qualified person It was fully established by cogent and credible evidence that TAFI, TAAI as inquiry officer for the purposes of carrying out the investigation. The

102 Getting the Deal Through – Air Transport 2016

& IAAI (Opposite Parties in the instant case) as also three other non-IATA per cent of the offender’s average turnover for the preceding three financial travel agents associations namely, Indian Association of Tour Operators years. In the case of a cartel, the CCI may impose a greater penalty equal to (IATO), Association of Domestic Tour Operators of India (ADTOI) and three times the profit for each year that the contravention was carried on by Enterprising Travel Agents Association (ETAA) contravened the above the cartel. The CCI can by order modify agreements, award compensation provisions which resulted into limiting the supply of travel agent services or pass such order as it may deem fit. as well as sale of tickets of Singapore Airlines and consequently sale of In the case of a combination that is likely to or will cause an appreci- Singapore Airlines tickets dropped by 29 per cent owing to the boycott call able adverse effect on competition, the CCI has the power to stop such a given by these associations. However, since the Commission had already combination from coming into effect, modify the combination suitably or imposed a penalty under section 27(b) of the Competition Act on TAFI, propose appropriate modifications so as to eliminate any adverse effect on TAAI & IAAI in Case No.03/2009, no penalty was imposed on the oppo- competition. If the parties do not agree with the modifications suggested site parties in this case. In TAAI v British Airways, decided in 2010, the CCI by the CCI, such parties may amend the proposed suggestion and seek dismissed a complaint against the carrier alleging abuse of dominance for the CCI’s approval within 30 days. The CCI, in its effort to tackle cartels, having restricted sale of their tickets only through certain accredited travel also has a leniency programme in place. In April 2014, the Competition agents. The Commission found that British Airways was not dominant in Appellate Tribunal disposed of an appeal seeking to restrain implementa- the relevant market. In 2011, the CCI dismissed a complaint, and then in tion of IATA’s cargo accounts settlement system. The tribunal upheld the 2012 the Competition Appellate Tribunal (Compat) dismissed an appeal CCI’s ruling that had rejected an Air Cargo Agents Association of India involving TAAI against nine airlines on the ground that the airlines had complaint in this regard. In a case decided by the CCI on 11 January 2012 (acting as a cartel) been guilty of abuse of dominance in moving to the zero titled In re: Domestic Air Lines, the CCI considered whether exorbitant fares per cent commission system. The CCI and Compat both rejected the city- of various Indian airlines for tickets and ‘shifting seats from lower buckets pair argument (that being the relevant market) and held that the airlines to higher buckets’ (allegedly due to a strike called by Air India pilots), vio- taken together were not dominant, did not act in concert so there was no lated section 3(3) of the Act. It was held that price parallelism in this case agreement and hence dismissed the complaint and appeal. was established but ‘this on its own cannot be said to be indicative of any ‘practice’ being carried on in terms of section 3(3) of the Act’. The CCI held, 29 Is there a sector-specific regulator or are competition rules ‘…it cannot be concluded that the airlines had been carrying on any anti- applied by the general competition authority? competitive practice in violation of section 3(3) of the Act’. Both competition agencies and regulators usually have some overlapping In Sh Shubham Srivastava vs Department of Industrial Policy & mandate to achieve economic efficiency. However, the conceptual frame- Promotion (DIPP) Ministry of Commerce & Industry 2013 CompLR 868 work reflects that sectoral regulators such as the DGCA have specific func- (CCI), the informant, challenged the conduct of the DIPP in revising Press tions relating to that sector but not market functions, which is the domain Note No. 6, modifying the foreign direct investment policy in the civil avia- of the general competition authority (ie, the Competition Commission of tion sector in a manner allegedly inconsistent with the scheme, intent and India). Therefore there are generally no sector-specific competition laws object of the Competition Act, 2002. It was alleged that the DIPP, by vir- or rules that can be applied by the competition authority, however the pro- tue of its role in formulation, promotion, approval and facilitation of FDI visions of rule 135 cited in reply to question 28 referring to oligopolistic in India, enjoyed a monopoly under the statutes, rules and regulations. practices are an exception that is not usually resorted to by the regulator Relevant market proposed by the informant was ‘formulation, promo- or the DGCA. tion, approval and facilitation of Foreign Direct Investment policy in civil air transport services in India’. Being entrusted with a significant role, the 30 How is the relevant market for the purposes of a competition DIPP was stated to be in a dominant position in the proposed relevant mar- assessment in the aviation sector defined by the competition ket. It was further contended that the move of FDI in the airlines of India authorities? was to open up financing options available for airlines in the country, for their operations and service upgradation, and to enable them to compete The Competition Act 2002 defines ‘relevant market’ under section 2(r). with other global carriers. The proposed exclusion of Air India from the Ascertaining the relevant market is a pertinent step to analysing whether changes in FDI architecture for civil aviation sector would result in reverse there is an adverse effect on competition. The relevant market is deter- discrimination against Air India at the cost of taxpayers. The CCI dis- mined in a two-pronged manner [section 19(5)]: one needs to ascertain missed the case and held, ‘DIPP is constitutionally empowered to frame the relevant geographic market as prescribed under section 19(6) and also such executive policy on FDI’ and further: determine the relevant product market as prescribed under section 19(7). Attempts have been made to define a geographic market by reference to The revised Press Note No. 6 (2012 Series) of September 20, 2012 city-pairs in the aviation sector, but the Competition Commission and the decided to permit foreign airlines to invest in the capital of Indian com- Competition Appellate Tribunal have not accepted this argument, gener- panies, engaged in scheduled and non-scheduled air transport services ally preferring the view that the market is international flights to and from up to a limit of 49% of their paid-up capital, in exclusion of Air India. India. This revision only gave an additional option to all private airlines to finance their capital needs through foreign direct investments from 31 What are the main standards for assessing the competitive foreign airlines, which does not affect their interest inter se. Moreover, effect of a transaction? the same may promote competition in the relevant market by facilitat- The standard for assessing the competitive impact of a transaction is by ing cash crunch airlines to avail FDI for their operations, growth and determining whether such transaction has an appreciable adverse effect on expansion. Not allowing FDI from foreign airlines in Air India does competition. Appreciable adverse effect on competition can be determined not appear to be hampering competition in the relevant market in any by the presence of any kind of anti-competitive agreements between par- way. As such, this action does not prima facie seem to create any appre- ties or whether such transaction would result in an abuse of dominance, ciable adverse effect on competition in markets in India. foreclosure of market, etc. Even in the case of a combination (merger or acquisition), the standard used is the same: that is, whether such a combi- In The Air Cargo Agents Association of India vs. International Air Transport nation would result in or is likely to cause an appreciable adverse effect on Association (IATA) & Ors, decided by the CCI on 4 June 2015, the CCI competition. observed:

32 What types of remedies have been imposed to remedy The Informant has alleged that the practice of the Opposite Party No. concerns identified by the competition authorities? 1 in fixing the commission for the cargo agents and limiting and con- The CCI may make inquiries into certain types of agreements (under sec- trolling the international air cargo transportation services through its tion 19) and combinations (under section 20, provided they are above the various resolutions is in contravention of the provisions of section 3(3) statutory threshold limit) to see whether they are anti-competitive. The of the Act read with the provisions of section 3(1) of the Act. The allega- CCI also has the power to take up these inquiries suo moto (of its own tions of the Informant against the Opposite Parties, as emanated from motion). Upon finding a contravention of the Act, the CCI may pass an the facts of the case, are threefold: (i) fixation of 5% commission for the order directing the responsible enterprises to discontinue the contraven- cargo agents through ‘Resolution 016aa’, (ii) implementation of CASS tion and impose such penalties as it deems fit. The penalties can be up to 10 www.gettingthedealthrough.com 103

36 Must clearance from the competition authorities be obtained Update and trends before state aid may be granted? The trend in India is to move towards facilitating more aviation No, since Air India is fully state-owned as the national carrier and no state business in India and to revive the aviation sector. Indian air carriers aid is rendered to other airlines. The competition authorities do not seem flew nearly 39 million passengers within the country in the first half to regard state aid as anti-competitive. of 2015, registering a 19.81 per cent increase over the same period last year. As per a 19 July 2015 news report, Indian airlines may no 37 If so, what are the main procedural steps to obtain clearance? longer require prior permission to import aircraft as the Ministry of Not applicable. Civil Aviation (MoCA) plans to facilitate aircraft import. The MoCA is set to bring in a domestic flying credits-based norm to replace the current 5/20 eligibility norm for flying 38 If no clearance is obtained, what procedures apply to recover international. The current (5/20) rule requires an airline to have five unlawfully granted state aid? years of domestic flying experience as well as 20 aircraft in its fleet Not applicable. to fly international. The new arrangement is likely to make India’s airlines eligible to fly international in a year’s time and with a fleet Miscellaneous of just five aircraft, allowing airlines like Vistara, AirAsia India and GoAir to start international operations from India. Analysts say that 39 Is there any aviation-specific passenger protection constraining rules like the existing 5/20 rule has impacted India’s legislation? growth. The Carriage by Air Act, 1972 and the Consumer Protection Act, 1986 are the statutes under which passengers may file an action to redress their grievances or approach civil courts for compensation and damages. in India through ‘Resolution 851’, and (iii) mandatory accreditation of The DGCA has issued CARs under section 3 – Air Transport, series cargo agents from IATA. ‘M’ for ‘Passenger Facilitation’. CAR dated 28 February 2014 (revised 17 October 2014), under this series, on ‘Carriage by Air – Persons with It was held: Disability and/or Persons with Reduced Mobility’ lists the rules for the protection of and provision of assistance to disabled persons and persons From the record available, it is evidenced that the Opposite Party No. with reduced mobility travelling by air in order to protect them against any 1 was not in favour of fixed commission system and the Commission form of discrimination and to ensure that they receive all possible assis- finds force in the contention of the Opposite Parties that the system tance during their travel. Clause 4.5.1 thereof deals with the complaints of 5% commission was due to lobby of the members of the Informant procedure and provides that if a person with disability or reduced mobility before the Government of India. Thus, based on the above evidences considers that this CAR has been infringed, he or she may bring the mat- and circumstances, the Commission is of the opinion that the alle- ter to the attention of the airlines and airport operator, as the case may be. gation of fixing of the rate of commission for cargo agents by the Another CAR dated 22 May 2008 has been issued on the subject of ‘Refund Opposite Parties under ‘Resolution 016aa’ does not hold valid and of Airline Tickets to Passengers of Public Transport Undertakings’. The therefore, the Opposite Parties have not contravened the provision CAR dated 6 August 2010 (revised on 14 January 2011) is on the subject of section 3(3)(a) of the Act… The Commission further notes that in of ‘Facilities to be provided to passengers by airlines due to denied board- India, CASS is not compulsory for the cargo agents and that entry ing, cancellation of flights and delays in flights’. This should be read in the and exit routes are available for every airline and agent. Moreover, context of the Interglobe decision cited in the reply to question 24. Clause CASS is not fully functional in India as it is still in pilot stage… 3.7 covers passenger redressal and provides that when affected by denied Considering the above, the Commission holds that the introduction boarding, a cancellation or a long delay, the passenger may complain of CASS is not anti-competitive in terms of section 3(3)(b) of the Act, directly to the airline. If the airline has not provided compensation or rea- as alleged by the Informant… the Commission notes that IATA plays sonable facilities as listed in clauses 3.5 and 3.6, or if an airline fails to ful- the role of self-regulator in the sector and as such the accreditation fil its obligations, passengers may complain to the statutory bodies set up provided by IATA is not mandatory and hence, cannot per se be under the relevant law. taken as anticompetitive. Further, it may also be observed that such In April 2015, the National Consumer Disputes Redressal Commission accreditation helps the stakeholders in providing assurance about the (the highest court of consumer cases) fined International airline major quality of services provided by the cargo agents. Accordingly, it can- Lufthansa two million rupees for failing to keep its promise of provid- not be termed as anti-competitive within the meaning of section 3(3) ing flat seats to a particular business-class passenger. The NCDRC held read with section 3(1) of the Act. Lufthansa responsible for indulging in ‘unfair trade practices’, asking the German airline to refund the flight ticket cost to a complainant, who said Financial support and state aid he got a ‘semi-reclined seat’ instead of a ‘lie-flat seat’ as promised. 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or 40 Are there mandatory insurance requirements for the government-controlled agencies or companies (state aid) in operators of aircraft? the aviation sector? If not, do general state aid rules apply? CAR dated 1 March 1994 (revised on 9 April 2014) provides in Clause 10.12 No. However, the central government has given approximately US$1.7 bil- that an operator shall maintain current insurance for an amount adequate lion in the past four years (before 31 March 2013) to aid Air India. In 2013, to cover its liability towards passengers and their baggage, crew, cargo, Indian Oil Corporation, the nation’s biggest refiner, agreed to sell jet fuel to hull loss and third-party risks in compliance with the requirements of the Air India at an 8 per cent discount. Carriage by Air Act, 1972, or any other applicable law. CAR dated 1 June 2010 under section 3 – Air Transport, series ‘C’ part 34 What are the main principles of the state aid rules applicable III, issue II lists the minimum requirements for grant of permit to operate to the aviation sector? non-scheduled air transport services and Clause 10.10 thereof provides for The state has, as a policy, given aid and injected funds to assist Air India’s insurance requirements on similar lines as Clause 10.12 mentioned above. business. It has been recommended that the stated policy ‘that the national CAR dated 26 August 1997 (revised 21 May 2009) under section 3 – Air carrier would be considered before allocation of traffic rights to other Transport, series ‘C’ part IV lists the minimum requirements for grant of eligible applicants’ should be discontinued (see the 2012 Report of the a permit and operation of air transport cargo services. This CAR, in clause Committee Constituted for examination of the recommendations made in 4.3, provides that the application for an operating permit shall be accom- the Report on Competitive Framework of Civil Aviation Sector). panied by a current comprehensive insurance policy covering the aircraft, crew, cargo and third party risks in accordance with the requirements. 35 Are there exemptions from the state aid rules or situations in Clause 7.5 thereof provides that the operator shall maintain a current and which they do not apply? adequate insurance coverage for liability in compliance with the requirements of the Carriage by Air Act, 1972. State aid is only given to the national carrier, as it is government-owned; as such there are no applicable exemptions.

104 Getting the Deal Through – Air Transport 2016

41 What legal requirements are there with regard to aviation to test professional efficiency and the alertness of security staff as well as security? mock exercises to test the efficacy of contingency plans and operational Section 5A of the Aircraft Act, 1934 provides that the DGCA or any other preparedness of the various agencies. The BCAS has prepared a national officer specially empowered by the central government, may issue direc- civil aviation security programme for airport operators, airline operators tions, etc in any case where the DGCA or such other officer is satisfied that and their security agencies. The commissioner of security of the BCAS is in the interests of the security of India or for securing the safety of aircraft responsible for the development, implementation and maintenance of the operations it is necessary so to do. national civil aviation security programme. The central government has created the Aircraft (Security) Rules, 2011. Part II thereof deals with security measures at aerodromes, Part V 42 What serious crimes exist with regard to aviation? deals with security measures by aircraft operators and Part VIII covers Crimes with regard to aviation (hijacking; committing an act of violence security accidents and incidents. onboard an aircraft in flight; destruction of, or damage to, air navigation Aviation security comes under the purview of the Bureau of Civil facilities; offence at airports, etc) are provided for in the Anti-Hijacking Aviation Security (BCAS), which issues AVSEC (aviation security) orders Act, 1982 along with the Anti-Hijacking (Amendment) Act, 1994 and the and circulars. It lays down aviation security standards in accordance with Suppression of Unlawful Acts against Safety of Civil Aviation Act, 1982 Annex 17 to the Chicago Convention of the ICAO for airport operators, along with the Suppression of Unlawful Acts against Safety of Civil Aviation airline operators, and their security agencies responsible for implement- (Amendment) Act, 1994. Other crimes include human and drug trafficking, ing AVSEC measures; the BCAS monitors implementation of security rules inappropriate behaviour onboard an aircraft, carrying of prohibited goods, and regulations and carries out surveys of security needs; it ensures that etc for which the general criminal laws apply. Some provisions to regulate persons implementing security controls are appropriately trained and pos- conduct aboard an aircraft also exist in the Aircraft Rules which, read with sess all competencies required to perform their duties; it plans and coordi- Schedule VI, provide for punishments that include imprisonment. nates aviation security matters; and conducts surprise or dummy checks

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Indonesia

Wahyuni Bahar and Anggia Rukmasari* Bahar & Partners

General candidate, no specific standard of financial fitness assessment is currently being regulated. 1 Which bodies regulate aviation in your country, under what The Aviation Law restricts foreign ownership for national air carri- basic laws? ers to no more than 49 per cent of the share capital and there must be an The basic law governing aviation is laid down by the parliament, currently Indonesian shareholder as the controlling party (single majority). through Law No. 1 of 2009 on Aviation (the Aviation Law). The Aviation Law authorises the Ministry of Transport (MoT) to cover not only further 6 What procedures are there to obtain licences or other rights to implementing regulations but also control and supervision. operate particular routes? The GoI as the particular route operator will tender the licence to operate Regulation of aviation operations particular routes to either a commercial air carrier or non-commercial air 2 How is air transport regulated in terms of safety? carrier, in the absence of commercial air carriers which are willing to serve the routes. The cooperation between the GoI and an entity will be in the Air transport safety is regulated by the MoT in accordance with interna- form of a contract. tional standards. Strict requirements are mandated by the MoT as to the airworthiness and operations of aircraft, qualification as aircraft operators, 7 What procedures are there for hearing or deciding contested airport standards, safe flight operation zones, maintenance of aircraft, applications for licences or other rights to operate particular technical and operational requirements for flight navigation services (air routes? traffic control), and for the granting licensing schemes for pilots, crew, As described in question 6, the tender participants (commercial air carri- ground staff, flight procedure design and air traffic controllers. ers or non-commercial air carriers) are entitled to submit a written rebuttal with unsatisfactory results of the tender. The written rebuttal is submit- 3 What safety regulation is provided for air operations that do ted to the tender committee after the announcement of the winner and not constitute public or commercial transport and how is the the tender committee must respond in writing to all of the rebuttals. As a distinction made? response to the tender committee’s response, the entity may further sub- Private operators are subject to regulations that in most respects are identi- mit an appeal to the MoT, regional head, or head of the institution of the cal to the regulations applicable to airlines. tender organiser by granting a guarantee.

4 Is access to the market for the provision of air transport 8 Is there a declared policy on airline access or competition and, services regulated and, if so, how? if so, what is it? The following are the primary restrictions on access to the market for the Indonesia does not have a detailed declared policy on airline access or provision of air transport services: competition. However, the Aviation Law adopts two key principles in • domestic scheduled commercial air transport may only be operated by undertaking aviation business in Indonesia, namely transparency and anti- a national airline after securing a licence from the MoT; monopoly. See also questions 28 to 32. • the principal restrictions on access to the international market for national airlines are ownership and control requirements. Foreign 9 What requirements must a foreign air carrier satisfy in order shareholdings are limited to 49 per cent of the share capital, and there to operate to or from your country? shall be an Indonesian shareholder as the controlling party (single For international scheduled air services, a foreign airline must demon- majority); strate that it is designated by its country and approved by the GoI under a • a foreign airline must demonstrate that it is designated by its country bilateral or multilateral agreement. Meanwhile, for international unsched- and approved by the government of Indonesia (GoI) under a bilat- uled air services, a foreign air carrier must first obtain a flight approval from eral or multilateral agreement. In the case of international regular air the MoT and other relevant ministries (including the Ministry of Defence). transport constituting part of a multi-sector multilateral agreement, it The GoI will tender a licence to operate particular routes to either a com- still must be established under a bilateral agreement; and mercial air carrier or a non-commercial air carrier. • ownership and possession of a certain number of aircraft, as follows: (i) scheduled airlines shall own at least five aircraft and possess at least 10 Are there specific rules in place to ensure aviation services five aircraft; and (ii) unscheduled and cargo airlines shall own at least are offered to remote destinations when vital for the local one aircraft and possess at least two aircraft. economy? According to the Aviation Law and Directorate General of Civil Aviation 5 What requirements apply in the areas of financial fitness and (DGCA) decree, the GoI has a public service obligation to connect remote nationality of ownership regarding control of air carriers? areas (not supported by other means of transport) that are commercially The MoT already regulated the standards to measure and evaluate the unprofitable, to encourage territorial development and promote defence financial fitness of air carriers. The standard is divided into two main cri- and homeland security. The GoI will tender a licence to operate particular teria: criteria for a commercial air carrier licensee as the applicant of an air routes to either a commercial air carrier or a non-commercial air carrier. operator certificate (AOC); and criteria for a commercial air carrier licensee as the holder of an AOC. For each of the criteria, the MoT determines 11 Are charter services specially regulated? the debt-to-equity ratio, debt-to-total-asset ratio, current ratio, working Charter services are classified as non-scheduled air transport, and are capital turnover and other applicable standards. However, for an air carrier therefore regulated under the regulations pertaining to non-scheduled air

106 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Bahar & Partners INDONESIA transport services. Such services may be conducted by a national air trans- that may be owned by an Indonesian airport business entity. However, port business entity carrying out domestic non-scheduled commercial air Indonesia limits foreign ownership shareholdings to a maximum of 49 per transport after getting a non-scheduled commercial air transport business cent on becoming an airport business entity. In line with the opportunity licence after securing flight approval from the MoT. for private participation, a regulation on the public airport business is cur- For foreign non-scheduled commercial air transport activities that are rently being prepared by the MoT. engaged in by national commercial air transport business entities, approval is needed from the MoT, while for foreign non-scheduled commercial air 18 What system is there for the licensing of airports? transport activities that are engaged in by foreign air transport companies, All airports need approval to be established and require licences and cer- approval is needed from the relevant minister (Minister of Foreign Affairs tificates to operate the airport. Such licences and certificates are issued for diplomatic clearance approval and Minister of Defence for security either by the MoT or the DGCA. The licensing processes involve a general clearance approval). assessment of a national airport master plan, safety and security, environmental aspects, economics and financial worthiness, etc. Detailed rules and 12 Are airfares regulated and, if so, how? requirements are set out by the MoT and the DGCA. Meanwhile, airport The Aviation Law regulates four ways to determine airfares, namely: services licensing will be covered by a ministerial regulation on airport ser- • a tariff ceiling for domestic economy class commercial air transport vices that is being prepared by the MoT. applicable for passengers; • a market mechanism for domestic non-economy services of sched- 19 Is there a system of economic regulation of airports and, if so, uled commercial air transport applicable for cargo and passengers; how does it function? • an agreement between users and providers of transport services for Yes. The Aviation Law imposes charges for airport services such as landing domestic non-scheduled air transport for passengers and cargo; and charges, parking charges, storage charges, passenger service charges, secu- • a bilateral and multilateral air transport agreement for foreign sched- rity charges and other applicable charges. Details of the charges structure uled commercial air transport for passengers and cargo. and category can be found in the recently issued MoT Regulation No. 36 of 2014 on Procedure of Airport Charges Imposition. Aircraft Airport-related services such as ground handling, cargo and mail han- 13 Who is entitled to be mentioned in the aircraft register? Do dling, aircraft catering and other services will also be required to charge requirements or limitations apply to the ownership of an fees. The charges for these services are determined by the service provider aircraft listed on your country’s register? based on an agreement between the service provider and service users. It is also worth noting that air navigation services in Indonesia are The DGCA shall record details of aircraft owners, operators, manufactur- also required to charge fees. The charges are based on the structure and ers’ designation and serial number of an aircraft in the register. category of charges. As well as aviation service charges, the structure and An owner of an aircraft to be registered in Indonesia must be a citizen category of charges for air navigation services will be stipulated by the MoT. or legal entity of Indonesia. A foreign citizen or legal entity is allowed to reg- The charges of air navigation services for airports operated by the GoI are ister its aircraft in Indonesia, provided that the aircraft is operated or con- determined by the GoI itself, while air navigation services operated by an trolled or both by a citizen or legal entity of Indonesia under an agreement. air navigation service body will be determined by the air navigation services body concerned. 14 Is there a register of aircraft mortgages or charges and, if so, how does it function? 20 Are there laws or rules restricting or qualifying access to There is no register of aircraft mortgages or charges in Indonesia. An airports? Indonesian aircraft, subject to a security agreement, title reservation agree- Other than compliance with the requirements on licensed airlines, reg- ment or leasing agreement or both will be registered in the International istered aircraft, flying permits and general safety standards, there are no Registry. restrictions to access airports. However, please note that Indonesia adopts the cabotage principle. Consequently a foreign air carrier cannot provide 15 What rights are there to detain aircraft, in respect of unpaid domestic flight within Indonesia. airport or air navigation charges, or other unpaid debts? The government normally will not detain an aircraft based on non-payment 21 How are slots allocated at congested airports? of debt to the GoI or any other parties. However, for safety and security con- Slots are coordinated by the Indonesian Airport Slot Management (IASM) siderations, an airport has the authority to keep an aircraft from taking off if and regulated by the DGCA. Those regulations refer to the International it does not have flight approval. Air Transport Association (IATA) Worldwide Scheduling Guidelines. The DGCA has determined a number of congested airports. Slot clear- 16 Do specific rules regulate the maintenance of aircraft? ance in the congested airports is determined by the IASM in reference to The Aviation Law and other implementing regulations require that main- the notice of airport capacity. Slot clearance is prioritised for scheduled tenance is mandatory for an aircraft. These regulations manage, for exam- flights. ple, maintenance practices, air operator certificate, approved maintenance organisation and aircraft maintenance engineer licences. 22 Are there any laws or rules specifically relating to ground handling? Airports Besides being regulated in the Aviation Law, ground-handling services 17 Who owns the airports? are further regulated by the the DGCA. Ground-handling services may be done by Indonesian individuals or Indonesian legal entities, includ- Airports in Indonesia are privately and publicly owned. Private airports ing stated-owned enterprises (being AP I or AP II) and local state-owned may be owned by either the GoI (central or regional) or an Indonesian legal enterprises. entity. Meanwhile, public airports, prior to the enactment of the Aviation The foreign shareholdings limitation in an Indonesian legal entity pro- Law, could only be owned by the government through a state-owned enter- viding ground handling services is limited to 49 per cent. prise, namely PT Angkasa Pura I (AP I) and PT Angkasa Pura II (AP II). Currently, the Aviation Law has opened up an opportunity for the pri- 23 Who provides air traffic control services? And how are they vate sector to participate in operating a public airport business through a regulated? public-private partnership scheme. In determining a private partner, the MoT will hold an open tender, and the winning bidder will enter into a As of 13 September 2012, air traffic control services are provided by the concession agreement with the MoT. Under the prevailing laws, there is Indonesian Aviation Navigation Services Agency (LPPNPI) replacing AP I, no priority right granted to AP I and AP II as airport operators, thus putting AP II and the technical execution unit of the DGCA as the previous provid- their status on the same footing as other business entities. ers. LPPNPI was established in the form of a public corporation in order to Currently, the Aviation Law has opened up an opportunity for the pri- prevent it from mere profiteering in providing its services. The air traffic vate sector to participate in a public airport business through a public–pri- control services provision by LPPNPI covers two flight information regions vate partnership scheme. There is no limitation as to the number of airports www.gettingthedealthrough.com 107

(FIRs), namely Jakarta FIR and Makassar FIR. The services provided by airport. For an aircraft accident and incident, the report shall be imme- LPPNPI include: diately submitted by aircraft operators to the KNKT, DGCA and regional • air traffic services, including air traffic control, flight information, and governments, and shall cover mandatory minimum information as appli- alerting services; cable. Meanwhile, for accidents, incidents and serious incidents occurring • aeronautical telecommunications services incorporating aeronautical at an airport, airport operators shall submit a report to the director general fixed and mobile services, and aeronautical radio navigation services; of civil aviation, the director of airports in the DGCA and the AIS Unit by • aeronautical information services (AIS) consisting of aeronautical using the applicable format. information, aviation maps, public announcements to airmen, and airport aeronautical information; Competition law • meteorological information services; and 28 Do sector-specific competition rules apply to aviation? If not, • information on search and rescue services. do the general competition law rules apply? There are no sector-specific competition rules applicable to aviation. Liability and accidents General competition law rules do apply, such as Law No. 5/1999 on 24 Are there any special rules in respect of death of, or injury to, Prohibition of Monopolistic Practices and Unfair Business Competition passengers or loss or damage to baggage or cargo in respect of (Law No. 5/1999). domestic carriage? The MoT regulates that air carriers can be obliged to pay compensation 29 Is there a sector-specific regulator or are competition rules with regard to: applied by the general competition authority? • accidents resulting in the death of passengers and accidents resulting Competition rules apply to all sectors including the aviation sector by a gen- in permanently disabled passengers; eral competition authority called the Business Competition Supervisory • flight elays;d Commission (KPPU). • lost, disappeared and damaged cargo and baggage; and • aggravation to a third party due to an aircraft operation, aircraft acci- 30 How is the relevant market for the purposes of a competition dent or the fall of objects from operated aircraft. assessment in the aviation sector defined by the competition authorities? The amount of compensation for each event is stipulated precisely under Law No. 5/1999 states that the relevant market consists of the relevant the regulation. product market and the relevant geographic market. The relevant geographic market is a set of geographical areas where the alternative sources 25 Are there any special rules about the liability of aircraft of supply for the relevant product are located. To determine them, the operators for surface damage? KPPU evaluates company policies, transport costs, duration of trip, tariffs In addition to regulating the relationship between the carrier and the cus- and regulations that limit the trade traffic between areas. tomer, the MoT also regulates aggravation to a third party due to an aircraft The relevant product market includes the goods or services that are operation, aircraft accident or the fall of objects from operated aircraft. being investigated and their replacements. For the substitution analysis, Further, the MoT determines the amount of compensation payable by the the KPPU evaluates the consumers’ preferences, the goods’ characteris- aircraft operator to a third party as a victim. tics, prices, and functions of the possible substitutes.

26 What system and procedures are in place for the investigation 31 What are the main standards for assessing the competitive of air accidents? effect of a transaction? Aircraft accidents are investigated by the National Committee for Substantially, Law No. 5/1999 stipulates three basic prohibitions, namely: Transportation Accidents (KNKT). The KNKT’s tasks are to: • prohibited agreements; • conduct an investigation at the location of the plane crash; • prohibited activities; and • collect data and information, explanations and evidence of the plane • dominant position. crash; • collect data and information about the aircraft and plane crew involved Relevant markets and dominance are the main criteria for assessing the in the crash, data of the flight navigation services, and meteorological competitive effect of a transaction under Law No. 5/1999. The standards and other data related to the operation of the afflicted aircraft; will assess the effective competition and also determine any company hav- • evaluate, analyse and make a conclusion as to the most probable cause ing market power in relevant markets. This assessment aims: of the aircraft accident; • to analyse whether a company or group of companies with significant market power have restricted competition on the relevant market; and • report on the results of the research to the MoT with a copy to the • to assess that there is no abuse of dominant position in the relevant DGCA; and market. • make recommendations to the relevant parties in order to prevent accidents with the same cause. 32 What types of remedies have been imposed to remedy concerns identified by the competition authorities? The KNKT is not responsible for prosecuting criminal behaviour or assigning blame. The KPPU is tasked with undertaking in-depth examinations on agree- For the advanced investigation of air accidents, the Aviation Law has ments or practices that may be anti-competitive. In carrying out that duty, mandated the KNKT to form an aviation profession council. The aviation the KPPU is authorised, upon its initiative or complaints, to investigate profession council will be entitled to: practices or acts that may infringe competition rules in Indonesia. If it finds • recommend the MoT on the imposition of administrative sanctions or any infringement of competition, the KPPU may impose sanctions on the performance of further inquiry by a civil servant investigator; business practitioner. These sanctions may be in the form of: • rule over the dispute between the parties as a result of air accidents; • administrative sanctions, such as the decision to annul the agreement, and impose a fine and compensation; • recommend the implementation of aviation regulations. • penal sanctions; and • additional penalties such as business licence revocation. To date, however, the process of forming an aviation profession council is still under way as there has been intensive discussion among aviation Financial support and state aid stakeholders. 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or 27 Is there a mandatory accident and incident reporting system government-controlled agencies or companies (state aid) in and, if so, how does it operate? the aviation sector? If not, do general state aid rules apply? The MoT already regulates a mandatory reporting system for: aircraft In the aviation sector, the GoI will provide financial support for a private operators’ report for an aircraft accident and incident; and airport opera- company undertaking pioneer air transport activity in the form of aid for tors’ report for an accident, incident and serious incident occurring at an

108 Getting the Deal Through – Air Transport 2016

38 If no clearance is obtained, what procedures apply to recover Update and trends unlawfully granted state aid? Recently, drone issues are intensively discussed by the MoT. Not applicable. Although the GoI has enacted an MoT regulation on drone operation, however, this regulation is considered not yet sufficient to Miscellaneous answer various challenges related to drone operation. 39 Is there any aviation-specific passenger protection Air liberalisation within the ASEAN states (ASEAN Open Skies Policy) starts in this year. We will see how effective and beneficial legislation? this policy for the ASEAN member states. Yes, there are a number of passenger protection regulations, concerning Early this year, the GoI issues a package of regulations that the protection of passengers’ flight safety and security, airfares, accidents enable private sector participation in airport development, operation resulting in the death of passengers and accidents resulting in permanently and management in Indonesia. disabled passengers, flight delays, lost, disappeared and damaged cargo and baggage, etc. air transport operation costs or aid for fuel transport costs or both. In addi- 40 Are there mandatory insurance requirements for the tion, the GoI may grant a guarantee in respect of airport construction. operators of aircraft? In addition, Law No. 17/2003 on State Finances, as the general state Insurance is mandatory. No carrier will be allowed to operate an aircraft in aid rule, stipulates that the central or regional government can provide aid Indonesia unless it has the requisite insurance policies that protect: to a private company (including a private company in the aviation sector) in • operated aircraft; the form of loans, gifts or capital participation, provided that the aid must • personnel of the operated aircraft; first be set out in the state or regional budget. • responsibility for second-party loss; The GoI does not only support direct financing but also indirect • responsibility for third-party loss; and financing in the form of incentives to be released from paying value added • incident investigation activities. tax (VAT) to companies operating overseas flights. For airports, since it is considered as infrastructure project, finan- 41 What legal requirements are there with regard to aviation cial supports from government controlled agencies (companies) may security? be provided. PT Sarana Multi Infrastruktur (Persero) and PT Indonesia Aviation security requirements are regulated by the government. According Infrastructure Finance are infrastructure financing companies facilitating to the regulation, the MoT has a vital role in preserving aviation security. infrastructure projects financing in Indonesia. Besides, PT Penjaminan The aviation security covers security of airports, aircraft, flight personnel, Infrastruktur Indonesia (Persero) (or Indonesia Infrastructure Guarantee passengers, cargo, etc. For example, screening must be conducted on pas- Fund) serves as the government’s single window for processing or structur- sengers, baggage, cargo and mail in order to be able to enter into an airport. ing sovereign guarantee for infrastructure projects on the basis of public- private partnership scheme. 42 What serious crimes exist with regard to aviation? 34 What are the main principles of the state aid rules applicable The Aviation Law contains a number of aviation-related sanctions, includ- to the aviation sector? ing the endangering of aircraft, passenger, cargo or third parties by disregarding aviation rules. The Indonesian Criminal Code, however, contains Indonesia does not regulate any main principles related to state aid rules sanctions for most serious aviation-related crimes, for example: that are applicable to the aviation sector. Nevertheless, Law No. 17/2003 • air piracy; governs several principles in managing state finance, namely good order, • destruction of aircraft; compliance with laws and regulations, efficiency, economical, effective- • air sabotage; ness, transparent and accountable. • carrying air hazardous material; • acts against air traffic; and 35 Are there exemptions from the state aid rules or situations in • acts against the safety and security of aircraft. which they do not apply? Not applicable. These crimes are subject to penalties. In line with this, Indonesia has also ratified several conventions in rela- 36 Must clearance from the competition authorities be obtained tion to aviation crime, such as the Tokyo Convention of 14 September 1963, before state aid may be granted? the Hague Convention of 16 December 1970 and the Montreal Convention Not applicable. and Protocol of 23 September 1971.

37 If so, what are the main procedural steps to obtain clearance? * Santri Satria, associate at Bahar & Partners, has assisted in the prepara- Not applicable. tion of this chapter.

Wahyuni Bahar [email protected] Anggia Rukmasari [email protected]

Menara Prima, 18th Floor Tel: +62 21 5794 7880 Jalan DR Ide Agung Anak Gde Agung Blok 6.2 Fax: +62 21 5794 7881 Kawasan Mega Kuningan www.baharandpartners.com Jakarta 12950 Indonesia

www.gettingthedealthrough.com 109

Italy

Laura Pierallini Studio Pierallini

General administrative, organisational and financial regulations. On 29 October 2009, ENAC issued Circular Nav 71-A, replaced by Circular Nav 71-B 1 Which bodies regulate aviation in your country, under what dated 31 October 2011, which provides that from 28 September 2009 air basic laws? carriers operating private transport must obtain the continuing airworthi- The main body regulating aviation in Italy is the Italian Civil Aviation ness management organisation approval certificate (CAMO) when the Authority (ENAC), as provided by article 687 of the Italian Navigation aircraft operated have a weight of more than 5,700kg or other certain Code and Legislative Decree No. 250/1997. The Ministry of Transport is specifications. the body having supervising authority for ENAC and general competence. The criteria to determine whether the operations constitute com- Other bodies regulating aviation in Italy are Assoclearance and ENAV mercial operations rather than private operations are provided by ENAC SPA, which are the entities with delegated authority in the field of, respec- Regulation dated 21 October 2003 (and following amendments) and ENAC tively, slots allocation and air traffic control (see questions 2 and 6), and Regulation dated 30 June 2003. Such regulations provide, in relation to the the Italian Transport Authority, being an independent administrative body aircraft’s use, a general distinction between: whose main task is promoting and protecting competition in the trans- • commercial operations, which are those carried out against considera- port sectors. The principal law on aviation is the Italian Navigation Code, tion. Such operations include scheduled, charter and taxi flights; and approved by Royal Decree No. 327 dated 30 March 1942, as amended by • non-commercial operations or general aviation operations, which Legislative Decree No. 96 dated 9 May 2005 and Legislative Decree No. cover activities carried out by, among others, flying clubs, flying 151 dated 15 March 2006. schools, small private aircraft and aerial works.

Regulation of aviation operations The aircraft’s private use must result by the statement rendered by the aircraft’s captain to ENAC on landing. Such statement is subject to checks by 2 How is air transport regulated in terms of safety? ENAC. The aircraft’s private use must be free of charge. Safety regulation falls within the institutional duties of ENAC. ENAC issues and renews airworthiness certificates and air operator 4 Is access to the market for the provision of air transport certificates and approves maintenance programmes. ENAC carries out services regulated and, if so, how? inspections and controls on aircraft, operated for private and public use. Access to the market for the provision of air transport services is regulated. Air traffic control is entrusted to ENAV. In particular, air carriers must obtain a licence to operate from ENAC. Italy applies all the international rules issued by the International Civil According to article 778 of the Italian Navigation Code, ENAC issues air Aviation Organization (ICAO) (ie, Annex 17), and by JAR 145/EASA 145 as carriers’ licences to enterprises established in Italy in compliance with EC amended by the European Aviation Safety Agency (EASA) Implementation Regulation No. 1008/2008. Rules (whose role has been significantly increased by Regulation (EC) No. 216/2008 of the European Parliament and the Council of 20 February 5 What requirements apply in the areas of financial fitness and 2008 on common rules in the field of civil aviation, as supplemented by nationality of ownership regarding control of air carriers? Commission Regulation (EU) No. 139/2014 laying down requirements and administrative procedures related to aerodromes pursuant to Regulation According to article 778 of the Italian Navigation Code, air carriers must: (EC) No. 216/2008) and, with effect from 16 July 2008, EU-OPS as pro- • be enterprises located in Italy and whose effective control is owned vided by article 2 of Regulation (EC) No. 1899/2006 amending Council and must continue to be owned directly or through majority owner- Regulation (EEC) No. 3922/91 on the harmonisation of technical require- ship by member states or nationals of member states; ments and administrative procedures in the field of civil aviation, as • have as their main objective, air transport in isolation or combined amended by Commission Regulation (EU) No. 859/2008), as well as all the with any other commercial operation of aircraft or the repair and EU regulations, including the Commission Regulation (EU) No. 748/2012, maintenance of aircraft; laying down implementing rules for the airworthiness and environmental • own a valid certificate of airworthiness issued by ENAC and one certification of aircraft and related products, parts and appliances, as well or more aircraft being its property or leased (dry lease), as provided as for the certification of design and production organisations, and the by article 2.2 of the Circular EAL-16 issued by ENAC on 27 February Commission Regulation (EU) No. 1321/2014 on the continuing airworthi- 2008; and ness of aircraft and aeronautical products, parts and appliances, and on the • provide satisfactory evidence of administrative, financial and insur- approval of organisations and personnel involved in these tasks. ance requirements, as provided by EC Regulation No. 1008/2008 ENAC issues its own circulars and rules to implement and further and EC Regulation No. 785/2004, as subsequently amended by EU detail the international rules above. ENAC is also responsible for the regu- Regulation No. 285/2010 on 6 April 2010. lation of crew skill assessment. In particular, on 27 February 2008 ENAC issued Circular EAL-16, which 3 What safety regulation is provided for air operations that do governs in detail the requirements for financial and administrative fitness. not constitute public or commercial transport and how is the Attached to this circular are, inter alia, the forms for business plans, cash distinction made? flow, etc. Moreover, on 21 December 2011, ENAC issued Circular EAL-17-A implementing Regulation No. 785/2004 on insurance requirements for air In general, safety requirements governing commercial and private flights carriers and aircraft operators. are the same. They cover the technical requirements of aircraft, air traffic control and public safety requirements. The differences relate to

110 Getting the Deal Through – Air Transport 2016

6 What procedures are there to obtain licences or other rights to 10 Are there specific rules in place to ensure aviation services operate particular routes? are offered to remote destinations when vital for the local For national and European routes, air carriers must submit an applica- economy? tion to the local coordinator in charge for the allocation of slots, accord- According to article 782 of the Italian Navigation Code, as amended by ing to international rules provided by IATA conferences (clearance). By Legislative Decree No. 96/2005 and Legislative Decree No. 151/2006, Ministerial Decree No. 44/T dated 4 August 1997, Assoclearance has the Italian government may impose public service obligations to guaran- been appointed as the local coordinator for Italian congested airports. tee the right of mobility provided by article 16 of the Italian Constitution. Assoclearance is responsible for the allocation of slots and must abide Article 782 of the Italian Navigation Code complies with EC Regulation No. by its Statute and Code of conduct approved on 21 July 2009. To perform 1008/2008 and No. 95/1993, as amended by EC Regulation No. 793/04. this activity, it has to meet the principles of transparency, neutrality, non- The Italian government may impose public service obligations in respect of discrimination, and the ‘use it or lose it’ rule. domestic scheduled air services serving a peripheral or developing region When an air carrier has operated the slots allocated for at least 80 per or on a thin route to any regional airport, when such route is considered cent of the time during the scheduling period for which they have been vital for the economic development of the region in which the airport is allocated, it will be entitled to operate the same series of slots in the next located. The Italian government imposed public service obligations from equivalent scheduling period (the grandfather rule). If an air carrier cannot and to Sicily and Sardinia pursuant to, respectively, article 36 of Law No. evidence such percentage of use, the slots are placed in a slot pool and real- 144/99, as modified, EU Communication No. 2006 C 305/05 published in located by the local coordinator upon request, unless the air carrier involved the EU Official Journal on 14 December 2006, and EU Communication No. can justify not having met the target on the basis of any reasons pointed out 2006 C 93/08 published in the EU Official Journal on 21 April 2006. in article 10 of EEC Regulation No. 95/93, as amended by Regulation No. 793/04. Furthermore, on 24 August 2009 ENAC issued Circular EAL-18 on 11 Are charter services specially regulated? ‘slot allocation at the Italian congested airports’. The circular aims at inter- Charter services were governed by the Decree of the Ministry of Transport preting and clarifying some provision of Regulation No. 95/93, as amended. dated 18 June 1981 (regulation of non-scheduled services), which covered: Traffic rights on non-European routes are governed by the Chicago • taxi flights; Convention of 1944 (which came into effect on 4 April 1947 and was • own-use charter; approved in Italy by Legislative Decree No. 616 dated 6 March 1948) and • inclusive tour charter; by the relevant treaties. To operate such routes, Italian air carriers must be • advance booking charter; designated by ENAC in compliance with the applicable treaty; designation • special event charter; may be single or multiple. Once designated, an air carrier must apply for • student charter; its relevant slots. • affinityharter; c • migrant workers charter; and 7 What procedures are there for hearing or deciding contested • charter cargo. applications for licences or other rights to operate particular routes? Most of the rules, especially those concerning charter flights within the Any decision made by ENAC or Assoclearance concerning a licence appli- EU, have been superseded by EU regulations, international conventions cation or other rights to operate particular routes can be challenged by the and treaties. interested air carrier by hierarchical petition before the superior adminis- Moreover, ENAC has issued a draft Regulation on extra-Community trative entity or before the competent administrative court. The judgments charter services, currently under discussion, which contains a substantial or orders can then be challenged before the Supreme Administrative Court. modification of the above-mentioned Decree dated 1981. The applicant may also submit the question to the European Commission if its application for an operating licence under Regulation 1008/2008 has 12 Are airfares regulated and, if so, how? been rejected. According to Regulation No. 1008/2008, EU air carriers are able to freely set airfares. Regulation No. 1008/2008 introduced new rules relating to 8 Is there a declared policy on airline access or competition and, the transparency of airfares, which can be briefly summarised as follows: if so, what is it? • fares must include applicable conditions when offered or published; There is no declared policy on airline access. In relation to competition, the • the final price must, at all times, be indicated and must include the competent antitrust authority, the Italian Competition Authority (AGCM), fare and all applicable, unavoidable and foreseeable taxes, charges, has expressed several principles about airline competition. These include surcharges and fees; abolishing burdens, opening the market and avoiding concentrations that • in addition to the final price, the fare, taxes, airport charges and other could have the effect of restricting competition. charges, surcharges or fees must be specified where they have been added to (ie, separated out from) the fare; and 9 What requirements must a foreign air carrier satisfy in order • any optional price supplements must be communicated clearly at the to operate to or from your country? start of the booking process and must be subject to acceptance on a No restrictions are provided for national air carriers to operate to and from strictly ‘opt-in’ basis. Italy, provided that they submit an application to the local coordinator in charge of the allocation of slots according to international rules provided ENAC, acting within its general powers of control of the Italian air carriers, by IATA conferences (clearance), Community Regulation No. 95/93, as oversees the fares determined by air carriers with respect to extra-EU long- amended by Regulation No. 793/04, as well as Circular EAL-18 issued haul routes operated with scheduled flights. by ENAC on 24 August 2009. The same application requirements apply to Community air carriers, provided that to operate domestic flights and Aircraft flights from Italy to extra-EU destinations they shall have an Italian home 13 Who is entitled to be mentioned in the aircraft register? Do base (ie, permanent establishment) pursuant to article 38 of the Italian requirements or limitations apply to the ownership of an Decree No. 179/2012, as converted into Law No. 221/2012. aircraft listed on your country’s register? Non-Community air carriers wishing to operate flights to and from Depending on the circumstances, the owner and the operator are entitled Italy according to traffic rights set out in either bilateral or multilateral air to be mentioned in the aircraft register. Registration in the Italian Aircraft services agreements have to be designated by the state holding the traffic Registry is governed by article 750 of the Italian Navigation Code, which rights. Should no air services agreement be in force, the schedule can be states: ‘Aircraft can be registered under the National Aircraft Registry held authorised only upon prior request submitted by the civil aviation authority by ENAC provided that nationality requirements set forth in article 756 of of the country. the Italian Navigation Code are met. Referring to the nationality requirements of the owner, article 756 paragraph I of the Italian Navigation Code states as follows. In order to satisfy the nationality requirements for registration in the National Aircraft Registry, aircraft should be whole or major property of: www.gettingthedealthrough.com 111

• states, regions, provinces, municipalities and any other Italian or EU requirements are met, the Ministry of Transport entrusts the management member state’s public or private body; of the relevant airport by decree. • Italian citizens or citizens of other EU member states; or • companies established or with registered offices in Italy or other EU 19 Is there a system of economic regulation of airports and, if so, member states, whose share capital is whole or major property of how does it function? Italian or other EU states’ citizens, or Italian or other EU member A system of economic regulation for airports is provided by Law No. 324 states’ body corporate with the same characteristics of shareholding dated 5 May 1976, by Law No. 537 dated 24 December 1993, as amended by and whose president and most part of the directors, including the article 11 of Law No. 248 dated 2 December 2005, and by Law No. 662 dated managing director are Italian or other EU member states’ citizens. 23 December 1996. According to the above rules, aircraft and passenger traffic to and from national airports are subject to the following charges and Article 756, paragraph II, concerning registration in the name of the opera- duties fixed by law: tor, states as follows: ENAC may, derogating from the provisions of the par- • landing and departure charges; agraph above, by grounded rulings, allow the registration in the National • parking charges; and Aircraft Registry of aircraft that are effectively used by, but not property of, • boarding of passengers charges. companies holding the air carrier licence. In such case, the title different from property, based upon which the registration is made, shall result from Pursuant to article 11-nonies of Law No. 248 dated 2 December 2005, the National Aircraft Registry and the registration certificate. airport charges are – as far as the Italian largest airports (such as Rome and Milan) – fixed by a Decree of the Ministry of Transport on the basis 14 Is there a register of aircraft mortgages or charges and, if so, of certain criteria established by a government committee called the how does it function? Interministerial Committee for Economic Planning. As far as the other Mortgages are registered with the National Aircraft Registry kept by Italian airports, airport charges are fixed on the basis of the charges appli- ENAC. Registration is made by filing the mortgage deed duly certified by cation guidelines issued by the Italian Transport Authority. a notary public with the relevant department of ENAC. ENAC records the mortgage on both the Aircraft Registry and the Certificate of Registration 20 Are there laws or rules restricting or qualifying access to of the relevant aircraft. Failing registration, the mortgages are null and airports? void. A mortgage is the most common priority on aircraft and the only one Yes. In particular, in relation to handlers and other service provid- that can be voluntarily granted. Other liens on an aircraft can only arise by ers, the relevant rules are contained in Legislative Decree No. 18 dated law or by judicial order. 13 January 1999, implementing Directive 96/67/EC, which allows only ENAC-licensed handlers and service providers access to airports. ENAC 15 What rights are there to detain aircraft, in respect of unpaid licences are granted on the basis of the requirements set out in section 13 of airport or air navigation charges, or other unpaid debts? Legislative Decree No. 18/99, in a Regulation issued by ENAC on 23 March The Italian courts may order the attachment on any Italian or foreign air- 2011, which replaced a January 2011 Regulation which had previously craft for unpaid charges provided under article 6 of Law No. 324 dated superseded a 2008 Regulation, and in Circular APT 02A issued by ENAC 5 May 1976, which states joint liability of the owner of the aircraft and the on 25 January 2007, replaced by Circular ATP 02B dated 22 November 2013. operator for the payment of any rights, taxes and interests to the airports. Additionally, Circular APT-19 issued by the ENAC on 26 October 2005, Moreover, in Italy an aircraft can be attached, pursuant to article 1023 of section 2.2 about the airport regulation system, governs handlers’ and the Italian Navigation Code, which provides certain liens on the aircraft by service providers’ access to airports. It also sets out regulations that each cause of its operation. airport has to implement.

16 Do specific rules regulate the maintenance of aircraft? 21 How are slots allocated at congested airports? ENAC has issued technical regulations about maintenance programmes At congested airports, slots are allocated by Assoclearance (the local coor- as well as various circulars (ie, NAV 26C dated 24 January 2007, NAV 6A, dinator) in accordance with articles 6, 8, 9, 10 of EEC Regulation No. 95/93, NAV 13, NAV 31B, NAV 42, and NAV 71-B) regulating aircraft maintenance as amended by EC Regulation No. 793/04. operations. Moreover, ENAC applies international rules governing the As already mentioned, in special cases, such as for Milan Linate air- maintenance of aircraft (ie, JAR/EASA 145 and, with effect from 16 July port, slot allocation is further governed by ministerial decrees (Ministerial 2008, EU-OPS, as provided by article 2 of Regulation (EC) No. 1899/2006 Decree dated 3 March 2000 (Bersani I) and Ministerial Decree dated amending Council Regulation (EEC) No. 3922/91 on the harmonisation 5 January 2001 (Bersani II)), which restricted the slot allocation to EU car- of technical requirements and administrative procedures in the field of riers and limited the number of slots to the requested destination on the civil aviation), as well as all the EU regulations, including the Commission basis of the number of passengers with the destination airport (article 1 of Regulation (EU) No. 748/2012, laying down implementing rules for the Bersani II). airworthiness and environmental certification of aircraft and related The Bersani Decrees have recently been amended by the so called products, parts and appliances, as well as for the certification of design Lupi Decree (Ministerial Decree dated 1 October 2014). The new Decree and production organisations, and the Commission Regulation (EU) No. has abolished any restrictions based on the number of passengers, as well 1321/2014 on the continuing airworthiness of aircraft and aeronautical as the European capital’s nature of the destinations served from Milan products, parts and appliances, and on the approval of organisations and Linate airport. personnel involved in these tasks. 22 Are there any laws or rules specifically relating to ground Airports handling? 17 Who owns the airports? EU Directive No. 96/97 of 15 October 1996 on access to the ground-handling market at EU airports has been implemented in Italy by Legislative Most of the Italian Commercial Airports are state-owned and managed by Decree No. 18 dated 13 January 1999. concessions from the state to private companies, according to article 2 of Additionally, as already mentioned above, other measures have been Ministerial Decree No. 521 dated 12 November 1997. issued by ENAC. In particular, the regulation dated 23 March 2011 and Such companies can be participated in by a public entity, such as Circular APT 02A dated 25 January 2007, replaced by Circular ATP 02B regional, provincial, municipal or other local public entities (eg, the dated 22 November 2013 The key changes relate to subcontracting and self- Chamber of Commerce). handling (ie, arrangements whereby airlines provide handling services to There are many private airports devoted to activities such as general their own flights and passengers). aviation, flying schools, parachuting, etc. 23 Who provides air traffic control services? And how are they 18 What system is there for the licensing of airports? regulated? The interested party must file an application pursuant to Ministerial ENAV SpA is the Italian company in charge of controlling and supporting Decree No. 521 dated 12 November 1997. Provided that all the necessary air traffic. It became a publicly controlled joint-stock company on 1 January

112 Getting the Deal Through – Air Transport 2016

2001, according to Law No. 665 dated 21 December 1996, as amended by aviation, as amended by Regulation (EU) No. 376/2014 of the European Law No. 144 dated 17 May 1999. ENAV’s aim is to: Parliament and of the Council of 3 April 2014 on the reporting, analy- • allow aircraft to fly within the assigned airspace with constantly sis and follow-up of occurrences in civil aviation, and Legislative Decree enhanced levels of safety, optimising the effectiveness of the service No. 18 dated 14 January 2013, governing the system of fines applicable in provided and the efficiency of the company; and the case of infringements of Regulation (EU) No. 996/2010 , as amended • handle the airspace safely and consistently, guaranteeing operational by Regulation (EU) No. 376/2014 of the European Parliament and of the continuity and regularity. Council of 3 April 2014 on the reporting, analysis and follow-up of occurrences in civil aviation. ENAV provides three main types of service: • air space management; 27 Is there a mandatory accident and incident reporting system • air traffic flow management; and and, if so, how does it operate? • air traffic services (ATS). The captain of the aircraft concerned has to record the accident or incident in the flight book and report it to ENAC (local airport) immediately after Based on the requirements of the International Civil Aviation Organization landing. (ICAO), the tasks of the ATS are to: Additionally, according to articles 828 and 829 of the Italian Navigation • prevent collisions between aircraft; Code, as amended by article 17 of Legislative Decree No. 66 dated • prevent collisions between aircraft in the manoeuvring area and 25 February 1999, already mentioned above, the airport director and any obstructions in that area; other public authority, upon knowledge of an accident or incident, have • expedite and maintain an orderly flow of air traffic; to immediately report it to the competent judicial authority, the National • provide advice and information useful for the safe and efficient con- Agency for the Safety of Flight and ENAC. duct of flights; and A specific mandatory accident and incident reporting system is pro- • notify appropriate organisations regarding aircraft in need of search vided for in article 3 of Legislative Decree No. 213 of 2 May 2006, which lays and rescue aid, and assist such organisations when required. down that, except as what is provided in articles 828 and 829 of the Italian Navigation Code, occurrences that endanger or that, if not corrected, would Liability and accidents endanger an aircraft, its occupants, or any other person, are reported to 24 Are there any special rules in respect of death of, or injury to, ENAC. A list of examples of these occurrences appears in Annexes I and passengers or loss or damage to baggage or cargo in respect of II to Legislative Decree No. 213. Article 4 indicates a list of persons who, in domestic carriage? the exercise of his or her functions, must report the occurrences to ENAC. According to article 5, the information gathered is stored in a database held Liability of air carriers for the death of, or injury to, passengers and loss or by ENAC. That information will be used for the sole objective of the preven- damage to baggage or cargo in respect of domestic carriage is governed by tion of incidents and accidents in civil aviation (articles 1 and 9). the Montreal Convention dated 28 May 1999 (Convention for the unification of certain rules for international carriage by air), which entered into Competition law force in Italy on the 60th day (28 June 2004) after the 30th ratification (article 56, paragraph 6), as implemented and integrated by Council Regulation 28 Do sector-specific competition rules apply to aviation? If not, (EC) No. 2027/97 of 9 October 1997 on air carrier liability in the event of do the general competition law rules apply? accidents, as amended by EC Regulation No. 889/2002 of 13 May 2002. General competition law rules apply to the aviation sector. No special rules are in force. 25 Are there any special rules about the liability of aircraft operators for surface damage? 29 Is there a sector-specific regulator or are competition rules Liability of aircraft operators for surface damage is regulated by article 965 applied by the general competition authority? of the Italian Navigation Code. According to article 965, the liability of an The competition rules are applied by the general competition authority, the aircraft operator for surface damage caused by an aircraft is entirely gov- AGCM. erned by international rules applicable in Italy. International rules also apply in case of damages caused by aircraft 30 How is the relevant market for the purposes of a competition registered in Italy and by state aircraft within the Italian territory. assessment in the aviation sector defined by the competition authorities? 26 What system and procedures are in place for the investigation In the aviation sector, the AGCM has distinguished between the charter of air accidents? and scheduled flights markets. For charter flights, the geographical market Air accidents are regulated by articles 826 to 833 of the Italian Navigation is divided into long-haul routes and medium or short-haul routes that are Code. The airport manager and public security authorities have to imme- then divided between European countries and the Mediterranean Sea. diately inform the judicial authority and the National Agency for the Safety The relevant market for scheduled flights is defined on the basis of the of Flight of any accidents (Legislative Decree No. 66 dated 25 February single routes operated by air carriers involved in a competition assessment. 1999 which implemented Directive No. 94/56/EC of the Council of 21 November 1994 containing the basic principles governing the investiga- 31 What are the main standards for assessing the competitive tions of civil aviation accidents and incidents. Directive No. 94/56 has been effect of a transaction? superseded by Regulation (EU) No. 996/2010 of the European Parliament The AGCM takes into account the following standards: and of the Council of 20 October 2010 on the investigation and preven- • the possibilities of substitution available to suppliers and users; tion of accidents and incidents in civil aviation and repealing Directive • the market position of the undertakings; No. 94/56/EC). Regulation (EU) No. 996/2010 has been then amended • the access conditions to suppliers or markets; by Regulation (EU) No. 376/2014 of the European Parliament and of the • the structure of the relevant markets; Council of 3 April 2014 on the reporting, analysis and follow-up of occur- • the competitive position of the domestic industry; rences in civil aviation). • barriers to entry of competing undertakings; and Pursuant to article 826, the technical investigations of air accidents and • evolution of supply and demand for the relevant goods or services. incidents, if any, are conducted or supervised by the Agenzia Nazionale per la Sicurezza del Volo in cooperation with the authorities responsible for the 32 What types of remedies have been imposed to remedy judicial inquiry. concerns identified by the competition authorities? According to Legislative Decree No. 66/99 any investigation of an accident or incidents shall be the subject of a report in a form appropriate Competition concerns can be identified by the AGCM after an investiga- to the type and seriousness of the accident. tion has been performed: Moreover, it applies Legislative Decree No. 213 dated 2 May 2006, • in the event of an alleged infringement of article 2 (Agreements which implemented Directive No. 2003/42/EC of the European Parliament restricting freedom of competition) or article 3 (Abuse of a dominant and of the Council of 13 June 1993 on occurrence reporting in civil position) of Law No. 287/1990; or www.gettingthedealthrough.com 113

• if the authority considers that a concentration may be subject to pro- 36 Must clearance from the competition authorities be obtained hibition under article 6 (Prohibition on concentrations restricting free before state aid may be granted? competition) of Law No. 287/1990. Clearance from the AGCM does not have to be obtained before state aid can be granted. In the event of infringements under the first of these points, the author- Instead, the European Commission must be informed about any ity sets a deadline within which the undertakings and entities concerned potential new aid or about plans to grant or alter aid. If the European have to remedy the infringements. In the most serious cases it may decide, Commission determines that such aid or plans are not compliant with the depending on the gravity and duration of the infringement, to impose a common market, having regard to article 107 TFEU, it shall impose that the fine up to 10 per cent of the turnover of each undertaking or entity during state concerned must withdraw or alter such aid, fixing the relevant term. the previous financial year. In the case of non-compliance, the authority shall impose a fine of up to 10 per cent of the turnover of each undertaking 37 If so, what are the main procedural steps to obtain clearance? or entity during the prior financial year. In the case of non-compliance, the See question 36. authority shall impose a fine up to 10 per cent of the turnover. The authority shall also set a time limit for the payment of a fine. In cases of repeated 38 If no clearance is obtained, what procedures apply to recover non-compliance, the authority may decide to order the undertaking to unlawfully granted state aid? suspend activities for up to 30 days. If, following an investigation under the second point, the authority Upon a negative decision of the European Commission in cases of unlawful ascertains that a concentration falls within the scope of article 6 of Law No. aid, Italy is required, pursuant to article 14 of Council Regulation (EC) No. 287/1990, it shall prohibit, or impose limits to, the same. 659/1999 of 22 March 1999, as amended, to take all necessary measures, In particular, in the aviation sector limits to concentration have con- in compliance with Italian laws, to recover the aid from the beneficiary, sisted in release of slots. An exception to the limits to concentration has except when the recovery is contrary to a general principle of Community been established for the recent new Alitalia/Air One merger, which has law. The recovery measure is usually adopted by an administrative act, been consequent to the insolvency of the former Italian flag carrier Alitalia. which can be challenged by the beneficiary of the aid before the competent If the concentration has already taken place, the authority may require Italian courts. measures to be taken in order to restore conditions of effective competition, and remove any effects that distort the same (for example it may order Miscellaneous the acquiring party not to exercise the acquired voting rights). 39 Is there any aviation-specific passenger protection The authority imposes administrative fines on undertakings which legislation? implement a concentration in violation of the prohibitions above, ranging from a minimum of 1 per cent to a maximum of 10 per cent of the turnover ENAC has issued regulations, in particular Circular APT 23A dated of the business forming the object of the concentration. The authority may 5 February 2008, governing the disciplinary proceedings in the case of EC also impose administrative fines on undertakings that fail to comply with Regulation No. 261/04 infringements, implementing EC Regulation No. the prior notification requirements in the amount of 1 per cent of the turno- 261/04, establishing common EU rules on compensation and assistance ver of the year before the year in which the undertaking is challenged, over to passengers in the event of denied boarding, cancellation or long delays and above any other penalties for which it may be liable. of flights. Circular APT 23A replaced Circular APT 23 dated 23 June 2006. On 13 March 2013 the European Commission submitted its proposal for Financial support and state aid revision of EC Regulation 261/2004, which was then amended and voted through by the European Parliament on 5 February 2014. 33 Are there sector-specific rules regulating direct or indirect Package travel, holiday and tours are regulated, including liability, by financial support to companies by the government or Legislative Decree No. 206/2005 (the Consumer Code) and by Legislative government-controlled agencies or companies (state aid) in Decree No. 79/2011 (the Tourism Code), which provides, inter alia, a spe- the aviation sector? If not, do general state aid rules apply? cial fund to reimburse passengers in the case of bankruptcy (limited to pas- General state aid rules provided by the Treaty on the Functioning of the sengers having purchased package tours). European Union (TFEU) are applied in Italy and in the aviation sector. No With reference to disabled passengers, ENAC, according to Law No. sector-specific rules regulating direct or indirect financial support to indi- 104/1992 and Presidential Decree No. 503/1996, has issued a regulation vidual companies by the government or government-controlled agencies (Circular EAL-11, dated 17 December 2003, replaced by Circular Enac or companies exist. GEN-02, implementing EU Regulation No. 1107/2006) regarding the assistance of passengers with reduced mobility. Moreover, the European 34 What are the main principles of the state aid rules applicable Parliament has issued Regulation No. 1107/2006, dated 5 July 2006, to the aviation sector? regarding the rights of disabled persons with reduced mobility when travelling by air, applicable from 26 July 2008, except for articles 3 and 4, which No special rules regulating state aid exist in the aviation sector. The main entered into force from 26 July 2007. principles of the state aid rules are contained in article 107 TFEU. Pursuant Regulation (EC) No. 80/2009 of the European Parliament and of the to article 107, any aid granted by the state or through state resources in any Council of 14 January 2009 on a Code of Conduct for computerised res- form whatsoever is incompatible with the common market when it distorts ervation systems and repealing Council Regulation (EEC) No. 2299/89, is or threatens to distort competition by favouring certain undertakings or applied in Italy. the production of certain goods. 40 Are there mandatory insurance requirements for the 35 Are there exemptions from the state aid rules or situations in operators of aircraft? which they do not apply? Insurance for hull-risk, hull war-risk, and liability for damage incurred There are some circumstances in which the state aid rules do not apply, by crew and passengers is mandatory (articles 935 and 942 of the Italian such as in the case of de minimis aid. The threshold of €200,000 in a Navigation Code). three-year period, as set in article 2 of Commission Regulation (EC) No. 1998/2006 of 15 December 2006 ‘on the application of articles 87 and 88 of the Treaty to de minimis aid’, is applied in Italy. Moreover, certain exemptions are provided under laws issued by Italy in accordance with article 107 TFEU (ie, Law No. 808 dated 24 December 1985, on the public funding subsidies granted to promote the technological development of the aeronautical industry as well as to increase relevant employment). Other situations in which the state aid rules do not apply are provided on a case-by-case basis in compliance with EU exemption regulations.

114 Getting the Deal Through – Air Transport 2016

Update and trends On 16 July 2015 the Italian civil aviation authority (ENAC) issued a Model aircraft are subject to a more lenient regulatory framework, new Regulation on remotely piloted aerial vehicles (RPAVs, also called which does not require self-declaration nor authorisation to start flight drones), which supersedes the previous Regulation of 2013 on the same operations, and distinguishes where such operations can be conducted matter and will come into force 60 days after the issuance date (on 14 depending on the vehicle’s technical requirements. In details, operators September 2015). must not apply ENAC for an ‘air space reserve’ to the extent that a The regulation was largely expected in the aviation field, in light of model aircraft has: the huge increase in the use of RPAVs over Italian territory in the past • maximum take-off operative mass less than 25kg; two years, and the consequent need to ensure a better oversight and • maximum wing surface of 500dm2; more detailed rules for the relevant flight operations. • maximum wing loading’ of 250g/dm2; The preliminary distinction made by ENAC is between ‘remotely • maximum piston engine size of 250cm3; piloted aircraft systems’ (RPAS, highly regulated and subject to the • maximum power of electric engines of 15kW; applicable provisions of the Italian Navigation Code) and ‘model • maximum thrust of turbine engines of 25kg; aircraft’ (exclusively used for recreational and sport purposes and • maximum power of turboprop engines of 15kW; and exempted from the Code provisions). Below is a summary of the main • as long as the operations are performed in non-populated spaces rules set for both of the categories. with an extension of no more than 200 metres, within a height of 70 metres and enough far from buildings and infrastructures. The Remotely piloted aircraft systems evaluation on the compliance with such limits is made directly by They are classified on the basis of the maximum take-off weight the operator and under its exclusive responsibility. (MTOW less than 25kg/MTOW equal to, or more than 25kg) and can be used for special operations or research and development activities. If the above technical or location requirements are not met aircraft Furthermore, the flight operations are distinguished in visual line of models can only be operated in dedicated areas selected by ENAC within sight (ie, operations within vertical and horizontal distances which allow Italian territory, or subject to prior institution of an ‘air space reserve’. the remote pilot to keep a continuing view of the RPAS, without the assistance of visual instruments) and beyond line of sight (ie, operations Update on the Italian tax on aircraft noise beyond certain distances which do not allow a continuous view of the A recent judgment issued by the Italian Constitutional Court (No. RPAS by the remote pilot). All RPAS must have a flight manual (or 13 dated 18 February 2015) established a fundamental rule for the equivalent) and their pilots must be certified by ENAC. The Regulation implementation of the tax on aircraft noise (IRESA) by the Italian also establishes a mandatory third-party insurance for any kind of flight regions. operations performed with RPAS (in compliance with Regulation (EC) By way of background, it must be recalled that IRESA is charged No. 785/2004) and hands down the treatment of personal data collected from 2013 for the noise emissions caused by civil aircraft during the by means of RPAS to the Italian Data Protection Code (Legislative take-off and landing operations at the Italian airports. The amount Decree No. 196/2003). Special provisions are also established on the of the tax is determined by each region on the basis of the aircraft basis of the MTOW: maximum take-off weight and the noise levels certified by the • RPAS with MTOW less than 25kg: International Civil Aviation Organization for each aircraft type. Aircraft • both the vehicle and the relevant ground station must have a types with maximum take-off weight below 4.5 tons benefit of a tax plate identifying the system and its operator; exemption, alike the state aircraft (ie, owned by the Italian government • if RPAS are employed in ‘non-critical flight operations’ or other public bodies) and aircraft engaged in fire-fighting, rescue the responsibility to assess the vehicle’s airworthiness, the operations and medical or emergency services. In addition, historical expected activity and the connected risks is borne by the aircraft (being registered for more than 40 years) and aircraft used for operator, who is required by ENAC to submit a self-declaration training purposes have a tax-exempt status. of compliance with the applicable sections of the Regulation. A case resolved by the Constitutional Court had been commenced The criticality of a flight operation depends on the kind of area by Lazio Region to challenge the provisions set out by National Law No. involved in the activity, whether urban, congested or hosting 9/2014, according to which the maximum rate of the noise emission sensitive infrastructures; tax cannot exceed €0.50 per aircraft ton throughout Italian territory. • if RPAS are otherwise employed in ‘critical flight operations’ This Law has also set guidelines for tax adjustment in case of daily or the operator must obtain a specific authorisation by ENAC in overnight flights, as well as in connection with the characteristics of the advance. The same is granted upon satisfactory survey on the specific urban area near the airport concerned. Before the issuance of vehicle’s airworthiness, pilot’s reliability, kind of operations National Law No. 9/2014, in practice taxes between €1.5 and €2.5 had and location where the vehicle is intended to be flown. ENAC been applied per ton and for each take-off or landing. authorisation is always required for research and development Lazio Region argued that the Law was illegitimate as IRESA would activities. Also, the overflight of aggregation of people is in be a matter under exclusive jurisdiction of the Italian Regions. It must any case forbidden (such as public demonstrations or sports be noted that Lazio Region had previously implemented IRESA by events); and Regional Law No. 2/2013 and applied tax rates between €1.60 and €2.5 • operators must keep detailed records of their flight operations per aircraft ton (both Rome FCO and Rome CIA airports fall within the and then file those with ENAC on a yearly basis. Lazio Region jurisdiction). On such a basis the Constitutional Court was • RPAS with MTOW of (or more than) 25kg: asked to rule on the constitutional legitimacy of the law adopted by the • in addition to a plate identifying the system and the operator to Italian parliament. be applied both on the vehicle and the relevant ground station, By means of the aforementioned decision the Constitutional RPAS must be recorded with the Italian Registry of Remotely Court stated that National Law No. 9/2014 is fully legal and legitimate, Piloted Aircraft held by ENAC. Therefore each RPAS shall also explaining – inter alia – that no violation to article 117 of the Italian have dedicated registration marks; Constitution (regarding the separation of the legislative powers among • the airworthiness assessment is carried out directly by ENAC. the state and the regions) had been proven by Lazio Region. According If the vehicle is made in a serial production by a certified to the court, the limit and guidelines fixed at national level also have an manufacturer the authority issues a certificate of airworthiness, important role in coordinating the implementation of IRESA region by otherwise the vehicle can be operated upon the issuance of a region, thus minimising the risk of negative effects on a fair competition specific permit to fly; between different airports and geographical areas. • the ENAC authorisation is always required, irrespective of As a consequence of the above resolution, on March 2015 the Lazio whether the flight operations are deemed ‘non-critical’ or Region authorities informed that they will readjust the IRESA rates ‘critical’; and in compliance with the ruling of the Constitutional Court, and refund • the operator must establish a proper maintenance programme the excess taxes paid by the operators prior to the court’s decision, by for ensuring the continuing airworthiness of the RPAS. allowing the excess amounts to apply against future payments of the tax.

Model aircraft The definition of a model aircraft given by the Regulation is ‘a remotely piloted aerial device exclusively used for recreational and sport purposes and being under the continuous visual control of the operator, without the assistance of visual instruments’.

www.gettingthedealthrough.com 115

41 What legal requirements are there with regard to aviation 42 What serious crimes exist with regard to aviation? security? The Italian Navigation Code specifies some crimes specific to aviation (see Article 5 of Law No. 217, dated 28 February 1992, provides certain rules articles 1080 to 1248). In particular, the following have to be noted in term about aviation security services activities. The rules have been then imple- of seriousness: mented by Ministerial Decree No. 85 dated 29 January 1999, which set forth • defection (article 1091 of the Italian Navigation Code); the legal requirements that the suppliers of security services are required to • a passenger disregarding an order given by the crew (articles 1094 and meet in order to be licensed by the ENAC. The following requirements are 1095 of the Italian Navigation Code); provided: • abandonment of an aircraft in distress by the captain or by the crew • professional, technical, insurance and financial capabilities; (articles 1097 and 1098 of the Italian Navigation Code); • reliability in carrying on the activities; • offences against the captain or officer (article 1104 of the Italian • the registered office to be located in Italy; and Navigation Code); • share capital not to be lower than €50,000. • mutiny (article 1105 of the Italian Navigation Code); and • piracy (article 1135 of the Italian Navigation Code). ENAC has also issued Circulars SEC-01, SEC-02 and SEC-03, dated 7 October 2004, SEC-04 dated 23 January 2013, SEC-05 dated 20 December 2012 and SEC-06 dated 15 May 2013, which provide technical regulation of the activities of the aviation security services.

Laura Pierallini [email protected]

28 Viale Liegi 26 Piazza Castello 00198 Rome 20121 Milan Italy Italy Tel: +39 06 884 1713 Tel: +39 02 8691 5468 Fax: +39 06 884 0249 Fax: +39 02 8775 04

www.studiopierallini.it

116 Getting the Deal Through – Air Transport 2016

Japan

Shuji Yamaguchi Okabe & Yamaguchi

General 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular 1 Which bodies regulate aviation in your country, under what routes? basic laws? The MLITT will decide based on the application. A hearing will be held, The Ministry of Land, Infrastructure, Transport and Tourism (MLITT) if necessary. regulates aviation under the Civil Aeronautics Law (CAL). 8 Is there a declared policy on airline access or competition and, Regulation of aviation operations if so, what is it? 2 How is air transport regulated in terms of safety? The MLITT set up the ‘Asian Gateway Initiative’ to promote open skies and No person may operate an aircraft without a valid airworthiness certifi- establish a framework for creating a network of various air routes across cate (CAL article 11). The airworthiness of aircraft shall be assessed by the 26 countries. MLITT (CAL article 10 (1)). The aircraft shall be maintained in accordance with the MLITT regulation. 9 What requirements must a foreign air carrier satisfy in order The pilot, flight navigator, flight engineer, radiotelephone operator, to operate to or from your country? aircraft maintenance technician, aircraft line maintenance technician and A foreign air carrier must submit the following to the MLITT: aircraft overhaul technician should have the airman competence certifi- • the documents that prove it has permission to carry out the air trans- cate (CAL article 24). The MLITT issues airman competence certification port service on the concerned route from the foreign state where the for a person who will perform air navigation service (CAL article 22). applicant has nationality; The air operator must obtain a licence from the MLITT. It must also • its articles of incorporation; have a suitable operation plan in place to ensure transport safety and its • its recent profit and loss data and a balance sheet; and ability to conduct the relevant service properly (CAL article 101). • the conditions of carriage.

3 What safety regulation is provided for air operations that do 10 Are there specific rules in place to ensure aviation services not constitute public or commercial transport and how is the are offered to remote destinations when vital for the local distinction made? economy? The CAL sets out the general safety rules, as mentioned in question 2. No special rule exists but, generally speaking, aviation services to a local The general safety rules shall be applicable to air operations that do airport will be more easily accepted. not constitute public or commercial transport. A private pilot licence is different from the licence for an airline transport pilot or commercial pilot. 11 Are charter services specially regulated? Only the Self-Defence Forces Law excludes the application of the CAL Air carriers that wish to operate a charter service must obtain permission to a certain extent (Self-Defence Forces Law article 107). The airworthi- from the MLITT. ness certificates, the licence, the flight certificate, the flight instructor No special regulation exists. certificate, and the aircraft registration requirements of the CAL shall not apply to the Self-Defence Forces. 12 Are airfares regulated and, if so, how? 4 Is access to the market for the provision of air transport A foreign air carrier must obtain permission from the MLITT for the airfare services regulated and, if so, how? or freight charges they plan to use (CAL article 129-2). The aircraft operator should be in possession of a licence from the MLITT Aircraft (CAL article 100). Foreign aircraft operators are also required to have a licence issued by 13 Who is entitled to be mentioned in the aircraft register? Do the MLITT (CAL article 129). requirements or limitations apply to the ownership of an aircraft listed on your country’s register? 5 What requirements apply in the areas of financial fitness and Only Japanese and Japanese-registered companies are entitled to register nationality of ownership regarding control of air carriers? an aircraft. The air carrier should have sufficient ability to perform air carriage (CAL CAL article 4 provides that the following persons or entities shall not articles 101(1)(iii) and 129(1)). Apart from having sufficient assets and be entitled to register aircraft in Japan: financial status to undertake the business of air carriage, no specific criteria • any person who does not have Japanese nationality; are stipulated for air carriers. • any foreign state or public entity or its equivalent to any foreign state; • any judicial person or body established in accordance with the law and 6 What procedures are there to obtain licences or other rights to ordinances of any foreign state; or operate particular routes? • any judicial person of which the representative is not one of those The air carrier must obtain approval from the MLITT for the routes speci- listed in the proceeding three items or of which more than one-third fied in their operation plan. of the officers are such persons or more than one-third of voting rights are held by such a person.

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14 Is there a register of aircraft mortgages or charges and, if so, 23 Who provides air traffic control services? And how are they how does it function? regulated? The aircraft mortgage shall be registered in the aircraft registry (Aircraft In an air traffic control area or an air traffic control zone, an aircraft shall Registry Rules article 39). be navigated in accordance with instruction given by the MLITT to ensure A creditor may apply to the court for a public auction (Civil Execution safety and smooth air traffic with regard to the order, time or method of Rules article 84), in accordance with the Civil Execution Law. take-off or landing (CAL article 96(1)).

15 What rights are there to detain aircraft, in respect of unpaid Liability and accidents airport or air navigation charges, or other unpaid debts? 24 Are there any special rules in respect of death of, or injury to, There are no special rights to detain aircraft in respect of unpaid airport or passengers or loss or damage to baggage or cargo in respect of airport navigation charges or other unpaid debts. domestic carriage? There is no law specific to domestic air transport. 16 Do specific rules regulate the maintenance of aircraft? It is considered that the Commercial Code’s provisions on land trans- The maintenance of aircraft shall be performed by an organisation port shall apply to air transport. The Commercial Code will be amended approved by and which conforms to technical standards specified by the and the new Code will have provisions about air transport. MLITT (CAL articles 19 and 20). After maintenance, the aircraft should be In the meantime, the air carriage rules provided by the air carriers certified to conform to the standards specified by article 14 of the MLITT shall be applicable. Ordinance of Civil Air Law and its appendices 1 to 3 with regard to strength, No limitation of liability exists for death of or injury to passengers. structure and performance to ensure the safety of the aircraft, and compli- However, the air carrier’s liability for the loss or damage to baggage shall ance with noise standards and engine emission requirements (CAL article be limited to ¥150,000 per person (Japan Air Lines (JAL) condition of car- 10(4)). riage for passengers article 47). The air carrier’s liability to the cargo shall be limited to ¥30,000 per Airports contract (JAL condition of inland carriage of goods article 41(2)). 17 Who owns the airports? Other airlines have similar conditions of domestic carriage. • Narita International Airport Co Ltd established and manages Narita 25 Are there any special rules about the liability of aircraft International Airport. operators for surface damage? • Central Japan International Airport Co Ltd established and manages Chubu International Airport. The air carrier shall be liable for any loss or damage to the third party, if any • New Kansai International Airport Co Ltd established and manages negligence exists for the air carrier in tort. Kansai International Airport and Osaka International Airport. • The Japanese government established and manages Tokyo 26 What system and procedures are in place for the investigation International Airport and other International Airports (Airport Law of air accidents? article 4). If an accident happens, the Transport Safety Board shall investigate the • Local governments establish and manage other local airports (Airport accident and its cause to prevent future accidents and mitigate loss or dam- Law article 5). age. The Transport Safety Board will issue a report about any accident that they investigate and this report shall be made available to the public. 18 What system is there for the licensing of airports? The airport shall be established in accordance with the Basic Policy of 27 Is there a mandatory accident and incident reporting system Establishment and Management of Airports provided by the MLITT. The and, if so, how does it operate? airport should have approval from the MLITT (CAL article 38). The pilot in command shall report to the MLITT the following: • a crash, collision or fire in an aircraft; 19 Is there a system of economic regulation of airports and, if so, • injury or death of any person or destruction of any object caused by an how does it function? aircraft; Landing charges must be notified to the MLITT. An airport using charges • the death or disappearance of any person on board; and must be approved by the MLITT. • contact with other aircraft and any malefaction of air navigation facility. 20 Are there laws or rules restricting or qualifying access to airports? The operator of the aircraft may report the above to the MLITT instead of the pilot (CAL article 76). The chief officer of the airport may restrict or prohibit entry to the airport if the airport is too crowded or for any other reasons necessary to manage Competition law the airport. 28 Do sector-specific competition rules apply to aviation? If not, 21 How are slots allocated at congested airports? do the general competition law rules apply? Slot allocation shall be decided by the MLITT. There are no sector-specific competition rules applicable to aviation. The No special slot allocation rules exist. general completion law rules apply to aviation but the following exceptions exist. 22 Are there any laws or rules specifically relating to ground The Act on Prohibition of Private Monopolisation and Maintenance of handling? Fair Trade (the Antitrust Law) shall not apply to the following actions if the The Airport Law provides that the MLITT may nominate the person who air carrier obtained approval: undertakes the airport function facility business upon his or her applica- • in the case where any domestic air carrier concludes an agreement on tion (article 15). joint management with another air carrier, when two or more domestic Following enactment of the Act on Promotion of Private Finance air carriers operate air transport services in order to ensure passenger Initiative in 2010, it is expected that the airport management will be open transport necessary for local residents’ life on a route between points to private companies. within the country where it is expected to be difficult to continue the The private company shall be chosen by the government or the local services due to decreased demand for air transport services; and government that manages the airport. • in the case where any domestic air carrier concludes an agreement on joint carriage, fare agreement and other agreements relating to transportation with another air carrier in order to promote public convenience for a route between a point in the country and another point in a foreign country, or between one point and another in foreign countries.

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29 Is there a sector-specific regulator or are competition rules 34 What are the main principles of the state aid rules applicable applied by the general competition authority? to the aviation sector? The competition rules applicable are those of the general competition No state aid rules exist. However, when JAL faced financial difficulties, it authority, the Fair Trade Commission. was supported by the Regional Economy Vitalization Corporation of Japan (REVC), a fund set up by the government and private financial companies 30 How is the relevant market for the purposes of a competition to support companies with large debt. assessment in the aviation sector defined by the competition authorities? 35 Are there exemptions from the state aid rules or situations in The same general principles will be applied to the aviation sector as for which they do not apply? other business areas. No state aid rules exist.

31 What are the main standards for assessing the competitive 36 Must clearance from the competition authorities be obtained effect of a transaction? before state aid may be granted? An enterprise must not effect private monopolisation or unreasonable No state aid rules exist. restraint of trade (Antitrust Law article 3). The support from the REVC is not the government aid. It is just sup- An enterprise must not enter into an international agreement or an port from a fund. international contract which contains such matters that fall under unrea- In the JAL case, a court procedure was used to apply for reorganisation. sonable restraint of trade or unfair trade practices (Antitrust Law article 6). The REVC supported JAL through the court proceedings. No enterprise shall employ unfair trade practices (Antitrust Law article 19). 37 If so, what are the main procedural steps to obtain clearance? Air carriers also use the Corporate Reorganisation Law or other insolvency 32 What types of remedies have been imposed to remedy law procedures. concerns identified by the competition authorities? The REVC decides to give its support at its own discretion but govern- A person whose interests are infringed upon or likely to be infringed upon ment policy is often important. by an act in violation of the provisions of article 8, item (v) or article 19 and who is thereby suffering or likely to suffer extreme damage is entitled to 38 If no clearance is obtained, what procedures apply to recover seek the suspension or prevention of such infringements from an enter- unlawfully granted state aid? prise or a trade association that infringe upon or are likely to infringe upon As the court system is used to reorganise air carriers, no unlawful aid exists. such interests (Antitrust Law article 24). The REVC’s support is not unlawful. A enterprise that has committed an act in violation of the provisions of articles 3, 6 or 19 (for enterprises that have committed acts in violation of Miscellaneous the provisions of article 6, limited to enterprises that have effected unreasonable restraint of trade or employed unfair trade practices in the inter- 39 Is there any aviation-specific passenger protection national agreement or contract concerned) and any trade association that legislation? has committed an act in violation of the provisions of article 8 is liable for There is no specific passenger protection legislation. damages suffered by another party (Antitrust Law article 25(1)). 40 Are there mandatory insurance requirements for the Financial support and state aid operators of aircraft? 33 Are there sector-specific rules regulating direct or indirect There are no mandatory insurance requirements. financial support to companies by the government or However, the MLITT may order a carrier to conclude an insurance government-controlled agencies or companies (state aid) in contract that underwrites liability for damage or injury due to aircraft acci- the aviation sector? If not, do general state aid rules apply? dents (CAL article 112(6)). No financial aid in the form of state aid is provided to the aviation sector as 41 What legal requirements are there with regard to aviation air carriers are private companies. security? Japan Air Lines Ltd (JAL) was reorganised by application of the Corporate Reorganisation Law, which is usual legal procedure in the courts. CAL requires all airports and aircraft operators to have a security manual to prohibit any dangerous objects from being brought into airports or on board aircraft. CAL also prohibits any persons from affecting the safety of the aircraft.

Okabe & Yamaguchi

Shuji Yamaguchi [email protected]

Eiha Shinkawa, 5th Floor Tel: +81 3 3555 7931 1-5-17, Shinkawa Fax: +81 3 3555 7934 Chuo-Ku [email protected] Tokyo 104-0033 www.olo.gr.jp Japan

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42 What serious crimes exist with regard to aviation? Article 3 There are two special laws about crimes relating to air carriage: the Law on Any persons who destroy an aircraft shall be sentenced to between one Punishment of Acts to Endanger Aviation (APAEA) and the Anti- Hijacking year and 10 years’ imprisonment. Law (AHL). Any persons who kill a person or persons by destroying an aircraft shall The APAPEA provides the following crimes: be sentenced to between three years’ and unlimited imprisonment.

Article 1 Article 4 Any persons who destroy airport facilities, air navigation facilities or under- Any persons who bring explosive object(s) into an aircraft shall be sen- take any other acts to make air carriage dangerous shall be sentenced to up tenced to three years’ imprisonment or more. to three years’ imprisonment. Any person who brings a gun, knife, Molotov cocktail or other dangerous objects shall be sentenced to two years’ imprisonment or more. Article 2 Any person who destroys or downs a flying aircraft shall be sentenced to The AHL provides the following crimes: three years’ imprisonment or more, including unlimited imprisonment. • any persons who hijack an aircraft shall be sentenced to between Any person who kills a person or persons by destroying or downing an seven years’ and unlimited imprisonment; and aircraft shall be sentenced to between seven years’ and unlimited impris- • any persons who kill a person or persons by hijacking an aircraft shall onment, or to death. be sentenced to death or unlimited imprisonment.

Japanese criminal laws have a large range in the punishment’s term. The punishment shall be at the judge’s discretion.

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Malta

Tonio Grech Dingli & Dingli Law Firm

General Furthermore, by section 3 of the Civil Aviation Act, the Authority has the power to appoint a person to act as Director General for Civil Aviation 1 Which bodies regulate aviation in your country, under what in Malta to implement the strategies and objectives of the Authority and basic laws? to act in accordance with the policies, strategies and directives of the In Malta, aviation is regulated by the Civil Aviation Directorate, which is Authority. In doing so he uses the powers given to him by the several laws a directorate within the Authority for Transport in Malta. This authority and regulations on civil aviation such as the Air Navigation Order and the falls within the remit of the Ministry for Infrastructure, Transport and Civil Aviation (Air Operators’ Certificates) Act. Furthermore, the aviation Communications. requirements issued by the European Aviation Safety Agency (EASA) have There are several laws regulating civil aviation in Malta, each govern- also enhanced air transport safety in Malta. ing the different aspects of civil aviation. These are mainly the following: • the Authority for Transport in Malta Act; 3 What safety regulation is provided for air operations that do • the Civil Aviation Act; not constitute public or commercial transport and how is the • the Eurocontrol Act; distinction made? • the Civil Aviation (Air Operators’ Certificates) Act; The Air Navigation Order distinguishes between public transport and pri- • the Airports and Civil Aviation (Security) Act; vate flights in that an aircraft in flight is deemed to fly for the purpose of • the Civil Aviation (Security) Act; public transport: • the Aircraft Registration Act; • if payment or reward is given or promised for the carriage of passen- • the Code of Conduct for Computerised Reservation Systems Act; gers or cargo on that flight; or • subsidiary legislation promulgated on the basis of the powers given to • if any passengers or cargo are carried gratuitously in the aircraft on the Minister for Transport in the several enabling acts; and that flight by an air transport undertaking (defined as an undertak- • EU Regulations on civil aviation. ing whose business includes the carriage by air of passengers or cargo for payment or reward), not being persons in the employment of the The subsidiary legislation is vital in the regulation of civil aviation in Malta undertaking (including in the case of a body corporate its directors), or because it is enacted specifically with regard to that aspect of civil avia- persons authorised by the Director General to make an inspection or tion that it purports to regulate. The following are a few examples: the Air witness any training practice or test for any of the purposes of the Air Navigation Order governing, inter alia, aviation safety, the Civil Aviation Navigation Order, or cargo intended to be used by any such passengers Joint Aviation Requirements Order forming the JARS part of Maltese law, as aforesaid, or by the undertaking; or and the several regulations transposing EU directives into Maltese law. • if payment or reward is given or promised for the right to fly the aircraft on that flight otherwise than under a hire purchase agreement or simi- Regulation of aviation operations lar agreement. 2 How is air transport regulated in terms of safety? Consequently, under the Air Navigation Order the main distinction Under section 9 of the Authority for Transport in Malta Act, the Authority between public transport and private flights is the question of payment or for Transport has, inter alia, the following powers: reward. The ordinary rules of airworthiness, safety and private pilot licens- • to ensure a safe operational environment in accordance with the ing and crew are still applicable to private flights. Moreover, any rule of Convention on International Civil Aviation created in Chicago on 7 EASA affecting private flights is adopted in Malta. December 1944; • to regulate transport by air, the registration, licensing and use of 4 Is access to the market for the provision of air transport aircraft, the licensing of all commercial operations connected with services regulated and, if so, how? air transport and service providers, the construction, maintenance, licensing and inspection of aerodromes and other facilities connected On the basis of subsection 1 of article 6 of the Civil Aviation Act, no air- with air transport and to make provision for any matter that is provided craft shall be used on any flight for reward or in connection with any trade for under the Authority for Transport in Malta Act in connection with or business except under and in accordance with the terms of a licence air transport; granted to the operator of the aircraft. Under the Civil Aviation Act this is • to regulate air traffic management and airspace design, including com- called an ‘operator licence’, being a licence currently in force and authoris- munications, navigation, surveillance, airspace and air traffic manage- ing the operator to operate aircraft on such flights as that in question. ment systems and procedures, as well as aeronautical information Moreover, by section 4 of the Civil Aviation (Air Operators’ Certificates) services; Act, an aircraft registered in Malta shall not fly on any flight for the purpose • generally to secure the safety, efficiency and regularity of air naviga- of public transport, other than under and in accordance with the terms of a tion and the safety of aircraft and of persons and property carried certificate granted to the operator of the aircraft, certifying that the holder therein, to prevent aircraft endangering other persons and property of the certificate is competent to secure that aircraft operated by him or her and, in particular, to detain aircraft for any of these purposes; and on such flights as that in question are operated safely. • to license flight crew, air traffic controllers and apron controllers and Furthermore, market access within the European Union is regu- to monitor the conduct of their medical examinations and to license lated by virtue of Regulation (EC) No. 1008/2008. The Civil Aviation aircraft maintenance engineers and other aviation personnel. (Air Transport Licensing) Regulations contain the rules emanating from EC Regulation No. 1008/2008 on common rules for the operation of air

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© Law Business Research Ltd 2015 MALTA Dingli & Dingli Law Firm services in the Community, which also apply also to Malta as a member 9 What requirements must a foreign air carrier satisfy in order state of the European Union. to operate to or from your country? According to article 9 of the Civil Aviation Act, an aircraft registered in any 5 What requirements apply in the areas of financial fitness and country or territory other than Malta shall not take on board or discharge nationality of ownership regarding control of air carriers? any passengers or cargo in Malta, being passengers or cargo carried or to According to the Civil Aviation Act, an air transport undertaking provid- be carried for hire or reward or in connection with any trade or business, ing an air transport service shall not be granted an operator licence unless except with the permission of the Authority for Transport in Malta granted it shows to the satisfaction of the Authority for Transport in Malta (the under article 9 to the operator or the charterer of the aircraft or to the gov- Authority) that: ernment of the country in which the aircraft is registered, and in accord- • its principal place of business and, if any, its registered office are ance with any conditions to which such permission may be subject unless located in Malta; that aircraft is being used in the exercise of traffic rights regarding access • its main occupation is air transport in isolation or combined with any of European Union air transport undertakings on air routes in the territory other commercial operation of aircraft or repair and maintenance of of the European Union. aircraft; and • it is owned and continues to be owned directly or through major- 10 Are there specific rules in place to ensure aviation services ity ownership by member states of the European Union or nationals are offered to remote destinations when vital for the local of member states of the European Union, who shall at all times have economy? effective control of the air transport undertaking. There are no specific rules in view of Malta’s small size.

Moreover, the Authority shall only grant an operator licence to an applicant 11 Are charter services specially regulated? if such applicant is in possession of a valid air operator’s certificate specify- Charter services are not specially regulated in Malta. ing the activities to be covered in the operator licence. The operator licence shall remain valid for as long as the air transport undertaking continues to 12 Are airfares regulated and, if so, how? meet the requirements for the issue thereof. The holder of the licence shall, whenever requested by the Authority, furnish it with all pertinent informa- Airfares are regulated by the Civil Aviation (Air Fares) Regulations. Air tion that the Authority may require to be in a position to ascertain the con- transport undertakings of ‘agreement states’ operating scheduled air ser- tinued validity of the licence. vices to and from Malta may set airfares without requiring any approval As far as the financial fitness is concerned, the Schedule to the Civil from the director. Airfares so set are not required to be filed with the Aviation (Air Transport Licensing) Regulations provides a list of informa- Director General of Civil Aviation more than 24 hours, including a working tion to be provided by a first-time applicant from a financial fitness point day, before the airfares come into effect, except in the case of matching an of view. existent fare, for which no more than prior notification is required. Moreover, the Civil Aviation Act states that if, as a result of insol- ‘Agreement’ means an agreement between groups of states to which vency or similar proceedings against the holder of an operator licence, Malta is a party, reciprocally granting to citizens of such states or their the Authority is satisfied that there is no realistic prospect of a satisfactory dependants the right to enter, remain and reside in and leave the country financial reconstruction of the holder within a reasonable time, it shall of such states, to move freely within such states for such period as may be revoke the licence. established in the agreement and to work or establish, provide or receive services therein; and ‘agreement state’ is construed accordingly; 6 What procedures are there to obtain licences or other rights to However, the Director General of Civil Aviation may decide, at any operate particular routes? moment: • to withdraw a basic fare which, taking into account the whole fare In general, when an air carrier obtains an operator licence, it may operate structure for the route in question and other relevant factors including any route that is covered by an air service agreement entered into between the competitive market situation, is excessively high to the disadvan- Malta and the other country. Insofar as the European Union is concerned, tage of users in relation to the long-term fully allocated relevant costs the air carrier, which has obtained an operating licence in any EU mem- of the air carrier, including a satisfactory return on capital; or ber state, may operate any intra-European route. The distribution of traffic • to stop, in a non-discriminatory way, further fare decreases in a mar- rights among EU air carriers is carried out by the Director General of Civil ket, whether on a route or a group of routes, when market forces have Aviation in accordance with article 5 of Regulation (EC) No. 847/2004 on led to sustained downward development of air fares deviating sig- the negotiation and implementation of air service agreements. nificantly from ordinary seasonal pricing movements and resulting in widespread losses among all air carriers concerned for the air services 7 What procedures are there for hearing or deciding contested concerned, taking into account the long-term fully allocated relevant applications for licences or other rights to operate particular costs of the air transport undertakings. routes? An applicant for or holder of an operator’s certificate who is aggrieved by Aircraft a decision of the director as to that application or certificate may appeal to the Aviation Safety Board on the basis of article 8(1) of the Civil Aviation 13 Who is entitled to be mentioned in the aircraft register? Do (Air Operators’ Certificates) Act. requirements or limitations apply to the ownership of an In the case of a decision on the right to operate a particular route, an aircraft listed on your country’s register? appeal lies to the Traffic Rights Appeals Board in accordance with regula- By article 6 of the Aircraft Registration Act, the persons qualified to register tion 3(3) of the Civil Aviation (Distribution of Traffic Rights) Regulations on any aircraft in the national aircraft are the following: any of the following grounds: (a) the government of Malta; • that a material error as to the facts has been made; (b) a citizen of Malta or a citizen of a member state of the European Union • that there was a material procedural error; or of an EEA state, or Switzerland, having a place of residence or busi- • that an error of law has been made; or ness in Malta, the European Union, the European Economic Area or • that there was some material illegality, including unreasonableness or Switzerland, including a person sharing in the ownership of such air- lack of proportionality. craft by virtue of the community of acquests subsisting between such person and a citizen as described above in whose name the aircraft is 8 Is there a declared policy on airline access or competition and, registered; if so, what is it? (c) an undertaking formed and existing in accordance with the laws of Malta does not have a declared policy on airline access or competition. Malta, of a member state of the European Union, of an EEA state or Market access is regulated by bilateral air service agreements. Furthermore of Switzerland and having its registered office, central administration as a member state of the European Union, air services between Malta and and principal place of business within Malta, or the European Union, other member states are liberalised. or the European Economic Area or Switzerland, whereof not less than 50 per cent of the undertaking is owned and effectively controlled by

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the government of Malta, or by any member state of the European in favour of one or more creditors, in the form prescribed, which shall be Union, or by persons referred to in (b), whether directly or indirectly entered into the National Aircraft Register by the Director General. through one or more intermediate undertakings; and When a prohibitory notice is entered in the National Aircraft Register, (d) a natural person who is a citizen of, or an undertaking established in, the Director General shall not thereafter record any security interest in the an approved jurisdiction, other than those mentioned in (b) or (c), shall National Aircraft Register in accordance with this part, until the prohibi- be qualified to register aircraft in construction or one which is not used tory notice is withdrawn by the creditor. to provide air services if it: • enjoys, to the satisfaction of the Director General, legal capacity 15 What rights are there to detain aircraft, in respect of unpaid to own or operate an aircraft in terms of the law under which it has airport or air navigation charges, or other unpaid debts? been established or registered; The detention of aircraft in respect of unpaid charges may be achieved • complies with the requirements established under the Aircraft through a warrant of arrest of the aircraft, both as a precautionary measure Registration Act, and any regulations made or guidelines issued or as a means of enforcement. As a precautionary measure, the warrant of pursuant thereto; arrest may only be sued out by a mortgagee whatever the amount of the • satisfies the Director General that it can and will ensure due mortgage or any other creditor in security of a claim of €7,000 in case of observance of the laws of Malta relating to civil aviation; and non-commercial aircraft or €1 million in case of aircraft being used for • complies with the requirements applicable to an international reg- public transport. istrant in terms of Part III of the Aircraft Registration Act. 16 Do specific rules regulate the maintenance of aircraft? An aircraft may be registered in the National Aircraft Register by any per- The Air Navigation Order regulates aircraft maintenance. Article 9 states son referred to in article 6 and who may be: that an aircraft registered in Malta in respect of which a certificate of air- (a) an owner of the aircraft who operates the said aircraft; worthiness in any category except the special category is in force shall not (b) an owner of an aircraft under construction or temporarily not being fly unless: operated or managed; • the aircraft, including in particular its engines, together with its equip- (c) an operator of an aircraft under a temporary title which satisfies the ment and radio station is maintained in accordance with a mainte- conditions that may be prescribed; or nance schedule or maintenance programme approved by the Director (d) a buyer of an aircraft under a conditional sale or title reservation or General in relation to that aircraft; and similar agreement which satisfies the conditions that may be pre- • there is in force a certificate, in this order referred to as a ‘certificate scribed and who is authorised thereunder to operate the aircraft. of maintenance review’, issued in respect of the aircraft in accordance with the provisions of this article and such certificate shall certify the Moreover, when an aircraft is registered by a registrant under (c) or (d) dates on which the maintenance review was carried out and the date above, every person who holds any interest by way of ownership or title in thereafter when the next review is due – provided that such a certifi- the aircraft or a share therein may make a request in writing to the Director cate is not required where an aircraft is being operated to the require- General to have his name, address and ownership interests or title noted in ments of JAR OPS 1 or JAR OPS 3. the certificate of registration. With regard to aircraft not engaged in air services (non-commercial Airports aircraft) there are no restrictions insofar as qualification for registration is concerned. However, the Director General of Civil Aviation retains the 17 Who owns the airports? right by law to declare that a registrant is not qualified. Malta International Airport, which is the only international airport in Malta, is currently owned and operated by Malta International Airport plc. 14 Is there a register of aircraft mortgages or charges and, if so, how does it function? 18 What system is there for the licensing of airports? The Aircraft Registration Act contains specific provisions with regard to The licensing of airports is regulated by the Civil Aviation (Aerodrome mortgages and other charges. Mortgages are recorded by the Director Licensing) Regulations. General of Civil Aviation in the National Aircraft Register in the order of The applicant for an aerodrome licence has to submit for accept- time in which they are produced to him for that purpose. ance to the Director General of Civil Aviation an aerodrome manual and Where it is stated in the instrument of the mortgage that it is prohib- amendments thereto as may be required from time to time. The manual ited to create further mortgages on an aircraft without the prior written shall consist of five parts which shall contain the information specified in consent of the mortgagee, the Director General shall make a note in the Appendix 1 to ICAO Document 9774. National Aircraft Register to such effect, and the Director General shall not The aerodrome manual shall: record such further mortgage unless the consent in writing of the holder of • be typewritten or printed, and signed by the aerodrome operator; a prior mortgage is produced to him, and any mortgage registered in viola- • be in a format that is easy to revise; tion of this provision shall be null and void. • have a system for recording the currency of pages and amendments Provided that where such further mortgage is executed in favour of an thereto, including a page for logging revisions; and existing creditor, no such consent shall be required from such creditor. • be organised in a manner that will facilitate the preparation, review Provided further that the above does not hinder the registration of a and acceptance and/or approval process. special privilege where the Aircraft Registration Act requires registration for its continuing validity and effect. Furthermore the operator of an aerodrome used for public transport pur- When it is stated in the instrument of mortgage that it is prohibited to poses shall comply with the Standards and Recommended Practices of effect the transfer of the aircraft which is being mortgaged or charged, or volume 1 and volume 2, Annex 14 to the Convention on International Civil of a share therein, without the previous written consent of the mortgagee, Aviation, except for differences filed by Malta, and with national regula- the Director General shall make a note in the National Aircraft Register to tions, as well as with any conditions that are specified in the aerodrome such effect, and the Director General, notwithstanding any other provision licence. of the Aircraft Registration Act, shall not record any transfer of such aircraft or of a share therein unless the consent in writing of such mortgagee 19 Is there a system of economic regulation of airports and, if so, is produced to him, saving where the transfer is made pursuant to a court how does it function? order in a sale by auction of such an aircraft or pursuant to any other court order, and any transfer registered in violation of this provision shall be null The Airport Economic Regulations transpose into Maltese law Directive and void. 2009/12/EC of the European Parliament and of the Council of 11 March Where a creditor has registered an international interest in the 2009 on airport charges. The Airport Charges Regulatory Board is respon- International Registry in accordance with the first Schedule to the Aircraft sible for the determination, review and regulation of airport charges as well Registration Act, it shall be lawful for the debtor (being the registrant or as the quality of service provided. the owner of the aircraft, or both) to execute and file a prohibitory notice The board is composed, along with the chairman, of the following members: www.gettingthedealthrough.com 123

• one representative from the Civil Aviation Directorate within the Air Conventions, namely the Warsaw Convention and the Montreal Authority for Transport in Malta; Convention, have the force of law in Malta in relation to any carriage by air • one representative of the Airport Users Committee (AUC), which is set to which they apply, irrespective of the nationality of the aircraft perform- up at the airport representing airport users; and ing that carriage. • one representative of the airport operator. This, however, does not apply in relation to EU air carriers to the extent that the provisions of the European Parliament and Council Regulation No. The members and the chairman of the board have one vote each and the 889/2002 have the force of law in Malta. chairman has a casting vote in the case of an equality of votes. The provisions of the second Schedule to the Carriage by Air In the event of disagreement between the members of the board over (International and Non-International Carriage) Regulations apply to all a decision on airport charges, every member may seek the intervention of carriage by air, not being international carriage by air as defined in para- the Authority for Transport in Malta, which shall examine the justifications graph 2, article 1 of the Montreal Convention. for the modification of the system or the level of airport charges. Any liability imposed by article 17 of the Warsaw Convention or by article 17 of the Montreal Convention on a carrier, as the case may be, in 20 Are there laws or rules restricting or qualifying access to respect of the death or wounding or any other bodily injury of a passen- airports? ger, shall be in substitution for any liability of the carrier in respect of the The Airports and Civil Aviation (Security) Act (Chapter 405 of the Laws of death or wounding or any other bodily injury of that passenger under Malta) states that no person shall enter a restricted area unless he is in pos- Maltese law. This also applies in case of non-international carriage where session of a security pass or a temporary authorisation in writing issued by the Convention applies. the manager of airport security. 25 Are there any special rules about the liability of aircraft 21 How are slots allocated at congested airports? operators for surface damage? Under the Allocation of Slots at Airport Regulations, a scheduling coordi- Article 11(2) of the Civil Aviation Act provides for strict liability in case of nator is appointed and is solely responsible for the scheduling of slots. He surface damage. It lays down that where material loss or damage is caused may consult the Airport Scheduling Committee on the scheduling of the to any person or property on land or water by, or by a person in, or an article slots, and, subject to the provisions of regulation 6, his decision is final. or person falling from, an aircraft while in flight, taking off or landing, then On the basis of regulation 6, an air carrier may submit a complaint, unless the loss or damage was caused or contributed to by the negligence of to be made in writing to the Airport Scheduling Committee, which shall the person by whom it was suffered, damages in respect of the loss or dam- investigate that complaint and may make recommendations to the sched- age shall be recoverable without proof of negligence or intention or other uling coordinator to review or alter his decision. cause of action, as if the loss or damage had been caused by the wilful act, neglect or default of the owner of the aircraft. 22 Are there any laws or rules specifically relating to ground handling? 26 What system and procedures are in place for the investigation of air accidents? According to the Airport (Groundhandling) Regulations, the managing body of the airport has to ensure free access by suppliers of ground-han- The procedure for the investigation of air accidents is regulated by the Civil dling services established throughout the European Union to the market Aviation (Investigation of Air Accidents and Incidents) Regulations, which for the provision of ground handling services to third parties in accordance transposed into Maltese law Council Directive 94/56/EC. The sole objec- with Council Directive 96/67/EC. tive of these Regulations is the prevention of accidents and incidents and However, not more than two suppliers are authorised to provide each not to apportion blame or liability. category of airside services and at least one of the authorised suppliers may not be directly or indirectly controlled by: 27 Is there a mandatory accident and incident reporting system • the managing body of the airport; and, if so, how does it operate? • any airport user who has carried more than 25 per cent of the passen- The reporting of accidents and incidents is regulated by the Civil Aviation gers or freight recorded at the airport during the year preceding that in (Investigation of Air Accidents and Incidents) Regulations. In the case of which those suppliers were selected; or an accident or a serious incident occurring on or adjacent to an aerodrome, • a body controlling or controlled directly or indirectly by the managing the aerodrome operator shall forthwith give notice thereof to the Chief body or any such user. Inspector of Air Accidents by the quickest means of communication available and, in the case of an accident occurring in or over Malta, shall also The managing body of the airport, either directly or indirectly, may also notify forthwith a police officer for the area where the accident occurred of provide airside services in addition to the other two authorised suppliers. the accident and of the place where it occurred. The term ‘airside services’ means the following categories of ground- In the case of an accident or serious incident occurring in or over Malta handling services: or occurring elsewhere to an aircraft registered in Malta, the commander • baggage handling; of the aircraft involved at the time of the accident or serious incident or, if • freight and mail handling as regards the physical handling of freight he be killed or incapacitated, the operator of the aircraft; and in the case of and mail, whether incoming, outgoing or being transferred, between a serious incident occurring in or over any country or territory other than a the air terminal and the aircraft; contracting state, that is a state which is a party to the Chicago Convention, • fuel and oil handling; and to an aircraft registered elsewhere than in Malta but operated by an under- • ramp handling. taking established in Malta, that undertaking. The notice to the Chief Inspector referred to in subregulation 1 shall 23 Who provides air traffic control services? And how are they contain as much of the following information as is available: regulated? • in the case of an accident, the identifying abbreviation ‘ACCID’ or, in Malta Air Traffic Services Limited provides air traffic control services in the case of a serious incident, the identifying abbreviation ‘INCID’; Malta. These services are regulated by the Air Navigation Order, which has • the type, model and the nationality and registration marks of the also incorporated the rules found in the Single European Sky Regulation aircraft; (550/2004/EC) regulating air traffic controllers. • the name of the owner, operator and hirer (if any) of the aircraft; • the name of the commander of the aircraft; Liability and accidents • the date and coordinated universal time of the accident or serious incident; 24 Are there any special rules in respect of death of, or injury to, • the last point of departure and the next point of intended landing of passengers or loss or damage to baggage or cargo in respect of the aircraft; domestic carriage? • the position of the aircraft by reference to some easily defined geo- According to the Carriage by Air (International and Non-International graphical point and latitude and longitude; and Carriage) Regulations, the applicable provisions of the Carriage by • the number of:

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• crew on board the aircraft at the time of the accident or serious 34 What are the main principles of the state aid rules applicable incident and, in the case of an accident, the number of them killed to the aviation sector? or seriously injured as a result of the accident; The principles are the same as those that are allowed by the European • passengers on board the aircraft at the time of the accident or seri- Commission, such as the ‘one time last time’ principle, the proportionality ous incident and, in the case of an accident, the number of them principle, the market economy investor principle, the restructuring princi- killed or seriously injured as a result of the accident; ple, the common interest objective, and so on. • in the case of an accident, other persons killed or seriously injured as a result of the accident; and 35 Are there exemptions from the state aid rules or situations in • the nature of the accident or serious incident and the extent of the which they do not apply? damage to the aircraft as far as is known. In general the exemptions and exceptions are those envisaged in article 107 of the Treaty on the Functioning of the European Union. Moreover, Where an incident, other than a serious incident, takes place in or over Commission Regulation No. 800/2008/EC, the General Block Exemption Malta, or other in or over Malta to an aircraft registered in Malta, the Regulation, exempts the states from the commission notification require- owner, operator, commander or hirer of the aircraft shall, if so required by ment in 26 categories of state aid. notice given to him by the Chief Inspector, send to the Chief Inspector such information as is in his possession or control with respect to the incident in 36 Must clearance from the competition authorities be obtained such times as may be specified in the notice. before state aid may be granted? Competition law In the case of state aid which does not fall within the 26 categories of the General Block Exemption Regulation, clearance must be obtained from 28 Do sector-specific competition rules apply to aviation? If not, the European Commission. do the general competition law rules apply? There are no sector-specific competition rules which apply to aviation in 37 If so, what are the main procedural steps to obtain clearance? Malta. The general competition rules found in the Competition Act apply. The procedural steps are those that are applicable to member states of the European Union. The member state must notify the commission of its 29 Is there a sector-specific regulator or are competition rules intention to grant or alter its aid. The commission will make a preliminary applied by the general competition authority? examination and decide whether the measure submitted by the member There is no sector-specific regulator for aviation in Malta. The responsibil- state qualifies as state aid and whether it raises serious concerns as to its ity for the application of competition rules in Malta lies principally with the compatibility, in which case the commission will proceed to the formal Office for Competition as established by article 13 of the Malta Competition investigation procedure. and Consumer Affairs Authority Act. The member state is allowed to submit its observations on a decision of incompatibility of the proposed measure, upon which the commission 30 How is the relevant market for the purposes of a competition will issue another decision. assessment in the aviation sector defined by the competition authorities? 38 If no clearance is obtained, what procedures apply to recover So far, there has been no competition assessment by the Office for unlawfully granted state aid? Competition regarding the aviation sector. It is therefore not certain that The procedures are those decided upon by the European Commission, the SSNIP test would be applied in Malta to define the relevant market for which may require the member state to suspend any unlawful aid pending the purposes of a competition assessment in the aviation sector. What is its final decision and to provisionally recover the aid. If after final assess- certain is that the Office for Competition is bound to apply the decisions of ment it is found that the aid is incompatible, the member state will have to the European Commission. take measures to recover the aid including interest at the rate fixed by the European Commission. 31 What are the main standards for assessing the competitive effect of a transaction? Miscellaneous The criteria for assessing the competitive effect of a transaction are those 39 Is there any aviation-specific passenger protection that would be applied by the European Commission in assessing a similar legislation? transaction, that is the welfare effects of the transaction on the consumer, The Denied Boarding (Compensation and Assistance to Air Passengers) whether the market entry by a new party is commercially viable, the mar- Regulations implement Regulation (EC) No. 261/2004 of the European ket dominance by two or more carriers, and so on. Parliament and the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of 32 What types of remedies have been imposed to remedy denied boarding and of cancellation or long delay of flights, and repealing concerns identified by the competition authorities? Regulation (EEC) No. 295/91 (text with EEA relevance). The Competition Act empowers the Director General of the Office for The Civil Aviation (Rights of Disabled and Persons with Reduced Competition to investigate, and in the case of a finding of an infringement, Mobility) Regulation implement Regulation (EC) No. 1107/2006 of the to impose an administrative fine of up to 10 per cent of the total turnover of European Parliament and of the Council of 5 July 2006 concerning the the undertaking or association of undertakings concerned in the preceding rights of disabled persons and persons with reduced mobility when business year. travelling by air and Regulation (EC) No. 2006/2004 of the European In view of the fact that the Office for Competition is bound by the deci- Parliament and of the Council of 27 October 2004 on cooperation between sions of the European Commission, other possible remedies can be based national authorities for the enforcement of consumer protection laws of on recent decisions of the European Commission. the Regulation on consumer protection cooperation. The Package Travel, Package Holidays and Package Tours Regulations, Financial support and state aid which transposed into Maltese law Council Directive 90/314/EEC, grant 33 Are there sector-specific rules regulating direct or indirect protection to customers of package holidays and tours. financial support to companies by the government or EC Regulation No. 80/2009, which repealed EEC Regulation No. government-controlled agencies or companies (state aid) in 2299/89, protects passengers with regard to computerised reservation sys- the aviation sector? If not, do general state aid rules apply? tems. In 2007 the Maltese parliament had enacted the Code of Conduct for Computerised Reservation Systems Act, which provides protection for In the case of financial support by the government or government-con- passengers in relation to the data submitted by carriers. trolled agencies or companies (state aid) in the aviation sector, an assessment would be made on the basis of the rules emanating from the Treaty on the Functioning of the European Union. The aviation sector-specific state aid guidelines issued by the European Commission would also be followed. www.gettingthedealthrough.com 125

40 Are there mandatory insurance requirements for the EC Regulation No. 820/2008. Moreover, the Civil Aviation Security operators of aircraft? Regulations adopt the standards found in Annex 17 to the Chicago The Civil Aviation (Insurance Requirements for Air Carriers and Aircraft Convention and in Document 30 of ECAC. Operations) Order implements the rules emanating from EC Regulation No. 785/2004 (later amended by Regulation No. 1137/2008). The order 42 What serious crimes exist with regard to aviation? prohibits aircraft to fly in Malta without having insurance cover that meets Apart from other offences affecting aviation security and punishable by the the requirements of the Regulation. imposition of a fine or imprisonment, or both, depending on the severity of the offence, the Civil Aviation (Security) Act gives effect to the provisions 41 What legal requirements are there with regard to aviation of the Tokyo Convention 1963, the Hague Convention 1970, the Montreal security? Convention 1971 and the Montreal Protocol 1988 and therefore the crimes The legal requirements with regard to aviation security in Malta are found found therein are also punishable as crimes under Maltese law. in the Airports and Civil Aviation (Security) Act. This act implements

Tonio Grech [email protected]

18/2, South Street Tel: +356 2123 6206/8256 1102 Valletta Fax: +356 2124 0321 Malta www.dingli.com.mt

126 Getting the Deal Through – Air Transport 2016

Mexico

Javier Alegre and Carlos Campillo Alegre, Calderón y Márquez Abogados

General 4 Is access to the market for the provision of air transport services regulated and, if so, how? 1 Which bodies regulate aviation in your country, under what basic laws? In addition to the safety point of view, access to the market for the provision of air transportation is additionally regulated through specific com- Aviation is regulated in Mexico by the 1940 Law of General Means of mercial, financial, legal and administrative requirements that have to be Communication. In 1995, the Civil Aviation Law and the Airports Law met and evidenced before the SCT. A concession or a permit, or both, must derogated specific provisions of the former law. be obtained to provide an air transport service. The Mexican aviation industry is regulated by the following governmental entities: 5 What requirements apply in the areas of financial fitness and • the Ministry of Communications and Transport (SCT), through the nationality of ownership regarding control of air carriers? Undersecretary of Transports and the Directorate General of Civil Aviation (DGAC); and Article 7 of the Foreign Investment Law regulates the percentage of shares • navigation services are controlled through the Mexican Air Navigation that may be subscribed by a foreign investor, which can be equivalent to Services Authority (SENEAM), which was created on 12 October 25 per cent at the most in the area of air transport. 1978 and regulates the navigation fees and existing services through Article 9(I) of the Civil Aviation Law contemplates, among the existing Mexican airspace to foreign and national carriers. requirements, the necessity to evidence the financial capacity of an entity interested in a concession; and article 19(II) of the Regulation of the Civil The aviation industry is regulated by the following basic laws: Aviation Law established that the air carriers must evidence economic sol- • the Law of General Means of Communication published in the Federal vency, availability of financial resources and an investment programme in Official Gazette on 19 February 1940; accordance with the service to be provided and its projection for a period • the Civil Aviation Law published in the Federal Official Gazette on 12 of no less than three years. May 1995; • the Airport Law published in the Federal Official Gazette on 6 What procedures are there to obtain licences or other rights to 22 December 1995; operate particular routes? • the Regulation of the Civil Aviation Law published in the Federal In Mexico, a concession from the SCT to render the public service of Official Gazette on 7 December 1998; national scheduled air transport is required. Such written authorisation • the Regulation of the Airport Law published in the Federal Official denominated as a concession would only be issued or granted in favour of Gazette on 17 February 2000; and a Mexican corporation. The general requirements for a concession would • the Regulation of the Mexican Aeronautic Registry published in the be that an interested party evidences: Federal Official Gazette on 28 November 2000. • the technical, financial, legal and administrative capacities to render an air transport service within conditions of quality, safety, opportu- Regulation of aviation operations nity, permanence and price; • the availability of aircraft and related equipment that fulfil the techni- 2 How is air transport regulated in terms of safety? cal requirements of safety, airworthiness conditions and environmen- Safety is regulated in accordance the International Civil Aviation tal requirements; and Organization (ICAO) Chicago Convention of 7 December 1944 (the • the availability of hangars, shops, and of the necessary infrastructure Chicago Convention) and its Annexes and with the Civil Aviation Law and for its air transport operation, as well as the necessary technical and the Airport Law and its regulations. administrative personnel duly qualified for the service to be rendered Therefore, any and all operators and aircraft must comply with several under a concession. technical requirements, such as airworthiness certificates, registration certificates, insurance policies, crew members’ licences, among others. The corporations that have a concession may render scheduled international air transportation, as long as they have the corresponding authorisa- 3 What safety regulation is provided for air operations that do tion from the SCT. not constitute public or commercial transport and how is the In the case of an international operation from a foreign or Mexican car- distinction made? rier, two basic elements need to exist in order to operate particular routes: Articles 28 and 29 of the Civil Aviation Law provide that private operators • the designation from the corresponding governmental agency enabled without commercial purposes are allowed to operate in Mexican territory to do so, in compliance with the necessary air transport bilateral agree- without a permit, but such operators must hold registration and airworthi- ment; and ness certificates and a third-party liability insurance certificate. • in absence of specific provisions within an air transport bilateral agree- A foreign aircraft will need to obtain an authorisation issued by SCT, ment, the Mexican government, on a discretional basis and via the and the first landing needs to be performed in a Mexican international air- DGAC, may grant a permit or rights to operate a particular route or port. Article 30 of the aforesaid regulation establishes the requirements routes, through the basic principle of reciprocity, which is clearly con- for the operation of aerial work, such as dirigible airships or similar, which templated in the existing bilateral agreements that Mexico has entered must be duly registered before the SCT. into with other nations.

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Concessions may be granted for a period of up to 30 years and may be The incorporation documents and the power of attorney must contain or be extended on one or more occasions, as long as the extended periods do not attached to the following in order to meet filing requirements of Mexican exceed a 30-year period. law: a certification by a notary public in the relevant jurisdiction; legalisa- In addition to the above, the following air transport services may be tion via competent consular officers or an ‘apostille’, issued by the local authorised through a permit: competent authorities (ie, secretary of state, county clerk or equivalent), • non-scheduled domestic service (including domestic charters); based on the requirements of the Hague Convention of 5 October 1961, • scheduled international service; Abolishing the Requirement of Legalisation for Foreign Public Documents; • non-scheduled international (international charters); and a legalisation before a Mexican embassy or consulate is required in case the • private commercial service. corresponding State is not a part of the Hague Convention; a translation into Spanish, which needs to be certified by a court-approved translator in The permits would be granted to Mexican corporations, in the specific case Mexico; and a certification by a notary public in Mexico. of an operation contemplated in the first instance, above; to foreign corporations in the second instance, above; to Mexican or foreign corporations Filing for the validation of the operations specifications of the air or entities in the third instance, above; and to Mexican individuals or cor- carrier porations in the fourth instance, above. A petition should be filed at the office of the technical director of the DGAC The establishment of a service, for example, a repair shop or training in compliance with the requirements of norm NOM-008-SCT3-2003 (the and qualification facilities, would require a permit, which could be granted norm), which was published in the Official Daily Gazette of the Federation to Mexican or foreign individuals or corporations. on 14 May 2003. The permits would be granted for indefinite periods. In compliance with this norm, notwithstanding that it involves a vast list of documentary requirements, the initial filing that is required needs 7 What procedures are there for hearing or deciding contested only to be accompanied by a copy of the operations specifications of the applications for licences or other rights to operate particular air carrier, issued by the Technical Aeronautical Authority. In response to routes? this filing, the carrier will be granted with a response from DGAC, in which The air carrier has the right to appeal, if the authority denies its appli- a list of the documents that the air carrier will need to file will be included cation, through an administrative procedure pursuant to the Federal and in which an exemption period will be granted in order to comply with Administrative Law. the same. In practice, the DGAC does not always requires all of the requirements 8 Is there a declared policy on airline access or competition and, established in the norm. The list of requirements has been reduced sub- if so, what is it? stantially in recent months and is determined by DGAC on a case-by-case On 25 October 2001, the government released a policy document related basis. to the general development of the aviation industry; nevertheless, the gov- Once the exemption is granted, the DGAC will consider the validation ernment stated that such authority should release a new aeronautical pol- requirement as complied with for the purposes of issuing the operating icy that would include, inter alia, airlines access, slots allocations, foreign permit and for the purposes of the required approval for the commence- investment, competition, safety, security, among others. ment of operations (see step 3).

9 What requirements must a foreign air carrier satisfy in order Obtaining approval for the commencement of operations to operate to or from your country? Once the operating permit has been issued, a filing is required in order to obtain the final approval that allows the air carrier to initiate its opera- To perform operations to or from Mexico, the air carrier must obtain an tions. For this, a few requirements must be credited, some of which are not operational permit; the procedure for obtaining an operating permit for a referred to in the applicable laws and regulations but appear listed in the foreign air carrier consists of the following steps: actual text of the non-scheduled operating permit: • the original of the operating permit duly registered before the Mexican Obtaining an operating permit Aeronautic Registry; A petition should be filed by air carrier through its legal representative in • approval of the slots, if applicable, for the operation issued by the cor- Mexico at the DGAC, accompanied by the following documents: responding Airport Slot Committee; and • incorporation documents of the air carrier; • approval by the General Directorate of Tariffs of the Ministry of • the appointment of an address for hearing and receiving notifications Communications and Transports of the registered tariffs for the trans- in Mexico; portation services to be provided by the air carrier; and • power of attorney granted in favour of certain individuals of a law firm • corresponding executed airport service agreements. in order to represent the interests of the air carrier in Mexico and to be recognised by the different authorities and entities as representatives In practice, the issuance by the DGAC of an operating permit takes approx- of the carrier’s interests; imately 60 to 90 calendar days from the date when filings are made in com- • an air carrier certificate, issued in favour of the airline by the compe- pliance with all of the above-mentioned requirements. tent transportation authority (ie, CAA, DOT) and operations specifications issued by the competent aviation authority; 10 Are there specific rules in place to ensure aviation services • a list of aircraft tail numbers and type that will be used for the operation; are offered to remote destinations when vital for the local • certificates of registration of each aircraft; economy? • certificates of airworthiness of each aircraft; • noise certificate for each aircraft; No specific rules exist to ensure aviation services are offered to remote • insurance certificates. Two originals (original signatures are required) destinations, even when vital for the local economy. Nevertheless, agree- and a copy of international and Mexican liability insurance certificates ments exist and have verified among local and federal air carriers on which evidencing coverage carried by the airline for all risk and third-party costs are shared or absorbed by local authorities, in an effort to render an liability. Insurance brokers are normally aware of this requirement, air transportation service to a destination with different economical condi- particularly with respect to the requirements of Mexican law concern- tions to those attractive to national or foreign carriers. ing the policy that must be issued by a Mexican insurance carrier; • notification of whom the air carrier will be receiving in Mexico (ie, 11 Are charter services specially regulated? ground handling and dispatch services; fuel; and maintenance The air charter carrier must obtain a non-scheduled operating permit services); based on the requirements set forth in question 9, above. • security manuals and procedures of the airline; Once the air carrier has obtained the non-scheduled operating permit, • manuals to prevent acts of illicit interference; such carrier must obtain a specific authorisation for every charter operation • approval of the slots and routes for non-scheduled flights; and or several charter operations, as the case may be. Therefore, the air car- • a letter of validation or exemption issued by the Technical Director of rier must file a petition before the DGAC, establish the route and schedule the DGAC (see step 2). of the operation and attach a copy of the air charter agreement. The law

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© Law Business Research Ltd 2015 Alegre, Calderón y Márquez Abogados MEXICO established that a specific provision regarding that charter operation can- 16 Do specific rules regulate the maintenance of aircraft? not be operated as a scheduled operation. There are some Official Norms that regulate some aspects of maintenance, for example, Norm NOM-006-SCT3-2001, which establishes the 12 Are airfares regulated and, if so, how? minimum content of general maintenance manual and Norm NOM-060- Airfares are regulated through the General Directorate of Tariffs (GDT), SCT3-2001, which establishes the procedures to be followed in the report an entity that is part of the Ministry of Communications and Transport. of failures occurred to aircraft). In addition to these specific Norms, sched- Tariffs are proposed by any and all carriers and finally approved or author- ule carriers are required to have minimum provisions of maintenance ised by the GDT. depending the type and size of operation. National and foreign air carriers are obliged to file before the GDT the tariffs that are or will be sold to the general public, as well as the corre- Airports sponding amendments to these tariffs. 17 Who owns the airports? Essentially, a potential concern to the authority would be the implementation of predatory tariffs, which would jeopardise or cause damage to Aeropuertos y Servicios Auxiliares (ASA), as a government entity, has con- any and all carriers operating into or from Mexico, including but not lim- trol of 18 airports (the ASA airports) and it is a shareholder of five airport ited to domestic operations and the market industry environment. administrative societies with states governmental entities and private International tariffs are regulated through bilateral air services agree- companies; and is the only vendor that provides fuel to any and all carriers ments too. operating into and from Mexico. The major and more important airport facilities in Mexico are con- Aircraft trolled by four different airport groups: ASUR Airport Group, Pacific Airport Group, Central – North Airport Group and the Mexico City Airport 13 Who is entitled to be mentioned in the aircraft register? Do Group – AICM. The first three are private entities and the fourth is a gov- requirements or limitations apply to the ownership of an ernment entity. aircraft listed on your country’s register? ASUR has the administration and control of nine major airports within Any individual, entity or corporation that has a legal interest in an aircraft the southeastern part of Mexico: or engine is entitled to carry out registrations before the DGAC of an exist- • Cancún; ing lien, encumbrance, seizure, mortgage, pledge, possession or owner- • Cozumel; ship. No particular requirements or limitations exist (particularly as to • Huatulco; nationality), apart from notary formalisation, legalisation, apostille and • Mérida; certified translation formalities. • Minatitlán; • Oaxaca; 14 Is there a register of aircraft mortgages or charges and, if so, • Tapachula; how does it function? • Veracruz; and Mortgages, ownership and any and all liens in connection to aircraft and • Villahermosa. engines are registered before the Mexican Aeronautics Registry, entity under the subordination of the DGAC. Pacific Airport Group (GAP) has the administration of 12 major airports on The Mexican Aeronautics Registry is public and under the supervision the north-west geographical area of Mexico: of the Ministry of Communications and Transports. In such registry shall • Tijuana; be filed: • Mexicali; • the documents through which property, possession and other rights on • Hermosillo; Mexican aircraft are acquired, transmitted, modified or extinguished, • La Paz; including such aircraft-related engines, as well as the lease of Mexican • Los Mochis; or foreign aircraft; • Los Cabos; • the registration and airworthiness certificates; • Guadalajara; • the resolution of the DGAC in case of abandonment, partial or total • Aguascalientes; loss and destruction; • Puerto Vallarta; • the concessions and permits granted by the DGAC for an air transport • Manzanillo; service and any amendments or resolutions that modify or extinguish • Morelia; and such specific authorisations; and • Guanajuato. • the insurance policies. Central – North Group (OMA) controls 13 major airports on the central and In addition to the above, as of November 2007, Mexico is part of the Cape northerly regions of Mexico: Town Convention on International Interest in Mobile Equipment and its • Monterrey; Protocol on Matters Specific to Aircraft Equipment, therefore, any interna- • Acapulco; tional interest must be registered before the International Registry. • Mazatlan; • Zihuatanejo; 15 What rights are there to detain aircraft, in respect of unpaid • Ciudad Juarez; airport or air navigation charges, or other unpaid debts? • Chihuahua; • Culiacan; In Mexico, the authority does not have a right to detain aircraft in respect of • Durango; unpaid airport or air navigation charges, or other unpaid debts in the spe- • Reynosa; cific case that the existing amounts due or owed are from an airline, opera- • San Luis Potosi; tor or carrier that does not have any legal interest in an aircraft. • Tampico; Unfortunately, we are aware of certain cases where the airport author- • Torreon; and ity, SENEAM and immigration authorities, without any legal authority, • Zacatecas. have detained aircraft for short periods of time. On the other hand, SENEAM has resolved, in accordance to what is The Mexico City Airport Group (AICM) has one airport, nevertheless, the established in the Mexican applicable law, to notify on a monthly basis, airport with the most significant number of operations in the country. The to the competent tax authorities (SAT) and the Legal Affairs Unit of the Mexican government has announced the construction of the New Mexico Mexican Ministry of Communications and Transportations (SCT), those City Airport which should be operational by 20 October 2020. air carriers that have any omissions in respect to their payment obligations of the duties generated from the services rendered by SENEAM regarding the use of Mexican airspace. Such notification has an immediate consequence in the suspension of services regarding the use of Mexican airspace, and therefore the suspension of operations in Mexico. www.gettingthedealthrough.com 129

18 What system is there for the licensing of airports? • The SCT may additionally assign concessions to commercial com- The Mexican law that regulates the investment in Mexican airports is the panies with a majority participation of the governments of the states Mexican Law on Airports and its corresponding Regulation, establishing or the municipalities constituted for the administration, operation, the following: exploitation and, in such case, construction of airports. • A concession granted by the SCT is required to administer, operate, • Concessions will be conferred for a period up to 50 years and may be exploit and build airports. extended one or more times up to a maximum period of and addi- This concession will be granted only to commercial companies tional 50 years, provided that the concessionaire has complied with incorporated under Mexican law and will include administration, the conditions of the respective certificate and requests and extension operation, exploitation activities and, in such case, construction before the last five-year period of the concession begins, and provided activities. it accepts any new conditions established by the SCT. • Such concessions will be granted through a public bidding procedure • Airports constructed upon private domain properties must be used in accordance with the following rules: during the term of the concession exclusively for the purpose speci- • the SCT, at its own initiative or at the request of an interested fied therein, even if they are encumbered or disposed of, except with a party will publish an invitation to participate in a specific bid; and prior authorisation of the Ministry. This limitation will be registered in • such will be published in the Federal Official Gazette and in at the respective Mexican Public Registry of Property. least one widely circulated newspaper in the state where the air- • At the end of the concession, and in order to maintain the airport in port is located oar intended to be established. operation, the Federation will have a preferential right to acquire it, • The following are the minimum bases for the bidding procedure: following an appraisal in accordance with applicable law or, should the • project description; owner prefer to retain ownership, lease it. • description of the lands and their legal status; • operation characteristics and services they may render; 19 Is there a system of economic regulation of airports and, if so, • required safety conditions for the airport; how does it function? • term of the concession; and The SCT may establish a basis for tariff regulation and prices for airport • criteria for selecting the winner; among the items that may be services rendered, leases and related agreements, when no reasonable taken into account are the quality levels offered, the amount of the competition conditions exist, in accordance with the Federal Competition required investment, proposed technical specifications, operation Commission. capacity, rates and considerations offered to the state. • Interested parties will evidence their legal, technical, administrative 20 Are there laws or rules restricting or qualifying access to and financial capacity and provide the following information: airports? • the activities for which they intend to contract third parties; Pursuant to the Aviation Law there are no restrictions to access to airports. • if applicable, evidence that it is legally possible to use and exploit Furthermore, the air carrier has the right to receive the services in a per- the land to establish the facilities required to render the services, manent, uniform and regular basis without discriminatory conditions in as the case may be; connection to price, quality, services and opportunity. • that technical safety requirements and environmental legal provisions are complied with; and 21 How are slots allocated at congested airports? • that they have trained technical and administrative personnel. The airport administrators have the prerogative to assign slots. There is a • The SCT will issue its award on the basis of a comparative analysis of local airport committee that comprises the airport administration, the local the proposals received and all participants will be notified thereof. authorities and the air operators that makes suggestions regarding the slots, • If applicable, the SCT will confer the concession within the term speci- however, there are no specific rules for the allocation of slots at congested fied in the rules, and an extract of the respective certificate will be airports. The SCT officially declared Mexico City International Airport as published in the Official Gazette of the Federation at the cost of the a congested airport and is currently under the process of establishing the concessionaire. rules to remove, assign, allocate and even to auction slots to airlines, the • A concession will not be granted if the proposals do not offer the best Mexican government executed a Memorandum of Understanding with conditions for national airport development, if they do not satisfy IATA regarding the assistance of IATA on the administration and alloca- the requirements of the bidding rules and technical specifications or tion of slots at AICM. airport safety specifications, or for reasons that could affect national sovereignty and safety; or when the economic proposals as presented 22 Are there any laws or rules specifically relating to ground are unsatisfactory in the judgment of the SCT. In these cases, the bid- handling? ding procedure will be deemed abandoned and a new invitation may be issued. The Airport Law and its Regulation regulates the ground handling activity. • The SCT may confer concessions without having to follow a public Only Mexican corporations are allow to provided ground handling ser- bidding procedure in the following cases: vices to third parties, however, the air carrier has the right to provide its • to the holder of a permit granted to operate a civil aerodrome, in own ground handling service. operation, who intends to convert it into an airport, provided that the proposed change is congruent with national airport develop- 23 Who provides air traffic control services? And how are they ment policies and programmes; that a civil aerodrome has been in regulated? continual operation for at least the preceding five years and com- SENEAM, a government entity created on 12 October 1978, that provides plies with the requirements for the concession in question; and air traffic control services within the Mexican territory, regulates the navi- • to concessionaires who require a complementary airport to satisfy gation fees and existing services through the Mexican airspace to foreign increased demand, provided that they show that the increase is and national carriers. necessary to expand existing capacity with another airport; that The Federal Duty Law established that any air carrier that procures the operation of both airports by the same concessionaire will be Mexican air navigation services by SENEAM has the obligation to pay economically more efficient in comparison with other options for duties for the said services, including over flights. achieving better coordination and rendering of services; that the The payment for air navigation services needs to be self-determined obligations established in the concession certificate have been on a monthly basis directly by air carrier. The payment procedure should satisfied and that the requirements stipulated for the new conces- be completed by the 15th of each month; after that day late payment must sion are satisfied. be made, including the payment of updates and surcharges. When for public interest reasons the relocation of an airport is There are three stages of the payment: ordered, the concessionaire will be entitled to receive the new conces- • the self-determination; sion directly, if it satisfies the established requirements. • the report of the self-determination to SENEAM; and • The SCT may grant concessions to entities of the Federal Public • the actual payment and its report to SENEAM. Administration without having to call a public bidding.

130 Getting the Deal Through – Air Transport 2016

It is important to bear in mind that the lack of payment of the said duty It should be noted that, pursuant to article 1,916-bis of the Civil Code could have as a consequence the suspension of the services provided by for the Federal District, in any and all events, whoever claims recovery for SENEAM, and therefore the suspension of operation of the air carrier moral damages, must fully prove the illicit conduct of the defendant and within Mexican territory. the direct damage caused by such conduct.

Liability and accidents The economic situation of the liable party and that of the victim The plaintiff must submit documents to the court that shall evidence their 24 Are there any special rules in respect of death of, or injury to, annual income so that the court, based on such documents, can justly passengers or loss or damage to baggage or cargo in respect of determine a fair indemnity with respect to the moral damage, in case that domestic carriage? it finds that such damage existed. Article 61 of the Aviation Law establishes that the authorised operators (‘permit or concession holders’) of the aircraft shall be responsible for the Other circumstances damages caused to the passengers, to the cargo and to the luggage being The court can only take into account those damages that are a direct con- transported. sequence of the illicit conduct. To this respect, article 1,916-bis of the Civil Based on the provisions of the Aviation Law, the airline or the operator Code for the Federal District expressly establishes the above. is responsible of the damages caused to passengers. Pursuant to article 1915 of the Civil Code for the Federal District, the No other recoverable damages damage repair shall consist in the restatement of the situation prior to such The Civil Code and the Civil Aviation Law establish the recoverable dam- damage, and when that consists in the payment of damages, pursuant to ages in favour of the victims, in the terms prescribed above. the following rules: When the damage is caused to the individuals and produces the death 25 Are there any special rules about the liability of aircraft or the total or partial disability, temporary or permanent, the amount of operators for surface damage? the indemnity shall be fixed applying the tariffs established in the Federal Labour Law. The basis to compute the corresponding indemnity shall be Aside from civil law and environmental general regulations, there are no four times the highest daily minimum salary in force in the region. special rules on the liability of aircraft operators for surface damage. Pursuant to articles 500 and 502 of the Federal Labour Law, the indemnity payment to be made in the event of death of the victim shall be 26 What system and procedures are in place for the investigation equivalent to two months of salary for funeral expenses and the payment of air accidents? of an amount equivalent to 5,000 days’ salary. The SCT, through the DGAC, is responsible for the procedures and inves- In accordance with article 62 of the Civil Aviation Law, the right to tigation of an accident or incident involving an aircraft within Mexican recover damages is subject to that prescribed by article 1915 of the Civil territory, including the constitution of an investigation commission with Code for the Federal District in common matters and for all of the Republic technical experts and investigators, in order to create a report of the in federal matters, with the only exception that the recoverable amount investigation. shall be three times the amount provided in such article. Consequently, pursuant to the above, the recoverable material dam- 27 Is there a mandatory accident and incident reporting system ages, under article 1,915 of the Civil Code, would be the amount equivalent and, if so, how does it operate? to the minimum salary in force at the time of the death, multiplied by 790 The mandatory reporting system in accordance with Mexican regulation is (5,000 plus 60 days for funeral expenses). This result is multiplied by four. the Regulation on Search, Rescue and Investigation of Air Accidents. Now, when the Civil Aviation Law applies to the recoverable damages, the amount resulting from the numerical operations described in the previ- Competition law ous paragraph is multiplied by three (article 62 of the Civil Aviation Law). 28 Do sector-specific competition rules apply to aviation? If not, Moral damage do the general competition law rules apply? It is important to note that article 62 of the Civil Aviation Law only pre- The new Mexican Federal Competition Law and rules apply in the avia- scribes that the damages to passengers would be subject to the indemnities tion sector, together with the Federal Economic Competition Commission established by article 1,915 of the Civil Code for the Federal District. Such (COFECE). legal provision only prescribes the recovery for material damages. Nevertheless, there is possibility that a Mexican court would analyse 29 Is there a sector-specific regulator or are competition rules and grant moral damages to the plaintiff, if the court finds that a moral applied by the general competition authority? damage has been caused to such plaintiff. General competition rules are applied by the COFECE, however, certain Pursuant to article 1,916, a moral damage consists in affection suffered articles of the Civil Aviation and Airport Laws establish certain regulation by a person to his or her feelings, likings, religious beliefs, decorum, hon- in competition matters. our, reputation, private life, configuration and physical aspect or the consideration that third parties may have of him or her. 30 How is the relevant market for the purposes of a competition In accordance with articles 1,916 and 1,916-bis of the Civil Code for the assessment in the aviation sector defined by the competition Federal District, the indemnity for moral damage must be established in a authorities? monetary amount determined by the judicial authority taking into account the following. On 16 February 2015, the COFECE launched an investigation in the market for the provision of air transport services used within the International Airport of Mexico City for its proceedings of slots; the objective of this The affected rights of the victim investigation is to determine the probable existence of barriers to competi- The plaintiff must prove that they have actually suffered in terms of their tion or essential inputs that may create anti-competitive effects pursuant to feelings, likes, religious beliefs, decorum, honour, reputation, private life, the new Economic Competitive Federal Law (LFCE). configuration and physical aspects or else the considerations that third par- This investigation is initiated derived from the powers granted to the ties may have of them. It is not enough, pursuant to Mexican law, to make COFECE through article 94 of the LFCE published on July 2014. It is the a general statement indicating that a damage has been caused, but instead, first time that the COFECE starts an investigation under these new powers the plaintiff must demonstrate to the court the alleged actual damage. and procedure. However, the investigated market was previously evaluated by the former COFECE at 2010, regarding possible relative monopo- The degree of responsibility listic practices; however, in that case, the COFECE suggested that it was a Pursuant to this principle, the court shall determine in any event the exist- regulatory issue and not a monopolistic practice. ence of an illicit conduct, and in its case, the extent or degree of same. An The investigation could last up to three periods of no more than 120 illicit act or conduct is defined by article 1,830 of the Civil Code as that business days each. If the COFECE determines that there are barriers which is contrary to the laws of public order or against customary good or essential inputs creating anti-competitive effects in the market, such behaviour. authority could issue recommendations to public authorities, such as the www.gettingthedealthrough.com 131

Financial support and state aid Update and trends 33 Are there sector-specific rules regulating direct or indirect New events inlclude: financial support to companies by the government or • the construction of the new Mexico City International airport, government-controlled agencies or companies (state aid) in the most important infrastructure for the federal government the aviation sector? If not, do general state aid rules apply? and for the industry in the past 50th years. • the process of the allocation of slots and their regulation for the Not applicable. current Mexico City International Airport, and the possibility to migrate to a best international practices such as IATA; 34 What are the main principles of the state aid rules applicable • the COFECE investigation regarding the allocation of to the aviation sector? slots at AICM and monopolistic practices and the possible Not applicable. consequences into the industry; and • the possible new regulations regarding passenger rights. 35 Are there exemptions from the state aid rules or situations in which they do not apply? Not applicable. Ministry of Communications and Transports, and orders to relevant economic agents (ie, airlines) regarding the elimination of barriers to entry, 36 Must clearance from the competition authorities be obtained policies and regulations to essential inputs, and even asset stripping of the before state aid may be granted? economic agent involved in order to solve the antitrust problem. Not applicable. 31 What are the main standards for assessing the competitive 37 If so, what are the main procedural steps to obtain clearance? effect of a transaction? Not applicable. The CFC decisively acts to promote the competition and free market principles in the instrumentation and design of economic, sectoral and regula- 38 If no clearance is obtained, what procedures apply to recover tory policies, and also to advocate for favourable regulatory frameworks unlawfully granted state aid? for competition and market efficiency. For that, it has an essential tool: opinions on competition and free market issuing. Not applicable.

32 What types of remedies have been imposed to remedy Miscellaneous concerns identified by the competition authorities? 39 Is there any aviation-specific passenger protection The COFECE has the power to issue opinions on bills, regulation drafts, legislation? regulations, rules, agreements and any kind of administrative acts as well The Consumer Protection Law is a passenger protection legislation, in as programme adjustments and public policies regarding their effects on addition to provisions on the Civil Aviation Law. competition and free access to markets. The CFC can also issue opinions on the current regulatory framework. 40 Are there mandatory insurance requirements for the There are two kinds of opinions, those that have legal effects (bind- operators of aircraft? ing opinions) and those that do not. The non-binding opinions are issued with regard to bill and regulation drafts, as well as current regulation. Article 74 of the Civil Aviation Law establishes that third-party liability Commonly, these kind of opinions are issued by the CFC’s chairman. insurance is required for the operation of an aircraft. The ‘binding opinions’ can be addressed to public federal administration bodies with regard to programme adjustments and public policies, as 41 What legal requirements are there with regard to aviation well as regulation drafts. The Plenum has the power to issue these opin- security? ions. The recommendations set forth in the binding opinions are obligatory Mexican legislation requirements in aviation security are linked with a for the bodies, unless the chairman objects to the opinion. main directives address by ICAO and international standard regulations.

42 What serious crimes exist with regard to aviation? Mexico is part of the Convention on Offence and Certain other Acts Committed Onboard Aircraft signed at Tokyo on 14 September 1963 and of the Convention for the Suppression of Unlawful Acts Against the Safety of Civil Aviation signed at Montreal on 23 September 1971.

Javier Alegre [email protected] Carlos Campillo [email protected]

Edificio Balmori Tel: +52 55 5511 7739 Orizaba 101 Piso 2 Fax: +52 55 5511 3138 Colonia Roma 06700 www.acym.com.mx Mexico City Mexico

132 Getting the Deal Through – Air Transport 2016

Netherlands

Jeroen Timmermans, Laetitia Kunst-den Teuling and Ruben Elkerbout Stek

General article 16 of the Aviation Act applies, stating that air carriers, unless otherwise provided by an international agreement, are prohibited from oper- 1 Which bodies regulate aviation in your country, under what ating aircraft in, to or from the Netherlands without an operating licence basic laws? granted by the Minister for Infrastructure and the Environment. The main regulatory body for aviation in the Netherlands is the Human Environment and Transport Inspectorate, a division of the Ministry of 5 What requirements apply in the areas of financial fitness and Infrastructure and the Environment. The Inspectorate is responsible for nationality of ownership regarding control of air carriers? the supervision of compliance with Netherlands aviation legislation. Air Under EC Regulation No. 1008/2008, applicable to air carriers established traffic control in the Netherlands is carried out by Air Traffic Control the in the EEA, the Minister for Infrastructure and the Environment may grant Netherlands. The principal national legislation regulating aviation consists an operating licence to an air carrier whose principal place of business is of the Aviation Act and the Act on Aviation, the latter replacing the Aviation located in the Netherlands, provided said air carrier meets the require- Act in phases. ments set forth in EC Regulation No. 1008/2008. As to financial fitness, EC Regulation No. 1008/2008 provides that an air carrier applying for an Regulation of aviation operations operating licence for the first time must provide evidence that it is able to: 2 How is air transport regulated in terms of safety? • meet, at any time, its actual and potential obligations for a period of 24 months from the start of operations; and The Netherlands is a party to the Chicago Convention and must therefore • cover its operational costs according to its business plan for a period of comply with International Civil Aviation Organization (ICAO) standards. three months from the start of operations, without taking into account Furthermore, EU legislation (in which, among others, ICAO regulation is any income from its operations. implemented) applies. The European Aviation Safety Agency (EASA) plays an important role in the field of safety of European civil aviation, among As to nationality of ownership, EC Regulation No. 1008/2008 provides others in advising the European Commission on the drafting of EU legisla- that, in order for an operating licence to be granted to an air carrier, EEA tion. The international legislation mentioned above has, where required, member states or nationals of EEA member states must own more than been implemented in national aviation legislation. The Aviation Act and 50 per cent of said air carrier, and effectively control it, whether directly the Act on Aviation contain general provisions relating to the safety of air or indirectly through one or more intermediate undertakings, except as transport and air traffic, which are specified in further regulation based provided for in an agreement with a third country to which the EU is a party. thereon, such as: • the Aircraft Decree 2008, the Aviation Licences Decree, the Air 6 What procedures are there to obtain licences or other rights to Operation Decree, the Regulations on Air Operation and the operate particular routes? Regulations on Aircraft Maintenance, containing provisions in respect of airworthiness, operators, operations and maintenance of aircraft; In principle, an air carrier having been granted an operating licence in and accordance with EC Regulation No. 1008/2008 is entitled to operate air • the Air Traffic Decree 2014, containing provisions in respect of air traf- services within the EEA. The operation of routes between an EEA mem- fic control. ber state and a non-EEA member state is regulated by bilateral agreements between the EU and said non-EEA member state. Where the operation of 3 What safety regulation is provided for air operations that do a certain route between the Netherlands and a non-EEA member state is not constitute public or commercial transport and how is the not governed by a bilateral agreement between the EU and the relevant distinction made? non-EEA member state, the air carrier must be designated by the Minister for Infrastructure and the Environment pursuant to the applicable bilateral In principle, non-commercial air operations fall under the same general agreement between the Netherlands and said non-EEA member state. safety regulation as commercial air operations. However, Netherlands law does make a distinction between commercial and non-commercial 7 What procedures are there for hearing or deciding contested air operations. The Air Operation Decree and certain provisions of the applications for licences or other rights to operate particular Act on Aviation specifically relate to commercial air operations, whereas routes? the Regulations on Air Operation, implementing Annex 6 to the Chicago Convention (to the extent relating to ‘general aviation’), contain provisions An air carrier or other interested party can file with the Minister for applicable to private air operations and corporate air operations. Aerial Infrastructure and the Environment a notice of objection to the Minister’s work, although not covered by Annex 6 to the Chicago Convention, falls decision in respect of an application for a licence to operate particular under the scope of the Regulations on Air Operation as well. routes. Against the decision on such objection, appeal can be filed with the court and against the judgment of the court, appeal can be filed with the 4 Is access to the market for the provision of air transport Administrative Law Division of the Council of State. services regulated and, if so, how? 8 Is there a declared policy on airline access or competition and, Yes, access to the market for the provision of air transport services is if so, what is it? regulated. EC Regulation No. 1008/2008 is directly applicable in the Netherlands. If an air carrier does not fall under the scope of EC Regulation According to the Policy Document on Aviation, containing the govern- No. 1008/2008 (ie, for example, an air carrier not established in the ment’s vision on and ambition in respect of aviation in the Netherlands, European Economic Area (EEA), or an air carrier operating local flights), the government aims to contribute to the development of as open and www.gettingthedealthrough.com 133

© Law Business Research Ltd 2015 NETHERLANDS Stek competitive an aviation market as possible. Other important policy docu- Such international agreements with third countries often contain liberal ments on aviation are the Licensing Policy Document on Aviation and tariff regimes, under which any designated air carrier may, under super- the Policy Regulations on Licences for Scheduled and Non-scheduled Air vision of the contracting states, freely determine its tariffs. The necessary Transport (both published in May 2014), through which the government criteria for the granting of consent (to the extent still required) have been aims to establish a level playing field, especially in light of increased con- included in policy regulations. solidation of air carriers. Aircraft 9 What requirements must a foreign air carrier satisfy in order 13 Who is entitled to be mentioned in the aircraft register? Do to operate to or from your country? requirements or limitations apply to the ownership of an To operate commercial flights to or from the Netherlands, a foreign, EEA- aircraft listed on your country’s register? established air carrier must be in the possession of an operating licence According to the Act on Aviation and the Regulations on the Registration issued in accordance with EC Regulation No. 1008/2008 by the competent of Netherlands Civil Aircraft, in the nationality register the holder of the licensing authority of the member state in which the air carrier’s principal aircraft (typically the lessee) is registered, as well as the owner if this is a place of business is located. Air carriers not established in the EEA must natural person or legal entity other than the holder. Pursuant to the Aircraft be designated pursuant to the applicable bilateral agreement between the Decree 2008, the holder of the aircraft should be a national or resident of Netherlands and the relevant country (or must be granted an operating an EEA member state, or a legal entity incorporated under the laws of, and licence in accordance with article 16 of the Aviation Act; see question 4). having its corporate seat or actual place of business in, an EEA member Furthermore, the Act on Aviation provides that any air carrier oper- state or Bonaire, St Eustatius or Saba (Caribbean islands forming part of ating flights for remuneration within the Amsterdam flight information the Netherlands). If the holder of the aircraft is not the owner as well, it is region must be in the possession of an air operator’s certificate (AOC) additionally required that the owner is not a national of, or a legal entity granted by the Minister for Infrastructure and the Environment (ie, the established in, a state with which the Netherlands no longer maintain Human Environment and Transport Inspectorate), unless provided other- diplomatic relations. wise by international agreement. Under EC Regulation No. 1008/2008, an operating licence shall only be granted provided that the air carrier apply- 14 Is there a register of aircraft mortgages or charges and, if so, ing for such licence holds a valid AOC issued by the competent authority how does it function? of the member state concerned. Technical requirements for an AOC to be granted are laid down in EU Regulation No. 965/2012 (said Regulation Yes, pursuant to the 1948 Geneva Convention on the International (Part I through V) being applicable in the Netherlands as from 28 October Recognition of Rights in Aircraft there is a public register for the registra- 2014 owing to the use of the opt-out possibilities provided therein). tion of mortgages and other rights on aircraft, which is held by the Land Registry. Rules pertaining to the registration of aircraft in the public reg- 10 Are there specific rules in place to ensure aviation services ister can be found in the Netherlands Civil Code, the Rules on Registered are offered to remote destinations when vital for the local Aircraft 1996 and the Regulations on Registered Aircraft 2005. An aircraft economy? can only be registered with the public register if said aircraft has a maximum take-off mass of at least 450 kilograms, has been registered with the Under EC Regulation No. 1008/2008, public service obligations may be Netherlands nationality register, has not been registered with the national- imposed by a member state in respect of scheduled air services between ity register of another state, and if the court has approved the request for an EU airport and an airport serving a peripheral or development region in registration. its territory or on a thin route to any airport on its territory, any such route being considered vital for the economic and social development of the 15 What rights are there to detain aircraft, in respect of unpaid region which the airport serves. Public service obligations shall be imposed airport or air navigation charges, or other unpaid debts? only following consultations with the other member states concerned and after having informed the European Commission, the airports concerned In the Netherlands, there are no specific rights to detain aircraft in respect and the air carriers operating on the relevant route, and only to the extent of unpaid airport or air navigation charges. In general, the provisions of necessary to ensure on that route the minimum provision of scheduled the Netherlands Code of Civil Procedure on seizure of aircraft apply in air services satisfying fixed standards of continuity, regularity, pricing or respect of unpaid charges or other debts. Under Netherlands law, an asset minimum capacity, which air carriers would not assume if they were solely can be detained by a creditor holding said asset (eg, a repairman) until the considering their commercial interest. In the Netherlands, no specific rules related amount owed to it is paid in full. In principle, this right of deten- on public service obligations exist. tion also exists in respect of aircraft, with the understanding that with respect to aircraft registered with the Netherlands public register, or any 11 Are charter services specially regulated? other public register within the meaning of the 1948 Geneva Convention on the International Recognition of Rights in Aircraft, special rules apply. EC Regulation No. 1008/2008 applies to both scheduled services and The Netherlands Civil Code provides that a right of detention can be exer- charter services. Pursuant to article 3 of the Decree on Non-scheduled Air cised in respect of such registered aircraft but that the same shall not entail Transport, the operation of non-scheduled flights between the Netherlands a right of priority over such aircraft, so that it merely serves as a pressure and a non-EEA member state that are not governed by a bilateral agree- tool. ment between the EU or the Netherlands on the one hand and the relevant non-EEA member state on the other, must be authorised by the Minister 16 Do specific rules regulate the maintenance of aircraft? for Infrastructure and the Environment. At a European level, EU Regulation No. 1321/2014 applies. At a national 12 Are airfares regulated and, if so, how? level, the maintenance of aircraft is regulated by the Act on Aviation, the Aircraft Decree 2008, the Regulations on Aircraft Maintenance, the Pursuant to EC Regulation No. 1008/2008, air carriers established in Regulations on Recognitions of Airworthiness 2008 and the Air Operation the EEA, and, on the basis of reciprocity, air carriers established in third Decree. countries, may freely determine airfares for air services within the EEA (although certain restrictions may apply in case of public service obliga- Airports tions). Notwithstanding the provisions of bilateral agreements between EEA member states, EEA member states may not discriminate on grounds 17 Who owns the airports? of nationality or identity of air carriers in allowing EEA-established air Amsterdam Airport Schiphol, Rotterdam The Hague Airport and Lelystad carriers to set fares and rates for air services between their territory and Airport are all owned by NV Luchthaven Schiphol (through Schiphol a third country. Nederland BV, Rotterdam Airport BV and NV Luchthaven Lelystad, Pursuant to the Tariff Decree on Scheduled Air Transport, airfares for respectively). NV Luchthaven Schiphol in its turn is owned by the state of scheduled air transport services between the Netherlands and destinations the Netherlands (69.77 per cent), the municipality of Amsterdam (20.03 per outside the EEA require prior consent from the Minister for Infrastructure cent), Aéroports de Paris SA (8 per cent) and the municipality of Rotterdam and the Environment, but only to the extent the international agreement (2.2 per cent). Schiphol Nederland BV owns 51 per cent, and the munici- between the Netherlands and the relevant non-EEA country so requires. pality of Eindhoven and the province of Noord-Brabant each own 24.5 per

134 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Stek NETHERLANDS cent, of Eindhoven Airport (through Eindhoven Airport NV). Maastricht 22 Are there any laws or rules specifically relating to ground Aachen Airport is owned by the province of Limburg (through Maastricht handling? Aachen Airport BV). Groningen Airport Eelde is owned by the provinces of The Regulations on Ground Handling Airports, based on the Act on Groningen (30 per cent) and Drenthe (30 per cent), and the municipalities Aviation and EC Directive 96/67 (in respect of which EC Directive replac- of Groningen (26 per cent), Assen (10 per cent) and Tynaarlo (4 per cent), ing legislation has been proposed and, in March 2015, withdrawn), apply to through Groningen Airport Eelde NV. Enschede Airport Twente is out of all types of ground handling services on airports open to commercial traf- operation. fic whose annual traffic is no less than 2 million passenger movements or 50,000 tonnes of cargo. 18 What system is there for the licensing of airports? In principle, access to the market by suppliers of ground handling ser- Pursuant to the Act on Aviation, the operation of Amsterdam Airport vices is free. However, the Regulations on Ground Handling Airports pro- Schiphol is subject to a licence (which has been granted to Schiphol vide that the Minister for Infrastructure and the Environment may limit the Nederland BV). According to the Act on Aviation, the licence is granted number of providers for certain categories of ground handling services to for an indefinite period of time, but can be revoked by the Minister for no less than two per such category, whereby at least one of these suppliers Infrastructure and the Environment, among others, in the event of mis- should be entirely independent from the airport and the dominant air car- management by the airport operator endangering the continuity of the rier at that airport. The Minister for Infrastructure and the Environment airport. In case of a serious presumption of impending mismanagement by may also limit the number of users of self-handling services (meaning that the airport operator, the Minister for Infrastructure and the Environment air carriers provide the services in question for themselves) to no less than may give binding instructions in order to avoid said mismanagement. The two. Furthermore, the Minister for Infrastructure and the Environment Regulations on Civil and Military Airports contain provisions for civil and may impose certain conditions (relating to, for example, financial fitness military airports other than Amsterdam Airport Schiphol. and safety) on ground handling service providers or users of self-handling In March 2014 EU Regulation No. 139/2014 entered into force, regulat- services. ing the certification of airports on a European level. Airports falling under the scope of said Regulation must be in the possession of a European cer- 23 Who provides air traffic control services? And how are they tificate granted in accordance therewith before 31 December 2017. regulated? Up to flight level 245 (24,500 feet), air traffic control services are provided 19 Is there a system of economic regulation of airports and, if so, by Air Traffic Control the Netherlands, an agency existing under the how does it function? Act on Aviation and reporting to the Minister for Infrastructure and the The Act on Aviation complies with EC Directive 2009/12, which applies Environment (while air traffic control services for the upper airspace above to Amsterdam Airport Schiphol and aims to create a common framework 24,500 feet are provided by the Maastricht Upper Area Control Centre, an for the regulation of airport charges (ie, a levy paid by air carriers for the agency operated by Eurocontrol). The tasks, structure and (operational use of facilities and services related to landing, take-off, lighting and park- and financial) management of Air Traffic Control the Netherlands are ing of aircraft, and processing of passengers and freight). At least once a governed by the Act on Aviation. In respect of air traffic control, reference year, the operator of Amsterdam Airport Schiphol must determine the tar- should also be made to the Single European Sky II (and the proposed but iffs and conditions relating to its activities for the benefit of the use of the slowly progressing Single European Sky II+) legislation, the aim and pur- airport by air carriers. Said tariffs and conditions must be reasonable and pose of which is to ensure a harmonised regulatory framework for air traffic non-discriminatory between air carriers. Tariffs may be modulated in the management in the EU. public and general interest, including environmental issues. The criteria used for such a modulation shall be relevant, objective and transparent. Liability and accidents The Authority for Consumers and Markets (ACM) is responsible for the 24 Are there any special rules in respect of death of, or injury to, enforcement of compliance with the relevant tariff regulations under or passengers or loss or damage to baggage or cargo in respect of pursuant to the Act on Aviation. domestic carriage? 20 Are there laws or rules restricting or qualifying access to Air carrier liability for passengers and their baggage is governed by EC airports? Regulation No. 2027/97, which has been amended by EC Regulation No. 889/2002 in order to implement the relevant provisions of the Montreal The Act on Aviation provides that access to the airport is to be ensured by Convention regarding the carriage of passengers and their baggage by the airport operator in accordance with the Act on Aviation and further reg- air, and which applies to domestic carriage as well. EC Regulation No. ulations based thereon. Said further regulations contain restrictions with a 2027/97 lays down the obligations of EU air carriers in relation to liability view to noise, safety, the environment, etc. Furthermore, access to airports in the event of accidents to passengers for damage sustained in the event may be limited pursuant to regulations on slot allocation (see question 21). of death or wounding of a passenger or any other bodily injury suffered Pursuant to EC Regulation No. 1008/2008 the regulation of distribution of by a passenger, if the accident which caused the damage took place on air traffic rights between EU airports are to be non-discriminatory among board an aircraft or in the course of any of the operations of embarking destinations inside the EEA or on grounds of nationality or identity of EU or disembarking. The air carrier is liable for damage sustained in case of air carriers. damage to, or destruction or loss of, checked baggage, provided that the event which caused said damage, destruction or loss took place on board 21 How are slots allocated at congested airports? the aircraft or during any period within which the checked baggage was in In accordance with the Decree on Slot Allocation, based on EC Regulation the charge of the air carrier. However, the air carrier is not liable if and to No. 95/93 (as amended by EC Regulation No. 793/2004 and most the extent the damage resulted from the inherent defect, quality or vice of recently by EC Regulation No. 545/2009), slots at coordinated airports the baggage. In the case of unchecked baggage, the air carrier is liable if (ie, Amsterdam Airport Schiphol, Eindhoven Airport and Rotterdam the damage resulted from its fault or that of its servants or agents. In order The Hague Airport) are allocated by Stichting Airport Coordination to strengthen passengers’ position, a revision of EC Regulation 2027/97 is Netherlands (SACN). Air carriers having been allocated slots from the pool under preparation. are allowed to use the airport infrastructure for the purposes of take-off At a national level, provisions relating to air carrier liability (based and landing at particular times and during a particular season. An air car- on the Montreal Convention), have been included in Chapter 8 of the rier has the right to retain the series of slots allocated to it in a particular Netherlands Civil Code. season for the next corresponding season, but only if such air carrier has operated the relevant slots for at least 80 per cent of the time. These rights 25 Are there any special rules about the liability of aircraft are known as ‘grandfather rights’. If said 80 per cent usage cannot be evi- operators for surface damage? denced, the relevant slots are returned to the pool. SACN must act in a EC Regulation No. 785/2004, as amended by EC Regulation No. 1137/2008 neutral, non-discriminatory and transparent way. and EU Regulation No. 285/2010, contains the minimum insurance requirements for all air carriers and all aircraft operators flying within, into, out of, or over the territory of a member state. See also question 40.

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26 What system and procedures are in place for the investigation Competition law of air accidents? 28 Do sector-specific competition rules apply to aviation? If not, EU Regulation No. 996/2010, taking into account Annex 13 to the Chicago do the general competition law rules apply? Convention, lays down international standards and recommended prac- In the Netherlands, sector-specific competition rules apply to Amsterdam tices for aircraft accident and incident investigation. Said Regulation Airport Schiphol because Amsterdam Airport Schiphol has a dominant applies to safety investigations into accidents and serious incidents which position on the national market. On the basis of these rules, Amsterdam occur: Airport Schiphol is required to hold separate accounts for its aviation and • within the EU; non-aviation activities. The ACM regulates the tariffs and conditions for • outside the EU, but involve aircraft registered in a member state or aviation activities provided to airlines by Amsterdam Airport Schiphol. operated by an undertaking established in a member state; or This concerns tariffs and conditions for landing, take off, parking of air- • in territories where a member state may, according to international craft, baggage transport and security measures. The ACM ensures that standards and recommended practices, appoint a representative or tariffs and conditions are cost-based and are not unreasonable or discrimi- has a special interest by virtue of fatalities or serious injuries to its natory. Amsterdam Airport Schiphol will also base its tariffs on an attribu- citizens. tive system of costs and benefits that requires the approval of the ACM. The general competition law rules as laid down in the Dutch Pursuant to EU Regulation No. 996/2010, a member state is obligated Competition Act apply to the aviation sector as a whole. to investigate every aircraft accident or serious incident which occurs on its territory. The Annex to EU Regulation No. 996/2010 contains a list of 29 Is there a sector-specific regulator or are competition rules examples of serious incidents. Each member state must ensure that safety applied by the general competition authority? investigations are conducted or supervised by a permanent, independent national civil aviation safety investigation authority. In the Netherlands, The ACM is entrusted with the enforcement of the competition rules. This this is the Dutch Safety Board. Also, EU Regulation No. 996/2010 includes both the sector-specific rules applicable to Amsterdam Airport establishes a European Network of Civil Aviation Safety Investigation Schiphol as well as the general competition rules in the Dutch Competition Authorities, formed of all member states’ national safety investigation Act. authorities, in order to improve the quality of investigations conducted by safety investigation authorities and strengthen their independence. EASA 30 How is the relevant market for the purposes of a competition is closely involved in the investigations referred to above; an EASA repre- assessment in the aviation sector defined by the competition sentative must be invited to participate in said investigations as an adviser. authorities? With effect as of 15 November 2015, EU Regulation No. 996/2010 shall In its decisional practice, the ACM has defined two separate product mar- be amended by EU Regulation No. 376/2014 to the extent it concerns the kets (ie, the sale of airline capacity for transport of cargo and the sale of reporting of occurrences in civil aviation (see question 27). airline capacity for transport of persons). The ACM has, on the basis of the decisional practice of the European 27 Is there a mandatory accident and incident reporting system Commission, considered that the market for the sale of airline capacity and, if so, how does it operate? for transport of persons could be divided into medium-haul and long-haul Pursuant to EU Regulation No. 996/2010, which contains detailed provi- flights. The ACM has left open whether or not this results in the existence sions on safety investigations following aircraft accidents or serious inci- of separate product markets, but has considered that if there is a separate dents, any person involved who has knowledge of the occurrence of such product market for long-haul flights, it will in any event include both sched- accident or serious incident shall notify without delay the competent safety uled flights and charter flights. The ACM has considered the geographical investigation authority of the member state in which the accident or seri- market for sale of airline capacity for transport of persons to be national. ous incident has occurred. In the Netherlands this is the Dutch Safety The ACM has considered the purchase of blocks of seats by tour opera- Board. The Dutch Safety Board has the obligation to notify without delay tors and travel agencies to be a separate product market as well. Also, the the European Commission, EASA, ICAO, the member states and any market for the purchase of blocks of seats is considered to be national, third parties involved. Each safety investigation shall be concluded with since tour operators focus all of their promotional activities on the national a report in a form appropriate to the type and seriousness of the accident market and purchase seats for flights departing from said national market. or serious incident. Such report shall contain, where appropriate, safety recommendations. 31 What are the main standards for assessing the competitive EC Directive 2003/42, regarding the reporting system in respect of effect of a transaction? occurrences (operational interruptions, defects, faults or other irregular If a notified transaction significantly impedes competition in the circumstances) that have or may have influenced flight safety but that have Netherlands market or part thereof, the ACM may prohibit this transaction. not resulted in an accident or serious incident, has been implemented in In particular, this will be the case if the transaction results in the strength- the Act on Aviation and further regulation (ie, the Decree on Occurrence ening or creation of a dominant position of a party on a given market. Reporting in Civil Aviation and the Regulations on Occurrence Reporting in To assess the competitive effects of a transaction, the ACM deter- Civil Aviation). Such occurrences must be notified to the Aviation Incident mines the position of the undertakings on the relevant markets. Market Occurrence Reporting Bureau of the Human Environment and Transport shares form the most important indication of dominance, but the ACM will Inspectorate by the natural persons and legal entities referred to in article also take into account other factors, such as the structure of the markets 4, paragraph 1 of EC Directive 2003/42 (eg, the operator or commander of a concerned, buyer power and barriers to entry. public transport aircraft, maintenance providers, air traffic controllers, etc) within 72 hours following the discovery of any such occurrence. 32 What types of remedies have been imposed to remedy As per 15 November 2015, EU Regulation No. 376/2014, amending concerns identified by the competition authorities? EU Regulation No. 996/2010 and repealing EC Directive 2003/42, shall The ACM may impose behavioural or structural remedies if a certain trans- apply. Said Regulation establishes more proactive rules on the reporting, action raises concerns. It must be noted that the ACM favours the imposi- collecting, storing, protecting and disseminating of safety incident infor- tion of structural remedies over the imposition of behavioural remedies. mation in order to identify potential safety hazards before they result in However, to date, the ACM has not required any remedies in the aviation an accident. Moreover, EU Regulation No. 376/2014 aims to create a ‘Just sector. Culture’ environment by introducing provisions relating to the inappropriate use of safety information and the protection of occurrence report- Financial support and state aid ers. The Netherlands is preparing a legislative proposal with the purpose of implementing EU Regulation No. 376/2014 in Netherlands aviation 33 Are there sector-specific rules regulating direct or indirect legislation. financial support to companies by the government or government-controlled agencies or companies (state aid) in the aviation sector? If not, do general state aid rules apply? Both general and sector-specific EU state aid rules apply in the aviation sector. Commission Communication 2014/C 99/03 contains guidelines

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© Law Business Research Ltd 2015 Stek NETHERLANDS specifically for state aid in the aviation sector. The objective of the guidelines is to preserve the accessibility of regions, whilst avoiding the dupli- Update and trends cation of unprofitable airports, a waste of public resources and undue distortions of competition. The guidelines, for example, clearly specify that Lelystad Airport is gradually developed into an airport handling up to 45,000 air transport movements per year (providing alternative when setting up agreements with an airline, the airport needs to ensure air traffic capacity for, and supporting the growth of, Amsterdam that the expected costs generated by the agreements will be covered by the Airport Schiphol). Eindhoven Airport is growing in phases as well. corresponding expected revenues. If this is not the case, the airline benefits This year, the airport is allowed to increase its flight movements from an undue advantage which in principle constitutes incompatible state from 19,000 to 29,000. aid. The European Commission recently adopted several decisions, based Plans to turn Enschede Airport Twente (which has been out of on the guidelines on state aid to airports and airlines, concerning public operation since 2008) into a commercial civil airport have failed. In support granted to airports and airlines in France and Germany. the coming years, the airport will be turned into a technology base. Besides the general and sector-specific EU state aid rules, national The provincial authorities of Limburg have proposed to the sector-specific rules apply to Amsterdam Airport Schiphol in view of European Commission a support package worth €45 million for the recovery of Maastricht Aachen Airport. Investigations whether its dominant position. On the basis of these rules, Amsterdam Airport providing said support package results in unlawful state aid are Schiphol is required to hold separate accounts for its aviation and non- ongoing. The province of Limburg is in the process of selecting an aviation activities. airport operator for Maastricht Aachen Airport. The fine of €370,000 imposed in March 2013 by the ACM on 34 What are the main principles of the state aid rules applicable Irish airline Ryanair for four violations of consumer protection to the aviation sector? regulations that were found in its online booking system, has largely been upheld by the court of Rotterdam. The court lowered said fine According to article 107(1) of the Treaty on the Functioning of the European to €324,000. Union (TFEU), any aid granted by a member state that distorts or threatens to distort competition by favouring certain undertakings shall be incompatible with the internal market, insofar as it affects trade between member states. The European Commission applies the ‘market economy investor should be recovered by using the general provisions in the Dutch General principle’ to determine the legality of aid granted by a member state or Administrative Law Act. another public authority. Under this principle, the European Commission assesses whether a private investor would have made the investment under Miscellaneous normal market conditions. 39 Is there any aviation-specific passenger protection 35 Are there exemptions from the state aid rules or situations in legislation? which they do not apply? EC Regulation No. 261/2004 establishes minimum rights for passengers Section 107(2) and (3) TFEU list specific situations in which state aid shall in case of denied boarding against the passenger’s will, flight cancella- be compatible with the common market. Section 107(2) TFEU states the tions and long delays by providing rules pertaining to reimbursement type of state aid considered to be in line with the internal market, namely of costs of tickets, care (eg, meals, hotel accommodation, etc) and com- state aids that have a social character granted to individual consumers, pensation. The Human Environment and Transport Inspectorate is state aids to make good the damage caused by national disasters or excep- responsible for the enforcement of compliance with EC Regulation No. tional occurrences, and state aids granted to certain areas of Germany 261/2004. On 17 September 2011 a policy regulation on the enforcement affected by the division of that country. Section 107(3) TFEU allows the of said EC Regulation, issued by the State Secretary for Infrastructure Commission to permit a number of categories of state aid for which any and the Environment, entered into force (which policy regulation was last anti-competitive effects are outweighed by other benefits. amended as per 23 September 2013). To strengthen passengers’ position, Furthermore, Block Exemption Regulation No. 651/2014 (‘Block a revision of EC Regulation No. 261/2004 is generally deemed necessary, Exemption Regulation’) applies. The Block Exemption Regulation exempts but progress is slow. the Netherlands and the other member states from the obligation to notify EC Regulation No. 1107/2006 contains provisions for the protection of, the grant of state aid, as long as all the Block Exemption Regulation criteria and provision of assistance to, disabled persons and persons with reduced are fulfilled. mobility travelling by air. In principle, disabled persons and persons with reduced mobility cannot be refused reservations or boarding on grounds 36 Must clearance from the competition authorities be obtained of their disability. Exceptions can be made on the basis of applicable safety before state aid may be granted? requirements and physical impossibility of embarkation or carriage. In respect of computerised reservation systems (CRS), EC Regulation According to section 108(3) TFEU clearance from the European No. 80/2009 applies, establishing a harmonised code of conduct regarding Commission must be obtained in order to grant state aid. Section 108(3) the use of CRS, in order to protect consumers’ interests. TFEU determines that the European Commission must be notified of any EC Regulation No. 1008/2008 deals with passengers’ rights regarding plans to grant or alter state aid in order to enable the European Commission airfares (see question 12). to submit comments on the plans. State aid that fulfils all conditions laid down in the Block Exemption 40 Are there mandatory insurance requirements for the Regulation, both general and specific, to the relevant categories of state operators of aircraft? aid is exempted from the notification obligation laid down in section 108(3) TFEU. Yes, there are mandatory insurance requirements for the operators of aircraft, laid down in EC Regulation No. 785/2004, as amended by EC 37 If so, what are the main procedural steps to obtain clearance? Regulation No. 1137/2008 and EU Regulation No. 285/2010. EC Regulation No. 785/2004 contains minimum insurance requirements for air carriers EC Regulation No. 659/1999, as implemented by EC Regulation No. and aircraft operators in respect of passengers, baggage, cargo and third 794/2004 describes, in detail, the procedural steps necessary to obtain parties, for both commercial and private flights. Under EC Regulation No. clearance from the European Commission. 785/2004, air carriers and aircraft operators are required to be insured to cover the risks associated with aviation-specific liability (including acts of 38 If no clearance is obtained, what procedures apply to recover war, terrorism, hijacking, acts of sabotage, unlawful seizure of aircraft and unlawfully granted state aid? civil commotion). In the event of unlawfully granted state aid, a member state must take all appropriate measures to recover the aid, including interest at an 41 What legal requirements are there with regard to aviation appropriate rate. In the Netherlands, a legislative bill is pending in the security? Dutch parliament regarding the recovery of unlawfully granted state aid. EC Regulation No. 300/2008 on common rules in the field of civil aviation Currently, there is no particular legislation that provides for a procedure security (as supplemented by EC Regulation No. 272/2009, EC Regulation to recover unlawfully granted state aid. Unlawfully granted state aid No. 1254/2009 and EU Regulation No. 18/2010) provides rules relating to aviation security. It provides the basis for a common interpretation www.gettingthedealthrough.com 137

© Law Business Research Ltd 2015 NETHERLANDS Stek of Annex 17 to the Chicago Convention regarding security issues. In the board an aircraft, deliberate reporting of incorrect flight information while Netherlands, the Aviation Act, the Civil Aviation Security Decree and the knowing the same jeopardises the safe operation of an aircraft, acts of Regulations on Implementation of Civil Aviation Security 2010 provide for violence against any person on airports and trespassing on airports. Said rules regarding security officers and security measures of airports, passen- crimes have been identified in the Netherlands Criminal Code. Besides ger and baggage control and control of goods. these provisions, the Netherlands is also a party to certain international instruments providing for rules against hijacking of aircraft, offences and 42 What serious crimes exist with regard to aviation? crimes committed on board an aircraft and sabotage, such as the 1963 Examples of serious crimes regarding aviation are equipping or rental Tokyo Convention, the 1970 Hague Convention and the 1971 Montreal of an aircraft to be used for violent acts, violence against any person on Convention.

Jeroen Timmermans [email protected] Laetitia Kunst-den Teuling [email protected] Ruben Elkerbout [email protected]

Vijzelstraat 72, floor 7B Tel: +31 20 530 5200 1017 HL Amsterdam Fax: +31 20 530 5299 Netherlands www.steklaw.com

138 Getting the Deal Through – Air Transport 2016

New Zealand

Frank Porter, Anita Birkinshaw and Rishalat Khan Buddle Findlay

General 4 Is access to the market for the provision of air transport services regulated and, if so, how? 1 Which bodies regulate aviation in your country, under what basic laws? Apart from compliance with civil aviation (including liability rules), aviation security and safety, legislative and regulatory requirements, the New The Ministry of Transport manages the interface with the two Crown enti- Zealand domestic market for air transport services (as distinct from airport ties responsible for air transport in New Zealand, the two Crown entities services and international air transport services) is not subject to regula- being the Civil Aviation Authority of New Zealand (CAA) and the Aviation tion except under generic laws. The provision of international air services Security Service of New Zealand, both established under the Civil Aviation is regulated by the responsible minister under Parts 8A and 9 of the Civil Act 1990. Aviation Act. The Act sets out various licensing or authorisation require- The Ministry also negotiates, on behalf of the New Zealand governments, procedures and criteria for scheduled international services and ment, bilateral and multilateral services agreements and is the licensing non-scheduled international services. These requirements are in addition authority for New Zealand international airlines, other than in respect of ser- to applicable regulations and rules under the Act. vices to and from countries designated as open aviation markets with which open aviation market arrangements are in place. The Secretary of Transport 5 What requirements apply in the areas of financial fitness and is the licensing authority for those countries as well as for foreign operators. nationality of ownership regarding control of air carriers? The CAA maintains the New Zealand Register of Aircraft, establishes the civil aviation safety and security standards and monitors adherence to The requirements vary depending on the nature of the scheduled interna- those standards. It also carries out accident and incident investigations. tional air service licence that is the subject of an application. The Aviation Security Service is responsible for undertaking the duties set out in the Civil Aviation Act including the screening of depart- New Zealand international airlines ing domestic and international passengers, access control, patrol of security According to information available from the Ministry of Transport, a designated areas and the searching of aircraft. In addition, the Transport scheduled international air service licence or open market aviation licence Accident Investigation Commission Act 1990 establishes an independent will not be granted to a New Zealand airline unless it is substantially owned body, the Transport Accident Investigation Commission, with a principal and effectively controlled by New Zealand nationals. This is because the function of the investigation of accidents and incidents including search and right of an airline to operate international scheduled services could be rescue and serious occurrences associated with the operation of aircraft. challenged under most of New Zealand’s bilateral air services agreements. An application for such a licence therefore requires verification of details Regulation of aviation operations showing that New Zealand nationals own at least 51 per cent of the paid-up capital of the airline and have effective control of the airline by holding a 2 How is air transport regulated in terms of safety? majority of the positions on the airline’s board of directors, including that The Civil Aviation Act and the Civil Aviation Rules (the Rules) regulate air of chairperson. If services are to be provided to Australia, at least two- transport safety in New Zealand. The Act and the Rules are comprehen- thirds of the board’s positions must be held by Australian or New Zealand sive and cover all aspects of civil aviation safety, including the regulation nationals, or both. of operators and aircraft, as well as crews and maintenance and air traffic While previously a New Zealand airline applying for a scheduled inter- control. national air service licence had to verify that not more than 25 per cent of In addition, the CAA administers the provisions of New Zealand’s the airline was owned by a foreign airline (or foreign airline interests) and Health and Safety in Employment Act 1992 (the HSE Act) in respect of the not more than 35 per cent in aggregate was owned by foreign airlines (or for- aviation sector, specifically for aircraft while in operation. The HSE Act eign airline interests), this restriction has now been removed by the govern- promotes the prevention of harm to people at work and other people in, or ment’s new International Air Transport Policy. Insofar as applicants for an in the vicinity of, a place of work, by imposing various duties and require- open market aviation licence are concerned, the issue of foreign ownership ments on employers, employees, self-employed people and principals. will be addressed on a case-by-case basis and the treatment of it will also Major accidents and incidents may also be investigated by the depend on the nature of the air services arrangements New Zealand has Transport Accident and Investigation Commission (as discussed in ques- with the countries to which an applicant proposed to operate. For airlines tions 26 and 27). operating to Australia, single aviation market (SAM) criteria may apply. The affidavits submitted with the application for a licence must also 3 What safety regulation is provided for air operations that do record that the airline’s head office and operational base is in New Zealand. not constitute public or commercial transport and how is the Regulatory consideration will also be given to whether or not arrange- distinction made? ments relating to the operation of the proposed service in effect vest con- All air operations are regulated by the Rules and the distinction as to public trol of the airline in a foreign interest. Airlines based in New Zealand and and private use of aircraft is contained in the Rules. In particular, the cer- primarily under the safety supervision of the CAA, but with more than tification and operating requirements for helicopters and small aeroplanes 49 per cent foreign ownership are encouraged to approach the Ministry in (nine seats or fewer and weighing 5,700kg or less) involved in air opera- the event they propose operating services as a New Zealand international tions are covered in Parts 119 and 135 of the Rules. Agricultural aircraft airline. This is because consideration will be given to licensing them where operations (eg, aerial top-dressing) and the operation and safety of other all proposed services would be offered pursuant to air services agreements aerial craft such as microlights, gliders, hang-gliders and hot air balloons under which the other country or countries would reasonably be expected are also regulated by the Rules. to accept New Zealand’s designation of, and to issue an operating authorisation to, such an airline. www.gettingthedealthrough.com 139

The financial ability of the applicant to carry on the proposed service in accordance with the above, or have been jointly approved as a SAM air- and the likelihood of the applicant carrying on the service satisfactorily line by the relevant Australian and New Zealand ministers. must also be taken into account by the responsible minister in considering As with applications for other licences, proof of insurance must be an application for a scheduled international air service licence. Information provided. that is required to accompany applications includes a business plan setting out the objectives of the enterprise and the resources available to achieve 6 What procedures are there to obtain licences or other rights to these objectives, a budgeted statement of financial performance of the operate particular routes? airline for its first year of operation, including key assumptions made, a Part 8A of the Civil Aviation Act requires operators of scheduled interna- statement of financial position as of the date of the application and as pre- tional air services to or from New Zealand (including by way of code shar- dicted over the first year of operation, a cash-flow analysis on a month-by- ing on the aircraft of another airline) to have a scheduled international air month basis for the airline’s first year of operation, a list of commitments service licence or an open aviation market licence. and guarantees given by the enterprise or its directors and management An open aviation market licence is applicable only for services sched- team, and a summary of relevant qualifications and work experience of uled between New Zealand and certain countries or territories that have senior management. The applicant must also provide proof of insurance, been specifically designated by the Minister of Transport. An open aviation a requirement that also applies where the application is for an open market market licence is currently applicable in respect of operations to and from aviation licence. Australia, Brunei, Chile, the Cook Islands, Luxembourg, Malaysia, Samoa, Singapore, Tonga, the United Arab Emirates and the United States. Special shareholder restrictions in respect of the national carrier, An airline intending to operate scheduled services between New Air New Zealand Limited (Air NZ) Zealand and a country other than those listed above, may do so only with a In order to provide enforcement rights to the Crown in the event of a scheduled international air service licence. The current requirements and breach of Air NZ’s constitution, the ‘Kiwi share’, a single shareholding, procedures required for international air service licences and open aviation is owned by the Crown as the ‘Kiwi shareholder’, and has a wide range of market licences respectively can be found at the New Zealand Ministry of rights attached to it. One of those rights is the power to force the sale of Transport’s website at www.transport.govt.nz. equity securities transferred in breach of the restrictions on the ownership Licensing provides the mechanism for ensuring airlines abide by the of equity securities. air traffic rights exchanged in bilateral negotiations. For New Zealand air- Additionally, the relevant provisions of Air NZ’s constitution cannot lines, licensing is also the method for allocating New Zealand’s air traffic be amended, removed or altered, without the written consent of the Kiwi rights that, under most agreements, are still restricted. shareholder. Air NZ’s company constitution restricts persons who own or operate 7 What procedures are there for hearing or deciding contested an airline business from holding or having an interest in equity securities applications for licences or other rights to operate particular in Air NZ without the consent of the Kiwi shareholder. It also restricts non- routes? New Zealand nationals from holding or having an interest in equity secu- Certain procedural requirements are prescribed under the Civil Aviation rities that confer 10 per cent or more of the total voting rights in Air NZ, Act. According to information available from the Ministry of Transport, without the prior written consent of the Kiwi shareholder. A ‘New Zealand international air service licence applications are notified in the New national’ is defined in the constitution, and includes a New Zealand citi- Zealand Gazette and may be sent directly to interested parties. Not less zen, the Crown and any company incorporated in New Zealand that is than 21 clear days are allowed within which the responsible minister will substantially owned and effectively controlled by New Zealand nationals. receive written representations relating to the application. The applicant is then given the opportunity to comment on those representations to the Foreign international airlines responsible minister. A foreign international airline applicant may be required to supply evidence Where there are competing scheduled international air service licence of the nationality of the control of the airline, and either evidence of the applications for constrained capacity, the responsible minister considers nationality of its ownership or its principal place of business and place of specific criteria. These comprise the extent to which: incorporation. Under most of New Zealand’s bilateral air services agree- • the proposed service would help develop a competitive environment ments, the nationality of the ownership and control of an airline can affect on the route concerned; its entitlement to exercise the rights accorded by the agreement. In some • the proposed service would facilitate increased inbound tourism and agreements the principal place of business and place of incorporation of the trade and investment; and airline may also be relevant. Applicants must also supply proof of insurance. • an airline has the ability to satisfy consumer interests in terms of degree of choice. International airlines operating under an open aviation market licence for SAM airlines for services between Australia and New Where a dedicated freight service is proposed, the extent to which the ser- Zealand vice would contribute to trade development, in particular export markets, In order to demonstrate that the applicant meets eligibility criteria under is also considered. the single aviation market (SAM) provisions of the Australia–New Zealand The duration of scheduled international air service licences for a New Air Services Agreement, applicants must verify: Zealand international airline is normally five years but may be stipulated • that Australian or New Zealand nationals or both: for a shorter term. The responsible minister must designate licensed air- • own a majority of the paid-up capital of the airline, and that, for pas- lines in accordance with the provisions of the relevant bilateral air services senger airlines, the total paid-up capital is commensurate with the agreement and notify the government of the countries concerned. scale of the operation proposed; • have effective control of the airline by holding at least two-thirds of the 8 Is there a declared policy on airline access or competition and, positions on the board, including that of chairperson; if so, what is it? • that the airline’s head office and operational base are in Australia or New Zealand has been a leader, internationally, in seeking liberalisation New Zealand; and of access for international air services including pursuing open skies and • whether arrangements relating to the operation of the proposed ser- other regional agreements (eg, with Australia and the UK, and with certain vice in effect vest control of the airline in a foreign interest. Pacific Rim and Pacific Island countries under the MALIAT Agreement). In August 2012, the government issued an International Air Transport An airline that does not meet these ownership and control requirements Policy Statement (available on www.transport.govt.nz) which recorded, may still be granted an open aviation market licence if the airline is jointly among other things, that New Zealand will pursue a policy of putting in approved as a ‘SAM airline’ by both the Australian and New Zealand min- place reciprocal open skies agreements, except where it is not in the best isters responsible for civil aviation in accordance with the Single Aviation interests of the country as a whole, will consider, on a case-by-case basis, Market Arrangements between the two countries. granting approval for extra-bilateral services pending the putting into place In order to continue to exercise the rights granted in an open aviation of new or expanded air services arrangements and that certain policy limits market licence, an airline must either continue to be substantially owned on foreign airline ownership would be removed (which has since occurred). and effectively controlled by Australian or New Zealand nationals, or both, However, access or competition policies for any particular international air

140 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Buddle Findlay NEW ZEALAND services licences depend on the relevant licensing criteria under the Civil 11 Are charter services specially regulated? Aviation Act and the terms of the air services agreements relating to the Commercial non-scheduled international flights for carriage of passen- services concerned. gers, cargo or mail for remuneration or hire must be authorised by the Secretary of the Ministry of Transport in accordance with any guidelines 9 What requirements must a foreign air carrier satisfy in order issued by the responsible minister (section 87ZE of the Civil Aviation to operate to or from your country? Act). This restriction does not apply to holders of open market aviation In order to operate scheduled international air services to or from New licences insofar as the countries or territories specified in those licences Zealand (including by way of code-sharing on the aircraft of another air- are concerned. line), an airline is required under Part 8A of the Civil Aviation Act to hold a scheduled international air service licence or, for services between New 12 Are airfares regulated and, if so, how? Zealand and countries or territories that have been specifically designated The Civil Aviation Act and International Services Licences may require by the Minister of Transport (currently Australia, Brunei, Chile, the Cook services and tariff filings. Part 9 of the Act provides for the responsible min- Islands, Luxembourg, Malaysia, Samoa, Singapore, Tonga, the United ister to issue commission regimes or, in defined circumstances, authorise Arab Emirates and the United States), an open aviation market licence. tariffs in respect of international air services. Agents’ commission arrange- Compliance with the relevant provisions of the Civil Aviation Act ments for carriage of passengers and the international carriage of cargo are involves various licensing requirements and procedures. Full details are also regulated. available at www.transport.govt.nz but key features are highlighted below and at question 5. Aircraft Clearly, before scheduled services can be commenced between New Zealand and other countries or territories, applicant airlines must meet the 13 Who is entitled to be mentioned in the aircraft register? Do requirements of the relevant authorities in each of those other countries requirements or limitations apply to the ownership of an or territories. aircraft listed on your country’s register? If granting a scheduled international air service licence or open avia- The only party entitled to be mentioned on the New Zealand Register of tion market licence would be contrary to the relevant bilateral air services Aircraft is the ‘owner’ of the aircraft, being for the purposes of the Rules the agreement or associated arrangements, or to any other international person lawfully entitled to possession of the aircraft for 28 days or longer. agreement, convention or arrangement to which New Zealand is a party, There are no requirements or limitations, particularly as to nationality, the minister or licensing authority (as the case may be) must refuse to grant which relate to the ‘ownership’ of an aircraft listed on the New Zealand the licence. Register. However, an applicant for registration must be a ‘fit and proper For open aviation market licences in respect of airlines operating person’ having regard to such matters as past history of transport safety under the Single Aviation Market Arrangement between New Zealand and compliance and physical and mental health. Australia (SAM airlines) for services between New Zealand and Australia, the granting of a licence must not be contrary to the Australia–New Zealand 14 Is there a register of aircraft mortgages or charges and, if so, Air Services Agreement or to any other international agreement, conven- how does it function? tion or arrangement to which New Zealand is a party. International interests in aircraft (such as mortgages, charges and leases) A foreign airline applying for a scheduled international air service can be registered on the International Registry of Mobile Assets (the IR) licence may be required to supply evidence of the nationality of the control in accordance with the Convention on International Interests in Mobile of the airline, and either evidence of the nationality of its ownership or its Equipment (the Cape Town Convention). The Cape Town Convention and principal place of business and place of incorporation. the Aircraft Protocol were adopted as part of New Zealand law under the To qualify for an open aviation market or a scheduled international Civil Aviation (Cape Town Convention and other Matters) Act 2010. licence, the applicant airline must have been designated by its government Aircraft mortgages and charges and leases of aircraft for more than in accordance with the relevant provisions of the air services arrangements one year can also be independently registered on the New Zealand between New Zealand and that other country. Personal Property Securities Register (PPSR) created by the Personal A foreign airline applicant may also be required to supply evidence Property Securities Act 1999 (PPSA) along with security interests in other that it complies with the requirements for designated airlines under the personal property. Aircraft mortgages and charges and leases of aircraft for relevant provisions of the air services arrangements. more than one year are ‘security interests’ for the purposes of the PPSA. Where an application is for a licence for scheduled international air Nevertheless, as a matter of statute the provisions of the Cape Town services, the applicant must hold a foreign air operator certificate (unless Convention have effect in place of any other New Zealand law (including the application is only for code-sharing on the aircraft of another carrier the PPSA), to the extent that the Cape Town Convention applies to a matter that has the relevant operating authorisation). Applicants for open market to which the other law applies. Registrations on the IR, as a matter of New licences are also ‘likely’ to require such a certificate. Zealand law, therefore have priority over PPSR registrations. Applicants must also supply proof of insurance covering liability that may arise from or in connection with the operation of the proposed ser- 15 What rights are there to detain aircraft, in respect of unpaid vices in respect of death or bodily injury or property damage. The licensee airport or air navigation charges, or other unpaid debts? may be called upon at any time to supply proof of such insurance. After taking into account the requirements set out above, the licensing There is no statutory right of detention of aircraft in respect of unpaid air- authority may refuse a licence application by a foreign international airport or air navigation charges or other unpaid debts. line, or may grant it wholly or partly, and subject to such conditions as it Airport companies or other service providers may, as a matter of con- thinks fit. If an applicant airline has met all the requirements, a decision on tract, withdraw services in respect of aircraft where there are unpaid fees the granting of a scheduled international air service licence can normally and charges. be made within one week of receipt of the licence application, in the case of an open market licence, and two months in the case of a scheduled interna- 16 Do specific rules regulate the maintenance of aircraft? tional airline licence . However, a licence cannot be granted until all these The maintenance of aircraft is provided for in the Civil Aviation Act and requirements have been met. When a licence has been granted, notice to the Rules. that effect is given in the New Zealand Gazette. Airports 10 Are there specific rules in place to ensure aviation services 17 Who owns the airports? are offered to remote destinations when vital for the local economy? Civilian airports in New Zealand are operated by airport authorities or airport companies. Airport authorities are local authorities authorised There are no specific rules in place to give effect to public service obliga- to operate airports by Order in Council under the Airport Authorities tions either in respect of domestic aviation services or international avia- Act 1966. Airport companies are also authorised under that act. Airport tion services. companies are owned by wholly commercial companies, by commercial interests and local authorities jointly, by joint ventures between the New www.gettingthedealthrough.com 141

Zealand Crown and local authorities, or by the Crown alone. The three Liability and accidents main international airports (Auckland, Wellington and Christchurch) are 24 Are there any special rules in respect of death of, or injury to, all owned by airport companies. passengers or loss or damage to baggage or cargo in respect of domestic carriage? 18 What system is there for the licensing of airports? Yes, the domestic carriage of passengers is regulated by the Civil Aviation There is no economic licensing of airports as such. The Civil Aviation Act Act. New Zealand has a no-fault accident compensation scheme that bars provides for licensing and other requirements for aviation safety purposes. any actions for compensatory damages that arise directly or indirectly out The Airport Authorities Act 1966 sets out certain rules concerning the of personal physical injury or death that occurs during domestic carriage operation of airports, including in relation to charges. on an airline within New Zealand except where a non-New Zealand resident is a passenger on the domestic leg of a flight that they travelled on 19 Is there a system of economic regulation of airports and, if so, and will leave New Zealand on. The death or injury would instead be com- how does it function? pensated for according to the relevant accident compensation legislation, The Airport Authorities Act 1966 requires airport companies to consult the Accident Compensation Act 2001. However, proceedings may still be their substantial airline customers before setting or changing their charges brought to recover exemplary damages or in respect of mental injury alone. (including charges to passengers) for ‘identified airport activities’, and The Carriage of Goods Act 1979 regulates the liability for domestic within five years after fixing or changing their charges. ‘Identified airport carriage of goods, including the domestic carriage of baggage or cargo by activities’ are the aeronautical services provided by an airport. Substantial air. The Act provides for a general presumption that a carrier will be liable customers are defined as representing 5 per cent or more of an airport’s for loss or damage to goods that occurs while the carrier is responsible for revenue for aeronautical activities either as individual airlines or as a the goods even if such loss or damage is not caused by the carrier. However, combined group of airlines. Specified airport companies (with revenues in this presumption is subject to the limitations set out in the Act (eg, if the excess of NZ$10 million per annum) must also consult over capital expend- carrier can establish that the loss or damage was caused by an inherent vice iture plans (representing 20 per cent of the companies’ assets as defined). or a breach of certain contractual terms implied by the Act such as fitness to The manner in which consultations are carried out, and whether be carried, it will not be liable and where the loss or damage was not caused charges are manifestly unreasonable, may be the subject of administra- intentionally, the liability of the carrier for direct loss in respect of each unit tive law review by the New Zealand courts (although there are limits as to of goods lost or damaged during carriage is limited to NZ$2,000, or, in the the extent to which price setting by airport companies is subject to judicial case of a contract at declared value risk, the amount specified in the con- review). The charges at New Zealand’s three major airports, Auckland, tract). The parties may agree to contract out of some of the provisions of Wellington and Christchurch, are regulated by the Commerce Act 1986, the Act (eg, they may agree that the carriage is to be at the owner’s risk). rather than (as previously) the Airport Authorities Act 1966. In addition, the Commerce Act 1986 imposes information disclosure requirements in 25 Are there any special rules about the liability of aircraft relation to those airports. operators for surface damage? Charges (as well as revenues and quality standards) for aeronautical Yes. The Civil Aviation Act provides that, if material damage is caused and other services by airports are also subject to potential control under to property by an aircraft (whether in flight, taking off, landing or alight- the general provisions of Part 4 of the Commerce Act 1986 (which provides ing) or by any person or article falling from an aircraft (other than a perfor regulation of the price and quality of goods or services in markets where son descending by parachute in order to avoid injury or death), damages there is little or no competition and little or no likelihood of a substantial are recoverable from the owner of the aircraft as if the damage or loss was increase in competition). caused by the owner’s fault. No proof of negligence, intention, or other cause of action is necessary to bring a proceeding. However, if the dam- 20 Are there laws or rules restricting or qualifying access to airports? age or loss was caused by or contributed to the person who suffers the loss, then any damages awarded may be apportioned under the Contributory Apart from civil aviation requirements, there are no explicit laws or rules Negligence Act 1947. restricting or qualifying access to airports. Refusal by a civilian airport This does not apply to the owner of the aircraft if the owner hires it out to provide access is potentially subject to challenge under Part 2 of the to any person for longer than 28 days and no pilot or crew of the aircraft is Commerce Act (which deals with restrictive trade practices). employed by the owner. In this situation, the person to whom the aircraft has been hired out would be liable. 21 How are slots allocated at congested airports? Slots are allocated by the individual airports in accordance with their 26 What system and procedures are in place for the investigation individual airport policies and consultations with airlines. The allocation of air accidents? of slots and related arrangements are potentially subject to the restrictive There is a comprehensive system for the investigation of air accidents in trade practices rules under Part 2 of the Commerce Act. New Zealand. The system is governed by the Civil Aviation Act, the Rules and the Transport Accident and Investigation Commission Act. Any ‘acci- 22 Are there any laws or rules specifically relating to ground dents’ or ‘incidents’ must be reported to the CAA as soon as possible. handling? Essentially an ‘accident’ is where the aircraft sustains damage or structural The operation of ground-handling services is determined by the airlines failure, a person is seriously injured or killed, or the aircraft is missing. An concerned but in accordance with arrangements with airports, for example ‘incident’ is an occurrence that is associated with the operation of an air- counter licence agreements. The practice regarding ground handling and craft and that affects or could affect the safety of that operation, but is not services may vary between airlines and airports and may include full out- an accident. sourcing of ground-handling services. The arrangements are potentially If the CAA is notified of an accident or incident, it must as soon as subject to challenge under Part 2 of the Commerce Act (which deals with practicable inform the Transport Accident Investigation Commission restrictive trade practices). (TAIC) if the accident involves aircraft or if the incident is a serious incident. The TAIC has a duty to investigate such an accident or incident in 23 Who provides air traffic control services? And how are they certain circumstances. Otherwise, it has only a discretion to do so. The regulated? TAIC’s purpose is to investigate the accident so as to promote safety in the industry, rather than to attribute blame or institute criminal proceedings. Airways Corporation of New Zealand (Airways New Zealand), a wholly Investigations for the purposes of enforcement action are generally under- state-owned enterprise, is responsible for managing all domestic and taken by the CAA or the New Zealand Police or by both. The CAA may also international air traffic operating within New Zealand’s airspace. investigate accidents or incidents not required to be reported to the TAIC Section 99 of the Civil Aviation Act provides that Airways New Zealand and may assist with TAIC investigations. is the only entity entitled to provide area control services, approach control services and flight information services in New Zealand. The statutory 27 Is there a mandatory accident and incident reporting system monopoly does not apply to aerodrome control services or aerodrome and, if so, how does it operate? flight information services. Air traffic control services are subject to regulation under the Civil Aviation Act. Yes. See question 26.

142 Getting the Deal Through – Air Transport 2016

Competition law Financial support and state aid 28 Do sector-specific competition rules apply to aviation? If not, 33 Are there sector-specific rules regulating direct or indirect do the general competition law rules apply? financial support to companies by the government or New Zealand’s generic competition statute, the Commerce Act (notably government-controlled agencies or companies (state aid) in Parts 2 and 3), applies to the aviation sector. the aviation sector? If not, do general state aid rules apply? In addition, Part 9 of the Civil Aviation Act is relevant to competition There are no sector-specific rules regulating direct or indirect financial law. It provides that certain restrictive trade practice prohibitions under support by the government to individual companies. the Commerce Act do not apply in respect of arrangements containing a The government may nevertheless respond on an ad hoc basis, par- provision relating to international carriage by air or the negotiation of such ticularly in circumstances that involve sensitive national interests includ- a provision provided it has been authorised by the Minister of Transport ing retention of reciprocal landing rights. under Part 9 (International Air Carriage Competition) of the Civil Aviation Act. Part 9 sets out a specific regime for authorisation of international air 34 What are the main principles of the state aid rules applicable carriage arrangements, commission regimes and tariffs. Conduct that has to the aviation sector? been authorised is deemed to be specifically authorised for the purposes of As noted above, there are no generic or sector-specific state aid rules. the prescribed exemptions from the restrictive trade practices provisions of the Commerce Act. 35 Are there exemptions from the state aid rules or situations in which they do not apply? 29 Is there a sector-specific regulator or are competition rules As noted above, there are no generic or sector-specific state aid rules. applied by the general competition authority? Except for the regulation of international carriage by air by the Minister of 36 Must clearance from the competition authorities be obtained Transport under the Civil Aviation Act (see the answer to question 28), the before state aid may be granted? general competition authority (the New Zealand Commerce Commission) As noted above, there are no generic or sector-specific state aid rules. If any has responsibility for enforcing the generic provisions of the Commerce ad hoc financial support provided by the government resulted in arrange- Act. These relate to restrictive trade practices and anti-competitive acqui- ments or transactions subject to Part 2 (restrictive trade practices) or Part 3 sitions of business assets or shares in relation to the aviation sector. The Act (acquisitions of business assets or shares) of the Commerce Act, authorisa- also provides for authorisations or clearances as may be applicable. tion or clearance, as applicable, may be required. 30 How is the relevant market for the purposes of a competition 37 If so, what are the main procedural steps to obtain clearance? assessment in the aviation sector defined by the competition authorities? The procedural steps to obtain authorisation of a restrictive trade practice prohibition under Part 2 of the Commerce Act or clearance or authorisa- The term ‘market’ is generally defined for the purposes of the Commerce tion of an acquisition of business assets or shares under Part 3 are set out Act as a market in New Zealand for goods or services, as well as other in the Commerce Act. These are further elaborated in the Commerce goods or services, that, as a matter of fact and commercial common sense, Commission’s prescribed authorisation or clearance forms and guidelines are substitutable for them. The Commerce Commission determines rel- issued by the Commission. evant markets in the circumstances of each case in accordance with this definition and decision precedents of the Commerce Commission and the 38 If no clearance is obtained, what procedures apply to recover courts. The Commission’s approach to market definition in any particular unlawfully granted state aid? case may be, and has been, challenged in the courts. If any ad hoc state aid were provided by the government, procedures for 31 What are the main standards for assessing the competitive recovery would depend on the contractual or other legal terms under effect of a transaction? which the aid was provided or general debt recovery law in New Zealand. The standards applied by the Commerce Commission in assessing the Miscellaneous competitive effects of a transaction in a market depend on the statutory competition test applicable to the particular statutory provision (eg, 39 Is there any aviation-specific passenger protection legislation? restrictive trade practice prohibition, or acquisition requiring clearance or Domestic carriage authorisation) under which the transaction is being considered. Except for Under Part 9B of the Civil Aviation Act, airlines are liable for damage transactions or practices that are deemed to have an anti-competitive effect caused by delay in the domestic carriage of passengers, unless the delay (eg, price fixing), the test in respect of most restrictive trade practices and was due to certain specified circumstances, such as meteorological condi- acquisitions of business assets or shares focuses on whether the effect or tions adverse to flying, compliance with instructions or advice from an air purpose of a transaction is to substantially lessen competition. In cases of traffic control service or orders or directions given by a lawful authority, alleged unlawful exercise of substantial market power, the test is whether force majeure or because the delay was necessary for the purpose of saving a person with a substantial degree of market power takes advantage of or attempting to save a life. In addition, an airline will have a defence if it that power for the defined anti-competitive purposes. The Commerce proves that it (or its agents or servants) had taken all necessary measure Commission has issued generic guidelines on how it approaches its assess- to avoid the damage or that it was not possible for it (or its agents or serv- ment of effects on competition. This approach includes counterfactual ants) to have taken those measures. Liability may also be reduced or extin- analysis. guished as a result of contributory negligence. In the absence of wilful or reckless misconduct (as defined in the Act), 32 What types of remedies have been imposed to remedy damages for delay are limited to the lesser of: concerns identified by the competition authorities? • the amount of damage proved to have been sustained as a result of the Remedies available to the Commerce Commission for breach of the delay; or restrictive trade practice or business acquisitions provisions (using the civil • an amount representing 10 times the sum paid for the carriage. standard of proof) of the Commerce Act include court proceedings for pecuniary penalties and injunctive relief. Actions for injunctions and for Contractual provisions purporting to fix a lower limit of liability will have damages (including exemplary damages for breaches) based on the restric- no effect. However, any rule of law relating to remoteness of damage is not tive trade practices provisions of the Commerce Act are also available to affected by the above limitations of liability, and an airline may, by special affected private parties. Remedies for breach of the business acquisition contract, increase the amount of its liability. provisions of the Commerce Act can also include orders for the divestiture A two-year limitation period applies to court proceedings for delay of assets and shares. Remedies for breach of the restrictive trade practices under Part 9B. sections may also include orders excluding persons from the management of New Zealand bodies corporate.

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41 What legal requirements are there with regard to aviation Update and trends security? In terms of the legislative framework, in 2014, the Ministry of Aviation security is covered by the Civil Aviation Act and the Aviation Transport sought public feedback on the Civil Aviation Act and the Crimes Act 1972. The Civil Aviation Act provides for detailed regulation of Airport Authorities Act. The purpose of the review was to ensure aviation security service providers and sets out the functions and duties of that the Acts were still fit for purpose given the significant changes those persons. These duties include carrying out baggage, passenger and within the public sector and the aviation environment during their crew screening as well as undertaking aerodrome security. In addition, lifespans. The Ministry has received submissions on its consultation they are jointly responsible with New Zealand Police for preventing the document and should submit recommendations on changes to both commission of crimes under the Aviation Crimes Act. The Aviation Crimes Acts shortly. If changes are agreed, the government will introduce a Act is discussed further in response to question 42. bill to Parliament. The scope of any changes remains to be seen, but the government has stated that the fundamental principles of the Civil 42 What serious crimes exist with regard to aviation? Aviation Act will be retained. Airways New Zealand will continue as In New Zealand, several serious crimes exist with regard to both acts the sole air traffic service provider of area control services, approach and omissions by passengers as well as aircraft operators. Serious crimes control services, and flight information services and the CAA will in respect of aviation are dealt with in the Aviation Crimes Act and the retain its statutory responsibility for the Aviation Security Service. Crimes Act 1961. The Aviation Crimes Act gave effect to the provisions As far as the opening-up of New Zealand airspace is concerned, of the Tokyo, Hague and Montreal Conventions. It establishes the crime since the government launched its International Air Transport Policy in August 2012, more than 40 new or amended agreements have of hijacking, which is punishable by imprisonment for life. Other crimes been negotiated providing more opportunities for international relating to aircraft set out in that Act include destroying or damaging an air- airlines to service New Zealand. For example, a 2014 agreement craft in service; committing an act of violence that is likely to endanger the with the Philippines has resulted in the Philippine national carrier safety of any aircraft in service; and endangering the safety of an aircraft announcing that it will begin services to New Zealand in late 2015. in flight by communicating false information. Similarly, it is also a crime to More recently still, New Zealand has signed an air services deal with use any device, substance, or weapon to intentionally do certain acts that Greece that will allow code share flights between the two countries. endanger or are likely to endanger the safety of an international airport. These examples are part of a wider pattern which reflects the These offences are punishable by up to 14 years’ imprisonment (although government’s ‘open skies’ policy. if the conduct in relation to an airport is the same as conduct that would have been murder or manslaughter under the Crimes Act then the offence is punishable by imprisonment for life). International carriage The provisions of the Crimes Act also apply to crimes committed on Part 9A of the Civil Aviation Act implements into New Zealand law the board an aircraft within New Zealand and, in certain circumstances, to Warsaw and Montreal Convention liability regime relating to the interna- crimes committed on aircraft beyond New Zealand. In particular, there is a tional carriage by air of passengers, baggage and cargo. duty in the Crimes Act that is placed upon persons in charge of dangerous Certain other circumstances will often be covered by general law. things, which could apply to operators of aircraft. Any person who has in For example, the rights of disabled passengers would be covered by the their control anything that may endanger human life in the absence of pre- Human Rights Act 1993, the rights of consumers booking flights on CRSs caution or care is under a legal duty to take reasonable precautions against, would be protected by the Consumer Guarantees Act 1993 and any issues and to use reasonable care to avoid, that danger. Certain provisions of the in relation to misleading representations regarding package holidays, for Crimes Act are also specifically expressed with regard to acts done in rela- instance, would be covered by the Fair Trading Act 1986. tion to aircraft, for example, arson. The Civil Aviation Act also creates several strict liability ‘public wel- 40 Are there mandatory insurance requirements for the fare’ safety offences in respect of the conduct of aircraft operators. These operators of aircraft? include ‘unnecessary endangerment’ and ‘careless operation of aircraft’ Under the Civil Aviation Act, the Minister of Transport or the Secretary of offences, and may be punished by way of a significant fine (in the case of the Ministry of Transport may call upon an applicant for a licence or the the ‘unnecessary endangerment’ offences, up to three times the value of holder of a licence to furnish to his or her satisfaction proof that its liabil- any commercial gain if the offence was committed in the course of pro- ity in relation to death or bodily injury or damage to property is covered ducing a commercial gain), imprisonment or disqualification, or all of the by insurance. This reflects the obligation in article 50 of the Montreal above. The Civil Aviation Act also provides that it is an offence punishable Convention 1999 that state parties require their carriers to maintain ade- by up to 12 months’ imprisonment or a maximum NZ$10,000 fine to pro- quate insurance cover in respect of liability under the Convention. vide false or misleading information at a security check.

Frank Porter [email protected] Anita Birkinshaw [email protected] Rishalat Khan [email protected]

PO Box 1433 Tel: +64 9 358 2555 Auckland 1140 Fax: +64 9 358 2055 New Zealand www.buddlefindlay.com

144 Getting the Deal Through – Air Transport 2016

Nigeria

Etigwe Uwa SAN, Chinasa Unaegbunam and Queenette Hogan Streamsowers & Köhn

General • for aircraft, the following regulations apply: Part 4 is aircraft registration and marking; Part 5 – airworthiness; and Part 7 – instruments and 1 Which bodies regulate aviation in your country, under what equipment; basic laws? • for operations, there are: Part 8 – operations, Part 9 – air operator The primary regulatory body for aviation in Nigerian is the Nigerian Civil certification and administration and Part 10 – commercial air trans- Aviation Authority (NCAA) established under the Civil Aviation Act 2006 port by foreign air operators within Nigeria; (CAA 2006 or the Act) now Cap C13 Laws of the Federation of Nigeria • for maintenance: Part 6 provides for approved maintenance organisa- 2010. The NCAA regulates matters such as safety, security, aircraft reg- tion; and istration, airworthiness standards, personnel licensing, commercial air • for air traffic control, the following regulations will apply: part 11 – transport, aerodrome and airspace standards, air navigation services and aerial work and Part 14 – air navigation services. the provision of allied aviation services. Other governmental bodies involved in the provision of aviation ser- It is necessary to reiterate here that matters not covered by the NCARs will vices and in some way oversee aspects of air transport in Nigeria are: The be regulated by the applicable subsidiary regulation listed under the CAA Nigerian Airspace Management Agency, established under the Nigerian 2006. Airspace Management Agency (Establishment, ETC) Act 1999 (NAMA The NCARs are modelled after ICAO Annexes and are in substan- 1999) now Cap N90 Laws of the Federation of Nigeria 2010 and the Federal tial conformity with ICAO’s international standards and recommended Airport Authority of Nigeria established the Federal Airports Authority Act practices. They are additionally supplemented where necessary with sec- 1996 (FAAN 1996) now Cap F5 Laws of the Federation of Nigeria 2010. tions from the European Joint Aviation Requirements or the Unites States NAMA is responsible for the provision of air navigation services while Federal Aviation Regulations. the FAAN is principally responsible for the development, provision and As part of its regulatory safety functions, the NCAA through the provi- maintenance of airports and associated services. sions of the NCARs ensures that: The primary legislation regulating aviation in Nigeria is the CAA 2006. • Every technical personnel, equipment and airport is accessed in Section 77(2) of the Act provides that all regulations, by-laws, orders and accordance with standards set by ICAO and other international bodies subsidiary legislation made under the old Civil Aviation Act, 1964 (recog- and must be certified by the NCAA. nised as Cap 51 Laws of the Federation of Nigeria 1990) shall continue to • There are operating guidelines and standards based on the standards be in force until new regulations by-laws, orders and subsidiary legisla- and recommended practices (SARP) of ICAO and other stipulated tion are made pursuant to the CAA 2006. This subsidiary legislation made national laws and regulations. under the old Civil Aviation Act was therefore listed as subsidiary legisla- • There are coordinated procedures to monitor safety standards, issue tion listed under the CAA 2006. It includes the following: licences and operating certificates such as the air operators certificate • the Civil Aviation (Aviation Security) Regulations 2006; (AOC), air transport licence, airline operating permit, permit for non- • the Civil Aviation (Air Transport) (Licensing) Regulation; commercial flight and air travel organisers licence. • the Civil Aviation (Aircraft Performance) Regulation; • Aviation safety inspectors conduct unscheduled on-the-spot inspec- • the Civil Aviation (Fees) Regulation; tion of the operations of airlines and other service providers to ensure • the Civil Aviation (Births, Deaths and Missing Persons) Regulation; continuous compliance with the regulations guiding their operations. • the Civil Aviation Rules of the Air and Air Traffic Control) Regulation; • the Civil Aviation (Air Navigation) Regulation; and 3 What safety regulation is provided for air operations that do • the Nigeria Civil Aviation Regulations. not constitute public or commercial transport, and how is the distinction made? The NCAA has pursuant to its regulatory powers under the CAA 2006 There is no separate and distinct safety regulation for private air operators. issued the Nigerian Civil Aviation Regulations 2009 and 2012 (NCARs Part 8 of the NCAR 2009 deals with operations and prescribes require- 2009 and 2012 and together referred to as NCARs). The NCAR 2009 con- ments for – operations conducted by flight crew member certified in Nigeria tain 10 parts, while the NCAR 2012 contain another 10 parts. The NCARs while operating aircraft registered in Nigeria; operations by Nigerian AOC contain regulations on issues ranging from personnel licensing, aircraft holder of aircraft registered in a state other than Nigeria and operations of registration and marking, approved maintenance organisation, instru- aircraft within Nigeria by flight crew or an AOC holder of another state. ments and equipment, operation, aviation security, environmental pro- The regulation contains provisions applicable to both private air operators tection, aerial work, airworthiness, consumer protection, etc. The NCARs as well operators involved in commercial air transport, although in certain will, to the extent that they cover any aspect of air transport contained in areas different requirements are in force for both types of operation. the subsidiary legislation made under the old Civil Aviation Act, be the For aerial work, Part 11 of NCAR 2012 contains specific requirements applicable regulation to govern that aspect. for operators and operations considered to be aerial work and all persons who conduct aerial work in Nigeria must comply with certification require- Regulation of aviation operations ments set out in the regulation. 2 How is air transport regulated in terms of safety? 4 Is access to the market for the provision of air transport Aviation safety is regulated by the NCAA via the NCARs 2009 and 2012. services regulated, and if so how? The specific regulations are: • for crew: Part 2 deals with personnel licensing; Yes. Otherwise than from the safety point of view, air transport services are regulated by the setting of eligibility criteria, screening and approval www.gettingthedealthrough.com 145

© Law Business Research Ltd 2015 NIGERIA Streamsowers & Köhn processes of persons seeking to provide air transport services. The NCAA 7 What procedures are there for hearing or deciding contested issues licences, permits, certificates and other authorisations to persons applications for licences or other rights to operate particular who satisfy the stipulated requirements for the issuance of the licences, routes? permits, certificates and other authorisations. A person seeking to provide There are no provisions describing procedures for hearing and deciding air transport services in Nigeria must obtain an air transport licence in contested applications for licences or other rights to operate particular respect of scheduled journeys; an air operating permit for non-scheduled routes. journeys and an airline tour organiser’s licence for tour organisers. 8 Is there a declared policy on airline access or competition, and 5 What requirements apply in the areas of financial fitness and if so what is it? nationality of ownership regarding control of air carriers? There is currently no declared policy on airline access or competition in air Financial fitness transport undertaking in Nigeria. The policy in the aviation industry as it Every company seeking to provide air transport services must in addition relates to domestic airlines is anchored on free enterprise and airlines may to meeting the safety requirements show evidence of capitalisation speci- operate any routes in the country. Foreign airlines operating into Nigeria fied as follows: are limited to the airport of entry specified in the relevant air traffic licence • domestic operations – 500 million naira; and are not allowed to operate on domestic routes. • regional operations – 1 billion naira; and • international operations – 2 billion naira. 9 What requirements must a foreign air carrier satisfy in order to operate to or from your country? Upon the issuance of a licence to operate air transport, the NCAA is Part 10 of the NCAR 2009 contains specific regulations for commercial air expected to continually monitor the financial health of air carriers by regu- transport by foreign air operators within Nigeria. This regulation sets out lar screening for up to date monthly management accounts, cash flow pro- requirements to be satisfied by a foreign air carrier engaged in commer- jections and analysis, quarterly balance sheets and annual profits and loss cial air transport undertaking and includes requirements such as apply- accounts. Operators are required to comply with tax regulations and are ing for and obtaining operations specifications to be issued by the NCAA required to have insurance for hull, passenger and cargo (comprehensive and compliance with applicable standards contained in the annexes to the and third party) in accordance with the relevant aviation regulation. Convention on International Civil Aviation as well as all other regulations as may be specified by the authority. In addition, a foreign air carrier will Nationality of ownership operate in accordance with the terms of any agreement for the time being By the provisions of section 33 of the CAA 2006, the NCAA can refuse the between the government of the Federal Republic of Nigeria and the govern- grant of a licence, permit, certificate or other authorisation made pursuant ment of that country. to an application if it is not satisfied that the applicant is a Nigerian citizen or being a company or body corporate, is registered in Nigeria and has its 10 Are there specific rules in place to ensure aviation services principal place of business in Nigeria and is controlled by Nigerian nation- are offered to remote destinations when vital for the local als. However, this eligibility criteria does not apply to a person seeking to economy? operate an aircraft for private use only. No, there are currently no public service obligations in the Nigerian avia- 6 What procedures are there to obtain licences or other rights to tion sector as aid for the local economy. operate particular routes? 11 Are charter services specially regulated? The NCAA does not specify different routes for which licences may be granted for domestic operations. Domestic routes in Nigeria are liberalised Charter services are regulated pursuant to the general applicable regula- and operators are free to fly any route without a special licence provided that tions in the NCAR 2009. Any air carrier seeking to operate a charter service they give notice of their flight schedules to the NCAA, the Federal Airports must obtain the necessary permits and air operator’s certificate (AOC). Authority and the NAMA. There are no special regulations applicable to charter services. With regard to rights by Nigerian carriers to operate international routes, an application is made to the Minister of Aviation for designation of 12 Are airfares regulated, and if so, how? an air carrier as a flag carrier to operate an international route which is the Section 30(4)(d) of the CAA 2006 provides that the NCAA shall have and subject of an air services agreement between Nigeria and another country. exercise the power to generally require all air carriers (both domestic and The applicant must comply with guidelines set for designation. The appli- foreign) to keep their tariffs open for inspection showing all rates, fares cation is sent by the Minister to the NCAA for technical evaluation and if a and charges charged and to approve or reject such tariffs so filed which are favourable report is issued by the NCAA, the Minister may in his discretion inconsistent with approved rates specified by the NCAA under the CAA designate such an air carrier as a flag carrier to operate the said route. 2006, applicable regulations, rules and orders made thereunder. However, For foreign airlines seeking to operate into Nigeria, after designation of the NCAA does not in practice specify the tariffs to be charged by air car- such airline by the relevant contracting state under the air service agreement, riers and air fares are determined by economic factors such as cost of fuel, the notice of designation is forwarded to the Nigerian Ministry of Foreign applicable charges, fees and demand. Foreign air carriers are expected to Affairs which transmits same to the Minister of Aviation. The Minister of notify and file any proposed change in their tariff with the NCAA. In addi- Aviation sends the said documents to the NCAA for assessment on the suit- tion to prevent predatory pricing, under its general power to regulate tariffs ability of the airline to operate into Nigeria under the terms of the relevant air the NCAA conducts economic audits on airlines offering such low prices services agreement. The process of assessment will involve the evaluation of for air services as appear inadequate to cover their costs and may impose the documents issued by the home country and all other relevant documents relevant sanctions or issue directives where such audit discloses predatory that may be demanded by NCAA from the airline. If the NCAA is satisfied pricing. with the documents and other materials provided by such a foreign carrier, it would give a favourable report to the Minister who may then issue the air Aircraft traffic licence. Generally the air traffic rights specify the amount of frequen- 13 Who is entitled to be mentioned in the aircraft register? Do cies given to such air carrier and the airports of entry. These are usually in requirements or limitations apply to the ownership of an accordance with the relevant air service agreements. Additional frequencies aircraft listed on your country’s register? can be negotiated under the relevant air service agreement via commercial agreements between the federal government and the air carrier. Part 4 of the NCAR 2009 prescribes the requirements for registration and marking of civil aircraft under the provisions of the CAA 2006. It provides in sub-part 4.2 the registration requirements for aircraft registration. Owners, operators and leases who meet the eligibility criteria are entitled to be mentioned in the aircraft register. The general criteria required by Part 4 of the NCAR 2009 is that no person may operate an aircraft that is eligible for registration in Nigeria unless it has been registered by its owner or operator under the provisions

146 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Streamsowers & Köhn NIGERIA of the applicable laws in Nigeria and have been issued with a certificate 18 What system is there for the licensing of airports? of aircraft registration by the NCAA. An aircraft is eligible for registration Part 12 of the NCAR 2012 provides for aerodrome certification. An aero- under the laws of Nigeria if it is: drome certificate is issued by the NCAA subsequent to the approval of • owned by a Nigerian citizen; an aerodrome operator’s manual. Under the regulation, certification and • an individual with permanent residency in Nigeria; licensing have the same meaning when used in the regulations, the CAA • a corporation lawfully organised and doing business in Nigeria and the 2006 as well as the aerodrome standard manual and related guidance aircraft is based and primarily used in Nigeria; materials. • a government entity or sub-division; or • a foreign person who has leased the aircraft to any of the aforemen- 19 Is there a system of economic regulation of airports, and, if so, tioned persons. how does it function? In practice, there is no specific system of economic regulation for airports. 14 Is there a register of aircraft mortgages or charges, and if so However, the NCAA has the power to conduct economic regulation of how does it function? airlines, aerodromes, air navigation services, other aviation allied and ser- Part 4 of NCAR 2009 requires the Authority to establish and maintain a vices providers. ‘legal interests in aircraft registry’ showing for each aircraft registered in Nigeria, with proprietary rights, interests, liens and other dealings thereon. 20 Are there laws or rules restricting or qualifying access to This information may be made available to individuals upon an applica- airports? tion to that effect. Presently, this aircraft registry has not been established For domestic operators there are no laws or rules qualifying access to air- and the interests of mortgagors, charges, liens or other encumbrances are ports. Domestic operators may operate into any airports of their choice upon application noted by the NCAA in the registration particulars of the subject to availability of slots in such airports for their operations. Foreign aircraft contained in a file opened and kept by the NCAA with respect to carriers operating into Nigeria are restricted to the airport of entry speci- each aircraft. The Companies and Allied Matters Act Cap C20 Laws of fied for their operations pursuant to the relevant air services agreement the Federation of Nigeria requires a company to register any charges or between Nigeria and the contracting state designating such air carrier. mortgages created over any part of its assets with the Corporate Affairs By-laws made by the Federal Airports Authority of Nigeria prohibit access Commission (the regulatory body for registered companies) within 28 days by unauthorised persons to certain areas of airports. Such areas are marked of the creation of such charge or mortgage. restricted areas. 15 What rights are there to detain aircraft, in respect of unpaid 21 How are slots allocated at congested airports? airport or air navigation charges, or other unpaid debts? Most local airports are underutilised and there is no specific regulation for Airport and air navigation services are provided by two federal govern- slot allocation in Nigeria. With regard to international operations, slots ment agencies – the FAAN and the NAMA. The laws setting up these agen- are allocated largely at the discretion of the FAAN. Slots are allocated on a cies do not contain specific provisions empowering them to detain aircraft first-come first-served basis and is coordinated by an autonomous commit- for unpaid airport or air navigation charges. However, the NCAA has the tee set up by various airport operators to define the slot allocation system. power to make regulations as to charges that may apply in respect to air traffic control and meteorological services and for the use of aerodromes 22 Are there any laws or rules specifically relating to ground licensed under the regulations and for services provided at such aero- handling? dromes. Section 27(3) of the CAA 2006 empowers the NCAA to take all steps necessary, including the power to ground any aircraft to ensure com- There are no specific laws relating solely to competition in the air transport pliance with the provisions of the act and the rules and regulations made industry. However, in relation ground handling services, the CAA 2006 pursuance to the act. authorises the NCAA to issue licences to applicants seeking to operate ground handling services in Nigeria. An application for grounding han- 16 Do specific rules regulate the maintenance of aircraft? dling services must clearly spell out the applicant’s name and address, state the type of ground handling services to be provided and the proposed The maintenance of Nigerian registered aircraft operating within or out- airport where the applicant intends to provide the services the NCAA only side Nigeria is regulated under sub-part 8.3 of NCAR 2009. The regula- issues a substantive licence upon satisfaction that the applicant has the tion provides that the registered owner or operator of an aircraft shall be ability to offer safe and efficient services. responsible for maintaining that aircraft in an airworthy condition includ- Further to section 72 of the CAA 2006 which makes it mandatory for ing compliance with all airworthiness directives. The following mainte- all persons engaged in the sale, distribution and provision of allied ser- nance and inspection programmes may be used by the owner or operator vices to obtain a licence from the NCAA. Through the Directorate of Air as may be appropriate for the aircraft and type of operation: Transport Regulation Department of Economic Regulation/Facilitation, • annual inspection; Allied Services Unit, the NCAA issues guidelines for obtaining a ground • annual or 100-hour inspection; handling licence. • progressive; or By these guidelines, an applicant seeking a licence to operate ground • continuous airworthiness maintenance programme. handling services in Nigeria is required to forward a written application to the Director General of the NCAA on or before a date not less than six The owner or operator shall also ensure that a record is kept of all mainte- months prior to the desired commencement of operations. nance work carried out on the aircraft. There are three stages in the application; the pre-qualification, qualifi- For operations of aircraft within Nigeria by flight crew or an AOC cation and demonstration stages. At the pre-qualification stage, the appli- holder of another state, sub-part 8.2.1.2 (a) provides that no person may cant is required to pay 1 million naira non-refundable processing fee as well operate a civil aircraft unless it is in an airworthy condition. There are also as obtain and complete pre-qualification processing forms and return same other requirements regarding instruments and equipment, flight manual, to the NCAA with evidence of payment of the non-refundable processing marking and placard requirements. fee with the certain particulars listed in the guidelines. An applicant company among other things must have a minimum share capital of 500 mil- Airports lion naira. 17 Who owns the airports? Upon receipt of these documents and evaluation of same, the NCAA Most of the airports in Nigeria are owned by the federal government and invites the promoters or directors of the company to a meeting with its operated by the FAAN. There are some privately owned airports, such officials and seeks comments from the airport operator or owner on the as the Warri airport, which is owned and operated by Shell Petroleum proposed operation. Upon satisfactory fulfilment of the requirements by Development Company. There has also been a successful concession of an the applicant, the NCAA will request the applicant to acquire the necessary airport terminal in Lagos to a private company. equipment and demonstrate its capability to carry out efficient services. The applicant will be required to demonstrate its ability to offer efficient services in accordance with the provisions of ICAO Annex 9 on Facilitation and Annex 17 on Security. www.gettingthedealthrough.com 147

A licence granted is valid for five years. Subsequent to receipt of the Competition law Licence, a utilisation fee of 100,000 naira shall be paid to the NCAA annually. 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? 23 Who provides air traffic control services? And how are they There are no sector-specific competition rules which apply to aviation. regulated? There is also no general competition law in Nigeria. However, the CAA The NAMA has the exclusive responsibility for air traffic control services. 2006 empowers the NCAA to guard against anti-competitive practices The NAMA’s activities are carried out by different departments respon- including but not limited to: price fixing, predatory pricing, collusion, sible for services such as air traffic advisory service, alerting service and deceptive and unethical advertisement. Further to section 30(4)(i) of the flight information service. The functions of the NAMA are regulated by CAA 2006, the NCAA is empowered to investigate and determine upon its the Nigerian Airspace Management (Establishment, Etc) Act and the CAA own initiative whether any air carrier has been or is engaged in unfair or 2006, while the Federal Ministry of Aviation acts as the supervising minis- deceptive practices or unfair methods of competition in air transportation. try over the NAMA’s affairs. In 2011, the Director General of the NCAA issued a directive to the effect that airline operators and owners who engage in anti-competitive Liability and accidents activities relating to price fixing can be investigated by the NCAA and sanctioned in accordance with the provisions of the CAA 2006 and inter- 24 Are there any special rules in respect of death of, or injury to, national best practices. This directive has been used in a few cases as the passengers or loss or damage to baggage or cargo in respect of term of reference in inquiries into the anti-competitive practices of for- domestic carriage? eign airline operators. By virtue of section 48 of the CAA 2006, the Convention for the Unification Any infraction by operators attracts a fine of 1 million naira or suspen- of Certain Rules relating to International Carriage by Air (1999), the sion of the operation authorisation, or a complete revocation of the operat- Montreal Convention, as modified in the Third Schedule to the CAA 2006, ing authorisation in the case of a persistent violator. is the effective legislation in respect of liability for death, injury, loss and damage in domestic carriage. 29 Is there a sector-specific regulator or are competition rules Among other things, the Convention as modified sets the liability applied by the general competition authority? limit of carriers in respect of each passenger at the sum of US$100,000 The NCAA acts as the major sector regulator for air transport in Nigeria. where the carrier is able to establish that the damage was not due to the By virtue of section 30(4)(i) of the CAA 2006 the NCAA is empowered to negligence or other wrongful act or omission of the carrier or its servants investigate and determine upon its own initiative whether any air carrier or agents; or that it was solely owing to the negligence or other wrongful act has been or is engaged in unfair or deceptive practices or unfair methods of or omission of a third party. competition in air transportation, the sale of tickets thereof or in the provi- The carrier is also required, in the event of death or injury to passen- sion of other allied aviation services. The NCAA carries out this function gers, to make an advance payment of US$30,000 within 30 days from through the Fares and Tariffs Unit of its Department of Commercial and the date of the accident to the victim or persons who are entitled to claim Statistics. compensation on his or her behalf to meet his or her immediate economic Other than the foregoing, Nigeria does not have other specific regu- needs. This advance payment does not imply an admission to liability and lator or competition rules for the aviation sector. There is, however, a it may be offset from sums subsequently paid, as damages, by the carrier. Nigerian Federal Competition and Consumer Protection Bill pending before the National Assembly. 25 Are there any special rules about the liability of aircraft operators for surface damage? 30 How is the relevant market for the purposes of a competition There are no special rules for liability for surface damage. Nigeria was assessment in the aviation sector defined by the competition party to the Rome Convention 1952, but it subsequently denounced the authorities? Rome Convention in 2002. Consequently, the general rules of tort apply The relevant market for competition assessment is not clearly defined with regard to liability for surface damage caused by aircraft. since there is no sector specific Competition Law in Nigeria. However, it would suffice to say that every anti-competitive allegation is usually con- 26 What system and procedures are in place for the investigation sidered on a case-by-case basis. of air accidents? In 2011, the NCAA set up a panel to consider whether the simultaneous Section 29 of the CAA 2006 created the Accident Investigation Bureau imposition of a fuel surcharge by some foreign airline operators was unfair (AIB). The AIB was established to be an autonomous body which reports and or deceptive to Nigerian consumers and or anti-competitive. directly to the President, through the Minister of Aviation. The Minister is empowered to make regulations for the investigation 31 What are the main standards for assessing the competitive of accidents and incidents arising out of or in the course of air navigation effect of a transaction? and either occurring in or over Nigeria or occurring to Nigerian aircraft The standards for assessing the competitive effect of a transaction are elsewhere. However, following the CAA 2006, there are yet to be regula- unclear as there is no sector specific competition law in Nigeria. However, tions to this effect. As such, the Civil Aviation (Investigation of Accidents) using the 2011 inquiry referred to in question 30 as a point of reference, the Regulations of 1965 made pursuant to the repealed CAA 1964 will apply, by main standards used in carrying out the DG’s directives were: concerted virtue of section 77(2) of the CAA 2006. practice, parallel behaviour and removing the uncertainty as to the future conduct of competitors, among others. 27 Is there a mandatory accident and incident reporting system, Importantly, these standards were applied in respect of a duopoly. and if so, how does it operate? They may not apply in a situation where a single entity occupies the domi- Regulation 5 of the Civil Aviation (Investigation of Accidents) Regulations nant position. of 1965 mandates the person in command of an aircraft or the aircraft’s owner to send a notice to the Minister by the quickest means possible and 32 What types of remedies have been imposed to remedy the nearest police authorities to where the accident occurs. The notice concerns identified by the competition authorities? must contain certain particulars, as listed in the regulations. No remedies have yet been imposed to ameliorate the concerns identified The AIB has also made public, guidelines as well as communica- by the NCAA; at best, there have been recommendations that payment of tion mechanisms for prompt reporting of accidents at www.aib.gov.ng/ appropriate compensation be made to all Nigerian consumers who paid accident_report.php. the fuel surcharge during the relevant period in consonance with section 71(1) of the CAA 2006 which empowers the NCAA to formulate schemes for compensation of passengers and other allied service consumers arising from different forms of grievance. This recommendation was not enforced.

148 Getting the Deal Through – Air Transport 2016

Financial support and state aid Update and trends 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or There are several ongoing reforms in the aviation sector affecting government-controlled agencies or companies (state aid) in air navigation services, airport expansion as well as oversight on the aviation sector? If not, do general state aid rules apply? commercial and private operators. The reforms aim at upgrading airport air navigation facilities from terrestrial based to satellite- There are no sector specific rules regulating any form of financial support based navigation. by governments or government controlled agencies and there are no gen- Nigerian airports are currently undergoing upgrades to enable eral state aid rules. In the past Nigerian Airways was owned and funded by the provision of 24-hour flight operation into certain airports in the federal government, but the airline has since been liquidated and cur- Nigeria where this is currently lacking. Prior to this 24-hour flight rently no airline receives any form of financial aid from the government. operations upgrade, aircraft do not take off and land from sunset However, in 2010, the federal government of Nigeria approved a to dawn. Further, there is full implementation of reduced vertical separation minima within Nigerian airspace. power and aviation intervention fund to be provided by the Central Bank In addition, the NCAA observed that some private operators of Nigeria. The fund entailed the provision of facilities to power and avia- undertake commercial air transport activities in breach of their tion companies in the wake of failing businesses particularly in the aviation licences. The NCAA is working in conjunction with other agencies sector. The fund amount was 300 billion naira and as at March 2013, the such as the NAMA to implement new requirements for tracking Bank of Industry – the bank responsible for disbursing the funds to benefi- the movement of such aircrafts within the Nigerian airspace. ciaries – had disbursed over 208.21 billion naira of the funds to companies Some of these requirements include verification of flight manifest, in the power and aviation sector. The objective of the fund was to fast-track flight clearance and continuous monitoring and oversight of their the development of the aviation sector by improving the terms of credit operations. to airlines as well as provides leverage for additional private sector investments in the power and aviation sectors. The facilities were also provided at a very concessionary interest rate of 7 per cent. Miscellaneous Most airports in Nigeria are owned by the Federal Airports Authority of Nigeria and air navigation services are provided by the Nigerian Airspace 39 Is there any aviation-specific passenger protection Management Agency. These are agencies of government and receive sub- legislation? ventions from the government to enable them to execute their statutory Part 19 of NCAR 2012 prescribes the minimum rights and duties of pas- functions. sengers and the obligation of airlines. It applies to cases of no-show and overbooking, denied boarding against the will of the passenger, delayed 34 What are the main principles of the state aid rules applicable flights in the case of scheduled operation and cancelled flight in the case to the aviation sector? of scheduled operation. Nigeria has no state aid rules for the aviation sector. The scope of application extends to: • carriage of passengers between two airports within Nigeria; 35 Are there exemptions from the state aid rules? • carriage of passengers from an airport outside Nigeria to an airport in Not applicable. Nigeria unless the passengers received compensation or assistance at the point of departure in the case of a Nigerian air carrier; and 36 Must clearance from the competition authorities be obtained • non-stop flight segments originating at a point in Nigeria (foreign air before state aid may be granted? transportation). Not applicable. In addition, every air carrier shall develop a procedure for the handling of cases of oversold flights and the manner in which persons having con- 37 If so, what are the main procedural steps to obtain clearance? firmed tickets on a flight can be involuntarily denied boarding and the car- Not applicable. rier is to develop its priority procedures considering, among other things, persons with reduced mobility or unaccompanied minors. 38 If no clearance is obtained, what procedures apply to recover There is no bankruptcy protection legislation specific to the aviation unlawfully granted state aid? sector and the general law on bankruptcy will apply in any bankruptcy Not applicable. situation.

Etigwe Uwa SAN [email protected] Chinasa Unaegbunam [email protected] Queenette Hogan [email protected]

16D Akin Olugbade Street Tel: +234 1 271 2276/+234 1 461 1820 Victoria Island, Lagos Fax: +234 1 271 2277 Nigeria www.sskoh.com

www.gettingthedealthrough.com 149

40 Are there mandatory insurance requirements for the and unaccompanied baggage are also screened or subjected to a prescribed operators of aircraft? security check before being placed on board an aircraft. Aircraft operators are required to maintain adequate insurance and shall The NCAA has also issued an Aviation Security Regulation – NCAR make quarterly returns to the NCAA under section 74(2) of CAA 2006. 2012 Part 17. The several parts of the regulation deal with issues such as showing that adequate insurance is maintained. Absence of adequate security programme, aerodrome security, aircraft operator security, cargo insurance is sufficient ground for refusal, suspension or revocation of the and regulated agent security, flight catering operator security, tenant permission to operate in Nigeria. The Nigerian Civil Aviation Authority restricted area security and quality control. This regulation covers specific also may from time to time determine if service providers in the aviation service providers in the aviation sector such as aviation service providers, sector are maintaining adequate insurance policies. Service providers that flight catering, aerodrome security and cargo operators. contravene the provision of this section shall be liable to a fine of not less than 10 million naira and its principal officers shall be liable to imprison- 42 What serious crimes exist with regard to aviation? ment for a term of not less than two years. In line with its constitutional requirement to incorporate into domestic law, international conventions to which it is signatory, Nigeria has domes- 41 What legal requirements are there with regard to aviation ticated the Convention on the Suppression of Unlawful Seizure of Aircraft security? signed at The Hague on 16 December 1970. In addition, the CAA 2006 and Sections 42 and 43 of the CAA 2006 stipulate that an aerodrome operator the NCARs provides for serious crimes as well as regulatory offences. Some and an airline operator must have in place a security programme approved of the serious crimes covered in the CAA 2006 (sections 54–60) include by the NCAA and the breach of the provisions of the security programme hijacking and interference of an aircraft either on ground or in flight, dan- by the aerodrome or airline operator, his or her representatives and per- gerous flying, violence against a person on board an aircraft, intention- sonnel attracts a monetary fine. The NCAA may also conduct surveys and ally destroying an aircraft, possession of explosives at screening point or inspections of security measures relating to passengers, baggage, cargo in sterile area with no intent to board a flight and artful concealment of a and other goods, as well as access controls and aerodrome design. The firearm or deadly weapon. Section 63 of the CAA 2006 vests jurisdiction on CAA 2006 in section 45 also makes it mandatory to search every person the Federal High Court to try offences committed under the act. Penalties entering an aerodrome or before they board an aircraft. Both accompanied include fines not exceeding 10 million naira or sentences from one year’s imprisonment to life imprisonment.

150 Getting the Deal Through – Air Transport 2016

Norway

Knut Boye, Ingar Fuglevåg and Camilla Flatum Advokatfirmaet Simonsen Vogt Wiig AS

General with general public interest’ (AA section 8-2) may mean that a minimum of financial fitness is required. 1 Which bodies regulate aviation in your country, under what basic laws? 6 What procedures are there to obtain licences or other rights to Aviation in Norway is regulated by the Norwegian Civil Aviation Authority operate particular routes? (CAA, www.luftfartstilsynet.no/caa_no/). Norway follows EEA Regulation No. 2408/92 regarding EU airlines’ access The CAA operates under Norwegian law, chiefly the Norwegian to routes in the EU. Aviation Act No. 101 of 11 June 1993 (AA), as subsequently amended (www. For routes that are subsidised, the routes are awarded by the lovdata.no/all/nl-19930611-101.html, English translation: www.ub.uio.no/ Norwegian Ministry of Transport and Communications according to pub- ujur/ulovdata/lov-19930611-101-eng.pdf), and by regulations issued pur- lic tender regulations. suant to the AA. 7 What procedures are there for hearing or deciding contested Regulation of aviation operations applications for licences or other rights to operate particular 2 How is air transport regulated in terms of safety? routes? Safety is regulated by: If a tender for a subsidised route is not awarded, the airline can complain to • regulation of operators, AA Chapter VII–XI; KOFA (the Norwegian appeal board for public tenders in Norway). • regulation of aircraft, AA Chapter IV; • regulation of crew, AA Chapters V and VI; and 8 Is there a declared policy on airline access or competition and, • regulation of airports, AA Chapter VII. if so, what is it? Norwegian authorities have adopted the European Common Aviation Area The AA also provides for the regulation of air traffic in general (AA Chapter (ECAA) and have a liberal attitude to foreign competition in general. IX) and air safety control (AA section 7-4). Norway has adopted the EU Regulations (EU) No. 748/2012 as 9 What requirements must a foreign air carrier satisfy in order amended by Regulation (EU) No. 7/2013, (EU) No. 805/2011, (EU) to operate to or from your country? 1332/2011 and (EU) No. 1178/2011 as amended by Regulation (EU) No. See question 8. 290/2012 (see Regulation (EC) No. 216/2008) as regulations applicable in Norway. 10 Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local 3 What safety regulation is provided for air operations that do economy? not constitute public or commercial transport and how is the distinction made? Routes to remote domestic destinations are subsidised. Increasingly, subsidies for such routes are tendered on a bid basis, also open to foreign AA section 8-8 regulates commercial traffic that is not on fixed schedules bidders. and AA Chapter 9 provides a general regulation of aviation. The general safety regulations apply for all aviation traffic unless spe- 11 Are charter services specially regulated? cifically exempted. There is a particular Norwegian Package Tour Act No. 57 of 25 August 1995 4 Is access to the market for the provision of air transport (www.lovdata.no/all/nl-19950825-057.html) (English version: www.ub.uio. services regulated and, if so, how? no/ujur/ulovdata/lov-19950825-057-eng.pdf) containing general regulations of charter (packaged) tours, regardless of mode of transportation. Yes, with the requirement that an operator be licensed (see AA section 8-1). The main condition is that the licence shall only be granted ‘when com- 12 Are airfares regulated and, if so, how? patible with general public interest’ (AA section 8-2), and with a further nationality requirement (AA section 8-3) whereby the operator must be In general airfares are not regulated, but for subsidised routes the subsidy either (i) Norwegian; (ii) of a nationality that by law or treaty is considered grant will specify the airfare to be charged to the passenger or freight. equal with Norwegian nationality; (iii) of a nationality allowed access by treaty; or (iv) by special permission. Aircraft Pursuant to AA section 16-1, regulations have been passed to imple- 13 Who is entitled to be mentioned in the aircraft register? Do ment the European Economic Area (EEA) agreement (whereby Norway requirements or limitations apply to the ownership of an adopts the majority of all EU regulations), including the European aircraft listed on your country’s register? Common Aviation Area (ECAA). Registration in the Norwegian Aircraft Registry is provided for in AA Chapter IIIA. 5 What requirements apply in the areas of financial fitness and In principle, only aircraft owned by Norwegian citizens, companies nationality of ownership regarding control of air carriers? and institutions can be registered (see AA section 3-2). However, under the See question 4. No particular requirement exists in terms of financial fit- EEA (EU association) agreement, Norway has waived this requirement for ness, but the requirement that a licence only be granted ‘when compatible aircraft falling under that agreement (see AA section 16-1). www.gettingthedealthrough.com 151

For aircraft owned by other foreign entities, registration can neverthe- 22 Are there any laws or rules specifically relating to ground less be allowed with a licence from the CAA. Such licence will normally handling? be conditional on the aircraft being operated by an approved Norwegian No particular rules apply. However, since Avinor is a government- operator. owned entity, access to ground handling must be provided on a non- discriminatory basis. 14 Is there a register of aircraft mortgages or charges and, if so, how does it function? 23 Who provides air traffic control services? And how are they Yes. The Norwegian Aircraft Registry (AA section 3-5) is an ownership reg- regulated? istry, allowing (and compelling) registration of the aircraft (but not engines Air control services are provided by the CAA (see AA section 7-4). separately), ownership and also encumbrances (aircraft mortgages and The EEA-agreement addendum XIII No. 66n (Regulation (EF) No. mortgagees, leases, etc) (see AA section 3-43). 216/2008 as amended by regulation (EF) No. 690/2009, Regulation (EF) Ownership and encumbrances that do not appear in the registry do not No. 1108/2009 and Regulation (EU) No. 6/2013) regarding common rules have any legal effect against a party performing a transaction relating to for civil aviation and the establishment of an European aviation safety the aircraft who is relying on the information in the registry in good faith body apply as Norwegian regulation with such adaptations as follow from (see AA section 3-33). Amendment XIII, Protocol 1 to the agreement and the agreement itself. Norway has ratified the Cape Town Convention on Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Liability and accidents Equipment on Matters Specific to Aircraft Equipment, which takes prece- dence over the domestic registration in case of conflict (see AA section 3-53). 24 Are there any special rules in respect of death of, or injury to, passengers or loss or damage to baggage or cargo in respect of 15 What rights are there to detain aircraft, in respect of unpaid domestic carriage? airport or air navigation charges, or other unpaid debts? The AA Chapter XD contains detailed rules regarding liability, and has According to AA section 7-26 the authorities can stipulate fees for the use adopted EU Regulation (EC) No. 2027/97 as amended by EU Regulation of airports and aviation services. According to the fee regulations issued (EC) No. 889/2002. pursuant thereto (section 6-7), the authorities may detain an aircraft if the fees for it are not paid. 25 Are there any special rules about the liability of aircraft operators for surface damage? 16 Do specific rules regulate the maintenance of aircraft? An aircraft used in traffic in Norway must have third-party damage insur- Yes, among others, Maintenance Regulation BSL B 2-1, issued pursuant to ance in accordance with EU Regulation (EC) No. 785/2004 (see AA section AA section 4-1, regulates the maintenance of aircraft. 11-2). The owner of the aircraft has a no-fault liability for any damage caused Airports to third parties outside the aircraft (see AA section 11-1).

17 Who owns the airports? 26 What system and procedures are in place for the investigation Most (46) airports in Norway are owned by Avinor AS (formerly the of air accidents? Norwegian Civil Aviation Authority) (www.avionor.no), a company wholly- The AA Chapter XII E–F provides for an investigatory commission to inves- owned by the Norwegian Ministry of Transport and Communications. tigate all aviation accidents and serious aviation ‘occurrences’ (events that A few airports are privately owned, notably Torp and Rygge Airports, almost led to an aviation accident). which are located reasonably near Oslo (about 100 kilometres) and are used by some low-cost airlines, both Norwegian and foreign. 27 Is there a mandatory accident and incident reporting system and, if so, how does it operate? 18 What system is there for the licensing of airports? The AA Chapter XII B provides rules obligating all witnesses to an aviation Establishing, owning and operating an airport requires a licence (AA sec- accident to report it to the police or main rescue centre. This obligation also tion 7-5). A licence shall only be granted if it is compatible with the public applies to all crew and all personnel employed in aviation safety, who also interest. The technical and operational conditions must be approved by the have an obligation to report any serious aviation ‘occurrence’. CAA. Competition law 19 Is there a system of economic regulation of airports and, if so, how does it function? 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? Per se there is no such system. However, Avinor does cross-subsidise its less profitable airports by the revenue from the more profitable airports, as The general competition rules apply to aviation in Norway. part of a policy of keeping airports in remote regions to facilitate air traffic and consequently fulfil the public purpose of maintaining population cen- 29 Is there a sector-specific regulator or are competition rules tres in such regions. applied by the general competition authority? There is no sector-specific regulator of competition rules for aviation. 20 Are there laws or rules restricting or qualifying access to Norway observes EU Council Regulation (EC) No. 487/2009 regard- airports? ing interlining (without itself having made any regulation in accordance No, AA section 7-28 specifically states that foreign aircraft shall also have therewith). access to airports that otherwise are open to general traffic on the same terms as apply to Norwegian aircraft in corresponding international avia- 30 How is the relevant market for the purposes of a competition tion, when provided for by applicable treaties. assessment in the aviation sector defined by the competition authorities? 21 How are slots allocated at congested airports? The relevant market has been defined route by route, and not depend- Slots at major airports are allocated by Airport Coordination Norway AS ent on intermodal competition (ie, competition from other means of (ACN) (www.airportcoordination.no), a company owned 50 per cent by transportation). Avinor and 50 per cent by the airlines. 31 What are the main standards for assessing the competitive effect of a transaction? The standard will be whether there is a significant impediment to competition.

152 Getting the Deal Through – Air Transport 2016

The Norwegian Competition Act closely follows EU competition rules, and in practice there is no difference in application. Update and trends

32 What types of remedies have been imposed to remedy Norway generally follows the liberalisation in aviation in Europe (EU) and internationally, and is expected to continue to do so. concerns identified by the competition authorities? Norway state subsidy of airports (and of remote routes) is a In principle all remedies are possible, which are prohibition or consent with recurring issue of dispute with European Commission. So far no conditions (eg, demand for divestiture of certain business, etc). penalties have been imposed. The Norwegian government owns 16 per cent of SAS Financial support and state aid (Scandinavian Airlines) (and together with the Swedish and Danish governments own a total of 51 per cent) and recently gave a loan 33 Are there sector-specific rules regulating direct or indirect as part of a necessary refinancing. This loan was challenged as financial support to companies by the government or unlawful state aid by low-cost competitors joined in ELFAA, which government-controlled agencies or companies (state aid) in has filed a complaint with the EU Commission. No illegal state aid the aviation sector? If not, do general state aid rules apply? was found. The state ownership of a portion of SAS (Scandinavian Airlines) Norway has three areas where state financial support is an issue: is not expected to last indefinitely, but will depend somewhat on the • the Norwegian government owns 16 per cent of SAS (Scandinavian financial future development of SAS. Airlines) (and together with the Swedish and Danish governments A particular competition rule was introduced by the authorities owns a total of 51 per cent) where a recent state loan as part of a refi- to promote competition was the prohibition against awarding of nancing was made. See ‘Update and trends’ for more details regarding bonus points (also for use on international flights) on domestic this; flights. This prohibition was introduced after SAS purchased and absorbed its former competitor Braathens, to make it possible • the Norwegian government subsidises certain air routes to remote for the newly set up Norwegian Air Shuttle (NAS) to compete regions as part of a public service; and with SAS on domestic flights. The regulation was introduced by a • the state-owned airport authority Avinor cross-subsidises small temporary special regulation as a political measure to engender the unprofitable airports with income from major airports. See ‘Update competition, not as an administrative ruling as a reaction to any and trends’ for more details. existing violation of the competition rules. The regulation has now been abolished, as NAS has enough international routes to compete Apart from the subsidies for remote routes, no rules or regulations govern also in the ‘bonus market’. these activities.

34 What are the main principles of the state aid rules applicable 38 If no clearance is obtained, what procedures apply to recover to the aviation sector? unlawfully granted state aid? Norway has as a stated policy to facilitate communications to remote If ESA should find state aid has been unlawful, the recipient will have to regions to encourage a widespread population pattern over many regions repay the aid to the state. in Norway, and believes state aid to airlines (and indirectly by its cross- subsidy of airports owned by Avinor) to keep routes to such regions is not Miscellaneous incompatible with ESA (EFTA Surveillance Authority – the EEA watchdog) guidelines for state aid (corresponding to the EU rules). 39 Is there any aviation-specific passenger protection legislation? 35 Are there exemptions from the state aid rules or situations in Yes, AA section 10-42 has authorised the enactment of the EEA/EU rules which they do not apply? regarding passenger rights. No, see also question 34. See also question 11 regarding the Package Tour Act.

36 Must clearance from the competition authorities be obtained 40 Are there mandatory insurance requirements for the before state aid may be granted? operators of aircraft? No. Yes, AA section 10-38 A stipulates that any operator (domestic or foreign) must be insured for any liability under the AA, and that EU Regulation (EC) 37 If so, what are the main procedural steps to obtain clearance? No. 785/2004 applies. Not applicable.

Knut Boye [email protected] Ingar Fuglevåg [email protected] Camilla Flatum [email protected]

Filipstad Brygge 1 Tel: +47 21 95 55 00 PO Box 2043 Vika Fax: +47 21 95 55 01 0125 Oslo www.svw.no Norway

www.gettingthedealthrough.com 153

41 What legal requirements are there with regard to aviation such offences are for breach of various regulatory regulations unlikely to security? entail more than a fine, but some could mean a prison sentence, such as The observance of air security is provided for in AA section 7-4, which acting as crew or in certain ground operation positions under the influence authorises the CAA to give regulations for that purpose. of alcohol or drugs, failing to observe safety regulations or acting reck- lessly. In addition, AA section 13 contains rules regarding fines for breaches 42 What serious crimes exist with regard to aviation? of a number of rules and regulations. Furthermore, the Norwegian Criminal Act 1902 applies to all activity, The Aviation Act Chapter XIV contains a number of offences that carry including aviation. potential punishment for up to several years in prison. In actual fact, most

154 Getting the Deal Through – Air Transport 2016

Poland

Krystyna Marut, Edyta Michalak and Anna Burchacińska-Mańko MMMLegal Legal Counsels

General The certification process is conducted according to the Aviation Act and its implementing Regulation on certification. 1 Which bodies regulate aviation in your country, under what basic laws? 4 Is access to the market for the provision of air transport Civil aviation in Poland is subject to international, EU and national legis- services regulated, and if so how? lation. Poland applies the Chicago Convention and its Annexes. Both the EU rules apply, particularly EU Regulation 1008/2008. The Aviation Act Treaty and secondary EU legislation are applied. All EU regulations are defines a system of licences and certificates enabling access to the market. applied directly in Polish law. Other pieces of secondary law are imple- Besides a certificate, an air carrier has to obtain the CAA’s licence (koncesja). mented into national law. Further to EU Regulation 216/2008 and its Operating on particular routes may require the CAA’s consent, authorisa- implementing rules, the operation of civil aviation entities is also subject to tion or appointment. Third-country carriers require the CAA’s consent for European Aviation Safety Agency’s (EASA) legislation. air carriage sales. The main national rules of civil aviation are defined in the Aviation Act (consolidated text Journal of Laws 2013.1393, as amended) and implement- 5 What requirements apply in the areas of financial fitness and ing Regulations issued by relevant ministers. Most Regulations are issued nationality of ownership regarding control of air carriers? by the Minister competent for Transport. Significant regulatory powers are vested also in the President of the Civil Aviation Office (CAA) regarding Poland applies EU Regulation 1008/2008. Under the Regulation an under- guidelines and instructions. The CAA is the authority competent for most taking may be granted with an operating licence by the Polish CAA if, practical decisions in the field of civil aviation. inter alia, nationals of EU member states own more than 50 per cent of the undertaking and effectively control it, whether directly or indirectly, Regulation of aviation operations except as provided for in an agreement with a third country to which the Community is a party. 2 How is air transport regulated in terms of safety? An undertaking applying to the Polish CAA for a licence shall submit In Poland the Chicago Convention with its Annexes as well as EU legisla- a business plan for, at least, the first three years of operation. The business tion regarding air safety apply. The main national act regulating all safety plan shall also detail the applicant’s financial links with any other commer- issues is the Aviation Act with numerous implementing regulations. Most cial activities in which the applicant is engaged either directly or through important are those related to safety of aircraft and airport exploitation, related undertakings. Requirements are to a certain extent modified in the construction requirements, certification, airworthiness, air accidents and case of carriers operating aircraft of less than 10 tonnes maximum take-off search and rescue. The CAA issues guidelines and instructions as well as mass (MTOM) or less than 20 seats. airworthiness directives. Holders of an existing licence are obliged to notify the Polish CAA EASA plays an important role in the scope of safety. Commercial air of any planned changes in their activities as well as any mergers or acqui- transport operators, aerodromes, personnel, aeronautical products, parts sitions that could influence their financial standing, attaching relevant and appliances and ATM/ANS services and products are subject to the documentation. rules determined under EU Regulation 216/2008 and its implementing rules and EASA decisions. 6 What procedures are there to obtain licences or other rights to The European Aviation Safety Programme and Plan have not been operate particular routes? implemented yet. The relevant legislative works on the State Safety Polish and EU carriers are not required to obtain licences for operating Programme have been commenced. intra-Community connections, both for scheduled and non-scheduled Air safety is primarily administered and supervised by the CAA and flights. the Minister competent for Transport. For outside-EU connections, Polish and community air carriers shall All air carriers are certified according to EU Regulation 965/2012. By apply to the CAA for a licence to operate on a particular route. Where the end of 2017, all public usage airports will have to be certified according required in international treaties or third country law, the CAA shall also to the rules determined under EU Regulation 139/2014. appoint a carrier authorised to perform flights to a particular third country. As regards third-country carriers, see question 9. 3 What safety regulation is provided for air operations that do not constitute public or commercial transport, and how is the 7 What procedures are there for hearing or deciding contested distinction made? applications for licences or other rights to operate particular In general, the Aviation Act provides the same safety rules for all air opera- routes? tions. In the case of aircraft falling outside the scope of EASA supervision, In practice, this problem concerns either outside-EU routes or third coun- the airworthiness falls under the supervision of the CAA. try carrier applications, as intra-Community connections by Community In the case of aerodromes, public usage airports have to be fully certi- carriers are not subject to licensing. Where there are two or more appli- fied in compliance with International Civil Aviation Organization (ICAO) cants for operating a particular route, the CAA shall organise a selection Annex 14, whereas exclusive usage airports have to comply with national procedure, and the result shall be determined by the following criteria in Regulations. Some airports may apply to the CAA for a limited certifica- particular: tion. For such airports the CAA determines the type of flights operated to • air carriers’ capacity to offer an adequate level of services and charges and from the airport, the time when such flights can be operated as well as as well as competing effectively with third country carriers; and characteristics of aircraft that can be operated. www.gettingthedealthrough.com 155

• previous expenditures for development of the connection in question 11 Are charter services specially regulated? and economic results achieved hitherto. General Regulations on aviation apply to air charter services, with minor changes, including the following. Licences, permits and appointments in the field of traffic rights are granted When operating to or from Poland, an air carrier with its operat- by the CAA in the form of an administrative decision. Such decisions can ing licence granted by the EU, Swiss Confederation, Iceland, Norway or be appealed and in the case of unsuccessful appeal proceedings before Liechtenstein is obliged to communicate its flight programme to the CAA administrative court can be instituted. 14 days before the start of each traffic season. A foreign air carrier aiming to perform charter services to or from 8 Is there a declared policy on airline access or competition and, Poland is obliged to file an application to the CAA in order to obtain author- if so, what is it? isation to operate. Such application should be submitted, at the latest, 14 Again, the problem concerns outside-EU connections. The Aviation Act days before the series of non-scheduled commercial flights starts, where determines a list of circumstances when an application for a licence to ‘series’ of flights means at least 10 flights (one flight includes an outbound operate routes outside the EU can be rejected. These are when: and inbound operation). • it is essential under the limitations provided by international treaties The Aviation Act and the Regulation of the Polish Minister for or regulations; Transport on the principal rules of organisation of air transportation in • it is justified in order to avoid serious limitation of effective competi- terms of package tours and charter flights impose requirements regarding tion among Polish, EU and third-country carriers; the documentation that should be submitted to the CAA together with the • it is justified by a need to ensure profitability of regular flights on a application. Additionally, the CAA is entitled to ask the air carrier to submit given route that is already being serviced, and where there is no need the charter agreement between the carrier and the tour operator. to increase carriage capacity; or • operating regular flights has already been entrusted to another carrier 12 Are airfares regulated and, if so, how? under public service obligation. Airfares for air services provided within the EU are fixed on the general basis of EU Regulation 1008/2008. This means that the rules of pricing As regards third-country carrier access to connections to and from Poland, freedom together with the informative obligations and non-discrimination please refer to question 9. rule apply. However, as regards airfares applying to air services between Poland 9 What requirements must a foreign air carrier satisfy in order and a ‘third country’, when a bilateral agreement on airfares exists, there to operate to or from your country? is an obligation to submit the airfares to the CAA. Procedures, as well as A foreign air carrier may operate to or from Poland provided that it obtains the detailed scope of information required from the carrier when assessing a permit issued by the CAA. The permit is granted upon the air carrier’s correctness of airfares, are described in the Regulation of the Minister for request, taking into account the provisions of existing agreements and Transport. international law. A foreign air carrier may be granted the permit, provided that: Aircraft • it is in the public interest; 13 Who is entitled to be mentioned in the aircraft register? Do • Polish air carriers benefit from the similar rights in the foreign air car- requirements or limitations apply to the ownership of an rier’s country or obtain other mutual benefits; aircraft listed on your country’s register? • flight service at Polish airports can be assured; and • the rules of organisation of air transportation in terms of package tours An aircraft owner or another aircraft user (eg, operator) as well as their and charter flights set by Polish law are fulfilled by the foreign air car- attorneys are entitled to be mentioned in the Aircraft Register. rier operating from Poland. An aircraft may be entered into the Polish Aircraft Register if it is owned or operated by: The Aviation Act also lists circumstances when the CAA may decline an • a Polish citizen; application for a permit, inter alia: • a Polish legal person; • when required by international treaties or Regulations; • another Polish entity not possessing status of a legal person; or • when a carrier infringes aircraft safety or security Regulations; and • a citizen of another county permanently domiciled in Poland. • when a carrier has overdue liabilities towards Polish entities, in particular towards the state ATM body and ground handlers. The CAA also exercises a discretionary right to enter an aircraft operated by other persons than listed above into the Polish Aircraft Register. 10 Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local 14 Is there a register of aircraft mortgages or charges and, if so, economy? how does it function? There are two situations when public service obligation (PSO) can be Aircraft mortgages are registered in a general mortgages register, kept by imposed: 11 courts in Poland (depending on the seat of mortgager). The mortgage registers are open, which means that the documents lodged in the register PSO imposed on a specific route can be viewed by anyone. Electronic access to such registers is unavailable. The Minister for Transport, in cooperation with the Minister for Regional Once registered in the general mortgages register, aircraft mortgages are Policy, may impose PSO on a specific route in respect of scheduled air ser- reflected in the Polish Aircraft Register ex officio. vices, determining its period as well as terms and conditions of service performance. PSO can be imposed between two airports located in Poland, or 15 What rights are there to detain aircraft, in respect of unpaid between an airport located in Poland and an airport located in any other airport or air navigation charges, or other unpaid debts? country within the EU. The decision must be made taking into account The Aviation Act allows for temporary detention, retention or seizure of an state policy in respect of regional development and non-discriminatory aircraft, inter alia: rules among EU carriers. The procedures and the criteria in this matter are • by the CAA for breach of safety Regulations; laid down in EU Regulation No. 1008/2008. • by the airport operator for securing claims for airport charges or damages caused at the airport: PSO imposed on an airport authority • under the Convention for the Unification of Certain Rules relating In a situation where an airport has relatively low air traffic, though is still to the Precautionary Arrest of Aircraft made in Rome on 29 May important for a city or for a certain region, a local government unit can file 1933; a motion to the CAA to compensate the airport’s loss or to grant other ben- • upon court judgment or decision; and efits. The CAA can conclude an agreement with the airport authority on • by a court bailiff under enforcement proceedings; and PSO, specifying its requirements concerning regularity and continuity of • as a security of reimbursement for expenditures or remedy for damage the air traffic at this airport. caused by the aircraft.

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An aircraft may be required to be rendered for military purposes or in the In certain cases, an airport operator is entitled to retain the aircraft. case of natural calamities. It can also deny its services to the aircraft if airport charges are not paid. Polish law is not clear whether an aircraft can be detained by Airports can also require payment of fees for their services other than Eurocontrol for non-payment of navigation charges. paid in the form of airport charges (ie, not connected with start, landing, lighting, parking of aircraft; services re passengers, goods or freight). 16 Do specific rules regulate the maintenance of aircraft? Airports can also require payment of PRM charges (ie, charges for provid- There are no specific national rules as regards maintenance of aircraft and ing services required under EU Regulation No. 1107/2006). its components. Common EU Regulations should be adhered to. All operators are requested to follow Annex I (Part M) of Commission Regulation 20 Are there laws or rules restricting or qualifying access to (EC) No. 2042/2003 including the relevant decisions of EASA Executive airports? Director. All tasks related to aircraft maintenance should be performed by Accessibility depends on the type of airport. Commercial flights can be appropriately-approved Part 145 organisations with respect to the class and operated from and to public usage airports. Exclusive usage airports can be rating of their approval. Furthermore, personnel performing aircraft main- used by their owner, users indicated in the aerodrome register and by other tenance shall be certified as per Part 66 rules. users with the airport operator’s consent. The following flights are permitted to use the exclusive usage airport: charter flights operated with aircraft Airports of 10,000kg or less MTOM and/or those with 20 or fewer passenger seats, local flights and other non-commercial flights. 17 Who owns the airports? Accessibility is also limited by a particular airport’s operational param- Airports in Poland can be state owned or privately owned. Requirements eters and may be limited by slot coordination. regarding airport establishment and the scope of ownership are defined in the Aviation Act. The division between an exclusive usage airport (usable 21 How are slots allocated at congested airports? by those registered in the airport register) and a public airport (usable by all Congested airports become coordinated or schedule-facilitated according air operators within the airport limits and relevant for commercial flights) to the rules of EU Regulation 95/93. If an airport is designated as coordi- is vital for ownership issues. Public airports can be established and man- nated or schedule-facilitated, the CAA appoints a coordinator or a sched- aged by a municipal or private undertaking situated in Poland, another ule facilitator. Slots are allocated according to the rules of EU Regulation EU country, the Swiss Confederation or a member state of EFTA – an EEA 95/93. IATA Worldwide Scheduling Guidelines are not included directly in agreement signatory. Further ownership limitations would apply for airport the legal system in Poland, but they are applied in the slot allocation pro- owner and airport operator. There are also limitations on land ownership in cess. Two airports are coordinated in Poland: Chopin Airport in Warsaw the case of international airports where the state border is open consistently (WAW) and Poznań-Ławica Airport. The latter is coordinated from 1 June – only the State Treasury, other state units, municipal units or commercial to 30 September, 20.00–04.00 UTC. Both airports are coordinated by the companies where such undertakings own at least 51 per cent of shares can UK-based slot coordinating company Airport Coordination Limited. own it. The main public airport in Poland is Warsaw Chopin (EPWA/WAW) 22 Are there any laws or rules specifically relating to ground – operated by the Polish Airports State Enterprise. The major regional handling? public airports are; Kraków-Balice (EPKK/KRK), Gdańsk im. Lecha Wałęsy (EPGD/GDN), Katowice-Pyrzowice Airport (EPKT/KTW), Modlin Ground handling issues are governed by the Aviation Act and its imple- (EPMO/WMI), Wrocław-Strachowice (EPWR/WRO), Poznań Ławica menting Regulation on ground handling services in airports. In order to (EPPO/POZ). Shares in those regional airports are owned mainly by Polish provide ground handling services at a given airport, an agent has to obtain Airport State Enterprise, self-governing bodies (such as municipalities and CAA permission. This permission is not necessary in the case of self-han- provinces) or private entities. dling. In the case of dangerous goods as well as fuel and oil handling, it is obligatory to obtain a CAA certificate. The organisation of ground handling 18 What system is there for the licensing of airports? is based on EU Directive 96/67. In general, ground handling agents and self-handlers have freedom to operate. Such freedom for ground handling The licensing system depends on the type of an airport, ie, whether it is a agents may be limited by the President of CAA (in the case of airports of public usage airport or an exclusive usage airport. Commercial flights, in at least 2 million passengers or 50,000 tonnes of goods) or by the airport general, may be operated from and to public usage airports only. In order operator (in other cases). In any case the amount of permissions can be to establish and operate such an airport it is necessary to obtain permis- limited to at least two agents. Self-handling can be limited by the CAA sion from the CAA. Each public usage airport has to obtain a certificate in the case of airports of at least 1 million passengers or 25,000 tonnes of and operating permission. Both of these are issued by the CAA. In order goods. In the case of limitation, the permission is given to the entity chosen to operate a public usage airport, the managing body has to elaborate on in a selection procedure. airport charges and tariff which then has to be approved or published by the CAA. 23 Who provides air traffic control services? And how are they regulated? 19 Is there a system of economic regulation of airports and, if so, how does it function? ATC is provided by a state agency, the Polish Air Navigation Services Agency (PANSA). The provision of ATC services and the functioning of The economic side of airport operation is considered at the stage of air- PANSA is governed by the Aviation Act, the Act concerning PANSA as well port establishment and later, during its operation. Airport capabilities in as EU law. An air traffic services provider has to obtain a CAA certificate this regard are examined during the process of obtaining permission to and it has to be designated, by the Minister for Transport, to provide such establish an airport – via a ‘master plan’. Economic data related to present services in the given area. Provision of air traffic control services is subject and future ownership structure, foreseen investment financing sources, to EU Regulations. profitability, airport charge amounts, etc, have to be included in the airport’s master plan that has to be consulted with relevant municipalities, Liability and accidents opined by the CAA and approved by the Minister for Transport as well as the Minister for Regional Development. 24 Are there any special rules in respect of death of, or injury to, Then, in order to manage a public usage airport, operating permission passengers or loss or damage to baggage or cargo in respect of from the CAA is required. To obtain such permission, an applicant has to domestic carriage? prove that it is able to fulfil its financial liabilities for at least 24 months Under the Aviation Act there are no specific rules in respect of death of, from the commencement of activities. It also has to provide, eg, data on its or injury to, a passenger or loss or damage to baggage or cargo in respect capital structure, liquidity, financing sources, etc. A financial report has to of domestic carriage. Such damages are subject to the rules envisaged by be filed with the CAA each year after it is approved. the Montreal Convention. In matters not regulated by the Conventions, the Public usage airports are also limited in their economic freedom rules of the Aviation Act and of the Polish Civil code may be applicable. regarding airport charges, which are subject to the CAA’s supervision. The CAA has the authority to order airport charges amendments.

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25 Are there any special rules about the liability of aircraft There is not much Polish case law regarding mergers and acquisitions operators for surface damage? within the aviation industry. The liability of the aircraft operators for surface damage is regulated by the Aviation Act and the Polish Civil Code. Generally the rules provide 31 What are the main standards for assessing the competitive for strict liability, with very limited exoneration possibilities. Poland has effect of a transaction? not ratified the 1952 Rome Convention. Two new international conven- The CCPO examines whether a transaction could limit the competition tions on surface damage made in Montreal in 2009 – the Convention on on a relevant market, in particular through creation or strengthening of a Compensation for Damage Caused by Aircraft to Third Parties and the dominant position. Convention on Compensation for Damage to Third Parties resulting from Acts of Unlawful Interference Involving Aircraft – have not entered into 32 What types of remedies have been imposed to remedy force due to the lack of sufficient number of ratifications. Poland has not concerns identified by the competition authorities? signed either of them. There is no relevant case law in the aviation industry in Poland. In general, the CCPO can for example in case of concentration: 26 What system and procedures are in place for the investigation • order sale of the whole, or part of, the enterprise of one or more of air accidents? undertakings; The primary pieces of legislation governing the investigation of air acci- • order disposal of a controlling stake in an enterprise, and dents are EU Regulation 996/2010, the Aviation Act and the Regulation of • order granting of a licence to a competitor. the Minister of Transport on Aviation Accidents and Incidents. Generally, under the Aviation Act, an investigation into aviation accidents or serious In case of competition restricting practices, the CCPO can for example: incidents may be carried out by the Polish State Commission for Aircraft • order the granting of an IP licence on non-discriminatory terms; Accident Investigation (SCAAI) if an accident or serious incident took • order enabling access to infrastructure on non-discriminatory terms; place on Polish territory or in Polish airspace. The purpose of the inves- • order changing of an agreement; and tigation carried out by SCAAI is the prevention of air accidents; SCAAI • order enabling other entities to supply of certain products or services does not decide on fault nor liability issues. Any access to the SCAAI files non-discriminatory terms. concerning aviation accident is limited and requires consent from the Regional Court in Warsaw. Financial support and state aid 33 Are there sector-specific rules regulating direct or indirect 27 Is there a mandatory accident and incident reporting system financial support to companies by the government or and, if so, how does it operate? government-controlled agencies or companies (state aid) in Any events of malfunction, damage to aircraft or other circumstances the aviation sector? If not, do general state aid rules apply? which had or could have had influence on flight safety must be reported to There are no sector-specific rules on state aid in the aviation sector beside SCAAI by, inter alia: an operator or pilot in command, an aircraft construc- the Aviation Act which allows support to airlines and airports or other avia- tor/designer/manufacturer, an ATM authority, an airport operator and a tion undertakings in the purchase of equipment necessary to ensure safety ground handler. Reporting of air events shall be made immediately, not and airport development. Public service obligation, subject to remunera- later than 72 hours from the occurrence. The computer database for man- tion, can be imposed on airports and airlines. datory occurrence reporting in civil aviation is maintained in accordance with the European system of central coordination of events notification in 34 What are the main principles of the state aid rules applicable aviation, ie, that of the European Coordination Centre for Accident and to the aviation sector? Incident Reporting Systems. The rules applicable under EU law apply. This is mainly governed by the Competition law Treaty and EU guidelines on state aid to airports and airlines. In the case of state aid granted under national or regional aid schemes, the rules gov- 28 Do sector-specific competition rules apply to aviation? If not, erning the given scheme apply. The Aviation Act and its implementing do the general competition law rules apply? Regulations govern the rules on state aid granted for performing safety General competition law rules apply. However, under the Aviation Act, cer- tasks, public service obligation or investments in airport infrastructure tain agreements, decisions and other practices of air carriers concerning used for services of general economic interest. the use of traffic rights granted in international treaties or granted to Polish air carriers by third countries are permitted. 35 Are there exemptions from the state aid rules or situations in Council Regulation (EC) No. 487/2009 is also applicable in Poland. which they do not apply? In general, EU rules apply, particularly EU Regulation 659/1999 (as 29 Is there a sector-specific regulator or are competition rules amended). The procedure in Poland is governed by the Act on procedure applied by the general competition authority? in the field of state aid. No national rules have been elaborated for imple- The general competition authority, the CCPO, is competent. Under EU menting EU guidelines on state aid to airports and airlines. In the cases Regulations the European Commission also exercises significant powers. defined in EU guidelines on state aid to airports and airlines the ‘private investor’ rule would apply. 30 How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition 36 Must clearance from the competition authorities be obtained authorities? before state aid may be granted? There is no definition of the relevant market in the aviation sector. The In most cases the opinion of the CCPO is required before notification to definition of the Act on Protection of Competition and Consumers is appli- the European Commission Notification of a state aid scheme may require cable. Further to the definition it is the market of goods, which, with regard consent to be granted by the Council of Ministers. to their destination, price and features, including quality, are considered by the purchasers as substitutes which are offered in an area, where, due to 37 If so, what are the main procedural steps to obtain clearance? their type and features, barriers in accessing the market, consumers’ pref- See question 36. The steps depend on the type of state aid, that is whether erences, significant price differences and transport costs, a similar compe- it is individual aid, individual restructuring aid or an aid scheme as well as tition environment exists. whether it is de minimis aid. Each case is examined individually by the CCPO on the basis of gathered evidence. The ‘relevant markets have a dynamic character. The deci- 38 If no clearance is obtained, what procedures apply to recover sion of the CCPO defining the ‘relevant market’ in one case cannot be unlawfully granted state aid? treated as a precedent for future proceedings; it may merely be treated as If the European Commission obligates a beneficiary to return the state a guideline. aid amount, the full amount has to be returned together with the interest determined under EU Regulation 659/1999. If not returned voluntarily,

158 Getting the Deal Through – Air Transport 2016

Miscellaneous The latest amendments to the Aviation Act open military airports for civil aircraft movements, generally in the case of flights by the Polish 39 Is there any aviation-specific passenger protection Armed Forces as well as for domestic flights operated by small air legislation? vehicles and helicopters. Following several incidents with UAV a public debate regarding European law, particularly EU Regulation 261/2004 and EU Regulation usage of such air vehicles and relevant legislation to be elaborated 1107/2006 shall apply. has been commenced. There are no aviation-specific passenger protection rules on package The Polish Supreme Court issued an important judgment on the holidays or bankruptcy protection. However in the event of clear signs of costs in civil proceedings. It has lessened the burden of costs borne financial problems of the carrier or in the event of opening insolvency pro- by air carriers in cases where multiple plaintiffs (passengers) claim ceedings against an air carrier, the CAA shall make a detailed assessment of against a carrier in relation to the same cause of action and the cases the financial ituations of the carrier. At the request of the CAA, the air car- are joint for common resolution. This is a frequent situation in cases based on Regulation 261/2004. rier shall present the financial statements and other required documents to the statutory auditor. The CAA may suspend or revoke the operating licence in the cases referred to in EU Regulation 1008/2008. 42 What serious crimes exist with regard to aviation? 40 Are there mandatory insurance requirements for the The Polish Criminal Code and the Aviation Act provide for certain catego- operators of aircraft? ries of crimes related to traffic, including aviation. For example, under the Under the Aviation Act air carriers and aircraft operators are required to Criminal Code the following constitute criminal offences and are subject conclude a contract of insurance civil liability for damages in connec- to imprisonment: tion with the business of air transport in accordance with EU Regulation • causing a disaster to air traffic, and thereby endangering the life or 785/2004. In the case of non-commercial operation of aircraft with a health of many people, or property to a significant degree; maximum take-off mass not exceeding 2,700kg, the minimum amount of • unintentionally causing an accident in which another person suffers a cover liability insurance in respect of each single passenger in a single flight bodily injury by violating, even unintentionally, the safety rules for air from one event whose effects are covered by insurance is the equivalent of traffic; and 100,000 SDR. Air carriers are required to conclude a contract on liability • allowing, in spite of a special duty, a vehicle to be operated in a condi- insurance for damage caused by delay in the carriage of passengers, bag- tion that directly endangers the safety of air traffic. gage or goods. Air carriers are required to conclude the insurance contract on civil liability for damage resulting from the carriage of mail by air, in The Aviation Act provides for certain penalising regulations, mostly in accordance with the provisions of the European Union concerning common respect of regulatory offences. As regards non-regulatory offences under rules for the operation of air services in the community. the Aviation Act, the following may be noted as an example of offences: • breaching the provisions concerning air traffic in the area while per- 41 What legal requirements are there with regard to aviation forming a flight; security? • destroying or seriously damaging aircraft located at the airport or causing an interruption in the activities of an airport; In general international and EU law applies, in particular EU Regulations • refusing to obey orders of the PIC during flight; 300/2008 and 185/2010. The Aviation Act provides implementing rules • carrying or using firearms, gas-based weapons or explosives onboard; and the most important national Regulations concern the National Civil • destroying airport facilities and air-traffic devices; and Aviation Security Programme, the National Training Programme and the • emitting or causing the emission of a laser light or light from other National Quality Control Programme. The protection of civil aviation sources in the direction of an aircraft in a manner likely to cause blind- against acts of unlawful interference threatening security and the safety ing, and as a result posing a threat to the safety of an aircraft or health of persons and property in connection with aviation business are subject to of crew and passengers on board. separate agreements, international laws and Regulations and special provisions of the Aviation Act.

Krystyna Marut [email protected] Edyta Michalak [email protected] Anna Burchacińska-Mańko [email protected]

Zimowa Str. 27 B/31 Tel: +48 22 713 82 12 05-500 Nowa Iwiczna Fax: +48 22 713 82 11 Poland [email protected] www.mmmlegal.pl

www.gettingthedealthrough.com 159

Portugal

João Pedro Alves Pereira and João Marques de Almeida APTS – Alves Pereira & Teixeira de Sousa RL

General • all flight and ground personnel must have the necessary professional qualification and be certified for the job. Regular crew training is also 1 Which bodies regulate aviation in your country, under what required; basic laws? • an insurance policy to cover the operators’ liability in respect of pas- The competent licensing and supervising authority of air transport activity sengers, cargo, mail and third parties must be in force; is the National Civil Aviation Authority (ANAC) whose responsibilities are • a flight crew operating manual must be submitted for ANAC’s established in Decree-Law No. 40/2015 of 16 March. The main responsi- approval; and bilities of ANAC in the regulation and supervision of air transport activity • all flights must be conducted in accordance with the information are the following: received from the air traffic services available. • assisting and advising the Portuguese government on air transport and aviation issues; 3 What safety regulation is provided for air operations that do • licensing and supervising all activities and entities related to aviation; not constitute public or commercial transport and how is the • organising the registry of national aircraft and its equipment; distinction made? • promoting aviation safety by regulating, supervising and inspecting air Only aircraft duly certified in terms of airworthiness and environmental transport activity and all entities of that sector; compliance can be operated in Portugal, irrespective of the purpose of its • defending consumer protection; use (ie, for private, commercial or aerial work). • representing the Portuguese state at Community and international All pilots (including private pilots) must successfully complete a pilot organisations in aviation issues; licence course certified and approved by ANAC. • assisting the Portuguese state in the national civil emergency policies; Aerial work is defined under section 2(l) of Decree-Law No. 44/2013 • participating, planning and supervising the national civil and military of 2 April as the use of an aircraft for any purpose other than the transpor- measures concerning the use of airspace, search and rescue, safety of tation of passengers, cargo or mail against any form of payment (ie, any air transport and cooperating with the Office for the Prevention and purpose other than private, commercial or public air transport). The fol- Investigation of Aircraft Accidents (GPIAA) – the Portuguese authority lowing activities qualify as aerial work: aerial photography, aerial advertis- for the prevention and investigation of all accidents and incidents with ing, parachute dropping, etc. Only operators duly certified and licensed by civil aircraft; ANAC may exercise these activities. An insurance policy to cover liability • promoting and defending competition rules on the aviation sector; deriving from this activity is also required by law. and • supervising, applying and monitoring compliance with Community 4 Is access to the market for the provision of air transport rules concerning aviation and air transport activity in the Portuguese services regulated and, if so, how? territory. As mentioned in question 2, the provision of air transport services is sub- Please note that ANAC is an independent public authority with adminis- ject to prior licensing by ANAC. Several requirements must be fulfilled, trative, management and financial autonomy from the Portuguese state notably: budget. • the principal place of business of the applicant must be located in Portugal and more than 50 per cent of its share capital must be held by Regulation of aviation operations EU member states or by national citizens of EU member states; • financial viability and technical ability must be assured; 2 How is air transport regulated in terms of safety? • an adequate professional structure (ie, flight personnel, maintenance, The rules set forth by Regulation (EC) No. 216/2008 are applicable and sales, etc) must be set by the operator; the European Aviation Safety Agency (EASA) plays a pivotal role in safety • air carriers must be insured to cover liability in case of accidents with matters. respect to passengers, cargo, mail and third parties; Furthermore, access to the market is subject to the granting by ANAC • applicants are required to provide proof that the persons who will of an air operator’s certificate (AOC) and an air carrier’s operating licence, manage the operations of the air carrier are of good repute and have which certify that the air carrier meets all the financial, technical, insur- professional integrity (ie, have no criminal background and have not ance and safety requirements imposed by European Community law (eg, been declared bankrupt); and EC Regulation No. 1008/2008 and No. 965/2012) and by domestic law • it is also necessary to own an aircraft fleet adequate to the specific (eg, Decree-Law No. 19/82 of 28 January and Decree-Law No. 289/2003 of activity intended to be developed. Please note that licences are 14 November). The most relevant safety requirements to be fulfilled are non-transferable. the following: • all aircraft must be duly certified in terms of airworthiness and envi- Market access and the exercise of traffic rights for scheduled air ser- ronmental compliance; vices in extra-Community routes is ruled by Decree-Law No. 116/2012 of • maintenance of the aircraft fleet and all of the aircraft equipment and 29 May which harmonises domestic law with Community regulations on components must be assured directly by the operator or by a third non-discriminatory market access and distribution of traffic rights embod- entity duly certified for the maintenance of aircraft; ied in Regulation (EC) No. 847/2004 of 29 April and Regulation (EC) No. • operational facilities in the operators’ main base must be adequate for 1008/2008 of 24 September, respectively. the area and type of operation licensed;

160 Getting the Deal Through – Air Transport 2016

5 What requirements apply in the areas of financial fitness and Commission Regulation (EU) No. 452/2014 of 29 April 2014 laying nationality of ownership regarding control of air carriers? down technical requirements and administrative procedures related to air To obtain a licence from ANAC, several requirements in the area of operations of third country operators is also applicable. financial fitness must be fulfilled by the air operator. In particular, the air Furthermore, all air carriers operating to and from Portuguese coor- operator shall prove that: dinated airports (see question 21) must previously submit a request for the • it is able to meet, at any time, its actual and potential obligations estab- allocation of slots to ANA, SA (the schedules facilitator and national coor- lished under realistic assumptions, for a period of 24 months from the dinator). Non-scheduled flights must be approved by ANAC in advance. start of operations; • it is able to meet its fixed and operational costs incurred by operations 10 Are there specific rules in place to ensure aviation services according to its business plan and established under realistic assump- are offered to remote destinations when vital for the local tions for a period of three months from the start of operations, without economy? taking into account any income from its operations; and In accordance with article 16 of EC Regulation No. 1008/2008, the • it does not have any amount in debt to the Portuguese tax authorities Portuguese government is entitled to impose public service obligations or social security, or both. (PSOs) in respect of scheduled air services to an airport serving a peripheral or development region in its territory, when the route is considered The air operator must also submit a business plan for at least the first three vital for the economic and social development of the region. years of operation, which shall detail its financial connection with any As from 29 March 2015, the only PSOs routes existing in Portugal are: other commercial activities in which it is engaged directly or not. In respect • Lisbon/Horta (Azores)/Lisbon; of nationality of ownership see question 4, bullet point one. • Funchal (Madeira)/Ponta Delgada (Azores)/Funchal (Madeira); • Lisbon/Santa Maria (Azores)/Lisbon and 6 What procedures are there to obtain licences or other rights to • Lisbon/Pico (Azores)/Lisbon. operate particular routes? To operate particular routes it is essential to obtain the respective licence Air carriers that operate those routes are entitled to receive compensation from ANAC. For that purpose it is necessary to submit an application to from the Portuguese government by way of payment of a predetermined ANAC informing it of the details of the desired route, namely, the identifi- amount or a percentage of the airfare of passengers. cation of the complete route, flight type, licence and type of the aircraft and Notwithstanding, the government will subsidise a percentage of the the schedule of the operation. airfare directly to the passengers residing or studying in Madeira, other If the application is duly submitted with all necessary information, islands of the Azores archipelago, Vila Real and Braganza. ANAC shall grant the licence and will publish its decision in the Portuguese New PSOs routes are expected to be created shortly as the Portuguese Official Journal. government recently issued two calls for tenders for the Braganza/Vila See also question 4. Real/Viseu/Cascais/Portimão routes and within different islands of the Azores archipelago. 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular 11 Are charter services specially regulated? routes? There is no special regulation of charter services in Portugal. EC Regulation ANAC shall make a decision on an application as soon as possible (not later No. 1008/2008 is applicable either to scheduled and non-scheduled air than three months) after all the necessary information has been submitted. services and ANAC does not distinguish these two flight types in order to Should ANAC refuse the application, it must indicate the grounds for this grant certification and licensing to air operators. However, air operators refusal. In this case, the applicant has the right to be heard and to submit its must inform ANAC on its flight type. reasons why the application should not have been refused. ANAC’s decision can also be contested before the administrative courts. 12 Are airfares regulated and, if so, how? In accordance with article 22 of EC Regulation No. 1008/2008, EU air car- 8 Is there a declared policy on airline access or competition and, riers can freely set airfares. As an EU member state, Portugal is covered by if so, what is it? the aforementioned provision. There is no declared policy specifically on airline access or competition. Please note that in respect of public service obligations (see question The provisions of EC Regulation No. 1008/2008 are applicable. In 10) and in accordance with article 16 of EC Regulation No. 1008/2008, a accordance with such provisions, the applicant for licensing of air carrier standard airfare must be fixed. activity in Portugal – ie, the applicant for a Portuguese AOC – must have its principal place of business located in Portugal and more than 50 per cent of Aircraft its share capital must be held by EU member states or by national citizens 13 Who is entitled to be mentioned in the aircraft register? Do of EU member states. requirements or limitations apply to the ownership of an Notwithstanding, air carriers duly certified and licensed in other aircraft listed on your country’s register? member states are entitled to provide air services in Portuguese territory. The Portuguese Aircraft Register must mention the complete information See also question 4. about the owner of the aircraft, namely, the name, address, marital status (if applicable), VAT and ID number. There are no special requirements or 9 What requirements must a foreign air carrier satisfy in order limitations (or both) concerning the ownership of an aircraft. to operate to or from your country? The Aircraft Register must also contain several details concerning the Intra-Community air carriers duly licensed in their place of residency aircraft, notably: are entitled to operate in Portugal in accordance with EC Regulation No. • name of the operator and the manufacturer; 1008/2008. • model, serial number, construction date (eg, year), weight, capacity Within the scope of the ‘Open Skies Agreement’ signed between the and number of flight hours; United States and the European Union, air carriers registered in the United • number of engines, respective model and serial number; and States are also entitled to operate to or from Portugal. In addition, Portugal • usual airport or aerodrome of the aircraft. signed several bilateral agreements with a number of states, which regulate the operation of flights to or from Portugal by air carriers registered in The following documents are necessary for the registration of an aircraft contracting states. in Portugal: Please also note that Decree-Law No. 40/2006 of 21 February estab- • bill of sale; lishes rules and procedures for ramp inspections of non-member state air- • cancellation of registration certificate of the country where the aircraft craft landing at airports located in Portugal in order to guarantee aircraft was previously registered or a non-registration certificate, if the air- airworthiness. According to the aforesaid legal provisions, any aircraft to craft was never registered in any other country; be found in non-compliance with international safety standards may be • customs release certificate – only required when the aircraft is from a grounded until corrective measures are adopted by the aircraft operator. non-EU country; www.gettingthedealthrough.com 161

• two photos of the aircraft – one of the front and one in profile, with the 18 What system is there for the licensing of airports? marks of nationality and registration painted, in 9cm x 12cm format, Under the rules set forth in Decree-Law No. 186/2007 of 10 May (amended without margins and printed in natural colour; and by Decree-Law No. 55/2010 of 31 May), the construction and operation of • registration application form (under the format of the official form of civil airports is subject to prior licensing by ANAC. For that purpose several ANAC). requirements must be fulfilled in terms of physical characteristics of the airport (eg, the absence of physical obstacles and known meteorological The aforementioned documents must be submitted by the owner of the conditions that may put at risk the safe operation of aircraft), environmen- aircraft to ANAC together with the application for the aircraft registra- tal impact and terminal facilities. Airport operators must have a valid insur- tion. Registration fees currently amounting to €72.33 (or 50 per cent of this ance policy to cover liability deriving from any accident occurring in the amount whenever the applicant is an aero club) must be paid upon submis- airport facilities and an airport operations manual must also be subject to sion of the necessary registration documents. ANAC’s approval.

14 Is there a register of aircraft mortgages or charges and, if so, 19 Is there a system of economic regulation of airports and, if so, how does it function? how does it function? There is a register for any mortgage or charges concerning an aircraft Under Decree-Law No. 254/2012 of 28 November, airport operators are registered in Portugal. As previously mentioned (see question 1), ANAC entitled to lease part of the airport infrastructures to third parties and are is the Portuguese authority responsible for the registration acts related to also entitled to grant third parties the right to provide services within the aircraft. airport (eg, ground handling services, restaurants and stores, etc). The Therefore, in order to apply for the registration of a mortgage over air- granting of such rights is ordinarily subject to public tender procedure. craft in Portugal, it is necessary that the owner submits the following docu- Airport charges are freely set by the airport operators but are capped under ments to ANAC: the single-till model (ie, charges are capped considering the costs and • the Aircraft Security Agreement or similar instrument or notarial deed revenues of both aeronautical and other commercial activities being per- containing a valid constitution of a mortgage; and formed in the respective airport). • the registration application form. 20 Are there laws or rules restricting or qualifying access to The registration fees must be paid upon submission of the aforementioned airports? documents which are calculated as following: full amount covered by the Night flying restrictions are imposed to meet the noise reduction criteria mortgage divided by 100,000. Please note that there is a minimum and established in EU Directive 2002/CE/30 (eg, Lisbon Airport may only a maximum amount for registration fees, which are €72.33 and €947.72, receive 91 weekly flights during the period from midnight to 6am). The respectively. applicable domestic laws in this matter are Decree-Law No. 293/2003 of 18th November and Decree-Law No. 9/2007 of 17 January. 15 What rights are there to detain aircraft, in respect of unpaid Regulation (EU) No. 598/2014 of 16 April on the establishment of rules airport or air navigation charges, or other unpaid debts? and procedures with regard to the introduction of noise-related operating Portugal is a signatory of the Convention on the International Recognition restrictions at EU airports will enter into force on 13 June 2016. of Rights in Aircraft signed at Geneva on 19 June 1948. Under the provi- See also question 21 on the allocation of slots at coordinated airports. sions of that Convention, all contracting states recognise mortgages and similar rights in aircraft, which were contractually created as security for 21 How are slots allocated at congested airports? payment of indebtedness. The allocation of slots is made in accordance with Council Regulation (EC) In case of default of any obligation assured by a mortgage, the credi- No. 95/93. Consequently, series of slots are allocated by the airport coordi- tor can opt for foreclosure under the mortgage and under provisions of the nator from the slot pool to applicant carriers for the purpose of landing or aforementioned Convention, the compensation claimed in those terms take-off from coordinated airports. take priority over all other rights in the aircraft. Portugal is not a member Slots are allocated for a predetermined period of time, after which they of the Cape Town Convention. have to be returned to the slot pool. Slots will be reallocated to the same As to unpaid airport charges, under section 46 of Decree-Law No. air carrier provided that it has operated those same slots for at least 80 per 254/2012 of 28 November, the Airport Authority may detain any asset of the cent of the time or will otherwise be returned to the slot pool. debtor located in the airport premises to secure payment of the debt and The airports of Lisbon, Porto, Madeira and Faro are fully coordi- accrued interest. The said Airport Authority also has a special right over nated (Faro only during the IATA summer period) and the airport of Ponta the property of the said assets for the payment of the debt (ie, the credit has Delgada (Azores) is a schedule facilitated airport. priority over other debts). ANA, SA (see question 17) is the schedule facilitator and airport coordinator for all Portuguese territory. 16 Do specific rules regulate the maintenance of aircraft? ANAC is responsible for the supervision of the slots allocation As mentioned in question 2, an air operator must be certified and licensed procedure. by ANAC in order to enter into air transportation activity and for that purpose several requirements must be fulfilled. 22 Are there any laws or rules specifically relating to ground One of the most important requirements is the maintenance of the handling? aircraft fleet, as required by Commission Regulation (EU) No. 1321/2014 Ground handling activity is subject to prior licensing by ANAC and the fol- of 26 November 2014. The compliance of all aircraft equipment and com- lowing requirements must be met: ponents must be directly assured by the operator or by a third entity duly • the applicant must be incorporated under Portuguese law; certified by ANAC for the maintenance of aircraft. • its principal place of business must be located in Portugal, in another The violation of this duty gives ANAC sufficient grounds to suspend or EU member state or in a third country with whom Portugal has a bind- revoke the licence granted to the air operator. ing international agreement; • financial fitness and technical ability must be assured; Airports • proof of good repute is necessary; and 17 Who owns the airports? • insurance to cover liability deriving from ground-handling activity is All major Portuguese airports are owned by the state and operated by ANA, mandatory. SA and ANAM, SA. ANA, SA was recently privatised and holds the concession for a period of 50 years for 10 airports, including four on Portugal’s Self-handling may be provided by any licensed air carrier that operates in mainland (Lisbon, Porto, Faro, Beja), four in the Azores (Ponta Delgada, the same airport where such handling services will be rendered. Horta, Flores and Santa Maria) and two in Madeira (Funchal and Porto The provision of ground-handling services to third entities may only Santo), the airports of Madeira being directly operated by ANAM (ANA’s be exercised in airports which have: a traffic volume equal or higher than subsidiary company). three million passengers or 75,000 tonnes of cargo per year; or registered traffic of more than two million passengers or 50,000 tonnes of cargo

162 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 APTS – Alves Pereira & Teixeira de Sousa RL PORTUGAL during the six months prior to 1 April or to 1 October of the preceding year. or liability but rather to improve safety and prevent future accidents and The number of suppliers for each airport is subject to government restric- incidents. tions. Under Ordinance No. 14886-A/2013 of the Secretary of State for Investigators are granted full access to the accident site, to the aircraft Transportation, a restriction of two ground-handling companies operating and to the flight data recording systems. Investigators are also entitled to in Lisbon, Oporto and Faro was imposed, until a minimum annual volume hear any witness of the accident or incident. of 15 million passengers or 200,000 tonnes of cargo is reached. A final report on the accident or incident will be published by GPIAA, ANAC may impose other restrictions owing to airport capacity and in accordance with the rules and procedures established in ICAO’s space limitations. Annex 13.

23 Who provides air traffic control services? And how are they 27 Is there a mandatory accident and incident reporting system regulated? and, if so, how does it operate? The only entity authorised to provide air traffic control services in Portugal Any person or entity that becomes aware of any accident or incident is the Portuguese state-owned company NAV Portugal, EPE. NAV’s main involving aircraft during the performance of their professional duties is duties are to: obligated to report such occurrence to ANAC (Decree-Law No. 318/99 and • promote the safe, orderly and rapid flow of aircraft traffic; Regulation (EU) No. 376/2014). Failure to do so constitutes a very serious • supply all information and suggestions necessary for the flight safety; aeronautical offence punishable with a fine up to €250,000. • avoid collisions between aircraft and between aircraft and obstacles Notification to ANAC and GPIAA must be made within six hours after on the ground; and the occurrence of the accident or incident. ANAC shall notify the compe- • alert all necessary entities whenever an aircraft is found to be in an tent authorities of the member states where: emergency situation and to provide those entities with the required • the accident or incident occurred; assistance and cooperation. • the aircraft is registered; • the aircraft was manufactured; and All air traffic controllers employed by NAV must be duly licensed by ANAC. • the aircraft operator is licensed. Portugal is a member of Eurocontrol and is subject to the Single European Skies legislative package. Competition law 28 Do sector-specific competition rules apply to aviation? If not, Liability and accidents do the general competition law rules apply? 24 Are there any special rules in respect of death of, or injury to, There are no sector-specific rules. The general Portuguese competition law passengers or loss or damage to baggage or cargo in respect of rules are applicable. domestic carriage? Under Decree-Law No. 321/89 of 25 September, a regime of strict liabil- 29 Is there a sector-specific regulator or are competition rules ity (ie, regardless of fault) was established in respect of death or injury of applied by the general competition authority? passengers and for loss or damage of luggage or cargo in domestic flights. There is no sector-specific regulator. The competition rules are applied by Notwithstanding, air carrier strict liability is limited to the following the Portuguese Competition Authority. amounts: • death or bodily injury to passengers – €125,000 per passenger, with the 30 How is the relevant market for the purposes of a competition maximum amount per accident of €125,000 multiplied by the number assessment in the aviation sector defined by the competition of seats of the aircraft; authorities? • loss or damage of luggage – the same limits per kilogram of luggage Two rulings of the Portuguese Competition Authority provide some guide- established in the Montreal Convention (ie, 1,131 special drawing lines in this respect, namely the decision of 5 June 2007 concerning the rights (SDR) per passenger); and merger between TAP and PGA. The Portuguese Competition Authority • loss or damage of cargo – the same limits per kilogram of cargo estab- makes a distinction between the following services: lished in the Warsaw Convention, the Hague Protocol and its addi- • scheduled commercial flights: the relevant market includes all routes tional protocols. operated by the air carriers and each route or destination is treated as a separate market; Under EC Regulation No. 2027/97, compensation for death or bodily injury • carriage of goods and mail: there is a European geographical market as to passengers in case of blameworthy conduct of the air carrier is not sub- defined by the European Commission; and ject to any limitation. • in-flight catering: the relevant market includes the provision of food and beverages aboard the aircraft for passengers and flight crew. In the 25 Are there any special rules about the liability of aircraft instance of Portuguese air carriers, the relevant geographical market operators for surface damage? for the provision of catering services is the Portuguese territory. Aircraft operators are subject to a regime of strict liability for surface damage caused by the aircraft (while flying, on the ground, or simply deriving 31 What are the main standards for assessing the competitive from objects detached from the aircraft) to third parties. Strict liability is effect of a transaction? limited to a maximum amount equal to the minimum mandatory insur- Portuguese competition rules aim to prohibit any agreements between ance cover as determined in EC Regulation No. 785/2004 – see question undertakings, decisions by associations of undertakings, concerted prac- 40. tices between undertakings, abusive exploitation of a dominant position Nevertheless, liability may be excluded when surface damage is or abusive exploitation of the economic dependence of any supplier or cli- caused by: ent with the purpose or effect to prevent, distort or restrict competition, • natural catastrophes; particularly: • wars or riots; • the imposition of purchase or selling prices; • the use of guns or weapons by third parties; or • the imposition of other conditions; • when the accident was entirely caused by blameworthy conduct of the • the restriction or limitation of production, distribution, technical person who suffered the damage. development or investments; • the share of markets or sources of supply; 26 What system and procedures are in place for the investigation • the use of discriminatory or unequal conditions or pricing for similar of air accidents? services; Under the rules set forth by Regulation (EU) No. 996/2010 of the European • the refusal to purchase or sell goods or services; or Parliament and of the Council and Decree-Law No. 318/99 of 11 August, • subjecting the execution of agreements to the acceptance of additional any accident or serious incident must be subject to an investigation by the obligations which, by their nature or according to the trade usage, have GPIAA. The investigation led by GPIAA is not intended to determine fault no relation to the purpose of such contracts. www.gettingthedealthrough.com 163

32 What types of remedies have been imposed to remedy The right of care is also applicable in case of flight delays of: concerns identified by the competition authorities? • more than two hours, for flights less than 1,500km; The Portuguese Competition Authority may impose one or more of the fol- • three hours or more, for flights within the EU longer than 1,500km, lowing remedies, depending upon the type of infringement or the circum- and for flights outside the EU between 1,500km and 3,500km; and stances (or both) of the case: • more than four hours for flights over 3,500km outside the EU. • interim measures (eg, the immediate suspension of the prohibited practice); If the delay is longer than five hours, passengers are also entitled to a • coercive remedies (eg, prohibiting the merger or, at a later stage, refund of the ticket price. For flights arriving from outside the EU, when ordering the demerger of the undertakings, imposing changes to operated by airlines of non-member states, passengers are entitled to the transaction, etc); protection established in the Warsaw Convention, Hague Protocol and • fines or periodic penalty payment; Montreal Convention (when the airline is registered in a contracting state). • advertisement of the penalty in the Official Gazette or in a local newspaper; and Disabled passengers • other additional penalties. The rights of disabled passengers are regulated by domestic law (Decree- Law No. 254/2012 of 28 November) and by EC Regulation No. 1107/2006. Financial support and state aid Air carriers cannot refuse the transportation of disabled passengers or of passengers with reduced mobility on the grounds of their disability. 33 Are there sector-specific rules regulating direct or indirect Notwithstanding, air carriers may refuse to accept a reservation from or financial support to companies by the government or to embark a disabled person or a person with reduced mobility in order to government-controlled agencies or companies (state aid) in meet applicable safety requirements or when such transportation is physi- the aviation sector? If not, do general state aid rules apply? cally impossible (eg, the size of the aircraft or its doors are too small). There are no sector-specific rules. General EU state aid rules are applicable Air carriers must ensure that their personnel have sufficient training to the aviation sector. on how to meet the needs of persons having various disabilities or mobility impairments. 34 What are the main principles of the state aid rules applicable to the aviation sector? Package holidays See question 33. Rules governing package holidays are set forth in Decree-Law No. 61/2011 of 6 May (which repeals and replaces Decree-Law No. 209/97 of 13 August 35 Are there exemptions from the state aid rules or situations in and incorporates into domestic law EC Directive 90/314/CE). Notably, which they do not apply? rules were set on the licensing of travel agencies, consumer information, contractual obligations, cancellations, liability, guarantees and mandatory See question 33. insurance. 36 Must clearance from the competition authorities be obtained Computerised reservation system before state aid may be granted? EC Regulation No. 80/2009 on a Code of Conduct for computerised reser- Clearance from the Portuguese Competition Authority does not need to vation systems, which entered into force on 29 March 2009, is applicable be obtained before state aid is granted. However, at the request of any in Portugal. This Regulation intends to reduce booking costs and increase interested party, the Portuguese Competition Authority may scrutinise travel options with benefit to the consumer. any state aid (or state aid project) and make such recommendations to the government as it deems necessary to eliminate the adverse effects on com- Airfares petition of such aid. The final price to be paid by air passengers shall include the applicable airfare or air rate as well as all applicable taxes, charges, surcharges and 37 If so, what are the main procedural steps to obtain clearance? fees that are unavoidable and foreseeable at the time of publication (see See question 36. EC Regulation No. 1008/2008 and Decree-Law No. 173/2007 of 8 May).

38 If no clearance is obtained, what procedures apply to recover 40 Are there mandatory insurance requirements for the unlawfully granted state aid? operators of aircraft? See question 36. Under EC Regulation No. 785/2004 and Decree-Law No. 289/2003 of 14 November, commercial air carriers and operators must be insured to Miscellaneous cover liability in case of accidents with respect to passengers, cargo and third parties. 39 Is there any aviation-specific passenger protection For liability in respect of passengers, the minimum insurance cover legislation? is 250,000 SDR per passenger. For baggage and cargo, the minimum Denied boarding, cancellation and delay of flights insurance cover is 1,131 SDR per passenger and 19 SDR per kilogram, EC Regulation No. 261/2004 is applicable. Domestic law establishes respectively. offences and sanctions for the non-compliance with the rules set out in the For liability in respect of third parties, there are different minimum aforesaid EC Regulation. insurance covers that vary from 750,000 SDR for aircraft with a maximum In case of denied boarding, air carriers must compensate passengers take-off mass (MTOM) of less than 500kg to 700 million SDR for aircraft on the following amounts: with a MTOM equal or higher than 500,000kg. • €250 for flights of less than 1,500km; • €400 for flights within the EU longer than 1,500km and for flights out- 41 What legal requirements are there with regard to aviation side the EU between 1,500km and 3,500km; and security? • €600 for flights over 3,500km outside the EU. In matters of aviation security, Portugal is subject to the provisions of EC Regulation No. 300/2008 of 11 March (which repealed and replaced EC In addition, passengers may opt for a refund of the price of the ticket or Regulation No. 2320/2002) and Regulation (EU) No. 185/2010 of 4 March alternative transport to their final destination. 2010. In obedience to such provisions, ANAC approved a national security The same rules apply should the flight be cancelled. However, mon- training programme for aeronautical personnel and a national security etary compensation to passengers is only due if notice of the flight cancel- quality control programme. lation is not given with sufficient time in advance. Furthermore, internal rules on the prevention and repression of Furthermore, passengers also have a ‘right of care’ (ie, an airline car- unlawful acts on board aircraft were also introduced by Decree-Law No. rier must provide meals and refreshments, hotel accommodation when 254/2003 of 18 October. According to the aforesaid statutory law, all penal- necessary, etc). ties (ie, fines and imprisonment) for criminal offences committed on board

164 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 APTS – Alves Pereira & Teixeira de Sousa RL PORTUGAL aircraft were increased. In addition, new crimes (eg, disobeying of a captain’s orders and conveying false information concerning the flight to other Update and trends passengers, thus causing unnecessary alarm) and regulatory offences (eg, smoking on board, the use of mobile phones and other electronic equip- The second public tender procedure for privatisation of the Portuguese national air carrier TAP Air Portugal was successfully ment when such use is not allowed by the air carrier and any behaviour completed by the Portuguese government. Under the approved resulting from alcohol or drugs abuse that jeopardises aircraft security) privatisation plan, Atlantic Gateway consortium acquired 61 per cent were also introduced. equity stake of TAP while the Portuguese government shall retain a 34 per cent minority shareholding. 42 What serious crimes exist with regard to aviation? However, some debate has arisen during the privatisation The most severe criminal offences sanctioned under Portuguese law are procedure as to the compliance with European Union rules on ‘ownership and effective control’ of Community air carriers [article as follows: 4(f) Regulation (EC) No. 1008/2008] since the Atlantic Gateway • aircraft hijacking (punishable with imprisonment of up to 15 years); consortium is composed of entrepreneurs Humberto Pedrosa • endangerment of air transportation safety (punishable with imprison- (Portuguese owner of the Barraqueiro Group) and David Neeleman ment of up to 10 years); and (American-Brazilian investor who is the CEO of Azul airline and • reckless operation of aircraft (punishable with imprisonment of up to founder of Jetblue airline). eight years). Probably not surprisingly, it was recently reported in the press that the privatisation decision will be challenged before Any crime committed by a terrorist association or on board an aircraft, thus the European Commission by one of the defeated bidders on the jeopardising aircraft safety, shall have its penalty aggravated by one-third grounds that the shareholders’ agreement will allow for a non- European national to be able to exercise a ‘decisive influence’ on of its minimum and maximum duration. the conduction of TAP business (even though more than 50 per cent Other relevant criminal offences are also established in Decree-Law of TAP’s share capital shall be owned by Portuguese nationals). No. 254/2003 of 18 October, such as disobedience of captain’s orders (pun- Therefore, TAP’s privatisation may still be far from definitely ishable with imprisonment up to two years) and conveying false informa- completed, as the European Commission and ANAC (Portuguese tion concerning the flight to other passengers, hence causing unnecessary civil aviation authority) are yet to deliver a decision on this issue. alarm (punishable with imprisonment up to one year). Sound pollution is also deemed a criminal offence punishable with imprisonment of up to three years.

João Pedro Alves Pereira [email protected] João Marques de Almeida [email protected]

Avenida da Liberdade 38, 3º Tel: +351 21 370 01 90 1250-145 Lisbon Fax: +351 21 382 90 03 Portugal www.alvespereira.com

www.gettingthedealthrough.com 165

Russia

Mikhail Sokolov, Anna Arkhipova and Sergey Seliverstov Sokolov, Maslov and Partners

General Certain types of activity in the sphere of aviation, in relation to design, production, testing, repairs of aviation equipment, carriage by air of passen- 1 Which bodies regulate aviation in your country, under what gers and cargo (except carriage for the carrier’s own purposes), are subject basic laws? to obtaining a licence. Aviation is regulated in the Russian Federation by: • the Ministry of Transport as the federal body of executive power in the 3 What safety regulation is provided for air operations that do sphere of transport, including air transport. The Ministry of Transport not constitute public or commercial transport and how is the works out the state policy and deals with legal regulation in the sphere distinction made? of, inter alia, aviation, use of the airspace and aero-navigational ser- There is no difference in the safety regulations applicable to either air vices provided to the users of the airspace; transport or air operations that do not constitute public or commercial • the Federal Agency of Air Transport (FAAT), a federal body with exec- transport, such as private operations or aerial works. In fact, aviation is utive power that provides state services and manages state property divided in the Russian Federation into civil, state and experimental. Civil in the sphere of air transport (civil aviation), of the use of the airspace aviation is aviation used for the purposes of meeting requirements of the and aero-navigational services provided to the users of the airspace. citizens and economy. Civil aviation that is not used for commercial air Inter alia, the FAAT conducts certification of airports and keeps the carriage and performance of aerial works is regarded as general-purpose state register of civil aerodromes and airports. Among other things, aviation (which does not include commercial air transport and perfor- the FAAT is in charge of registration of aircraft. The FAAT is part of the mance of aerial work). State aviation is divided into military aviation and Ministry of Transport; special-purpose aviation. The same safety regulations are applicable to all • the Federal Service on the Supervision in the Sphere of Transport types of aviation in the Russian Federation. (FSSST), which is the federal body having mostly control and supervision functions in different transport sectors, including, among other 4 Is access to the market for the provision of air transport areas, civil aviation, the use of airspace and aero-navigational services services regulated and, if so, how? provided to the users of the airspace. The FSSST is also part of the system of the Ministry of Transport; and Certain types of activity in the sphere of aviation can be undertaken only • the Ministry of Defence, which regulates the use of airspace in general. on the basis of licences issued in accordance with the legislation of the Russian Federation (see question 2). The same applies to foreign entities The main aviation law is the Air Code of the Russian Federation, which is performing international air transport or aerial work within the territory of followed by extensive subordinate legislation. The legal status, authority, the Russian Federation. scope of activity and functions of the above-mentioned federal bodies with Foreign entities do not have the right: executive power are determined by respective government decrees. • to accept in the territory of the Russian Federation aircraft passengers, luggage, cargo or post for air transport to the territory of a foreign Regulation of aviation operations state, or to transport such items from the territory of a foreign state to the territory of the Russian Federation, unless otherwise provided for 2 How is air transport regulated in terms of safety? by an international treaty of the Russian Federation or single-voyage The following activities, persons and products are subject to obligatory permissions issued by the FAAT; or certification: • to accept on the territory of the Russian Federation aircraft passen- • aerodromes used for performance commercial air carriage on the air- gers, luggage, cargo and post for air transport within the territory of craft with passenger capacity more than 20 persons and aerodromes the Russian Federation without permission issued by the FAAT or the used for performance of international flights of civil aircraft; FSSST. See also questions 9, 28 and 29. • civil aircraft (except civil aircraft which airworthiness certificate is issued on the basis of a type certificate or an assessment report); In addition, the Ministry of Transport establishes the rules for the deter- • aviation engines and certain other aviation equipment; mination and application of tariffs, charging duties, selling tickets, issuing • lighting and weather equipment installed at the certified aerodromes, airway bills and other transportation documents. radio and air electric communication equipment used for maintenance of air traffic; 5 What requirements apply in the areas of financial fitness and • designers and manufacturers of aircraft and other aviation equipment; nationality of ownership regarding control of air carriers? • persons performing air-navigation maintenance on flights in Russian No specific requirements in the area of financial fitness shall be applica- air space; ble to air carriers in comparison with other spheres of commercial activ- • persons maintaining aviation security; ity. This can be verified at the stage when the necessary licences are being • persons performing or servicing commercial air carriage, or perform- issued, and generally in the course of doing business (proper payment of ing aerial works, technical maintenance of civil aircraft; taxes, performing obligations generally, not being subject to bankruptcy, • the relevant educational institutions; and etc). As to the nationality of ownership, the law provides that establishment • operators of aerodromes of the civil aviation. on the territory of the Russian Federation of an aviation enterprise (ie, a legal entity having as main purpose of its activity performance for charge Aviation personnel are subject to obligatory attestation. Obligatory certi- of air carriage of passengers, luggage, cargo, post or of aerial work) shall fication and obligatory attestation are performed by authorised agencies. be allowed on condition that the share of foreign capital shall not exceed

166 Getting the Deal Through – Air Transport 2016

49 per cent of the share capital of the aviation enterprise, its manager shall 11 Are charter services specially regulated? be a citizen of the Russian Federation, and the number of foreign citizens Prices for charter services are regulated only by the parties of the charter in the governing body of the aviation enterprise shall not exceed one-third agreement. of the composition of the governing body. 12 Are airfares regulated and, if so, how? 6 What procedures are there to obtain licences or other rights to Generally, airfares are established by the carriers themselves. In accordance operate particular routes? with the Air Code of the Russian Federation rules for the determination and The licensing requirements for the carriage of passengers and goods are application of tariffs shall be established by the Ministry of Transport. laid down by the government. To fulfil the requirements the applicant shall: • have an operator’s certificate; Aircraft • abide by the rules of transportation of passengers or goods; and • have aircraft (including reserve aircraft) sufficient to execute sched- 13 Who is entitled to be mentioned in the aircraft register? Do uled flights. requirements or limitations apply to the ownership of an aircraft listed on your country’s register? The obligation to organise the issuance of licences is vested in the The state register of civil aircraft contains data in respect of civil air- Department of Regulation of Air Transportation of the FAAT of the craft and owners thereof. Civil aircraft, except for super-light aircraft for Ministry of Transport of the Russian Federation. general-purpose aviation, are subject to registration in the state register As to international transportation, the Ministry of Transport has estab- of civil aircraft. The legislation determines that a super-light aircraft is an lished the routine admittance of air carriers that have the required opera- aircraft with a maximum take-off weight of 495kg without including the tor’s certificate and a licence for effecting air carriages. To be admitted to weight for aviation salvage means, and that general-purpose aviation is international transportation, the interested air carrier sends an applica- civil aviation not performing commercial air carriage or aerial work. The tion, together with the required documentation, to the FAAT. The appli- registered aircraft acquires Russian Federation nationality. The Law on cation shall be considered by the special commission of the FAAT. The State Registration of Aircraft came into force in September 2009. The decision of the Commission shall be minuted, and on the basis of the said Law establishes a procedure of state registration of aircraft, which is fur- minutes an executive order of the FAAT shall be issued. ther detailed in the Rules of Keeping the Register of Rights to Aircraft and Transactions Therewith, approved by the government, and in the Rules of 7 What procedures are there for hearing or deciding contested Registration of Aircraft approved by the Ministry of Transport. The reg- applications for licences or other rights to operate particular ister should contain data on the owner of the aircraft, where ownership routes? is restricted by lease, mortgage, etc, on the lessee, mortgagee, etc, and, A decision of the Department of Regulation of Air Transportation of the where a transaction with aircraft is registered, on the parties to the transac- FAAT to refuse to issue a licence can be contested to the Head of FAAT, to tion. If an aircraft is sold to a foreign party and exported out of Russia, it the Ministry of Transport or in court. should be deleted from the registry. A decision of the FAAT to refuse to admit the air carrier to undertake international transportation cannot be contested by any further applica- 14 Is there a register of aircraft mortgages or charges and, if so, tion to any other state body. However, it may be contested in the courts how does it function? in accordance with the established procedure if the applicant believes that Under the Law on State Registration of Aircraft mortgages should be reg- the refusal violates the rights and lawful interests of persons and legal enti- istered in the state registry of aircraft. The information contained in the ties in the sphere of business and other economic activity. registry is open to any interested person, and the law provides a procedure for obtaining such information. The mortgage is registered in a special sec- 8 Is there a declared policy on airline access or competition and, tion of the state registry of civil aircraft. The information contained in the if so, what is it? register includes the identification of aircraft, name of the mortgagee, the There are no specific rules on the access or competition applicable to air- term of mortgage and the amount of obligation secured by mortgage. lines and air transport. General rules on competition and antimonopoly legislation should obviously be complied with, but no special arrange- 15 What rights are there to detain aircraft, in respect of unpaid ments are applicable in the air transport legislation. airport or air navigation charges, or other unpaid debts? There are no specific rules established by the internal legislation of the 9 What requirements must a foreign air carrier satisfy in order Russian Federation concerning the possibility of the detention of aircraft to operate to or from your country? in respect of unpaid debts. In accordance with the general rules of Russian Flights of foreign aircraft to or from the Russian Federation shall be law it is possible to obtain a court order to arrest assets of a debtor to secure effected on the basis of international treaties of the Russian Federation a claim against the debtor. with the respective state or states, or on the basis of permissions issued by Also, a creditor (claimant) holding property, which should be trans- the FAAT. ferred to the debtor or a person specified by the debtor, is entitled to a lien The foreign carrier effecting such flights should, inter alia: on the said property until the debtor performs its obligations, in particular, • comply with the respective laws and rules of the Russian Federation, payment obligations. Claims of a creditor with a lien shall be subject to sat- conditions of effecting international carriages; isfaction from the value of the property in the same scope and manner as in • not have any indebtedness for the aero-navigational services rendered respect of claims secured by a mortgage. thereto in the Russian Federation; • procure availability of necessary documentation on board, as estab- 16 Do specific rules regulate the maintenance of aircraft? lished for international flights, by complying with the aviation stand- Maintenance of aircraft is regulated to the extent that organisations pro- ards recognised by the Russian Federation; and viding maintenance should be properly certified. When undertaking main- • procure insurance or other security regarding liability for causing harm tenance, organisations providing maintenance are supposed to comply to third parties and aircraft. with mandatory requirements for the ‘flying fitness’ of aircraft, which are determined by federal aviation rules. 10 Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local Airports economy? 17 Who owns the airports? No specific public service obligations are stipulated by legislation. However, the Air Code of the Russian Federation provides that issuance of a A civil airport may be a private, municipal or federal property. As a complex particular licence (a licence to perform certain types of activity in the sphere object it may have several owners. However, any airport should have an of aviation – see question 2) to a legal entity or an individual entrepreneur operator who is responsible for the operation of the airport in its entirety. might oblige such legal entity or individual entrepreneur to perform socially Objects that are part of the unified system of air traffic management can be significant air carriage or aerial work. www.gettingthedealthrough.com 167

© Law Business Research Ltd 2015 RUSSIA Sokolov, Maslov and Partners federal property only. Ownership of shares in airport operators and other higher than the amount of the fixed compensation, the injured party who strategic enterprises is subject to restrictions (see question 29). has received the compensation may claim the balance from the air carrier. The limits of compensation for luggage are set at its declared value or 18 What system is there for the licensing of airports? 600 roubles per kilogram; for other property, the limit of compensation is An airport is entitled to operate provided that the airport itself, as well as 11,000 roubles, unless it is not proved that the damage is larger. all radio, lightning and meteorological equipment used in it, has a certifi- The risk of the civil liability of the carrier with regards to death of, or cate of fitness. The permission to operate is given by the FAAT. The FAAT injury to, passengers or loss or damage to luggage or cargo must be insured. also keeps unified registers where all airports and aerodromes should be There is an obligatory pre-judicial procedure, which means that before registered: the State Register of Airports and the State Register of Civil filing the claim to the court the interested party should send a pre-judicial Aerodromes. claim to the air carrier. Such pre-judicial claim in cases of domestic carriage must be filed within six months (in cases of international carriage, 19 Is there a system of economic regulation of airports and, if so, 18 months). how does it function? 25 Are there any special rules about the liability of aircraft According to the Taxation Code, VAT is not applicable to services rendered operators for surface damage? at airports within Russia, including aero-navigational services. In addition, fees for aero-navigational services are exempt from the tax on profits. The operator is liable to compensate the damage incurred during the oper- These two exemptions create a specific tax regime for services rendered ation of the aircraft, unless it is able to prove that the damage arose due to at airports. force majeure or the intent of the injured party. The liability of the operator for damage that can be caused as a result of aerial work must also be 20 Are there laws or rules restricting or qualifying access to insured. airports? It should be noted that for the purposes of personal injury compensation, the air transportation of a passenger includes the period starting Each airport has a restricted zone where persons or vehicles without spe- from the moment of pre-flight baggage check until the moment when the cial permission are not allowed. The territory of the airport should be passenger has left the airfield accompanied by the representatives of the fenced and under control of the aviation security division of the airport. carrier. The airports must have internal regulations regarding restricted areas and conditions of access. 26 What system and procedures are in place for the investigation of air accidents? 21 How are slots allocated at congested airports? There is a mandatory system for the investigation of air accidents and inci- The slots are allocated pursuant to the list of priorities, which is set out in dents concerning all types of the aircraft. In accordance with the law, the the Air Code. They rank as follows (from highest to lowest priority): main purpose of the investigation is to clarify the reasons for the accident • strategic interests of the state; and to prevent such accidents in future. Finding a person guilty or respon- • rescue services; sible for the accident is not considered as one of the purposes of the inves- • regular carriage of passengers and luggage; tigation – this should be done by means of common judicial proceedings, • state operations (ie, military and similar); which shall be held separately from the investigation. • experimental aviation operations; The investigation is held by a special commission created for acci- • regular carriage of cargo and mail; dents by the International Aviation Committee and in case of an incident, • non-regular carriage by air, performance of aerial work; by the FAAT. The commission may include representatives of government • sports events, demonstrations and similar; and authorities, scientific, construction and other commercial organisations • private aviation. that are not directly connected with the accident. Members of the commission should not represent the interests of insurance companies. 22 Are there any laws or rules specifically relating to ground The work of the commission shall be executed in accordance with a handling? prescribed plan, which provides for the main direction of the commission’s Ground handling is governed by a number of acts containing mostly tech- activities, their sequence and the division of the areas of responsibility nical provisions, such as: monitoring the condition of the runway; handling between groups within the commission. Before the approval of the plan the airport lightning equipment; dealing with the ornithological safety in case of accidents, the commission is only allowed to undertake urgent of the airport; organisation of passengers’ boarding and calculation of measures, such as evacuation of persons, preservation of evidence that the aircraft’s centring; and use of other special equipment at the airport. might disappear, etc. Compliance with such regulations is a condition for the certification of an The investigation period is 30 days for accidents and 10 days for inci- airport. dents, which can be extended. The investigation shall end with the final report on results. The final report shall be addressed to a mandatory list of 23 Who provides air traffic control services? And how are they entities and may be open to the public. At the end of the investigation the regulated? company owning or operating the aircraft shall make an open analysis of There is a unified system of air traffic management. It unites subdivisions the accident in order to inform the interested parties of the grounds and of the Ministry of Defence and the FAAT as well as various items and underlying factors of the accident. equipment that are part of the system. The system is divided into subdivisions covering all areas of the country. There are specific technical rules as 27 Is there a mandatory accident and incident reporting system to the interaction of these subdivisions and the communication between and, if so, how does it operate? them. Apart from territorial division, the system is divided into civil and There is a mandatory reporting system, and persons intentionally conceal- military sectors. The instructions of the military sectors are obligatory for ing an accident or an incident, or information or data connected therewith, the civil sectors and all users of airspace. shall be held responsible. Upon receipt of initial information, traffic superintendents shall Liability and accidents inform the central and regional authorities in the aviation sector. The FAAT shall then forward the information to the authorities in the spheres of 24 Are there any special rules in respect of death of, or injury to, security, environment and economy and to the International Civil Aviation passengers or loss or damage to baggage or cargo in respect of Organization (ICAO). If an accident involving a Russian aircraft has taken domestic carriage? place over or on the territory of a foreign state or if foreign citizens were In the case of a death of a passenger, the air carrier shall pay a fixed com- on board the aircraft, diplomatic channels are used to convey information. pensation of 2.025 million roubles. According to the rule implemented as Three days after arrival at the place of the accident, the chairman of from 1 January 2010, the air carrier should also pay compensation of up to the commission shall forward a follow-up report. The final report on results 2 million roubles in case of personal injury, the exact amount of such com- shall be sent to the addressees within 10 days following its approval. pensation to be determined depending on the extent of damage to the passenger’s health. If the actual damage caused by death or personal injury is

168 Getting the Deal Through – Air Transport 2016

Competition law restricting competition or concerted practices, the list contains prohibition of abuse of a dominant position and prohibition of unfair competition. 28 Do sector-specific competition rules apply to aviation? If not, The standards for assessing the anti-competitive effect of a transac- do the general competition law rules apply? tion may be the following: Russian competition law does not have a very long history and it tends to • diminishing the number of players on the relevant market; follow the European model of regulation (as opposed to the US antitrust • price manipulation; model). The first law on competition was enacted in 1991. For these rea- • restricting certain market players from taking independent action; sons, among others, the overwhelming majority of the competition rules • determination of joint conditions for the circulation of goods; and applicable to aviation are of a general nature and are laid down in the set of • other circumstances allowing some of the market players to influence general legislative acts – the Federal Law on Protection of Competition, the the conditions for the circulation of goods. Federal Law on Natural Monopolies, etc. The role of sector-specific rules is not very significant. 32 What types of remedies have been imposed to remedy It should also be noted that in May 2008 the Law on Foreign concerns identified by the competition authorities? Investments in the Companies Having Strategic Importance was enacted. The Federal Antimonopoly Service and its local bodies may issue instruc- This law provides requirements that complement the requirements of the tions, which are obligatory for the companies and addressees and may Law on Protection of Competition (see question 29) and is applicable to contain a wide variety of remedies, such as: termination of agreements some of the enterprises in the aviation sector. restricting competition, execution of pro-competitive actions, termination of unfair competition, fulfilment of economic, technical and information 29 Is there a sector-specific regulator or are competition rules requirements on elimination of discriminatory conditions, payment of applied by the general competition authority? revenues received as a result of the infringement of competition law and The competition rules are applied by the general competition authority restoration of the status quo before the infringement of competition law. In – the Federal Antimonopoly Service and its local bodies. In the sphere of case of mergers, the Service may also impose obligatory conditions, such natural monopolies, the tariffs for their services are being approved by the as third-party access to production capacities, infrastructure and informa- Federal Service on Tariffs. tion, provision of intellectual property to the third parties, requirements There is a specific registry of natural monopolies in the transport sec- for transfer of assets and requirements for the composition of the group of tor (as well as in other sectors) approved by the Federal Service on Tariffs, affiliated persons. which includes the companies that operate the airports and certain other companies. Financial support and state aid In the light of the Law on Foreign Investments in the Companies Having Strategic Importance, it should be stressed that transactions and 33 Are there sector-specific rules regulating direct or indirect other actions that lead to establishment of the control of a foreign investor financial support to companies by the government or or the group of persons over the entities that have a strategic importance government-controlled agencies or companies (state aid) in and transactions that lead to acquisition of such entities’ property that is the aviation sector? If not, do general state aid rules apply? considered to be a basic production asset and the value of which is 25 per The general state aid rules contained in the Law on Protection of cent or more of the balance value of assets of such entity need to be ex ante Competition are not applicable to the aviation sector. The purposes of state approved by a special commission of the government on control of foreign aid contained in the said Law (such as environmental protection and social investments. Foreign investors are also obliged to provide information security) do not coincide with the priorities of the development of aviation. upon acquisition of at least 5 per cent of shares in strategic companies or There is also a specific Law on Public Regulation of the Development of upon performance of transactions and other actions that have been prelim- Aviation. This Law, however, contains mere references to the main priori- inary approved in accordance with the Law on Foreign Investments in the ties of the public policy in this sector. Companies Having Strategic Importance. The list of strategic companies State aid in the form of subsidies is distributed in the aviation sector by within the meaning of the said law includes not only natural monopolies in means of regulations of the government and other public authorities, such the transport sector, but also companies exercising activities in the spheres as the Ministry of Transport or the FAAT. These regulations usually take of maintenance of aviation security, engineering, production, repair and the form of ‘Rules for Granting Subsidies’. At present the most important testing of aircraft and equipment. subsidies are the following: • partial compensation to Russian leasing companies for interest on 30 How is the relevant market for the purposes of a competition loans, established by the government; assessment in the aviation sector defined by the competition • partial compensation to Russian manufacturers of aircraft engines for authorities? the interest on long-term credits for refinancing of earlier credits; The general definition of relevant market for goods and services is con- • partial compensation to the Russian manufacturers of aircraft, heli- tained in the Law on Protection of Competition and is as follows: ‘a sphere copters and aviation engines for the interest on loans for technical of circulation of such goods (service, work) that cannot be substituted with renovation, established by the government; other goods, or of goods that can be mutually substituted, inside which the • compensation to Russian aircraft manufacturing companies for pay- buyer can acquire the goods and outside which there is no possibility or ments of coupon profit arising from bond-secured loans guaranteed by practical sense to acquire such’. the Russian Federation; In 2007 the Federal Antimonopoly Service started an investigation in • compensation to Russian air carriers for non-received profit owing the sphere of air fuel. As the result of this some of the air fuel suppliers to air carriage of passengers who entered into air carriage agreement were fined for their concerted practices. At present the government has with air carriers whose air operator certificate has been suspended; increased antimonopoly and administrative control in this sector and is • partial compensation to Russian air companies for leasing payments, further examining tools to enhance competition. established by the government; and It should be noted, however, that government policy in the aviation • compensation for the costs of salvage operations for the legal entities sector is aimed at concentration of the air carriers, thereby diminishing owning salvage bases, established by the FAAT, etc. the number of players. This could not leave the airfares for carriage of passengers unaffected. The Federal Antimonopoly Service in its turn recom- 34 What are the main principles of the state aid rules applicable mended the air carriers to increase the transparency of the price formation to the aviation sector? and to stop selling tickets, which could not be refunded (at least partially) There are no general principles for state aid rules applicable to the aviation in case of the unilateral refusal on the part of the passenger. sector.

31 What are the main standards for assessing the competitive 35 Are there exemptions from the state aid rules or situations in effect of a transaction? which they do not apply? As a starting point it should be noted that the Law on Protection of As mentioned above, state aid in the form of subsidies is provided to enter- Competition contains a list of prohibited measures, which in general, is in prises acting in only the specific spheres mentioned, thereby representing line with the European tradition. Apart from the prohibition of agreements an exemption. www.gettingthedealthrough.com 169

Miscellaneous Update and trends 39 Is there any aviation-specific passenger protection Some tendencies for monopolisation of air transport services can be legislation? detected in the Russian air transport sector. OJSC ‘Aeroflot-Russian The rules of carriage of passengers and their luggage by air contain a Airlines’ (Aeroflot) (of which more than a half the shares belong detailed regulation of carrier-passenger relations. They include specific to the state) increased its market share to 45 per cent, while the passenger traffic of its competitors is falling. In accordance with the provisions related to carriage of children, disabled and sick passengers. results of January–May 2015, the Aeroflot group has approximately The rules define the range of service to be provided to passengers under 45 per cent of passenger traffic and this figure has increased over the the carriage by air contract, such as transportation from the airport termi- year by seven subpoints. Aeroflot operates flights to 120 destinations nal to the aircraft, loading or unloading of luggage, etc. They also provide in 52 countries (41 destinations in Russia) and has recently conditions on which the passenger is entitled to free additional services established its discount subsidiary Dobrolet. (hotel, storage of luggage, additional meals, etc). Besides, the rules define Another trend is the increase of liability for breach of the the scope of information that the carrier must disclose to the passenger order of use of the Russian air space. According to the information when entering into the contract. provided by the FAAT in 2015 there were five air crashes and four Under the rules, a passenger is entitled to return the money paid for air accidents with participation of unregistered aircrafts, in 2014 – six air crashes and six air accidents. These aircraft and helicopters carriage in case of ‘forced rejection of carriage’, that is, rejection caused performed flights without any notification of and permissions by by delay or cancellation of flight, change of route, failure to comply with the competent authorities, their air worthiness was not confirmed the timetable (except for safety reasons), etc. A partial compensation of the in the established order. In this regard the FAAT suggests that airfare may also be provided in case of voluntary rejection of carriage. stricter liability for breach of the rules of use of Russian air space and operation of aircraft and helicopters shall be established. As of 40 Are there mandatory insurance requirements for the now the Administrative Offences Code of the Russian Federation operators of aircraft? provides for the maximum fine for breach of the order of use of air space – 500,000 roubles. Taking into consideration the high level There are several types of mandatory insurance applicable in aviation. In of danger in case of breach of this order, the FAAT proposes to particular, the owner of the aircraft must insure its liability for personal establish the maximum amount of fine for such offence as being up injury or damage to property of third parties (see questions 24 and 25). The to 12 million roubles. air carrier must insure its liability to passengers and cargo owners. In addition, the crew members of an aircraft must have life insurance coverage. The liability of the operator for damage that can be caused as a result of 36 Must clearance from the competition authorities be obtained aerial work must also be insured. before state aid may be granted? 41 What legal requirements are there with regard to aviation None of the above-mentioned regulations provides for obligatory clear- security? ance from the competition authorities. The recipient of the subsidies should file with the administrator of funds documents confirming the ful- Aviation security is defined by the Air Code as the protection of aviation filment of the underlying obligation and the timely payment of taxes. from illegal interference. Aviation security may be procured, inter alia, by the following means: 37 If so, what are the main procedural steps to obtain clearance? • restriction of access to controlled zones of airports and aerodromes; • guarding the aircraft while at the parking area; None. • prevention of illegal carriage of dangerous items; and • pre-flight and post-flight inspections. 38 If no clearance is obtained, what procedures apply to recover unlawfully granted state aid? Aviation security services are entitled to detain persons who violate avia- Usually the regulation providing for the subsidies does not contain express tion security requirements, as well as luggage, cargo or post containing sanctions for the non-fulfilment of the subsidies’ conditions. It is implied prohibited items. that the administrator of funds shall cease to subsidise the company in Each airport must have an emergency plan identifying actions that such cases. Sometimes it is expressly stated that the administrator can stop should be taken in case of extraordinary situations. On the federal level, the subsidies or even recover the funds already granted. the FAAT is in charge of elaborating and taking measures to enhance aviation security.

Mikhail Sokolov [email protected] Anna Arkhipova [email protected] Sergey Seliverstov [email protected]

17, Ulitsa Barklaya Tel: +7 499 145 21 30 / 33 79 121309 Moscow Fax: +7 495 956 22 45 Russia www.smplawyers.ru

170 Getting the Deal Through – Air Transport 2016

42 What serious crimes exist with regard to aviation? the state authorities in aviation may be a criminal offence if it leads, by neg- The Russian Criminal Code provides a number of specific crimes in ligence, to severe injury or death of one or more person or substantial dam- the field of aviation. Capture or stealing of the aircraft may lead to up to age of property. It can be punished by up to seven years of imprisonment. 15 years of imprisonment. Violation of the rules of international flights may Finally, poor-quality repair of aircraft and airport facilities, if it leads, by result in a fine, arrest of up to six months and deprivation of the right to negligence, to severe injury or death can also be punished by up to seven hold positions connected with aviation for up to three years. Violation of years’ imprisonment. safety rules applicable and non-compliance with the safety instruction of

www.gettingthedealthrough.com 171

Singapore

Rajaram Ramiah and Amos Tan Quahe Woo & Palmer LLC

General • instruments, equipment and flight documents (ie, lights, transponders and transmitters); 1 Which bodies regulate aviation in your country, under what • maintenance; basic laws? • flight crew and their qualifications; and The main body responsible for the regulation of aviation is the Civil • security. Aviation Authority of Singapore (CAAS) which is within the purview of the Ministry of Transport. The CAAS was established in 1984 as a statutory 4 Is access to the market for the provision of air transport board. services regulated, and if so how? The primary legislation laying down the functions and powers of the Yes. Section 87 and 87A of the ANO regulates the provision of air transport CAAS is the Civil Aviation Authority of Singapore Act (Cap 41) (the CAAS services for Singapore air operators and foreign air operators respectively. Act), which sets out the constitution, functions and powers of the CAAS. Under the ANO, no person whose principal place of business is in Singapore shall operate an aircraft for the purpose of public transport oth- Regulation of aviation operations erwise than under and in accordance with the terms of an air operator cer- 2 How is air transport regulated in terms of safety? tificate (AOC) granted to the operator of the aircraft. AOCs are granted or renewed by the Chief Executive of the CAAS The principal body responsible for regulating aviation safety is the CAAS. (the Chief Executive). In determining whether to grant or renew an AOC, The principal legislation regulating aviation safety is the Air Navigation the Chief Executive will normally need to be satisfied that the applicant Act (Cap. 41) (ANA) and the subsidiary legislations therein include the Air or operator is competent having regard, in particular, to the applicant’s or Navigation Order (ANO). These legislation set out a regulatory framework operator’s previous conduct and experience, his equipment, organisation, for aviation safety, and procedures for accident and incident reporting. staffing, maintenance and other arrangements, to secure the safe operation The ANO sets out general requirements for the registration and of aircraft of the type specified in the certificate on flights of the description marking of aircraft, airworthiness, operations, air traffic control, and aer- and for the purposes so specified. Holders of AOCs need to comply with odromes. In particular, Part V of the ANO sets out safety requirements, obli- all the requirements set out in the Air Operator Certificate Requirements. gations and responsibilities in respect of public transport aircraft registered Foreign air operators who have been granted AOCs by other countries in Singapore, while Part VA of the ANO applies to non-public transport may only operate aircraft into or out of Singapore for the purpose of public aircraft. transport with an operations permit (OP). The granting or renewal of an The CAAS will also, from time to time, issue advisory circulars setting OP is also under the purview of the Chief Executive, who must be satisfied out standards, practices and procedures acceptable to the CAAS. that the foreign air operator is capable of ensuring the safe operation of In respect of the investigation of air accidents and serious incidents, the foreign air operator’s aircraft. The Chief Executive may also impose the body responsible is the Air Accident Investigation Bureau of Singapore any conditions on an OP which the OP holder must operate the aircraft in (AAIB), established pursuant to section 13B of the ANA. The AAIB is an compliance with. independent investigation authority made up of qualified Inspectors of Accidents (with the required qualifications as set out in the ANO), 5 What requirements apply in the areas of financial fitness and which conducts its investigations in accordance with the Air Navigation nationality of ownership regarding control of air carriers? (Investigation of Accidents and Incidents) Order 2003. There appear to be no clear requirements for financial fitness or nationality 3 What safety regulation is provided for air operations that do of ownership for applicants of an AOC. However, the CAAS, when assess- not constitute public or commercial transport, and how is the ing applications for AOCs, will require details of the nationality of the own- distinction made? ers along with the organisational structure of the company applying for the AOC, its financial data, and business plan. Air operations that do not constitute public transport are subject to the In the case of foreign air operators, the CAAS may request for informa- Singapore General Aviation Requirements (SGAR), which apply to general tion on the financial fitness in assessing an application for an OP. aviation operations, and contain the requirements which shall be complied Further, in respect of licences or rights to operate particular routes, the with by the owner, operator or pilot-in-command of a Singapore aircraft nationality, ownership and financial fitness of an air carrier is a factor to be used in any general aviation operations in addition to any other obligations considered by the CAAS in deciding whether or not to grant a licence for imposed by the ANO. scheduled journeys, as contained in Regulation 2G of the Air Navigation Under the ANO, ‘general aviation operations’ is defined as the opera- (Licencing of Air Services) Regulations. See question 6. tion of an aircraft for any purpose other than for public transport or aerial work. 6 What procedures are there to obtain licences or other rights to Two separate SGARs have been issued, one for aeroplanes and one for operate particular routes? helicopters. The SGARs provide for, among others, rules and regulations pertaining to: According to the Air Navigation (Licencing of Air Services) Regulations, to • reporting of accidents, incidents and occurrences; operate particular scheduled routes, airlines must either: • flight operations (ie, flight preparation, in-flight procedures and cabin • be a designated carrier under a bilateral, plurilateral or multilateral Air baggage); Services Agreement with Singapore (ASA); or • operating performance limitations; • be licensed under the Air Navigation (Licensing of Air Services) Regulations to operate to Singapore.

172 Getting the Deal Through – Air Transport 2016

Where an airline is not a designated carrier under an ASA, the grant Aircraft and maintenance of a licence under the Air Navigation (Licencing of 13 Who is entitled to be mentioned in the aircraft register? Do Air Services) Regulations for scheduled journeys will be subject to the requirements or limitations apply to the ownership of an Air Traffic Rights Committee’s consideration of a number of factors in aircraft listed on your country’s register? Regulation 2G of the Air Navigation (Licencing of Air Services) Regulations, which include, among others: Part II of the ANO sets out the registration requirements for aircraft. • the nationality, ownership and financial fitness of the applicant; Only qualified owners, or unqualified owners with the approval of the • whether there are available air traffic rights relating to the network of Chief Executive, may be mentioned in the aircraft register. Paragraph 4(3) air services to be provided by the applicant; states that the following persons and no other shall be qualified to be the • the provision of air services by other airlines along the routes in respect owner of a legal or beneficial interest in an aircraft registered in Singapore of which the application is made; or a share therein: • the demand for air services along the routes in respect of which the • the government; application is made; and • citizens of Singapore; • the applicant’s proposals for providing air services (including the • citizens of any Commonwealth country; and cities to be served and the routes on which the air services are to be • bodies incorporated in Singapore or in some part of the provided). Commonwealth and having their principal place of business in some part of the Commonwealth. 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular Where an unqualified person residing or having a place of business in routes? Singapore is entitled as owner to a legal or beneficial interest in an aircraft, or a share therein, the Chief Executive, upon being satisfied that the air- Anyone aggrieved by a decision of the Air Traffic Rights Committee in craft may otherwise be properly so registered, may register the aircraft in respect of the refusal to grant or renew a licence may appeal to the Minister Singapore. However, the unqualified person is not permitted to cause or within 14 days of the decision being made. This appeal has to be in writ- permit the aircraft, while it is registered in pursuance of this section, to be ing, stating the decision of the Committee in respect of which the appeal is used for the purpose of public transport or aerial work. sought, and specifying the grounds on which the appeal is made. In making Further, where any aircraft is chartered by demise (ie, a dry lease) to a a determination, the applicant may be required to provide any documen- qualified person, the charterer may register the aircraft in Singapore in the tation or information as the Minister thinks fit. Any decision made by the name of the charterer, and the aircraft may remain so registered during the Minister is final and no further appeals may be brought. continuation of the charter. 8 Is there a declared policy on airline access or competition, and 14 Is there a register of aircraft mortgages or charges, and if so if so what is it? how does it function? See the CAAS’s Airport Competition Code, discussed in question 28. There is no register of aircraft mortgages or charges in Singapore. 9 What requirements must a foreign air carrier satisfy in order 15 What rights are there to detain aircraft, in respect of unpaid to operate to or from your country? airport or air navigation charges, or other unpaid debts? As set out in question 4, a foreign air carrier must already be a holder of an The right to detain aircraft in respect of unpaid levies or service charges are air operator’s certificate be it its country of origin or incorporation or other- provided for in sections 89 to 94 of the CAAS Act. wise, and may only operate aircraft into or out of Singapore for the purpose Under section 89 of the CAAS Act, if any levy or service charge of providing public transport under an OP. imposed in respect of an aircraft is not paid in full by the due date for pay- Further, as set out in question 6, for an air carrier to operate sched- ment, the CAAS may make an entry in the Register of Statutory Liens. uled routes to or from Singapore, it must either be a designated carrier Upon the making of an entry, a statutory lien on the aircraft will vest under a bilateral, plurilateral or multilateral Air Services Agreement in the CAAS and this will have effect as a security interest in respect of the with Singapore or be licensed under the Air Navigation (Licensing of Air aircraft ranking in priority after any security interest (other than a float- Services) Regulations to operate to Singapore. ing charge) in respect of the aircraft created before the time of registration For non-scheduled routes to or from Singapore, a foreign air operator of the statutory lien, to the extent that the security interest covers a debt must first obtain approval from the CAAS, as set out in question 11. incurred before that time. Any aircraft that is subject to a statutory lien cannot be removed from 10 Are there specific rules in place to ensure aviation services Singapore or be dismantled, without prior approval of the CAAS, and any are offered to remote destinations when vital for the local person doing so will be guilty of an offence and shall be liable on convic- economy? tion to a fine not exceeding S$200,000 or to imprisonment for a term not Not applicable. Given its size, there are no domestic revenue flights under- exceeding 12 months or to both. taken in Singapore. Where the amount covered by a statutory lien remains unpaid at the end of nine months, the CAAS may, seize the aircraft, or keep possession 11 Are charter services specially regulated? of the aircraft until all outstanding amounts covered by the statutory lien Yes. Under the Air Navigation (Licencing of Air Services) Regulations, are paid. If so, the CAAS must take reasonable steps to give notice of the all charter flights (also known as non-scheduled air services for hire or seizure to persons having an interest in the aircraft. reward) are subject to prior approval by the CAAS. Where an aircraft is to be seized under this section, the CAAS has to Approval is required under Part III of the Air Navigation (Licensing of insure the aircraft against the loss of or damage to the aircraft during its Air Services) Regulations, which provides that no person shall provide air seizure or while it is in the custody, possession or control of the CAAS or its services on any non-scheduled journey except under and in accordance agents. However, the CAAS is entitled to recover any premium paid on the with a permit granted by the Chief Executive. insurance policy in court as a debt due by the person who is liable to pay the According to the CAAS website, charter flights should generally serve amounts covered by the statutory lien on the aircraft. routes for which existing scheduled services are unable to meet market Alternatively, where the amount covered by a statutory lien remains needs, and it is likely that this is a consideration taken into account when unpaid at the end of nine months, the CAAS may, only after taking reason- the CAAS determines whether or not to grant approval. able steps to give reasonable notice of the sale or disposal to persons having an interest in the aircraft, sell or otherwise dispose of the aircraft, whether 12 Are airfares regulated, and if so, how? or not the aircraft has been seized. Airfares are not regulated in Singapore. A debtor with a registered International Interest (as defined in the However, anti-competition laws would nevertheless apply to air trans- Cape Town Treaty) will be able to rely on remedies under the International port services and airfares. The scope of anti-competition laws in Singapore Interests in Aircraft Equipment Act Chapter 144 B, which implements the is discussed in questions 31 and 32. Cape Town Treaty (the Convention on International Interests in Mobile Equipment). www.gettingthedealthrough.com 173

Further, a common law unpaid vendor may exercise a lien which There is no similar pricing regulation at Seletar Airport as the nature of includes the right of possession until the lien is discharged. operations at Seletar Airport is fundamentally different.

16 Do specific rules regulate the maintenance of aircraft? 20 Are there laws or rules restricting or qualifying access to Under Part III of the ANO, Singapore registered aircraft must not fly unless airports? they are maintained in accordance with maintenance schedules and other Other than compliance with the general civil aviation requirements (eg, requirements as set out in the ANO. registration, licences and permits), there are no restrictions to access to Further, any maintenance of Singapore aircraft or any aircraft compo- airports. nent fitted or to be fitted into a Singapore aircraft has to be conducted by However, under section 70 of the CAAS Act, the Minister may require a person who has obtained a certificate or other form of written approval an the airport operator to give access or priority of access to specified kinds from the Chief Executive in respect of the maintenance of the aircraft or of airport service for specified kinds of defence-related purposes, or for the aircraft component, or been notified that no approval is required. conduct of specified kinds of public events of national significance. Under the ANO, the Chief Executive may also issue aircraft maintenance licences (which may limit the licence to particular types of aircraft or 21 How are slots allocated at congested airports? equipment) and approve of any training or instruction in respect of aircraft The CAAS oversees slot allocation at Changi Airport and exercises supervi- maintenance. sory oversight over the Slot Coordinator at Changi Airport. All flight operators, both scheduled and non-scheduled, and both Airports commercial and non-commercial, have to apply for and be allocated slots 17 Who owns the airports? by the Slot Coordinator. However, certain flights are exempted from this requirement (ie, emergency landings, diplomatic flights, military flights, There are two commercial airports in Singapore: Changi International humanitarian flights, and technical flights). Airport and Seletar Airport. An airline with slot matters that cannot be resolved with the Slot Changi Airport is Singapore’s air hub for international air services, Coordinator may submit its feedback or appeal in writing to the Chairman while Seletar Airport is the preferred airport for business aviation traffic of the Changi Slot Committee. in Singapore. Both airports are owned by the government of Singapore, and are managed and operated by the Changi Airport Group, which is also 22 Are there any laws or rules specifically relating to ground owned by the government of Singapore. handling? 18 What system is there for the licensing of airports? Holders of AOCs are required by the Air Operator Certificate Requirements to provide ground handling instructions, procedures and arrangements so The conditions for the licencing and management of airports are set out in that all ground handling despatch tasks are carried out in a standard man- Part IV of the CAAS Act. Under the CAAS Act, no person is allowed to oper- ner. Further, all ground handling responsibility must be maintained by the ate an airport unless the person is authorised to do so by an airport licence, AOC holder, even where all or part of the functions and tasks related to or an exemption granted by the CAAS. ground handling services have been contracted to a service provider. In deciding whether to grant a licence, the CAAS will take into consid- Aerodrome operators are required under the CAAS’s Manual of eration, among others, the ability of the person to finance the operation of Aerodrome Standards to establish procedures for ground handling activi- the airport and the experience of that person in operating the airport. ties such as aircraft handling operations. In order to ensure that all air- According to section 37, these airport licences may include such con- craft handling operations are conducted safely, aerodrome operators are ditions as appear to the CAAS to be requisite or expedient, which include required to ensure that these procedures are complied with by all organi- requirements to enter into agreements or arrangements with any other sations that perform air handling operations, including ground handling person or class or persons, to be prepared for public emergencies, or to service providers, fixed-based operators, and ground handling agents. do or not do such things as specified by the CAAS. Further, airport licence Further, pursuant to the ANO and the Manual of Aerodrome holders have to comply with codes of practice, as discussed below at ques- Standards, the CAAS has published Aerodrome Safety Publication No. tion 19. 02/2014 which sets out guidelines on the safety of ground handling opera- Airport licences cannot be transferred, and airport licence holders are tions, including the development of safety requirements, safety training, not permitted to carry on substantial trading or financial activities other performance indicators, the setting up of a ground operations safety com- than activities that are related or incidental to the operation of the airport. mittee, and enforcement of safety requirements. Part V of the CAAS Act also sets out a number of restrictions on ownership and management of an airport licence holder, for example share own- 23 Who provides air traffic control services? And how are they ership, acquisition of, or appointments of staff in an airport licence holder. regulated? 19 Is there a system of economic regulation of airports, and, if so, Air traffic control services are provided by air navigation service providers. how does it function? At present, CAAS is the sole air navigation service provider. All air traffic controllers are required to be licenced by the Chief Yes. The CAAS has implemented three forms of economic regulation. Executive, pursuant to the ANO, and must comply with the CAAS Licencing of Air Traffic Control Personnel Manual of Standards, which sets Service regulation out standards, recommended practices and guidance material relating to The Code of Practice for Changi Airport Service Standards and the Code the licensing of air traffic controllers and the approval of persons to provide of Practice for Seletar Airport Service Standards set out requirements with training for air traffic controllers. which an airport licensee operating the airport must comply with, and also The ANO also sets out prohibitions on acting as an air traffic controller set out penalties and other measures to be imposed by the CAAS on the including incapacity, fatigue or the use of psychoactive substances. licensee for any breach of the code. Liability and accidents Competition regulation The CAAS enforces the Airport Competition Code, as discussed in ques- 24 Are there any special rules in respect of death of, or injury to, tion 28. passengers or loss or damage to baggage or cargo in respect of domestic carriage? Pricing regulation Not applicable, as there is no domestic carriage of passengers or cargo by The CAAS enforces a pricing regulation framework by controlling aeronau- air in Singapore. tical charges at Changi Airport, while providing incentives for the Changi Airport licencee to be efficient, by utilising a portion of economic profit 25 Are there any special rules about the liability of aircraft from retail businesses at Changi Airport to subsidise Changi Airport’s aer- operators for surface damage? onautical costs each year. Price regulation covers among others, landing, Under section 9 of the ANA, damages are recoverable from the owner parking and aerobridge charges. of any aircraft in respect of any damage or loss caused to any person or

174 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Quahe Woo & Palmer LLC SINGAPORE property by an aircraft (including in flight, taking off or landing, or by any 30 How is the relevant market for the purposes of a competition person in any aircraft, or by any article falling from any aircraft). Where assessment in the aviation sector defined by the competition such a claim is brought, damage is recoverable as though the damage or authorities? loss had been caused by a wilful act or negligence of the owner, without Under the Competition Code, the relevant market is defined as ‘any mar- the claimant needing to prove negligence or any cause of action (unless the ket in Singapore wherein an airport licensee is engaged in the provision of damage or loss was caused by or contributed to by the negligence of the airport services and facilities’. claimant). There is no statutory definition of the relevant market in the However, where damages for loss are recoverable from the owner by Competition Act. However, the Competition Commission of Singapore’s virtue of the ANA, and legal liability is created in a third party to pay dam- Guidelines on Market Definition set out the analytical framework on how ages in respect of that damage or loss, the owner is entitled to be indemni- relevant markets are defined when investigating infringements of prohi- fied by that third party in respect of that damage or loss. bitions under the Competition Act. In general, the relevant market is the smallest product group (and geographical area) such that a hypothetical 26 What system and procedures are in place for the investigation monopolist controlling that product group could profitably sustain ‘supra- of air accidents? competitive’ prices. However, in practice this requires an assessment of the Part IIA of the ANA sets out a legislative framework for accidents and inci- evidence and the exercise of judgment. dents investigation. The ANA provides for the establishment of a department of the 31 What are the main standards for assessing the competitive Government known as the Air Investigation Bureau of Singapore (AAIB), effect of a transaction? comprising of public officials and Inspectors of Accidents, who are individ- Competition Code uals with suitable qualifications and experience to exercise investigatory In respect of airport licence holders, the Competition Code prohibits powers of the AAIB. agreements that are entered into, or concerted practices, by an airport Further, the Air Navigation (Investigation of Accidents and Incidents) licensee (whether directly or indirectly) which have as their object or effect Order sets out provisions on the investigation of accidents and incidents, the prevention, restriction or distortion of competition within any airport including the notification procedure, powers of inspectors, and publication market. In particular the Competition Code prohibits agreements that: of investigation reports. • directly or indirectly fix prices, or any other trading conditions, for the Under the Air Navigation (Investigation of Accidents and Incidents) provision of airport services and facilities or for any other goods or Order, the owner, operator or pilot-in-command of an aircraft must notify services in relation to such provision; the AAIB when an aircraft accident or serious incident occurs in Singapore, • limit or control services, markets, technical development or invest- regardless of the country that the aircraft is registered in, or a Singapore- ment in relation to airport services and facilities or for any other goods registered aircraft or an aircraft operated by a Singapore operator is or services in relation to such provision; involved in an accident or serious incident overseas. • allocate or share markets or sources of supply for airport services and facilities or for any other goods or services in relation to such provi- 27 Is there a mandatory accident and incident reporting system, sion; or and if so, how does it operate? • result in an agreement to boycott any other person in relation to the Yes, there is. Section 13(E) of the ANA sets out a mandatory accident and provision of airport services and facilities or for any other goods or incident reporting scheme. services connected with such provision. Where a ‘relevant person’ (as defined in the ANA to include the owner of the aircraft, the provider of air traffic services, and owners or operators Competition Act of aerodromes) has knowledge of an accident or serious incident occurring Generally, the Competition Act stipulates three basic prohibitions, namely: in Singapore or an accident or a serious incident outside Singapore involv- • agreements, decisions and practices that prevent, restrict or distort ing a Singapore registered aircraft or an aircraft operated by a Singapore competition; operator, that person must give notice of the accident or serious incident • abuse of dominant position; and to the AAIB. • mergers causing a substantial lessening of competition. Further, section 88 of the ANO also sets out a mandatory reporting procedure for specified persons (including holders of AOCs, owners of air- A transaction may fall within these prohibitions if it, among others: craft, and other holders of certificated under the ANO) to report incidents • causes a substantial lessening of competition; relating to defects or malfunctioning of aircraft or facility, or any incident • directly or indirectly fixes purchase or selling prices or other trading relating to a violation of any regulation or procedures. conditions; Failure to comply with either mandatory reporting system without rea- • limits or controls production, markets, technical development or sonable excuse constitutes an offence and an offender is liable on convic- investment; or tion to a fine not exceeding S$100,000 or to imprisonment for a term not • applies dissimilar conditions to equivalent transactions with other exceeding five years, or to both. trading parties thereby placing them at a competitive disadvantage.

Competition law 32 What types of remedies have been imposed to remedy 28 Do sector-specific competition rules apply to aviation? If not, concerns identified by the competition authorities? do the general competition law rules apply? Competition Code The CAAS’s Airport Competition Code (the Competition Code) sets out Under the Competition Code, the CAAS has the power to issue directions the sector-specific competition rules applicable to airport licence holders to the airport licensee to bring the contravention to an end, issue directions in Singapore, including the prohibitions against anti-competitive activities to the airport licensee to take such action to remedy, mitigate or eliminate in the airport market. any adverse effect on the airport market, or require the airport licensee to The general competition law rules apply in relation to non-airport pay such penalty as the Authority may think appropriate, subject to a maxi- licence holders (eg, air operators, ground service providers) as the mum of S$1 million. Competition Code only applies to airport licence holders. Competition Act 29 Is there a sector-specific regulator or are competition rules Under the Competition Act, the Competition Commission of Singapore applied by the general competition authority? has the power to give interim or final directions to bring infringements to an end, or impose financial penalties of up to 10 per cent of the turnover of The Civil Aviation Authority is Singapore’s sector-specific regulator. It the business of the undertaking in Singapore for each year of infringement enforces the provisions against anti-competitive activities under the up to a maximum of three years. Competition Code, applicable only to airport licence holders. The Competition Commission of Singapore is a statutory body under the Ministry of Trade and Industry, and is the general competition authority that administers and enforces the Competition Act (Cap 50B). www.gettingthedealthrough.com 175

Financial support and state aid Further, the general law relating to consumer protection and contract will apply to contracts of carriage between air service operators and 33 Are there sector-specific rules regulating direct or indirect passengers, particularly the Unfair Contract Terms Act (Cap 396) which financial support to companies by the government or imposes limits on the extent to which civil liability for breach of contract government-controlled agencies or companies (state aid) in can be avoided, and the Consumer Protection (Fair Trading) Act (Cap 52A) the aviation sector? If not, do general state aid rules apply? which prohibits unfair practices and sets out the rights of consumers to sue There are no rules specific to the aviation sector regulating any financial for unfair practice. support to companies by the government or government-controlled agencies or companies. 40 Are there mandatory insurance requirements for the However, there are several schemes through which the Singapore operators of aircraft? Government assists companies with subsidies and incentives. These Although there are legislative provisions enabling the CAAS and the include the Aviation Development Fund, which is a scheme of grants and Minister to make regulations in respect of insurance requirements, there incentives for the purpose of accelerating further development and growth are at the moment no mandatory insurance requirements for the operators of the aviation industry in Singapore, and to ensure its continued relevance of aircraft: and competitiveness globally. • Section 3A(1) of the ANA states that the CAAS may make regulations Further, the Singapore Economic Development Board implements for the safety of air navigation or for public safety, including but not an Aircraft Leasing Scheme, which applies to aircraft leasing companies limited to requiring the operator of an aircraft that is flying into or out which derive income from leasing of aircraft or other prescribed activities. of Singapore to have a policy of insurance that insures the operator in Under the Aircraft Leasing Scheme, companies may: respect of such liabilities as may be prescribed. Section 3A(2) of the • Be granted a concessionary tax rate of 5 to 10 per cent for a period of ANA also provides that the regulations may include requirements for five years; notification of insurance coverage for air services. • Apply for withholding tax exemption on interest and qualifying related • Section 10(1) of the Carriage by Air (Montreal Convention, 1999) Act payment arising from qualifying foreign loans taken to finance the pur- (Cap 32B) states that the Minister may make regulations that make chase of aircraft or aircraft engines; and such provisions as may be necessary to give effect to article 50 of the • Apply to depreciate their aircraft over a working life of five to 20 years. Montreal Convention in relation to the insurance that a carrier must maintain to cover its liability under the Montreal Convention. On a more general level, companies can also obtain relief from income tax under the Economic Expansion Incentives (Relief from Income Tax) However, details of the aircraft’s insurance and the certificate of insurance Act (Cap 86), which provides incentives for the establishment of pioneer are required by the CAAS when: industries and for economic expansion by way of providing relief from • applying for or renewing a Certificate of Airworthiness, which is income tax. required under the ANO for any aircraft to fly; and • requesting for approval of commercial flights to/from Singapore by 34 What are the main principles of the state aid rules applicable foreign operators and non-scheduled flights for Singapore operators. to the aviation sector? Not applicable. Further, when granting or renewing an AOC, the Chief Executive is likely to take into consideration the aircraft operator’s insurance. As mentioned 35 Are there exemptions from the state aid rules or situations in at question 4, the Chief Executive will take into consideration, among oth- which they do not apply? ers, the previous conduct and experience of the applicant, his equipment, Not applicable. organisation, staffing, maintenance and other arrangements, to secure the safe operation of aircraft. 36 Must clearance from the competition authorities be obtained In addition, as operators of aircraft are employers of staff, they are before state aid may be granted? required to have insurance against all liabilities which they may incur under the provisions of the Work Injury Compensation Act (Cap 354) in Not applicable. respect of any employee employed by them. 37 If so, what are the main procedural steps to obtain clearance? 41 What legal requirements are there with regard to aviation Not applicable. security? The ANA, and the regulations made thereunder, contain detailed provi- 38 If no clearance is obtained, what procedures apply to recover sions on aviation safety. unlawfully granted state aid? In particular, Division 5 of Part II covers detailed provisions on seri- Not applicable. ous risks to aviation safety, including tampering with aircraft, interference with crew and unruly passengers, dangerous activity involving aircraft, Miscellaneous failure to satisfy safety requirements, and trespassing. 39 Is there any aviation-specific passenger protection Part IIB of the ANA also provides for the appointment of the legislation? National Civil Aviation Security Authority, responsible for the development, implementation and maintenance of the National Civil Aviation The Carriage by Air Act (Cap 32A) gives effect to the provisions of the Security Programme to safeguard civil aviation operations from unlawful Warsaw Convention concerning international carriage by air and the interference. Convention as amended by the Hague Protocol and the Montreal Protocol Further, Part VB of the ANO sets out restrictions on the carriage No. 4, which, among others: of munitions of war and dangerous goods by air in accordance with the • regulates liability for international carriage of persons, luggage, or Technical Instructions for the Safe Transport of Dangerous Goods by Air goods; (Doc 9284), approved and issued in accordance with the procedure estab- • sets rules for documents of carriage; lished by the Council of the International Civil Aviation Organisation, and • mandates carriers to use passenger tickets; prohibits the transportation of dangerous goods on passenger or cargo air- • requires carriers to issue baggage checks for checked luggage; and craft unless certain requirements set out in sections 50C to 50DA of the • sets down limitation periods for bringing claims. ANO are complied with. Apart from aviation for public transport, under the SGAR for The Carriage By Air (Montreal Convention, 1999) Act (Cap 32B) provides Aeroplanes, as mentioned above in question 3, the operator of a Singapore that the rules of the Montreal Convention, setting out rules relating to the aeroplane for any purpose other than for public transport or aerial work international carriage of passengers, baggage and cargo, shall have the has to establish and maintain a training programme to acquaint employees force of law in Singapore in relation to any carriage by air to which the with preventive measures and techniques in relation to passengers, bag- Convention applies irrespective or the nationality of the aircraft perform- gage, cargo, mail, equipment, stores and supplies intended for carriage on ing that carriage.

176 Getting the Deal Through – Air Transport 2016

Update and trends

The ASEAN Open Skies Policy The need for a regional aviation safety and traffic control regulator Singapore, as a member of the Association of South East Asian Nations In the wake of the numerous air disasters in the region in 2014, (ASEAN), is a party to the discussion on open skies for ASEAN. commentators have suggested that the lack of a regional agency The ASEAN Single Aviation Market policy came into effect on 1 overseeing safety or coordinating air traffic control in ASEAN has a part January 2015, aiming to increase regional and domestic connectivity to play. by integrating production networks and enhancing regional trade by The aviation safety standards in ASEAN are often said to be lacking, allowing airlines from ASEAN member states to fly freely throughout compared to the unified regional standards in Europe and America, the region. which are enforced by the European Aviation Safety Agency and the If this policy is successfully implemented, there will be no Federal Aviation Administration respectively. These bodies ensure regulatory limits on the frequency or capacity of flights between unified standards in flight control and safety policy. international airports across the 10 ASEAN member countries. In comparison, aviation experts have raised the region’s congested Although progress is still ongoing, ASEAN is working on skies and patchwork of differing safety standards as factors contributing implementing ‘fifth freedom right’. This will allow an airline to fly to to the need for a regional aviation regulator in ASEAN, and have stated beyond a second country to a third country with the right to sell tickets that unless the industry comes together for this purpose, the ASEAN in the second country. ASEAN aims to ultimately achieve an open sky, Open Skies Policy may be too far off to achieve. which would allow an airline to operate anywhere in the region, while crew and staff would also be able to work in any country throughout ASEAN.

an aeroplane so that they contribute to the prevention of acts of sabotage In order to give effect to these conventions, the Hijacking of Aircraft or other forms of unlawful interference. and Protection of Aircraft and International Airports Act (Cap 124) was passed, making any violence against passengers or crew, or any act destroy- 42 What serious crimes exist with regard to aviation? ing, damaging or endangering safety of aircraft, an offence. Singapore is a party to several international conventions including the Singapore is also a party to the Convention on Offences and certain Convention for the Suppression of Unlawful Seizure of Aircraft, the other Acts Committed on board Aircraft, given effect to by the Tokyo Convention for the Suppression of Unlawful Acts against the Safety of Civil Convention Act (Cap 327) which applies criminal law to any acts jeopardis- Aviation and the Protocol for the Suppression of Unlawful Acts of Violence ing the safety of persons or property on board aircraft in flight elsewhere at Airports Serving International Civil Aviation. than in or over Singapore, and recognises powers of the aircraft commander to restrain persons.

Rajaram Ramiah [email protected] Amos Tan [email protected]

180 Clemenceau Avenue Tel: +65 6622 0366 #02-02 Haw Par Centre Fax: +65 6622 0377 Singapore 239922 www.quahewoo.com

www.gettingthedealthrough.com 177

Sweden

Stephan Eriksson and Erik Hägnefors Sander Advokaterna Liman & Partners AB

General For helicopter operations aerial work has been highly regulated in Sweden in a European context. This will change with the introduction of 1 Which bodies regulate aviation in your country, under what common EU regulations, with the introduction of Part-SPO (Specialised basic laws? Operations), which is a part of EU Regulation No. 965/2012 as amended by The Swedish Transport Agency has authority in areas of transport by air, EU Regulation No. 800/2013. Those are applicable not only for helicopters. sea, rail and road. The authority is a matter of The Ministry of Enterprise As for private flights, the regulations also contain Part-NCC and Part- and Innovation which is a part of the Government Offices of Sweden. NCO, which will regulate non commercial flights. The Civil Aviation and Maritime Department is the part of the Swedish A private flight, as opposed to a commercial flight, can be charac- Transport Agency that monitors and regulates civil aviation in Sweden. terised by there not being any remuneration made for the flight. ‘Cost- Within the scope of its assignment, the authority inter alia issues regula- sharing’ is usually accepted on private flights. tions pertaining to aviation, examines and issues permits relating to aviation, administers aircraft registrations and supervises aviation rules. The 4 Is access to the market for the provision of air transport authority is also assessing civil aviation focusing primarily on safety and services regulated and, if so, how? security. As an EU member state, the EC Regulation No 1008/2008 on common The Swedish Aviation Act and the Swedish Aviation Ordinance are rules for the operation of air services in the Community regulates access important legislation for granting the Swedish Transport Agency authority to the Swedish market. Accordingly, any operator who has been granted an in civil aviation. operating licence which has been issued in any EU or European Economic As Sweden is a member of the European Union (EU), the Swedish Area (EEA) member state is granted access to most routes in Sweden (as in Transport Agency only has authority to certify aircraft and aircraft materi- the rest of the EEA area). In order to gain access to the market with regards als pertaining to aircraft listed in Annex II to EC Regulation No. 216/2008 to routes between Sweden and states outside of the EEA, the operator must on common rules in the field of civil aviation. The European Aviation Safety apply for the Swedish Transport Agency’s permission. The same applies for Agency (EASA) is otherwise the regulating body, whose authority has been operators holding operating licences issued in a state outside of the EEA. established in the aforementioned EC regulation including amendments. The EASA is also conducting oversight of the Swedish Transport Agency in 5 What requirements apply in the areas of financial fitness and several aspects pertaining to civil aviation. nationality of ownership regarding control of air carriers? Regulation of aviation operations EC Regulation No. 1008/2008 on common rules for the operation of air services in the Community sets forth the Swedish requirements pertain- 2 How is air transport regulated in terms of safety? ing to the financial fitness and nationality of ownership for operating As the country is a member of the European Union (EU) air transport safety licences. The Swedish Transport Agency issues domestic provisions in in Sweden is governed by the implementation of the general provisions of accordance with and in addition to the regulation. A holder of an operating EC Regulation No. 216/2008, including amendments, on common rules in licence must establish and demonstrate financial plans over the following the field of civil aviation. The EC regulation is referred to as ‘basic regu- 24-month period proving its financial fitness. Further, it is required that a lation’. The provisions apply to several aspects of civil aviation with some holder of an operating licence is able to pay all fixed costs and foreseeable exceptions that may be regulated nationally, such as search and rescue. operational costs for the first three months, regardless whether it generates There are several implementing rules issued under the aforementioned any income or not. The majority ownership of the air carrier must be held EC regulation. by nationals of EU member states. To meet the requirements of majority EASA issues soft law in the form of certification specifications, accept- ownership, one or several EU nationals must have at least 50 per cent direct able means of compliance and Guidance Material and is advising, among or indirect ownership or effective control of the air carrier. The above may others, the Swedish Transport Agency on the application pertaining to the be subject to exemptions owing to agreements between the EU and third aforementioned EC regulation. countries, agreements that should follow the Chicago Convention. The Swedish Aviation Act and the Swedish Aviation Ordinance are the main Swedish national laws in this field. 6 What procedures are there to obtain licences or other rights to The Swedish Transport Agency furthermore issues regulations (TSFS). operate particular routes? Air carriers that hold an operating licence issued in any EU member state, 3 What safety regulation is provided for air operations that do are entitled to any route, with some exceptions, within the EEA in accord- not constitute public or commercial transport and how is the ance with the EU rules on air services within the union, subject to slot avail- distinction made? ability at the relevant Swedish airport. The traffic shall be reported to the The Swedish Transport Agency provides detailed safety regulations which Swedish Transport Agency. In order to operate routes between Sweden and apply to non-commercial and non-public transport operations. Holders of states outside of the EEA, permission by the Swedish Transport Agency is relevant documentation (eg, pilot licence, aircraft registration, certificate required, unless otherwise is provided by bilateral agreements. of airworthiness etcetera) are normally not obliged to retain additional per- Non-EU air carriers or air carriers that hold an operating licence mits to carry out such operations. Certain non-commercial aerial opera- issued by a state outside of the EU or the EEA, must apply to the Swedish tions do require specific permits, such as for flight training or surveillance Transport Agency in order to be permitted to operate a particular route to, purposes, the latter which should be referred to as aerial work. from and in Sweden.

178 Getting the Deal Through – Air Transport 2016

7 What procedures are there for hearing or deciding contested Aircraft applications for licences or other rights to operate particular 13 Who is entitled to be mentioned in the aircraft register? Do routes? requirements or limitations apply to the ownership of an Any negative decision by the Swedish Transport Agency in respect of traffic aircraft listed on your country’s register? licences may be brought before the Swedish government. An aircraft may be registered in the Swedish Civil Aircraft Register if the Decisions by the Swedish Transport Agency with regards to licences, owner of the aircraft is an EU or EEA national or entity. Further, aircraft authorisations or other decisions which are negative to an applicant, may owned by foreigners from outside the EU or the EEA and where the air- be appealed by the applicant to the Swedish administrative courts. If the craft is operated within or from Sweden may apply for registration in applied law is, or is based on EU law the administrative court may refer the Swedish Civil Aircraft Register. The register is administered by the the question to the Court of Justice of the European Union (CJEU) in Swedish Transport Agency. Luxembourg. The CJEU will try the case and refer back with its decision to the Swedish administrative court, which will then give its decision based 14 Is there a register of aircraft mortgages or charges and, if so, on the decision by the CJEU. This is a practice that is seldom used in avia- how does it function? tion matters in Sweden, it would also considerably delay the proceeding. The Swedish Transport Agency administers a register over acquisitions, 8 Is there a declared policy on airline access or competition and, leasing rights and mortgages in which the owners of aircraft may choose if so, what is it? to register relevant information about its aircraft, provided that the aircraft is registered in the Swedish Civil Aircraft Register, resulting in a perfected There is no specific declared policy on airline access or competition. The interest which is thereby better protected against other, unregistered Swedish Competition Authority monitors competition matters in Sweden corresponding interests by third parties. and regularly issues reports with general policies for the avoidance of hin- ders or limits for the establishment of new competitors in specific business 15 What rights are there to detain aircraft, in respect of unpaid sectors. There are a few such reports which concern airline access and airport or air navigation charges, or other unpaid debts? competition, such as slot constrains. The EU general competition rules also apply. The operator of an airport has a right of detention of an aircraft if the fees for the aircraft’s most recent landing are unpaid. The right of deten- 9 What requirements must a foreign air carrier satisfy in order tion allows the operator of the airport to hinder the take off of the aircraft. to operate to or from your country? Further, aircraft located in Sweden may be detained within the scope of the enforcement procedure for unpaid debts. Such detention requires a court In general air carriers from EU or EEA member states that operate between order and the applicant may be ordered to post a bond covering the losses Sweden and other EU or EEA member states, only need valid operating the detention may cause if the application is successfully disputed. licences and permits from their home countries. Aircraft may under certain circumstances be detained in accordance Third country (eg, non-EU or EEA) air carriers, that hold an operating with Swedish civil law, for instance, in the event of unpaid maintenance licence issued by a state outside of the EU or the EEA, would, in addition to services. its domestic licences and permits, usually need an operating permit from Sweden. In addition, the third country air carrier needs to meet or exceed 16 Do specific rules regulate the maintenance of aircraft? International Civil Aviation Organization requirements and apply for a third country operator authorisation by the EASA. As Sweden is a member of the European Union, all aircraft which are If an air carrier is flying cargo or mail into the EU an ACC-3 approval registered in Sweden must be maintained by an EASA-approved mainte- might be needed in accordance with EU Regulation No. 859/2011. nance organisation. The maintenance must be done in accordance with an approved maintenance programme based on the manufacturer’s specific 10 Are there specific rules in place to ensure aviation services programme for that aircraft type’s service bulletins and applicable airwor- are offered to remote destinations when vital for the local thiness directives. economy? Airworthiness certificates are issued by the Swedish Transport Agency and are regularly subject to review and upon request renewed by the The Swedish government may, in accordance with EC Regulation No. authority. Aircraft maintenance is mainly governed by EC Regulation No. 1008/2008 on common rules for the operation of air services in the 2042/2003, including amendments and regulations issued by the Swedish Community, impose public service obligations on air carriers with respect Transport Agency. to scheduled air services to regional airports. For the government to impose such obligations, it must be deemed vital for the economic devel- Airports opment for the relevant region. 17 Who owns the airports? 11 Are charter services specially regulated? The Swedish government indirectly owns 10 major Swedish airports Charter operators need a specific operating permit. The Swedish Transport through the corporate group Swedavia. There are several smaller airports Agency has also issued Regulation TSFS 2011:104 applicable to charter that are owned by the local or regional municipalities, by local private flights. enterprises or as joint ventures by both public and private interests and investors. 12 Are airfares regulated and, if so, how? EC Regulation No. 1008/2008 sets forth a pricing freedom, allowing air 18 What system is there for the licensing of airports? carriers to set the airfares for air traffic, subject to requirements laid down In order to establish and to operate a public airport, the permission of and by the relevant member state in accordance with EU legislation. The regu- a licence from the Swedish government or the Swedish Transport Agency lation further requires the airfares to specify the air fare or air rate, taxes, is required. When deciding whether or not to grant the licence of an air- airport charges and other charges (including those relating to fuel and port, an overall assessment is made which includes the public interest in security) if added to the final price. Optional price supplements must be the establishment, as well as considerations with regards to air safety, the communicated clearly and the customer must choose to accept them on environment, etc. The Swedish Transport Agency provides detailed rules an ‘opt-in’ basis. and requirements for the licensing of airports. For civil airports that have a The Swedish Transport Administration procures air transportation paved runway of 800 metres or more, exclusively cater for helicopters, are and is in the procurement stipulating how those airfares are to be regu- open to the public and have some kind of instrument landing procedure, lated. The procurement is only done for routes where towns or villages EU Regulation No. 139/2014 is applicable. cannot otherwise get satisfactory transportation. 19 Is there a system of economic regulation of airports and, if so, how does it function? By implementation of the EC Directive 2009/12 on airport charges, the two major Swedish airports, Stockholm–Arlanda and Gothenburg–Landvetter, www.gettingthedealthrough.com 179

© Law Business Research Ltd 2015 SWEDEN Advokaterna Liman & Partners AB are economically regulated by the Swedish Act on Airport Charges. There Act (Act 2010:510). Domestic tort regulations could also be applicable if the is no legislation governing the levying of fees etcetera for smaller air- matter, or part thereof, is not specifically regulated for domestic aviation. ports. However, airports owned by the Swedish government through the Swedavia group are bound to set the airport fees in accordance with the 25 Are there any special rules about the liability of aircraft principles set forth in ICAO Doc 9082 on Charges for Airports and Air operators for surface damage? Navigation Services, which includes the principles of transparency, rela- The Swedish Aviation Act and the Swedish Air Liability Act (Act 1922:382) tion between fees and costs and non-discrimination. and to a lesser extent the Swedish Aviation Ordinance regulate liability for The Swedish Transport Agency takes into account the economic con- damages to persons or property not being transported by the aircraft (third ditions of an applicant when assessing whether or not to grant a licence to party). The Swedish Air Liability act stipulates strict liability and with some establish and to operate an airport. The authority has issued a regulation exceptions the owner of the aircraft is responsible. If damages are claimed based on the European Commission’s guidelines from 2005 on financing specifically in accordance with the Swedish Air Liability Act, the statute of of airports and start-up aid to airlines departing from regional airports. All limitation is two years. Domestic tort regulations could also be applicable if airports also need to pay an annual fee to the Swedish Transport Agency. the matter, or part thereof, is not specifically regulated for aviation. The amount is based on the size of the airport and whether the airport is used for charter or scheduled flights. 26 What system and procedures are in place for the investigation All operators must pay a certain fee covering the airport costs for secu- of air accidents? rity. The fee is administered by the Swedish Transport Agency. The investigation of most air accidents and some serious incidents in Sweden are conducted by the Swedish Accident Investigation Authority. 20 Are there laws or rules restricting or qualifying access to If an investigation is conducted three questions are to be answered: what airports? happened, why did it happen and what can be done to prevent similar Access to airports in Sweden is primarily governed by the licence that occurrences in the future, or to mitigate the consequences should it hap- the Swedish Transport Agency has issued for the relevant airport. Other pen again? If rescue services have been used the assessment of those and operational limits could apply and there might have to be, depending on for possible improvements are to be made. the type of operation, an allocation of slots. EC Regulation No. 1008/2008 The investigation should not apportion blame as this could be coun- stipulates that EU air carriers generally have access to all routes within the terproductive to answering the abovementioned questions. In practice the community. See question 6. result of the investigation is often used by the police and public prosecutor. The Swedish Accident Investigation Authority does normally not investi- 21 How are slots allocated at congested airports? gate accidents of ultralight aircraft. These accidents can be investigated by Slots are allocated in accordance with EU Regulation No. 1995/93 on com- the police and could also be reviewed by private organisations. mon rules for the allocation of slots at Community airports as amended by EU Regulation No. 793/2004. Airport Coordination Sweden has been 27 Is there a mandatory accident and incident reporting system authorised by the Swedish Transport Agency to administer the slot allo- and, if so, how does it operate? cation for the airports Stockholm–Arlanda, Gothenburg–Landvetter and An incident must be reported to the Swedish Transport Agency. An inci- Stockholm–Bromma. Airport Coordination Sweden is a non-profit organi- dent may also have to be reported even if the incident did not pose any sation equally owned by the airports and the airlines. immediate danger for the operation or aviation safety. The same principles apply if other circumstances could have led to a situation posing an 22 Are there any laws or rules specifically relating to ground immediate risk, or if there would be a risk factor if no correction is made. handling? The authority that is the predecessor of the Swedish Transport Agency has EC Directive 96/97 is implemented by the Swedish Act on Ground issued Regulation LFS 2007:68 on incident reporting. Handling. The main purpose of the act is to ensure free competition with EU Regulation No. 996/2010 stipulates that all involved persons who regards to ground handling at airports by creating a free market for ground have knowledge of an accident or serious incident must without undue handling services. There are, however, many important exceptions pro- delay report the occurrence to the authority that is responsible for the ter- vided by the act. For instance, the act only applies to the major Swedish ritory where the accident or serious incident occurred. For Sweden the airports, and the Swedish Transport Agency may limit the number of sup- responsible authority is the Swedish Transport Agency. pliers at the airport upon the airport operator’s request. In accordance with the Swedish Aviation Act the pilot in command is responsible for reporting an accident or a serious incident. If the pilot in 23 Who provides air traffic control services? And how are they command cannot fulfil his or her duties the owner, or if the aircraft is not regulated? used by the owner, the user of the aircraft is responsible for reporting an Both public and private operators have access to the Swedish air traffic con- accident or serious incident or report if the aircraft is missing and cannot trol market. The Swedish Transport Agency licenses and supervises the be found. operators, and distributes the specific airspace that each operator is responsible for. Various EU regulations, the Swedish Aviation Act and the Swedish Competition law Aviation Ordinance and regulations issued by the Swedish Transport 28 Do sector-specific competition rules apply to aviation? If not, Agency regulate air traffic control services in Sweden. Furthermore, for do the general competition law rules apply? the upper airspace various EU regulations apply, with the EC Regulation There is no sector-specific competition regulation for aviation in Sweden. No. 549/2004, as amended by EC Regulation No. 1070/2009, setting the Instead general competition regulations apply. The main regulation is the framework for the Single European Sky II, a common regulated upper air- Swedish Competition Act which implements EU legislation. space in Europe to which Eurocontrol is responsible for, inter alia, drafting implementing rules, assisting member states in exercising regulatory func- 29 Is there a sector-specific regulator or are competition rules tions and identifying needs for new regulations pertaining to Air Traffic applied by the general competition authority? Management (ATM) and procedures delivered by Single European Sky ATM Research in Air Transportation. There is no sector-specific competition regulator in Sweden. The main competent authority for all competition matters is the Swedish Competition Liability and accidents Authority. The European Commission also has competence in competition matters although it usually only investigates if several member states are 24 Are there any special rules in respect of death of, or injury to, involved. passengers or loss or damage to baggage or cargo in respect of domestic carriage? 30 How is the relevant market for the purposes of a competition EC Regulation No. 2027/97, as amended by EC Regulation No. 889/2002, assessment in the aviation sector defined by the competition is also applicable for domestic carriage in Sweden. The regulations imple- authorities? ment the Montreal Convention. If the EU regulations do not apply, the con- The general principles that are defining the relevant market are also vention in most parts is also incorporated into the Swedish Air Transport applicable for the aviation sector. The point of origin and the point of

180 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Advokaterna Liman & Partners AB SWEDEN destination, in practice a specific route, could specify a relevant market. 36 Must clearance from the competition authorities be obtained An airport in the vicinity could also be part of the same area, if that air- before state aid may be granted? port is a viable alternative option to be used for passengers or goods. This Clearance must be obtained from the European Commission before any would not be applicable for the purpose of ground handling where one air- state aid is granted if block exemptions, the De Minimis Rule or SGEI are port constitutes the relevant market. Other means of transport could also not applicable. be included in the relevant market, which in such case would most often be railway travel. There could also be a distinction between time-sensitive 37 If so, what are the main procedural steps to obtain clearance? and not time-sensitive passengers or goods. The procedure for applying to the European Commission, for the approval of aid, is regulated in EC Regulation No. 659/199, implemented by EC 31 What are the main standards for assessing the competitive Regulation No. 794/2004, as amended by EU Regulation No. 734/2013. effect of a transaction? Normally the European Commission carries out a preliminary exami- The main concern is to determine that a transaction would not substan- nation and if there are findings of concern that would normally warrant a tially lessen the competition within the relevant market. full investigation. During the preliminary examination only the European For the competition assessment non-stop/non-stop, non-stop/indirect Commission and the involved member state are involved, not the enter- and indirect or indirect routes, that overlap, should be taken into consider- prise receiving the aid or its competitors. ation when assessing the competition. Hub-to-hub routes get a higher level of scrutiny. Several factors are considered, inter alia, restriction of market 38 If no clearance is obtained, what procedures apply to recover power, market entry conditions and regulations. The dominance of two unlawfully granted state aid? or more operators and the possible positive effect of increased efficiency If the European Commission reaches a formal decision that an aid is following a merger are also considered. unlawful the decision often requires the member state to recover such aid including interest. If the member state neglects to follow the decision pro- 32 What types of remedies have been imposed to remedy ceedings against the member state might be initiated before the CJEU. concerns identified by the competition authorities? There are several options for the competition authorities to remedy con- Miscellaneous cerns, inter alia, surrender of slots to a new competitor, pricing constraints, access to frequent flyer programme, agreement to enter into interline, 39 Is there any aviation-specific passenger protection special prorate agreements with new competitors, agreements to enter legislation? into intermodal agreements, frequency freeze, pricing constraints and The principal aviation-specific passenger protection legislations are pro- sale of certain assets. vided by the EU. TEC Regulation No. 1107/2006 protects disabled passengers and Financial support and state aid passengers with reduced mobility when travelling by air. The refusal of carriage on those grounds might not be allowed. The regulation requires 33 Are there sector-specific rules regulating direct or indirect air carriers to inform, assist and provide training to its personnel and to financial support to companies by the government or grant compensation in case of non-compliance. government-controlled agencies or companies (state aid) in EC Regulation No. 261/2004 entitles air carrier passengers subjected the aviation sector? If not, do general state aid rules apply? to denied boarding, cancellation or long delay of flights to compensation. Effective as of March 2014 the European Commission has changed its This could be in the form of reimbursement of the cost of the ticket, meals, guidelines on state aid to airports. State aid for investments and operation hotel accommodation, transport and monetary compensation in the range of an airport is allowed if it is necessary to ensure transportation to and of €250 to €600. from a region. The possibilities for state aid are better for smaller airports The EEC Directive 90/314 is implemented in Sweden by the Package and airports in rural or non-densely populated areas. Travel Act and the Travel Guarantee Act. Those provide certain rights to The aid to air carriers for new routes is allowed provided that the aid is passengers that have bought a package holiday, in relation to travel pack- limited in time. In Sweden there are procured routes as well as state aid and age organisers and retailers. The regulations provide for certain informa- municipal allowances to some non-state owned airports. tion to be provided to the traveller, formal requirements for package travel Air carriers starting a new route are permitted to have state aid only if contracts, compulsory rules applicable to contractual obligations and pro- they can show prospects of being profitable within three years or make an tection of travellers in case of a package tour organiser’s insolvency. irrevocable commitment to operate the route for a period not less than the EC Regulation No. 80/2009 sets out a code of conduct for computer- period that state aid is given for. ised reservation systems. EC Regulation No. 2111/2005 requires passengers to be informed of 34 What are the main principles of the state aid rules applicable the identity of the operating air carrier. to the aviation sector? EC Regulation No. 1008/2008 regulates airfares. See question 12. The main principles of state aid in EU are also applicable for the aviation sector. Those principles are the ‘market economy investor principle’, ‘one 40 Are there mandatory insurance requirements for the time, last time principle’, ‘principle of neutrality of property ownership’ operators of aircraft? and ‘market economy investor principle’. EC Regulation No. 785/2004, as amended by EC Regulation No. 1137/2008 and EU Regulation No. 285/2010, sets forth minimum insurance require- 35 Are there exemptions from the state aid rules or situations in ments by air carriers and aircraft operators. Minimum liability insurance which they do not apply? coverage is set at 1,131 SDR per passenger in respect of lost or damaged The general exemptions from the Treaty on the Functioning of the baggage, 19 SDR per kilogram in respect of cargo and 250,000 SDR per European Union (article 107(1), stating the prohibitions, are article 107(2) passenger in respect of death or injury to passengers. The minimum insur- stating activities that are compatible with the internal market and article ance requirements in respect of third-party liability is calculated, inter alia, 107(3) stating activities that may be compatible with the internal mar- according to a specific aircraft’s maximum take-off mass, ranging from 75 ket. There are also ‘block exemptions’ from that prohibition. There are to 700 million SDR. furthermore exemptions as to the 2014 guidelines from the European The requirements are a prerequisite for the grant of an operating Commission, as well as EU Regulation No. 1407/2013 on De Minimis Aid licence in accordance with EC Regulation No. 1008/2008. Non EU or EEA and Commission Decision 2012/21 on application of article 106(2) regulat- air carriers or aircraft operators may also need to comply with some or all of ing ‘undertakings entrusted with the operation of services of general eco- those minimum insurance requirements, when flying in any member state, nomic interest or having the character of a revenue-producing monopoly’. to which extent may depend if any take-off or landing is conducted in any Services of General Economic Interest (SGEI) could be applicable for air- member state. ports with 200,000 or fewer passengers per year.

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41 What legal requirements are there with regard to aviation Update and trends security? Together with most of the world drones are also becoming The Swedish government has assigned the Swedish Transport Agency increasingly more popular in Sweden. Unfortunately there has been to develop and have responsibility for the Swedish national security pro- a steady increase in the number of incidents where a drone, without gramme. The programme includes an informational part and a part permission, has flown into controlled airspace. Fifteen incidents containing requirements set forth in the regulations SEC issued by the have been reported in the first half of 2015 compared with eight authority. There are common EU regulations concerning security with in the whole of 2014. During at least four times airports have had EC Regulation No. 300/2008 as basic regulation and EU Regulation No. to temporarily close for air traffic, at least once affecting Sweden’s 185/2010 as the most important implementing rule. EU Regulation No. largest airport Stockholm-Arlanda. 245/2013 amends EC Regulation No. 272/2009 on the screening of liquids, It would be interesting to find out how many of those aerosols and gels at EU airports. infringements that have occurred owing to negligence upon the drone pilot or been committed wilfully. The state owned airport operator Swedavia has announced that they may start to claim 42 What serious crimes exist with regard to aviation? compensation for losses owing to such infringements by drone The Swedish Criminal Code stipulates penal responsibly for, inter alia, pilots. The infringements are regularly reported to the police. hijacking, sabotage against or destruction of an aircraft or airport. The It will be interesting to see how the regulation of drones will Swedish Aviation Act and the Swedish Aviation Ordinance stipulate evolve during the coming years. penal responsibly for less serious aviation related offences, inter alia, fly- Furthermore, the tragic accident with Germanwings flight ing under the influence of illegal substances or alcohol, violation of traffic 9525 from Barcelona to Düsseldorf where it is believed that the first officer may have wilfully flown an aircraft into a mountain rules, flying without a valid licence, flying without valid authorisations and will naturally have future regulatory consequences, apart from the for passengers not complying with the order by the pilot in command in a recommendations that have already been issued by the European law and order matter on board. Aviation Safety Agency.

Advokaterna Liman & Partners AB

Stephan Eriksson [email protected] Erik Hägnefors Sander [email protected]

Narvavägen 12 Tel: +46 8 6716000 /+46 7 05142890 PO Box 24224 Fax: +46 86716060 104 51 Stockholm www.limanpartners.se Sweden

182 Getting the Deal Through – Air Transport 2016

Switzerland

Andreas Fankhauser Baumgartner Mächler

General aircraft components must have an approval certificate, and persons that perform maintenance work must be properly licensed. 1 Which bodies regulate aviation in your country, under what Air traffic control services are provided by Skyguide Swiss basic laws? Air Navigation Services Ltd, which is commissioned by the Swiss The Federal Constitution of the Swiss Confederation provides that leg- Confederation to manage and monitor both civil and military air traffic. islation pertaining to aviation is a federal matter. The main body that FOCA regulates the safety management of Skyguide. Air traffic controllers regulates aviation is the Federal Office of Civil Aviation (FOCA), which is must also be properly licensed. part of the Federal Department of Environment, Transport, Energy and Communications (DETEC). FOCA is responsible for supervising civil avia- 3 What safety regulation is provided for air operations that do tion activities and aviation development. not constitute public or commercial transport and how is the Aviation in Switzerland is governed by international, European and distinction made? national (federal and cantonal) laws, all of which are, in principle, directly Air operations that do not constitute commercial transport do not require applicable in Switzerland. On the international level, the most pertinent an operating licence, subject to certain exceptions. Such private flights, are the 1944 Chicago Convention on International Civil Aviation (Chicago however, need to comply with general safety requirements, including air- Convention) and its Annexes, a large number of bilateral air services worthiness of the aircraft, pilot licensing and operational standards and agreements, and the 1999 Montreal Convention for the Unification of procedures. Certain Rules for International Carriage by Air (Montreal Convention). All flights of air transport undertakings holding an operating licence Switzerland is not a member of the European Union, but has adopted most are presumed to be commercial. Pursuant to EC Regulation No. 216/2008, of the EU’s aviation laws through the Agreement between the European the term ‘commercial operation’ shall mean any operation of an aircraft, in Community (EC) and the Swiss Confederation on Air Transport of 1999 return for remuneration or other valuable consideration, which is available (EU–Switzerland Agreement). The main piece of national aviation legisla- to the public or, when not made available to the public, which is performed tion is the Swiss Federal Aviation Law of 1948, as amended. under a contract between an operator and a customer, where the latter has Switzerland is a member of many aviation-related organisations, such no control over the operator. To the extent that the Swiss Air Navigation as the International Civil Aviation Organization (ICAO), Eurocontrol, the Regulation applies, a flight will be considered private: European Civil Aviation Conference (ECAC) and the European Aviation • if no valuable consideration is given for more than the costs of the Safety Agency (EASA). lease for the aircraft, including fuel and airport and air traffic control charges; and Regulation of aviation operations • if the flight is not accessible to an unspecified number of persons. 2 How is air transport regulated in terms of safety? 4 Is access to the market for the provision of air transport As a supervisory body, FOCA creates and implements the framework for services regulated and, if so, how? safe air operations on the basis of applicable international, European and national laws. FOCA grants operating licences under EC Regulation No. 1008/2008 on Regarding commercial air transport, FOCA only grants an air opera- rules for the operation of air services and national law, if certain require- tor’s certificate (AOC) if the company has and continues to have the pro- ments are satisfied. These include the applicant’s: fessional ability and organisation to secure safe operation of the aircraft. • principal place of business; Particularly noteworthy in this respect is EC Regulation No. 859/2008, • ownership and control; amending Regulation No. 3922/1991, which Switzerland agreed to adopt • financial fitness; under the EU–Switzerland Agreement. The amendment contains an • adequate insurance; Annex, commonly referred to as EU-OPS1, which deals with the operation • holding of a valid AOC; of aircraft for the purpose of commercial air transport. This set of rules pro- • aircraft, including compliance with standards concerning noise and vides for standards and procedures, with which AOC holders must comply. pollution; and As set out in a variety of international, European and national regula- • ability to operate aircraft in an environmentally responsible manner. tions and directives, flight crews must hold the necessary and valid pilot’s licences and ratings required for the aircraft and type of flight in question. Pursuant to EC Regulation No. 1008/2008, a Community air carrier hold- Switzerland implemented Commission Regulation (EU) No. 1178/2011 laying a valid operating licence is permitted to exercise traffic rights within ing down technical requirements and administrative procedures related to the EU and Switzerland. Switzerland may, however, impose conditions civil aviation air crew. on, limit or refuse the exercise of traffic rights when serious congestion or Switzerland has also adopted EC Regulation No. 1702/2003, contain- environmental problems exist, particularly when other modes of transport ing rules for initial airworthiness, and EC Regulation No. 2042/2003 on provide satisfactory levels of service. continuing airworthiness of aircraft. Under these and national rules, air- For scheduled air services with respect to routes outside the EU and craft may not be operated unless they are maintained in an airworthy con- Switzerland, FOCA grants operating permits and route licences accord- dition. Before aircraft are entered into the Swiss aircraft register, they must ing to the conditions agreed upon in the relevant bilateral air services undergo technical inspections that confirm that all technical requirements agreement. are met. Aircraft are continually monitored and periodically checked when In addition, flight operations to and from Zurich and Geneva Airports they are operated. In addition, maintenance companies for aircraft and require the allocation of slots by Slot Coordination Switzerland, a non- profit organisation, in accordance with the procedures established in www.gettingthedealthrough.com 183

© Law Business Research Ltd 2015 SWITZERLAND Baumgartner Mächler the Worldwide Slot Guidelines (WSG) of the International Air Transport 10 Are there specific rules in place to ensure aviation services Association (IATA) and the provisions of EC Regulation No. 95/93. are offered to remote destinations when vital for the local economy? 5 What requirements apply in the areas of financial fitness and Switzerland may impose public service obligations with respect to sched- nationality of ownership regarding control of air carriers? uled air services on routes that are vital for the economic development of Under EC Regulation No. 1008/2008 and national law, the applicant must the region they serve. EC Regulation 1008/2008 contains specific rules. prove to FOCA that at any time in the 24-month period beginning with the start of operations, it can meet its actual and potential obligations as estab- 11 Are charter services specially regulated? lished under realistic assumptions. Additionally, the applicant must show There is no special regulation of charter services as regards operations its ability to meet its fixed and operational costs for the first three months within the EU and Switzerland. without taking into account any income from its operations. Thereafter, An air carrier incorporated outside the EU that plans to operate non- the carrier must be able to demonstrate to FOCA that it can meet its actual scheduled services to and from Switzerland is required to apply for an oper- and potential obligations over a 12-month period. ating permit (a route licence is not necessary). FOCA issues such permits For routes within the EU, in accordance with EC Regulation No. for third and fourth freedom flights. 1008/2008, the holder of an operating licence must at all times be able to If the carrier wishes to operate fifth freedom traffic rights, it is also demonstrate to FOCA that it is owned directly or through majority owner- required to apply for approval. FOCA approval is subject to the applicant ship by either EU member states or Switzerland or nationals of either EU providing a declaration of reciprocity issued by the national Civil Aviation member states or Switzerland. It must also be effectively controlled by Authority of its home country. such states or nationals. With respect to scheduled air services outside the EU and Switzerland, 12 Are airfares regulated and, if so, how? the conditions agreed upon in the relevant bilateral air services agree- Under EC Regulation No. 1008/2008, carriers are free to set airfares. ment apply. Traditionally, most air service agreements require that the Regulatory approval is not required but a notification might be. designated air carriers must be substantially owned and effectively con- Non-EU scheduled air services are subject to the conditions agreed trolled by the respective states or their citizens. These ownership and upon in the relevant bilateral air services agreements. According to the control rules, however, have been an issue in the context of multinational Swiss Federal Aviation Law, FOCA must be notified of airfares. mergers and takeovers of airlines, for instance in Lufthansa’s takeover of There is no notification requirement for the fares of charter services. Swiss International Airlines. Thus, many air services agreements involv- The final price to be paid by the customer for air services should always ing Switzerland now contain a clause that merely requires a designated air be indicated inclusive of all taxes, charges and fees. carrier to be incorporated and to have its principle place of business in the country of designation. Aircraft 6 What procedures are there to obtain licences or other rights to 13 Who is entitled to be mentioned in the aircraft register? Do operate particular routes? requirements or limitations apply to the ownership of an An air carrier holding an operating licence issued by an EU member state aircraft listed on your country’s register? no longer requires separate permission for flights between the EU and Both the owner and operator are mentioned in the aircraft register, but the Switzerland (EC Regulation No. 1008/2008). Cabotage flights within entry does not constitute ownership in the legal sense. Registration of own- Switzerland currently fall outside the EU–Switzerland Agreement and ership with an affect on third parties must be done in the aircraft ownership require prior permission. Negotiations for the inclusion of cabotage in the and mortgage register (see question 14). Lessees and mortgagors are also EU–Switzerland Agreement began in November 2011. recorded in such register. An air carrier of an EU member state that plans to operate flights An aircraft can only be registered, if it is owned by Swiss nationals, com- between Switzerland and a country outside the EU is required to apply for panies with their seat in Switzerland, Swiss public corporations and agen- the exercise of the respective traffic rights (the fifth freedom of the air, con- cies, or Swiss private associations (if two-thirds of their members are Swiss cerning traffic to and from non-EU countries). nationals). Foreign individuals are entitled to own a Swiss aircraft, if they FOCA approval is subject to the applicant providing a declaration of have a permanent residence permit for one or more years. Foreigners who reciprocity issued by the national Civil Aviation Authority of the appli- do not live in Switzerland and foreign companies may receive equal treat- cant’s home country. ment through bilateral treaties. Based on the EU–Switzerland Agreement, An air carrier incorporated outside the EU that plans to operate sched- this is the case for citizens and companies of EU member states. uled services to and from Switzerland is required to apply for an operating permit and a route licence. FOCA will grant the operating permit provided 14 Is there a register of aircraft mortgages or charges and, if so, that the air carrier is duly authorised by the authorities of its home country how does it function? to operate international services. The route licence is granted according to Apart from the aircraft register, Switzerland also maintains an aircraft the conditions agreed upon in the relevant bilateral air services agreement. ownership and mortgage register (in compliance with the 1948 Geneva Convention on the International Recognition of Rights in Aircraft). In this 7 What procedures are there for hearing or deciding contested register, mainly ownership and mortgages are recorded, but restraints on applications for licences or other rights to operate particular disposal or leasing and charter agreements (with duration of at least six routes? months) may also be registered. Lessors and charterers may register their If FOCA rejects an application, the applicant may appeal to the Federal agreements in the aircraft ownership and mortgage register, but they are Administrative Court. Competitors may also be heard under certain not obliged to do so. The entry would, however, affect third parties and an circumstances. acquirer of an aircraft would also step into those existing leasing agreements recorded in such register. 8 Is there a declared policy on airline access or competition and, The status of a mortgage relates to the day of registration and the if so, what is it? entries in the register are deemed to be publicly known. There are also The Swiss Federal Council published an aviation policy report in 2004, in statutory liens on the aircraft for salvage compensations and extraordinary which the Federal Council stressed the importance of direct air transport expenses indispensable for the prevention of aircraft. They must be reg- connections to European and global centres and the need to strengthen the istered within three months after the lien has come into existence, other- competitiveness of Swiss air transport companies. wise, the liens will extinguish.

9 What requirements must a foreign air carrier satisfy in order 15 What rights are there to detain aircraft, in respect of unpaid to operate to or from your country? airport or air navigation charges, or other unpaid debts? See questions 4 and 6. Normally there are no rights to detain aircraft in respect of unpaid airport charges, air navigation charges or other unpaid debts. Switzerland is a signatory to the 1933 Rome Convention on Precautionary Arrest of Aircraft,

184 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Baumgartner Mächler SWITZERLAND which, in most cases, prevents precautionary attachment or detention of a coordinator is appointed, who must act in an independent, neutral and aircraft. Exceptions apply with regard to operating private (non-commercial) non-discriminatory manner. In Switzerland, the coordinator is a non-profit and certain non-scheduled flights. organisation by the name of Slot Coordination Switzerland (SCS). SCS is financed through Swiss airports (49 per cent), airlines holding a Swiss AOC 16 Do specific rules regulate the maintenance of aircraft? (49 per cent) and FOCA (2 per cent). Regulations regarding maintenance, repair and overhaul are contained in The core of the slot allocation process is the use of historical prec- Annex 8 to the Chicago Convention, in publications of EASA, as well as edence. Incumbent airlines have ‘grandfather rights’ giving them prefer- in national regulations. The most relevant legislation in that regard is the ential rights to slots, provided that at least 80 per cent of the slots were above-mentioned EC Regulation No. 2042/2003 that lays down techni- operated by the airline (‘use it or lose it’ rule). Some preference is also cal requirements and administrative procedures for ensuring continuous given to new entrant airlines that may obtain slots from a slot pool, con- airworthiness of aircraft including any component for installation thereon sisting of unused and newly created slots. Airlines may transfer slots from which are registered in a member state of EASA, including Switzerland. one route to another route (operated by the same airline). Airlines are also Maintenance organisations need approval from FOCA. Certifying staff permitted to exchange slots on a one-to-one basis. Moreover, slots may be must also be qualified. Organisations involved in the training of personnel, transferred between parent and subsidiary companies and between sub- such as certifying staff, must also be approved by FOCA. sidiaries, and in the case of a takeover when the slots are directly related to the airline taken over. Airports 22 Are there any laws or rules specifically relating to ground 17 Who owns the airports? handling? Most larger airports in Switzerland are either directly or indirectly state- Ground handling services are regulated on the basis of EC Directive 96/67, owned. For instance, Geneva Airport is organised as a public agency which essentially provides that at larger airports access to the market by owned by the canton of Geneva. suppliers of ground handling services must be free, and that for certain Basel-Mulhouse-Freiburg Airport is located completely on French categories of services the number of suppliers should be at least two. At soil, but jointly operated by Switzerland and France. It is organised as a least one of these suppliers should be independent from the airport or the state-owned public enterprise. dominant airline at that airport. Similar rules apply to self-handling, which Zurich Airport is partly privatised. Flughafen Zurich AG is both owner means that airlines provide the services in question for themselves: there of the airport infrastructure and operator of Zurich Airport and is thus should be at least two airlines admitted for these services. responsible for managing Zurich Airport. Shares of Zurich Airport are listed on the Swiss Stock Exchange (SIX); the major shareholders are the 23 Who provides air traffic control services? And how are they canton and (to a lesser extent) the city of Zurich. regulated? As mentioned above, air traffic control services are provided by Skyguide 18 What system is there for the licensing of airports? Swiss Air Navigation Ltd. Skyguide is a non-profit public limited company Public airports need a licence, which may be granted by DETEC. The that is over 99 per cent owned by the Swiss Federation. Ownership is exer- licence grants the right to operate the airport commercially in accordance cised through DETEC, which must approve strategic goals, board appoint- with the Sector Plan Infrastructure of Aviation (SIL process), and to impose ments and fees, which are paid by the users of Skyguide’s services. airport charges. The licensee must provide the necessary infrastructure FOCA regulates the safety management of Skyguide and DETEC is and must ensure that the airport is operated in a safe and secure manner. In empowered to regulate fees. addition, the licensee has the duty to open the airport to all aircraft, regardless of whether aircraft are operating nationally or internationally, subject Liability and accidents to certain exceptions. Non-public airports must be approved by FOCA, which defines the 24 Are there any special rules in respect of death of, or injury to, rights and duties that are attached to the operation of these airports. passengers or loss or damage to baggage or cargo in respect of domestic carriage? 19 Is there a system of economic regulation of airports and, if so, In the case of EU and Swiss air carriers, domestic carriage is governed by EC how does it function? Regulation No. 2027/97 as amended by Regulation No. 889/2002. These Swiss airport authorities levy charges for the use of the airport, for instance Regulations implement provisions of the Montreal Convention (which landing charges, noise charges (according to noise classes), pollution applies to international carriage) on air carrier liability with respect to car- charges (according to pollution emission classes), parking charges, pas- riage of passengers and their baggage. According to these rules, liability of senger charges, cargo charges and security charges. Charges must not be the carrier for bodily injury or death of a passenger is premised upon there discriminatory and, in principle, users shall bear their share of the cost of being an accident on board the aircraft or in the course of embarking or having access to the airport, as provided for in article 15 of the Chicago disembarking. The carrier is strictly liable for the first 131,100 special draw- Convention and in ICAO’s policies on airport charges, as well as under ing rights (SDR). Above that amount, the carrier can defend itself against a national laws. claim by proving that it was not negligent or otherwise at fault. For loss or damage to baggage, the carrier is liable for up to 1,131 SDR. 20 Are there laws or rules restricting or qualifying access to For cases that fall outside the scope of EC Regulation Nos. 2027/97 and airports? 889/2002, the Swiss Ordinance on carriage by air applies the provisions of the Montreal Convention to domestic carriage. Specific operating regulations apply for all Swiss airports. In the case of loss or damage to cargo, the carrier’s liability is, in prin- As regards air traffic services to and from the EU, access to Swiss air- ciple, limited to a sum of 19 SDR per kilogram. ports may be restricted in accordance with EC Regulation No. 1008/2008, which states, as mentioned above, that the exercise of traffic rights may be 25 Are there any special rules about the liability of aircraft conditioned, limited or refused, when serious congestion or environmen- operators for surface damage? tal problems exist, in particular when other modes of transport provide satisfactory levels of service. Pursuant to the Swiss Aviation Act, the aircraft operator is strictly liable The operation of Zurich Airport is also affected by controversial uni- without limitation for all surface damage caused by the aircraft. If the air- lateral German ordinances, which prohibit overflight of southern German craft was used by a third party without the permission of the operator, such airspace during certain operating hours. third party will be liable. Nevertheless, the operator (or rather its insurer) will still have to provide the minimum insurance coverage, which depends 21 How are slots allocated at congested airports? on the maximum take-off weight of the aircraft and is laid down in EC Regulation No. 785/2004. Slots are allocated in accordance with the procedures established in IATA-WSG and EC Regulation No. 95/93. Airports may be designated as ‘schedules facilitated’ or ‘coordinated’, depending on the level of congestion. At coordinated airports, such as Zurich and Geneva (but not Basel), www.gettingthedealthrough.com 185

26 What system and procedures are in place for the investigation prevent other enterprises from entering or competing in the market, or of air accidents? when they injure trading partners. The Chicago Convention requires that the signatory states, including In the case of a merger, the mere possibility of the merger creating or Switzerland, undertake to conduct investigations into those air accidents strengthening a dominant position is not sufficient for an intervention. The that take place within their own territory. ICAO issued Appendix 13 to the merger must also eliminate effective competition. Chicago Convention containing guidelines as to how investigations of accidents and serious incidents should be conducted. The sole purpose of 32 What types of remedies have been imposed to remedy these investigations is the prevention of aircraft accidents and therefore concerns identified by the competition authorities? the improvement of aviation safety. ICAO also recommends that air acci- The remedies applied will vary depending on the competition analysis in dents be investigated by independent bodies. an individual matter. In Switzerland, the Accident Investigation Board (AIB), which is part In January 2014, the Swiss Competition Commission prohibited a of DETEC, is the competent authority to conduct these investigations. If price cartel in the context of air freight. Between 2000 and 2005 several an accident or serious incident involving one or more aircraft takes place, airlines agreed on certain elements of the price for air freight transport. it must be reported to the AIB. The AIB appoints an investigator who, The Competition Commission fined the airlines 11 million Swiss francs together with police and experts, investigates the wreck and the accident in total. Lufthansa, as part of the cartel, triggered the legal proceedings site; then the AIB publishes a report of initial findings. The manufacturer of by self-denunciation and benefitted from complete immunity from the the aircraft, the engines and other equipment, as well as representatives of sanction. the airline, can take part in the investigation. The investigation concludes with a report determining the causes of the accident. The draft report will Financial support and state aid be submitted to the parties concerned and FOCA. The AIB may accept 33 Are there sector-specific rules regulating direct or indirect comments and objections, and then publishes the final report. financial support to companies by the government or The report may include safety recommendations that are directed to government-controlled agencies or companies (state aid) in FOCA. Such recommendations do not (or should not) represent an indica- the aviation sector? If not, do general state aid rules apply? tion of blame or an opinion on the question of responsibility. The EU–Switzerland Agreement contains specific rules on financial sup- 27 Is there a mandatory accident and incident reporting system port and state aid in the aviation sector. and, if so, how does it operate? 34 What are the main principles of the state aid rules applicable Switzerland implemented the mandatory occurrence reporting system as to the aviation sector? laid down in EC Directive 2003/42. The objective of the reporting system is the prevention of accidents and incidents and not to attribute blame or lia- In the aviation sector, any aid granted by Switzerland or by an EU member bility. Operators and commanders of turbine-powered or public transport state or through state resources that distorts or threatens to distort compe- aircraft, air traffic controllers and others are required to report to FOCA all tition by favouring certain undertakings or the production of certain goods occurrences which endanger an aircraft, its occupants or any other person. is, insofar as it affects trade between the EU and Switzerland, unlawful.

Competition law 35 Are there exemptions from the state aid rules or situations in which they do not apply? 28 Do sector-specific competition rules apply to aviation? If not, The prohibition of state aid does not apply to aid that: do the general competition law rules apply? • has a social character and is granted to individual consumers, pro- Under the EU–Switzerland Agreement, Switzerland adopted the EC vided that such aid is granted without discrimination; or competition rules to the extent that they concern air transport or directly • makes good the damage caused by natural disasters or exceptional related matters. Those rules are enforced by the EC institutions if the EU occurrences. market is affected. Agreements, decisions, concerted practices, or abuses of a dominant Further, the following may be considered lawful: position, which only affect trade within Switzerland, remain, however, sub- • aid to promote the economic development of areas where the standard ject to the general Swiss law competition rules. Under Swiss competition of living is abnormally low or where there is serious unemployment; law, sector-specific rules do not apply to aviation. • aid to promote the execution of an important project of common European interest or to remedy serious disturbances in the economy; 29 Is there a sector-specific regulator or are competition rules and applied by the general competition authority? • aid to facilitate the development of certain economic activities or of Principal responsibility for the application of Swiss competition rules lies certain economic areas, where such aid does not adversely affect trad- with the Swiss Competition Commission, which is the general competition ing conditions. authority. 36 Must clearance from the competition authorities be obtained 30 How is the relevant market for the purposes of a competition before state aid may be granted? assessment in the aviation sector defined by the competition Under the EU-Switzerland Agreement, the Swiss Competition Commission authorities? and the European Commission review matters to which the prohibition The same principles apply in the aviation sector as in other industry sec- of state aid of the EU–Switzerland Agreement may apply. The European tors. In order to determine the affected markets, it is necessary to first Commission is responsible for the supervision of measures taken by determine the relevant markets. The relevant market is made up of the the EU or its member states within the EU, and the Swiss Competition product market and the geographic market. Commission is responsible for measures taken by the Swiss authorities in The product market consists of all the products or services substitut- Switzerland. able, due to their characteristics and use, to the product or service under The Swiss Competition Commission examines whether the follow- consideration. The geographical market corresponds to the territory in ing are compatible with the provisions on state aid of the EU–Switzerland which the potential partners of the operation are engaged. Agreement: • the drafts of decrees of the Swiss Federal Council that favour certain 31 What are the main standards for assessing the competitive companies or manufacturing branches, in particular services and effect of a transaction? shareholdings of airlines; and Agreements that significantly affect competition in the relevant market • similar support measures taken by cantons and communes or other and are not justified on the grounds of economic efficiency and all agree- Swiss bodies or institutions subject to public law or of mixed economic ments that lead to the suppression of effective competition are unlawful. structure. Practices of enterprises that have a dominant position are deemed unlawful when such enterprises, through the abuse of their position,

186 Getting the Deal Through – Air Transport 2016

Update and trends On 25 June 2015 the Swiss Federal Administrative Tribunal handed expensive pricing mechanism. However, the Tribunal confirmed that down a significant judgment in a dispute between a number of airlines the relevant provisions of Swiss law (as amended in 2012) provide for and Flughafen Zurich AG on the determination of operational charges an adjusted dual till pricing mechanism as applied in the FOCA decree. at Zurich airport. The Tribunal partly allowed the appeal brought by the The dual pricing mechanism makes a difficult, detailed cost and asset airlines, and remanded the matter to the Federal Office of Civil Aviation allocation necessary between the aeronautical and commercial tills. (FOCA) for a reassessment of a decree dated 14 November 2014. To that end, several expert reports were produced in the proceedings The Tribunal found that under the single till principle, all airport before the Tribunal. The Tribunal held that certain cost and asset activities (including aeronautical and commercial) are taken into allocations provided for in the FOCA decree must be reassessed. account when determining the level of airport charges. This contrasts As there is no final decision in respect of the FOCA decree, with the dual till principle, where only aeronautical activities are taken Flughafen Zurich AG cannot implement its new operational charges into consideration when setting charges. The FOCA decree was made for the time being. It is to be expected that Flughafen Zurich AG will on the basis of an adjusted dual pricing mechanism, in the sense that the collect for some further time the existing operational charges (including dual till principle applies but transfer payments of up to 30 per cent of landing and passenger charges) from airlines operating at Zurich the revenues can be made from the commercial to the aeronautical side. airport. The airlines argued that the FOCA decree results in an unbalanced and

Switzerland and the EU ensure that the other party is informed of any pro- The Federal Act on package holidays contains provisions on the lia- cedure initiated to guarantee respect of the provisions of the agreement bility of tour organisers and their obligation to secure the repayment of and may submit observations before a final decision is taken. Upon request prepaid charges and to provide for the return journey in case they declare by either Switzerland or the EU, the joint committee set up under the themselves bankrupt. The Act implements EC Directives 90/314 on pack- agreement discusses appropriate measures. age travel, package holidays and package tours and 93/13 on unfair terms in consumer contracts. 37 If so, what are the main procedural steps to obtain clearance? EC Regulation No. 80/2009 on a code of conduct for computerised reservation systems also applies in Switzerland. See question 36. 40 Are there mandatory insurance requirements for the 38 If no clearance is obtained, what procedures apply to recover operators of aircraft? unlawfully granted state aid? EC Regulation No. 785/2004 (as amended by EU Regulation No. 285/2010) See question 36. establishes minimum insurance requirements for air carriers and aircraft operators. The minimum insurance coverage for liability with respect Miscellaneous to passengers is 250,000 SDR per passenger, for liability with respect to 39 Is there any aviation-specific passenger protection baggage 1,131 SDR per passenger, and for liability with respect to cargo legislation? 19 SDR per kilogram in commercial operations (subject to exceptions for EC Regulation No. 261/2004 provides for compensation and assistance non-commercial operations by aircraft with a maximum take-off weight for passengers that are denied boarding or experience cancellation or long of 2,700kg or less). In respect of liability for third parties, the minimum delays of their flight. It applies: insurance cover varies according to the maximum take-off weight of the • to passengers departing from the EU including Switzerland; and aircraft concerned. • to passengers departing from a third country to the EU including Switzerland, if the operating carrier is licensed based on EC Regulation 41 What legal requirements are there with regard to aviation No. 1008/2008, unless the passengers received benefits or compensa- security? tion and were given assistance in that third country. Annex 17 to the Chicago Convention and EC Regulation No. 300/2008 on civil aviation security apply in Switzerland. The main objective is to EC Regulation No. 1107/2006 on rights of disabled persons and persons establish and implement measures to prevent acts of unlawful interfer- with reduced mobility is in force in Switzerland. It applies to passengers ence against civil aviation. The basic standards for protecting civil aviation with disabilities or reduced mobility departing from, on transit through, or cover: airport security; demarcated areas of airports; aircraft security; pas- on arrival at an airport situated in the EU including Switzerland. Articles 3 sengers and cabin baggage; hold baggage; cargo and mail; air carrier mail (prevention of refusal of carriage), 4 (derogations, special conditions and and air carrier materials; in-flight and airport supplies; in-flight security information) and 10 (assistance by air carriers) also apply to passengers measures; staff recruitment and training; and security equipment. There departing from a third country to the EU including Switzerland, if the oper- are, in addition, detailed Swiss national laws and regulations with regard ating carrier is licensed based on EC Regulation No. 1008/2008. to security issues.

Andreas Fankhauser [email protected]

Löwenstrasse 2 Tel: +41 44 215 44 77 8001 Zurich Fax: +41 44 215 44 79 Switzerland www.bmlaw.ch

www.gettingthedealthrough.com 187

42 What serious crimes exist with regard to aviation? sanctions, including the endangering of life and property by disregard- Switzerland implemented the provisions of the 1963 Tokyo Convention on ing air traffic rules. The Swiss Penal Code, however, contains sanctions Offences and Certain Other Acts Committed on Board Aircraft, the 1970 for most serious aviation-related crimes, for example aircraft hijacking, Hague Convention for the Suppression of Unlawful Seizure of Aircraft hostage-taking, serious interference with public traffic, causing an explo- and the 1971 Montreal Convention for the Suppression on Unlawful Acts. sion and endangering life or property by using explosives or toxins. The Swiss Federal Aviation Act contains a number of aviation-related

188 Getting the Deal Through – Air Transport 2016

Turkey

M Ali Kartal Aybay & Aybay

General 6 What procedures are there to obtain licences or other rights to operate particular routes? Which bodies regulate aviation in your country, under what 1 Routes on which an airline may operate are written on the operating basic laws? licence. Any changes or new additions to routes require approval of the The basic law that governs aviation in Turkey is the Turkish Civil Aviation DGCA. Act which was passed by the Parliament and came into effect in 1983. Under this law, the Directorate General of Civil Aviation (DGCA), which is 7 What procedures are there for hearing or deciding contested a department of the Ministry of Transportation, is the regulatory authority applications for licences or other rights to operate particular for civil aviation. The DGCA is authorised to publish and implement regu- routes? lations that govern civil aviation. Granting of route licences is at the discretion of the DGCA and third parties do not have a formal right to contest any route licence applications. If Regulation of aviation operations an application for a certain route is refused by the DGCA, remedies are 2 How is air transport regulated in terms of safety? available in the form of administrative appeal and administrative lawsuits just as against any other governmental acts. Aviation safety requirements are published by the DGCA mainly in the form of regulations, and sometimes as directives and guidelines. The 8 Is there a declared policy on airline access or competition, and DGCA has the authority to monitor and enforce compliance with aviation if so what is it? regulations and to impose sanctions, revoke licences and levy fines on civil aviation operators. There is no declared policy.

3 What safety regulation is provided for air operations that do 9 What requirements must a foreign air carrier satisfy in order not constitute public or commercial transport, and how is the to operate to or from your country? distinction made? All flights using Turkish airspace are subject to the approval of the DGCA. Aviation operations that do not constitute public or commercial transport A foreign carrier must possess an airline operator’s certificate (AOC) from are regulated by the General Aviation Regulation. Any aviation opera- its own state. The foreign carrier must maintain a fully authorised repre- tion that does not constitute carriage of passengers or cargo for monetary sentative in Turkey or appoint an appropriately licensed Class C ground consideration falls within the scope of the General Aviation Regulation. handling company as its agent. Unless bilateral air services agreements Ballooning, agricultural aviation and seaplane operations are subject to provide otherwise, applications for scheduled flights are to be made at the additional specific rules and regulations. latest 30 days prior to the commencement of a timetable period. The carrier must provide proof of insurance. 4 Is access to the market for the provision of air transport services regulated, and if so how? 10 Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local Access to the market for provision of air transport services is subject to economy? obtaining a licence. The licence is granted by the DGCA upon completion of a rigorous inspection and testing of the entity applying for the licence to There is no specific rule or requirement to this effect. However, the DGCA ascertain that it is capable of complying with the financial, business and is authorised to offer financial incentives to airlines wishing to operate to technical prerequisites for operating commercial air transport services. such destinations. The criteria for these capabilities are pre-established by regulations, therefore, any entity able to fulfil the predetermined criteria is able to obtain the 11 Are charter services specially regulated? licences for operating commercial air services. This being said, the DGCA Charter services are not regulated specifically. These services constitute does have some discretion since operating licences can be made subject to one of the types of commercial air transport services, and are regulated as certain conditions. such in the Regulation of Commercial Air Transport Services.

5 What requirements apply in the areas of financial fitness and 12 Are airfares regulated, and if so, how? nationality of ownership regarding control of air carriers? Air fares are not regulated. However, for domestic flights, in 2013 the DGCA There are minimum aircraft, seating and capacity requirements that are announced that it had reached an accord with domestic carriers for a maxi- different for scheduled carriers, non-scheduled carriers, regional carriers, mum fare for domestic flights, which is said to be accepted and voluntarily air taxi operators and cargo carriers. Financial fitness is determined by complied with, by all carriers. There is no legal basis for such a restriction. means of a minimum paid-up capital requirement per aircraft in the fleet. As an example, scheduled passenger services requires at least five aircraft with more than 100 seats and a minimum paid in capital of US$15 million. Operators are also required to post a standby letter of guarantee. In all cases, at least 51 per cent of the shares of the company must be registered shares, the majority of voting shares must be held by Turkish citizens and 51 per cent of directors must be Turkish citizens. www.gettingthedealthrough.com 189

Aircraft providers is limited by regulations and is determined according to the traffic volume of an airport. The minimum number is two, and may be 13 Who is entitled to be mentioned in the aircraft register? Do increased according to traffic volumes. Foreign air carriers are allowed to requirements or limitations apply to the ownership of an perform ground services for their own aircraft, but not for aircraft of other aircraft listed on your country’s register? carriers. Certain types of ground services such as representation, aircraft Owners of the aircraft and holders of limited rights in rem such as mort- security, catering, etc, have less onerous requirements or requirements gages are named in the aircraft registry. In certain cases and subject to rel- specific to the operation. evant rules, lessees of the aircraft or ordinary creditors of the owner may also be named. In order for an aircraft to be registered in Turkey, its owner 23 Who provides air traffic control services? And how are they must be a Turkish citizen or entity. If this is a company incorporated and regulated? registered in Turkey, the majority of its shares must be held by Turkish Air traffic control services are provided by the State Airports Administration citizens and the majority of its directors must be Turkish. As an exception, in accordance with the relevant International Civil Aviation Organization foreign-registered aircraft that are dry leased to Turkish entities that meet (ICAO) documents and annexes. Licensing of air traffic control personnel the aforementioned criteria can be registered in the temporary aircraft is controlled and regulated by the DGCA. registry. Liability and accidents 14 Is there a register of aircraft mortgages or charges, and if so how does it function? 24 Are there any special rules in respect of death of, or injury to, Mortgages and other charges are also recorded in the aircraft registry. passengers or loss or damage to baggage or cargo in respect of domestic carriage? 15 What rights are there to detain aircraft, in respect of unpaid Turkey is a signatory to the 1999 Montreal Convention. The Civil Aviation airport or air navigation charges, or other unpaid debts? Act of 1983 extended the scope of application of the Montreal Convention Aircraft cannot be detained in the absence of a court order to that effect. rules on liability of the air carrier to domestic carriages as well. Preliminary injunctions entailing detention of aircraft can be obtained prior to commencing legal action for recovery of a debt. 25 Are there any special rules about the liability of aircraft operators for surface damage? 16 Do specific rules regulate the maintenance of aircraft? Aircraft operators are liable for damages to third persons. This description There is a body of detailed rules and regulations for licensing and opera- is accepted to include surface damage. tion of aircraft maintenance personnel and maintenance providers. 26 What system and procedures are in place for the investigation Airport of air accidents? Investigation of air accidents is the duty and responsibility of the Ministry 17 Who owns the airports? of Transportation. Upon the occurrence of an air accident, the ministry Airports can be owned and operated privately, although most civilian air- appoints an investigation commission composed of persons who are experts ports in Turkey are owned and operated by the State Airports Authority. in their respective fields. In most cases, these are pilots, engineers or similar The State Airports Authority is organised as a government-owned com- professionals who are employees of the ministry or the DGCA. The inves- pany. It has commercial goals as well as regulatory and operational duties. tigation is conducted in accordance with the Regulation on Investigation of The State Airports Authority also operates the air traffic control system. Air Accidents, which is an extensive and detailed regulation.

18 What system is there for the licensing of airports? 27 Is there a mandatory accident and incident reporting system, There are detailed regulations on construction, operation and certification and if so, how does it operate? of civil aerodromes. Any application for building or operating an airport, or The crew, operator, the local governor and the airport operator are required both, is subject to detailed scrutiny and many levels of approvals. to notify the Ministry of Transportation of any air accident. The operator of an aircraft is required to notify the Ministry of Transportation of any inci- 19 Is there a system of economic regulation of airports, and, if so, dent. An incident is defined as any occurrence that has not resulted in an how does it function? accident, but has or may have adversely affected the safe operation of a The airport operator is required to make a pricing tariff for its services to flight. users and must submit this to the Ministry of Transportation for approval. Publication of the tariff is subject to the approval of the ministry. Potential Competition law users of the airport are required to submit their traffic density and volume 28 Do sector-specific competition rules apply to aviation? If not, forecasts, intended operations and aircraft types, if requested by the air- do the general competition law rules apply? port operator. There are no sector-specific rules applicable to aviation. General competi- 20 Are there laws or rules restricting or qualifying access to tion rules apply. airports? 29 Is there a sector-specific regulator or are competition rules There are no such laws; the DGCA is authorised to limit or prohibit access applied by the general competition authority? to airports on the grounds of safety and security considerations. There is no sector specific competition regulator for aviation or any other 21 How are slots allocated at congested airports? sector in Turkey. The Competition Board applies the rules. Slot allocation is made by a slot coordinator appointed by the DGCA. 30 How is the relevant market for the purposes of a competition There is a detailed regulation on slot allocation, which is based on and very assessment in the aviation sector defined by the competition similar to the relevant EC Regulation No. 793/2004 on allocation of slots authorities? at Community airports. In most decisions of the Competition Board on aviation, the relevant mar- 22 Are there any laws or rules specifically relating to ground ket has been defined in two ways: the relevant market is usually defined handling? as the ‘carriage of passengers by air’. The geographical market is usually defined as a city pair. Any complaint or allegation of breach of competi- Yes. Ground services are defined in great detail and certain types of tion rules is usually focused on the passenger services that are provided licences are required for operating ground handling services. Similar to air between one or more pairs of cities. Depending on the nature of the inves- transport operation licences, there are requirements for minimum capi- tigation, there have been instances where the market has been defined as talisation and equipment. Operators must be capable of offering ground ‘provision of agency services for ticket sales’ or a similar sub-classification handling services at more than one airport. The total number of service of the air passenger carriage market.

190 Getting the Deal Through – Air Transport 2016

31 What are the main standards for assessing the competitive effect of a transaction? Update and trends Agreements and concerted practices between undertakings, decisions Similar to many other countries in the world, general aviation and practices of associations of undertakings that have as their object or and privately owned airlines have undergone a phenomenal rate effect or likely effect the prevention, distortion or restriction of competi- of growth within the past decade in Turkey. This has created a tion directly or indirectly in a particular market for goods or services are tremendous challenge for the Turkish government to keep in pace illegal and prohibited. Such cases are as follows: with this rate of development. New regulations are constantly • fixing the purchase or sale price of goods or services, elements such as being developed and put into force to maintain uniformity, safety cost and profit which form the price, and any terms of purchase or sale; and security in various types of aviation operations. Although the • partitioning markets for goods or services, and sharing or controlling underlying principles laid down by the ICAO conventions and the Civil Aviation Act will remain in place, lower level legislation in the of market resources or supplies; form of aviation regulations is very likely to remain in a state of flux • controlling the amount of supply or demand in relation to goods or and development as the industry and its supervision continue to services, or determining them outside the markets; develop. • complicating and restricting the activities of competing undertakings, or excluding firms operating in the market by boycotts or other behaviour, or preventing potential new entrants to the market; • except exclusive distribution systems, applying different terms to 34 What are the main principles of the state aid rules applicable persons with equal status for equal rights, obligations and acts; and to the aviation sector ? • contrary to the nature of the agreement or commercial usages, requir- Not applicable. ing the of purchase other goods or services together with goods or services, or tying a good or service demanded by purchasers acting as 35 Are there exemptions from the state aid rules or situations in intermediary undertakings to the condition of displaying other goods which they do not apply? or services by the purchaser, or putting forward terms as to the resup- Not applicable. ply of a good or service supplied. 36 Must clearance from the competition authorities be obtained In cases where the existence of an agreement cannot be proved, that the before state aid may be granted? price changes in the market, or the balance of demand and supply, or the operational areas of undertakings are similar to those markets where Not applicable. competition is prevented, distorted or restricted, constitutes a presumption that the undertakings are engaged in concerted practice. Each of the 37 If so, what are the main procedural steps to obtain clearance? parties may relieve itself of the responsibility by proving that it does not Not applicable. engage in concerted practices, provided that it is based on economic and rational facts. 38 If no clearance is obtained, what procedures apply to recover unlawfully granted state aid? 32 What types of remedies have been imposed to remedy Not applicable. concerns identified by the competition authorities? The Competition Board is authorised, upon its own initiative or upon com- Miscellaneous plaint, to investigate practices or acts that may have infringed competition rules. Upon a finding that competition rules are infringed, the board may 39 Is there any aviation-specific passenger protection order the involved party or parties to terminate the acts or actions that legislation? caused the infringement, and may impose administrative fines. Current EU legislation and directives in respect of passenger rights in the case of denied boarding, cancellation and delay are in effect in Turkey. Financial support and state aid Airline operators are required to maintain a certain level of liquid security with the DGCA that is to be used to compensate passengers in case of ces- 33 Are there sector-specific rules regulating direct or indirect sation of operations, bankruptcy or similar occurrences. Issues concerning financial support to companies by the government or CRS, distribution and airfares are subject to rules on competition. government-controlled agencies or companies (state aid) in the aviation sector? If not, do general state aid rules apply? There are no rules or provisions that regulate or allow state aid to airlines.

Aybay & Aybay

M Ali Kartal [email protected]

Siraselviler Cad. 49/8 Beyoglu Tel: +90 212 293 23 23 Istanbul 34433 Fax: +90 212 245 39 49 Turkey www.aybaylaw.com

www.gettingthedealthrough.com 191

40 Are there mandatory insurance requirements for the cooperation and collaboration from other relevant ministries and govern- operators of aircraft? ment departments. Security at airports is the responsibility of the provin- Yes, there are certain minimum coverage and insurance documentation cial governor. Each airport is assigned a deputy governor who is on duty at requirements, varying with the type and number of aircraft. the airport directing security details and oversees the security and access control to airports. Airport and aviation operators are obliged to comply 41 What legal requirements are there with regard to aviation with requirements and directives of the deputy governor and their staff. security? 42 What serious crimes exist with regard to aviation? The primary authority responsible for maintaining safety and security of aviation is the Ministry of Transportation. The Ministry can request Hijacking of aircraft is specifically defined as a felony in the Turkish Criminal Code.

192 Getting the Deal Through – Air Transport 2016

Ukraine

Anna Tsirat Jurvneshservice International Legal Services

General Although flights for private purposes are defined, there is no special rule for their safety as they are regulated by general norms on operators’ 1 Which bodies regulate aviation in your country, under what and aircraft safety and pilot licensing. basic laws? The main authority regulating aviation in Ukraine is the State Aviation 4 Is access to the market for the provision of air transport Service (SAS), which carries out its activities under Provision No. 389/2011 services regulated and if so how? dated 6 April 2012 on the State Aviation Service approved by presiden- The Air Code provides that an air operator performing transportation tial decree and by Regulation No. 520 dated 8 October 2014 on the State of passengers or cargo for fee or under a contract shall hold the relevant Aviation Service adopted by the Ukrainian government. licence. Transportation of passengers or cargo without a licence is forbid- Both the provision and regulation define the functions and main aims den. To have access to the market (ie, to make regular air home or interna- of the SAS. tional transportation or charter international flights in or outside Ukraine or within its borders that have a systematic lot of at least one flight per week Regulation of aviation operations or not less than three flights per month or aviation transportation in other 2 How is air transport regulated in terms of safety? countries) the air operator must have a traffic right allowance (TRA) issued by the SAS. The allowance is issued in accordance with the Aviation Rules The principal instruments regulating aviation safety are the Air Code of Ukraine’s ‘Procedure to issue and to cancel rights to operate air routes’ 2011, which contains the basic provisions relating to aircraft (registration, adopted by SAS Order No. 686 dated 24 October 2014, as amended. airworthiness, maintenance), operators (air operator’s certificates and To receive TRA an air operator must have a licence and an air opera- licences), personnel (required crew, powers and duties of commander, tor certificate (AOC) and be at least 50 per cent controlled by Ukraine certification and access of aviation personnel to aviation activities), aero- or Ukrainian citizens. TRA may not be assigned to another operator. Air dromes and requirements to safety of environment, and the Law on the routes may be operated by several operators if each operator has TRA on State Programme on Civil Aviation Air Safety 2003. the same route. Further detailed safety rules are contained in the Provision on management of flight safety systems on air transport, No. 1503/11783 dated 5 What requirements apply in the areas of financial fitness and 14 December 2005, Rule of maintenance information for flight safety in nationality of ownership regarding control of air carriers? the air traffic management system of civil aircraft adopted by Order of the Ministry of Transport and Communication No. 295 dated 19 March To receive an AOC an air transport company must have sufficient finan- 2009, the Provision on the review on flight safety in the system of air cial resources to perform the transportation, appropriate management and traffic management approved by Order of the Ministry of Transport and organisational structure, personnel, equipment and documents necessary Communication No. 320 dated 31 May 2010, the Procedure to agree loca- for air and technical operation of at least two aircraft for air transportation and altitude of objects in the vicinity of aerodromes and objects whose tion. The operator submits a business plan for two years approved by the activities may affect flight safety and interfere with civil aviation radio SAS and other documentation provided for by the Rules of certification equipment adopted by Order of the Ministry of Infrastructure (succes- of operators of civil aircraft that render commercial transport services sor to the Ministry of Transport and Communication) No. 721 dated 30 under OPS 1 approved by Order No. 430 of the Ministry of Transport and November 2012, and the Flight Safety Programme for 2014–2016 adopted Communication dated 5 July 2010. The AOC is initially given for one year by the order of the Ministry of Infrastructure No. 18 dated 15 January 2014. only. Requirements on nationality of ownership are contained in the 3 What safety regulation is provided for air operations that do Aviation Rules of Ukraine ‘Procedure to issue and to cancel rights to not constitute public or commercial transport, and how is the operate air routes’ and were introduced into national law on 22 May 2015, distinction made? although they were included in all bilateral agreements on air communicated concluded by the Ukrainian government. Ukrainian law divides air transport into state-owned aviation and civil aviation that is used to satisfy the needs of the economy and citizens in 6 What procedures are there to obtain licences or other rights to air transportation and aerial works as well as for flights performance for operate particular routes? private purposes. A flight is commercial if it is paid for and if it is made with commercial Ukrainian law does not require a licence, only TRA, to operate particular purpose, including rendering of a medical service. The commercial flight routes. Only an operator with the relevant AOC and a passenger and cargo is made under the requirements of OPS-1, which provides rules regulating transportation licence may obtain TRA. Applications for TRA on regular operations. An operator may perform a commercial flight if it has the right air home, international and charter routes are enclosed with copies of insur- operator’s certificate and licence for passengers and cargo transportation. ance policies confirming the operator’s liability, crew and other personnel Aerial works are those that stipulate aircraft flights perform special- insurance made under the requirements of the country to which flights ised kinds of work in such fields as agriculture, photo-engraving, mapping, shall be made; a three-year business plan; information on the fleet and building, air patrol, research and salvage, air advertising, extinguishing volume of taxes paid into the Ukrainian budget; and a list of persons who of forest fires, etc. Appropriate kinds of aerial work may be performed if have ownership and beneficial control over the air operator. A list of for- the aircraft is airworthy, its operator has the relevant specialised licence eign countries and their airports and appropriate agreements confirm- to fulfil this kind of aerial work, the aircraft is insured and the crew has the ing availability of orders in these countries is added for TRA in foreign necessary licences. countries. www.gettingthedealthrough.com 193

7 What procedures are there for hearing or deciding contested others, they are the only document describing the kinds of services and applications for licences or other rights to operate particular documents to be submitted to the SAS to receive an appropriate allowance routes? if charter service has no systematic series. Submitted applications with enclosed documents are considered by a The decision to allow a Ukrainian operator to perform a charter flight commission on TRA which is set up by the SAS. All decisions are taken on is taken within 48 hours from an appropriate application receipt if the commission’s meetings that have to be held from 26 to the last date of each flight is planned to be fulfilled on a route: where there is no regular flight; month if there is at least one application for TRA and if at least two-thirds to transport high officials and official delegations of Ukraine; with a spe- of its members are present. The commission considers all applications cial or business purpose; for personal matters on private jets with a non- received by the SAS before the 20th of the month in which the meeting is commercial purpose; as a series of charter flights to resorts; to repair, held. An agenda of the commission’s meeting, as well as data on the appli- maintain or aircraft retrofit; to transports spare parts, engines for opera- cations to be considered, are published on the SAS website. Air operator’s needs; to transport goods for repair. tor’s representatives and other interested persons may be present at the The application is considered by the TRA commission within five days commission meeting. The meeting concludes with the commission’s well- if the charter flight is planned to be performed under a route that has reg- reasoned decision which will recommend the SAS Chief either give or ular flights; or to regions with unstable military and political, ecological, refuse TRA, limit the volume of TRA, amend existing TRA, cancel exist- epidemiologic or another complicated situation; or to transport special, ing TRA or ignore the application. TRA is issued in five days from approval dangerous cargo, goods of military and dual application. of the appropriate decision. Permission to perform a charter service is given for the term of its A decision may be appealed to the SAS Chief or to a court within 20 performance but no longer than for one IATA season. days of approval. Foreign carriers may within 48 hours receive the right to perform a Although the established procedure is a little controversial, in practice charter service landing on the territory of Ukraine: TRA may be issued 1.5 months from the application submission and opera- • to transport high officials and official delegations of other countries; tors accept this as for a long time there was no procedure at all. • to transport humanitarian cargo from Ukraine by a decision of the government of Ukraine; 8 Is there a declared policy on airline access or competition, and • for clearance of land connected to acts of God, sanitary, aviation, if so what is it? search-and-rescue work, etc; • if they are personal private jets with a non-commercial purpose; TRA for regular international routes is given to each route under agree- • to repair, maintain or retrofit aircraft; ments and arrangements concluded between aviation authorities. The air • to transport spare parts or engines; operator may apply for TRA if it makes regular flights in the country for • to transport goods for repair; at least 12 months before submission of its application, this has a positive • to transport cargo to the consignor or consignee’s country; influence on the maximum permitted frequency which can be calculated • if they involve business transport of up to 15 persons or up to two tons under certain formulae. of cargo; or If there are two or more applications for the same route which has cer- • as a series of charter flights on a route with no regular transportation. tain limitations as to operation frequency or quantity of operators under concluded agreements and arrangements between aviation authorities, 12 Are airfares regulated, and if so, how? these applications are estimated under the following criteria: • actual usage of previous TRA (ratio of frequency of flights to total Airfares are not regulated in Ukraine, although the SAS has the right to quantity of frequency which the operator has right to operate); cancel overly high tariffs in case of insufficient competition or to stop the • amount of taxes paid to the state budget for the 12 months before application of low tariffs if they are lower than prime cost. application submission; To check the viability of fixed tariffs for air transportation the SAS may • quantity of aviation accidents on 1 million departures that have to oblige an air carrier to disclose the details of tariff formation including be reported to SAS for the 12 months before application submission costs. provided that the flight safety management system and procedure of If the air carrier fails to provide the information within the stated term domestic investigations or accident analysis are available (the lower or the disclosure is incomplete the SAS has the right to cancel such tariff coefficient, the higher the estimate). If an air operator has no flight and withdraw it from the air ticket booking system. safety management system and there is no procedure for internal If any international agreement provides for regulation of tariffs the investigation, accident analysis or flight statistics, the air operator SAS shall impose such tariffs on carriers. receives no TRA; and • regularity of flight performance during the six months before applica- Aircraft tion submission (per cent of on-delayed flights from the total quantity 13 Who is entitled to be mentioned in the aircraft register? Do of flights for the stated period). requirements or limitations apply to the ownership of an aircraft listed on your country’s register? The highest scorer on each point estimated out of a maximum of 10 balls Only Ukrainian-owned aircraft or aircraft leased to Ukrainian legal or nat- receives the maximum estimate. ural entities may be registered in the Aircraft Register. Further, the following prerequisites must also be satisfied before an aircraft can be registered 9 What requirements must a foreign air carrier satisfy in order in the Aircraft Register: to operate to or from your country? • the aircraft has a ‘type certificate’ which is issued by the SAS pursuant There are no special rules for foreign air carriers. Their applications are to the Rules of Aviation Equipment Type Certification; considered together with the applications of Ukrainian operators under the • the aircraft is not currently registered in any foreign aircraft register; ballot system described in question 8. Clearly foreign carriers score lower and on such items as taxes paid to the Ukrainian budget but may accrue higher • the documents stipulated by the rules are submitted. balls on the remaining items. 14 Is there a register of aircraft mortgages or charges, and if so 10 Are there specific rules in place to ensure aviation services how does it function? are offered to remote destinations when vital for the local There is no special register of mortgages, or other rights, over an aircraft economy? in the Ukraine. However, a mortgage over an aircraft may be registered We are not aware of any such specific rules. in the State Registry of Moveable Property Encumbering (the Mortgage Register). 11 Are charter services specially regulated? The Ukrainian Law on Mortgage, No. 2654-XII was enacted on 2 Charter services are regulated with the Rules on Charter Service October 1992. It makes provision as to non-possessory mortgages. The Performance approved by Order of the Ministry of Transport of Ukraine, Law states that mortgage of the aircraft shall be made under its prescrip- No. 297 dated 18 May 2001. Although the rules are somewhat outdated tion at a local notary if the aircraft is registered in the Ukrainian Aircraft and refer to standard aviation acts that have been already substituted with Register. Aircraft mortgages are registered in the Mortgage Register

194 Getting the Deal Through – Air Transport 2016

© Law Business Research Ltd 2015 Jurvneshservice International Legal Services UKRAINE pursuant to the Procedure for keeping the Mortgage Register. This proce- assess the suitability of air transportation and to assist carriers in planning dure was adopted by Cabinet of Ministers Regulation No. 830 dated 5 July their flights effectively. 2004, which provides the prescribed form of application to be submitted to the Mortgage Register. There is no requirement for the consent of any 21 How are slots allocated at congested airports? official body (including the National Bank) in respect of the registration of The Rule on issuance of allowances to depart the airports of Ukraine and to any mortgage in the Mortgage Register. arrive at the airports of Ukraine, No. 897/703 dated 28 November 2005 as The application must be submitted to the Mortgage Register by the amended provides a carrier obligation to approve slots as well as all kinds mortgagee. Alternatively, it can be submitted by his or her representative, of services with the planned to arrival or departure airport in advance and who must identify him or herself and the authority by which he or she acts after that to receive appropriate allowance from SAS. In case of a delay of (usually, this is a power of attorney to be notarised and apostilled). The more than 30 minutes, the transfer of a flight or its cancellation, the carrier application will be registered if it is signed by the person submitting it. If shall immediately formally inform the airport. the application is not signed or if the person submitting it fails to identify him or herself or to prove the due authority under which he or she acts, 22 Are there any laws or rules specifically relating to ground then registration of the mortgage in the Mortgage Register will not be handling? completed. The Air Code of Ukraine has a general provision that ground handling shall Registration will be completed that same day. Registration of the air- be performed under the laws of Ukraine and correspond to standards and craft mortgage is treated as effective from the date and time at which the International Civil Aviation Organization (ICAO) recommended practices. corresponding entry is noted in the Mortgage Register. The effectiveness In addition, there is a specific Recommendation on the establishment of this registration will continue up to the time of the satisfaction of the of airport fees, No. 472 approved by the Ministry of Transport on 1 July mortgage. Once the mortgage debt has been satisfied the mortgagee is 2003. Calculated ground handling fees shall be approved by the Ministry. obliged to notify the Mortgage Register within five days. There is no regulatory act dealing with the access of ground handling If an aircraft registered and mortgaged abroad is planned to be used in companies to the market. Ukraine but is not yet registered here a foreign mortgage may be registered at the Mortgage Register within 30 days of the aircraft’s importation into 23 Who provides air traffic control services? And how are they Ukrainian territory. In such case the Ukrainian mortgage will be treated as regulated? perfected from the moment of foreign mortgage registration. The Mortgage Register is open for any person who wishes to consult it. Supervision of planning, coordination, usage, service and management of air traffic in the regions of flight information, dispatcher zones and 15 What rights are there to detain aircraft, in respect of unpaid routes is made by the entities of unified civil and military system of air airport or air navigation charges, or other unpaid debts? traffic created in 1999. The schedule of regular domestic and international flights of civil air- In the case where the aircraft operator (whether the owner or lessee) fails craft is approved by the SAS and delivered to Ukrairruh – a state-owned to pay the requisite air navigation or airport charges the aircraft may be enterprise to service air traffic on corridors, routes and also outside them, detained at the airport according to the Civil Code. Ukraine has joined the as well as at Ukrainian airports – and to the headquarters of the Air Force of Eurocontrol Convention which provides for the arrest of an aircraft in the Ukraine at least 20 days before departure. The headquarters of the Ukraine case of a failure to pay Eurocontrol charges. Air Force and Ukrairruh control the performance of regular domestic and international flights as well as transit regular flights. Thus all carriers must 16 Do specific rules regulate the maintenance of aircraft? submit lists of repeated flight plans to Ukrairruh at least 14 days before SAS requires air operators carrying commercial transportation to follow departing, and seven days in the case of any changes to these lists. In turn, OPS 1 technical requirements as well as requirements of the aircraft type Ukrairruh duly informs the headquarters of the Air Force of Ukraine. manufacturer manual and the operator’s technical manual. Non-regular international transit flights by civil aircraft are made All tasks related to aircraft maintenance may only be performed by a under information duly submitted to air traffic service bodies which is certified provider. resubmitted to Ukrairruh. Such information may be submitted 30 minutes before entering Ukrainian air space. Airports 17 Who owns the airports? Liability and accidents Most airports in Ukraine are owned by local government. Only two air- 24 Are there any special rules in respect of death of, or injury to, ports – Borispil International Airport and Lviv International Airport Danilo passengers or loss or damage to baggage or cargo in respect of Galytsiy – are state owned. Some local airports such as Dnipropetrovsk domestic carriage? International Airport, Ivano-Frankivsk International Airport, Mariupil and The Rule on air transportation of passengers and their luggage, No. Kharkiv are privately owned. 735 dated 30 November 2012 were elaborated in compliance with EC The main public airport in Ukraine is Borispil International Airport. Regulations No. 1107/2006, 261/2004, Council Regulation No. 2027/97 as The main regional public airports are Kiev, Odessa, Dnipropetrovsk and- amended by Regulation No. 889/2002, Montreal Convention 1999, IATA Kharkiv. Donetsk airport, which was one of the biggest local airports, was General Conditions of Carriage (passenger and baggage and IATA’s reso- severly damaged in 2014 in the Ukrainian–Russian conflict. lutions and recommended practices). The rules on air cargo transportation have been developed to meet the 18 What system is there for the licensing of airports? programme of Ukrainian integration into the European Union as of 2000 – Any airport to start operation shall receive appropriate certification under the Air Code of Ukraine, Montreal Convention and Air Waybill, conditions Airports Certification Rule No. 407 dated 13 June 2006 at SAS. of contract, IATA Resolution 600b.

19 Is there a system of economic regulation of airports, and, if so, 25 Are there any special rules about the liability of aircraft how does it function? operators for surface damage? There is no special regulation of airports, but we assume that the rele- There are no special rules as to operators’ liability for surface damage. vant airport owners impose some regulation on the airports to maintain In case of any accidents a general rule established by the Civil Code is stability. applied – the operator is strictly liable to cover all damage incurred unless it can prove that the damage arose owing to an act of God or at the victim’s 20 Are there laws or rules restricting or qualifying access to instigation. airports? Access to airports is regulated by the Rule on managing air transportation 26 What system and procedures are in place for the investigation flow, No. 522 dated 19 July 2005. Air traffic flow in Ukraine is managed by of air accidents? the regional dispatcher centre that is used to calculate an airport’s maxi- Pursuant to the provisions of article 119 of the Air Code of Ukraine and mum flight acceptance rate to prevent overloading of dispatcher bodies, the Rule on investigation of air accidents and incidents with civil aircraft in www.gettingthedealthrough.com 195

Ukraine, No. 943, all air accidents, serious incidents, incidents, extraordi- 31 What are the main standards for assessing the competitive nary events and damage to aircraft landed on Ukrainian territory as well as effect of a transaction? accidents and incidents of Ukrainian civil aircraft abroad shall be investi- A transaction is considered anti-competitive if it, in particular, concerns: gated to prevent similar situations in future. • the setting of prices or other conditions with respect to the purchase or Air accident investigation is performed by a specially appointed state sale of products; commission. The commission is independent in its activities. The investi- • the restriction of production, product markets, technical and techno- gation process does not assume the protection of the interests of parties to logical development, investments or the establishment of control over the investigation. them; An air accident investigation may be fully given to a foreign country • the distribution of markets or sources of supply in accordance with the under mutual agreement with it. In any case SAS shall make every effort to territorial principle, the assortment of products, the volume of their encourage the investigation. sale or purchase, in accordance with the circle of sellers, buyers or The investigation of Ukrainian civil aircraft accidents on the territory consumers or in accordance with other signs; of another state is conducted by a commission created by the other state • the distortion of the results of auctions, contests or tenders; under ICAO Rules and its national acts. In such case the SAS appoints rep- • the removal of other economic entities, buyers and sellers from the resentatives (experts and counsel) to take part in the investigation. If the market or the limitation of their entry into (or exit from) the market; country of investigation fails to submit a final report on the accident to • the application of different conditions to equivalent agreements con- Ukraine within just over one year, SAS representatives will draft informa- cluded with other economic entities, which results in the creation of a tion on the investigation process. disadvantage for these economic entities in terms of competition; If the SAS investigates a foreign aircraft accident on Ukrainian territory • the conclusion of agreements provided that other economic entities and the foreign aircraft’s state of registration and the operator’s state fail to assume additional obligations whose content in terms of customs in appoint representatives, the operator shall be involved in the investigation. trade and other fair practices in entrepreneurial activities have noth- Air accident investigation includes the gathering and analysis of infor- ing in common with the subject of these agreements; mation, necessary research, discovering the reason for air accidents, draft- • the substantial limitation of the competitiveness of economic entities ing of reports as well as submission of the final report with the necessary on the market without objectively justified causes. recommendations on flight safety. The investigation is conducted under the multi-factor principle, which provides for the search for deviations The above-mentioned actions may be authorised by the relevant bodies of from the air transport system’s normal functioning and an estimation of the Antimonopoly Committee of Ukraine if their participants prove that these deviations before completion of the flight. the anti-competitive actions facilitate: the improvement of the production, An investigation must be conducted quickly but for not more than 30 purchase or sale of a product; technical, technological and economic devel- days for an accident, 60 days for a crash or 90 days for an air accident with opment; the development of small or medium-sized businesses; optimis- a foreign aircraft. If necessary the stated terms may be prolonged. ing export or import of products; the elaboration and application of unified technical conditions or standards for products; or the rationalisation of 27 Is there a mandatory accident and incident reporting system, production. and if so, how does it operate? According to the Rule on investigation of air accidents and incidents with 32 What types of remedies have been imposed to remedy civil aircraft in Ukraine, No. 943 and the Provision on the system of flights concerns identified by the competition authorities? safety management on air transport, No. 895 dated 25 November 2005, The main remedy is the imposition of a penalty, the amount of which a crew commander shall immediately report an accident resulting in the depends on the type of violation. Besides this, compulsory segregation of serious injury of passengers or major damage to an aircraft to the opera- an operator may be used. tor’s management, which shall duly report on the accident to the SAS. In case of accident three kinds of notification must be submitted: Financial support and state aid initial notification transmitted immediately; initial reporting that details air accident circumstances and next reporting that make initial notifica- 33 Are there sector-specific rules regulating direct or indirect tion mare concrete. financial support to companies by the government or The carrier’s director shall gather operative information and notify the government-controlled agencies or companies (state aid) in SAS, the local authority on whose territory the accident has occurred, local the aviation sector? If not, do general state aid rules apply? transport and home affairs bodies within two hours. There is no sector-specific rule regulating direct or indirect financial sup- Next reporting shall be submitted within three days of the accident. port to companies by the government or government-controlled agencies The SAS informs the ICAO of any accident involving an aircraft with a or companies (state aid) in the aviation sector. weight of more than 2,250kg. Although the Budget Code of Ukraine provides the possibility for a In the case of any accident of foreign aircraft on the territory of state to fully or partially guarantee the liability of Ukrainian companies Ukraine, the SAS additionally informs the state of the aircraft’s registra- under concluded transactions, such guarantee may be issued only if tion, the carrier, designer and manufacturer. directly provided by the Law on the State Budget of Ukraine for a certain year. The aviation sector has never been supported by the government or Competition law government-controlled agencies or companies. There are no general state aid rules. 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? 34 What are the main principles of the state aid rules applicable No sector-specific competition rules apply to aviation. The norms of the to the aviation sector? Law on the Protection of Economic Competition shall be applied. See question 33. 29 Is there a sector-specific regulator or are competition rules 35 Are there exemptions from the state aid rules or situations in applied by the general competition authority? which they do not apply? As there is no sector-specific regulator the competition rules are applied by See question 33. the appropriate bodies of the Antimonopoly Committee of Ukraine. 36 Must clearance from the competition authorities be obtained 30 How is the relevant market for the purposes of a competition before state aid may be granted? assessment in the aviation sector defined by the competition authorities? See question 33. As there is no special regulation for the aviation sector, general method- 37 If so, what are the main procedural steps to obtain clearance? ology to define the monopolistic (dominant) position of an entity on the market, No. 49-p dated 5 March 2002 is applied. The evaluation is focused See question 33. on time, geography and the participants of a market.

196 Getting the Deal Through – Air Transport 2016

38 If no clearance is obtained, what procedures apply to recover unlawfully granted state aid? Update and trends See question 33. Owing to the Russian–Ukrainian conflict and the country’s poor financial condition the main trend over the past two years has been Miscellaneous a fall in air passenger transportation and a drop in the quantity of Ukrainian and foreign carriers. The regular routes are operated by 39 Is there any aviation-specific passenger protection seven Ukrainian air companies to 33 countries and by 33 foreign legislation? carriers from 22 countries. Passenger transportation fell 18 per cent The issues of passenger protection are contained in the appropriate provi- in comparison with 2014, where the decrease was 20 per cent of the sions of the Air Code and Rule of air transportation of passengers and their previous year. luggage, No. 735 dated 30 November 2012. There are rules on rendering due assistance to passengers with reduced mobility, children and pregnant women. • controls for access of persons and vehicles into controlled and limited The Rules of air transportation of passengers and their luggage pro- access zones of airports; vide lists on the lawful denial of boarding in the interests of flight safety. • safety controls for personnel and vehicles allowed into limited access They also have norms on compensating passengers for denied boarding, zones; cancellation or a delay which fully corresponds to EC Regulation No. • safeguarding and access control before and after a flight and special 261/2004. Moreover, the Air Code provides for the carrier’s liability for aircraft inspection; appropriate provisions on compensation in its rules of transportation to be • safety controls for crew, passengers, hold baggage, luggage, cargo, notified to the passengers. courier and mail dispatches, flight and airport supplies and onboard Ukraine has no special passenger protection legislation for package stores including meals; holidays, bankruptcy protection or distribution and airfares. • the physical protection of the airport perimeter and its patrol; and • the location of parking no closer than 50 metres to the airport building. 40 Are there mandatory insurance requirements for the operators of aircraft? 42 What serious crimes exist with regard to aviation? The government of Ukraine adopted Regulation No. 1535 dated 12 October These include illegal acts of natural and legal persons whose activities are 2002, which obliges Ukrainian carriers to insure liability for the injury or connected with the use of air space; the design, manufacture, maintenance death of passengers on international flights as well as liability of the third and operation of aviation equipment; business activities in the aviation parties on the ground within the limits provided by international treaties or sector; service of air transportation; or aviation safety. These are punished the law of a country into whose territory the flight is made, including insur- with financial penalties. The illegal acts are: ance of war risks. Insurance shall be arranged with local insurance compa- • aircraft operation without permission to fly or with overdue permission; nies which may re-insure their risks in London or any other international • violation of mandatory insurance requirements for the operators of aviation insurance market. aircraft; The minimum requirement as to loss or damage to luggage, mail or • destruction of onboard and ground means to define materials and cargo is limited to US$20 per kg. documents that may be used to discover the reasons for an aviation The minimum requirement for insurance of unregistered hold bag- accident or incident; gage is US$400. • performance of flights in an aircraft that is not duly maintained; • use of an aerodrome that does not correspond to the type of aircraft 41 What legal requirements are there with regard to aviation and flight; security? • failure to submit in time or undue disclosure of information required Ukraine is a party to the Convention for the Suppression of Unlawful by the SAS; Seizure of Aircraft signed at the Hague on 16 December 1970 and the • failure to use obligatory marks and signals connected with air Convention for the Suppression of Unlawful Acts against the Safety of Civil movement; Aviation signed at Montreal on 23 September 1971. • passenger or cargo transportation without due licence; Ukraine has a State Programme of Aviation Security of Civil Aviation • performance of flights without due allowance for route operation or adopted by Law No. 545-IV dated 20 February 2003, which corresponds to violation of limits introduced for the route; or United Nations Security Council Resolution 1373 and Annex 17 of the ICAO • access of aviation personnel to professional activities without due Convention. licence or with violation of limits stated in the licence, etc. To prevent the coming on board of any weapon, explosives or other dangerous items that may be used in illegal conduct, the following actions are performed:

Anna Tsirat [email protected]

46/11 Turgenevska Street, suite 2 Tel: +380 44 239 23 90 Kyiv 01054 Fax: +380 44 239 23 90 Ukraine www.jvs.com.ua

www.gettingthedealthrough.com 197

United Arab Emirates

Donald H Bunker, Ian Veall, Christine Veall and Henock Girma Donald H Bunker and Associates

General 5 What requirements apply in the areas of financial fitness and nationality of ownership regarding control of air carriers? 1 Which bodies regulate aviation in your country, under what basic laws? An operator of an air carrier must be: • considered a UAE corporate body, which requires an ownership by The United Arab Emirates is a federation comprising seven emirates (Abu nationals of over 50 per cent; or Dhabi, Dubai, Sharjah, Fujairah, Ajman, Umm-Al-Quwain and Ras-Al- • any corporate entity that is located in a free trade zone (which may be Khaimah), each with its own legal system. foreign-owned and controlled). Pursuant to UAE Federal Law No. 4 of 1996, the General Civil Aviation Authority (GCAA) was established as a federal autonomous body under The GCAA requires the applicant for an AOC to demonstrate financial the Ministry of Communications (now under the authority of the Minister capabilities to sustain its operations. It should also be noted that certain of Development for the Government Sector) to regulate civil aviation in the emirates’ departments of civil aviation require proof of financial fitness for UAE in accordance with the Law of Civil Aviation as the competent author- an operator to obtain a trade licence. ity thereunder. The GCAA’s organisational structure is headed by a director general 6 What procedures are there to obtain licences or other rights to who is responsible for a board of directors comprising the Minister, as chair- operate particular routes? man of the board, four members (each being a chairman of Departments of Civil Aviation of Abu Dhabi, Dubai, Sharjah and Fujairah) and a repre- An operator of any aircraft based in the UAE must have an authority to sentative from the Ministry of the Interior and the UAE Air Force. operate under a licence or permit issued by the GCAA that shall define its The principal legislation regulating civil aviation is: conditions, such as: • Federal Law No. 20 of 1991 issuing the Law of Civil Aviation; • its aircraft must be registered in a state approved by the GCAA; • Civil Aviation Regulations (the Regulations); and • each aircraft must maintain a current certificate of airworthiness • Federal Law No. 8 of 1993 issuing the Commercial Transactions Law, issued by the state of registry; providing for the rules of Air Carriage. • each aircraft must bear the appropriate marks of nationality and registration; Regulation of aviation operations • the aircraft must comply with the equipment requirements of the GCAA in addition to those of the state of registry; 2 How is air transport regulated in terms of safety? • the members of its aircrew must hold the appropriate licences; Air transport safety is regulated by the GCAA, which maintains strict • liability insurance must be maintained with respect to crew, passen- requirements as to airworthiness and licensing procedures for flight crew gers and third parties on the ground in accordance with established and other relevant personnel. All requirements relating to safety are found principles; and in the Law of Civil Aviation and the Regulations. • the commercial operator must hold an appropriate AOC.

3 What safety regulation is provided for air operations that do 7 What procedures are there for hearing or deciding contested not constitute public or commercial transport and how is the applications for licences or other rights to operate particular distinction made? routes? The GCAA regulates the safety of all air transport and the same airwor- Applications are made directly to the GCAA. There are no rights of appeal thiness guidelines apply to both private and commercial aircraft. All or any provisions for formal public hearings. commercial operators based in the UAE must obtain an air operator’s certificate (AOC) and operations specifications from the GCAA before 8 Is there a declared policy on airline access or competition and, conducting operations, but proposed operators of UAE-registered pri- if so, what is it? vate category aircraft do not need to obtain an AOC, although they need Currently there is no stated policy on airline access or competition. authority to operate pursuant to a private operator certificate. The GCAA may grant an exemption to operators of foreign aircraft 9 What requirements must a foreign air carrier satisfy in order based in the UAE and used for commercial air transport operations from to operate to or from your country? compliance with the Law of Civil Aviation for up to one year. Foreign- With respect to foreign air carriers operating from the UAE, see question 6. registered aircraft operated under this exemption shall have their AOC Aircraft operating to the UAE must be in compliance with the regulations revoked and be required to leave the UAE on completion of the exemption of their state of registration. period. 10 Are there specific rules in place to ensure aviation services 4 Is access to the market for the provision of air transport are offered to remote destinations when vital for the local services regulated and, if so, how? economy? Pursuant to the Law of Civil Aviation no aircraft may operate within the There are no rules in place that require aviation services to be provided to territory or air space of the UAE without a licence or permit issued by the remote destinations when vital to the local economy. GCAA or pursuant to an international treaty or effective bilateral air agreement. The licence or permit shall be deemed personally granted and may not be assigned.

198 Getting the Deal Through – Air Transport 2016

11 Are charter services specially regulated? 22 Are there any laws or rules specifically relating to ground Charter services are not regulated in the UAE. handling? There is no national law with respect to ground handling in the UAE. The 12 Are airfares regulated and, if so, how? respective DCAs are responsible for and regulate matters relating to ground Airfares are not regulated in the UAE. handling in their respective emirates in accordance with the administrative procedures together with the provisions of the Law of Civil Aviation and Aircraft the Regulations. For example, Dnata Airport Services, which together with Emirates comprises the Emirates Group, is the sole ground handling agent 13 Who is entitled to be mentioned in the aircraft register? Do at Dubai International Airport. requirements or limitations apply to the ownership of an aircraft listed on your country’s register? 23 Who provides air traffic control services? And how are they To be registered with the GCAA, an aircraft must be owned by, or leased to: regulated? • a UAE national or a corporate entity controlled by UAE nationals or The GCAA has the authority and responsibility for the provision of air navi- having UAE nationality; or gation services and all aspects of flight safety. • a corporate entity that is located in a UAE free trade zone, which may be foreign-owned and controlled. Liability and accidents

A mortgagee may be recorded on the register (see question 14). 24 Are there any special rules in respect of death of, or injury to, passengers or loss or damage to baggage or cargo in respect of 14 Is there a register of aircraft mortgages or charges and, if so, domestic carriage? how does it function? Special rules with respect to liability regarding air carriage are provided There is no mortgage registry in the UAE. However, it has been the practice under the Commercial Transactions Law. for creditors financing foreign-owned aircraft to have the existence of any foreign-registered mortgage relating to such aircraft noted by the GCAA 25 Are there any special rules about the liability of aircraft on its files. The GCAA will also acknowledge the existence of any irrevoca- operators for surface damage? ble de-registration and export request authorisation validly registered with The owner of any civil aircraft flying over the UAE territory is liable for any the International Registry under the Cape Town Convention, 2001. (The damage caused to people or property on the surface. UAE acceded to the Cape Town Convention on 13 April 2008.) While there is no specific law on the point and there have been no 26 What system and procedures are in place for the investigation court decisions in this regard, it is expected that after noting such mort- of air accidents? gage, and assuming that the mortgage is legal, valid and binding under the The GCAA, either itself or through an external body nominated by it, has laws by which it expresses it is governed, a security interest will be created. the jurisdiction and obligation to investigate all accidents and incidents involving aircraft that occur within the territory and waters of the UAE. 15 What rights are there to detain aircraft, in respect of unpaid airport or air navigation charges, or other unpaid debts? 27 Is there a mandatory accident and incident reporting system No detention rights exist with respect to unpaid airport or air navigation and, if so, how does it operate? charges per se. However, detention rights may be available under the Any local authority must inform the competent authority immediately in general civil law in favour of an owner or in the case of in rem rights in an case of an aircraft accident occurring in the area of its jurisdiction. aircraft of other creditors, although there are no known cases with respect The aircraft involved and any debris or cargo relating thereto may not to aircraft. be moved from the accident site without the consent of the competent authority. 16 Do specific rules regulate the maintenance of aircraft? Representatives of the states of registry and the manufacturer may The maintenance of aircraft is regulated by the GCAA. Maintenance attend the investigation as observers. Such states together with the organisations supporting aircraft types specified in UAE AOCs must be International Civil Aviation Organization, as well as the manufacturer, registered in the UAE as approved maintenance organisations. owner, operator or insurer, who suffer damages as a result of the accident, shall be entitled to receive a copy of the investigation report of the compe- Airports tent authority. 17 Who owns the airports? Competition law The airports of the UAE are owned by the respective governments of the emirates in which they are located. 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? 18 What system is there for the licensing of airports? The UAE does not have competition or antitrust laws, although the enact- The regulation and licensing of airports in the UAE is the responsibility of ment of such laws is being contemplated. the GCAA. 29 Is there a sector-specific regulator or are competition rules 19 Is there a system of economic regulation of airports and, if so, applied by the general competition authority? how does it function? See question 28. There is no system for the economic regulation of airports in the UAE. Each airport is operated and promoted by the department of civil aviation 30 How is the relevant market for the purposes of a competition (DCA) in the relevant emirate. assessment in the aviation sector defined by the competition authorities? 20 Are there laws or rules restricting or qualifying access to See question 28. airports? All aircraft entering any airport of the UAE must comply with security 31 What are the main standards for assessing the competitive requirements established by the Law of Civil Aviation and the Regulations. effect of a transaction? All airports must have a security protocol that follows the requirements of See question 28. the GCAA. 32 What types of remedies have been imposed to remedy 21 How are slots allocated at congested airports? concerns identified by the competition authorities? The allocation of slots is regulated by the relevant DCAs in the UAE. See question 28. www.gettingthedealthrough.com 199

Update and trends On 18 March 2015, the GCAA issued Information Bulletin No. 02/2015 Such Information Bulletin further specified that, in the case of an highlighting the legal framework of AOC approval in the UAE and intended acquisition of a UAE air operator, such acquisition will be commenting on the GCAA’s procedures in relation to certification, subject to GCAA approval and such operator will need to undergo a revocation and suspension of such AOCs. In particular, such partial or full certification exercise where an active AOC is held and Information Bulletin advised that: that a full certification exercise will be required where such operator is • an AOC which was inactive or suspended or was not renewed inactive or its AOC has been suspended or revoked. for more than three months will be revoked. In case of voluntary Given the recent prevalence of unmanned aerial systems (UAS) in suspension of an AOC by the AOC holder, such AOC may, with the the UAE and the need to regulate their use, the GCAA, in April 2015, approval of the GCAA, be renewed for another three months, after issued GCAA UAS Regulations, among other things, classifying UAS the lapse of which period, the AOC will be rendered inactive; based on mass and user, providing guidelines for their use including • an inactive, suspended or revoked AOC will not be renewed. The noting privacy law issues and required GCAA permissions, designating AOC holder must undergo fresh certification procedures; and flying zones and establishing a UAS registration system. • an application for AOC which is not progressing for more than three months or which was not completed within 18 months from the date of application will be cancelled.

Donald H Bunker [email protected] Ian Veall [email protected] Christine Veall [email protected] Henock Girma [email protected]

Al Reem Tower, Suite 1606 Tel: +971 4 222 9747 Al Maktoum Street, PO Box 42717 Fax: +971 4 222 8767 Dubai www.dhbassociates.com United Arab Emirates

200 Getting the Deal Through – Air Transport 2016

• seizure, destruction or damage of an aircraft in service while in flight An aircraft shall be deemed to be in flight status at any time from the status; moment of the completion of the closing of the doors at the time of board- • placement of any equipment or material with an intention of destroying, to the time that the doors are opened for disembarkation. ing or damaging an aircraft while in flight status; An aircraft shall be deemed to be in service from the commencement • destruction or damage to or interference with navigation facilities if of operation of the aircraft for flight until 24 hours after any landing of the such action endangers any aircraft in flight status; and aircraft. • threatening the safety of any aircraft while in flight status, with false There are numerous other lesser offences subject to various degrees information. of penalty.

www.gettingthedealthrough.com 201

United Kingdom

John Balfour Clyde & Co LLP

General the holder of an air operator’s certificate (AOC). The operator of any such flight must hold and comply with a national AOC. 1 Which bodies regulate aviation in your country, under what Aerial work means any purpose, other than commercial air transport basic laws? or public transport, for which an aircraft is flown if valuable considera- The two principal bodies responsible for the regulation of aviation are the tion is given or promised for the flight or purpose of the flight. Aerial work Department for Transport, headed by the Secretary of State for Transport, operations are only regulated from the safety point of view with regard to and the Civil Aviation Authority (CAA). The CAA was established in 1971 crew licensing, although they are subject to aircraft safety rules and rules as a regulatory body removed from detailed ministerial supervision, while of the air. subject to some control by the Secretary of State. A private flight is a flight that is not aerial work, public transport or The basic law laying down the functions of the Secretary of State and commercial air transport. The operation of private flights is not regulated the constitution and functions of the CAA is the Civil Aviation Act 1982, and from the safety point of view, although they are regulated from the point of further provisions relevant to the relationship between the Department for view of pilot licensing and aircraft safety. Transport and the CAA are contained in the Transport Act 2000. The 1982 Act provides for the making of statutory instruments for car- 4 Is access to the market for the provision of air transport rying out the Chicago Convention and generally for regulating air naviga- services regulated and, if so, how? tion. The principal such statutory instrument is the Air Navigation Order Access to the market for the provision of air transport services is dealt with 2009. by EU Regulation No. 1008/2008 on common rules for the operation of air services in the Community and the regulations implementing it in the UK, Regulation of aviation operations the Operation of Air Services in the Community Regulations 2009. 2 How is air transport regulated in terms of safety? The EU Regulation provides that no undertaking established in the EU shall be permitted to carry by air passengers, mail or cargo for remunera- The principal instrument regulating aviation safety is the Air Navigation tion or hire without an operating licence. The grant and maintenance in Order 2009, which contains provisions relating to: aircraft (registration, force of an operating licence in the UK requires satisfaction of a number airworthiness, maintenance and equipment), operators (air operators’ cer- of conditions: tificates and operating and other requirements relating to public transport • a principal place of business in the UK; flights), personnel (required crew, powers and duties of commander and • AOC issued by the CAA; licensing of flight crew and air traffic controllers), air traffic services and • one or more aircraft at its disposal through ownership or dry-lease; equipment and aerodromes. • main occupation is the operation of air services; Further detailed safety rules are contained in the Air Navigation • more than 50 per cent owned or effectively controlled by member (Dangerous Goods) Regulations 2002, the Air Navigation (General) states or nationals of member states, or both; Regulations 2006 (principally as to weight and performance require- • compliance with required insurance minima; and ments) and the Rules of the Air Regulations 2015 (containing flight rules • satisfaction of specified financial fitness conditions. and aerodrome traffic rules). The principal body responsible for regulating aviation safety is the An undertaking that possesses an operating licence granted by an EU CAA, although an increasing role is being played by the European Aviation member state is permitted to operate air services for the carriage of pas- Safety Agency (EASA) in developing the fundamental safety rules laid sengers, cargo or mail for remuneration or hire between any two points in down in EU regulations, for enforcement by the CAA, and safety regula- the EU, without the need to obtain any further permit or authorisation. tion of non-UK-registered aircraft is within the responsibilities of the sec- This freedom of access may only be qualified in the following ways: retary of state. • on routes on which a public service obligation has been imposed in Safety regulation of non-UK-registered aircraft is the responsibility of accordance with the Regulation; the secretary of state. • where traffic distribution rules direct operations to a particular airport serving the same city, in accordance with the Regulation; 3 What safety regulation is provided for air operations that do • subject to any limitations or conditions imposed to meet serious envi- not constitute public or commercial transport and how is the ronmental problems or sudden problems of short duration resulting distinction made? from unforeseeable and unavoidable circumstances; or There are four different categories of flight relevant for the purposes of • subject to published EU, national, regional and local operational rules safety regulation: commercial air transport, public transport, aerial work relating to safety, security, the protection of the environment and the and private. allocation of slots. A flight is a commercial air transport flight if it is required to be operated in accordance with EU-OPS, which provides rules regulating In the UK the CAA is the body responsible for granting operating licences operations. and monitoring compliance with the conditions, and suspending or revok- A flight is a public transport flight if it is not flying on a commercial ing them in the event of non-compliance. air transport flight and valuable consideration is given or promised for the carriage of passengers or cargo in the aircraft on that flight, or passengers or cargo are carried gratuitously on the aircraft and the flight is operated by

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5 What requirements apply in the areas of financial fitness and 10 Are there specific rules in place to ensure aviation services nationality of ownership regarding control of air carriers? are offered to remote destinations when vital for the local Under the Regulation, an applicant must be able to show that it can meet economy? at any time its actual and potential obligations for a period of 24 months The EU Regulation permits a member state to impose a public service from commencement and that it can meet its fixed and operational costs obligation (PSO) in respect of scheduled air services between any airport for a period of three months from commencement without taking account in the EU and an airport serving a peripheral or development region in its of income. territory or on a thin route to any airport in its territory where the route Existing licence holders of an operating licence must notify the CAA is considered vital for the economic and social development of the region of substantial changes in their activities, mergers or acquisitions and any the airport serves, and prescribes various procedures and conditions which significant change in ownership. If the CAA considers that such changes must be complied with. A number of such PSOs have been imposed on have a significant bearing on the carrier’s finances it may ask for a revised routes in the UK, principally in the Scottish Highlands and Islands. 12 month business plan or that the licence be re-submitted for approval, or both. Existing licence holders must also supply to the CAA audited 11 Are charter services specially regulated? accounts each year, and other specified financial information upon request. Within the EU there is no distinction for regulatory purposes between Modified financial requirements apply to carriers exclusively engaged scheduled and charter services, except only that a public service obligation in operations with aircraft of less than 10 tons MTOW or less than 20 seats. may only be imposed in respect of scheduled air services. A licence holder must also be able to satisfy the CAA at all times that it is As regards services to or from points outside the EU, as mentioned more than 50 per cent owned and effectively controlled, directly or indi- above, different route licences are issued for scheduled services on the one rectly through one or more intermediate undertakings, by member states hand and charter services on the other. The licensing of charter services or nationals of member states. is generally very liberal, subject only to any restrictions in the applicable While the Regulation provides a definition of ‘effective control’, bilateral. the way in which the requirements apply in particular situations can be unclear. Some assistance is provided by a guidance note provided by the 12 Are airfares regulated and, if so, how? CAA on these requirements. Under the EU Regulation, Community air carriers are entirely free to set fares for services on routes between two points in the EU. Moreover, 6 What procedures are there to obtain licences or other rights to member states may not discriminate on grounds of nationality or identity operate particular routes? in allowing Community air carriers to set fares and rates for air services An applicant for an operating licence must satisfy the CAA that it meets between their territory and a third country. the various requirements mentioned above. As regards intra-EU routes, However, the Regulation does provide some regulation of fares from no further authorisation or procedure is necessary. A UK-licensed carrier the points of view of transparency and non-discrimination. Fares available wishing to operate a route to or from a point outside the EU must obtain a to the general public must include applicable conditions when offered or route licence on application to the CAA. published, the final price must at all times be indicated and be all-inclusive, However, such a licence (issued either as a scheduled licence or a char- and where elements of the fare are separated out they must be specified. ter licence) only permits operations on any route where the holder has traf- Air carriers must grant access to generally available fares without discrimi- fic rights, and the holder will need to ensure that traffic rights exist or are nation based on the nationality or place of residence of the customer or obtained under the relevant bilateral and that it is designated under the place of establishment of the agent or ticket seller. bilateral by the Department for Transport. Excessively high or excessively low pricing may, depending on the An air operator that is not a Community air carrier must hold an air circumstances, be capable of constituting an abuse of a dominant posi- transport licence in order to operate a UK-registered aircraft for the car- tion for the purposes of article 102 of the Treaty on the Functioning of the riage for reward of passengers or cargo. In practice, this requirement European Union (TFEU), and similar UK competition legislation. applies mostly to air carriers established in the Channel Islands, the Isle of With respect to international air services outside of the EU, under the Man and British dependent territories. Open Skies agreements concluded with the United States and Canada air carriers are free to set their fares on routes between points in those states 7 What procedures are there for hearing or deciding contested and the EU subject to normal competition policy. However, there are more applications for licences or other rights to operate particular restrictive bilateral air services agreements to which the UK is a party that routes? may require air carriers to submit fares to the corresponding national aero- In practice, contested applications now only arise in respect of routes to or nautical authorities for approval. from outside the EU for which there is ‘scarce capacity’ under the relevant bilateral, and a decision has to be made as to how to allocate such scarce Aircraft capacity as between competing applicants. Relevant procedures, which 13 Who is entitled to be mentioned in the aircraft register? Do include the ability to make representations and the right to a public hear- requirements or limitations apply to the ownership of an ing, are contained in the Civil Aviation Authority Regulations 1991. aircraft listed on your country’s register? 8 Is there a declared policy on airline access or competition and, Only the following persons are entitled to hold a legal or beneficial interest if so, what is it? by way of ownership in an aircraft registered in the UK: • the Crown; Within the EU, as there is essentially complete freedom of access for • Commonwealth citizens; Community air carriers, as mentioned above, there is no scope for any par- • nationals of any EU or EEA state; ticular policy position. As regards air transport to or from countries outside • British protected persons; the EU, the CAA adopts similarly a very liberal policy, as indicated in its • bodies incorporated in and having their principal place of business in published Statement of Policies on Route and Air Transport Licensing. some part of the Commonwealth; and • undertakings formed in accordance with the law of and having their 9 What requirements must a foreign air carrier satisfy in order registered office, central administration or principal place of business to operate to or from your country? in the EU or EEA. Under the Air Navigation Order, an aircraft registered in a state other than the UK must not take on board or discharge any passengers or cargo in the However, the CAA may permit an aircraft in which an unqualified person UK for valuable consideration without an operating permit granted by the holds an interest to be registered in the UK if it is satisfied that the aircraft secretary of state. Such permit will only be granted if the necessary traffic may otherwise be properly registered and: rights under the relevant bilateral exist, and also subject to satisfying the • the person resides or has a place of business in the UK; and Department for Transport of compliance by the carrier with a number of • the aircraft is leased to a qualified person. administrative requirements relating to the carrier’s aircraft and insurance arrangements.

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14 Is there a register of aircraft mortgages or charges and, if so, safety requirements are met. A licence may be granted either for private how does it function? use or for public use, and in the latter case the airport must be available to The Mortgaging of Aircraft Order 1972 provides for the creation of a all persons on equal terms and conditions at all times when it is available Register of Aircraft Mortgages to be kept by the CAA. There may be entered for the take-off or landing or aircraft. on it any mortgage of a UK-registered aircraft, including spare parts for such an aircraft. As a general rule, a mortgage of an aircraft entered in the 19 Is there a system of economic regulation of airports and, if so, Register has priority over any other mortgage of or charge on that aircraft, how does it function? other than any other mortgage previously entered on the Register, and The system of economic regulation of airports that had been provided other than liens or other rights to detain aircraft arising by operation of law. by the Airports Act 1986 was replaced by a new system introduced by the Following the UK’s ratification of the Cape Town Convention and the Civil Aviation Act 2012. Under this system an airport operator that has, or is Aircraft Protocol, which will be in force in the UK from 1 November 2015, to likely to acquire, substantial market power requires a licence from the CAA the extent that the mortgage over an aircraft constitutes an ‘international where the benefits of this are likely to outweigh the adverse effects from interest’ under the Convention the priority of such international inter- the point of view of users of air transport services, and competition law est will be determined by the date of its registration on the International does not provide sufficient protection. Heathrow and Gatwick currently Registry established by the Convention. hold licences, which include conditions relating to price controls, service quality and operational resilience. Although Stansted had previously been 15 What rights are there to detain aircraft, in respect of unpaid regulated, the CAA found that it did not meet the market power test and airport or air navigation charges, or other unpaid debts? consequently it has not required a licence since 1 April 2014. Under section 88 of the Civil Aviation Act 1982, a government or local authority airport, or an airport specifically designated by order, may detain 20 Are there laws or rules restricting or qualifying access to any aircraft in respect of which any airport charges are due and unpaid, or airports? any other aircraft of which the person in default is the operator at the time, Under the Airports Act 1986, the Secretary of State has certain powers to or both. restrict or qualify access to airports: Under the Civil Aviation (Chargeable Air Services) (Detention and • by means of a direction where necessary or expedient in the interests Sale of Aircraft) Regulations 2001, the CAA may detain and sell any air- of national security or external relations; craft in respect of which any air navigation charges are due and unpaid, or • through traffic distribution rules between airports serving the same any other aircraft of which the person in default is the operator at the time, area in the UK (which must comply with the conditions relating to such or both. Similar provisions are made in respect of unpaid charges due to rules in EU Regulation No. 1008/2008); Eurocontrol by the Civil Aviation (Chargeable Air Services) (Detention and • through the imposition of a limit on the number of movements at an Sale of Aircraft for Eurocontrol) Regulations 2001. airport; and In addition, a lien may arise by operation of law in favour of a person • by means of a scheme prepared by the CAA, at the direction or the sec- who has undertaken work on an aircraft improving it (ie, repair, as opposed retary of state, allocating capacity at the airport. to mere maintenance). Providers of maintenance and repair services often incorporate contractual liens in their contractual terms and conditions 21 How are slots allocated at congested airports? which give broader rights. HM Revenue & Customs has rights to detain Slot allocation at airports in the EU is regulated by EU Regulation No. aircraft in certain circumstances. 95/93 (as amended) and (to the extent they are compatible with the Regulation) the IATA Worldwide Scheduling Guidelines. The revision of 16 Do specific rules regulate the maintenance of aircraft? the Regulation is currently under consideration. UK-registered aircraft must not fly unless they are maintained in accord- Most congested airports are designated as coordinated airports, ance with EASA requirements, laid down in EU regulations, and any main- although an airport with a lesser degree of congestion may be designated tenance, overhaul, repair or modification work must be followed by the as a schedules facilitated airport. At a coordinated airport, the allocation issue of a certificate of release to service issued by the holder of an aircraft of slots is carried out by an independent coordinator (in the UK Airport maintenance engineer’s licence or other approved person. Coordination Limited). The bedrock of the slot allocation system is the The CAA issues such maintenance engineer’s licences, and mainte- principle of ‘grandfather rights’, whereby an airline which has used a slot nance organisations are approved pursuant to the Part 145 provisions con- for at least 80 per cent of the time during a traffic season is entitled to have tained Annex II to Commission Regulation 2042/2003 on the continuing it allocated to it in the next equivalent season, but if it cannot show at least airworthiness of aircraft. 80 per cent usage, then the slot must be given up to the slot pool. There are certain other rules about priority, including that priority in the allocation Airports of 50 per cent of slots from the slot pool must be given to ‘new entrants’ (as defined). 17 Who owns the airports? Slots may be transferred by an air carrier between its routes and Since the BAA was privatised in 1986, the state does not own any of the between carriers in a group, but cannot otherwise generally be transferred. airports in the UK. Heathrow, Aberdeen and Glasgow (former state- However, they may be exchanged between air carriers. In reliance on this owned airports) and Southampton are now owned by a consortium led right the practice of slot trading has developed, at any rate at the London by Ferrovial of Spain. Ferrovial did also own Gatwick, Edinburgh and airports, whereby valuable slots are exchanged for worthless slots plus Stansted Airports, but was compelled by the Competition Commission money and thus effectively sold. This practice was sanctioned by a judg- to sell them, with Gatwick and Edinburgh now owned by Infrastructure ment of the High Court in 1999 (in R v Airport Coordination Limited ex p Partners (also the owner of London City Airport), and with Stansted owned The States of Guernsey Transport Board) and, although it had previously by the Manchester Airport Group as of March 2013. expressed doubts on the legality of the practice, by the Commission in a There are, however, a number of airports owned by local authori- communication issued in April 2008. ties through public airport companies, and the Scottish government The EU Regulation is implemented in the UK by the Airports Slot owns a number of the airports in the Highlands and islands of Scotland. Allocation Regulations 2006. Other major airport owners include the Manchester Airport Group, which, in addition to Manchester and Stansted, owns the East Midlands, 22 Are there any laws or rules specifically relating to ground Bournemouth and Humberside Airports, and the Peel Group, which owns handling? Durham Tees Valley, Doncaster, Sheffield and Manchester City Airports EU Directive No. 96/67 liberalises access to the ground handling mar- and has a 35 per cent share in Liverpool Airport. ket at EU or EEA airports, and is implemented in the UK by the Airports (Groundhandling) Regulations 1997. 18 What system is there for the licensing of airports? Although no airport is required to be licensed, aircraft engaged on public transport flights or for instruction in flying can generally only take off or land at a licensed airport. The CAA must grant a licence if various specified

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The main effect of the Directive and the Regulations is to: by the Air Navigation (General) Regulations 2006 and article 226 of the Air • require member states to allow access for third-party ground handlers Navigation Order, which require the reporting to the CAA of any occur- to the ground handling market at airports with annual traffic of not less rence that endangers or that, if not corrected, would endanger an aircraft, than 2 million passengers or 50,000 tonnes of freight, subject to the its occupants or any other person. ability of member states to impose limits in certain circumstances; and • oblige member states to ensure that airlines can self-handle at air- Competition law ports with annual traffic of not less than 1 million passengers or 25,000 28 Do sector-specific competition rules apply to aviation? If not, tonnes of freight, subject to the possibility of limiting this in certain do the general competition law rules apply? circumstances. There are no sector-specific competition rules applying to aviation. The Revision of the Directive is currently under consideration. general competition rules (principally those contained in the Competition Act 1998, and closely modelled on articles 101 and 102 of the TFEU) apply 23 Who provides air traffic control services? And how are they fully to aviation as they do to other sectors. regulated? 29 Is there a sector-specific regulator or are competition rules The principal provider of air traffic control services in the UK is National applied by the general competition authority? Air Traffic Services Limited, a partnership between the state and the Airline Group (a company whose shareholders include the principal UK The body principally responsible for enforcing competition law in the UK is airlines). This company is licensed by the CAA under the Transport Act the Competition and Markets Authority, which replaced the Office of Fair 2000, and providers of air traffic control services at other airports are Trading (OFT), although the CAA has some role, particularly as regards similarly licensed. airports. The European Commission has competence as regards matters with a EU or EEA dimension. Liability and accidents 30 How is the relevant market for the purposes of a competition 24 Are there any special rules in respect of death of, or injury to, assessment in the aviation sector defined by the competition passengers or loss or damage to baggage or cargo in respect of authorities? domestic carriage? The OFT has not yet had to do so on many occasions, but it generally fol- EU Regulation No. 2027/97 (as amended by Regulation No. 889/2002), lowed the well-developed European Commission approach based on iden- as implemented in the UK by the Air Carrier Liability Regulations 2004, tifying overlapping routes, starting on a basis of point-to-point city-pair provides that the rules of the Montreal Convention 1999 shall apply to all routes, but also including surface and indirect alternatives, to the extent carriage by a Community carrier (ie, a carrier with an operating licence they provide acceptable substitutes, and taking account of networks. issued by an EU or EEA member state). Consequently, the Montreal Convention regime applies in respect of death of or injury to passengers or 31 What are the main standards for assessing the competitive loss or damage to baggage in the context of domestic carriage within the effect of a transaction? UK, as well as international carriage. Similarly to EU merger control, UK merger control law is concerned with identifying whether a transaction would result in a substantial lessening of 25 Are there any special rules about the liability of aircraft competition within the relevant market. operators for surface damage? Section 76(2) of the Civil Aviation Act 1982 provides for strict liability on 32 What types of remedies have been imposed to remedy the part of the owner of the aircraft (or where the aircraft has been leased concerns identified by the competition authorities? for a period exceeding 14 days, the lessee) in respect of material loss or The OFT only rarely had occasion to seek remedies, but where it had done damage caused to any person or property on land or water by, or by a per- so it followed the approach of the European Commission in connection son in, or an article, animal or person falling from an aircraft while in flight with mergers, alliances and similar transactions. The principal remedy was taking off or landing, subject to a defence of contributory negligence. whereby the parties agreed to give up slots at congested airports in order The Rome Convention 1952 provides for strict liability with limits to enable competitors to launch competing services on the affected routes. of liability related to the weight of the aircraft, but the UK is not a party. Other typical remedies included: agreement to enter into interline and In 2009, two conventions were signed in Montreal on Compensation special prorate agreements with new competitors, and to permit them to for Damage Caused by Aircraft to Third Parties, and Compensation for participate in the parties’ frequent-flyer programmes; agreements to enter Damage to Third Parties Resulting from Acts of Unlawful Interference into intermodal agreements with surface transport operators; and some- Involving Aircraft. However, neither of these Conventions has yet received times freezing frequencies. the number of ratifications necessary to bring it into force. As a counterpart, section 76(1) of the Act provides that no action shall Financial support and state aid lie in respect of trespass or nuisance by reason only of the flight of an aircraft over any property at a reasonable height or the ordinary incidence of 33 Are there sector-specific rules regulating direct or indirect such flight, provided it is conducted in accordance with applicable legal financial support to companies by the government or requirements. Nevertheless, a remedy may exist at common law. government-controlled agencies or companies (state aid) in the aviation sector? If not, do general state aid rules apply? 26 What system and procedures are in place for the investigation There are no UK rules regarding state aid in the aviation sector. However, of air accidents? the EU rules contained in articles 107 to 109 of the TFEU apply fully to EU Regulation 996/2010 lays down provisions on the investigation of air transport. The European Commission’s approach to state aid to airlines civil air accidents, and is to a large extent consistent with the provisions and airports is evident from a large number of investigations it has carried on this subject in Annex 13 to the Chicago Convention. The system pre- out, and also (revised) guidelines it issued in February 2014. scribed involves investigation by an inspector of air accidents, who pre- pares a report, the purpose of which is the prevention of accidents and not 34 What are the main principles of the state aid rules applicable to apportion blame, and which is published, but also involves EASA and to the aviation sector? establishes a European Network of Civil Aviation Safety Investigation The main principles of the EU state aid rules are: Authorities. • financialassistance from state sources will not constitute aid if it is such as would have been given by a private investor in market econ- 27 Is there a mandatory accident and incident reporting system omy circumstances; and, if so, how does it operate? • the concept of aid is to be interpreted very widely, as is the concept of EU Directive No. 2003/42 requires member states to establish a system for state sources; reporting civil aviation occurrences that endanger or would endanger an • aid may be permitted, as furthering the development of certain aircraft, its occupants or any other person. 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Miscellaneous Update and trends 39 Is there any aviation-specific passenger protection Applicable new regulations include: legislation? • London Airports policy; and The principal aviation-specific passenger protection legislation applicable • EU Regulation 261. in the UK is provided at EU level, by: • Directive No. 90/314 protecting consumers in connection with package holidays; – principally, that the aid must form part of an approved restructuring • Regulation No. 261/2004 on compensation and assistance to passen- programme and be used for its purposes, and not be used for any anti- gers in the event of denied boarding, cancellation and long delay; competitive purposes. The Commission’s typical ‘one time, last time’ • Regulation No. 2111/2005 requiring passengers to be informed of the approach makes it unlikely that approval will be given for payment of identity of the operating air carrier; aid to an airline which has already received it; • Regulation No. 1107/2006 on the rights of disabled persons and per- • aid for the financing of the construction of airport infrastructure may sons with reduced mobility when travelling by air; and be permitted if necessary to meet a clearly defined objective of general • Regulation No. 80/2009 setting out a code of conduct for computer- interest and there is no unacceptable effect on competition; ised reservation systems. • operating aid to regional airports is allowed for a transitional period of 10 years and under certain conditions; and As mentioned in question 12, EU Regulation No. 1008/2008 regulates fares • start-up aid to airlines for new routes from small and peripheral air- from the points of view of transparency and non-discrimination. ports (owned by the state or regional government) may be approved if There is implementing legislation providing for the enforcement of a number of conditions are satisfied (following the Commission’s deci- the above rules. In addition, the Civil Aviation (Air Travel Organisers’ sion in the Ryanair/Charleroi case). Licensing) Regulations 2012 provide for a system of licensing of those selling accommodation on aircraft (other than airlines themselves), involving 35 Are there exemptions from the state aid rules or situations in bonding and financial protection for consumers. which they do not apply? The principal exemptions are provided by article 107 of the TFEU, 40 Are there mandatory insurance requirements for the although the mandatory exemptions will rarely apply in an airline context. operators of aircraft? In addition, a Commission Regulation stipulates that aid amounting to up EU Regulation No. 785/2004 lays down mandatory minimum insurance to €200,000 over a three-year period is de minimis and hence not subject requirements for air carriers and aircraft operators, and is implemented to control. in the UK by the Civil Aviation (Insurance) Regulations 2005. The minimum requirements are in line with most airlines’ normal insurance cover. 36 Must clearance from the competition authorities be obtained Compliance with these requirements is a precondition of eligibility for an before state aid may be granted? operating licence under Regulation No. 1008/2008. Under the EU state aid rules, state aid must be notified to and approved by Non-EU or EEA operators wishing to operate to or from the UK need the Commission before it is granted, and if it is granted before and without to satisfy the Department for Transport that they have adequate insurance such permission it is illegal. in place.

37 If so, what are the main procedural steps to obtain clearance? 41 What legal requirements are there with regard to aviation security? The procedure for applying to the Commission for approval of aid is contained in EU Council Regulation No. 659/1999, as implemented An increasing amount of legislation on aviation security is made at EU by Commission Regulation No. 794/2004, and amended by Council level. The basic Regulation is No. 300/2008 on common rules in the field of Regulation No. 734/2013. The Commission normally carries out a prelimi- aviation security, and there are a number of implementing measures, most nary examination, and if this gives rise to concerns that there has been ille- importantly Commission Regulation No. 185/2010, and the most recent of gal aid it will normally continue with a full investigation. which is Commission Regulation No. 245/2013 of 19 March 2013 amending Regulation No. 272/2009 on the screening of liquids, aerosols and gels at 38 If no clearance is obtained, what procedures apply to recover EU airports. unlawfully granted state aid? In addition, the Aviation Security Act 1982, and regulations made thereunder, contain detailed provisions on safety relating to aircraft, air- If the Commission reaches a formal decision that the aid is illegal, it will craft operators, airports and air cargo agents. normally as part of that decision require the member state concerned to The Civil Aviation Act 2012 transferred certain aviation security func- recover it. If it does not do so, the Commission may commence infringe- tions from the secretary of state to the CAA. ment proceedings before the Court of Justice.

John Balfour [email protected]

The St Botolph Building Tel: +44 20 7876 5000 138 Houndsditch Fax: +44 20 7876 5111 London EC3A 7AR www.clydeco.com United Kingdom

206 Getting the Deal Through – Air Transport 2016

42 What serious crimes exist with regard to aviation? The Air Navigation Order 2009 creates certain criminal offences relat- The Aviation Security Act 1982 creates the offences, punishable by impris- ing to the safety of aircraft, including: endangering an aircraft or person in onment for life, of hijacking an aircraft, destroying an aircraft in service, an aircraft, or causing or permitting an aircraft to endanger any person or committing on board an act of violence likely to endanger its safety, or property; being drunk on an aircraft; smoking on an aircraft; failing to obey placing on board an aircraft anything likely to destroy or endanger it, and the lawful commands of the aircraft commander; and using threatening, of carrying a firearm, explosive or article made, adapted or intended for abusive or insulting words or behaviour towards a member of the crew of injuring persons or property on an aerodrome or air navigation installation, the aircraft. or carrying munitions of war on board an aircraft. The Corporate Manslaughter and Corporate Homicide Act 2007 intro- UK criminal jurisdiction extends to any act or omission taking place duced the offence of corporate manslaughter, committed where a corpo- on board a British-controlled aircraft in flight outside the UK which would rate entity causes death in gross breach of its duty of care. Such offence is have been an offence if committed in the UK, and to any act or omission capable of being committed in connection with death arising in an aircraft taking place on a foreign aircraft outside the UK if it lands next in the UK accident. and the act or omission would constitute an offence under the law of the state of registration of the aircraft (section 92 Civil Aviation Act 1982).

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United States

Andrew J Harakas and Christopher Carlsen Clyde & Co US LLP

General In determining whether to grant an applicant with the necessary authority to become a US air carrier, the DOT determines whether the 1 Which bodies regulate aviation in your country, under what applicant is ‘fit, willing, and able’ to conduct commercial operations. An basic laws? applicant’s fitness is assessed through a three-part test. First, the DOT US civil aviation is primarily regulated by the US Department of examines the competence of an applicant’s key personnel and manage- Transportation (DOT) and the Federal Aviation Administration (FAA), ment team to determine if the applicant possesses the requisite experience an agency within the DOT. Laws pertaining to aviation are found within to operate an airline. Second, the DOT examines an applicant’s proposed Subtitle VII (section 40101 et seq) of Title 49 of the US Code (the operating and financial plans to determine if the applicant will possess the Transportation Code). Regulations issued by the DOT and FAA are pub- necessary capital for its operations. Third, the DOT examines the compli- lished in Title 14 of the Code of Federal Regulations (FARs). Certain other ance record of an applicant’s owners and managers to assess for, among regulations related to, among other matters, aviation security and accident other things, a history of safety violations or consumer fraud. See FAR Part investigations are set forth in Title 49 of the Code of Federal Regulations. 204 for information that an applicant is required to provide to the DOT. In addition to the application of US federal laws and regulations, Further, the applicant must be owned or controlled by US citizens, as each individual state also has aviation statutes, regulations and common defined in 49 USC 40102(a)(15). law tort rules that may apply to the extent that such state laws and regula- With respect to codeshare services, US and foreign air carriers must tions are not found to be pre-empted by federal law. Thus, when operating obtain authorisation from the DOT in the form of a statement of authori- within a state in the US, it is important to consult the relevant state’s laws sation under 14 CFR Part 212. The DOT will approve the application if it and regulations in addition to federal laws. determines that the proposed service is in the public interest.

Regulation of aviation operations 5 What requirements apply in the areas of financial fitness and nationality of ownership regarding control of air carriers? 2 How is air transport regulated in terms of safety? With regard to financial fitness, see question 4. When assessing a US air The safety of commercial and private air transport is regulated by the carrier applicant’s financial fitness to conduct commercial operations, the DOT and the FAA. The Transportation Security Administration (TSA), DOT’s Air Carrier Fitness Division determines whether the applicant pos- an agency within the Department of Homeland Security (DHS), regulates sesses or has access to the necessary capital. A third party must verify that aviation security. The National Transportation Safety Board (NTSB) is an the applicant can cover all pre-operating costs and operating expenses for independent federal agency responsible for the organisation, conduct and three months of operations. Further, pursuant to 49 USC 41110(e), an air control of non-criminal accident and incident investigations within the US carrier must continue to demonstrate financial fitness to remain certifi- where the accident or incident involves any civil aircraft or certain public cated. The DOT, however, has not provided specific financial fitness crite- aircraft. ria for air carriers. In relation to nationality of ownership and control, a certificated car- 3 What safety regulation is provided for air operations that do rier must be owned by and be under the actual control of US citizens. not constitute public or commercial transport and how is the Pursuant to 49 USC 401012(a)(15) and 14 CFR 204.2(c)(3), a corporation distinction made? or association has US citizenship when it is organised under US laws, when FAR Part 91 provides general operating and flight rules for all US civil air- its president and at least two-thirds of the board of directors and manag- craft operations. Sub-chapter G of the FARs provides additional require- ing officers are citizens, citizens own and control at least 75 per cent of the ments specific to certain categories of commercial carriers (air carriers and entity’s voting interest and when US citizens possess ‘actual control’ of the operators for compensation or hire). These additional requirements vary corporation. with respect to the category of the commercial carrier. Generally, com- For US citizens to be in ‘actual control’, foreign interests must not pos- mercial carriers are required to be certified under either Part 121 (major sess a substantial influence over a carrier’s operations. Although foreign- commercial airlines), Part 125 (private (non-common) carriers using large ers must not own more than 25 per cent of voting stock, in the past, the aircraft) or Part 135 (short-distance (commuter) and on-demand (air taxis DOT, on a case-by-case basis, has approved up to 49 per cent of total equity and charters) carriers, both common and private). In contrast to a private foreign ownership in a carrier. In 2007, the US and EU entered into an air carrier, a ‘common carrier’ is a carrier that ‘holds out’ to the public or to a transport agreement agreeing that 50 per cent or more total equity owner- segment of the public a willingness to transport passengers or property for ship by EU nationals in a US air carrier would not automatically trigger a compensation. presumption that foreigners possessed actual control.

4 Is access to the market for the provision of air transport 6 What procedures are there to obtain licences or other rights to services regulated and, if so, how? operate particular routes? Yes. A US air carrier must obtain ‘safety’ and ‘economic’ authorisation FAR Part 121, subpart E, governs certificate holder route approval for from the FAA and the DOT, respectively. (See question 9 regarding foreign domestic and flag operations. For DOT approval, among other things, air carriers.) a carrier must prove it can satisfactorily conduct scheduled operations The requirements for the FAA’s ‘safety’ authorisation are dependent between each regular, provisional and refuelling airport over its proposed upon under which category an applicant’s air transport services falls. For routes and prove the adequacy and availability of airports and other vital example, in addition to meeting requirements under FAR Part 91, a carrier facilities (set forth in FAR sections 121.97–121.107). may be required to obtain certification under FAR Parts 121 or 135.

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International routes are subject to international bilateral or multilat- the information it receives, the DOT determines whether approving the eral agreements. The DOT issues international route authority to a carrier application is in the public interest. subject to competitive proceedings and presidential approval. Pursuant to FAR Part 129, after receiving a foreign air carrier permit or an exemption, the carrier then must obtain FAA operations specifications. 7 What procedures are there for hearing or deciding contested FAR Part 294 provides simplified licensing requirements for Canadian applications for licences or other rights to operate particular air taxi operators. In addition, applicants from EU member states (also routes? Iceland and Norway) may file abbreviated applications for permits or FAR Part 302 governs procedures for DOT aviation economic proceedings. exemptions pursuant to the US–EU Reciprocal Recognition Procedures Subpart B addresses US air carrier certificate and foreign air carrier per- (released by the DOT on 19 February 2009), which delineates the US–EU mit licensing proceedings. Although the DOT generally reviews certificate Joint Committee procedures for the reciprocal recognition of regulatory and permit applications as written submissions, the DOT decision-maker determinations with regard to airline fitness and citizenship. (usually the Assistant Secretary for Aviation and International Affairs) may decide, on petition by any person or on his or her own initiative, that an oral 10 Are there specific rules in place to ensure aviation services presentation or an administrative law judge (ALJ) decision is necessary. An are offered to remote destinations when vital for the local ALJ presides over an oral evidentiary hearing and recommends or makes economy? an initial decision, which is subject to the decision-maker’s approval. Yes. Congress established the Essential Air Service (EAS) programme (Transportation Code, sections 41731–41748). The Airline Deregulation 8 Is there a declared policy on airline access or competition and, Act of 1978 gave airlines almost complete freedom to choose which domes- if so, what is it? tic markets to serve and what fares to charge. The EAS programme was Yes. US Federal antitrust policies include those against monopolisation, established to ensure that small communities that were served by air car- attempted monopolisation and mergers and acquisitions lessening compe- riers before deregulation would continue to have a minimal level of sched- tition (see questions 28–32). The aviation sector is subject to the Sherman uled air service and access to the nation’s hub airports. Antitrust Act, 15 USC sections 1–7 and the Clayton Act, 15 USC sections The programme subsidises carriers for providing ‘basic essential air 12–27, 29 USC sections 52–53. The Department of Justice (DOJ) reviews air- service’ to these communities. The Transportation Code section 41732 and line mergers, acquisitions and interlocking directorates (corporate board FAR Part 398 define and set guidelines for this service. With some excep- of director members sitting on boards of multiple corporations) in the avia- tions, at a minimum, such service must include two daily round trips for six tion sector as it does for any other sector. days a week, not more than one intermediate stop to a hub airport, reason- The Transportation Code section 41712 authorises the DOT to investi- able times for passengers and reasonable prices. gate and determine whether an air carrier ‘has or is engaged in an unfair or The Federal Aviation Modernization and Reform Act of 2012 capped deceptive practice or an unfair method of competition in air transportation the number of communities participating in this programme and man- or the sale of air transportation’. After providing notice and an opportunity dated that communities average at least 10 passenger enplanements per for hearing, the Secretary of Transportation can order a carrier to stop such service day to remain in the programme. conduct if the Secretary, guided by section 40101, determines doing so is EAS programme carriers generally enter into two-year contracts with in the public interest. The DOT also has authority to issue civil penalties the DOT. Ninety days prior to a contract’s expiration the DOT issues a for violations. request for bids containing service and subsidy proposals from which it selects an EAS carrier. When selecting a carrier, the DOT considers the 9 What requirements must a foreign air carrier satisfy in order carrier’s reliability, the carrier’s contract, marketing arrangements and to operate to or from your country? interline arrangements with larger carriers operating at the target hub and the concerns of the community being served. A foreign air carrier conducting operations to and from the United States must receive safety and economic authority from the FAA and the DOT. To 11 Are charter services specially regulated? receive economic authority, a foreign carrier must apply for a foreign air carrier permit (Transportation Code, section 41301, et. seq.) or an exemp- Yes. A charter must be either a FAR Part 119 certificated carrier or have tion (Transportation Code, section 40109). The foreign air carrier permit a FAR Part 298 exemption. FAR Part 135 operating rules govern charter is the more permanent licence, typically having a duration coextensive service providers. FAR Parts 212 and 380 provide further charter-specific with the terms of the applicable bilateral aviation agreement between the regulations. Part 380 requires all persons who wish to arrange public char- United States and the applicant’s homeland, or, if there is no agreement, ter flights to first submit a charter prospectus to the Special Authorities a duration of five years. Typically, the DOT grants exemptions for one- Division with the required information about the proposed charter pro- or two-year periods, and the carrier must apply for renewal to continue gramme. This document outlines the procedures, payment information operations. and related forms needed to apply. FAR Parts 211 and 302 address what information is needed in an appli- The Transportation Code section 41104 authorises the Secretary of cation to obtain initial economic authority. FAR section 211.20 sets forth Transportation to regulate and restrict ‘marketability, flexibility, acces- the filing and evidence requirements for prospective foreign air carriers, sibility, or variety of charter air transportation’ to the extent that such which include proof: regulation or restriction is required by the public interest. This section also • of the carrier’s ownership; prohibits, with certain exceptions, regularly scheduled charter services to • of the carrier’s operational and financial fitness to conduct the pro- or from airports lacking FAR Part 139 operating certificates (see question posed services; and 18) in aircraft designed to seat more than nine passengers. Transportation • that the proposed services either fall under an air transport agreement is not ‘regularly scheduled’ if the air carrier negotiates the departure time, between the US and the applicant’s homeland or sufficient comity and departure location and arrival location with its customers. reciprocity to support granting the applicant’s proposed services. 12 Are airfares regulated and, if so, how? FAR Part 302, Subpart B addresses rules applicable to Federal Air Carrier Since the Airline Deregulation Act of 1978, domestic airfares (travel fares Permit Licensing proceedings. within all US territories) have not been regulated. The DOT, however, col- In accordance with the International Aviation Safety Assessment lects airfare information and provides that information to the public in a (IASA) programme, the DOT notifies the FAA of the application to obtain quarterly Consumer Air Fare Report (www.dot.gov/policy/aviation-policy/ the FAA’s evaluation of the respective civil aviation authority’s capability domestic-airline-fares-consumer-report). for providing safety certification and continuing oversight for its interna- With regard to foreign airfares, US and foreign carriers file tariffs with tional carriers. The focus of the IASA programme is on a country’s ability, the DOT which, subject to exemption, provide fare information for carrier as opposed to that of the individual air carrier, to adhere to international routes or joint fare information for routes served by a carrier jointly with standards and recommended practices for aircraft operations and mainte- another carrier. Pursuant to the Transportation Code section 41501, US nance established by the International Civil Aviation Organization (ICAO). and foreign air carriers’ fares must be ‘reasonable’. A fare cannot be unrea- Public notice of the application is given and, for a specified time sonable for being too low or too high unless it is 5 per cent higher than or period, interested parties may comment on the application. Based upon 50 per cent lower than the ‘standard foreign fare level’ defined in section 41509(e). www.gettingthedealthrough.com 209

Aircraft Airports 13 Who is entitled to be mentioned in the aircraft register? Do 17 Who owns the airports? requirements or limitations apply to the ownership of an Pursuant to section 47102(22) of the Transportation Code, public-use aircraft listed on your country’s register? airports may be publicly or privately owned. Most public use airports are The registration of aircraft is governed by FAR Part 47. An aircraft can be owned by state and local governments either directly, or indirectly (through registered only in the name of its owner, who may be a buyer in possession, a quasi-governmental body called an ‘authority’) or directly licensed while bailee or lessee under a conditional sale contract (FAR section 47.5). military airports are owned by the federal government. An aircraft registered in the US cannot be registered in another coun- However, privately owned public airports must be intended for public try and must be owned by a US citizen, a permanent resident alien or a use and fall under the category of ‘commercial service airports’ or ‘reliever non-citizen corporation meeting certain requirements. airports’ (section 47102(22)). The Code defines ‘commercial service air- To satisfy the requirement that the aircraft be owned by a US citizen, ports’ as airports that have at least 2,500 boardings per year and that a foreign applicant may place legal title of the aircraft with US citizen or receive scheduled service (section 47102(7)) while a ‘reliever airport’ is resident alien trustees. By doing so, the foreign applicant becomes a ben- designated by the Secretary of Transportation to relieve congestion at eficial owner. An affidavit from each trustee must be filed stating that the commercial service airports (section 47102(23)). ‘General aviation air- trustee is not ‘aware of any reason, situation, or relationship (involving ports’ which are public airports not meeting the boarding or scheduling beneficiaries or other persons who are not US citizens or resident aliens) as requirements of commercial service airports cannot be privately owned. a result of which those persons together would have more than 25 per cent of the aggregate power to influence or limit the exercise of the trustee’s 18 What system is there for the licensing of airports? authority’. FAR Part 139 governs airport certification in non-US government oper- Pursuant to FAR section 47.8, a domestic corporation owned by foreign ated airports. Generally, an airport operating certificate (AOC) is required shareholders may be considered a citizen through establishing a voting for airports serving scheduled passenger operations on aircraft with more trust. To do so, the corporation must file a voting trust agreement with the than nine passenger seats but fewer than 31 and serving non-scheduled FAA and all voting trustees must be US citizens. A change in the voting trust passenger operations with aircraft of more than 30 seats. An AOC appli- resulting in a US citizen voting interest of less than 75 per cent results in cant submits an airport certification manual. The manual describes the loss of citizenship. airport’s operating procedures, facilities, equipment and other information A non-citizen corporation can register an aircraft in the US if it is organ- deemed necessary for the airport to show how it will comply with specific ised and doing business in the US and the aircraft is based and primarily Part 139 regulations. AOC possession subjects airports to FAA inspection. used in the US (at least 60 per cent of the aircraft’s flight hours must come Under FAR Part 121.590 carriers may use non-certificated airports if from flights starting or terminating in the US). Pursuant to FAR section 47.9, the safety standards and airport classification requirements under Part 139 a semi-annual report must be filed with the FAA certifying this information. are met. Aircraft registrations expire after three years and aircraft owners are Airports also may be subject to state or local municipal regulations. required to renew every three years. 19 Is there a system of economic regulation of airports and, if so, 14 Is there a register of aircraft mortgages or charges and, if so, how does it function? how does it function? Under section 40116 of the Transportation Code (the Anti-Head Tax Act), Yes. Under FAR Part 49, the FAA maintains an aircraft registry that records state and local governments may collect ‘reasonable rental charges, land- aircraft conveyances, bills of sale, mortgages, contracts and other instru- ing fees, and other service charges from aircraft operators for the use of ments. The registry assists prospective aircraft purchasers, financiers and airport facilities’. The US Supreme Court in Northwest Airlines, Inc v County other interested parties. The registry includes information about the regis- of Kent, 510 US 355 (1994), held that for charges and fees to be ‘reasonable’ tered owner, any recorded security interests and the aircraft’s airworthiness. they must be ‘based on some fair approximation of use of the facilities’, To record a security agreement, chattel mortgage or a claim of lien, not be ‘excess in relation to the benefit conferred’, and ‘not discriminate there is a fee of US$5. In addition to recording an aircraft as collateral, against interstate commerce’. certain aircraft engines and propellers capable of 550 rated take-off horse- Section 47129 of the Transportation Code requires the Secretary of power and certain propellers capable of absorbing over 750 rated take-off Transportation to determine the reasonableness of the fees airport owners horsepower may be recorded as well. and operators impose upon air carriers. The Secretary makes a determina- The United States ratified the Cape Town Convention on International tion after receiving the written request from either an owner or operator Interests in Mobile Equipment recognising an electronic international or an air carrier’s written complaint. FAR Part 302, subpart F provides that aircraft and aircraft engine registry. FAR Part 49, subpart F addresses fil- an ALJ makes an initial finding which becomes final upon the Secretary’s ing an interest on this registry. Eligible items to record include airframes approval. Further to Subtitle VII, Part B, Chapter 471 of this section, the capable of transporting at least eight individuals or over 2,750 kilograms in Secretary of Transportation is required to publish its policy outlining goods, helicopters capable of transporting at least five individuals or 450 criteria for the determination of the reasonableness of fees. The latest kilograms in goods, jet engines with at least 1,750 pounds of thrust, and Policy Regarding Airport Rates and Charges was published in the Federal turbine or piston aircraft engines of at least 550 rated take-off horsepower. Register on 10 September 2013 and sets out the importance of consultation with aircraft carriers before modifying the charges as well as charge struc- 15 What rights are there to detain aircraft, in respect of unpaid tures and setting methods which can be used reasonably. airport or air navigation charges, or other unpaid debts? Airports receiving federal funds have limits on the usage of these rev- Subject to state law and federal bankruptcy law, creditors may obtain a enues. Section 47133(a) of the Transportation Code limits the usage of rev- judgment against an aircraft operator for unpaid debts. Upon an operator’s enues to capital or operating costs of ‘the airport, the local airport system, default, a lien holder may foreclose upon a lien and seize an aircraft. or other local facilities owned or operated by the airport owner or operator Under section 46304 of the Transportation Code, the government and directly and substantially related to the air transportation of passen- may seize an aircraft for unpaid civil penalties assessed against an aircraft gers or property’. According to the FAA’s Air Carrier Incentive Program owner until the owner pays the penalty, a compromise occurs, the Attorney Guidebook, relevant to federally obligated airports seeking to incentivise General decides not to bring a civil suit or the owner deposits a bond condi- air carrier service, airport revenue may be used for ‘the full costs of activi- tioned on payment of penalty. ties directed at promoting competition at an airport’ and ‘public and industry awareness of airport facilities and services’, but may not be used for 16 Do specific rules regulate the maintenance of aircraft? ‘destination or tourism marketing, any activities, materials, or expenses for FAR Part 43 prescribes rules governing aircraft maintenance, preventative general economic development not related to the airport, and marketing or maintenance, rebuilding and alteration, maintenance records and who promotional activities unrelated to airports or airport systems’. may perform these activities and approve an aircraft’s return to service. The FAA publishes on its website, www.faa.gov, an airport compliance manual for airports which have accepted federal funds or property.

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20 Are there laws or rules restricting or qualifying access to 23 Who provides air traffic control services? And how are they airports? regulated? Yes. Airport access may be restricted or qualified through ‘slot’ regula- The FAA employs and trains most air traffic controllers through the Air tions or ‘perimeter rules’. Since 1968, at some congested airports, the FAA Traffic Organization (ATO). The ATO was created by executive order to has divided and allocated runway time into ‘slots’. Section 41714 of the ‘reorganiz[e] the FAA’s air traffic services and related offices into a perfor- Transportation Code defines a ‘slot’ as a ‘reservation for an instrument mance-based, results-oriented, organization’ (Executive Order No. 13,180, flight rule take-off or landing by an air carrier of an aircraft in air trans- 65 Fed. Reg. 77,493 (7 December 2000)). portation’. At some airports, FAA perimeter rules restrict airport usage if a The FAA regulates air traffic control services. FAR Part 65 provides flight is scheduled to take off from or land at another airport outside a des- air traffic control operator eligibility, certification requirements and oper- ignated perimeter. For instance, the Washington Metropolitan Airports Act ating rules. Further, FAR Part 65 requires that air traffic control operators of 1986 limits air traffic using Ronald Reagan Washington National Airport perform their duties in accordance with FAA air traffic control manuals to to flights taking off or landing within a 1,250-mile radius. ‘provide for the safe, orderly and expeditious flow of air traffic’. In FAR Part These restrictions recently have been relaxed. For example, under 170, the FAA provides rules governing an airport’s qualification for an air- section 41718, Congress authorised the DOT to grant several ‘beyond- port traffic control tower. perimeter’ and ‘within-perimeter’ exemptions at Ronald Reagan Washington National for transportation meeting certain criteria, such as Liability and accidents promoting service to small communities and increasing competition. At 24 Are there any special rules in respect of death of, or injury to, other airports, restrictions have been allowed to expire. passengers or loss or damage to baggage or cargo in respect of domestic carriage? 21 How are slots allocated at congested airports? The US is a party to the Montreal Convention (1999), the Warsaw In 1969, the FAA established a high-density rule (HDR) at five airports – Convention (1929) and the Warsaw Convention as amended by the Hague John F Kennedy, LaGuardia, O’Hare, Washington National and Newark Protocol (1955) and Montreal Protocol No. 4 (1975). These conventions – and labelled these airports high density traffic airports (HDTA). Except apply to international carriage by air and exclusively govern the liability of for Newark, HDR became a permanent rule at these airports. The FAA set an air carrier with respect to passenger injury or death, baggage and cargo. HDTA slot quotas based on each airport’s operating capacity. If the carriage is not governed by these conventions, the liability of the FAR Part 93 governs slot allocation. Slots may be bought, sold or air carrier generally is governed by state tort law. Common carriers owe leased for any consideration, including being traded for other slots at any passengers the highest duty of care, which includes providing safe condi- HDTA. These slots, however, are not property rights, but instead operat- tions for its passengers during transportation, ingress and egress and warning privileges subject to FAA control, which the FAA reserves the right to ing passengers of potentially dangerous conditions. withdraw (FAR 93.221). With exceptions, the FAA recalls and redistributes In addition, some states have enacted statutes that impose liability on slots not used 80 per cent of the time over a two-month period. Pursuant to the owner of an aircraft for death or injury to person or property resulting FAR section 93.225, redistribution occurs via lottery and slots received via from a negligent or wrongful act or omission in the operation of the aircraft. lottery can only be traded for other slots in the same HDTA for the first 24 Although an air carrier may limit liability for damaged or lost baggage months after allocation. Separate slot allocation procedures are used for occurring during domestic carriage, FAR Part 254 requires that a carrier not international and EAS operations, also found in Part 93. A slot for which limit liability to less than US$3,400 per passenger on large passenger air- the take-off or landing is in a foreign point (or if it is a foreign operator, the craft. The DOT reviews this limit every two years and adjusts the amount flight is a continuation of a flight which lands or takes off at a foreign point) using the July consumer price index for that year. However, the limits must be returned to the FAA if it will not be put to such use for a period provided in Part 254 do not apply for loss, damage or delay concerning longer than two weeks (FAR 93.217(3)). wheelchairs or other assistive devices provided in Part 254. The basis for calculating the compensation for a lost, damaged or destroyed wheelchair 22 Are there any laws or rules specifically relating to ground or other assistive device is the original purchase price of the device (FAR handling? section 382.131). Yes. The Transportation Code prohibits fixed-base operators (which If a government employee’s (such as an FAA employee) negligent or includes ground handlers) from being given an exclusive right to use an wrongful act or omission caused death or injury to another, the Federal airport on which federal funds have been expended (49 USC sections Tort Claims Act (FTCA)(28 USC section 2671 et seq) applies. The FTCA 40103(e), 47107(a)(4)). However, provision of services at an airport by provides a limited waiver of the United States’ immunity from suit, allowing only one fixed-based operator is not an exclusive right if ‘the right would be claims for damages ‘for injury or loss of property, or personal injury or death unreasonably costly, burdensome or impractical for more than one fixed- caused by the negligent or wrongful act or omission of any employee of base operator to provide the services; and allowing more than one fixed- the government while acting within the scope of his office or employment, based operator to provide the services would require reducing the space under circumstances where the United States, if a private person, would be leased under an existing agreement between the one fixed-base operator liable to the claimant in accordance with the law of the place where the act and the airport owner or operator’ (49 USC section 47107(a)(4)(A)(B)). or omission occurred’ (28 USC section 1346(b)). Under the FTCA, the US Where the airport owner has not entered into an express commitment or government is liable ‘in the same manner and to the same extent as a pri- shown intent to exclude other reasonably qualified providers, the FAA does vate individual under like circumstances, but [is not] liable for interest prior not consider the presence of only one provider as a breach of the exclusive to judgment or for punitive damages’ (28 USC section 2674). rights prohibition. The FAA outlines its policy in relation to exclusive rights Certain state law doctrines may impose liability upon an owner or les- in advisory circular AC 150/5190-6, explaining, for example, that the sponsor of aircraft even when the aircraft is not under their immediate control sor of the airport may provide all services for the airport as long as this is or possession. For example, some states have a ‘dangerous instrumental- done directly (‘proprietary exclusive right’). ity’ doctrine that imposes vicarious liability on aircraft owners or lessors Fixed-base operators similarly using the airport can only be subjected for the negligent operation of the aircraft that causes injury. An aircraft to the same charges (49 USC section 47107(a)(5)) and an air carrier using owner or lessor also may be liable under a state law negligent entrustment the airport can either service itself or use any fixed-based operator allowed doctrine, under which the aircraft owner or lessor is under a duty to entrust by the airport to provide services (49 USC section 47107(a)(6)). it to a responsible person whose use will not create an unreasonable risk Additionally, while airports often provide specific written minimum of harm to others. Thus, an aircraft owner or lessor may be liable for its requirements for fixed-based operators, the FAA highly recommends mini- active negligence in entrusting the aircraft to an incompetent or reckless mum requirements to reduce the potential for violation of federal obliga- individual. Such liability may occur even if the individual being entrusted tions at airports receiving federal funds, the latest of which are set out in is a licensed pilot, if the owner or lessor was, or should have been, aware of advisory circular AC 150/5190-7. facts indicating that the individual lacked the ability to safely operate the aircraft under certain conditions. The Federal Registration and Recordation of Aircraft – Limitation of Liability Statute (Transportation Code section 44112) may serve as a defence to dangerous instrumentality claims where aircraft owners or www.gettingthedealthrough.com 211

© Law Business Research Ltd 2015 UNITED STATES Clyde & Co US LLP lessors are vicariously liable even though they are not in possession of the 27 Is there a mandatory accident and incident reporting system aircraft. Section 44112(b) provides: and, if so, how does it operate? 49 CFR Part 830 requires aircraft operators to immediately notify the NTSB Liability – A lessor, owner, or secured party is liable for personal injury, after accidents and certain incidents. Operators must immediately notify death, or property loss or damage on land or water only when a civil the NTSB only for certain incidents such as malfunctions or failures in a aircraft, aircraft engine or propeller is in the actual possession or flight control system, damage to property other than the aircraft exceeding control of the lessor, owner, or secured party, and the personal injury, US$25,000, in-flight fire, and loss of information from more than half of an death, or property loss or damage occurs because of (i) the aircraft, aircraft’s cockpit displays (49 CFR section 830.5). engine or propeller; or (ii) the flight of, or an object falling from, the aircraft, engine or propeller. Competition law

The purpose of the statute is to remove one of the obstacles to financing or 28 Do sector-specific competition rules apply to aviation? If not, purchases of new aircraft by removing the threat of liability for aircraft over do the general competition law rules apply? which financiers have no actual possession. Recently, one court held that to Federal competition laws include the Sherman Act, 15 USC sections 1–7; the the extent that the dangerous instrumentality doctrine applies to injuries, Clayton Act, 15 USC sections 12–27, 29 USC sections 52–53; the Robinson- damages or deaths that occur on the surface of the earth (but not to pas- Patman Act, 15 USC section 13; and the Federal Trade Commission Act, sengers on board the aircraft), the doctrine conflicts with, and is therefore 15 USC sections 41–58. While the Sherman Act and Clayton Act apply to pre-empted by, section 44112(b). However, claims based upon the active carriers, the Robinson-Patman Act and the Federal Trade Commission Act negligence of an owner or lessor (eg, negligent maintenance and inspec- do not. tion) would not be pre-empted. Although that decision did not directly The Sherman Act addresses unreasonable ‘contracts, combinations address the interplay between section 44112(b) and state negligent entrust- or conspiracies in restraint of trade’ as well as ‘monopolization, attempted ment law, the federal statute likely would not pre-empt a claim based upon monopolization, or conspiracy or combination to monopolize’ (15 USC negligence of the owner or lessor while the aircraft is in its possession or sections 1–2). The US Supreme Court has held that this prohibition only control, such as a claim for negligent entrustment. extends to ‘unreasonable restraints of trade’ (State Oil Co v Khan, 522 US 3, 10 (1997)). The Clayton Act applies to conduct not specifically addressed 25 Are there any special rules about the liability of aircraft by the Sherman Act, such as mergers and acquisitions. The Clayton Act operators for surface damage? prohibits mergers and acquisitions when the effect ‘may be substantially to No. The US has neither signed nor ratified the Rome Convention of 1952, lessen competition, or to create a monopoly’ (15 USC section 18). In deter- the 2009 Convention on Compensation for Damages to Third Parties mining whether to prohibit a proposed merger, regulators analyse whether resulting from Acts of Unlawful Interference Involving Aircraft or the the proposed merger is likely to create or enhance market power or facili- 2009 Convention on Compensation for Damages Caused by Aircraft to tate its exercise and use the Horizontal Merger Guidelines (see question Third Parties. 30) in conducting that analysis. State law governs the liability of aircraft operators for surface damage. The Transportation Code contains industry-specific competition rules Notably, some states have statutes that impose absolute liability on the granting power to the DOT, similar to the FTCA’s grant of authority to the owner of an aircraft for injuries to individuals and property on the ground Federal Trade Commission not applying to air carriers. The FTCA author- caused by the flight of an aircraft or objects falling from an aircraft. (See ises the FTC to investigate and prevent ‘unfair methods of competition’ question 24 regarding potential pre-emption of such state statutes in 49 and ‘unfair or deceptive acts or practices’ (15 USC section 45). Similarly, USC section 44112 for lessors, owners or secured parties who lack actual section 41712 of the Transportation Code authorises the DOT to investi- possession and control of the aircraft.) gate and prevent an air carrier from engaging in ‘an unfair or deceptive practice or unfair method of competition in air transportation or the sale 26 What system and procedures are in place for the investigation of air transportation’ if taking such action would be in the public interest. of air accidents? Under the Transportation Code section 41720, major US air carriers must submit joint venture agreements for the DOT to determine whether Pursuant to 49 USC section 1132, the NTSB, an independent investigatory the agreements are against public interest and anti-competitive. agency, is responsible for investigating each civil aircraft accident. The The DOT also has the power to grant US and foreign air carriers immu- NTSB defines an ‘accident’ as ‘an occurrence associated with the opera- nity from US antitrust laws allowing carriers to enter into commercial alli- tion of an aircraft that takes place between the time any person boards the ance agreements to coordinate on matters including fares, capacity and aircraft with the intention of flight and all such persons have disembarked, services (Transportation Code, sections 41308–41309). and in which any person suffers death or serious injury, or in which the aircraft receives substantial damage’ (14 CFR section 830.2). Along with the 29 Is there a sector-specific regulator or are competition rules NTSB, section 1132 requires the FAA to assist in the investigation when nec- applied by the general competition authority? essary and, pursuant to section 1131, other parties may be joined to assist in the investigation, as well. The NTSB does not conduct criminal inves- The DOJ and DOT regulate competition in the aviation sector. The DOJ’s tigations and must give the Federal Bureau of Investigation investigative antitrust division, a general competition authority, enforces federal anti- priority if it appears criminal conduct may have caused the accident (49 trust laws – the Sherman Act and the Clayton Act – and reviews proposed USC section 1131(a)(2)). mergers, acquisitions and interlocking directorates to determine whether Section 1131 requires that an NTSB investigation ‘establish the facts, they are anti-competitive. circumstances, and cause or probable cause’ for each accident and provide The DOT, as a sector-specific regulator, has authority to stop ‘an unfair a public report. Further, pursuant to section 1136, in the event of a foreign or deceptive practice or an unfair method of competition in air transporta- or domestic air carrier crash resulting in major loss of life, the NTSB desig- tion or the sale of air transportation’, to grant antitrust immunity to cer- nates an NTSB employee to act as a liaison between the families and the air tain air carrier agreements when in the public interest, and to oversee joint carrier as well as an organisation to provide family services. ventures between carriers such as code-sharing, joint marketing, and joint NTSB investigations vary depending on the size of the accident and frequent-flyer programmes (Transportation Code sections 41712, 41720 the type of aircraft involved. ‘Major investigations’ of accidents involving 41308 and 41309). Although the DOJ enforces federal antitrust laws, the commercial air carriers often require that the NTSB send a ‘go-team’ from DOT conducts an analysis and provides the DOJ with input on carrier its main headquarters to the scene to investigate the accident. For smaller mergers and acquisitions. accidents, an NTSB regional office may handle the accident investigation. The FTC and individual states, which usually regulate competition, For certain accidents involving small aircraft, rotorcrafts, amateur-built do not regulate air carrier competition. The FTCA exempts common carri- aircraft and restricted category aircraft, the NTSB may delegate the inves- ers from the FTC’s authority (15 USC sections 45–46). 49 USC section 1713 tigation to the FAA and the FAA reports its findings to the NTSB. exempts carriers from state antitrust laws.

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30 How is the relevant market for the purposes of a competition The DOT also has authority to exempt air carriers from certain eco- assessment in the aviation sector defined by the competition nomic regulations when necessary. authorities? According to the DOJ’s Horizontal Merger Guidelines, the DOJ considers 34 What are the main principles of the state aid rules applicable both product and geographic dimensions when defining a relevant product to the aviation sector? market to assess competition. When defining a market, the DOJ looks to a See question 10 regarding the EAS programme and question 33 regarding consumer’s ability and willingness to substitute demand from one product the ATS Act. to another as a result of a price increase or a reduction in quality or service. The FAA addresses the insurance needs of the US aviation industry not For passenger aviation transportation, the DOJ uses specific air carrier adequately met by commercial insurers. Until 15 December 2014 the FAA markets. The DOJ often looks to ‘city pairs’ (the specific origin and destina- provided premium war-risk insurance covering hull loss, passenger liabil- tion points served by an air carrier). The DOJ identifies city pairs covered ity and third-party liability under section 443 of 49 USC. This programme, by merging air carriers and then determines the merger’s effect on custom- set up in the aftermath of 9/11, has now expired. Discussing the reform of ers’ access to those markets. the programme, the FAA Budget for the 2015 Fiscal Year proposes only providing insurance for terrorist attacks involving nuclear, biological or radio- 31 What are the main standards for assessing the competitive active weapons, as this coverage is not available in the commercial market, effect of a transaction? and full war risk aviation coverage for 90 days in the event of a widespread Under the Sherman Act, an agreement must not be an ‘unreasonable cancellation of coverage by the commercial market. restraint of trade’. See State Oil Co v Khan, 522 US 3, 10 (1997). The US The Secretary of Transportation can provide non-premium insurance Supreme Court has held that unlawful monopolisation occurs when there for a period not more than a year if the head of a US government depart- is ‘possession of monopoly power in the relevant market’ and ‘the willful ment, agency or instrumentality agrees to indemnify them against all acquisition or maintenance of that power, as distinguished from growth or losses covered. development as a consequence of a superior product, business, acumen, or historic accident’. United States v Grinnell Corp, 384 US 563, 570–71 (1966). 35 Are there exemptions from the state aid rules or situations in The Court also has held that ‘attempted monopolisation’ occurs when an which they do not apply? entity ‘(1) has engaged in predatory or anticompetitive conduct with (2) a See question 10 regarding the EAS programme and question 33 regarding specific intent to monopolise and (3) a dangerous probability of achieving the ATS Act. monopoly power’ in a relevant market, Spectrum Sports, Inc v McQuillan, To receive non-premium war-risk insurance, the carrier must be 506 US 447, 456 (1993). ‘engaged in operations that the President decides are necessary in the inter- For the Clayton Act and DOT standards, see question 28. est of air commerce, or national security, or to carry out the foreign policy of the United States’. Non-premium insurance is issued on standby mode 32 What types of remedies have been imposed to remedy and only becomes effective when the Department of Defense requests concerns identified by the competition authorities? FAA non-premium insurance, the FAA agrees to provide this insurance and Sherman Act violations may lead to civil or criminal liability, or both. The the FAA notifies the operator that the coverage is in effect. DOJ reserves criminal prosecutions of Sherman Act violations for the most clear and serious violations, such as price fixing and bid rigging. For 36 Must clearance from the competition authorities be obtained corporations, the maximum criminal fine is the larger of US$100 million before state aid may be granted? or twice the amount either gained from the illegal conduct or lost by vic- See question 10. tims. Individuals may be fined up to US$1 million and sentenced to federal prison for up to 10 years (15 USC sections 1–3; 18 USC section 3571(c), (d)). 37 If so, what are the main procedural steps to obtain clearance? The Clayton Act only provides for civil penalties including the issuing of See question 10. an injunction to stop anti-competitive conduct (15 USC sections 21, 26). The DOT is also allowed to enjoin a carrier’s unfair or deceptive practices 38 If no clearance is obtained, what procedures apply to recover (Transportation Code section 41712). unlawfully granted state aid? Violations of the antitrust laws also can create civil liability to third Not applicable. parties who are injured by those violations. Injured parties are entitled to recover treble damages for injury to their business or property caused by Miscellaneous an antitrust violation and are entitled to recover their attorneys’ fees (15 USC section 15). 39 Is there any aviation-specific passenger protection Recently, several air carriers have paid substantial amounts resulting legislation? from Sherman Act violations. The largest fines assessed on carriers include Yes. FAR Part 250 addresses oversales and protection to passengers fines of US$350 million and US$300 million. denied boarding on interstate or foreign flights (on aircraft of 30 or more For the past several years the DOJ has been investigating violations passenger seats). If a flight is oversold, the carrier must ensure that the involving air cargo and freight forwarding services for air cargo. According fewest passengers possible are denied boarding involuntarily (section to the most recent DOJ statistics, the air cargo investigation secured more 250.2a). Under FAR section 250.2b(a), the carrier must request volunteers than US$1.9 billion in criminal fines and over US$100 million in criminal to give up seats prior to denying boarding passengers. Part 250 addresses fines with respect to freight forwarding. The civil class-action suits against the information a carrier must provide a volunteer giving up his or her the air cargo carriers have, to date, resulted in numerous airlines paying or seat. If having to resort to involuntary denials, the regulations stipulate agreeing to pay hundreds of millions of dollars to settle the claims against the boarding priority rules the carrier must follow (section 250.3) and the them. compensation a carrier must provide the passenger (section 250.5). FAR Part 399 protects airline consumers from unfair and deceptive 33 Are there sector-specific rules regulating direct or indirect practices relating to advertising and price increases and, as previously financial support to companies by the government or stated, pursuant to section 41712 of the Transportation Code, the DOT may government-controlled agencies or companies (state aid) in investigate ‘unfair or deceptive practices or an unfair method of competi- the aviation sector? If not, do general state aid rules apply? tion in the sale of air transportation’. Additionally, FAR Part 259 requires The federal government subsidises airlines serving rural communities that air carriers have contingency plans for lengthy tarmac delays. The which would otherwise not receive scheduled air service under the EAS regulations require that carriers covered under these rules (US carriers and programme. Also, pursuant to the FAA Aviation Insurance Programme foreign carriers operating to and from the US providing passenger service and subject to its expiration, the DOT provides non-premium war-risk with aircraft of 30 or more passenger seats) adopt and submit contingency insurance. The Air Transportation Safety and System Stabilization Act plans ensuring that the aircraft will not remain on the tarmac for over a (the ATS Act) allowed airlines to seek federal assistance in the wake of the specified amount of time (three hours for domestic flights and four hours for 11 September 2001 terrorist attacks. international) without an opportunity for its passengers to deplane, subject to certain exceptions such as for safety and security. The plan must include www.gettingthedealthrough.com 213

Update and trends Proposed rulemaking for drones weighing less than 55 pounds airspeed of 100mph and 500 feet above ground level; and over As a result of improvements in drone technology, drones are now being individuals who are involved in the UAS operation. The proposed rules used for a variety of commercial purposes, such as farming, security and also consider a microUAS option in which certain requirements would construction. Further, companies such as Amazon have even sought be relaxed for UAS under 4.4lbs. to use drones to deliver packages. However, the operation of drones These proposed rules do not apply to aircrafts deemed ‘model generates a variety of safety concerns, and, as a result, to use a drone for aircraft’ under section 336 of the 2012 Act. Among other things, section a commercial purpose a drone operator must receive an FAA exemption, 336 of the 2012 Act requires that aircraft falling under that section only which is issued on a case-by-case basis. be operated for hobby or recreation. Further, section 333 of the 2012 The FAA Modernization and Reform Act of 2012 (the 2012 Act) Act allows the FAA to grant exemptions on a case-by-case basis to directed the FAA to establish regulations that ‘provide for the safe allow certain UAS commercial operations prior to the finalisation of the integration of civil unmanned aircraft systems (UAS) into the national proposed rules. airspace system’. On 15 February 2015, the FAA issued a Notice of Prior to finalisation, the proposed rules were required to undergo Proposed Rulemaking (NPRM) with respect to a certain category of public comment and likely revision. The public comment period for the UAS, drones weighing less than 55 pounds (small UAS). rules ended on 24 April 2015. It is unknown when the FAA will issue final The proposed rules include certification requirements for small rules as the process can take a considerable amount of time. UAS operators and operational limitations. The operational limitations This is clearly only the beginning of the process to regulate new provide that the UAS only can be operated: within the visual line-of- technology that has a variety of commercial uses. sight of the UAS operator or a visual observer; in daylight; at a maximum

providing passengers with adequate food and water, medical attention, FAR Part 205 provides different minimums for Part 298 US taxi opera- operable lavatory facilities and notifications during a delay. tors. Such operators must maintain third-party aircraft accident liability The Air Carrier Access Act, 49 USC section 41705, prohibits air car- coverage for bodily injury or death of individuals at US$75,000 per person riers from discriminating based upon a passenger’s mental or physical and a total of at least US$300,000 per aircraft for each occurrence. For disabilities. FAR Part 382 implements this section, setting out air carriers’ loss or damage to third-party property, the operator must maintain at least responsibilities to ensure compliance under this law. US$100,000 for each occurrence. If transporting passengers, the air taxi Other statutes and aviation consumer protection regulations include operator must have insurance coverage for bodily injury or death of aircraft rules pertaining to lost and damaged baggage during domestic carriage passengers of at least US$75,000 per passenger and US$75,000 multiplied (FAR Part 254), refunds (FAR Part 374), carrier on-time performance (FAR by 75 per cent of the number of passenger seats per involved aircraft. Part 234), smoking on board aircraft (FAR Part 252), charter flights (FAR In addition to these rules, there are separate rules in FAR Part 205 for Part 212) and disclosure of code-sharing arrangements (FAR Part 257). Canadian charter air taxi operators.

40 Are there mandatory insurance requirements for the 41 What legal requirements are there with regard to aviation operators of aircraft? security? Yes. FAR Part 205 provides aircraft accident liability insurance require- In November 2001, the TSA was established and assumed responsibility for ments. US and foreign direct air carriers, including commuter air carri- airport security. In March 2003, the TSA and 21 other agencies were consoli- ers but excluding air taxi operators, must maintain third-party aircraft dated into a newly created DHS. DHS responsibilities include transporta- accident liability coverage of at least US$300,000 for third-party bodily tion security, customs, immigration and agricultural inspections. injury or death and for damage to property with at least US$20 million per The Transportation Code Chapter 449 provides rules governing avia- involved aircraft for each occurrence. Carriers, however, need only main- tion security. This Chapter contains sections addressing the screening of tain coverage of US$2 million per involved aircraft for each occurrence for passengers and property (section 44901), information about threats to aircraft with no more than 60 seats or 18,000 pounds maximum payload aviation security (section 44905), explosive detection (section 44913), capacity. deployment of federal air marshals (section 44917), the deployment and Carriers providing passenger air transportation also must maintain use of airport detection equipment (section 44925) and procedures for insurance coverage for bodily injury or death of passengers at a minimum passengers who believe they were wrongfully refused boarding by airport of US$300,000 for any one passenger, and, for involved aircraft in each security (section 44926). occurrence, US$300,000 multiplied by 75 per cent of the number of aircraft passenger seats.

Andrew J Harakas [email protected] Christopher Carlsen [email protected]

The Chrysler Building Tel: +1 212 710 3900 405 Lexington Avenue Fax: +1 212 710 3950 New York, NY 10174 www.clydeco.com United States

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42 What serious crimes exist with regard to aviation? 7192, reprinted in 1974 USCCAN 3975 (the Hague Convention) and the The Transportation Code section 46301 et seq and section 46501 et seq Convention on Offences and Certain Other Acts Committed on Board provide various aviation-specific felonies and misdemeanours including Aircraft, 14 September 1963, 20 UST 2941, 704 UNTS 219 (1969) (the interference with air navigation (section 46308), transport of hazardous Tokyo Convention). materials (section 46312), air piracy (section 46502), air transport opera- The US has signed but not yet ratified the Convention on the tions without an airman’s certificate (section 46317), entrance into air- Suppression of Unlawful Acts Relating to International Civil Aviation, craft or airport areas in violation of security requirements (section 46314), opened for signature 10 September 2010, ICAO Doc. 9960 (2011) (the interference with crew members (section 46504) and carrying weapons or Beijing Convention) (not yet in force) or the Protocol Supplementary to the explosives onto aircraft (section 46505). Convention for the Suppression of Unlawful Seizure of Aircraft, opened In addition, the US also is a party to the Convention for the Suppression for signature 10 September 2010, ICAO Doc. 9959 (2011) (the Beijing of Unlawful Seizure of Aircraft, 16 December 1970, 22 UST 1641, TIAS No. Protocol) (not yet in force).

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Uruguay

Gonzalo Yelpo Yelpo & Facal Abogados

General Private flights are not regulated; however all must comply with the airworthiness directives and have duly licensed crews following direc- 1 Which bodies regulate aviation in your country, under what tions of return to service. basic laws? In February 2014, RAU 137 for agricultural aircraft operations, was Uruguay has undergone a transition in the bodies that regulate Commercial completely modified by decree 51/014 which adopts the Latin American Aviation. Until 2006 Uruguay’s civil aviation was regulated by the air force Regulation (LAR). through the Ministry of Defence, and, more specifically, the National Directorate of Civil Aviation and Infrastructure (DINACIA) headed by an 4 Is access to the market for the provision of air transport air force general. services regulated and, if so, how? After the approval of Decree 267/006 the influence of the Ministry of We must distinguish operations of national and foreign carriers. Basically Transportation has increased to a level that currently shows that it is the access to market for foreign carriers is governed by the relevant bilateral civil aviation authority as a matter of fact. Created as an advisory body, air services agreements (ASAs). Uruguay has a number of bilateral ASAs, the National Board of Civil Aviation (JNAC), headed by the Minister of some of them with an ‘open skies’ approach including domestic flights, as Transport and Public Infrastructure, has taken over all relevant decisions is the case with Chile. such as distribution of routes and traffic rights enacted as ‘advisories’, vir- Uruguay is also a party to the Fortaleza Agreement together with tually determining the aeronautical policy of the country, granting and Argentina, Bolivia, Brazil, Chile, Paraguay and Peru, which establishes denying routes to air operators and negotiating bilateral air services agree- intra-regional third, fourth, fifth and sixth freedom rights together with ments. For the moment, some executive functions on the commercial side, unlimited capacity on routes different to those regulated under bilateral such as supplemental and charter flights authorisations, still remain with ASAs. This agreement has led to some controversy when PLUNA, the for- the DINACIA, which also exclusively regulates matters concerning safety, mer Uruguayan flag carrier now in liquidation, requested authorisations air navigation and airworthiness. to fly from Montevideo to several cities in Argentina, supposedly granted by the Fortaleza Agreement, when authorisations had never been granted Regulation of aviation operations by the latter. A similar situation happened with other foreign carriers with 2 How is air transport regulated in terms of safety? intention to fly to some inner cities of Argentina. A relevant point is the government’s interest in developing traffic to Safety is regulated by Law No. 18,619 of November 2009, which follows and from Uruguay’s main tourist destination, Punta del Este. Open skies the principles and guidelines of the Chicago Convention, articles 37 and were declared to apply to operations from any point to Punta del Este by 38 and its Annexes. Decree 244/2011 of 14 July 2011. The experience with this decree is that the The Civil Aviation Authority in the safety area is the DINACIA, whose authorisation of flights is as quick as two business days without requesting role is the surveillance and control of safety with power of supervision of further formalities to operators than those established in the decree, which safety, airworthiness, grants the airline operator certification, certificates are copies of the airline operator certificate, of the certificate of insurance, airports, ground-handling providers, grants licences to crews and other copies of operational specifications and dates and routes. technical staff such as mechanics and flight dispatchers and certifies prod- Finally, as regards international aspect of commercial air transport, ucts and parts as well. The DINACIA also has the power to impose penal- Uruguay is a signatory of the Multilateral Open Skies Agreement for ties such as warnings, fines up to 1 million indexed units, suspension up to Member States of the Latin American Civil Aviation Commission, open for 10 years, cancellation of aeronautical documents (licence, certificate, etc) signature on November 2010 but which is still pending a round of ratifica- and cancellation of permits. tions to enter into force. The Aviation Accident and Incident Investigation Commission was For the national carriers there are some limitations on access to mar- created by Decree 160/013, which derogates and substitutes the Office of kets further specified in question 8. Investigation and Prevention of Aviation Accidents. The new Commission directly reports to the Minister of Defence, but the latter used to report 5 What requirements apply in the areas of financial fitness and to the Civil Aviation Authority (DINACIA). This new Commission was nationality of ownership regarding control of air carriers? granted technical independence. Uruguay traditionally followed the path of national ownership and effective 3 What safety regulation is provided for air operations that do control of its airlines and similar requests to foreign airlines were placed in not constitute public or commercial transport and how is the the bilateral ASAs. However, after 1995 and the privatisation of its former distinction made? flag carrier, PLUNA, a series of modifications of this regime were applied. The last was as of April 2010 (Decree 145/2010), by which ownership There are three Uruguayan Regulations (RAU), the RAU 133, RAU 135 and requirements were modified again. Uruguayan airlines must have head RAU 137, which regulate operations of cargo with helicopters, operations of offices in Uruguay with management and control also in the country. If the non-scheduled air transport and agricultural operations respectively. owner is an individual this person must be a Uruguayan citizen, but if it RAU 135 regulates air taxi services with aircraft of less than 10 seats or is a company with its equity represented by shares, the majority of these 3,400kg of maximum payload; scheduled and non-scheduled flights with shares must be nominative and be owned by Uruguayan citizens domiciled aircraft from 11 to 30 seats; air courier and mail; tourist flights; and non- in Uruguay or be owned by other Uruguayan companies with nominative scheduled cargo flights with aircraft with a maximum 3,400kg of payload. shares. As a consequence a Uruguayan airline can be owned by foreigners through a Uruguayan company with nominative shares. One particular innovation introduced by this last modification is that the shareholders

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© Law Business Research Ltd 2015 Yelpo & Facal Abogados URUGUAY must inform the origin of funds to the Central Bank and the JNAC to pre- 10 Are there specific rules in place to ensure aviation services vent money laundering and cooperation with terrorism. are offered to remote destinations when vital for the local economy? 6 What procedures are there to obtain licences or other rights to No. Uruguayan geography and population density has prevented the devel- operate particular routes? opment of a relevant domestic air services network. The procedure to obtain licences for national and foreign carriers and on domestic and international flights is the one established by Decree 39 of 11 Are charter services specially regulated? 1979, that despite having undergone minor modifications through the Certification of charter services is regulated under RAU 135, except for years, remains essentially the same. It basically provides that any carrier aircraft of fewer than 30 seats (excluding crew). This regulation was also must submit its request with a series of details such as routes to be served, recently updated following LAR 135, which adopted international stand- fares to be applied, type of company and relationships with other compa- ards in the field. nies, but the most significant part is that prior to granting the licence, the All charter operators are granted four flights per year for the same petition is made public through the Official Gazette so any other party with route or eight for different routes, without the need of certification, just by a legitimate interest may oppose such a request. Although this process presenting appropriate insurance (Decree 43/972). can be perceived as onerous, the common practice of the DINACIA is that Another relevant aspect are the operations to Punta del Este, which provisional authorisation is granted prior to such publication after the receive special treatment under Decree 244/2011. For flights to and from ‘green light’ from the JNAC, and this provisional authorisation de facto Punta del Este the only documentation requested from operators is their operates as final. certificate of operations and a valid certificate of insurance.

7 What procedures are there for hearing or deciding contested 12 Are airfares regulated and, if so, how? applications for licences or other rights to operate particular Public air transport is considered a public service so airfares are supposed routes? to be regulated under the Constitution since regulation by government is Originally a public hearing took place in which all interested parties were mandatory for any public service. However, after the conclusion of several able to make their statements and at the end the granting authority would bilateral air services agreements in which airfares were liberalised, the make its decision. Following Decree 39/979 mentioned above, the pub- DINACIA is requesting the filing of airfares with no further control. lic hearing process was no longer required and the decision on contested applications relies on the JNAC, which finally recommends which position Aircraft to take and the decision is finally made by the DINACIA, which in all cases follows the ‘recommendation’ of the JNAC (see question 1). 13 Who is entitled to be mentioned in the aircraft register? Do Currently, most objections are dismissed on the grounds of promoting requirements or limitations apply to the ownership of an competition. aircraft listed on your country’s register? There are two registries with different roles. According to Law No. 17,292 8 Is there a declared policy on airline access or competition and, and Decree 63/001 there is an Aircraft National Registry which receives, if so, what is it? among other registrations, registration of property rights and rights against Decree 325/1974 establishes the principles of Uruguayan air policy, which aircraft. This registry works under the Public Registry Services created by has as a main principle that only one Uruguayan carrier can operate a cer- Law No. 16,871. tain route except for reasons of public interest or specific needs of pas- According to the Aeronautic Code, to register the ownership of an air- sengers. The reasons of public interest and specific needs of passengers craft with Uruguayan registration marks ownership of the aircraft must fall are not defined so it continues to be a matter of debate each time a sec- on: ond Uruguayan carrier is willing to operate the same route. A new decree, • an individual who must be domiciled in Uruguay; or 287/2014, was recently approved and it is supposed to include the new prin- • a company domiciled in Uruguay and must be a sociedad anónima (a ciples on Uruguayan Air Policy, but it does not include any similar principle corporation whose equity is divided into shares): or derogation of the allocation of routes between Uruguayan airlines. • shares must be nominal; The validity of Decree 325/974 has been challenged and currently the • 51 per cent of shareholders must be domiciled in Uruguay; and JNAC and the DINACIA are in the position that the decree has been abro- • two-thirds of the board of the company must be domiciled in Uruguay. gated by Law No. 18,159 for the Defence and Promotion of Competition, which grants free access in all activities to all markets and to all players. As per the Aeronautic Code, article 38.3, Decree 507/002 and Decree This position had been challenged in court by the main carrier, PLUNA, 695/991, lease agreements with terms of more than six months are reg- which ceased operations in July 2012 and is now in the process of liquida- istered in the Aircraft National Registry that works under the DINACIA. tion. There was no decision in this challenge which was closed owing to As mentioned above, there are two different national aircraft regis- inaction. tries, each with different tasks. The former registers ownership, mortgages, credits against aircraft, liens, attachments and seizures. The latter gives 9 What requirements must a foreign air carrier satisfy in order registration marks, registers titles of use of aircraft, insurance of aircraft to operate to or from your country? and airlines. Registration in the lease agreements section in the Registry of the DINACIA only gives a provisional registration for the term of the A foreign carrier must establish an office or branch in Uruguay, show its lease agreement. financial details, determine the equity involved in the new venture, name a legal representative domiciled in Uruguay with an adequate power of 14 Is there a register of aircraft mortgages or charges and, if so, attorney, establish what type of service it intends to perform (scheduled, how does it function? supplemental, cargo, passengers, etc), routes, aircraft, fares to be applied, present a guarantee before the DINACIA and present certification accord- Yes, the registry working under the Public Registry Services registers mort- ing to RAU 129 (Operations of Foreign Carriers), which mainly is a homolo- gages, ownership rights and seizures. gation of the home base certification (security, safety, airworthiness). Registration of ownership or a mortgage gives priority over any claim RAU 129 was recently modified, adopting LAR 129, which implies a of rights. Rights are considered as per the date of registration, so any rights much simpler process of certification for foreign carriers. that have been registered before others takes priority over the latter. Finally, following Decree 244/2011, if the foreign carrier intends to However according to the Aeronautic Code (articles 52 to 57) privileged have regular services to Punta del Este under the open skies regime, it will rights (liens) are granted to the crews for the salaries of the last month of be allowed to do so with a simplified application procedure requiring the work, legal fees on benefit of the mortgagee, taxes and fees for the use of presentation of evidence of insurance coverage, airline operator certificate airports and air navigation services (ANS services), credits for provisions and operations specifications. and repairs to continue the flight. These privileged rights last for a year after registration in the registry but they can be renewed.

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15 What rights are there to detain aircraft, in respect of unpaid On the other hand, in Punta del Este, ground handling was granted in airport or air navigation charges, or other unpaid debts? the public bidding so it is part of the monopoly of the airport concessionaire. As mentioned above, airports’ ANS services have liens for unpaid airport or air navigation charges (article 54 Aeronautic Code). However, in the case 23 Who provides air traffic control services? And how are they of aircraft used for public air transport, detention of the aircraft can only regulated? be made by a decision of a competent court for the public auction of such The DINACIA provides air traffic control services in Uruguay that are regu- aircraft. lated by the Aeronautic Code and a system of decrees that establishes the fees and how these are adjusted. The DINACIA also collects the moneys 16 Do specific rules regulate the maintenance of aircraft? corresponding to these fees, which in respect to late payment penalties, There are several rules applying to maintenance of aircraft. All mainte- interest rate and statute of limitations are treated similar to taxes. nance workshops performing work on aircraft with Uruguayan registration marks must be certified by the DINACIA following RAU 145, which regu- Liability and accidents lates facilities, personnel, tools and documentation. 24 Are there any special rules in respect of death of, or injury to, In addition, RAU 43 also applies to any aircraft with a Uruguayan air- passengers or loss or damage to baggage or cargo in respect of worthiness certificate, regulating people authorised to return aircraft to domestic carriage? service, facilities and other matters. The Aeronautic Code regulates liability in case of death, injury to passengers or loss or damage to baggage and cargo for domestic carriage and, Airports where no international treaty is applicable, to certain countries. 17 Who owns the airports? The limits of liability were set in identical terms to those of the Warsaw From a legal perspective, airports can be privately or state owned. However, Convention of 1929, changing francs for unidades de cuenta, but with the the approval for all airports falls to the government through the DINACIA. particular criterion followed by the courts in Uruguay whereby the method Currently, the two main airports, Montevideo and Punta del Este, of calculation is using the market value of gold at any given time. which are state-owned, are subject to concessions to private companies, Thus, according to article 157 of the Aeronautic Code, liability to pas- whose parent company is Corporación América, concessionaire of airports sengers is limited to 250,000 units, liability to checked baggage and cargo in Argentina, Ecuador (Guayaquil), Armenia (Yerevan) and Brazil. is 250 units per kilogram unless a special declaration of value was made by the consignor at the moment the package or baggage was handed over to 18 What system is there for the licensing of airports? the carrier. Article 158 of the Aeronautic Code establishes that the ‘units’ shall be Uruguay, as signatory of the Chicago Convention, follows the standards deemed to refer to 65.5 milligrams of gold at the standards of fineness of of Annex 14, so certification of security, safety, efficiency and regularity of 900 thousandths, at the date of the arrival of baggage or cargo or the date airports is the competence of the civil aviation authority, in this case the it should had arrived. Following this rule, conversion is currently approxi- DINACIA. mately US$600 per kilogram, which fluctuates with the value of gold. The process of certification is established under RAU 139. The certification process is mandatory for all international airports but for those 25 Are there any special rules about the liability of aircraft only operating domestic flights with aircraft of fewer than 30 seats it is a operators for surface damage? voluntary process. Uruguay is a signatory to the Rome Convention of 1952 so surface dam- 19 Is there a system of economic regulation of airports and, if so, age to third parties for international air transport is regulated by this how does it function? convention. On domestic carriage a presumption of liability of the operator is in The Airport and Concessions Control Board is headed by the director place, which it can overrule if it proves that it has taken all necessary meas- general of the DINACIA. ures to prevent the illegal use of the aircraft. One of its roles is the monitoring of prices, rates and other commercial The limits of liability in the case of surface damage to third parties terms of the airports. were derogated by Law No. 16,403. The monitoring of concessions at airports follows the rule that such concessions are established by an agreement between the government and 26 What system and procedures are in place for the investigation the private bidder. In the case of airports operated by the government this of air accidents? monitoring does not work effectively since the operator and the surveyor are the same public entity, the DINACIA. Pursuant to article 14 of Law No. 18,619, the investigation of accidents is However, charges and fares of airports are subject to review by the performed by the Commission of Accident and Incident Investigation. competent administrative court, as with any other public fee. This commission works under the Ministry of Defence and has technical autonomy. It investigates incidents and accidents for Uruguayan aircraft 20 Are there laws or rules restricting or qualifying access to both in Uruguay and foreign domains and accidents and incidents of for- airports? eign aircraft in Uruguay. According to article 67 of the Aeronautic Code, public airports are open to 27 Is there a mandatory accident and incident reporting system international and domestic operations subject to the relevant certification and, if so, how does it operate? as mentioned above. On the other hand, military and private airports can only be accessed According to article 95 of the Aeronautic Code and article 15 of Law No. with authorisation from the air force in the first case or the owner in the 18,619, operators, owners and crews, or any of the above, are obliged to second. report any accident or incident suffered by their aircraft. The same obligation applies to any person who knows about an accident or the remains 21 How are slots allocated at congested airports? of an aircraft. The person willing to make this report will file it before the commission stated above. There are no congested airports in Uruguay. Competition law 22 Are there any laws or rules specifically relating to ground handling? 28 Do sector-specific competition rules apply to aviation? If not, There are two main airports in Uruguay – Montevideo and Punta del Este. do the general competition law rules apply? Ground handling at Montevideo was a monopoly in the hands of the flag Uruguay has in place a specific law on competition – ie, Law No. 18,159 – carrier until the 1990s, in which ground handling was handled through which governs all types of activities, including air transport. However, cer- concession to another company but still with monopoly rights. In 2000 the tain restrictions on access to aviation markets are in place. monopoly was barred and now competition is free and open to other ven- We already mentioned the disputes that the liquidated PLUNA had dors, which only need to be certified by the DINACIA. with the JNAC, the DINACIA and another operator on the applicability of the competition regime to air transport. We expect that similar disputes

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Financial support and state aid Update and trends 33 Are there sector-specific rules regulating direct or indirect Uruguay is to face a new stage in its aviation development. Firstly, financial support to companies by the government or owing to the announced start of operations of Alas Uruguay, a government-controlled agencies or companies (state aid) in company created from the former PLUNA, but fully privately the aviation sector? If not, do general state aid rules apply? owned by its employees. It is will be a challenge for the firm but a particularly important test for viable commercial aviation without There are no state aid provisions for aviation. However, air transport has the government participation. a special tax treatment so in general terms, aircraft, parts, engines and Secondly, oil resources have been discovered in Uruguay’s others are exempted of import and local taxes. Additionally, airlines are waters. Offshore operations started two years ago with foreign exempted from income tax, which is a kind of state aid. aircraft and crews, but it is the intention of the Civil Aviation Airline trade associations (international associations such as ALTA Authority to force the use of national aircraft and crews on a regular and IATA, together with the local BAR) had been asking government- basis if oil exploration starts effectively. This would imply an owned ANCAP (a fuel refinery and distributor) for years for transparency important challenge and opportunity for the industry since human in jet fuel pricing and the non-application of taxes owing to the tax pro- resources and capital investment would be needed. motion noted above. In September 2012, just after PLUNA’s demise in July 2012, the Ministry of Finance exempted jet fuel from taxation. Additionally, following further pressure from airline associations, especially ALTA, the will arise once there are two or more Uruguayan carriers operating and government forced ANCAP to use international standards in fuel pricing, willing to explore the same routes. and from December 2012 its price was reduced by over eight per cent. Associative agreements, between airlines, such as code sharing Concerning state aid, there is an intended start-up by former PLUNA agreements, joint ventures and others, are assessed by the Civil Aviation employees who have been granted government aid of US$15 million and Authority. Airlines must submit the intended agreement to the Civil this has led to concerns from the company’s local competitors. Aviation Authority which has a 90-day period to evaluate it, and if there is no reply, it is considered approved. There are no sanctions in place for 34 What are the main principles of the state aid rules applicable jumping the gun regarding approval. to the aviation sector? The other type of state aid rules are the subsidy for the instruction of pilots 29 Is there a sector-specific regulator or are competition rules and mechanics. Aviation schools are granted tax exemptions and also applied by the general competition authority? funds from the air force. From a competition perspective, we should distinguish access to markets with behaviour in such a market. Access to markets is regulated by the 35 Are there exemptions from the state aid rules or situations in JNAC, so we cannot talk about unrestricted access to markets. The rule of which they do not apply? a single Uruguayan carrier per route is still applicable (see also question 8 Not applicable. above) and the JNAC is the competent body for establishing which airline will serve a route or whether there will be any exceptions applicable. 36 Must clearance from the competition authorities be obtained In the market, behaviour such as predatory pricing, abuse of dominant before state aid may be granted? position and other types of conduct are controlled by the Competition No. Defence Commission, which is the general competition authority. 37 If so, what are the main procedural steps to obtain clearance? 30 How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition Not applicable. authorities? 38 If no clearance is obtained, what procedures apply to recover The relevant market is defined in general terms, not only for aviation. unlawfully granted state aid? Article 5 of Law No. 18,159 provides some guidelines to determine relevant markets (ie, the existence of substitute products, the geographic area and Not applicable. whether the conduct takes place in a certain relevant market). Miscellaneous 31 What are the main standards for assessing the competitive 39 Is there any aviation-specific passenger protection effect of a transaction? legislation? Pursuant to article 7 of Law No. 18,159 there are two ways to look at a cer- There is a regulation of rights of passengers which, in addition to those tain transaction, ie, if as a consequence of such transaction a share of more granted by international regulations and treaties such as the Montreal than 50 per cent of the relevant market is obtained, or whether the new 1999 Convention, apply to compensation for denied boarding, cancella- group after the transaction has gross revenues of more than 750 million tion of flights and other matters. This rule is called the Passenger Guide. indexed units or the current equivalent of US$75 million. The Passenger Guide establishes for delayed flights of more than four However, this rule was not observed when Corporación América hours, the right to food and refreshments, hotel accommodation and trans- acquired the concession of Punta del Este Airport. It already had the port to or from the airport. For the case of cancellation, this guide provides concession of Montevideo Airport, so after this acquisition, Corporación for the immediate refund of the value of the air ticket. América had a virtual airport monopoly in Uruguay without antitrust clearance. 40 Are there mandatory insurance requirements for the Additionally in the case of agreements between airlines, we have not operators of aircraft? seen the civil aviation authority analysing the cases through the prism of Insurance for the operators of aircraft is mandatory according to articles competition law. 182 to 188 of the Aeronautic Code. Operators must provide evidence of insurance of liability for surface, accident to crew and hull insurance to 32 What types of remedies have been imposed to remedy passengers and third parties. concerns identified by the competition authorities? In the case of Uruguayan airlines, insurance must be granted by a There are no precedents in aviation on the aspect of competition law. There Uruguayan-authorised insurance company. is just one case between two airlines in which one of them has accused the Aircraft without insurance are prevented from flying within Uruguayan other airlines of abuse of a dominant position and predatory pricing. The territory according to article 184 of the Aeronautic Code. Competence Defence Commission fined one of the airlines for unfair The insurance is controlled by the Aeronautic Registry of the DINACIA competition through misleading advertising. in which these are registered and evidence of registration is stamped in each aircraft certificate of registration.

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If insurance is not renewed on time and evidence registered with the In cases where no personal damage or damage to goods is caused, the Aeronautic Registry, the airworthiness certificate of the relevant aircraft is following crimes would be fined: automatically cancelled (article 186 Aeronautic Code). • flying an aircraft without an airworthiness certificate; • flying an aircraft with an airworthiness certificate that expired more 41 What legal requirements are there with regard to aviation than six months ago; security? • the deletion of registration marks from an aircraft; Aviation security is controlled by the air force pursuant to article 209 of • the improper carriage of dangerous goods; the Aeronautic Code, in which it is named as the ‘air police’. The security • flying an aircraft without licence or having been prohibited from fly- regulations follow the standards set by ICAO and the Chicago Convention ing; and and its Annexes. The rules set by the air force apply to all parties involved in • flying an aircraft under influence of alcohol or drugs. air transport and airport operations, namely airlines, airports, vendors and also other government agencies such as customs and migrations authori- More serious crimes for which prison sentences are applied are: ties. All the people involved must be duly licensed and must follow the • violence on or against aircraft or against its crew or any person on rules set by the air force. board; • taking control of the aircraft or forcing a change to its route; 42 What serious crimes exist with regard to aviation? • flying over restricted or prohibited areas; and • failure to provide aid to distressed aircraft. The Aeronautic Code establishes several crimes in articles 198 to 208. These crimes rank from minor ones, which are punished with fines, to serious crimes where prison terms can be applied.

Gonzalo Yelpo [email protected]

18 de Julio 1296 No. 701 Tel: +598 2 908 4665 Montevideo 11100 Fax: +598 2 908 4665 Uruguay www.yelpofacal.com

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