2015 Contributing Editors John Balfour and Mark Bisset

2015 In 37 jurisdictions worldwide In jurisdictions 37 Contributing editors John Balfour and Mark Bisset

Transport

Air Air

GETTING THE DEAL THROUGH Air Transport 2015 Air Transport 2015

Contributing editors John Balfour and Mark Bisset Clyde & Co LLP

Publisher The information provided in this publication is Gideon Roberton general and may not apply in a specific situation. [email protected] Legal advice should always be sought before taking any legal action based on the information provided. Subscriptions This information is not intended to create, nor does Sophie Pallier Published by receipt of it constitute, a lawyer–client relationship. [email protected] Law Business Research Ltd The publishers and authors accept no responsibility 87 Lancaster Road for any acts or omissions contained herein. Business development managers London, W11 1QQ, UK Although the information provided is accurate as of George Ingledew Tel: +44 20 7908 1188 September 2014, be advised that this is a developing [email protected] Fax: +44 20 7229 6910 area.

Alan Lee © Law Business Research Ltd 2014 [email protected] No photocopying: copyright licences do not apply. Printed and distributed by First published 2006 Encompass Print Solutions Dan White Ninth edition Tel: 0844 2480 112 [email protected] ISSN 1751-9098 CONTENTS

Global Overview 7 Hong Kong 88 John Balfour Michael Kan and Lawrence Cheng Clyde & Co LLP Brandt Chan & Partners in association with Dentons HK LLP

Afghanistan 11 Iceland 94 M Wisal Khan and Ghazi Khan Erlendur Gíslason Legal Oracles Logos Legal Services

Argentina 15 India 99 Elizabeth Mireya Freidenberg Amir Singh Pasrich and Mohana Malhotra Freidenberg, Freidenberg & Lifsic I.L.A. Pasrich & Company

Australia 21 Indonesia 109 Simon Liddy, Matthew Brooks and Richard Davis Wahyuni Bahar and Anggia Rukmasari HWL Ebsworth Lawyers Bahar & Partners

Bahamas 28 Italy 113 Arthur K Parris Laura Pierallini ParrisWhittaker Studio Pierallini

Belgium 31 Japan 119 Birgitta Van Itterbeek Shuji Yamaguchi Monard-D’Hulst Okabe & Yamaguchi

Brazil 36 Malta 123 Kenneth Basch Tonio Grech Basch & Rameh Dingli & Dingli Law Firm

Canada 41 Mexico 129 Laura M Safran QC and Prasad Taksal Javier Alegre and Carlos Campillo Davis LLP Alegre, Calderón y Márquez Abogados

Colombia 48 Netherlands 135 José Vicente Guzmán and Andrés Reyes Jeroen Timmermans and Laetitia Kunst-den Teuling Guzmán Escobar & Asociados Stek

Denmark 53 New Zealand 140 Henrik Kleis and Rune Hamborg Frank Porter, Anita Birkinshaw and Rishalat Khan Delacour Law Firm Buddle Findlay

Dominican Republic 59 Nigeria 146 Rodolfo Mesa Chavez Olawale Akoni, Kehinde Daodu and Olamide Aiyeola Mesa & Mesa Abogados Babalakin & Co

European Union 63 Norway 151 Geert Goeteyn Knut Boye, Ingar Fuglevåg and Camilla Flatum Shearman & Sterling LLP Advokatfirmaet Simonsen Vogt Wiig AS

Germany 75 Philippines 154 P Nikolai Ehlers Mia G Gentugaya, Emmar Benjoe B Panahon and Ma Luisa D Manalaysay Ehlers, Ehlers & Partner SyCip Salazar Hernandez & Gatmaitan

Greece 80 Poland 158 Betty Smyrniou and Konstantina Linardou Krystyna Marut, Edyta Michalak and Anna Burchacińska-Mańko Bahas, Gramatidis & Partners MMMLegal Legal Counsels

2 Getting the Deal Through – Air Transport 2015 CONTENTS

Portugal 164 United Arab Emirates 192 João Pedro Alves Pereira and João Marques de Almeida Donald H Bunker, Ian Veall, Christine Veall and Henock Girma APTS – Alves Pereira & Teixeira de Sousa RL Donald H Bunker and Associates

Russia 170 United Kingdom 195 Mikhail Sokolov, Anna Arkhipova and Sergey Seliverstov John Balfour Sokolov, Maslov and Partners Clyde & Co LLP

South Africa 175 United States 201 Vanil Bagwandeen, Kamiel Rajah, Sally Mashiane and Jennifer Finnigan Andrew J Harakas and Christopher Carlsen Shepstone & Wylie Attorneys Clyde & Co US LLP

Switzerland 181 Uruguay 209 Andreas Fankhauser Gonzalo Yelpo Baumgartner Mächler Yelpo & Facal Abogados

Thailand 186 Venezuela 214 Alan Polivnick and Joe Osgerby-Lacey John R Pate Watson, Farley & Williams (Thailand) Ltd De Sola Pate & Brown

www.gettingthedealthrough.com 3 PREFACE

Preface

Air Transport 2015 Ninth edition

Getting the Deal Through is delighted to publish the ninth 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 37 jurisdictions featured. Our coverage this year includes the Bahamas, Greece, Japan and Poland.

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 John Balfour and Mark Bisset of Clyde & Co LLP, the contributing editors, for their continued assistance with this volume.

London September 2014

www.gettingthedealthrough.com 5 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 GLOBAL OVERVIEW Clyde & Co LLP

• 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, 106 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, 53 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 There are three international conventions specifically concerned with of rights and interests arising in connection therewith, so as to reduce the crimes on aircraft and affecting aviation, as follows. risks of lending for aircraft financiers, and hence reduce the cost of bor- rowing. The Convention also establishes an international register, admin- The Tokyo Convention 1963 istered by the ICAO, in which various interests in aircraft can be registered, The Tokyo Convention 1963 was drawn up principally to deal with prob- whereupon they will take priority over subsequently registered and unreg- lems that had been experienced in practice concerning jurisdiction and istered 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 offences, and entitles other states to exercise jurisdiction if the offence has European Union) was founded in 1957, it was not until the 1980s that it effects for that state. It also provides that such an offence is to be treated started to make its effects felt in the air transport sector. Since then, pro- for extradition purposes as if committed in the state of registration of the gress has been significant and there now exists a virtually complete inter- aircraft, as well as where it was in fact committed, so that extradition may nal market in air transport among the 28 EU member states (and the three be sought and granted under existing extradition treaties, although the EEA states). Convention creates no obligation to grant extradition. It gives power to the aircraft commander to impose reasonable meas- Liberalisation ures if he or she has reasonable grounds to believe that a person has com- The way in which this result was achieved was principally as a result of mitted or is about to commit such an offence, or an act jeopardising safety three ‘packages’, which liberalised access to routes, fares and rates in or good order on board. The measures, including restraint, are those that a phased process between 1988 and 1993. In addition, the third package are necessary to protect the safety of the aircraft, and persons and prop- introduced common licensing requirements for air carriers and the prin- erty on board, to maintain good order and discipline, or to enable the com- ciple that any air carrier satisfying these requirements had to be allowed mander to deliver the person to competent authorities or to require the to operate, thus at the same time bringing an end to national monopolies person to disembark. and enabling an airline from one EU member state to establish itself and A protocol to amend the Convention was signed in Montreal in 2014 acquire an airline in another member state. Although the legal changes but is not yet in force. were slow to produce practical results, in due course they led to significant developments, not least the emergence and increasing expansion of low- The Hague Convention 1970 cost carriers and cross-border operations. The third package was consoli- The Hague Convention 1970 is aimed mainly at hijacking. It makes it an dated into and replaced by a new regulation with effect from 1 November offence for a person on board an aircraft in flight to unlawfully, by force or 2008, which basically continues the previous provisions but adds some by other form of intimidation, seize or exercise control of the aircraft, or new rules, particularly on the transparency of fares. attempt to do so or be an accomplice to such an offence or attempt. The Convention applies if either the place of take-off or the place of Air transport policy legislation landing is a state other than the state of registration of the aircraft. Each of The basic liberalisation laws have been accompanied by a growing body the states of registration of the aircraft, the state where the aircraft lands of legislation dealing with other aspects relevant to air transport, comple- with the offender on board and the state in which any lessee of the aircraft menting liberalisation measures and harmonising rules and standards in has its main residence or place of business must take all necessary meas- the areas of environmental and consumer protection. ures to establish jurisdiction. The state in whose territory the offender is Regulation No. 95/93 (as amended by Regulation Nos. 894/2002 and must either extradite the offender to one of those states or take steps to 793/2004) provides common rules on slot allocation at airports within establish its own jurisdiction. the EU. Directive 96/67 introduces greater competition into the ground- The Convention also aims to facilitate extradition by treating the handling market at airports within the EU. The practical effects of both offence as having been committed not only where it occurred but also measures have been somewhat limited, but the ground-handling Directive in the other three states mentioned above, and providing that it is to be will soon be updated. More recently, Directive 2009/12 on airport charges treated as an extraditable offence as between contracting states. was adopted, but it did not have to be transposed into national law until 15 March 2011 and in any case makes only modest changes. Montreal Convention 1971, supplemented by the Montreal Protocol On the technical front, Regulation No. 3922/91 provides for the har- 1988 monisation of technical requirements and administrative procedures, and The Montreal Convention 1971 is aimed at similar behaviour, but with mutual recognition, in connection with the design, manufacture, operation a broader scope. It makes it an offence for a person to perform an act of and maintenance of aircraft and persons and organisations involved in violence against a person either when the person is on board an aircraft in these tasks. This regulation has been significantly supplemented recently flight and the act is likely to endanger the safety of the aircraft, or when the by Regulation No. 216/2008, which also establishes the European Aviation Safety Agency.

8 Getting the Deal Through – Air Transport 2015 Clyde & Co LLP GLOBAL OVERVIEW

Regulation No. 996/2010 establishes rules concerning the investiga- significantly, fines amounting to almost €800 million imposed on 11 air- tion and prevention of civil aviation accidents and incidents and Directive lines in November 2010 for a cartel on air cargo surcharges. 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 agree- decisions granting exemptions for a number of airline alliances, subject ments was recognised, provided that they respect certain conditions. Such to conditions – namely, Lufthansa and SAS, bmi British Midland, Austrian negotiations have been successfully concluded between the commission and United, British Airways and SN Brussels and Iberia, Air France and and over 40 other countries. At the same time, the European Commission Alitalia, KLM and Northwest and British Airways, American Airlines and has been proceeding with fuller negotiations with various other states, Iberia – and is still investigating cooperative arrangements between core particularly neighbouring and nearby states: common aviation area agree- members of the Star and Skyteam alliances. ments have been concluded with Switzerland, Morocco, Georgia, Jordan, The European Commission has also imposed fines in several Moldova, Israel and with the eight Balkan countries. A significant break- cases where it has found infringement of the competition rules – most through took place on 30 April 2007, with the signature of the Air Transport Agreement between the EU and the US, which came into provisional effect

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

www.gettingthedealthrough.com 9 GLOBAL OVERVIEW Clyde & Co LLP on 30 March 2008. While it did not go as far as the commission would have moving from regulation controlling entry to the market and the ability to liked, and was only extended to a limited extent by the protocol that has compete to the other types of regulation necessary in a competitive mar- been applied since 24 June 2010, it essentially applies ‘open skies’ princi- ket. This is in the form of competition rules and other measures designed ples between the US and the EU and confirms that the US will accept that to ensure fair conditions for competition and protection of consumers. any EU airline can operate to or from the US from any point in the EU. A As such rules and measures are applied on a national or regional (eg, similar agreement was signed with Canada early in 2009 and with Brazil EU) basis, there is an increasing risk of international fragmentation, and in 2011. of airlines having to satisfy a variety of differing rules – something that the Chicago Convention and the ICAO system have on the whole successfully Rules and regulation avoided in relation to safety rules. Paradoxically, this is taking place at The air transport industry will always remain highly regulated from the the same time as increasing consolidation among airlines. It may become safety point of view. In relation to other forms of regulation, the focus is desirable for the ICAO’s areas of competence to be extended, or for air transport to be more fully involved in the WTO system.

10 Getting the Deal Through – Air Transport 2015 Legal Oracles AFGHANISTAN

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 laid down the Civil Aviation Safety Regulations (the Safety Regulations) Operators Incorporation Regulation) and the Private Investment Law in accordance with the standards set forth and recommended by the 2005 (the Investment Law). The Air Operators Incorporation Regulation International Civil Aviation Organization (ICAO). requires the applicant to have, inter alia: • a sound and competent flight safety, technical and managerial organi- Regulation of aviation operations sational structure with highly competent human resources; • 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- Furthermore, in order to operate, air carriers must obtain an air operator’s prise 11 parts and provide, inter alia, for the following: certificate (AOC) from the CAA. The detailed procedure for obtaining an • Part 2: licensing of personnel; AOC and the application requirements are set out in Part 9 of the Safety • Part 3: certification and administration of aviation training Regulations. organisations; Access to the market for the provision of domestic air transport services • Part 5: aircraft airworthiness; within the country is available only to aircraft registered in Afghanistan. • Part 7: safety requirements for instruments and equipment; • Part 8: operation of aircraft and flight norms; 5 What requirements apply in the areas of financial fitness and • Part 9: air operation certification, flight operations management, nationality of ownership regarding control of air carriers? maintenance requirements, security management and dangerous Part 10 of the Safety Regulations requires a foreign air operator to have goods management; sufficient financial resources to conduct safe operations within and to and • Part 10: operation requirements for foreign commercial air carriers; from Afghanistan. The CAA determines the financial fitness of the appli- and cant/air carrier, keeping in view the type of operations, operations base • Part 11: aerial work operations. and flight routes provided in the business plan. There are no restrictions or limitations on nationality of ownership The CAA enforces the Safety Regulations. However, the safety regula- regarding control of air carriers. The Investment Law and the Air Operators tions have not been laid down in accordance with the Regulation on the Incorporation Regulation permits 100 per cent foreign ownership of an air Procedure and Preparation of Legislative Documents and have not been gazetted as required under the Regulation on Publication and Enforcement carrier incorporated in Afghanistan. of Legislative Documents 1999. Therefore, the enforceability of the Safety Regulations is questionable in view of the laws of Afghanistan. 6 What procedures are there to obtain licences or other rights to operate particular routes? 3 What safety regulation is provided for air operations that do While applying for an AOC the applicant/air carrier is also required to state not constitute public or commercial transport and how is the in its application the routes intended to be used. The routes approved by distinction made? the CAA are specified in the air transport certificate (ATC). Air operations that do not constitute public or commercial transport are Domestic routes are largely allocated at the discretion of the CAA while regulated by Part 11 of the Safety Regulations: aerial work operations. international routes are regulated in accordance with mutual agreements Pursuant to article 5(3) of the Aviation Law, aircraft operations can take on bilateral air services or international treaties to which Afghanistan is a place for specialised services. Clause 1.1.2(a)(1) of Part 11 of the Safety party. Regulation defines ‘aerial work’ as an aircraft operation in which an aircraft is used for specialised services such as agriculture, construction, 7 What procedures are there for hearing or deciding contested photography, surveying, observation and patrol, search and rescue, aerial applications for licences or other rights to operate particular advertisement, etc. routes? Part 11 of the Safety Regulations requires all persons who conduct There are no specific procedures for hearing contested applications. aerial work in Afghanistan to comply with the applicable airworthiness and Applications are examined by the CAA based on the merit of the applicant, which is assessed according to the applicant’s readiness and the suitability www.gettingthedealthrough.com 11 AFGHANISTAN Legal Oracles of the air operations in terms of number of aircraft, frequencies, type of 10 Are there specific rules in place to ensure aviation services aircraft, aircraft use, market size, financial situation and an increase in are offered to remote destinations when vital for the local tourism and facilitating consumers. The CAA is authorised to prohibit the economy? issuance of ATCs to foreign applicants or subject them to fulfilment of spe- There are no specific rules in place to ensure that aviation services are cial 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 Regulations, no foreign air carrier is allowed to operate in Afghanistan new Aviation Law provides that air carriers shall fix airfares and there- unless it holds an AOC from its respective country and is duly authorised after obtain approval of the same from the CAA. However, the CAA has by the terms and conditions thereof to conduct air operations to and from not yet started regulating airfares as required by the new Aviation Law. Afghanistan. The CAA grants the AOC in consideration of a fee in accord- Furthermore, the Law on Protection of Competition, published in the ance with the provisions of the Aviation Law. Official Gazette Issue No. 1010 dated 30 June 2010 (the Competition Law), Part 10 of the Safety Regulations provides that requirements under- prohibits unjust 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 Register. 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- Register 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 among 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. Furthermore, 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 Moreover, 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. Furthermore, the CAA may also exercise the right to lien available under the Civil Law of Afghanistan.

12 Getting the Deal Through – Air Transport 2015 Legal Oracles AFGHANISTAN

16 Do specific rules regulate the maintenance of aircraft? for death of a person) or arsh (the Islamic concept of fixed compensation Yes. Part 9 of the Safety Regulations provides maintenance requirements for injury not resulting in death of a person) or hukumat al-’adl (the Islamic of aircraft in respect of operational and emergency equipment and air- concept of compensation for injury not resulting in death of a person that worthiness. Air carriers shall ensure that their aircraft are maintained and is determined by experts in proportion to the injury caused). The amount released to service by either an approved maintenance organisation certif- of diyya has not been determined under the statutory law of Afghanistan, icated under Part 6 of the Safety Regulations or by an equivalent system. hence, diyya is paid in accordance with the Hanafi sect of Islamic Law, Pursuant to the provisions of article 42 of the Aviation Law, the CAA which is recognised by the Constitution of Afghanistan to be the applicable shall issue a certificate of airworthiness, which shall contain information in law where the statutory law is silent. respect of operational guides, flight safety requirements and other require- With regard to loss or damage to baggage or cargo, air carriers are ments and limitations. liable to pay 1,000 afghani per kilogram for loss of baggage and cargo, and 20,000 afghani against each passenger for damage to baggage in the pos- Airports session of the passenger within the aircraft. Where the value of the cargo or baggage is higher than the amount of compensation mentioned above, 17 Who owns the airports? then requirements of the provisions of article 67 of the Aviation Law shall All airports in Afghanistan are state-owned and operated by the CAA. be fulfilled before loading of such baggage and cargo.

18 What system is there for the licensing of airports? 25 Are there any special rules about the liability of aircraft operators for surface damage? There is no system for the licensing of airports. However, the new aviation law authorises the CAA to lease out parts of airport facilities and Yes. Compensation rules mentioned in question 24 are also applicable to structures, with the exception of air traffic control services, aviation infor- operators for surface damage. Pursuant to the provisions of article 65 of mation services, aviation communication services and arrival and depar- the Aviation Law, any event that causes death or any other injury to a pas- ture strips, to third parties. The CAA is contemplating initiating the same senger in the aircraft or when boarding or disembarking the aircraft shall in the near future. be compensated. Article 50 of the Aviation Law further creates liability of the carrier for damage caused by objects that fall from, or are thrown out 19 Is there a system of economic regulation of airports and, if so, of, the aircraft. how does it function? However, the air carrier would not be liable to compensate the passengers if it is established that loss or damage was caused due to a fault in the Yes. In view of the ACAIFR promulgated in 2005 (see question 11), airports cargo itself or its packing. are divided into three categories in respect of airport structure and technical facilities. In addition, Khwaja Rawash Airport in the state capital Kabul, 26 What system and procedures are in place for the investigation Kandahar Airport in Kandahar province and Herat Airport in Herat prov- of air accidents? ince are international airports. All airport charges are collected in accordance with the rates provided under the ACAIFR for each airport category. The CAA conducts investigation of air accidents. Once an accident is reported to the CAA, it appoints an investigation team. Investigations are 20 Are there laws or rules restricting or qualifying access to conducted in accordance with Parts 8 and 9 of the Safety Regulations and airports? the policies of the CAA. Investigation reports are submitted with the CAA, which may be made public. Generally, all aircraft are required to land at the designated airports and strips complying with all the requirements stipulated by the CAA. The 27 Is there a mandatory accident and incident reporting system Aviation Law authorises the CAA to restrict or qualify access to airports and, if so, how does it operate? due to the unavailability of necessary facilities required for safety of the aircraft or for public security reasons. Further, the Aviation Law prohibits The Aviation Law requires the pilot in command to report any threat or dan- the entry of unauthorised persons in airport vicinities that have been des- ger posed to the aircraft and its passengers. The Aviation Law also requires ignated with special signs. any person who finds traces of a lost or damaged or destroyed aircraft to report to local authorities immediately. Part 8 of the Safety Regulations 21 How are slots allocated at congested airports? provides detailed rules with regard to mandatory reporting. Slots are allocated by the CAA at each individual airport in accordance Competition law with the aerodrome and en-route procedures published and edited by the CAA from time to time and other policies of the individual airports. 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? 22 Are there any laws or rules specifically relating to ground There are no competition rules in the aviation sector in Afghanistan. handling? General provisions of the Competition Law would be applicable. Part 9 of the Safety Regulations requires an AOC holder to arrange appropriate ground handling facilities at each airport to ensure the safe servicing 29 Is there a sector-specific regulator or are competition rules and loading of its flights. The Safety Regulations allow air carriers to sub- applied by the general competition authority? contract services related to ground handling to external agencies. Rules of There is no regulator for competition in the aviation sector. In view of the Competition Law are applicable in case of unjust commercial practices the Competition Law, the National Competition Board (NCB) is the only and agreements concluded in violation of its provisions. regulator that is responsible for regulating competition-related matters. However, the NCB has not yet started functioning, even though the 23 Who provides air traffic control services? And how are they Competition Law has been in effect since 2010. Instead, a new body, the regulated? Competition Promotion and Consumer Protection Directorate under the Air traffic control services are provided and regulated by the CAA in Ministry of Commerce and Industry is given mandate to regulate matters accordance with Part 8 of the Safety Regulations. related to competition.

www.gettingthedealthrough.com 13 AFGHANISTAN Legal Oracles

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

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

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

14 Getting the Deal Through – Air Transport 2015 Freidenberg, Freidenberg & Lifsic ARGENTINA

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 nego- • Law No. 19,793 (ratification of the Hague Convention 1970 for the tiation 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);

www.gettingthedealthrough.com 15 ARGENTINA Freidenberg, Freidenberg & Lifsic

• Law No. 24,237 (Sweden); Domestic and international scheduled services are granted by conces- • Law No. 16,748 (Switzerland); sion of the executive authority (ANAC or ST) but the concession to operate • Law No. 26,450 (Panama); a route does not imply exclusivity. • Law No. 26,677 (Ecuador); and Non-scheduled domestic and international services require authorisa- • Memorandum No. 2074 (Qatar). tion granted by the same listed authority. International transport may be operated by foreign companies in Memoranda of consultation have been agreed between Argentina and accordance with the international air services agreements signed by most of the countries with which it has signed the above agreements to Argentina, or under authorisation from the Argentine federal authority amend or modify the ratified agreements. (ANAC) in the legal framework of Law No. 19,030 as amended by Law No. Bilateral air services agreements have also been signed with Turkey, the 19,534. United Arab Emirates and South Africa, but they still have not been ratified by law. 5 What requirements apply in the areas of financial fitness and Other memoranda of consultation have been signed with countries with nationality of ownership regarding control of air carriers? which no bilateral air services agreements are in force. According to AAC article 105, no permit or concession will be granted without examining the technical expertise and financial soundness of the peti- Regulation of aviation operations tioner. Such control is conducted throughout the duration of the permit or 2 How is air transport regulated in terms of safety? concession once granted by the authority. A permit or concession may be revoked by the Aeronautical Authority upon failure to comply with any pre- The ANAC (formerly the AAF) sets out the rules on safety and checks established condition attached to the granting of the permits. compliance. According to section 99 of the AAC, 51 per cent of the share capital of an Every aircraft must fly with a pilot on board who is the principal air carrier must be owned by Argentine individuals or Argentine legal entities, authority. In the case of danger, the captain must stay at his or her position who must be domiciled in Argentina. In the case of legal entities, the president until all of the safety measures have been taken. He or she ensures the effi- of the corporation must be Argentine and 51 per cent of the members of the ciency of the aircraft and the safe conditions of the flight before taking off. administrative bodies must also be Argentine. Furthermore, the chairman of A mechanic licensed by the Argentine Authority must approve the safety the board and two-thirds of the board members must also be Argentine. The conditions of the aircraft before it takes off. A flight dispatcher licensed by AAC (section 129) establishes a public hearing procedure for Argentine carri- the Argentine Authority takes responsibility for the weight and balance of ers requesting a concession or permit, which is regulated by Executive Decree the aircraft before it takes off, even if remote dispatch is implemented. 1492/92 as amended by Executive Decree 2186/92. Aircraft with a take-off As of 1 July 2009, ANAC establishes general rules related to aircraft weight of less than 38 tons can be excluded from this procedure. circulation and may impose restrictions when national defence, public Executive Decree 52/94 as amended by Executive Decree 1012/06 has interest or the safety of the flight is at risk. clarified that Argentine commercial corporations as referred to in section 99 No aircraft can fly without a crew with valid licences, aircraft airwor- of the AAC may apply for the granting of a permit or concession even if its thiness and registration certificates, and a logbook. It is also required that shareholders are foreigners. when an aircraft has been repaired, modified or built, that an inspection is There are several law projects to derogate both decrees, but at the time of carried out by the aeronautical authority before an aircraft can take off. The writing none of them has been formally discussed by Congress. authority can inspect persons, aircraft, crew and carried goods, particularly those that may endanger the safety of the flight, before departure, during 6 What procedures are there to obtain licences or other rights to flight, upon landing and while on the ground, taking the proper measures operate particular routes? to secure the safety of the flight (AAC sections 3, 8, 9, 10, 12 and 13, Law No. 24,051 on Hazardous Remains). The PSA is in charge of security within the The licence or concessions procedure to operate particular routes is estab- airport terminals and ramp according to Law No. 26,102. A National Safety lished by Law No. 19,030 as amended by Law No. 19,534 and by Executive Operational Programme for Civil Aviation (2008/2011) was approved by Decree 2186/92. Licences are granted in relation to certain routes and for the Argentine Air Force on 2/5709 by Disposition 28/2009 and revised by a period that will not exceed 15 years (the licence is renewable). See ques- Disposition 074/10. tion 5. ANAC is responsible for compliance with the Chicago Convention norms and its Annexes regarding safety. 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular 3 What safety regulation is provided for air operations that do routes? not constitute public or commercial transport and how is the The party interested in obtaining licences to operate commercial air ser- distinction made? vices will have to describe the characteristics of the service it intends to Section 92 of the AAC makes a distinction between air service transporta- operate and provide the documentation required by law. After the application (the commercial transportation on an aircraft of passengers or goods tion is filed by the carrier, the authority will check if all the requirements from one airport to another), and aerial work, which includes all com- have been met and notify the interested parties that a public hearing will be mercial air operations that are not transportation. To perform aerial work, called. The interested parties must register with the Air Transport Board to operators need an authorisation granted by ANAC (AAC section 131/32). take part in the hearing and be able to contest the application of the peti- Aircraft performing aerial work must comply with the general aviation tioners (AAC 129, Executive Decrees 1492/92 and 2186/92). regulations and the rules applicable to any special equipment they carry on board. 8 Is there a declared policy on airline access or competition and, Safety is governed by the AAF Resolution (RAAC) approved by the if so, what is it? Joint Resolution 3/2005 issued by three AAF agencies (the Air Transport Law No. 19,030 as amended by Law No. 19,534 governs Argentine Air Authority, the Air Navigation Authority and the Air Licensing Authority). Policy. On 18 November 2010, ANAC issued Resolution 980 approving modifica- From 1998 onwards, permits and concessions to new carriers have only tion No. 2 to the third edition of the Civil Avation Regulations with regard been granted on the basis of unsatisfied demand for certain routes. A detailed to Parts 1, 18, 61, 63, 64, 65, 67, 91, 119, 121, 135 and 145 (see www.anac. procedure to ascertain the unmet demand and the granting of routes is estab- gov.ar). lished in Annex 2 to Executive Decree No. 1401/98 as amended by Executive Decree 2186/92. Antitrust Law No. 25,156 may apply to airline agreements 4 Is access to the market for the provision of air transport and mergers (see question 28). services regulated and, if so, how? For the provision of domestic transport, according to sections 97 and fol- 9 What requirements must a foreign air carrier satisfy in order lowing of the AAC, Argentine individuals or corporations domiciled in to operate to or from your country? Argentina may be eligible to obtain an authorisation from the federal gov- The party interested in obtaining traffic rights to operate between a for- ernment (see question 5). eign country and Argentina and vice versa must comply with the following requirements:

16 Getting the Deal Through – Air Transport 2015 Freidenberg, Freidenberg & Lifsic ARGENTINA

• a diplomatic designation by the country of the carrier’s flag; 14 Is there a register of aircraft mortgages or charges and, if so, • the foreign carrier must register as an Argentine branch of the foreign how does it function? corporation at the Argentine Superintendency of Corporations under Mortgages and any rights on aircraft are registered at the Public Aircraft the terms of section 118 of the Corporations Law No. 19,550; and Registry. • once the foreign carrier has been duly registered in Argentina as a A public or private instrument, duly notarised and legalised by the branch it must request the authorisation to operate international nearest Argentine consulate or apostilled if the transaction was imple- scheduled or non-scheduled air services to the Argentine Aeronautical mented outside Argentina, is necessary for registration (AAC sections 45, Authority and provide: 52, 53 and sections 1 and 28 of Executive Decree 4907/73). • the corporation’s documents; The Aircraft Registry functions under the AAC and regulations estab- • the commercial and operative permits obtained in its country of lished by Decree 4907/73. The registry issues regulations from time to origin; time that must be complied with by the parties that intend to register rights • details of the aircraft that it intends to operate in the route; on aircraft. • certificates of registration and airworthiness; • an insurance certificate that covers the carrier’s operations; and 15 What rights are there to detain aircraft, in respect of unpaid • its liability regarding its passengers, cargo and mail, third parties airport or air navigation charges, or other unpaid debts? on the ground and crew members. Section 73 of the AAC sets forth the only five scenarios where an aircraft may be detained: 10 Are there specific rules in place to ensure aviation services • in case of a judicial sentence being executed; are offered to remote destinations when vital for the local • in case of credits being granted for the accomplishment of a trip; economy? • in case of unpaid credits originating in an aircraft contract of sale; Sections 48 to 50 of Law No. 19,030 establish that public transport services • in case of unpaid airport fees for more than three months (according to may be authorised if there is a national interest in providing services to Executive Decree 1674/1976); and areas where public transport needs are not fulfilled. • in case of non-compliance with certain regulations (deportees) set Executive Decree No. 1012/2006 sets out that the provisions for emer- forth in the Immigration Law No. 25871 (article 48). gency air transport in Argentine territory previously declared by Executive Decree 1654/2002 will continue. The main reason for the continuity of air Finally, it should be noted that Argentina is a party to the Convention for transport emergency provisions is to protect transport to remote destinations the Unification of Certain Rules relating to the Precautionary Attachment and keep the different areas of Argentina connected. of Aircraft. (Law 23,111). Article 138 AAC sets forth that certain routes of special interest to Argentina may be subsidised under certain conditions. 16 Do specific rules regulate the maintenance of aircraft? Maintenance is regulated by the the RAAC and the Regulations of 11 Are charter services specially regulated? Airworthiness issued by ANAC (formerly the AAF). Those regulations Charter services are regulated by Executive Decree, 1470/97, 1364/90 apply to all aircraft that bear Argentine registration and also to aircraft with (Incoming), Resolution ST No. 205/1998 and Tourism Secretary Resolution a foreign registration if they are operating for an Argentine carrier. No. 173/95 (outgoing). Some bilateral agreements contain provisions on charter flights. Airports

12 Are airfares regulated and, if so, how? 17 Who owns the airports? Resolution SSTA 275/87 establishes that there are minimum and maxi- Section 25 of the AAC establishes that airports may be public or private. mum limits for domestic fares for each route. Carriers must notify the ST Public airports are owned by the provincial or federal government and may of the fares that will apply for each route. Executive Decree 1012/06 sets be granted in concession to private entities. forth that fares for domestic transport must be charged by the carriers with regard to Executive Decree No. 1654/2002 and complementary Resolution 18 What system is there for the licensing of airports? 35 of the Ministry of Production, which establishes the possibility of apply- The licences are granted by the executive power by means of public ing touristic fares from those fixed, on routes of geopolitical, strategic or bidding. tourism interest. From time to time the ST has authorised increases in domestic airfares (ie, Resolution ST 257/08, ST 210/10 and ST 23/2012). 19 Is there a system of economic regulation of airports and, if so, International airfares are deregulated but carriers must register its appli- how does it function? cable airfares with ANAC. For airports that have been privatised, the terms and conditions of the concession are to be complied with by the concessionaire. Such terms and con- Aircraft ditions require the concessionaire, among other obligations, to pay a fee 13 Who is entitled to be mentioned in the aircraft register? Do and to make certain investments in each of the privatised airports. Some requirements or limitations apply to the ownership of an concessionaries must pay a fixed fee, and others pay a percentage of the aircraft listed on your country’s register? income they receive. Investments, control and planning of the privatised airports must be Section 48 of the AAC, as governed by Executive Decree 4907/73, states regularly reported to the Regulatory Agency for the National System of that the only requirement for registering an aircraft in Argentina is to Airports (ORSNA) for approval. have legal domicile in the country, which applies to both individuals and Aeropuertos Argentina 2000 SA (AA2000) is the current conces- corporations. sionaire of 33 airports of the National Airport System including Ministro Section 42 of the AAC sets out that aircraft that have a take-off weight Pistarini, Ezeiza Airport and Aeroparque Jorge Newbery, serving Buenos of more than six tons may obtain a provisional Argentine registration if they Aires. This concession contract was renegotiated in 2007 as set forth in comply with certain requirements. In this case the owner or mortgagee of the Executive Decree 1799/2007. By the negotiation terms the AA2000 has aircraft (or both) is recorded in the aircraft register. This section is used by the obligation to invest in the airport but not to pay a fee. This concession Argentine carriers when leasing or acquiring aircraft in a foreign country to is controlled by the ORSNA. obtain a provisional Argentine registration until the full price agreed for the Many investments will be made by forming a trust. The airport conces- transaction is fully paid. sionaire will assign part of the airport fees and taxes to a fiduciary trustee in If the aircraft weighs less than 6 tons it can bear provisional Argentine order to grant the execution of new construction. registration if it is connected with a carrier holding commercial authority (article 43 CCA).

www.gettingthedealthrough.com 17 ARGENTINA Freidenberg, Freidenberg & Lifsic

20 Are there laws or rules restricting or qualifying access to International Carriage by Air signed at Montreal on 28 May 1999 (Law No. airports? 26,451). Access to public airports should be granted by ANAC, in the framework of Title I, Chapter I of the AAC. Every commercial arrival or departure to 25 Are there any special rules about the liability of aircraft public airports must be authorised by ANAC. operators for surface damage? In order to operate international flights the airport must have been The operator is responsible for damages caused by an aircraft in flight or qualified as an international airport by the aviation authority. a person or a thing thrown from it or abnormal noise. The responsibility Airport access restrictions (operation procedures) are published in of the operator can be attenuated or exempted, if it proves that the victim NOTAMs (notices concerning the conditions or changes to any facility) caused the damage or contributed to causing it. Liability is limited accord- issued by the aviation authority. ing to the aircraft’s take-off weight (sections 155 to 162 of the AAC). Law No. 23,111 ratified the Rome Convention 1933 for the Unification of Certain 21 How are slots allocated at congested airports? Rules on Precautionary Arrest of Aircraft. Disposition 006/2003 issued by the former Undersecretary of Civil Aviation that established the slot allocation procedure was replaced by 26 What system and procedures are in place for the investigation ANAC Resolution No. 764/10. of air accidents? Before a scheduled or non-scheduled commercial service is approved Accident investigations are regulated by Annex 13 to the Chicago by the Aviation Authority the airport principal (appointed by the Aviation Convention, AAC sections 185 to 190 and Executive Decree 934/70. Authority) and the airport administrator (appointed by the airport owner or The Accidents Investigation Board, which was within the jurisdiction concessionaire) must approve the slots. There are no specific rules for con- of ANAC, was moved by Executive Decree 1192/10 to the jurisdiction of the gested airports. secretary of transportation. The Accident Investigation Board is in charge of carrying out the investigation. It will determine the causes of accidents and 22 Are there any laws or rules specifically relating to ground incidents to aircraft or produced by them. handling? Executive Decree 2145/73 sets forth that the AAF is the exclusive provider 27 Is there a mandatory accident and incident reporting system of ground handling to airlines at airports and authorises the AAF to assign and, if so, how does it operate? such service to third parties. Consequently, the AAF has assigned the right Sections 185 to 190 of the AAC and Executive Decree 934/70 govern acci- to perform ground handling to a state-owned corporation, Intercargo SAC. dent investigations in Argentina. Executive Decrees 480/94 interpreted Executive Decree 2145/73 as According to the above norms, any person who knows about a flight acci- follows: carriers operating in Argentine airports may self-handle but may dent or incident has to communicate this to the closest authority (military not provide services to other operators. agency or police) who will immediately notify the Accidents Investigation Executive Decree 698/01 removed for domestic carriers the handling Board. Until the arrival of the personnel in charge of the investigation a guard services exclusivity, allowing carriers to provide handling services not only must be stationed at the accident site to avoid the site being disturbed or evi- to themselves but also to other domestic operators. dence being removed. See question 1 regarding AAF duties being transferred to ANAC. ORSNA Resolution 421/11 establishes new fares for ramp services. Competition law 28 Do sector-specific competition rules apply to aviation? If not, 23 Who provides air traffic control services? And how are they do the general competition law rules apply? regulated? There are no sector-specific competition rules applied to aviation, the gen- Executive Decree 1770/2007, article 7 assigns the duties related to air traf- eral competition rules apply instead. fic control to ANAC. The air traffic control services are self-regulated by Antitrust Law No. 25,156 establishes a procedure to avoid disloyal compe- administrative regulations formerly issued by the AAF and now under the tition based upon the abuse of a dominant position. jurisdiction of ANAC. 29 Is there a sector-specific regulator or are competition rules Liability and accidents applied by the general competition authority? 24 Are there any special rules in respect of death of, or injury to, The competition rules are applied by the National Antitrust Commission passengers or loss or damage to baggage or cargo in respect of (CNDC) which is the competition authority. domestic carriage? The CNDC must request the opinion of the aviation authority in According to sections 139 to 154 of the AAC, the carrier is responsible for aviation-related matters. the damages caused by death or corporal injury suffered by a passenger when the accident that occasioned the damage had taken place on board 30 How is the relevant market for the purposes of a competition the aircraft or during embarkation or disembarkation. (Note that Argentine assessment in the aviation sector defined by the competition courts also award moral damages, not only corporal.) The carrier is also authorities? responsible in cases of destruction, loss or damage of registered luggage The competition authorities have not defined the relevant market in the and cargo, when the cause of the damage has taken place during transpor- aviation sector. However, Law No. 25,156 defines the characteristics of the tation. The carrier will not be held responsible if it proves that it has taken dominant position of an offeror of services with the intention of prevent- all the necessary measures to avoid the damage, that it was impossible for ing offerors from unilaterally determining fares or avoiding competition; it to take them, or if it proves that the person that has suffered the damage the relevant market may be defined as that in which one or more airlines, caused it or contributed to causing it. regardless of flag country, effectively exercise traffic rights between two The carrier’s liability is limited. The limitation will not, however, oper- countries. ate when the damage is caused by its wilful misconduct or by a carrier’s employee. 31 What are the main standards for assessing the competitive Argentina is a party to the Convention for the Unification of Certain effect of a transaction? Rules Relating to International Carriage by Air, signed at Warsaw on 12 The main objective of the Antitrust Law is to protect the general eco- October 1929 (Law No. 14,111); the Protocol to Amend the Convention nomic interest (consumers and other competitors) and competition in the for the Unification of Certain Rules Relating to International Carriage by markets. Air, signed at Warsaw on 12 October 1929 and signed at The Hague on 28 Law No. 25,156 introduces a preventive control that aims to avoid the September 1955 (Law No. 17,386); the Additional Protocols No. I, II, III and abnormal operation of the market. A commercial operation is considered IV to amend the Convention for the Unification of Certain Rules Relating to be detrimental to the general public when an offeror gains control of the to International Carriage By Air signed at Warsaw on 12 October 1929 (Law market. Law No. 25,156 is aimed at preventing the irreversible effects that No. 23,556) and the Convention for the Unification of Certain Rules for

18 Getting the Deal Through – Air Transport 2015 Freidenberg, Freidenberg & Lifsic ARGENTINA an economic concentration of corporations might have on competition and 37 If so, what are the main procedural steps to obtain clearance? the results that such a concentration might produce. See question 36.

32 What types of remedies have been imposed to remedy 38 If no clearance is obtained, what procedures apply to recover concerns identified by the competition authorities? unlawfully granted state aid? Mergers and acquisitions must be notified to the CNDC. In all cases where state aid is unlawfully granted, administrative and crimi- In the case of mergers or acquisitions worth more than 200 million nal procedures to recover illegally spent public funds apply. pesos, previous authorisation from the CNDC must be requested and The Criminal Code (CC) contemplates the following measures: obtained. • section 260 of the CC establishes that a government employee who A few years ago, the CNDC rejected a vertical integration between an gives funds or effects a different destination from that which the law airport concessionaire and an airline. The CNDC in this case evaluated the sets forth will be punished; and airport concessionaire’s power to govern the regulation of fares. The nega- • section 248 establishes that a government employee who violates the tive evaluation of the effects of vertical integration was based on the exist- constitution, federal or local laws or does not carry out laws that he or ence of incentives that the airport operator (integrated vertically) could have used to expand its market power to domestic air transport. she is obliged to fulfil will be punished. Law No. 25,156 establishes fines in case of its violation, which may be appealed to the judicial courts. A motion to vacate the administrative decision must be filed in court in order to recover funds from the beneficiary. Financial support and state aid Miscellaneous 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or 39 Is there any aviation-specific passenger protection government-controlled agencies or companies (state aid) in legislation? the aviation sector? If not, do general state aid rules apply? The Ministry of Economy, Public Works and Services Resolution 1532/98 There are sector-specific rules regulating direct or indirect financial sup- establishes domestic and international general conditions for contracts for port to individual companies by the government in the aviation sector air transport. Passenger protection rules regarding denied boarding, can- and they are contemplated in section 138 of the AAC, section 6 of Law No. cellations and delays are included. 19030 and Executive Decree 1012/2006. Package and holiday protection has been established by several rules Also, there are several state aid regulations that support the aviation sec- issued by the tourism secretary, enacted in the framework of the Brussels tor in matters of fuel and fares (eg, ST Resolutions 360/2007, 257/2008 and Convention of 1970 ratified by Law No. 19,918/72. 315/2008, which set forth a compensation regime for domestic scheduled In the case of bankruptcy the passenger must file a proof of claim of his flights’ fuel price). or her credit against the insolvent airline like any other creditor before the commercial courts. 34 What are the main principles of the state aid rules applicable There are no specific protection laws in case of disabled passengers and to the aviation sector? CRS/Distribution. Nevertheless there are general rules such as Law No. Section 138 of the AAC states that the federal government may subsidise 22,431, Law No. 23,592, Law No. 24,515 and Executive Decree 1086/2005, etc, air transport services on routes of public interest. which prevent discrimination. This means that the state may grant subsidies at its discretion for com- Furthermore Argentina is a party to several treaties that prevent discrim- mercial transport or aerial work, when the route to be subsidised or the ination including, among others: aerial work activity is declared of public interest. • the American Convention on Human Rights (Law No. 23,054); Section 6 of Law No. 19,030 also establishes that the state will distrib- • the American Declaration of the Rights and Duties of Man; ute financial aid to compensate for financial loss originating from the appli- • the Universal Declaration of Human Rights; cation of promotional fares in scheduled air transport services to remote • the International Pact of Civil and Political Rights (Law No. 23,313); destinations that have been declared to be of general interest of the state • the International Pact on Economic Social and Cultural Rights (Law where the service is not cost-effective. Executive Decree 1012/2006 estab- No. 23,313); lishes a minimum and a maximum level for domestic air carriers’ fares. • the International Convention on the Elimination of all Forms of Racial Discrimination (Law No. 17,722); 35 Are there exemptions from the state aid rules or situations in • the International Convention on the Elimination of All Forms of which they do not apply? Discrimination against Women (Law No. 23,179); Provided the preconditions mentioned in question 33 are met, the govern- • the Convention on the Rights of the Child (Law No. 23,849); and ment may grant subsidies to the best of its judgment. There are no general • the Convention Against Torture and Other Cruel, Inhuman or exemptions or other limitations contemplated by the applicable regula- Degrading Treatment or Punishment (Law No. 23,338). tions exonerating government debt to allow for the privatisation of a state- owned company. Any passenger, as a service user, is protected by Law No. 24,240 as amended Nevertheless, when Aerolíneas Argentinas Sociedad del Estado, a by Law No. 26,361 (Consumer Rights Protection Law). Nevertheless, sec- state-owned company, was privatised as Aerolíneas Argentinas SA, a pri- tion 63 of said law sets forth that international liability conventions that vate corporation, it was exonerated by the government of all liabilities regulate aviation liability take priority over Law No. 24,240. (Executive Decrees 1591/89, 461/90, 575/90, 1024/90, 1354/90, 2201/90 and 2438/90). 40 Are there mandatory insurance requirements for the At present, Aerolíneas Argentinas SA is again a state-owned company. operators of aircraft? Law No. 26,466 of 2008 stated that the stocks of Aerolíneas Argentinas SA (AR) and its subsidiaries and affiliate companies are of ‘public interest’ and Sections 191 to 196 of the AAC establish that the following insurance must the stock is subject to expropriation in accordance with the Expropriation be provided to the aviation authority in order to operate aircraft: Law (Law No. 21,499). • employee insurance (for all those who carry out functions on board); The above-mentioned Law No. 26,466 also says that the executive • insurance against damage caused by death or injury suffered by a pas- power shall provide the mechanism to cover the financial needs of AR and senger (note that according to Argentine jurisprudence moral dam- it shall prepare AR business, strategic and operative plans. ages are granted for death or personal injury as well as for delay or cancellation of flights) or damage to transported cargo and mail; and 36 Must clearance from the competition authorities be obtained • insurance against damages caused to third parties on the surface. before state aid may be granted? Clearance does not need to be obtained from the competition authority For international flights the insurance must at least cover the liability limi- before state aid can be granted. tations set forth in the international conventions that have been ratified by Argentina and those established by the AAC. www.gettingthedealthrough.com 19 ARGENTINA Freidenberg, Freidenberg & Lifsic

41 What legal requirements are there with regard to aviation • abandoning an aircraft or position before arriving at the final destina- security? tion (section 195 of the CC); Law No. 26,102 created the PSA, a specific police force to ensure airport • acts of imprudence or negligence that cause an accident or air colli- security. The PSA controls all airports and installations, and the areas near sion, with aggravated penalties applying if the accident or collision to all airports. causes injuries or death of a person (section 196 of the CC); and Each carrier operating in, to and from Argentina must provide the PSA • piracy: acts of plundering or violence against an aircraft while in flight with its security manual for the PSA’s approval. Security manuals must or while engaged in pre-flight operations, or against persons or prop- comply with ICAO and Argentine legal standards (in particular with PSA erty on board, without being duly authorised by a belligerent nation. Disposition 074/10). This also includes usurpation of the aircraft authority, impediment or obstruction of the defence of the aircraft attacked by hijackers and 42 What serious crimes exist with regard to aviation? dealing with hijackers. Aggravated penalties apply if the act of piracy causes injuries or the death of a person (section 198 and 199 of the Serious aviation crimes are established in the Criminal Code (CC). They CC). include: • threats to the safety of an aircraft, aggravated penalties apply if those See question 1 regarding ratification by Argentina of the conventions that threats result in an air accident, injuries to, or the death of a person deal with criminal activities related to aviation. (section 190 of the CC); • impediment or obstruction of the normal functioning of air transport (section 194 of the CC);

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 2015 HWL Ebsworth Lawyers AUSTRALIA

Australia

Simon Liddy, Matthew Brooks and Richard Davis HWL Ebsworth Lawyers

General Private aircraft are defined as aircraft that: • have a maximum take-off mass of 5,700kg or less; and 1 Which bodies regulate aviation in your country, under what • are used only in private operations by either the owner of the aircraft basic laws? or a person to whom the owner has provided the aircraft without Aviation is regulated by the Department of Infrastructure and Regional receiving any remuneration from the person. Development (DOIRD), and the Civil Aviation Safety Authority (CASA). The principal legislation regulating aviation is: Private operators must undergo a licence test to ensure their knowledge of • Civil Aviation Act 1988; safety regulations. Operators are required to conduct the relevant training • Civil Aviation Regulations 1988; and checking programmes set out in the operating rules. • Civil Aviation Safety Regulations 1998; Safety regulations for aerial work are set out in the Civil Aviation • Civil Aviation Orders; Regulations 1988 and Civil Aviation Orders. Compliance is monitored • Civil Aviation (Carrier’s Liability) Act 1959; by CASA. Aerial work operations are required to be certified, namely the • Civil Aviation (Carrier’s Liability) Regulations 1991; operator must hold an air operator’s certificate (AOC). • Air Navigation Act 1920; Aerial work operations can be contracted out with CASA approval; • Air Navigation Regulations 1947; however, the operator retains responsibility for ensuring that the con- • Airports Act 1996; tracted organisation carries out the specified duties. • Airports Regulations 1997; All flight crew, ground support personnel and some non-flight crew • Aviation Transport Security Act 2004; and members are required to be trained and checked annually. • Aviation Transport Security Regulations 2005. CASA is responsible for the regulation of sports aviation (for instance, ultralight aircraft, gliders, hang-gliders and hot-air balloons), but has dele- Regulation of aviation operations gated the administrative functions to various sports and recreational organisations, known as recreational aviation administration organisations. 2 How is air transport regulated in terms of safety? Air transport safety is regulated by CASA. Strict requirements are man- 4 Is access to the market for the provision of air transport dated by CASA as to the airworthiness of aircraft and the imposition of services regulated and, if so, how? licensing schemes for pilots, crew, ground staff, flight procedure design The following are the primary restrictions on access to the markets for the and air traffic control. In addition, CASA mandates requirements for the provision of air transport services: maintenance of aircraft. Crew are also regulated by CASA through security • any airline proposing to operate scheduled international air services checks and a photo licensing scheme. Operators are regulated by CASA (passenger and cargo) into or out of Australian territory requires an and the DOIRD. international airline licence (IAL) pursuant to the Air Navigation Act All requirements relating to safety are found in the Civil Aviation 1920; airline applicants must apply to the DOIRD for an IAL and to Act, the Regulations made under that Act (namely, the Civil Aviation CASA for a foreign aircraft air operator’s certificate (FAAOC), as well Regulations 1988 and the Civil Aviation Safety Regulations 1998), and the as to the Office of Transport Security for transport security programme supporting documents issued under those Regulations. approval; • airlines proposing to market seats or cargo capacity, or both, to or from 3 What safety regulation is provided for air operations that do Australia under code share arrangements also require an IAL; not constitute public or commercial transport and how is the • the principal restrictions on access to the international market for distinction made? Australian airlines are ownership and control requirements – foreign CASA regulates the safety of all air transport and the same airworthiness shareholdings are limited to 49 per cent of the share capital, and there guidelines apply to both private and commercial aircraft. are also a number of (Australian) control criteria; The distinction between commercial transport and private operations • a foreign airline must demonstrate that it is designated by its country is set out in the Civil Aviation Act. Commercial transport encompasses under the relevant air services agreement (ASA) and otherwise comply both ‘regular public transport’ (ie, scheduled commercial operations) and with the requirements of the ASA; charter operations, each of which has the following characteristics. • Australian airlines will also need an allocation of capacity from the For regular public transport: International Air Services Commission (IASC) prior to the granting of • passengers purchase a seat on the aircraft and seats are available to the an IAL; general public; and • access to the domestic interstate market is unregulated; there is no • the airline fixes the time of departure and the route to be taken. restriction on foreign ownership of Australian domestic airlines; and • some licensing restrictions apply to intra-state services. For charter operations: • the charterer contracts with the owner to obtain total control of all the 5 What requirements apply in the areas of financial fitness and passenger and cargo space on the aircraft; nationality of ownership regarding control of air carriers? • the charterer is not simply buying a seat or seats on an aircraft and There are no requirements for financial fitness for applicants for an IAL seats are not available for purchase by members of the public; and or for an AOC (for international or domestic operations). As to ownership • the charterer controls the times of departure and the routes taken, and and control restrictions, see question 4. However, the IASC, when assess- can change them. ing applications for an allocation of capacity by new carriers, does request www.gettingthedealthrough.com 21 AUSTRALIA HWL Ebsworth Lawyers financial statements and financial projections for the first two years of Foreign Investment Review Board (FIRB) approval in some circumstances operations. Also, CASA may have regard to the financial circumstances (eg, where the foreign airline may be state owned). of an applicant as one of the matters it takes into account in assessing an There are no restrictions on access to interstate domestic routes, application for an FAAOC. which includes all air transport between capital city airports.

6 What procedures are there to obtain licences or other rights to 9 What requirements must a foreign air carrier satisfy in order operate particular routes? to operate to or from your country? Scheduled international services are operated pursuant to ASAs between Foreign carriers seeking to operate to or from Australia must obtain an IAL Australia and other countries. Non-scheduled services (including charters) from the DOIRD, and an FAAOC from CASA as set out in question 4. are regulated by other requirements, not pursuant to an ASA. They must demonstrate that they are designated by their country and ASAs (agreements between the respective governments) establish the that they meet the requirements of the relevant ASA between Australia and capacity for the route. The IASC then allocates that capacity to designated their country of designation relating to incorporation, ownership and con- Australian carriers, on public benefit grounds, on an application by applica- trol, and their principal place of business. tion basis, depending on available capacity. The DOIRD maintains a public In assessing an application for an FAAOC, CASA will review the appli- register of available capacity for all routes. cant’s operations manuals, maintenance manuals, safety management The IASC has published policies on allocation of capacity in start-up systems (SMS), training regime and other similar operational require- phases and after start-up. In general, where capacity is subject to compet- ments. CASA will also look carefully at the regulatory oversight regime of ing allocations, the government considers that own aircraft operations the home jurisdiction of the airline and may also be influenced by EU and deliver greater benefits than code-share operations involving arrange- FAA ratings. ments for marketing seats on international carriers operated by another carrier. 10 Are there specific rules in place to ensure aviation services In allocating capacity on a route, the IASC will allocate such as to pro- are offered to remote destinations when vital for the local vide reasonable growth in entitlements to all Australian carriers operating economy? that route. Where an ASA provides that capacity can be used for code-share The Australian government provides assistance for air services to operations, including where foreign airlines have rights to code-share on regional and remote communities through several programmes includ- services operated by Australian carriers, the IASC will authorise use of ing the Remote Air Service Subsidy Scheme, the Remote Airstrip Upgrade capacity to code-share. Programme, the Remote Aerodrome Safety Programme and the Remote There are no restrictions on requirements for licensees for domestic Aerodrome Inspection Programme. These programmes have been consoli- interstate routes. A domestic airline conducting interstate services will dated under the Regional Aviation Access Programme. The aim of these simply make operational arrangements at each airport, and subject to slot programmes is to provide support for remote aviation services that are not allocation may commence services. commercially viable but are essential for the social and economic well- Services within states are licensed by the respective state governments. being of the communities they serve. Some state governments also provide assistance to regional and 7 What procedures are there for hearing or deciding contested remote communities via direct subsidies, limiting competition on low- applications for licences or other rights to operate particular volume routes and providing funding support for airport maintenance and routes? upgrading. New South Wales and South Australia regulate marginal routes Applications for capacity to the IASC are dealt with by written submissions but do not subsidise them; Western Australia regulates marginal routes and to the commission in a transparent process. The IASC may hold hearings, also directly subsidises some routes; and Queensland subsidises the provi- but this is rare. sion of services on marginal routes and ensures that everyone is within 200 The IASC may publish a draft decision, including a statement of rea- kilometres of an air service. The Victorian, Northern Territory, Tasmanian sons, to give all parties an opportunity to comment before final determina- and Australian Capital Territory governments do not subsidise or regulate tion. The commission may also conduct a pre-decision conference. any intra-state routes. A final determination is issued to the parties and published on the IASC website, as are all formal communications. There have been no 11 Are charter services specially regulated? appeals from a decision of the IASC (but if so, these would be made to the An operator of domestic charter services in Australia must hold an AOC Federal Court of Australia). issued by CASA. A charter service into Australia operated by a foreign carrier, will be 8 Is there a declared policy on airline access or competition and, required to satisfy various requirements of CASA and also file an approved if so, what is it? Transport Security Plan. An operator may conduct up to eight charters The current Australian Airspace Policy Statement came into effect on 1 July a year into Australia, but beyond that will usually have to apply for an 2012. FAAOC, and possibly also an IAL, depending on the frequency and nature While the rights of Australian carriers to operate scheduled interna- of the services. tional services are governed by bilateral arrangements, it is the IASC that allocates the capacity to Australian carriers. The IASC operates accord- 12 Are airfares regulated and, if so, how? ing to the ‘Minister’s Policy Statement’. The Policy Statement sets out a No. Airfares are set by the air services provider. range of criteria for assessing public benefits for an allocation of capacity The ACCC oversees compliance with the relevant competition legisla- to the Australian community. These include tourism, benefits to consum- tion. In general, prices advertised must be clear, accurate and not mislead- ers through lower fares and better access to freight services for Australian ing to consumers. Also, businesses that choose to advertise a part of the importers and exporters. airfare must also prominently specify a single total price and display the The IASC also consults with the Australian Competition and total airfare. Consumer Commission (ACCC) on competition issues. To be an Australian-designated airline, in order to be able to apply for Aircraft capacity, the airline must be 51 per cent Australian-owned and controlled, as above. 13 Who is entitled to be mentioned in the aircraft register? Do The government is also encouraging international airlines to increase requirements or limitations apply to the ownership of an services to Australia’s secondary international gateways, by granting unre- aircraft listed on your country’s register? stricted access to the major capital city airports to airlines that operate to The Australian Civil Aircraft Register is kept by CASA pursuant to Part 47 Australia’s secondary international gateways. of the Civil Aviation Safety Regulations 1998. Under these regulations, At a domestic level, the industry is totally deregulated. Domestic CASA must enter details of the owner, registered operator, manufacturer, airlines may be 100 per cent foreign-owned, subject to Commonwealth model and serial number of an aircraft in the register.

22 Getting the Deal Through – Air Transport 2015 HWL Ebsworth Lawyers AUSTRALIA

There are no limitations as to the owner’s nationality, although a regis- compliant with the CASA Manual of Standards (pursuant to Part 139) and tered operator must have some connection with Australia (eg, as a foreign have a CASA approved aerodrome manual as well as pass certain tests by corporation lawfully carrying on business in Australia). Note that foreign CASA. aircraft operating in Australia need not be registered in Australia if they are registered in a country with which Australia has a relevant agreement, or 19 Is there a system of economic regulation of airports and, if so, that is a contracting state to the Chicago Convention 1944. how does it function? No. However, the ACCC has an indirect role in regulating pricing at 14 Is there a register of aircraft mortgages or charges and, if so, Australian airports. how does it function? The ACCC is responsible under the Consumer and Competition Act The Personal Properties Securities Act 2009 establishes a single national (CCA) for monitoring prices, costs, profits and quality relating to aero- system for the registration of security interests in personal property, such nautical and car parking for the four largest airports: Sydney, Melbourne, as aircraft. The Personal Properties Securities (PPS) Register commenced Brisbane and Perth. In addition, under the CCA, Sydney Airport on 30 January 2012. The new PPS system has reformed the multiplicity of Corporation Limited must notify proposed increases in charges relating to Australian laws dealing with secured finance of personal property and the aviation services within New South Wales to the ACCC, which must then variety of registers in place, and replaced the ASIC Register of Company assess the proposed price increases and decide whether to object. Charges and register of statutory liens kept by Airservices Australia. The Regulations also restrict certain on-airport activities including the sale PPS system applies to a number of securities including fixed and floating of liquor, commercial trading, vehicle movements, gambling and smoking. charges, chattel mortgages, and finance and operating leases. The register is available at www.ppsr.gov.au. 20 Are there laws or rules restricting or qualifying access to Australia is in the process of acceding to the 2001 Convention on airports? International Interests in Mobile Equipment and the associated Protocol The federal government enacted the Airports Act 1996 and Airports to the Convention on International Interests in Mobile Equipment on Regulations 1997 in order to establish a system for the regulation of air- Matters Specific to Aircraft Equipment (the Cape Town Convention). The ports that has due regard to the interests of airport users and the commu- International Interests in Mobile Equipment (Cape Town Convention) Act nity and ensures that there is an Australian majority ownership of airports. 2013 and the International Interests in Mobile Equipment (Cape Town This also limits the ownership of airports by airlines and implements inter- Convention) (Consequential Amendments) Act 2013 give effect to the national obligations relating to airports. Cape Town Convention. The Cape Town Convention is due to come into Airports are also potentially subject to the third party access provisions operation three months after the Australian government lodges its notice of Part IIIA of the Competition and Consumer Act 2010 (Cth), which sets of accession with UNIDROIT which is anticipated to occur in late 2014. out the general framework for access regulation. If an essential service provided by a facility, such as a terminal or airfield, satisfies certain crite- 15 What rights are there to detain aircraft, in respect of unpaid ria and the National Competition Council recommends declaration of the airport or air navigation charges, or other unpaid debts? service to the Treasurer, and the Treasurer then ‘declares’ the facility, dis- The Air Services Act 1995 gives Airservices Australia, the provider of air puted terms of access may be referred by the access seeker (eg, an airline) traffic control and fire and rescue services, the right to seize (and sell) air- to the ACCC for arbitration. craft where statutory charges remain unpaid. There is no specific regulatory regime monitoring access to airports by Australian airports occasionally make it a condition of use that they airlines. The airport environment in Australia is competitive as between may detain an airport user’s aircraft if charges owing to them have not been the capital city airports, and other than the usual difficulties associated paid within a reasonable time, but such rights are rarely if ever exercised. with access at peak periods (and a formal slot allocation system), access is open and non-discriminatory and airports compete for airline services. 16 Do specific rules regulate the maintenance of aircraft? There are local restrictions at Sydney Airport limiting movements, and Yes. Part 4A of the Civil Aviation Regulations 1988 and Part 42 of the Civil some airports are curfew-restricted. Aviation Safety Regulations 1998 relate to maintenance. They deal, for example, with approved systems of maintenance and who may carry out 21 How are slots allocated at congested airports? maintenance on Australian aircraft. Part 13 of the Airports Act 1996 enables the federal minister for transport In 2011, CASA introduced new maintenance regulations with a view to to formulate a demand management scheme for an airport. Under section modernising and harmonising aircraft maintenance rules. Further changes 201 of the Act, a ‘demand management scheme’ allows for the handling of to the maintenance regulations are currently being proposed in relation to aircraft movements at an airport. Section 205 allows for the formulation charter, aerial work and private operations. of ‘slot allocation schemes’ and for the minister to authorise a person to be a ‘slot coordinator’ for an airport and confer powers and functions on Airports that person. Sydney Airport is subject to the Sydney Airport Demand Management 17 Who owns the airports? Act 1997, and the Sydney Airport Slot Management and Compliance Since 1997, the Commonwealth Government of Australia has granted Schemes, pursuant to which the Minister appoints an independent Slot rights of ownership and control of all major Australian airports to privately Co-ordinator who regulates both slot allocation and compliance by owned companies through long-term leases. In total, 21 leased federal air- operators. ports exist across Australia. Leases can be granted over airport facilities for Airport Co-ordination Australia Pty Limited is the appointed Slot a term of up to 50 years, with or without an option to renew the lease for an Manager. additional 49 years. Most regional airports are owned by local government In addition, before deciding whether to offer a slot to an operator, the authorities. slot manager must take into account any advice from Airservices Australia At present, these laws restrict ownership of leased Australian air- about the likely effect of the allocation, if made, on the operational effi- ports. These restrictions include a 49 per cent limit on foreign ownership ciency of the airport (Airservices Australia is currently the only civil air traf- of airport-operator companies, a 5 per cent limit on ownership of airport- fic control service provider in Australia). operator companies by airlines and a 15 per cent limit on cross-ownership between paired airport operator companies. Furthermore, certain foreign 22 Are there any laws or rules specifically relating to ground investments are subject to approval by the FIRB. handling? CASA oversees ground operation activities in Australia pursuant to a 18 What system is there for the licensing of airports? number of statutes and supplementary legislation, including loading and CASA regulates the operation of airports. Airports above a certain mini- unloading aircraft and preparing cargo for air transportation, passenger mum operational threshold are required to be registered and certified handling and safety, refueling precautions, and tarmac vehicle warn- under the Civil Aviation Safety Regulations (Part 139). Airports must be ing lights etc. Requirements exist under the AOC for ground handling

www.gettingthedealthrough.com 23 AUSTRALIA HWL Ebsworth Lawyers activities to be carried out to certain standards and to be properly docu- The following are generally jointly and severally liable in the event of such mented in manuals to be approved by CASA. New regulations for taxiing injury, loss, damage or destruction: aeroplanes and using aeronautical radios in Australia are due to come into • the operator of the aircraft immediately before the impact happened; effect on 1 September 2014. • the owner of the aircraft immediately before the impact happened; Airports will typically licence ground handling companies for com- • the person who authorised the use of the aircraft, if the operator of the mercial reasons, but there is no statutory scheme as such and the market aircraft immediately before the impact happened was authorised to is open. use the aircraft but did not have the exclusive right to use it for a period of more than 14 consecutive days; and 23 Who provides air traffic control services? And how are they • the person entitled to control the navigation of the aircraft, if the oper- regulated? ator of the aircraft immediately before the impact happened was using Air traffic control services are provided by Airservices Australia, a govern- the aircraft without the authority of the person entitled to control its ment-owned corporation. Airservices Australia is licensed under the Civil navigation. Aviation Safety Regulations (CASR) 1998 Parts 171 and 172, and is currently the only civil traffic control service provider with such a licence. Damages are recoverable in an action in an Australian court of compe- CASA currently regulates Australia’s airspace via their Office of tent jurisdiction ‘without proof of intention, negligence or other cause of Airspace Regulation (OAR). CASA was established under the Civil Aviation action, as if the injury, loss, damage or destruction had been caused by the Act 1988, with one of its objectives being to oversee the regulation of air wilful act, negligence or default of the defendant or defendants’. traffic control. Recent changes to the Civil Aviation (Damage by Aircraft) Act CASR Part 171 prescribes the regulatory requirements and stand- expressly exclude claims for compensation for mental injury unless the ards for the approval of organisations that provide, operate and main- person suffers other personal injury or property damage, and also recog- tain aeronautical telecommunications used for air traffic services, and nise claims for contributory negligence. radio-navigation services used for air navigation. 26 What system and procedures are in place for the investigation Liability and accidents of air accidents? The investigation of air accidents, incidents and safety deficiencies, are the 24 Are there any special rules in respect of death of, or injury to, responsibility of the Australian Transport Safety Bureau (ATSB). The ATSB passengers or loss or damage to baggage or cargo in respect of is an independent Commonwealth government statutory agency managed domestic carriage? by a Commission and is entirely separate from transport regulators, policy- Domestic air carriage in the course of air transport operations or in the makers and service providers. course of trade or commerce is governed by Part IV of the Civil Aviation The ATSB is established by the Transport Safety Investigation Act (Carriers Liability) Act 1959, which mirrors many of the features of the 2003 (the TSI Act) and conducts its investigations in accordance with Warsaw and Montreal Convention system, including the requirement the provisions of the TSI Act. The TSI Act stipulates that the powers con- of ‘accident’ in respect of death or bodily injury, time limits for claims in ferred by the TSI Act are to be exercised in a manner that is consistent with respect of baggage and the overall two-year time limit for commencing Australia’s obligations under international agreements (as in force from litigation. time to time). The system that has been put in place conforms with Annex However, Part IV of the Civil Aviation (Carriers Liability) Act 1959 13 to the Convention on International Civil Aviation (Chicago Convention does not mirror the Warsaw and Montreal Convention system in respect 1944) particularly in pursuing a ‘no blame’ investigations culture. of liability limits. For Australian domestic carriers there is an unbreakable The accident investigators are given considerable powers. There are a liability limit for claims for death or bodily injury of A$725,000 per passen- number of safeguards. For example: ger. A carrier may have the damages reduced on account of contributory • a published report must not include the name of an individual unless negligence but the ‘court shall first determine the damages that would have the individual has consented to that inclusion; been recoverable if there were no limit on the amount of those damages […] • representations may be made to the ATSB in relation to the content of and there had been no negligence on the part of the passenger’. If the result a draft report; is a figure that exceeds the limit of A$725,000, the award of damages is to • a person who receives a draft report is not entitled to take any discipli- be reduced to that limit. A limit of A$1,600 applies for registered baggage, nary action against an employee of the person on the basis of informa- and a limit of A$160 applies for hand luggage. The domestic framework is tion in the report; and consistent with the Warsaw and Montreal Convention system as it is now • ATSB investigation reports and most evidence collected during restricted to bodily injury, and therefore excludes pure mental injury. an investigation cannot be used in civil or criminal proceedings. The compulsory passenger insurance for airlines has also increased to However, the final report is admissible in a coronial enquiry. It is a A$725,000 per passenger. criminal offence to hinder an air accident investigation.

25 Are there any special rules about the liability of aircraft 27 Is there a mandatory accident and incident reporting system operators for surface damage? and, if so, how does it operate? Australia has denounced the Rome Convention 1952 as applied by the Air accident and incident reporting is governed by Part 3 of the Transport Civil Aviation (Damage by Aircraft) Act 1958. In its place, the Damage Safety Investigation Act 2003 and Transport Safety Investigation by Aircraft Act 1999 was enacted which provides for unlimited liability, Regulations 2003. without proof of negligence, of the ‘operator’ of an aircraft ‘in flight’ that If a responsible person (a person prescribed by the regulations) has caused the damage. ‘In flight’ is defined as being from the moment when knowledge of an immediately reportable matter, then the person must power is applied for the purpose of take-off until the moment when the air- report it to a nominated official as soon as is reasonably practicable by tel- craft’s landing run ends. ephone, and then a follow-up written report must be made within 72 hours. The liability applies if a person or property on, in or under land or A responsible person is excused from the legal requirement to report if they water suffers personal injury, loss of life, material loss, damage or destruc- have reasonable grounds to believe that another responsible person has tion caused by: already reported the matter to a nominated official. Failure to comply is a • an impact with an aircraft that is in flight, or that was in flight immedi- criminal offence with the defendant bearing the evidential burden (subsec- ately before the impact happened; tion 13.3(3) of the Criminal Code). • an impact with part of an aircraft that was damaged or destroyed while The list of reportable incidents in Part 2 of the Regulations is long and in flight; ranges from the aircraft being missing through to breakdown, and mid-air • an impact with a person, animal or thing that dropped or fell from an near misses through to misinterpretation by a flight crew member of infor- aircraft in flight; or mation or instructions. • something that is a result of an impact of a kind mentioned in the The Australian Transport Safety Bureau (ATSB) is proposing amend- above three points. ments to the mandatory aviation accident and incident reporting scheme contained in the Transport Safety Investigations Regulations 2003. The

24 Getting the Deal Through – Air Transport 2015 HWL Ebsworth Lawyers AUSTRALIA

ATSB aims to clarify what accidents and incidents must be reported and 31 What are the main standards for assessing the competitive aims to improve the Civil Aviation Safety Authority’s access to mandato- effect of a transaction? rily supplied notifications of aviation accidents and incidents. The ATSB The CCA has extensive provisions dealing with cartel conduct, restric- also intends to amend the confidential reporting regime to create a multi- tive trade practices (including contracts, arrangements or understand- modal confidential reporting scheme for the aviation, maritime and rail ings between competitors) price fixing, market sharing, exclusive dealing industries to assist all three industries to learn from reports of safety con- (third-line forcing), misuse of market power (including predatory pricing cerns that contain transferable lessons. and capacity dumping) and market acquisitions, that would result in a substantial lessening of competition. Competition law The CCA contains provisions whereby a transaction that might oth- 28 Do sector-specific competition rules apply to aviation? If not, erwise be in breach of the CCA may be authorised by the ACCC, if the do the general competition law rules apply? public benefits outweigh the anti-competitive detriments. These are commonly referred to as ATI (antitrust immunity) and are of course common in No. There are no sector-specific competition rules, other than for the role Australia, as elsewhere, in relation to alliances between airlines. of the ACCC in monitoring airport pricing, as mentioned in question 19. Generally, however, the competition laws applying to aviation are the 32 What types of remedies have been imposed to remedy general competition laws in respect of restrictive trade practices and access concerns identified by the competition authorities? to essential services contained in the CCA. Under the CCA there are substantial penalties, both personal and corpo- 29 Is there a sector-specific regulator or are competition rules rate, for persons found guilty of engaging in anti-competitive conduct. applied by the general competition authority? Companies can be fined up to A$10 million per offence or three times the gain or 10 per cent of the company’s turnover, and individuals can be There is no specific aviation sector competition regulator in Australia. fined up to A$500,000. There are also civil remedies for damages and Instead, the relevant regulator is in most instances the Australian competi- injunctions and other remedial orders. tion regulator, the ACCC, applying the competition provisions of the CCA Remedies for some offences such as misuse of market power are rare to regulate and promote competition in the aviation sector. due to evidentiary burdens on the prosecution in terms of proof of inten- The IASC is responsible for the allocation of scheduled international tion to injure a competitor, as distinct from robust market behaviour. air route capacity to Australian carriers, as set out above. The IASC must therefore approve code-sharing arrangements of Australian carriers with Financial support and state aid other carriers. As part of this process the IASC will consider and take into account competition effects when determining whether or not to grant 33 Are there sector-specific rules regulating direct or indirect approval to a code share. In theory, the competition effects of code-sharing financial support to companies by the government or arrangements are also subject to separate scrutiny by the ACCC. In prac- government-controlled agencies or companies (state aid) in tice, however, the ACCC will rarely seek to override the IASC process. the aviation sector? If not, do general state aid rules apply? The DOIRD also contributes to regulating competition in the aviation In Australia, there are no sector-specific rules regulating direct or indirect sector by advising the government on the policy and regulatory framework state aid to individual companies in the aviation sector. However, there are for the aviation industry, and managing the administration of privatised several schemes, including the Remote Air Service Subsidy Scheme, the airports under the Airports Act 1996. Enroute Charges Scheme, the Remote Aerodrome Safety Programme and the Regional Airports Funding Programme, through which the Australian 30 How is the relevant market for the purposes of a competition government provides a subsidy to certain industry operators in return for assessment in the aviation sector defined by the competition providing specific services such as air services to remote and isolated areas authorities? of Australia and the operation of regional routes. Under Australian law, markets are defined by reference to equivalent principles, such as demand and supply-side substitutability, as applied in most 34 What are the main principles of the state aid rules applicable jurisdictions with developed competition law regimes around the world. to the aviation sector? As is common in other jurisdictions, the ACCC has tended to Not applicable. define domestic aviation markets by reference to city pairs (eg, Sydney– Melbourne or Brisbane–Adelaide). 35 Are there exemptions from the state aid rules or situations in There are, however, differences in how the ACCC has tended to define which they do not apply? international aviation markets compared to the approach adopted in other Not applicable. jurisdictions: • The extreme distances typically involved in travel to and from 36 Must clearance from the competition authorities be obtained Australia mean that Australian travellers commonly structure their before state aid may be granted? travel to visit more than one centre on each overseas trip. Further, the addition of a one- or two-hour regional end sector is likely to be less Not applicable. significant to a consumer in the context of an international flight from Australia of over 20 hours than it would be in the context of shorter- 37 If so, what are the main procedural steps to obtain clearance? haul travel. As a result, in long-haul markets the ACCC has to date Not applicable. tended to define passenger aviation markets by region (eg, Australia– Europe or Australia–US) rather than by country pairs, city pairs or 38 If no clearance is obtained, what procedures apply to recover airports pairs. In short to medium-haul flights, country pairs may be unlawfully granted state aid? accepted. Freight markets are likely to be defined similarly. Not applicable. • The distances involved in travel to and from Australia mean that direct travel to many destinations is often not physically possible. As a result, Miscellaneous the ACCC tends to focus less than other international regulators on whether a flight to an international destination is direct or indirect. 39 Is there any aviation-specific passenger protection Even where direct flights to a destination exist, the ACCC has in the legislation? past accepted that indirect flights compete in the same market as The Civil Aviation (Carrier’s Liability) Act 1959 provides passenger protec- direct flights to that destination. tion for injury and death, loss or damage to baggage, and damage arising • To date, the ACCC has not defined separate markets for business and from delay in the scheduled arrival of a passenger or baggage, by imple- leisure travel. menting into Australian law the provisions of the Warsaw Convention and the Montreal Convention.

www.gettingthedealthrough.com 25 AUSTRALIA HWL Ebsworth Lawyers

Update and trends The Australian government recently conducted a review (Aviation collaboration’ between all parties, based upon ‘mutual trust and Safety Regulation Review, May 2014) of the aviation safety regulatory respect’. system, with particular focus on the main government agencies involved Recommendations were made concerning the governance of in that system, namely: CASA; the decentralisation of CASA activities with more in the field • the Australian Transport Safety Bureau; location of staff; as well as the use of third-party, commercial auditors • the Civil Aviation Safety Authority; and as a means of enhancing CASA’s regulatory surveillance and regulatory • Airservices Australia. oversight. The Review also made recommendations to improve the The review made 37 recommendations for the Australian government to governance of the ATSB. consider as a means of improving aviation safety regulation. Assuming that the majority of the Review’s recommendations However, the review highlighted that the relationship between are implemented, then there will be significant changes in the way the regulator CASA, and industry, which the Review described as Australia’s aviation safety regulation system operates and the way in ‘adversarial’ and not in the interests of achieving progress in aviation which the key government agencies conduct their day-to-day functions. safety, and that this needed to change to one where there was ‘effective

There is no aviation-specific legislation on denied boarding, cancella- Australia. In the case of domestic carriage, the minimum insurance level is tion, package holidays, bankruptcy protection or CRS or distribution. A$725,000 per passenger. International carriers, including foreign carriers In terms of disability discrimination, the aviation industry is affected serving Australia, are required to provide evidence that they are insured by the Disability Discrimination Act 1992 (Cth) (DDA) and the Disability to a level of 260,000 SDR per passenger. Carriers are obliged to provide Standards Accessible Public Transport Act 2002 (Cth). The DDA empow- CASA with a declaration indicating that they have obtained insurance. ers the relevant minister to formulate ‘disability standards’ for the provi- Where an international carrier proposes to confine its operations to sion of public transportation services, and which are applicable to aircraft, flights to and from Australia, the carrier’s insurance contract is not required airports and airport terminals. The disability standards are numerous and to extend cover under state laws. State legislation applies only to carriers highly detailed, with requirements from ramps through to toilets, and from operating intra-state passenger charter or regular public transport flights payment of fares through to baggage and food. However, several of the dis- and their insurance coverage must hold insurance contracts that extend ability standards do not apply to small aircraft (any aircraft with fewer than cover under Commonwealth legislation as well as the laws of all the states. 30 seats) or airports that do not regularly accept public transport services. Insurers must meet certain qualifications as stipulated in the Civil Aviation Under Part VIIA of the Competition and Consumer Act 2010 (Cth), (Carriers’ Liability) Act 1959 and an insurer cannot limit or escape liability some prices charged by airports to airlines are capped. Airfares are other- to indemnify a passenger against injury by means of a warranty or exclu- wise regulated by generic consumer protection measures (in, for example, sion in a contract. Certain acceptable ‘standard’ exclusions are specified in the Australian Consumer Law, which is Schedule 2 to the Competition and the regulations, which also contain rules relating to the cancellation of poli- Consumer Act 2010 (Cth)). cies. Failure to have the required insurance in place is a criminal offence and may lead to the suspension of operations. 40 Are there mandatory insurance requirements for the Although requirements for third-party insurance in Australia are mini- operators of aircraft? mal, it is more common than not for carriers to maintain third-party insur- Any carrier who carries passengers for hire or reward to or from Australia, ance anyway, particularly given the strict and unlimited liability under or within Australia, is required to have in place passenger liability insur- the Damage by Aircraft Act 1999. Also, international airlines operating in ance that ensures that compensation will be paid in respect of death or Australia are required to maintain ‘appropriate’ insurance, and this gener- bodily injury suffered by passengers on the carrier’s aircraft. A statutory ally requires airlines to maintain some level of third-party insurance. insurance scheme is administered by the CASA pursuant to the powers given to it under section 9 of the Civil Aviation Act 1988, Part IVA of the 41 What legal requirements are there with regard to aviation Civil Aviation (Carriers’ Liability) Act 1959 and the Civil Aviation (Carriers’ security? Liability) Regulations 1991. Australia has an advanced aviation security regime, which is currently Each of the states of the Commonwealth has mirrored the regulated under the Aviation Transport Security Act 2004. The act and Commonwealth legislation in its own legislation. The Commonwealth the regulations promulgated under it covers a wide range of security meas- laws extend to transport of passengers by an air carrier to, from or within ures establishing a number of mechanisms to safeguard against unlawful

Simon Liddy [email protected] Matthew Brooks [email protected] Richard Davis [email protected]

Level 14, Australia Square Tel: +61 2 9334 8555 264–278 George Street Fax: +61 3 9981 3404 Sydney, NSW 2000 www.hwlebsworth.com.au Australia

26 Getting the Deal Through – Air Transport 2015 HWL Ebsworth Lawyers AUSTRALIA interference with aviation and requires aviation industry participants to There are a range of enforcement mechanisms, including unan- have in place approved transport security programmes, which must show nounced inspections, infringement notices, enforcement orders, injunc- in detail how security for their operations will be managed. tions and a demerit points system. Certain decisions may be reviewed by There are restrictions on the quantity of liquids, aerosols and gels the Administrative Appeals Tribunal. that may be carried by passengers on international flights to and from Australia, and to passengers on the domestic leg of an international flight 42 What serious crimes exist with regard to aviation? within Australia. There are also prohibitions on carrying various items, The Crimes (Aviation) Act 1991 is the principal legislation providing including some sharp objects. offences and penalties for acts against civil aviation and prohibits offences Airports may be designated as security-controlled airports and such as hijacking, acts of violence, carrying dangerous goods and making assigned a particular category according to its risk profile, and be required threats or false statements. Penalties for some acts, such as the carriage to establish airside and landside areas and security zones. of dangerous goods, may be imposed on bodies corporate as well as pas- There are a number of specific security measures, including identity sengers. Australia is a party to numerous multilateral international instru- cards, screening, onboard security, persons in custody and offences in ments dealing with terrorism. relation to weapons and prohibited items. The minister for transport may The Aviation Transport Security Act 2004 also gives effect to determine a code regulating and authorising the use of optical surveillance Australia’s aviation security obligations under the Chicago Convention. devices at airports and on board aircraft. The act also establishes reporting obligations in relation to aviation security incidents. Body scanner screening commenced at eight of Australia’s airports in December 2012.

www.gettingthedealthrough.com 27 BAHAMAS ParrisWhittaker

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 Aviation in the Bahamas is regulated by the Bahamas Civil Aviation indicating no outstanding debt to the Department for services, permit Authority (BCAA), under the Bahamas Civil Aviation Act. 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 the BCAA finds that the applicant is not properly or adequately equipped or is not able to conduct 3 What safety regulation is provided for air operations that do safe operations in commercial air transport; the applicant previously held not constitute public or commercial transport and how is the an AOC which was revoked; or an individual that contributed to the cir- distinction made? cumstances causing the revocation process of an AOC obtains a substantial Safety regulations for private operations and aerial work are included ownership 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/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

28 Getting the Deal Through – Air Transport 2015 ParrisWhittaker BAHAMAS 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 flow of air traffic via its air traffic control services. Air traffic controllers undergo a rigorous selection and training process.

www.gettingthedealthrough.com 29 BAHAMAS ParrisWhittaker

36 Must clearance from the competition authorities be obtained Update and trends before state aid may be granted? There are two key hot topics relating to aviation regulation and Not applicable. safety in the Bahamas: The Bahamas is working towards the establishment of an 37 If so, what are the main procedural steps to obtain clearance? international aircraft registry. Such a registry will help enable the Not applicable. Bahamas’ aviation industry to operate to the same world-class level as its maritime and shipping industry. 38 If no clearance is obtained, what procedures apply to recover The Bahamas is well on its way to meeting the aviation safety targets set by the International Civil Aviation Organization’s unlawfully granted state aid? action plan, helping to ensure civil aviation in the Bahamas meets Not applicable. internationally-agreed targets for safety. Miscellaneous 39 Is there any aviation-specific passenger protection 30 How is the relevant market for the purposes of a competition legislation? assessment in the aviation sector defined by the competition No. There is no aviation-specific passenger protection legislation. authorities? Not applicable. 40 Are there mandatory insurance requirements for the operators of aircraft? 31 What are the main standards for assessing the competitive There are no mandatory insurance requirements for aircraft operators effect of a transaction? within the Bahamas Civil Aviation Act or the BASR. Not applicable. 41 What legal requirements are there with regard to aviation 32 What types of remedies have been imposed to remedy security? concerns identified by the competition authorities? 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 Financial support and state aid its aviation security measures. The Bahamas was the first Caribbean country to implement the programme, which identifies and mitigates risks at 33 Are there sector-specific rules regulating direct or indirect nearly 300 foreign airports from which US airlines operate or US-bound financial support to companies by the government or passengers and cargo depart. government-controlled agencies or companies (state aid) in the aviation sector? If not, do general state aid rules apply? 42 What serious crimes exist with regard to aviation? No. There are no applicable sector-specific or general state aid rules. A number of serious aviation-related crimes exist including threatening and abusive behaviour onboard aircraft and aviation-related fraud. There 34 What are the main principles of the state aid rules applicable is no separate aviation crimes Act in the Bahamas, and crimes related to to the aviation sector? aviation are prosecuted under general criminal legislation. Not applicable.

35 Are there exemptions from the state aid rules or situations in which they do not apply? Not applicable.

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

30 Getting the Deal Through – Air Transport 2015 Monard-D’Hulst BELGIUM

Belgium

Birgitta Van Itterbeek Monard-D’Hulst

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 operations and of 10 January 2000 with respect to flight operation licences make a clear distinction between the different types of aircraft.

www.gettingthedealthrough.com 31 BELGIUM Monard-D’Hulst

7 What procedures are there for hearing or deciding contested Regulation 868/2004 and to the Belgian trade practice regulations. They applications for licences or other rights to operate particular may be further limited by the competition regulations. Trade practices are routes? regulated in Belgium by the Law of 6 April 2010, which entered into force Any appeal can be lodged with the Minister of Transport. Appeals against on 12 May 2010 and replaced the former Trade Practices Law of 1991. It decisions of the minister can be filed with the Council of State. specifies how prices (including airfares) have to be published, how price reductions can be provided, it allows comparative publicity provided it is 8 Is there a declared policy on airline access or competition and, not misleading and complies with the strict fairness criteria laid down in if so, what is it? the law, and allows combined services insofar as they do not relate in principle to financial services. The Law contains strict rules on distance selling, A distinction should be made between intra-European access or competi- including over the internet, for example the information to the consumer tion and access by airlines established outside the EEA. Belgium has imple- with respect to prices, costs and services has to be clear and detailed and mented no state policies over and above the EC regulations in this respect. specify whether the consumer can revoke its purchase within 14 days (pre- Access to the Belgian territory for airlines established outside the EEA viously seven days). The revocation right is the default position, unless the is laid down in bilateral treaties. services are rendered within this 14-day period or the services are immediately executed and invoiced. If these conditions are not fulfilled, the con- 9 What requirements must a foreign air carrier satisfy in order sumer is not obliged to pay. to operate to or from your country? A distinction has to be made between a Community air carrier and any Aircraft other air carriers and flight within the EU and to a non-EU member state. In accordance with EC Regulation No. 1008/2008, article 15, any EU air 13 Who is entitled to be mentioned in the aircraft register? Do carrier duly licensed by its home country in accordance with the above- requirements or limitations apply to the ownership of an mentioned EC regulation can freely operate intra-European routes. No aircraft listed on your country’s register? member states can submit the Community air carrier to any further for- The Royal Decree of 15 March 1954 provides that the following aircraft can malities or conditions. be registered in the Belgian aviation register: The Royal Decree dated 18 August 2010 regulates the allocation of traf- • civil aircraft that are fully owned by nationals of an EU member state fic rights to non-EU countries. Only Community air carriers established in or nationals of an EEA country who are domiciled in Belgium; or Belgium are entitled to traffic rights to non-EU member states. These air- • civil aircraft wholly-owned by legal entities incorporated under lines must submit to the Belgian Civil Aviation Authority a formal request Belgian law and whose main shareholders, managing shareholders, together with a copy of their AOC, insurance certificate, evidence that the directors or agents are nationals of an EU member state or of an EEA airline is established in Belgium in accordance with Community law, infor- country. mation on the operational and financial sustainability and information on the planned flights and the possible acceptance of the applicant to cover The following aircraft can be registered with the prior authorisation of the in exceptional circumstances any required capacity to fulfil the national minister of communications: or international requirements of Belgium. The allocation of traffic rights • civil aircraft part-owned by: and the possible limits on the number of flights will be determined by the • nationals of an EU member state or of an EEA country who are terms and conditions of the applicable bilateral treaty. A non-Community domiciled in Belgium; or carrier is not allowed to operate regular air transport services unless it has • legal entities formed under Belgian law and whose main share- received prior authorisation from the minister of transport either through holders, managing shareholders, directors or agents are nationals bilateral agreements or specific authorisation. Such bilateral treaties or of an EU member state or of an EEA country; authorisation will set out specific conditions with which the airline has to • civil aircraft wholly or part-owned by: comply. Moreover, such airline may not be blacklisted by the European • Belgians residing abroad who have elected to domicile in Belgium Commission pursuant to EC Regulation No. 2111/2005 as an unsafe airline. for registration purposes; Any carrier that has a trading activity in Belgium must also be regis- • legal entities governed by Belgian law whose main shareholders, tered in the commercial register and obtain a value added tax number. If managing shareholders, directors or agents are not nationals of an such air carrier opens a branch office in Belgium it must also fulfil the -for EU member state or of an EEA country; malities for the opening of a branch office in Belgium as stipulated in the • legal entities of an EU member state or of an EEA country that Belgian Company Code. have a place of business, an agency or an office in Belgium; • foreign nationals of a country that is not a member of the EU or 10 Are there specific rules in place to ensure aviation services the EEA who have resided in Belgium for at least one year or who are offered to remote destinations when vital for the local have maintained for at least one year an office, place of business or economy? agency in Belgium; A distinction has to be made between intra-Community operations and • civil aircraft that have been leased under a finance lease to any of the operations with third countries. As to intra-Community operations, see EC persons listed above; or Regulation No. 1008/2008. As to operations with third countries, see the • civil aircraft operated by any of the persons listed above under a lease criteria set out in question 6. for at least six months.

11 Are charter services specially regulated? 14 Is there a register of aircraft mortgages or charges and, if so, how does it function? The EU regulatory framework makes no distinction between regular services or chartered services. The Royal Decree of 15 March 1954 provides, in Belgium ratified the Geneva Convention on the International Recognition article 47, specific licence requirements for charter services and specifies of Rights in Aircraft on 22 October 1993, but failed up to recently to imple- that non-scheduled flights or series of non-scheduled flights are subject to ment a law recording of security interests on aircraft in a public register. A the specific authorisation of the minister. Non-scheduled air services are new law dated 11 July 2013 on security interest on mobile goods introduces considered on a case-by-case basis within the framework of the bilateral for the first time a national register for all security interests on mobile treaties. goods, including aircraft pledges which will record any security interest created over such mobile good. This law will enter into force at the latest 12 Are airfares regulated and, if so, how? on 1 December 2014. The law on security interests on mobile goods has introduced a dual regime for pledges, namely a possessory and non-pos- See EC Regulation No. 2409/92, which liberalised airfares and is now sessory pledge. In the case of a registered pledge, the pledge will function replaced by EC Regulation No. 1008/2008. With respect to flights to third as a mortgage. This means that the pledgor can remain in possession of countries, restrictions or information requirements on airfares can be the aircraft. The perfection of the pledge towards third parties is achieved contained in the bilateral treaties. The airfares are further subject to EC through the registration in the national register. For non-registered aircraft

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

www.gettingthedealthrough.com 33 BELGIUM Monard-D’Hulst

25 Are there any special rules about the liability of aircraft Competition law operators for surface damage? 28 Do sector-specific competition rules apply to aviation? If not, The Royal Decree of 3 May 1991 sets out the safety measures for civil avia- do the general competition law rules apply? tion. It contains specific safety measures that must be complied with by the As to Belgian law competition rules, the general competition rules apply. air carriers. Belgocontrol is also responsible for safety on the runways. Any accidents on the runways as a result of any breach of the applicable police 29 Is there a sector-specific regulator or are competition rules rules can be subject to administrative sanctions. Otherwise general civil applied by the general competition authority? liability rules apply. Competition rules are applied by the Competition Council. 26 What system and procedures are in place for the investigation of air accidents? 30 How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition Pursuant to the Royal Decree of 9 December 1998, an independent unit authorities? has been created within the Ministry of Transport, namely the accidents and incidents investigation unit. The unit is responsible for the independ- On 24 December 2004, the Competition Council made a pronouncement ent investigation of any accident or incident and is especially independent on the merger between Delta Air Transport and Virgin Express at holding from the Civil Aviation Authority, which is responsible among other things level. The Competition Council considered that the relevant market had to for the control on the airworthiness of the aircraft. be analysed based on the method place of origin and place of destination. The accident and incident investigation unit will, following any acci- Each combination of place of origin and place of destination can as such be dent or incident, carry out a full investigation and draft a report within 12 considered as a separate market. But for the purposes of defining the mar- months to be available on a database for those responsible for safety in ket, any alternative airport in the same region and any alternative means aerospace. Such report is furthermore communicated to the companies of transport must be considered as well as any direct and indirect flights. involved, the Civil Aviation Authority, the European Commission and the international civil aviation organisations. The investigators have free 31 What are the main standards for assessing the competitive access to all data relating to the aircraft and accident or incident. effect of a transaction? Following an accident, no repair can be carried out without prior In the above-mentioned decision, the Competition Council, although there approval of the Civil Aviation Authority, unless such repair is carried was a concentration on two routes, took into consideration the availability out in accordance with the manufacturer’s manuals and maintenance of slots in the relevant airports and that the absence of such a merger might programme. lead to the disappearance of both airlines and that one larger airline might Belgocontrol is also responsible for safety in the air and on the ground. instead lead to a more competitive environment.

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 Royal Decree of 22 April 2005 sets out the reporting requirement to In the above-mentioned case, no remedies were imposed. the accident and incidents investigation unit. Only those accidents or incidents that could have endangered the life of passengers or third parties or Financial support and state aid the aeroplane need to be reported. A list of those accidents and incidents is attached to the above-mentioned royal decree. 33 Are there sector-specific rules regulating direct or indirect The airline or the pilot must notify the inspection unit within 72 financial support to companies by the government or hours of the accident or incident. (The royal decree extends this notifica- government-controlled agencies or companies (state aid) in tion requirement to, among others, the maintenance providers, handling the aviation sector? If not, do general state aid rules apply? agents, Belgocontrol or similar agencies abroad, and the Civil Aviation There are no state-owned airlines in Belgium. General EU state aid rules Authority.) apply in the aviation sector. There are no national specific rules in the avia- Any accident or incident also needs to be reported to Belgocontrol, the tion sector. Civil Aviation Authority and the local competent authorities if the accident or incident has occurred abroad. This is an obligation incumbent on the 34 What are the main principles of the state aid rules applicable pilot, commander on board in accordance with the Ministerial Decree of to the aviation sector? 13 February 1970 relating to technical measures for the operation of air- See question 33. craft having a weight exceeding 5,700kg and the Royal Decree of 9 January 2005.

Monard-D’Hulst

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.monard-dhulst.be

34 Getting the Deal Through – Air Transport 2015 Monard-D’Hulst BELGIUM

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 onboard 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.

www.gettingthedealthrough.com 35 BRAZIL Basch & Rameh

Brazil

Kenneth Basch Basch & Rameh

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. See ‘Update and trends’. 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 Ministry of Civil Aviation. Once admin- July 2007, Brazil’s air traffic controllers and airport infrastructure attracted istrative remedies have been exhausted, an airline can seek judicial review considerable public attention. After the 2007 accident new rules restrict- of ANAC decisions. Sometimes, in exceptional circumstances, adminis- ing the use of Congonhas Airport in São Paulo were promulgated to relieve trative remedies do not need to be exhausted. For example, in the judicial that airport of serious congestion; however, some of the measures were recuperation (bankruptcy restructuring) of Varig airlines during 2005 and subsequently relaxed. Brazil hosted the Football Confederations Cup in 2006, a Rio de Janeiro bankruptcy judge issued injunctions against the 2013 and the FIFA World Cup 2014. During the World Cup, Brazilian air- ANAC to preserve Varig’s route rights and slots, even though Varig was not ports received more than 16 million passengers. Brazil is now preparing to using them. host the 2016 Olympic Games in Rio de Janeiro. The country’s airports still need improvements prior to the 2016 Olympic Games. Because of these major international events Brazil created a specific ministry, the Ministry of Civil Aviation, to regulate air transport.

36 Getting the Deal Through – Air Transport 2015 Basch & Rameh BRAZIL

8 Is there a declared policy on airline access or competition and, and validity of their rights under Brazilian law and effectiveness against if so, what is it? third parties. The purported policy is that there be free competition and open access There is no specific registration of engines and their ownership at the (subject to approved ANAC plans) among the airlines. In practice, there RAB; however, the RAB also allows for registration of engine leases and 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, this economy? trend has decreased recently. There has been some limited use of irrevoca- The ANAC sometimes offers special conditions to induce airlines to des- ble deregistration and export authorisations issued in accordance with the tinations with thinner demand. Government policies to ensure services in Cape Town Convention, and in those cases the authorities did not seek to remote locations were more common several years ago than today. There collect unpaid airport or air navigation charges. is a public programme called the Regional Aviation Plan, created in 2012 by the SAC, which not yet been implemented. One of the programme’s pur- 16 Do specific rules regulate the maintenance of aircraft? poses is to enable flight routes to small Brazilian cities through the creation The ANAC issues specific rules (eg, the Brazilian Regulation of and improvement of airports by public subsidies. Aeronautical Certification – RBAC 121, which is similar to FAA Part 121) in relation to the maintenance of Brazilian-registered aircraft. Such mainte- 11 Are charter services specially regulated? nance can be performed only by maintenance facilities (national or inter- Charter services are regulated by the ANAC. Charter operators must fol- national) approved by the ANAC. The Brazilian regulations in relation to low the same licensing procedures and rules as scheduled airlines in terms maintenance and flight safety follow the standard norms of the Chicago of financial capacity, Brazilian management, pilot certification, insurance Convention of 1944. Failure of an operator to observe all maintenance and maintenance. requirements and the pre-approved maintenance manual can lead to cancellation of an airworthiness certificate of an aircraft. 12 Are airfares regulated and, if so, how? Airports Domestic airfares are not regulated; however, the ANAC can (and occasionally does) intervene to prohibit fares if they seem manipulative. The regula- 17 Who owns the airports? tion of international airfares has also started to take effect. Some months The federal government owns most of Brazil’s major airports. INFRAERO before the World Cup started, some airlines substantially increased the air- (see questions 1 and 15) is the entity through which the government con- fares for domestic routes to and from host cities. The Brazilian authorities trols and administers the airports. In preparation for the 2014 World Cup monitored the situation closely but did not intervene. and the 2016 Olympic Games and in response to some public demands the federal government privatised three major airports in Brazil in 2012: Aircraft Cumbica (the main airport for the City of São Paulo, located in neighbour- 13 Who is entitled to be mentioned in the aircraft register? Do ing Guarulhos) – sold to a pool of investors called Invepar (Investimentos e requirements or limitations apply to the ownership of an Participações em Infraestrutura SA) and South African Airports Company aircraft listed on your country’s register? South Africa; Viracopos (located approximately 90km from the City of São Paulo) – sold to a pool of investors called Aeroportos Brasil; and Brasilia – There are no nationality or other restrictions in relation to the ownership of sold to a pool of investors called Inframérica, a joint venture composed by aircraft registered in Brazil with the Brazilian Aeronautical Registry (RAB). Infravix Participações SA and Corporacion America AS. In 2013, the inter- Non-Brazilian entities or individuals can be registered owners, lessors and national airports in Rio de Janeiro (Galeao) and in Belo Horizonte (Confins) mortgagees of aircraft. Restrictions apply to operation, as mentioned in were also sold, respectively, to a pool of investors called Aeroportos do question 5. Futuro, a joint venture composed by Odebrecht Construtora (Brazilian) Many aircraft have several parties registered at the RAB, such as an and Changi (Singaporean), and to a pool of investors called ‘Aerobrasil’, owner, a lessor, a lessee or operator and the holder of mortgage liens. a joint venture composed of CCR (Brazilian) and Flughafen Zurich AG Interests must be registered in the RAB as a condition to the recognition (Swiss). With this new concept these airports will start to be managed by www.gettingthedealthrough.com 37 BRAZIL Basch & Rameh private companies in partnership with INFRAERO, which will retain an The CBA includes statutory limits of an operator’s liability. The limits interest in the privatised airports. are expressed in OTNs, which are government bonds that ceased to exist in 1989. Based on successive regulations, it is possible to determine the cur- 18 What system is there for the licensing of airports? rent value of the extinct OTN for the purpose of setting liability limits. The According to INFRAERO’s website, there are 67 airports in addition to current liability limits with OTN values converted to US dollar equivalents 34 cargo terminals and 51 air navigation units managed by INFRAERO. are: R$60,000 per passenger in cases of death or injury; R$2,600 in cases These numbers represent 97 per cent of the air transport traffic in Brazil of delays and losses or damage to baggage; and R$52 per kilogram in cases and over 155 million passengers being transported every year, so there is of damages to cargo. In addition, the limits do not apply in cases where no substantial system for licensing airports as almost all major airports are injuries or damages are the result of an operator’s wilful misconduct or owned and administered by the federal government through INFRAERO. gross negligence. There has been litigation in Brazil concerning possible However, INFRAERO issues licences for commercial use of airport space, conflicts between these limits established in the CBA and general liability in particular for retail vendors and facility operators (eg, parking opera- principles set forth in the Civil Code. Brazil also has a Consumer Defence tors), and the ANAC is responsible for implementing the concessions and Code that ratifies the CBA provisions but contains exceptions. Considering for monitoring the state divestment process concerning the five airports these various statutes, carriers cannot assume that the CBA’s limits will referred to in question 17 under the supervision of a new department, the apply in all cases. Civil Aviation Secretariat (SAC), following the rules of a government plan called the National Privatisation Plan. In relation to the three privatised 25 Are there any special rules about the liability of aircraft airports mentioned in question 17, concession contracts were signed in operators for surface damage? 2012. During the first six months following privatisation there is a transi- The CBA is also applied in relation to surface damages. The carrier is pre- tion period during which the new operators and INFRAERO jointly man- sumed liable (strict liability) for surface damages, unless the aircraft is not age privatised airports. After this period the private companies manage the cause of the damages, the damages arise from air traffic control errors, 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 R$60,600 for aircraft with maximum how does it function? take-off weights of 1,000kg; and, for aircraft with maximum take-off INFRAERO determines the costs and fees for all airport activities such weights greater than 1,000kg, R$60,600 plus R$1.80 per kg over 1,000. as airline operations, cargo, ground handling, maintenance and also pas- As mentioned in question 24, these US dollar figures are illustrative only senger terminal stores. INFRAERO is authorised to waive fees when in the and fluctuate with currency rate changes. The statutory amounts are public interest. Navigation, radio, hangar and landing fees are also regu- expressed in OTNs and not US dollars. lated and charged by DECEA. Considering the privatisation of the three Also, as with damages to passengers and baggage, an operator’s strict airports and considering the current transition period there may be further liability does not apply if the damages result from the operator’s (including changes in regulation of the privatised airports as well as those yet to be its employees’) wilful misconduct or gross negligence, were caused while privatised. the aircraft was on the ground and its engines were not in operation or were caused by persons illegally operating the aircraft. 20 Are there laws or rules restricting or qualifying access to airports? 26 What system and procedures are in place for the investigation of air accidents? INFRAERO regulates access to different airports and airport areas depending on the type of activities and each airport’s capacity. Access can There is a system for accident investigation that uses the acronym SIPAER. be obtained only through INFRAERO. Considering the privatisation of the SIPAER’s central organisation is called CENIPA and is located in Brazil. three airports and considering the current transition period there may be CENIPA is supposed to be an independent agency reporting directly to the further changes to the laws and regulations restricting or qualifying access Brazilian Air Force Command. The members of CENIPA supervise all air- to these airports. craft accident and incident investigations in Brazil. After an accident that occurred on 17 July 2007 involving an Airbus A320, CENIPA investigators 21 How are slots allocated at congested airports? were pressed by members of the Brazilian congress to disclose information concerning the accident, in particular black box voice recordings, fairly The ANAC allocates slots based on an operator’s approved business plans. soon after the accident occurred. After some resistance, the CENIPA chief For disputed slots at congested airports auctions are held. The ANAC also investigator made the public disclosure. Through this incident CENIPA’s holds as much as 20 per cent of slots for new entrants. independence suffered possible compromise through pressure from Congress. The congressional role in the A320 investigation is controversial 22 Are there any laws or rules specifically relating to ground and may not be indicative of Congress’s role in future accident investiga- handling? tions. In May 2009 an Air France A330 in flight from Rio de Janeiro to Paris The ANAC regulates ground-handling operations through a published set crashed into international waters of the Atlantic Ocean. Brazil (through of regulations. Access to ground-handling services is free subject to com- CENIPA) and France cooperated in the investigation, with French authori- pliance with the ANAC rules mentioned above. Frequently, only one ser- ties taking the lead. The final results of that investigation were released in vice provider qualifies at particular airports, in which case competition is July 2012. At present CENIPA’s role as Brazil’s primary investigation agency limited. remains unchanged. Investigation procedures are set forth in a published set of rules that 23 Who provides air traffic control services? And how are they follow the international standards of Annex 13 to the Chicago Convention. regulated? Air traffic control is controlled by DECEA, a department subordinate to the 27 Is there a mandatory accident and incident reporting system Ministry of Defence, and is performed by a mix of military and civil air traf- and, if so, how does it operate? fic controllers under military supervision. See question 2 for more details. Any person who witnesses or is involved in an aeronautical accident or incident must immediately contact the ANAC or CENIPA directly. If con- Liability and accidents tact is made via the ANAC, CENIPA is then informed and an accident report begins to be generated. CENIPA eventually issues a final report and 24 Are there any special rules in respect of death of, or injury to, can issue safety recommendations. passengers or loss or damage to baggage or cargo in respect of domestic carriage? The CBA provides that the operator is responsible for death or injury to 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 health or if the accident or damages arise from the passenger’s exclusive fault.

38 Getting the Deal Through – Air Transport 2015 Basch & Rameh BRAZIL

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

www.gettingthedealthrough.com 39 BRAZIL Basch & Rameh

42 What serious crimes exist with regard to aviation? Update and trends The Brazilian Criminal Code, the National Security Law and the Criminal The last step for approval of the Cape Town Convention occurred on Contravention Law include the following aviation-specific crimes: 16 May 2013 with the publication of an Executive Order. In principle • attacks against the safety of air transport or exposing personal or the Cape Town Convention and Aircraft Protocol have been in effect third-party aircraft to danger or practices preventing or inhibiting air since 1 March 2012; however, the Executive Order was needed to navigation; complete the formal approval process. Brazil has elected a system • sabotage against military units, media and transport facilities (includ- that required authorising entry codes for International Registry ing airports and ports); filings. The RAB has been designated as the agency authorised to • unauthorised operation of aircraft; and issue such codes, however, the RAB commenced issuing authorising • abusive aviation conduct (eg, acrobatics, flights outside permitted entry codes after the promulgation of specific regulations. Such zones, landing aircraft outside permitted areas). regulations were approved by the ANAC, by ANAC Resolution 309 of 18 March 2014, which was published on 21 March 2014. According to ANAC Resolution 309, authorising entry codes Brazil is also a signatory to the Montreal Convention of 1973 (Convention will be issued in respect of international interests arising from and for the Suppression of Unlawful Acts Against the Safety of Civil Aviation), after 15 May 2013 and not 1 March 2012. which deems the following acts crimes: The RAB also began to accept (for registration) irrevocable • performance of an act of violence against persons on board an aircraft deregistration and export authorisations on or about 19 March 2014. in flight if the act is likely to endanger the safety of the aircraft; Consistent with ANAC Resolution 309 in respect of authorising • destruction of an aircraft in service or causing damage to an aircraft entry codes, the RAB now accepts irrevocable deregistration and which renders it incapable of flight or which is likely to endanger its export authorisations dated from and after 15 May 2013 only. safety in flight; • acts that place or cause to be placed on an aircraft in service a device or substance that is likely to destroy or damage the aircraft; 41 What legal requirements are there with regard to aviation • acts that destroy or damage air navigation facilities or interfere with security? their operation; or The ANAC has issued a written set of instructions with regard to aviation • communication of false information that endangers the safety of an security. For international flights, Brazil’s airports tend to follow interna- aircraft in flight. tional trends in relation to security. Domestic flights are subject to slightly lighter standards.

Kenneth Basch [email protected]

Rua da Consolação No. 3741, Terreo Tel: +55 11 3064 8599 01416-001 São Paulo, SP Fax: +55 11 3064 6049 Brazil www.baschrameh.com.br

40 Getting the Deal Through – Air Transport 2015 Davis LLP CANADA

Canada

Laura M Safran QC and Prasad Taksal Davis LLP

General CARs. The requirements include obtaining an airworthiness certificate and submission of an annual airworthiness report (except in the case of an 1 Which bodies regulate aviation in your country, under what ultralight aeroplane). Operators of unmanned air vehicles are required to basic laws? obtain a special flight operations certificate. The Aeronautics Act defines Under the Canadian Constitution Act 1867 aviation is a federal area of ‘commercial air service’ as any use of an aircraft for hire or reward, that is responsibility. Transport Canada is a department of the Government of in consideration of any payment or receipt of any benefit. In addition to the Canada under the federal Minister of Transport. It is responsible for the airworthiness requirements prescribed in Part V of the CARs, any use of an issuance of operating authorities and safety oversight. The principal leg- aircraft for a commercial air service is subject to the certification scheme islation administered by Transport Canada is the Aeronautics Act. Under created by the Aeronautics Act and associated regulations. For aerial work the authority of that statute, the Canadian Aviation Regulations (CARs) (consisting of helicopter external loads, towing or dispersal of products and more detailed standards respecting aviation have been promulgated. and involving the carriage of persons other than crew members) an opera- The Canadian Transportation Agency (CTA), formed under the Canada tor certificate is required, subject to limited exceptions. Transportation Act, is an independent, quasi-judicial agency, that makes Private operators that provide passenger transport using large decisions concerning air, rail and marine matters and whose jurisdiction or turbine-powered pressurised aircraft are governed by subpart 4 of extends to economic regulation and consumer protection. With respect Part VI of the CARs. Until March 2011, the Canadian Business Aviation to aviation, the CTA issues licences and permits, has authority to disallow Association, a non-profit association, was authorised to issue private oper- tariffs and imposes rules relating to the accessibility of air services. The ator certificates to private operators of business aircraft and monitor their Carriage by Air Act implements, among other matters, the provisions of the operations. However, subpart 4 of Part VI was suspended and, pending Montreal Convention as part of domestic law in Canada. The Canadian Air the introduction of new regulations by Transport Canada and by Interim Transport Security Act establishes and defines the authority and the pow- Order No. 10 Respecting Private Operators, the certification and oversight ers of the Canadian Air Transport Security Authority, the agency responsi- responsibilities have been transferred back to Transport Canada. In June ble for aviation security in Canada. The Transportation Safety Board (TSB) 2014, Transport Canada introduced revised regulations under subpart 4 is an independent agency established under the Canadian Transportation of Part VI of the CARs. Operators that held a Temporary Private Operator Accident Investigation and Safety Board Act. The TSB is responsible for Certificate on 28 May 2014 are automatically provided with replacement conducting independent investigations into aviation incidents and publicly documents that comply with the revised Regulations, including a Private reporting its findings, identifying safety deficiencies and making recom- Operator Registration Document and Special Authorization(s). Private mendations for eliminating such deficiencies. Civil air navigation services operators holding a Temporary Private Operator Certificate on 28 May are provided by NAV Canada, a private sector corporation established 2014 have also been given a 24-month transition period during which a under the Civil Air Navigation Services Commercialization Act (CANSCA). general exemption will be available for most requirements, subject to certain conditions. Regulation of aviation operations 4 Is access to the market for the provision of air transport 2 How is air transport regulated in terms of safety? services regulated and, if so, how? The CARs and the associated standards form a comprehensive code for Financial and nationality requirements apply and there are limited exit the regulation of aviation safety. The standards required of commercial controls. Those requirements and Canadian competition law requirements operators are found in Part VII of the CARs, which divides commercial air are dealt with in more detail in the following questions; otherwise there are operations into six classes: no limitations on access to the domestic market. Access to the market for • foreign air operations, (subpart 1); international air services is governed by bilateral air service agreements • aerial operations (subpart 2); between Canada and various foreign states. In negotiating the terms of • air taxi operations (subpart 3); those bilateral air service agreements, the Government of Canada follows, • commuter operations (subpart 4); among other matters, the principles outlined in Canada’s international air • airline operations (subpart 5); and policy, entitled ‘Blue Sky’. Those bilateral air service agreements range • aircraft maintenance by aircraft operators and unmanned air vehicles from liberal open skies agreements to agreements involving market access, (subpart 6). 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 Airworthiness and maintenance are addressed in Part V, which also Canada’s overall interest; however, the Blue Sky Policy precludes any pos- addresses associated detailed standards. General operating and flight sibility of a foreign airline being granted the rights to carry domestic traffic rules are found in Part VI. Regulations respecting aerodromes and airports in Canada. are in Part III and air navigation services are addressed in Part VIII. Generally, all foreign air operators wishing to operate commercial air services to and from Canada are required to obtain a Canadian foreign 3 What safety regulation is provided for air operations that do air operator certificate under subpart 1 of Part VII of the CARs and be in not constitute public or commercial transport and how is the receipt of applicable licences or permits issued by the CTA. distinction made? Transport Canada is responsible for regulating aviation safety and airworthiness requirements for all civilian aircraft in Canada. Airworthiness requirements and the applicable standards are described in Part V of the www.gettingthedealthrough.com 41 CANADA Davis LLP

5 What requirements apply in the areas of financial fitness and 9 What requirements must a foreign air carrier satisfy in order nationality of ownership regarding control of air carriers? to operate to or from your country? With respect to international air services, the nationality requirements are The licensing procedures for foreign air carriers are set out in question 6. those of the Chicago Convention and the applicable bilateral air service In order to be eligible for a licence to operate a scheduled international ser- agreements to which Canada is a party. Subject to very limited exceptions, vice, a foreign air carrier must obtain the appropriate Canadian aviation in order to operate a domestic air service in Canada, the operator must be document, have the prescribed liability insurance coverage in place, meet ‘Canadian’ as that term is defined in Part II of the Canada Transportation the prescribed eligibility conditions and satisfy the CTA that the foreign air Act. For an individual, this means being a Canadian citizen or permanent carrier has not contravened the provisions of the Canada Transportation resident. For a corporation, it means that at least 75 per cent of voting Act relating to sale of air services in Canada without an appropriate licence. interests must be owned and controlled by Canadians. In addition, a cor- In order to satisfy the eligibility conditions, the foreign air operator should poration must pass a ‘control in fact’ test. There is ministerial discretion to be designated by a foreign government to operate an air service in terms dispense with such requirement. It is used sparingly to authorise special of a bilateral air service agreement between that country and Canada operations. In 2009, legislation was enacted that would permit up to 49 and must hold a scheduled international licence issued by that foreign per cent foreign ownership in Canadian carriers, but that has not yet come government. into force. It is important to note that in order to obtain a foreign air operator cer- Start-up operations must pass a financial solvency test. They must tificate, a foreign carrier may be required to pass a base inspection carried demonstrate the ability to cover start-up costs and operating expenses for out by Transport Canada. In undertaking the base inspection, Transport the first 90 days of operations, without relying upon revenues from the Canada may attend at the foreign air carrier’s base to assess whether the operation. foreign air carrier meets its requirements on maintenance, security and operational issues. 6 What procedures are there to obtain licences or other rights to operate particular routes? 10 Are there specific rules in place to ensure aviation services The licensing of air operators for the provision of domestic services and are offered to remote destinations when vital for the local scheduled and unscheduled international services is regulated by the pro- economy? visions of the Canada Transportation Act and the regulations made there- Such rules were once a mainstay of Canadian domestic regulation, but they under, and is administered by the CTA. To operate an air service which is have been repealed. A vestige of the old regime is section 64 of the Canada publicly available, a licence must be obtained from the CTA. The licences Transportation Act, which specifies which notices must be given when a available are domestic (small, medium, large and all-cargo aircraft) and carrier proposes to discontinue a domestic service or reduce it to less than international. International licences are distinguished by aircraft size and one flight per week. If such discontinuance or reduction results in reducing use (in the case of all-cargo). International licences are issued on a sched- the number of carriers providing weekly service to one or fewer, the carrier uled and non-scheduled basis. An applicant must establish that it holds proposing to discontinue or reduce services must give notice and enter into an appropriate operating certificate, has liability insurance and meets the discussions with local government officials. However, the carrier cannot be financial fitness requirements discussed above. Licences for international prevented from discontinuing or reducing service. It can only be required scheduled services generally are issued pursuant to bilateral air service to suspend the planned change for a period of 30 or 120 days, depending arrangements between Canada and foreign states and are route-specific, on whether the service was in operation for at least one year before the in accordance with the commercial rights identified in these agreements. notice was given. The same rule applies to reduction of certain services if Extra-bilateral authority in the form of additional city pairs and fifth or sev- the reduction will reduce capacity by at least 50 per cent. enth freedom rights can sometimes be obtained on application to the CTA. 11 Are charter services specially regulated? 7 What procedures are there for hearing or deciding contested Charter services are regulated separately. The Air Transportation applications for licences or other rights to operate particular Regulations specify a stringent set of rules that nominally apply. However, routes? the impact of these rules is largely alleviated by the provisions of Canada’s The CTA, of its own motion or on complaint, may determine that a licensee International Cargo Charter Policy and International Passenger Charter ceases to meet the conditions upon which the licence was granted. In this Policy, which were announced in May 1998 and April 2000 respectively. case, the CTA will typically suspend the licence and give the licensee 90 The CTA is in the process of amending the Air Transport Regulations to days to show cause why the licence should not be cancelled. Applications conform but, in the interim, the CTA has been authorised to grant general for extra-bilateral authority, for extended wet-lease charter operations and exemptions from the application of those provisions of the Air Transport for all-cargo seventh freedoms are still contested on occasion, but with less Regulations that conflict with the provisions of the policies. The most frequency. In case of complaint, the CTA opens pleadings by inviting the important restrictions that remain in place are those requiring a carrier to interested parties to state their cases in writing. A public hearing is possible provide financial guarantees in respect of advance payments received from but rare in fact. An appeal from a decision of the CTA lies to the Federal tour operators. Carriers are also required to price charter contracts on the Court of Appeal, but only on questions of law or jurisdiction and only with basis of tariffs in effect on the date the contract is entered into. Those tariffs leave. must be maintained by the carrier, but need not be filed with the CTA.

8 Is there a declared policy on airline access or competition and, 12 Are airfares regulated and, if so, how? if so, what is it? Airfares are subject to limited regulation in Canada. The most important In late 2006, the Government of Canada announced its Blue Sky Policy, statutory provision is section 66 of the Canada Transportation Act, which which is intended to ‘further connect Canadians to each other and the applies to lightly serviced routes. On such routes, passengers and ship- world’. The policy is an attempt to pursue more liberalised bilateral agree- pers are given the right to complain to the CTA if they are of the view that ments with other states, contemplating fifth and sixth freedoms for pas- the fare or rate offered is unreasonable or that the range of rates and fares senger services and seventh freedom for all-cargo services. Since the offered is inadequate. The CTA deals with a small number of individual implementation of the Blue Sky Policy, Canada has negotiated new or complaints each year and occasionally commissions more general studies expanded air service agreements with over 20 states as well as with the 28 of the state of competition on lightly serviced routes. In dealing with an member states of the EU. individual complaint, the CTA will consider historical data, compare fares Separate from the Blue Sky Policy, the Canada–United States Open and rates on similar services and consider competition from other modes Skies Agreement was signed in 2007. This agreement reinforces the previ- of transport. The Air Transportation Regulations stipulate that carriers are ous open regime for air services between the two countries by removing to apply the fares set out in their tariffs, and only those fares. some constraints regarding air services between each other’s territory and Sections 86.1 and 86.2 of the Canada Transportation Act grant to the third countries. Cabotage is still off the table. CTA the power to make regulations in relation to advertising of prices for air services. In exercise of this power, the CTA has amended the ATRs

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

www.gettingthedealthrough.com 43 CANADA Davis LLP arm’s-length, not-for-profit provincial corporations entrusted with the negotiation. Slot allocation at the Canadian airports using a slot clearance twin goals of providing the services required, while working toward eco- request/reply system is regulated by the IATA Scheduling Guidelines. nomic self-sufficiency through earned revenue. 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. All Arctic airports, to territorial governments. competent operators are free to apply to an airport authority and any restric- The balance of the airports certified by Transport Canada are very tions on their ability to offer ground-handling services are determined by small, privately operated facilities, many of which are simply grass land- space and capacity considerations. Competition issues are addressed by ing strips. legislation of general application and, in particular, the Competition Act.

18 What system is there for the licensing of airports? 23 Who provides air traffic control services? And how are they Transport Canada is charged with certifying non-military airports in regulated? Canada under Part III of the CARs. Certification is granted following a The Government of Canada transferred responsibility for all of the coun- successful inspection by Transport Canada, establishing that the applica- try’s air navigation services (ANS) network to NAV Canada, a private, non- ble standards are met and the publication of the airport data (verified by share capital corporation. NAV Canada is statutorily obligated to provide the regulator) in publications available to the public, such as the Canada navigational services on a cost recovery basis in Canadian airspace. Service Flight Supplement, which details the various facilities and services avail- charges are levied on air carriers and aircraft operators to recover costs able at each certified airport. There are two components to certification, incurred by NAV Canada in providing the air navigation services. CANSCA namely the airport certificate itself, which evidences compliance with the provides for a right to appeal NAV Canada charges to the CTA. required Transport Canada standards, and the airport operations manual, which details the precise specifications for airport facilities and services. Liability and accidents Deviations from these specifications require the approval of Transport Canada, which conducts regular inspections to ensure compliance. 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 19 Is there a system of economic regulation of airports and, if so, domestic carriage? how does it function? Until very recently, there were no special rules with respect to death or As stated above, the majority of airports in Canada are private, but the injury to passengers and loss or damage to baggage or cargo for domestic most significant facilities continue to be owned by the federal government, carriage. These claims were (and largely still are) resolved in accordance although leased to and managed and operated by independent CAAs. The with principles of the common law of contract and negligence, as inter- goal is to ensure the viability and self-sufficiency of those airports. preted by the courts of each province. The courts of Quebec apply civil As an integral component of the NAP, the federal government estab- law principles and concepts, but the end result for an aviation claim in that lished the Airports Capital Assistance (ACA) programme in 1995. Eligible province is not likely to substantially differ from a similar case in a common airport operators may apply for financial assistance for capital projects law province. Over the past couple of years, the CTA has intervened in a relating to safety, asset protection and operating cost reductions. The number of cases to require air carriers to apply international liability rules. assistance ranges from ‘first priority projects’, which include safety-related As of now, such intervention is limited to cases in which the claim is for airside projects, such as rehabilitation of runways, to ‘third priority pro- damage to, loss of, or delay in the transport of baggage. jects’, including safety-related air terminal building and groundside pro- Under the Criminal Code, dangerous or negligent operation of an jects, such as sprinkler systems, asbestos removal and barrier-free access. aircraft or knowingly sending an aircraft that is not airworthy on flight are Airport authorities are often required to fund a portion of ACA projects. criminal offences. Therefore, incidents that result in injury or death may A material issue in Canada is the cost of airport operations and, in result in criminal investigation and possible criminal charges if there the particular, the rents that the federal government charges to the airport circumstances so warrant. authorities. These are passed on to air carriers. Toronto and Vancouver are often cited as expensive airports within which to operate and a number of 25 Are there any special rules about the liability of aircraft economic studies have suggested that significant traffic has been diverted operators for surface damage? from those cities to Buffalo, New York and Bellingham, Washington in the Although there are no specific rules governing the liability of aircraft US. operators for surface damage, the Airport Traffic Regulations, which were enacted under the Government Property Traffic Act, prescribe rules for the 20 Are there laws or rules restricting or qualifying access to operation of motor vehicles, pedestrians and mobile equipment at airports, airports? which may be of some interest to ground handlers. In addition, Part IV of Domestic carriers have a prima facie right to serve any airport in Canada, the Airport Traffic Regulations addresses requirements specific to the con- so long as they are licensed to operate by the CTA. Foreign carriers have trol of aircraft on aprons. the same requirement of licensing but, as part of the licensing process, they must be able to demonstrate that they have the requisite bilateral authority 26 What system and procedures are in place for the investigation to serve a particular destination. In a technical sense, access is governed by of air accidents? wide-ranging regulations covering, for example, departure and arrival pro- The TSB has statutory authority under the Canadian Transportation cedures, traffic circuits, noise abatement and aircraft separation. These are Accident Investigation and Safety Board Act to investigate civil aviation summarised in the Transport Canada Aeronautical Information Manual. incidents and accidents. The powers of TSB investigators are extremely broad. They may 21 How are slots allocated at congested airports? search and seize, sometimes without warrant, and may compel sworn Slots are allocated by individual airport authorities and there is no uniform statements. Any person thought to have relevant information may be slot allotment policy or system applicable to all airports in Canada. Some required to attend. Canadian airports have airport adviser status with IATA and participate in Operators and others with an interest in the investigation may seek biannual IATA schedules conferences, at which carriers, airports, coordi- observer status. Disposition of such requests is in the discretion of the nators and industry experts discuss schedule adjustments. Upon negotiat- investigator in charge. ing, trading or transferring slot times at the IATA schedules conferences, The TSB has established criteria to determine the extent of any par- carriers will then apply to the applicable airport for a slot. The airport will ticular investigation. In the case of a significant accident or incident, a ascertain the availability of the time as well as the logistical ability to pro- public inquiry is possible. Ultimately the TSB will issue a report to identify vide that time. If that time is not available or feasible, the airport will offer contributing factors and safety deficiencies. The TSB is barred from assign- another time and the carrier and the airport will engage in a scheduling ing blame and its role is limited to identifying deficiencies resulting in the

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

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

46 Getting the Deal Through – Air Transport 2015 Davis LLP CANADA nature. As in many jurisdictions, what is required of the carrier by way of 42 What serious crimes exist with regard to aviation? collection and distribution of information is in a state of flux, with numer- Section 7 of the Criminal Code creates a territorial extension of the jurisdic- ous authorities making separate and sometimes conflicting demands. tion of Canadian courts in respect of certain acts committed on an aircraft Overall responsibility for implementing security measures, such as the in flight. The principal serious crimes specifically related to aeronautics screening of passengers and bags, rests with the Canadian Air Transport are found in sections 76, 77 and 78 of the Criminal Code. Hijacking is an Security Authority. indictable offence and is punishable by life imprisonment. Various acts of The Public Safety Act received royal assent in May 2004. This legisla- violence on board aircraft or in an airport that are likely to endanger the tion allows the collection and use of passenger information for the purpose safety of the aircraft or airport are also punishable by life imprisonment. of security. It also provides the minister of transport with the authority to Carrying an offensive weapon or explosive on board, without the consent issue interim orders in emergency situations. 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, 250 2nd Street SW Tel: +1 403 698 8778 / 8796 Calgary Fax: +1 403 697 6625 Alberta T2P 0C1 www.davis.ca Canada

www.gettingthedealthrough.com 47 COLOMBIA Guzmán Escobar & Asociados

Colombia

José Vicente Guzmán and Andrés Reyes Guzmán Escobar & Asociados

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? According to RAC Part 3 and article 1857 of the Colombian Commercial Code, for access to the market it is necessary to go through a public hear- The entity that regulates aviation is the Unidad Administrativa de ing procedure and prove legal, financial and technical requirements. Any Aeronáutica Civil – Aerocivil, created by Decree 1721 of 1960 as company that intends to access the market must comply with the following Departamento Administrativo de Aeronáutica Civil, and reformed by information and reports: Law 3 and Decree 2332 of 1977, article 67 of Decree 2171 of 1992 on the • justification of the public convenience and the need of the service; merger of Departamento Administrativo de Aeronáutica Civil and Fondo • incorporation of the company in Colombia (at least a branch); Aeronáutico Nacional, and finally with Decree 260 of 2004 the old Aerocivil was transformed into the Unidad Administrativa Especial de • evidence of economic and financial resources; Aeronáutica Civil – Aerocivil. • availability of a minimum number of planes and their technical support and compliance with the proposed airport for operations; Regulation of aviation operations • a five-year marketing research; and • investment return calculation. 2 How is air transport regulated in terms of safety? Air transport is regulated in terms of safety in various parts of the 5 What requirements apply in the areas of financial fitness and Colombian Aeronautical Rules, known as the RAC. nationality of ownership regarding control of air carriers? Part 4 of the RAC regulates airworthiness and operational rules The company minimum capital must be as follows: both generally and specifically. In addition, Part 22 contains the specific • 10,000 minimum monthly wages for main airlines; regulation for the implementation of a safety management system that • 7,000 minimum monthly wages for secondary airlines; is mandatory for aircraft operators. • 1,750 minimum monthly wages for regional airlines; Regulations in Part 4 include general aspects of airworthiness that • 1,500 minimum monthly wages for air taxi; apply to any civil aircraft that operates with a base in Colombia, regard- • 3,500 minimum monthly wages for cargo airlines; and less of its registration country. The general part includes regulations • 1,750 minimum monthly wages for special cargo airlines that require for engines, lights, equipment and all general aspects of the aircraft’s one aircraft. operation. It also includes regulations starting from small aircraft with propeller engines to aircraft that uses turbofan engines. There is no national ownership requirement regarding control of air carri- The specific rules for airworthiness include: ers under Colombian law. • flight data recorder; • operations under CAT II; 6 What procedures are there to obtain licences or other rights to • operations under reduced vertical minimum separation; operate particular routes? • special rules for aircraft used by airlines on schedule services; • special rules for aircraft used for charter services; According to Part 3 of RAC any carrier that wants to operate or expand • special rules for aircraft used in aerial work; routes in Colombia or from and to Colombia must complete the procedure • special rules for helicopters; that includes presenting a petition to Aerocivil with the proposed fares • special rules for aircraft used in general aviation, flight schools and and operational costs. In order to operate the route the carrier must obtain state civil aviation; the following approvals: modification of schedules, slot coordination for • rules for repair stations; Bogotá, registration of fares, bank or insurance company guarantees and • operational rules; technical verification by the security general secretary of Aerocivil. • operational rules for commercial scheduled and charter services; • crew flight time and duty limits; 7 What procedures are there for hearing or deciding contested • flight dispatchers and flight authorisation; applications for licences or other rights to operate particular • precision operations CAT II; routes? • polar extended-range twin-engine operations; Contested applications are presented in the public hearing mentioned • report and records from scheduled and charter services airlines; above and are decided by the director of Aerocivil. • special rules for aerial work; • helicopter operations; 8 Is there a declared policy on airline access or competition and, • special rules for general aviation, state civil aviation and flight schools; if so, what is it? • balloon operations; and • sport aviation. The Colombian competition authority has no formal declaration on policy on airline access or competition; nevertheless, for international carriers 3 What safety regulation is provided for air operations that do accessing the Colombian international market, Colombian authorities not constitute public or commercial transport and how is the approve services included in bilateral agreements or multilateral agree- distinction made? ments. Approval of services from carriers incorporated in countries without an agreement with Colombia are possible based on reciprocity to Part 4 of RAC has special rules regarding the safety of operations for corpo- Colombian carriers and the proven convenience of the service. rate aviation, general aviation and aerial work (see question 2).

48 Getting the Deal Through – Air Transport 2015 Guzmán Escobar & Asociados COLOMBIA

9 What requirements must a foreign air carrier satisfy in order • Aerocivil will issue a certificate of registration of the mortgage upon to operate to or from your country? request. The company must go through a procedure that includes the approval by the director of Aerocivil, after a public hearing in which the carrier explains 15 What rights are there to detain aircraft, in respect of unpaid the proposed service. For commencing the procedure the company must airport or air navigation charges, or other unpaid debts? submit the following information: The Treasury Office of Aerocivil has a duty to collect all the due pay- • designation from its registry country; ments of aircraft operators in Colombia. If there are some unpaid airport • specific route stops and freedoms of the air to be exercised; or air navigation charges, the Treasury Office will report it directly to the • aircraft for the proposed service; Aerocivil management system and the aircraft in question will be blocked • insurance (collision and third-party damages); for further flight plan approval until the payment is made. If the owner or • certificate of national ownership and control of the company; operator of the aircraft does not pay the debt, Aerocivil is entitled and has • proposed schedules; the legal duty to initiate a jurisdiction procedure in order to obtain judicial • commercial relations with Colombian carriers; payment of the debt. During this procedure a lien can apply over the air- • general description of the routes operated by the company; craft and the limitation will be reported to the aircraft registry. • fares; • incorporation of an office in Colombia or at least the appointment of a 16 Do specific rules regulate the maintenance of aircraft? legal representative (residency must be in Colombia); and RAC 4 regulates maintenance of aircraft as follows. A general part contains • safety certificate. the general rules for maintenance, preventive maintenance, reconstruction and modification of aircraft. The specific rules about aircraft opera- 10 Are there specific rules in place to ensure aviation services tional safety appear in different appendices; these include: are offered to remote destinations when vital for the local • major modifications and maintenance and preventive maintenance; economy? • registration of inspections, repair and modifications of aircraft; Part 3 of RAC regulates services for destinations without regular air ser- • scope and items to be inspected in the annual or the 100-hour inspec- vices. The carrier authorised to cover a route under the above condition is tion (whichever occurs first); protected against competition for one year extendable for an equal period • inspections and tests of the altimeter system; and if a maximum of 10,000 passengers per year use the route. • inspections and tests of the ATC transponder.

11 Are charter services specially regulated? Airports Part 3 of the RAC has special provisions for charter services that include the 17 Who owns the airports? general requirements for authorisation such as route, number of charter Unidad Administrativa Especial de Aeronáutica Civil – Aerocivil, the flight to be operated, insurance and authorisation by its registry country Colombian national aviation authority, owns major airports in Colombia, government. A maximum of 18 charter flights per semester are authorised with the exception of Pereira’s Matecaña International Airport, which is per carrier. owned by the Municipality of Pereira. Private airports are very common in Colombia for corporate operations, aerial work, recreational services and 12 Are airfares regulated and, if so, how? remote locations; these airports are owned and operated by private com- Fares are not regulated in Colombia; however, for new routes and for panies or persons. accessing the market the carrier must present before the Colombian aeronautical authorities the proposed fares for a specific route and class of 18 What system is there for the licensing of airports? service. RAC 14 regulates airports and heliports as follows: Every airport or heliport to be used for landing or take-off of any air- Aircraft craft must have an operation permit from Aerocivil. 13 Who is entitled to be mentioned in the aircraft register? Do For obtaining the permit the petitioner must identify the airport, its requirements or limitations apply to the ownership of an location, name of the owner, operator, airport class and category and the aircraft listed on your country’s register? operational conditions including plans of the terminal, tarmacs, runways The aircraft registry mentions the owner and the registered operator of the and protection areas in order to get a construction permit. Aerocivil will aircraft. No requirements or limitations apply to ownership of aircraft reg- inspect the area before, during and after construction. In case of airports istered under Colombian registration. an environmental licence issued by the Environmental Licence Agency is required for construction. 14 Is there a register of aircraft mortgages or charges and, if so, After the construction is finished, and all operational requirements are how does it function? complied with, such as airport security certification, airport manual and safety mangement systems, Aerocivil will issue the operation permit. Any mortgage document must be registered with Aerocivil. The mortgage document over an aircraft must contain all the necessary information in 19 Is there a system of economic regulation of airports and, if so, order to be duly registered before Aerocivil such as: information about how does it function? the aircraft registration, model, serial number, engines and their serial number, kind of mortgage, manufacturer, propellers’ serial number and In the case of airports operated directly by Aerocivil, it establishes the manufacturer (if applicable) and identification of the parties involved in tariffs and fares for the use of the airport. When an airport has been con- the mortgage. tracted to a particular operator, by way of a concession contract under Law In addition, any aircraft arrest must be registered before Aerocivil No. 80 of 1993 and Law No. 105 of 1993, or a private–public partnership by presenting the judicial decision to the registry office. The judicial (PPP) under Law No. 1508 of 2012, then such tariffs and fares are regulated decision must contain the information mentioned above. in the particular contract or PPP and these tariffs and fares, as well and The registration steps are: their modification, are subject to the approval of Aerocivil. • the documents containing the mortgage or arrest must be presented to Aerocivil according to the above procedure; 20 Are there laws or rules restricting or qualifying access to • Aerocivil will review all the documentation and information contained airports? in the documents; Rules restricting and qualifying access to airports are as follows. • if the information and documents comply with the requirements, the registration will be completed; and

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For airlines 25 Are there any special rules about the liability of aircraft A restriction applies to Enrique Olaya Herrera Airport located in cen- operators for surface damage? tral Medellin, since the airport is limited to recreational, instruction and Articles 1827 to 1840 of the Colombian Commercial Code regulate the lia- regional operations. It is not an international airport. bility of the aircraft operator in case of surface damages. According to the code anyone that suffers damages from an airborne aircraft or from a per- For any aircraft operator son or thing fallen from an aircraft is entitled to a compensation. Some lia- All international flights must arrive and depart from an international air- bility exclusions apply such as damage caused by the victim, third parties port. According to Colombian law the list of international airports is as fol- and when a public authority or others are in control of the aircraft without lows: Bogotá (El Dorado), Rionegro (serves Medellin), Cali, Barranquilla, consent of the owner or operator. The compensation is limited according Cartagena, Santa Marta, Rioacha, Cucuta, San Andrés, Bucaramanga, to the MTOW of the aircraft and is calculated in gold kilograms according Pereira, Armenia and Leticia. to the procedure set forth in article 1835 of the Code. Technical restrictions apply according to the category of the airport – A, B or C – and the emergency services located at the terminal. 26 What system and procedures are in place for the investigation of air accidents? 21 How are slots allocated at congested airports? According to article 1847 of the Colombian Commercial Code, every acci- According to Appendix A of RAC Part 3, slots reservation must be requested dent must be investigated by the aeronautical authority (Aerocivil) in order before the Coordination of Slots Office and/or at the Air Transportation to find its cause and take the necessary measures to avoid new accidents. Office of Aerocivil. The legal representative of the company, its attorney Part 8 of RAC establishes the accident investigation procedure, which or the person designated to represent the branch in Colombia, or a fixed- is conducted by the Accidents Investigation Group of Aerocivil, including base operator duly authorised by Aerocivil, must sign the request. The slots the following steps: are coordinated and managed from the Integrated System of Aeronautical • collection, registration, recording and analysis (includes laboratory Information as the only tool for reservation and allocation. research and investigation) of all the information available from the accident site or related sources; 22 Are there any laws or rules specifically relating to ground • determination of the causes of the accident; handling? • publication of safety recommendations, if applicable; and Every company or person interested in offering services for ground han- • drafting and completion of the final report. dling must get a licence from Aerocivil according to Part 3 of the RAC as follows. 27 Is there a mandatory accident and incident reporting system Ground handling licence may include aircraft services, luggage han- and, if so, how does it operate? dling, cargo handling, aircraft dispatch and maintenance. Part 8 of RAC establishes special mandatory accident and incident report- To obtain the licence a petition must submitted before the Safety ing. According to the rules, every accident and incident must be notified Secretary for an operation certificate or technical verification. using the format that is available on the Aerocivil website (www.aerocivil. Once the above certificate is issued, the Air Transport Office of gov.co). If the format is not available, the report can be submitted by any Aerocivil will study other documents before issuing the final authorisation. available source that guarantees the expeditious transfer of information Depending on the services proposed, the ground handling company must to Aerocivil and its investigation group. Aerocivil has designated different present a minimum capital as follows: 200 minimum monthly salaries if contact points around the country in order to report incidents and acci- maintenance is proposed, 100 minimum monthly salaries if dispatch is dents and if necessary to deploy the emergency and rescue services. proposed, and 50 minimum monthly salaries for the rest of the companies. Competition law 23 Who provides air traffic control services? And how are they regulated? 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? Air traffic control services are provided by Aerocivil. Part 6 of RAC divides the services into ATS air transit service, ATFM flow of air transit and ASM General competition rules apply to aviation. The general competition rules management of airspace, ATS being the principal element of the system. in Colombia are embodied in Decree 2153 of 1992 and Law No. 256 of 1996, Any authorisation of overflight or flight plan must be submitted to the and there are some special rules on aviation competition in article 1866 of director of the Air Navigation Services office or the flight plan office at each the Colombian Commercial Code, which requires approval from Aerocivil airport. ATS is run solely by Aerocivil but coordinated with the Colombian of any agreement aimed at or with the effect of regulating or restricting airforce. The ATS services are provided depending on areas of air naviga- competition between air traffic carriers, in particular cooperation agree- tion from a control tower, approaching control or a control centre. ments relating to the integration of joint operations, connections, consolidation or integration of services. Liability and accidents 29 Is there a sector-specific regulator or are competition rules 24 Are there any special rules in respect of death of, or injury to, applied by the general competition authority? passengers or loss or damage to baggage or cargo in respect of Competition regulations in Colombia fall under the laws issued by domestic carriage? the national congress and decrees issued by the national government. Article 1880 of the Colombian Commercial Code establishes the rules in Compliance with the competition regulations is monitored by the respect of death or injury to passengers. The code states that the carrier Superintendencia de Industria y Comercio (SIC), which is the national will be liable if the damage occurs on board the aircraft or during boarding authority in competition affairs, with the exception of the approval of the or deplaning operations unless the airline demonstrate liability exemption agreements referred to in article 1866 of the Colombian Commercial Code (damage from third parties or the passenger) and its due diligence to avoid (see question 28), which is the responsibility of Aerocivil. the damage. Colombian law establishes a limit of liability of up to 25,000 grams of pure gold per passenger. 30 How is the relevant market for the purposes of a competition Article 1887 of the Colombian Commercial Code establishes the rules assessment in the aviation sector defined by the competition in respect of loss or damage to baggage or cargo. The code states that the authorities? carrier will be liable if the damage occurs while the baggage or the cargo is There is no particular definition of the relevant market for the aviation in its custody or under its agents or dependants. The limitation of liability sector, so the general definition set forth in the Competition Law applies. will not exceed 10 grams of pure gold per kilogram of the registered bag- According to General Opinion No. 23410 of 2000 issued by the SIC, in gage or cargo. A declaration of value of the baggage or cargo will result in order to identify the relevant market for competition purposes reference full compensation from the carrier without the mentioned limit of liability. shall be made to the scope of the market for the product or service in Liability exemption applies in the case of damage from third parties and question, the product or service that can be a substitute of them and the loss or damage of hand baggage in the custody of the passenger. geographic area of the potential competitors for such product or service.

50 Getting the Deal Through – Air Transport 2015 Guzmán Escobar & Asociados COLOMBIA

Application of this general definition of the relevant market for the avia- 35 Are there exemptions from the state aid rules or situations in tion sector is made on a case-by-case basis, having regard to the particular which they do not apply? transport route involved. Not applicable.

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? Aerocivil is the competent authority for the approval of transactions in the Not applicable. aviation sector that might affect competition. This authority applies four main standards for assessing the competitive effect of a transaction as 37 If so, what are the main procedural steps to obtain clearance? follows: Not applicable. • development of a transport system that fits the present and future market needs for domestic and international services; 38 If no clearance is obtained, what procedures apply to recover • reasonable operational profits for carriers that serve the same routes; unlawfully granted state aid? • safety standards; and • benefits for passengers arising out of the transaction. 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 Competition authorities are entitled to set conditions or to prohibit opera- legislation? tional integration agreements, as well as mergers and acquisitions in the Part 3 of the RAC has a special regulation about the protection of passen- aviation sector. They can also impose fines for violations to the Competition gers. The regulations include mandatory compensation for passengers in Law, and in the case of air carriers they can impose fines for rendering ser- case of boarding denial, delay or cancellation of flights. Compensation vices beyond the scope of their authorised routes or itineraries. includes the obligation to provide food, accommodation and transport to and from hotels, depending on the case. Part 3 of RAC also has provi- Financial support and state aid sions about the definition of package holidays, and the exclusion of the 33 Are there sector-specific rules regulating direct or indirect carrier’s liability (for different services not related to air transport) when financial support to companies by the government or those packages are not offered directly by airlines. Finally, the rules grant government-controlled agencies or companies (state aid) in the passenger protection against a carrier’s last-minute change of fares or the aviation sector? If not, do general state aid rules apply? extra charges, enabling the users of air transport not to be subject to extra charges or hidden fees after purchasing air tickets, unless extra fees are Notwithstanding that article 1863 of the Colombian Commercial Code pro- duly authorised by Aerocivil. vides for possible financial aid to companies of the aviation sector, according to the decision of the Consejo de Estado (Supreme Administrative 40 Are there mandatory insurance requirements for the Court of Colombia) issued on 23 May 2002, the Constitution prohibits operators of aircraft? financial aid for persons or privately owned companies. According to that decision, only state-owned carriers will be entitled to state aid. At present Operators must be insured against the following risks: there is only one state company, called Satena. • damages on surface; • collision; and 34 What are the main principles of the state aid rules applicable • liability for loss or damage of luggage, cargo and death or injury of to the aviation sector? passengers. There is no principle of state aid applicable to the aviation sector. When 41 What legal requirements are there with regard to aviation financial aid has been needed for Satena it has been decided on a case-by- security? case basis and authorised by the congress. Aviation security was initially treated as a separate matter from RAC. However, at present Part 17 of RAC adopts the full National Airport

José Vicente Guzmán [email protected] Andrés Reyes [email protected]

Calle 82 #11-37, Ofc 308 Tel: +57 1 617 0580 Bogotá DC Fax: +57 1 610 8500 Colombia www.gealegal.com

www.gettingthedealthrough.com 51 COLOMBIA Guzmán Escobar & Asociados

Security Plan (PNSAC), which establishes the legal obligation for every air- 42 What serious crimes exist with regard to aviation? port operator, airport neighbours and aircraft operator to follow strictly the Colombian criminal law has established the following crimes related to rules contained therein. For complying with PNSAC, Aerocivil approves aviation: every security plan for airports and aircraft operator, if applicable, through • Penal Code, article 173 – hijacking of aircraft: the party responsible can the secretary of airport security. The secretary also has the duty and right be sentenced to serve between 13 and 22 years in prison, with an uplift to undertake inspections of airports and aircraft operators. of two-thirds if passengers are not allowed to leave the aircraft at the Specific legal obligations can be summarised as follows: first opportunity to do so. A fine must also be imposed on the offender; • the obligation to implement of a safety management system for • Penal Code, article 353 – blocking of public transport: the party respon- security; sible can be sentenced to serve between four and eight years in prison. • every airport must designate a person or office responsible for security; A fine must also be imposed on the offender; and • a security committee is mandatory for public airports; • Penal Code, article 354 – damage to aircraft: the party responsible can • implementation of protection and access (persons and vehicles to be sentenced to serve between 16 months and 10 years in prison. A fine restricted areas); must also be imposed on the offender. • implementation of an ID system for personnel working at airports; and • security checkpoint procedures.

52 Getting the Deal Through – Air Transport 2015 Delacour Law Firm DENMARK

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 53 DENMARK Delacour Law Firm

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 access • when the owner is Danish and the owner is domiciled or resident in 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

54 Getting the Deal Through – Air Transport 2015 Delacour Law Firm DENMARK aircraft until the airport charge is paid or equivalent collateral has been As to the general rules on access to airports there is, inter alia, Order made. No. 979/2004 on approval by the police of persons with access to the enclosed airport space, Order No. 933/1997 on ground handling and Order 16 Do specific rules regulate the maintenance of aircraft? No. 1339/2007 (revised by Order No. 1167/2010) on airport security. Maintenance of aircraft in Denmark is governed by different EU regula- CAA-DK is responsible for issuing most of the specific rules in respect tions enforced by EASA and through BLs issued by the CAA-DK. of aircraft’s access to the Danish airports. The BL 1 series, inter alia, sets Furthermore, the CAA-DK supervises workshops that maintain and out specific rules and conditions to aircraft and aircraft material. carry out repairs of aircraft. Such workshops must be licensed by CAA-DK to carry out the specific maintenance or repairs. 21 How are slots allocated at congested airports? The allocation of slots at Danish airports is carried out in accordance with Airports Regulation (EEC) 95/93 on common rules on the allocation of slots at Community airports as amended by Regulation (EC) 793/2004. 17 Who owns the airports? Allocation and coordination of slots outside EU member states is car- Denmark has a number of both private and publicly owned airports. In ried out in accordance with the IATA Worldwide Scheduling Guidelines relation to the transport of freight and passengers, Copenhagen Airport and IATA Worldwide Slot Guidelines. and Billund Airport are the two largest and considered to be the most In Denmark, Airport Coordination Denmark A/S (ACD) is responsible important airports. for slot allocation, schedules facilitation and schedule data collection at The ownership of the airports varies. In Denmark there are examples larger airports. At present ACD has been appointed to provide coordina- of state ownership, private ownership, ownership by local municipalities or tion services to Copenhagen Airport and Billund Airport. a combination of these. Copenhagen Airport together with Roskilde Airport is owned by 22 Are there any laws or rules specifically relating to ground the privatised company Copenhagen Airports A/S. The shareholders as handling? per 31 December 2013 are: Copenhagen Airports Denmark ApS (Ontario Access to the ground-handling market in the large Danish airports is Teachers Pension Plan and Macquarie European Infrastructure Fund III) regulated by Order No. 933 of 9 December 1997 on access to the ground- – 57.7 per cent; the Danish state – 39.2 per cent; foreign, private and institu- handling market in Danish airports. The order is an implementation of tional investors – 1.3 per cent; and Danish, private and institutional inves- Directive 96/67/EC. tors – 1.8 per cent. According to the rules set out in Order No. 933, the obligation to secure Billund Airport is owned by the company Billund Airport A/S. The share- free access to the ground-handling market applies to airports with com- holders of the company are eight different municipalities. mercial traffic of more than 2 million passenger movements or 50,000 tonnes of freight. In Denmark, only Copenhagen Airport and Billund 18 What system is there for the licensing of airports? Airport exceed these thresholds. The general rules on the licensing of airports are listed in sections 55 to 60 of the Danish Air Navigation Act. In order to establish and operate a public 23 Who provides air traffic control services? And how are they airport the company is obligated to obtain permission from the CAA-DK. regulated? Furthermore, the company is obligated to comply with the special rules in Within the framework of the relevant EU legislation Eurocontrol is respon- the Regulations on Civil Aviation (BL), especially the BL 3 series. sible for both the development of licensing policy for air traffic controllers If the airport is considered to be of vital importance for Denmark’s and also the standards for licensing set out by national authorities. national and international air traffic connections the company is required Naviair, which as from 27 October 2010 was reorganised into an inde- to obtain special permission from the CAA-DK. The special permission pendent public corporation, has been granted a licence to operate and is requires the company to comply with a number of conditions set out in the the principal provider of air traffic control (en route) in Denmark. Naviair permission and in accordance with section 57 of the Danish Air Navigation is regulated by Act No. 529 of 26 May 2010 on Naviair. Special and general Act. rules on air traffic control can be found in the Regulations on Civil Aviation At present Copenhagen Airport is the only airport considered to be of (BL). vital importance for the national and international air traffic connections As per 1 July 2012, Nordic Unified Air Traffic Control (NUAC), a -com of Denmark. pany owned by Naviair and the Swedish Luftfartsverket (LFV), was fully The general rules for the licensing of airports not considered to be certified to deliver air navigation services in the Danish–Swedish area. public airports are listed in section 59 of the Danish Air Navigation Act. NUAC is responsible for the control centres in Copenhagen, Malmö and Stockholm. 19 Is there a system of economic regulation of airports and, if so, how does it function? Liability and accidents At EU level the Commission has issued Directive 2009/12/EC with rules and principles regarding the airport operators’ right to levy airport charges 24 Are there any special rules in respect of death of, or injury to, from its users. passengers or loss or damage to baggage or cargo in respect of Directive 2009/12/EC on airport charges, eg, aircraft landing charges, domestic carriage? passenger charges, freight and other charges has been implemented into Sections 106–119 of the Danish Air Navigation Act regulate conditions con- Danish aviation law via the BL 9-15 on airport charges, as amended by BL cerning the air carrier’s liability in connection with domestic carriage. 9-15A. If a passenger is killed or suffers any bodily injuries or whose health BL 9-15 only applies to airports with an annual number of passengers suffers as a consequence of an accident occurring on board an aircraft or above 5 million. Copenhagen Airport is the only Danish airport exceeding in connection with boarding or disembarking, the air carrier is held liable, 5 million annual passengers. see section 106 of the Danish Air Navigation Act. The air carrier’s liability Some of the main principles in BL 9-15 are non-discrimination of also comprises loss of dependency in case of death. The air carrier’s liabil- users, transparency in assessing the specific airport charges, the airport’s ity cannot be removed or limited to less than 113,000 SDR per passenger. consultation with users and the existence of an independent authority, the However, the compensation is annulled or lowered, provided the air carrier 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

www.gettingthedealthrough.com 55 DENMARK Delacour Law Firm air carrier is not liable to the extent the damage is caused by mistakes or Act and Order No. 301 of 1997 on notification duty in respect of aircraft defects in the checked-in luggage or its condition. The air carrier’s liability accidents and aviation incidents. for damage as a consequence of luggage being lost, damaged or delayed is generally limited to 1,131 SDR per passenger. 27 Is there a mandatory accident and incident reporting system Similarly the air carrier is responsible for damage when cargo is lost and, if so, how does it operate? or damaged as a consequence of circumstances occurring during the time Upon the occurrence of an accident or an incident over or on Danish terri- where the cargo is in the air carrier’s custody, see section 108 of the Danish tory or with a Danish-registered, civil aircraft the AIB must be notified as Air Navigation Act. However, the air carrier is not liable to the extent the soon as possible. damage is caused by defects in the cargo or its condition, insufficient pack- The notification duty rests with the head of the aircraft and the person ing, etc. The air carrier’s liability for damage as a consequence of cargo serving as air traffic controller, or the person serving in another position of being lost, damaged or delayed is generally limited to 19 SDR per kilo. importance for the air traffic safety, provided this person has provided air The air carrier’s liability is also regulated by Regulation (EC) 2017/97 traffic service which has or could have importance to the accident or inci- on air carriers’ liability in case of accidents, amended by Regulation (EC) dent. In respect of aeronautical equipment on the ground the notification 889/2002. duty rests with the person responsible for the equipment. Likewise there is an obligation to notify air traffic incidents which did 25 Are there any special rules about the liability of aircraft not result in an accident. Such notification shall be given as a preliminary operators for surface damage? notification over the radio to the nearest air traffic safety unit and must as Sections 127–130(a) of the Danish Air Navigation Act regulate conditions soon as possible upon landing be followed up on by handing in the stand- concerning damage to objects or persons outside the aircraft. ard-form Air Traffic Incident Report to the air traffic service. If damage occurs to a person or object outside the aircraft as a conse- The form ‘Air Traffic Incident Report’ is published in Aeronautical quence of using an aircraft for air carriage, the owner is obliged to com- Information Circular A (AIC A). pensate the damage. If the owner has left the usage of the aircraft to an The rules are regulated by section 137 of the Danish Air Navigation Act independent user who has taken on full responsibility of the aircraft’s and section 7 of Order No. 301 of 1997 on notification duty in respect of operation and maintenance, this obligation rests with the user instead. aircraft accidents and aviation incidents. However, it should be noted that the owner is responsible for insurance of the aircraft, and if the owner has not observed this obligation he may be Competition law held liable although the aircraft is operated by an independent user. 28 Do sector-specific competition rules apply to aviation? If not, In addition, the manufacturer and the owner of an aircraft are liable do the general competition law rules apply? pursuant to the Danish Product Liability Act, which is based on Directive 85/374/EEC. The Danish competition rules contain no sector-specific competition rules Pursuant to the Danish Product Liability Act, the manufacturer and applying to the aviation sector. even intermediaries are liable for damage caused by defects to the prod- Competition within the Danish aviation sector is regulated by the rules uct. The owner of an aircraft who leases the aircraft to an independent user in the Danish Competition Act (DCA) No. 700 of 18 June 2013. will, according to the Danish Product Liability Act, be considered an inter- In so far as the restrictive behaviour will affect trade between member mediary, and thus have joint and several liability together with the manu- states EU competition rules shall be applied concurrently with the Danish facturer for damages as a consequence of defects to the aircraft. However, competition rules. it should be noted that the owner will normally be able to claim recourse Competition rules of importance are: restrictive agreements (DCA sec- against the manufacturer. tion 6 and TFEU article 101), abuse of dominant position (DCA section 11 and TFEU article 102), merger control (DCA section 12 and Regulation (EC) 26 What system and procedures are in place for the investigation 139/2004), state aid (DCA section 11a and TFEU articles 107 to 109) and the of air accidents? general block exemptions from application of TFEU article 101. In general the rules shall be interpreted and applied in accordance The Accident Investigation Board (AIB) in Denmark investigates accidents with EU case law. and incidents concerning air transport in Denmark, Greenland and the Faroe Islands. 29 Is there a sector-specific regulator or are competition rules On the basis of impartial investigations the AIB shall present recom- applied by the general competition authority? mendations in order to prevent breakdowns and accidents. The AIB’s investigations do not determine blame or liability – the purpose is only to Denmark has no sector-specific regulator concerning the application of prevent breakdowns and accidents. Danish and EU competition law in the aviation sector. The AIB determines the number of investigations to be carried out in As a consequence, the Danish Competition and Consumer Authority consequence of an accident or incident; and the aircraft, parts or contents (DCCA) is also competent to apply and enforce the Danish competition or any leads may thus not be removed or touched before the AIB has final- rules within the aviation sector. ised its investigations, unless the police with permission from the board gives permission to do so. The AIB has without a court order access to per- 30 How is the relevant market for the purposes of a competition form investigation of the aircraft or its parts, regardless of whether it is situ- assessment in the aviation sector defined by the competition ated on private premises. authorities? The AIB shall keep the CAA-DK informed about findings and incidents There is no sector-specific definition of the relevant market for the purpose concerning an investigation which are considered to have substantial impor- of a competition assessment in the aviation sector. tance to air traffic safety, and must as soon as possible inform the CAA-DK As a consequence defining the relevant market (the relevant product about such findings. When the AIB has finalised its investigation, it must pre- and geographic market) shall be done in accordance with section 5a of the pare a draft report concerning the results of the investigation and the board’s DCA and the Commission notice on the definition of the relevant market recommendation in respect to any measures for preventing accidents or inci- for the purposes of Community competition law. dents of the same or similar type. The draft is sent for an opinion to the owner In general, market definitions are issued on a case-by-case basis. or user of the aircraft or airport or aeronautical equipment to whom the investigation in the opinion of the board will have importance. On this basis the par- 31 What are the main standards for assessing the competitive ties concerned can present their request for further investigations. effect of a transaction? The final report and recommendations are sent to the relevant The general rules on how to assess the competitive effects of a transaction authorities which in Denmark will typically be the CAA-DK and the EASA, in the aviation sector are regulated by the rules on merger control in sec- which in some areas maintain a common European role as authorities. tion 12 of the DCA. In order to apply the Danish merger rules the turnover The CAA-DK publishes the report unless this is unfavourable on decisive of the companies concerned must exceed specific thresholds set out in sec- grounds. tion 12. The AIB’s tasks concerning investigations of accidents and breakdowns are determined in sections 134–144(b) of the Danish Air Navigation

56 Getting the Deal Through – Air Transport 2015 Delacour Law Firm DENMARK

The test relating to the assessment of the competitive effect of a The Commission has published Community guidelines on financing transaction under the DCA is concurrent to the test under the EU Merger of airports and start-up aid to airlines departing from regional airports Regulation (EC) 139/2004. (2005/C 312/01). The overall question is whether the transaction could raise any competition concerns by means of impeding effective competition in particular as 36 Must clearance from the competition authorities be obtained a result of the creation or strengthening of a dominant position. If so, the before state aid may be granted? question is whether the verifiable efficiencies of the transaction by certain The Danish state aid rules in section 11a of the DCA do not require the rel- criteria will be passed on to consumers. evant authorities to obtain a clearance from the DCCA before state aid is granted. 32 What types of remedies have been imposed to remedy The rules on the procedure for the approval of state aid and the rem- concerns identified by the competition authorities? edies of the Commission in cases where a member state has granted The specific rules on remedies in transactions are regulated by section 12e unlawful state aid to a company in violation of TFEU article 107(1) are of the DCA. regulated in TFEU article 108 and the general procedure rules (Procedural In competition cases involving a transaction within the Danish avia- Regulation (EC) 659/1999). tion sector there are no examples of the need to impose remedies on the companies involved to remedy the concerns of the DCCA. 37 If so, what are the main procedural steps to obtain clearance? According to the Procedural Regulation (EC) 659/1999 a member Financial support and state aid state granting state aid is obliged to notify the state aid measures to the 33 Are there sector-specific rules regulating direct or indirect Commission. If the state aid gives rise to serious concerns the Commission financial support to companies by the government or will have to open a formal investigation that involves the opportunity for government-controlled agencies or companies (state aid) in the member state and other interested parties to comment on and justify the aviation sector? If not, do general state aid rules apply? the specific measures. Depending on the outcome of the investigation the Commission will either approve or prohibit the implementation of the state There are no sector-specific rules regulating the provision of state aid aid. within the Danish aviation sector. In Denmark the provision of state aid is regulated by section 11a of the 38 If no clearance is obtained, what procedures apply to recover DCA. Provided that trade between member states is affected the provision unlawfully granted state aid? of state aid also has to comply with the principal EU state aid rules in TFEU articles 107 and 108. According to section 11a of the DCA, the Danish Competition Council is TFEU article 107 contains a general prohibition against state aid, competent to either prohibit further financial support or require of the examples on what constitutes state aid and possible exemptions from the company to return unlawful granted state aid including interest. The general prohibition. TFEU article 108 contains rules on procedure for the demand of return is time-barred to five years from the date the state aid approval of state aid and the remedies of the Commission in cases where a was provided. member state has granted unlawful state aid to a company. The Commission has published Community guidelines on financing Miscellaneous of airports and start-up aid to airlines departing from regional airports, 39 Is there any aviation-specific passenger protection (2005/C 312/01). legislation? Denmark has adopted Directive 90/314/EEC on package travel, pack- 34 What are the main principles of the state aid rules applicable age holidays and package tours into special legislation, the Act on Travel to the aviation sector? Guarantee Fund that ensures compensation to passengers that have As previously noted there are no sector-specific state aid rules regulating bought airlines tickets as part of a package holiday, in the event of the air- state aid within the Danish aviation sector. line’s bankruptcy. The Danish rules on state aid are regulated in section 11a of the DCA. A package holiday is covered by the Danish Travel Guarantee Fund, One of the main principles in the Danish state aid rules are that state aid provided that: with a direct or indirect object or consequence to restrict competition shall • the passenger has entered into an agreement on a package holiday; be prohibited. • the passenger has paid for the holiday; and In most cases EU state aid rules will apply and therefore also the prin- • the agreement between the passenger and the holiday provider has ciples related to those rules. been registered by the Travel Guarantee Fund. The general EU principles relating to state aid are the ‘market economy investor principle’ (whether the conditions related to a public invest- Providers of flight tickets (travel agencies and airlines) registered in ment would be acceptable to a long-term private investor under normal Denmark must register with the Danish Travel Guarantee Fund. It is condi- marked conditions), the ‘proportionality principle’ (aid must be proportional for registration in the fund that the holiday provider provides a guar- tionate to the purpose of the investment), the ‘one time, last time principle’ antee towards the fund. The size of the guarantee depends on the turnover (contributions with the purpose to rescue or restructure the same company of the holiday provider. can only be granted once every 10 years) and the ‘neutrality of property The right to compensation and assistance to passengers in the event ownership principle’ (the member state’s right to establish public under- of denied boarding, cancellation and delay in Denmark is governed by takings, acquire shareholdings and to nationalise existing undertakings on Regulation (EC) 261/2004. conditions from the ‘market economy investor principle’). Disabled passengers and passengers with reduced mobility are protected by Regulation (EC) 1107/2006 when travelling by air. 35 Are there exemptions from the state aid rules or situations in The code of conduct for computerised reservation system in Denmark which they do not apply? is governed by Regulation (EEC) 2299/89, which also applies directly in The specific Danish state aid rules contain no de minimis regulation that Denmark. exempts financial support below a certain threshold. State aid not restrictive of competition and provided in accordance with other Danish legisla- 40 Are there mandatory insurance requirements for the tion may be exempted from the general prohibition. operators of aircraft? EU legislation contains general exemptions to the prohibition in An owner of an aircraft is obliged to take out liability insurance (unless the TFEU article 107(1). These are TFEU 107(2) and (3) and the general Block owner is the state), provided the aircraft is intended for aerial work within Exemption Regulation (EC) 800/2008, which are all applicable within the Danish territory or for test aviation, see section 130 of the Danish Air aviation sector. Navigation Act. The insurance must cover claims which may arise against

www.gettingthedealthrough.com 57 DENMARK Delacour Law Firm

1167/2010) and Regulation (EC) 300/2008 on common rules in the field of Update and trends civil aviation security. The most important requirements is that both licensed airport opera- At a national level there are currently no specific hot topics within air tors and Danish aircraft operators are obliged to submit a security plan, to transport regulation. appoint a security manager and to obtain a quality control programme. As a member state, Denmark is a part of the Single European Sky (SES) project, which is a European Community initiative The security plan must comply with the rules in Order No. 1339/2007 with the purpose of reforming and improving European air traffic and the provisions in the overall security plan ‘The Model Security Plan’. management in order to meet future capacity and safety needs The latter are prepared by the CAA-DK in cooperation with the police. All within the air transport sector. security plans are confidential. The first package Single European Sky was proposed by the EU Commission in 2000 and adopted by Regulation (EC) 549/2004. 42 What serious crimes exist with regard to aviation? The second package, Single European Sky II, was adopted in 2009 by Regulation (EC) 1070/2009. By examining to what extent a serious crime has been committed, only According to the European Commission, a successful SES crimes with a maximum penalty of at least two years’ imprisonment have relies on the member states’ timely implementation of the different been taken into consideration in the following. components in the SES and SES II legislation. On the part of passengers there is terrorism, which pursuant to section With the establishment of the shared air navigation service 114 of the Danish Criminal Code may result in life imprisonment. provider NUAC, Denmark and Sweden have placed themselves in In the same category there is also hijacking, which pursuant to sec- a leading position in the development of common air navigation tion 183a of the Danish Criminal Code has the same maximum penalty, services in accordance with the overall goals of the SES project. life imprisonment. This provision does not only concern occasions where the perpetrator is on board the aircraft but also occasions where the perpetrator in other ways, eg, by forcing entry into a control centre and without the owner or against the user for damage as a consequence of the air trans- justification takes over control of the aircraft. port on a person or object outside the aircraft. On the part of airlines serious crimes according to the Danish Air Regulation (EC) 785/2004 (amended by Regulation (EC) 1137/2008 Navigation Act are, for example: and Regulation (EC) 285/2010) on insurance requirements for air carriers • serving alcohol or attempting to do so on board an aircraft after exces- and aircraft operators establishing minimum insurance requirements for sive intake; both commercial and private flights applies in Denmark. • continuing to supply services on board an aircraft after the right to do so has been withdrawn; 41 What legal requirements are there with regard to aviation • lack of surveillance of the airworthiness of an aircraft; security? • incompetent aircraft crew; Security within the Danish aviation sector is primarily regulated by Order • lack of a certificate issued or approved by the CAA-DK; and No. 1339 of 3 December 2007 (Order on Security) (revised by Order No. • carrying explosives, weapons or ammunition without permission from proper authorities.

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

58 Getting the Deal Through – Air Transport 2015 Mesa & Mesa Abogados DOMINICAN REPUBLIC

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 and following of LAC define aerial works by differentiating transport policies and the ruling and executive body for economic matters. them from civil and commercial operations. Aerial work means all com- IDAC is a specialised independent and technical body in charge of mercial activities different from air transport. aviation safety. It supervises and controls civil aviation, particularly the 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- The aerial work operators must have an aerial work certification issued sible for enforcement and compliance with the National Programme of by IDAC. Initially only Dominican citizens are authorised to undertake Civil Aviation Security. aerial work. Occasionally, IDAC will authorise companies and foreign staff The basic legal framework includes the following laws: to 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 the JAC, and they • Montreal Protocol 1954; must 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 the 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 the LAC and Dominican amended certain aspects of the Civil Aviation Law (Law 491-06). Aeronautical Rules (RAD) numbers 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 coun- Nowadays most operating airlines are from abroad. Dominican tries of the International Civil Aviation Organization (ICAO) to pilots, crew authorities have an open and flexible policy to allow the entry of new for- and mechanics that are going to support or operate Dominican aircraft. eign air operators into the market. www.gettingthedealthrough.com 59 DOMINICAN REPUBLIC Mesa & Mesa Abogados

6 What procedures are there to obtain licences or other rights to apply for a charter flights authorisation through a foreign air operator air- operate particular routes? craft by a consignee in charter flights. Licensing and permissions are ruled by the LAC. The requirements to obtain a charter flights authorisation are less To operate a route, national air operators need a CAE issued by the than those required for regular flights, therefore it is a quicker and easier JAC, and an AOC issued by IDAC. proceeding. National air operator applicants must prove to JAC that they comply with nationality requirement in connection with company ownership and 12 Are airfares regulated and, if so, how? control, as set out in question 5. Airfares shall be approved by the JAC. Airfares are typically ruled by air Furthermore, the national air operator must prove compliance with transport agreements entered into by the Dominican Republic and other the National Civil Aviation Security Programme as set forth by CESAC, countries. which has been drafted in accordance with Appendix 17 of the Chicago Convention, as well as financial and economic supporting information, Aircraft 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 without an agreement or reciprocity statement. The LAC regulates any matters related to aircraft registration. To that end Operation licences are issued for a 10-year maximum term. the Nation Aircraft Registry was created by IDAC. An aircraft could be registered by Dominicans and foreign citizens who are domiciled in the 7 What procedures are there for hearing or deciding contested Dominican Republic. applications for licences or other rights to operate particular Before an aircraft is registered in the Dominican Republic, the previ- routes? ous registration must to be cancelled. 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, the JAC shall hold a public hearing in relation to the application. Any interested party that considers itself affected 14 Is there a register of aircraft mortgages or charges and, if so, can appear at the hearing and oppose the licensing. how does it function? When the hearing is over, the JAC shall pass a resolution approving or refusing the licence. Mortgages and charges on Dominican Republic aircraft can be recorded in JAC decisions are appealable before the Administrative Litigious the National Aircraft Registry. Mortgages are recorded by notarised docu- Court. The appeal can be filed within 15 days. ments, in accordance with Civil Code provisions.

8 Is there a declared policy on airline access or competition and, 15 What rights are there to detain aircraft, in respect of unpaid if so, what is it? airport or air navigation charges, or other unpaid debts? There is no specific access and competition policy in the transport field. In According to the LAC, an aircraft can be detained only with the relevant the Dominican Republic there is a very flexible licensing and permission court authorisation, based on debts derived from airport and air navigation granting system, which is based on reciprocity criteria and open skies trea- services rendered. ties and conventions that have been entered into with several countries. JAC authorities could refuse to issue licences or authorisations for cer- 16 Do specific rules regulate the maintenance of aircraft? tain routes if air traffic necessities are completely satisfied. Aircraft maintenance is regulated by the LAC and RAD No. 43. These regu- JAC authorities could refuse or cancel operation licences when air lations are applicable to aircraft with registration issued in the Dominican transport services without schedule or isolated frequency are an unfair Republic. competition to airlines established in the market. IDAC must ensure the proper maintenance of aircraft registered in the Dominican Republic. 9 What requirements must a foreign air carrier satisfy in order Likewise the law provides that an air operator must ensure that air- to operate to or from your country? craft maintenance and operations are performed in the public interest A foreign air carrier that desires to operate from and to the Dominican and according to LAC provisions, rules, regulations, directives and orders Republic must have an operation licence from JAC. It also has to comply issued by IDAC. with the guidelines on safety and airworthiness set forth by IDAC and the When aircraft are registered overseas, IDAC is not directly involved National Security Civil Aviation Programme (PNSAC), which supervises in their maintenance and it is just involved in control and ramp revisions. the CESAC. To obtain an operation licence, a foreign air operator must prove to Airports JAC the following: 17 Who owns the airports? • that it is suitable, willing and qualified to perform international commercial air transport and to comply with the legal provisions, rules and In the Dominican Republic airports are both state and privately owned. regulations; Those owned by the state are administrated by concessionnaire companies. • that it is qualified and it has been designated by its government to be engaged in international commercial air transport under the terms 18 What system is there for the licensing of airports? of an agreement entered into with the Dominican state or that such According to the LAC airports are classified as public, private and military. transport is in the public interest; and Public airport are intended for general air navigation use; private airports • that its government has granted or is able to grant reciprocity to are those intended for particular use by a person or a company; military Dominican air transport companies. airports are those intended to be exclusively used by Dominican Republic armed forces. 10 Are there specific rules in place to ensure aviation services To operate any public or private airport, an operator must have an are offered to remote destinations when vital for the local authorisation issued by IDAC. When an airport is a public aerodrome, it economy? also requires previous authorisation from the president of the republic. There are no legal provisions for aviation services to remote destinations. RAD 19 defines aerodrome guidelines and airport certification, while RAD 14 defines regulations related to their design and operation. 11 Are charter services specially regulated? Furthermore, the Airport Commission, an independent body created by Law No. 8-78, is involved in licensing and permission granting. Charter flights are regulated by the LAC, RAD 121 and Decree 832-09, which states any foreign air operator not having an operation licence shall

60 Getting the Deal Through – Air Transport 2015 Mesa & Mesa Abogados DOMINICAN REPUBLIC

19 Is there a system of economic regulation of airports and, if so, In addition, CIAA has powers to investigate serious accidents occurred how does it function? abroad where aircraft registered in the Dominican Republic are involved By a presidential decree, the Dominican state sets the airport fees and providing, however, that a convention or agreement has been entered into charges. Both private airports and state airports operated under conces- by the Dominican Republic and the state where the accident occurred. sion are subject to airport fees determined by the Dominican state. CIAA must take all measures to prevent accidents happening again. Airport services charges shall be paid directly by air transport operators to the airport administration. 27 Is there a mandatory accident and incident reporting system and, if so, how does it operate? 20 Are there laws or rules restricting or qualifying access to According to the LAC any authority having knowledge of an accident must airports? report it to IDAC. Likewise, any owners, operators or crew members shall The LAC provides that any aircraft entering to or departing from report promptly to IDAC any accidents or incidents in aircraft under their Dominican territory shall comply with the airworthiness rules provided responsibility within Dominican territory and in Dominican-registered air- by IDAC. RAD 25 provides that IDAC shall accept the airworthiness cer- craft abroad. tificates issued by the European Safety Aviation Agency and the Federal Aviation Administration of the United States. Airports are bound to comply Competition law with safety rules set by IDAC. 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 aviation sector-specific regulations in the Dominican There is no specific guideline for assigning a slot; airport operators usually Republic related to this matter, therefore the general guidelines provided assign the slots by arrival time order or as agreed with air operators. in Law No. 42-08 on the defence of competition apply.

22 Are there any laws or rules specifically relating to ground 29 Is there a sector-specific regulator or are competition rules handling? applied by the general competition authority? The Airport Commission rules ground handling, which approves contracts There is no specific regulator for aviation competition. However, JAC regu- and services fees in all Dominican Republic airports. lates some aspects of competition such as airfares, air traffic and frequencies. Regulations on competition are applied by the National Commission 23 Who provides air traffic control services? And how are they for the Defence of Competition (Pro-Competition), an independent body regulated? created under Law No. 42-08 for the defence of competition. However the According to the LAC, IDAC has to offer, supervise and monitor air traf- application of this law has been put on hold until the appointment of the fic control services and ensure they are performed at an optimum safety executive director. level, as per ICAO rules. RAD 11 rules all matters related to air traffic control services. 30 How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition Liability and accidents authorities? 24 Are there any special rules in respect of death of, or injury to, There is no particular definition of a relevant market for aviation. passengers or loss or damage to baggage or cargo in respect of According to the general law on competition defence, the relevant domestic carriage? market comprises the economic activity and a specific geographic zone, in a scenario that includes all replaceable or interchangeable goods and The LAC, Chapter X, Part I provides rules on civil liability of air operators services, and all immediate competitors with whom customers could come for national and international flights. Article 194 states that air operators into contact in the short term, without restriction or abuse, which should are bound to compensate for damage arising from death or any injury suf- cause a significant increase in prices. fered by a passenger related to transport. Air operators shall also compensate for damage derived from loss, 31 What are the main standards for assessing the competitive destruction, breakdown or cargo or baggage delay. effect of a transaction? The Law provides that air operators shall have mandatory insurance, which has to be in accordance with the Montreal Convention 1999 and The main object of regulation is to promote and defend competition to guideline set by local aviation authorities. increase the economical efficiency in the market, to benefit consumers. Dominican civil law provides for compensation not only for material The legal system recognises and protects the freedom to engage in damages but also for damages for pain and suffering. business, commercial and industrial activities. Regulations for the defence When damage or loss occurs on international flights, the operator’s of competition are in the public interest, which is binding and required of liability shall be limited as provided in international treaties to which the any economic agent. Dominican Republic is a party. The law prevents and sanctions agreements and practices against competition and abuse of dominant position in connection with a relevant 25 Are there any special rules about the liability of aircraft market. Likewise, unfair competition is prevented and sanctioned by law. operators for surface damage? 32 What types of remedies have been imposed to remedy An air operator shall compensate any person suffering damage caused concerns identified by the competition authorities? by something falling from or coming off an aircraft in flight over national territory. Pro-Competition can impose the following measures and sanctions: Occasionally the air operator shall not be liable if the damage is not a • suspension and termination of factors or behaviour causing the dam- direct consequence of those facts from which they are derived. age to competition; • fines from 30 to 3,000 minimum salaries depending on the breach of 26 What system and procedures are in place for the investigation free completion; and of air accidents? • obligations against the economic agent or sanctioned person to correct the market distortion and recover the competition. The Aviation Accidents Investigation Commission (CIAA) was created to conduct the technical investigation into any serious accident involving civil The law provides for the absolute nullity of acts, anti-competition agree- aircraft in Dominican Republic territory and in international waters when ments and agreed practices. Dominican-registered aircraft are involved. CIAA is an independent body from IDAC and the JAC and follows the guidelines set out in appendix 13 of the Chicago Convention.

www.gettingthedealthrough.com 61 DOMINICAN REPUBLIC Mesa & Mesa Abogados

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

Mesa & Mesa Abogados

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

62 Getting the Deal Through – Air Transport 2015 Shearman & Sterling LLP EUROPEAN UNION

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 102 (abuse of dominance) and 107 to 109 (state aid) of the Treaty on the (DG Comp) is responsible for the application of EU competition law in the Functioning of the European Union (TFEU), as well as the merger control air transport sector, including state aid matters since 2010. provisions contained in Regulation 139/2004. Regulation 487/2009 (for- The Commission is responsible for ensuring the implementation and, mer Regulation 3976/87) enables the Commission to grant block exemp- where applicable, enforcement of EU law by the member states, national tions to certain agreements and forms of cooperation normally restricted agencies and companies. If a member state fails to implement EU legisla- by articles 101 and 102 TFEU. Block exemptions were used in the past to tion, the Commission may (after it has followed certain procedural warn- exempt certain forms of revenue-sharing and capacity coordination, coming steps) bring a case against it before the Court of Justice of the EU (Court puter reservation systems and ground handling as well as the International of Justice). Air Transport Association (IATA) slot and tariff coordination conferences. EU air transport policy covers a wide variety of aspects of the air However, the scope of the block exemptions has gradually declined over transport sector, including the liberalisation of air transport on intra-EU time to the extent that no aviation-specific block exemptions are currently routes and (subject to conditions and limitations) routes between the EU in force. The Commission has so far expressed no intention to issue any and third countries, aviation safety, and air traffic control. Other important new block exemptions for the aviation sector. fields include slot allocation, ground handling services, computerised reservation systems, noise emissions, denied boarding, baggage controls, per- Aviation safety sonnel licensing, accident investigation and occurrence reporting, airline The EU has adopted a regulatory framework in the field of aviation safety, 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. Regulation 1008/2008 covers the following areas: A first-stage agreement came into force on 30 March 2008, and • Licensing of carriers: issuance, suspension and revocation of EU-wide allowed for the liberalisation of air services between the EU and the US air carrier operating licences. For an air carrier to obtain an operating in a number of important respects, although certain significant limitations licence, it must comply with the requirements set down in the regula- continued to apply. The main provisions can be summarised as follows: tion, including ownership and control requirements, financial fitness • any EU carrier has the right to fly between any point in the EU and and insurance. any point in the US, without any restrictions on pricing, capacity or fre- • Market access: establishment of the basic principle of free access for quency (although this right does not extend to flights within the 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;

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• all European airlines must be recognised as EU carriers by the US • conduct standardisation inspections to ensure that these rules are cor- authorities, allowing for consolidation between EU airlines; rectly applied within the member states; • 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 commu- Air transport safety is principally governed by Regulation 216/2008 on the nication on an action plan for airport capacity, efficiency and safety in common rules in the field of civil aviation (as amended by Regulations Europe. 620/2009, 1108/2009, 6/2013, 800/2013 and 71/2014). Regulation In addition, to address a possible ‘capacity crunch’ at Europe’s busy 216/2008 applies to the design, production, maintenance and operation of main airports, the Commission proposed a number of measures, consistent aeronautical products, parts and appliances, as well as to personnel and with its approach to enhance air safety at airports as increased traffic levels organisations involved in these activities. It also applies to personnel and require improved safety measures throughout Europe. Measures include organisations handling aircraft operation. the extension of EASA’s responsibilities to cover airport safety regulation, The main body responsible for air transport safety is the European Air the use of global navigation satellite systems, and the development and Safety Agency (EASA). Under Regulation 216/2008, EASA’s main func- implementation of technological solutions to help improve airport safety tions are to: and efficiency, such as advanced-surface movement guidance and control • assist the Commission to develop common rules in the field of civil systems for controlling air traffic movements under all weather conditions. aviation and to provide it with technical, scientific and administrative Moreover, one of the major targets of the airport package, namely the support to carry out its tasks;

64 Getting the Deal Through – Air Transport 2015 Shearman & Sterling LLP EUROPEAN UNION adoption of an EU-wide regime on airport charges, was achieved in March fitness. Less stringent provisions apply to smaller carriers and existing 2009, when the directive on airport charges entered into force (see ques- operators. An applicant for a licence must be able to demonstrate that: tion 19). • it will be able at any time to meet its actual and potential obligations In relation to air traffic control, the Single European Sky I (SES I) pack- under realistic assumptions for a period of 24 months from the start of age (see question 23) included four regulations with the aim to promote a operations; and more rational organisation of European airspace, increasing capacity and • it can cover its fixed and operational costs for at least three months ensuring uniformly high safety standards. In June 2008, the Commission without taking into account its operating income. To facilitate assess- published a communication setting out the shortcomings of the implement of these conditions, applicants must submit a business plan for at mentation of the SES legislation, such as the continued fragmentation least the first three years of operation, and provide a thorough financial of European airspace. To improve the performance and sustainability assessment (as detailed in Annex 1 of Regulation 1008/2008) demon- of the European aviation system in key areas such as safety, capacity, as strating compliance. well as flight and cost efficiency, Regulation 1070/2009 was adopted as part of the SES II initiative (amending the SES I package). In June 2013, Once a licence has been granted, there are continuing financial report- the Commission sought to accelerate the implementation of the SES pro- ing obligations on the licence holder, including the obligation to provide gramme. To this end, it published a communication and proposed fur- audited accounts on a regular basis and details of any substantial changes ther measures (SES2+) to build on previous reforms. The proposal aims in activities, and planned increases or reductions of fleet. The licensing to update the SES package and amend the rules governing the EASA and authorities may at any time assess the financial performance of an under- focuses on the improvement of the oversight of air traffic control organisa- taking, and must in any case do so two years after the granting of a new tions, the strengthening of air traffic management performance, the crea- licence. The licensing authorities are also obliged to undertake an in-depth tion of new business opportunities in support services and the enabling of assessment of the financial situation of a licence holder if there are clear industrial partnerships. indications that financial problems exist or when insolvency proceedings Furthermore, in accordance with Regulation 768/2006, the EASA is are opened. Finally, if the undertaking is unable to meet its financial obli- also entrusted with the tasks related to the Safety Assessment for Foreign gations for a 12-month period, they must suspend an operating licence, Aircraft (SAFA) programme, which implemented Directive 2004/36 although a temporary licence may be granted. regarding the collection and exchange of information on the safety of aircraft using EU airports and the management of the information system. Nationality The directive introduced a uniform approach to enforcement of interna- In order to qualify for an EU operating licence, inter alia, an undertak- tional safety standards within the EU, by harmonising the rules and pro- ing’s principal place of business must be located in the member state in cedures operated by the Joint Aviation Authorities for ramp inspections which the operating licence is granted (ie, its principal place of business of third-country aircraft landing at airports in the member states. As must be within the EU). Other than where specific agreements are in place Regulation 216/2008 establishes a complete framework for the safety of (for example with the US), the undertaking must also be majority owned third-country aircraft, Directive 2004/36 has been repealed, but without and effectively controlled by a member state or EU nationals (article 4, prejudice to the implementing measures on collection and exchange of Regulation 1008/2008). information and ramp inspection. Finally, based on Regulation 2111/2005, the Commission has prepared 6 What procedures are there to obtain licences or other rights to and updated an EU blacklist of unsafe airlines since 2006. The most recent operate particular routes? (23rd) update of this list was adopted by the Commission on 10 April 2014 EU carriers require operating licences under Regulation 1008/2008, (Regulation 368/2014). which are granted by the competent authorities of the member states. Accordingly, the procedural requirements for obtaining an operating 3 What safety regulation is provided for air operations that do licence are a matter of member state national law (see national chapters). not constitute public or commercial transport and how is the However, Regulation 1008/2008 does specify that member states must distinction made? make these procedures public and decide on applications no later than Regulation 216/2008 (as amended by Regulation 1108/2009) (see question three months after receiving all the necessary information. As discussed in 2) applies to all aircraft except: question 5, once a carrier has obtained an operating licence in one member • those with certain historic or scientific value; state, it is free to operate on any intra-EU route, although separate licences • aircraft built by amateurs; may be needed in order for it to operate routes to and from certain third • military aircraft; countries. • emergency service aircraft; and • very small aircraft. 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular Safety requirements for these aircraft fall under the scope of individual routes? member states’ national law and are not governed at the EU level (see As mentioned in response to question 6, the procedural requirements national chapters). for obtaining an operating licence are a matter of member state national law and as such Regulation 1008/2008 contains no specific provisions 4 Is access to the market for the provision of air transport on appeal procedures in the event that a licence application is rejected services regulated and, if so, how? or an operating licence is suspended or revoked. Article 14 of Regulation Market access within the EU has been liberalised, and the operation of 1008/2008 does provide that the air carrier must be given the opportunity EU air services and access to the EU market is governed by Regulation to be heard and requires national authorities to inform the Commission if 1008/2008 (see question 1). an operating licence is suspended or revoked.

5 What requirements apply in the areas of financial fitness and 8 Is there a declared policy on airline access or competition and, nationality of ownership regarding control of air carriers? if so, what is it? Financial fitness and nationality requirements regarding control of air car- There is a common EU air transport policy. One of its main objectives is to riers are governed by Regulation 1008/2008 (see question 1). In order to eliminate national barriers between the member states and establish a sin- carry passengers, mail or cargo for remuneration within the EU, article 3 gle aviation market in the EU. To this end, EU-wide measures are in place of Regulation 1008/2008 requires an air carrier to have an EU operating liberalising airfares, market (route) access and capacity. The EU competi- licence granted by a competent member state licensing authority. tion rules apply fully to air transport services within the EU and on routes to and from the EU (see questions 28 to 38). Financial fitness Regulation 1008/2008 specifies that, inter alia, applicants for an operating licence must satisfy detailed requirements with regard to their financial

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9 What requirements must a foreign air carrier satisfy in order Owners of aircraft have to ensure the continued airworthiness and safe to operate to or from your country? operation of their aircraft and are subject to inspections by the competent This is a matter for member state national law (see national chapters). national authority. Any maintenance must be carried out by a maintenance However, the Commission, in conjunction with the competent national organisation approved by EASA. This may either be the operator or an agencies of the member states, publishes a blacklist of airlines that are pro- external approved organisation, which would issue a certificate of release hibited from operating within the EU airspace (see question 2). to service to the operator. Annex II to Regulation 2042/2003 describes the requirements to qualify as an approved maintenance organisation. 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? A member state may impose a public service obligation (PSO) in respect In the EU, there are state-owned airports and privately owned airports. of scheduled air services between an airport in the EU and an airport serv- The control of many airports has been transferred from state to regional ing a peripheral or development region in its territory. A PSO may also be authorities (in some cases to be operated by public companies), while oth- imposed on a ‘thin’ route to any airport on its territory if the route is considers have been privatised. ered vital for the economic and social development of the outlying region. A PSO can only be imposed to the extent necessary to ensure the minimum 18 What system is there for the licensing of airports? provision of fixed standards of continuity, regularity, pricing or minimum This is a matter for member state national law (see national chapters). capacity, which air carriers would not assume if they were solely considering their commercial interest. 19 Is there a system of economic regulation of airports and, if so, A PSO must be imposed in accordance with the provisions laid down how does it function? in Regulation 1008/2008. The member state first determines the conditions of the planned PSO in terms of the routes concerned, date of entry, In general, this is a matter for member state national law (see national capacity, flight frequency, fares and other parameters. It then communi- chapters). The Commission issued Directive 2009/12 with regard to air- cates a description of the proposed PSO to the Commission, other member port charges, ie, aircraft landing charges, charges for the processing of states and airports concerned as well as any carriers operating the route in passengers and freight and other charges related to the use of airport infra- question. The Commission publishes an information notice setting out the structure which has been implemented into most of the respective mem- details of the PSO. ber states’ national law. If no carrier has started operations or plans to do so, the member state The Directive does not impose a particular calculation method of may then restrict access to the route or routes covered by the PSO to a sin- charges, but aims at harmonising the rules applicable to the setting of air- gle carrier for a maximum period of five years and may grant that carrier port charges by member states’ competent authorities. financial compensation in exchange for compliance with these obligations. The Directive applies to EU airports with an annual passenger volume In that case, the carrier operating the service must be selected through a of 5 million or, if none of the airports in a given member state reaches this public tender procedure as specified in article 17 of Regulation 1008/2008. threshold, to the airport with the highest passenger volume in that member DG Move of the Commission publishes a list of PSO routes on its state. The directive allows for the differentiation of services according to website. the needs of individual airlines (‘tailored services’), but requires member states to apply specific principles when determining airport charges, in 11 Are charter services specially regulated? particular ‘non-discrimination’, and ‘transparency’. Moreover, Directive 2009/12 obliges member states to put in place consultation procedures No. The EU regulatory framework applies to all charter and scheduled ser- between airport managing bodies and airport users with respect to the vices within the EU, including air taxi and general aviation services for the system and the level of airport charges. An independent supervisory entity transport of passengers, cargo and mail for remuneration. The EU regula- must be set up to resolve disagreements between airport users and the air- tory framework is therefore general in scope, applying to all commercial air port managing body. services (including charter). In May 2014, the Commission published a report on the application of Directive 2009/12. In this report, the Commission identified improved 12 Are airfares regulated and, if so, how? consultation and transparency of airport charges, but found that consist- No. According to Regulation 1008/2008, EU carriers set airfares freely for ency of application of the Directive could be improved. The Commission intra-EU air services, although certain restrictions may apply in the case has also set up a new expert group, the Thessaloniki Forum of Airport of PSOs (see question 10). Equally, air carriers of third countries can set Charges Regulators, to discuss issues related to the implementation of the their fares freely for intra-EU services subject to reciprocity. With respect Directive. to fares between member states and third countries, member states may In addition, in February 2014, the Commission issued guidelines on not discriminate on the grounds of nationality or identity of air carriers. state aid to airports and airlines. These guidelines consolidate and replace Regulation 1008/2008 also imposes certain obligations to ensure transpar- the 1994 guidelines on state aid to the aviation sector and the 2005 guide- ency of passenger fares (see question 39). lines on the financing of airports and start up aid to airlines departing from regional airports (see question 33). Aircraft 13 Who is entitled to be mentioned in the aircraft register? Do 20 Are there laws or rules restricting or qualifying access to requirements or limitations apply to the ownership of an airports? aircraft listed on your country’s register? Under Regulation 1008/2008, EU air carriers enjoy the general right to This is a matter for member state national law (see national chapters). provide air transport services on all routes within the EU. Member states may impose PSOs in respect of scheduled air services to specified regions 14 Is there a register of aircraft mortgages or charges and, if so, or on vital routes for the economic development of certain regions (see how does it function? question 10). This is a matter for member state national law (see national chapters). 21 How are slots allocated at congested airports? 15 What rights are there to detain aircraft, in respect of unpaid Slot allocation at congested airports is governed by Regulation 95/93 as airport or air navigation charges, or other unpaid debts? amended by Regulation 793/2004, known as the ‘Slot Regulation’. Under the Slot Regulation, the definition of slots also includes the use of the air- This is a matter for member state national law (see national chapters). port infrastructure. The Slot Regulation applies to congested airports, which fall into two 16 Do specific rules regulate the maintenance of aircraft? differently regulated categories: Aircraft maintenance is governed by Regulation 2042/2003 (as amended), • ‘schedule-facilitated’ airports, where there is potential for congestion which is enforced by the European Aviation Safety Agency (EASA) (see at some periods of the day, week or year and a facilitator has been question 2).

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appointed to assist the operating carriers in regard to slot availability; aircraft services and aircraft maintenance, fuel and oil handling and cater- and ing services at all EU airports open to commercial traffic with annual traffic • ‘slot coordinated’ airports, where more serious congestion problems over 2 million passenger movements or 50,000 tonnes of cargo. occur and a coordinator has been appointed to actively allocate take- The main aim of Directive 96/67 was to open up the ground handling off and landing slots to applying carriers. market to competition. For example, it prescribes that for certain services the number of suppliers may be no fewer than two for each category of The Slot Regulation is not applicable to airports not falling into either of service. It also governs self-handling, access to installations, selection pro- these two categories. cedures for suppliers and the separation of accounts for ground handling A slot facilitator is not responsible for the actual slot allocation but services from other activities. rather advises and recommends air carriers on alternative take-off and On 1 December 2011, the Commission announced its Better Airports landing times, when congestion is likely to occur. A slot coordinator, on the Package, comprising legislative proposals on slots, ground handling and other hand, is fully responsible for the allocation of slots. The coordinator noise as well as a communication. The Commission has proposed the allocates a series of slots from the pool to the applicant carriers allowing replacement of Directive 96/97 with a ground handling regulation. With the use of the airport infrastructure for the purposes of take-off and land- this proposal, the Commission aims to liberalise further the European ing at the time and for the season for which they were requested. Once it ground handling market, provide more control to airports over ground has been determined that an airport must be schedule-facilitated or slot- handling services at the airport and give extra protection to ground han- coordinated, member states must appoint a knowledgeable natural or legal dling workers in particular by providing for their transfer when the contract person as the airport’s schedule facilitator or slot coordinator. The facilita- for ground handling services transfers from one provider to another. In tor or coordinator must be truly independent and must have the necessary April 2013, the European Parliament adopted a legislative resolution on the financial resources to accomplish its tasks. It must act in a neutral, non- Commission’s proposal, opening the way for negotiations with the Council discriminatory and transparent way. and the Commission regarding the final text of the legislation. At the time Under the Slot Regulation, a carrier has the right to retain slots allo- of writing, the legislative process is still ongoing. cated to it for the next corresponding season, provided it can satisfactorily demonstrate to the coordinator that it has operated such slots for at least 23 Who provides air traffic control services? And how are they 80 per cent of the time. If this is not the case, slots must be returned to the regulated? pool (the ‘use it or lose it’ principle). The rights of a carrier to retain already In the EU, air traffic control and management services are principally pro- held and used slots are called grandfather rights. The Commission has in vided by the national control units. As mentioned above (see question 2), certain extraordinary circumstances (eg, the terror attacks of 11 September a long-term overhaul of the European air traffic management is currently 2001 and the SARS outbreak of 2003) made exceptions to the 80 per cent under way, the SES programme (in its various iterations), with the aim to usage rule. A similar amendment to the 80 per cent usage rule entered into create a truly pan-European air traffic management system, a central ele- force in June 2009 with respect to the 2010 summer scheduling period ment of which being the nine ‘functional airspace blocks’ (FABs) covering in response to the severe economic downturn which led to a substantial the EU airspace. decline in air traffic. The SES programme covers not just the EU member states but most The Slot Regulation further provides that 50 per cent of the slots in the European countries. It is being developed and regulated by Eurocontrol, an slot pool at a given airport must be provided to new entrants. In situations intergovernmental body made up of the SES member states and, in paral- where requests cannot be all accommodated, preference is to be given to lel, the EU. commercial air services, scheduled services and programmed non-sched- The SES I package consisted of: uled air services. In cases of competing requests under the same category, • a framework regulation (Regulation 549/2004) (the Framework priority will be given to year-round operations. Slots may be transferred Regulation), which established the Commission as the regulator for between air carriers that hold a slot for an alternative route or between par- the civil sector and the Single Sky Committee to assist it in its regula- ent and subsidiary companies. tory activities; Secondary slot trading is the process whereby slots are exchanged in • the Airspace Regulation (Regulation 551/2004), which will establish a return for monetary or other compensation. Following a 2008 Commission single European Upper Information Region and within it organise air- communication, this practice is considered compatible with, but not man- space into functional airspace blocks; dated by, the Slot Regulation, provided it takes place in a transparent • the Service Provision Regulation (Regulation 550/2004), which estab- manner, and it respects all the other administrative requirements for the lishes a common licensing system for civil ATM providers; and allocation of slots. • the Interoperability Regulation (Regulation 552/2004), which aims to On 1 December 2011, the Commission announced its Better Airports ensure that systems, equipment and procedures operate seamlessly. Package, comprising legislative proposals on slots, ground handling and noise as well as a communication. As concerns the proposed amendments In 2009, a significant reform of the SES I took place based on five key and to the Slot Regulation, key proposals include an express permission for sec- interrelated pillars (SES II): ondary slot trading and stricter ‘use it or lose it’ rules including increasing • safety; the slot utilisation threshold from 80 to 85 per cent. A ‘General Approach’ • environment (including decarbonisation of the sky); was agreed upon by the Council in October 2012, however, the text, which • capacity and cost-efficiency; has also been reviewed by the Parliament, deviated from the Commission’s • performance monitoring; and proposal significantly and does not include the Commission’s proposal to • incentive mechanisms. increase the ‘use it or lose it’ threshold. In December 2012, the Parliament voted to maintain the current slot utilisation rules (80 per cent ‘use it As part of this reform, the Framework Regulation and the three technical or lose it’ rule), as well as the current slot series length. The Parliament regulations have all been amended by Regulation 1070/2009. The SES II instead opted to strengthen the penalty system in order to dissuade air package of legislation now also comprises: carriers from holding slots without using them or taking too long to return • Commission Regulation 691/2010 laying down a performance them to the pool. The Parliament did support the Commission’s proposals scheme for navigation services and network functions and amending expressly to permit secondary trading of slots. At the time of writing, the Regulation 2096/2005 (see below); legislative process is still ongoing. • Regulation 1191/2010 amending Regulation 1794/2006 laying down a common charging scheme for air navigation services; 22 Are there any laws or rules specifically relating to ground • Regulation 977/2011 laying down detailed rules for the implemen- handling? tation of air traffic management network functions and amending Directive 96/67 provides the regulatory framework with respect to ground Regulation 691/2010; handling services at EU airports, and has been transposed into member • Regulation 677/2011 laying down detailed rules for the implementa- state national law. The directive applies to all types of airside and land- tion of air traffic management network functions amending Regulation side ground handling services, such as passenger and baggage handling, 691/2010; and

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• 2011 Commission Decision on the nomination of the network man- parties. Member states have the possibility to introduce rules establishing ager for air traffic management network functions of the SES. adequate insurance on points that are not covered by the regulation. Finally, according to Regulation 1008/2008 (article 11), air carriers Also relevant is the legislation on airport safety (see question 2). should be insured so as to cover liability arising from accidents with respect The aim of the SES II reform is to improve aviation performance, to to mail. adapt the legislation to changes having arisen since SES I, and to succeed in creating a truly unified European airspace. In June 2013, the Commission 25 Are there any special rules about the liability of aircraft acted to accelerate the implementation of SES. To this end, it issued a com- operators for surface damage? munication and proposed further measures (SES2+) to build on the previ- Regulation 785/2004 (as amended by Regulations 1137/2008 and ous reforms. The proposal aims to update the SES package and amends the 285/2010) establishes that an air carrier must also be insured towards third rules governing the EASA and focuses on the improvement of the oversight parties to cover liability in case of accidents. The regulation further speci- of air traffic control organisations, the strengthening of air traffic manage- fies the minimum insurance cover, which varies depending on the maxi- ment performance, the creation of new business opportunities in support mum take-off mass of the aircraft (ie, a certified amount which is specific services and the enabling of industrial partnerships. However, the SES+ to all aircraft types, and is stated in the aircraft’s airworthiness certificate). package has faced resistance from certain stakeholders, including some unions. In March 2014, the European Parliament preliminarily approved 26 What system and procedures are in place for the investigation the SES2+ proposals. However, at the time of writing the legislative process of air accidents? is still ongoing. The fundamental principles governing the investigation of civil aviation In July 2014 the Commission formally requested 18 member states, accidents and serious incidents are set out in Regulation 996/2010 (replac- members of six different FABs, to make a decisive move towards common ing and repealing Directive 94/56). Article 5 of the regulation requires airspace management by implementing their FABs. that (subject to limited exceptions relating to the type of aircraft involved) Licensing of air traffic controllers is carried out at a national level, but every accident or serious incident which has occurred within EU territory Eurocontrol is responsible for the development of a harmonised licensing or involves aircraft registered in a member state or operated by an under- policy for air traffic controllers employed within the European civil aviation taking established in a member state is reported and subject to a safety countries. The Framework Regulation also sets the licence standards to be investigation. applied by national authorities. Usually, the safety investigation will take place in the member state Within the framework of European air traffic control, five further legis- in which the accident or serious incident occurred. Article 4 of the regula- lative instruments are of importance, namely: tion states that safety investigations are to be conducted or supervised by • Regulation 2150/2005 on the flexible use of airspace, which establishes a permanent civil aviation safety investigatory authority capable of carry- rules and procedures between civil and military authorities responsi- ing out a full safety investigation, either on its own or through agreements ble for air traffic management; with other safety authorities. The sole objective of the safety investigation • Regulation 2096/2005 requirements, against which air navigation ser- is to prevent further accidents, not apportion blame. They are intended to vice providers will be certified in the EU (as amended by Regulation complement any judicial or administrative investigation which may to take 1315/2007, Annexes last updated by Commission Regulation place under member state national law (article 5(5)). 668/2008). In the area of safety, the regulation also incorporates the Each safety investigation shall be concluded with a report and shall Eurocontrol Safety Regulatory Requirements; contain, where appropriate, safety recommendations. The report should • Regulation 1315/2007 on safety oversight in air traffic management be made public within 12 months of the date of the accident or serious inci- states that national supervisory authorities are to exercise a safety dent. If that is not possible, the authority shall release an interim statement oversight function to complete the common requirements; at least every anniversary of the accident or serious incident (article 16). • Directive 2006/23, which establishes high-level competence require- The safety investigation authority may also make safety recommendations ments for air traffic controllers under the EU air traffic controller at any stage of its investigation (article 17). licence regime; and Regulation 996/2010 also mandates that member states shall estab- • Regulation 730/2006 on airspace classification and access of flights lish between themselves a European Network of Civil Aviation Safety operated under visual flight rules above flight level 195. Investigation Authorities with a view to raising standards of safety investigations (article 7). Liability and accidents 24 Are there any special rules in respect of death of, or injury to, 27 Is there a mandatory accident and incident reporting system passengers or loss or damage to baggage or cargo in respect of and, if so, how does it operate? domestic carriage? EU law provides for a mandatory accident or incident reporting sys- There are currently three regulations setting out the obligations arising in tem. According to Regulation 996/2010, any person who has knowledge cases of death or injury of air passengers, for the loss or damage of their of the occurrence of an accident or serious incident shall notify without baggage, and accidents regarding mail. delay the competent safety investigation authority in the state of occur- Regulation 889/2002 (amending Regulation 2027/97 on air carrier rence. The safety investigation authority will then notify without delay liability in the event of accidents) aligns EU law with the provisions of the the Commission, the European Air Safety Agency (EASA), the ICAO and Montreal Convention of 18 May 1999 for the unification of certain rules for appropriate member states and third countries (article 9). international carriage by air, establishing a regime of unlimited liability in The regulation also provides for the exchange of information between the case of death or injury of air passengers, and creating a uniform system the EASA and member state authorities on occurrences. of liability for international air transport. Regulation 889/2002 thus imple- In addition, Regulation 376/2014 of the European Parliament on the ments the relevant provisions of the Montreal Convention, while laying reporting, analysis and follow-up of occurrences in civil aviation, will, down certain supplementary provisions, and extending its application to effective as of November 2015, repeal Directive 2003/42/EC and amend carriage by air within a single member state. Regulation 996/2010. As of November 2015, pilots and other professional Regulation 785/2004 on insurance requirements for air carriers and staff – be they employees or contract workers – will be able to report safety aircraft operators amended by Regulations 1137/2008 and 285/2010 con- occurrences. Regulation 376/2014 provides for the establishment of a tains the corresponding insurance requirements for all air carriers and safety management system aimed at preventing air accidents. It also aims aircraft operators flying within, into, out of or over the territory of a mem- to set in place provisions against the inappropriate use of safety informa- ber state, and defines the minimum insurance requirements for liabilities tion and provide for stricter protection of the reporter of a safety occur- linked to passengers, baggage, cargo and third parties. Moreover, the rence. In addition, the regulation also mandates the setting-up of an regulation specifies the minimum insurance coverage for non-commer- ‘appeal body’ at a national level. cial operations and the liability in respect of baggage and cargo and third

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Competition law 31 What are the main standards for assessing the competitive effect of a transaction? 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? To assess the competitive impact of a transaction in the air transport sector (eg, an airline merger or an alliance), the Commission examines whether The general EU competition rules have applied in full to the aviation sec- the transaction could raise any competition concerns on those O&D city- tor since 2004, when the previous sector-specific regime of Regulation pairs where the parties’ services overlap, or could potentially overlap (ie, 3975/87 was abolished. Accordingly, articles 101 TFEU (prohibiting and where, in the absence of the agreement, the parties would be actual or making void anti-competitive agreements) and 102 TFEU (prohibiting the potential competitors). The Commission pays particular attention to over- abuse of a dominant position) apply fully to all agreements and behaviour laps on hub-to-hub routes. concerning air transport services that may affect trade between member The Commission assesses whether a sufficient number of actual com- states, including those relating to routes between the EU and third coun- petitors would remain active in the relevant market post-transaction so as tries. The Commission has full enforcement powers under Regulation to prevent the parties from obtaining incremental market power as a result 1/2003 when applying EU competition rules in cases concerning the air of the transaction. The Commission also takes into account competitive transport sector. Likewise, the EU merger control rules under Regulation constraints exercised by potential entrants in the relevant market and, 139/2004 (EUMR), and the EU state aid rules under articles 107 to 109 where appropriate, alternative possibilities (such as indirect flights or other TFEU apply fully to the aviation sector (regarding state aid, see questions modes of transport) on the city-pair. 33 etc). With regard to potential competition, a carrier will only be considered Previous block exemptions from the application of article 101 TFEU as a potential competitor on a specific O&D city-pair, if that city-pair’s traf- (covering, for instance, IATA passenger tariff consultations and slot allo- fic size is such (taking into account both local and connecting flights) so as cation conferences) implementing the (now defunct) Regulation 3976/87 to allow for and justify the offering of a competing service. on the application of article 101(3) TFEU to certain categories of agree- Furthermore, entry of a specific carrier must be reasonably expected ments and concerted practices in the air transport sector have been abol- in the sense that it must be in line with that carrier’s operational and stra- ished. With respect to the IATA airport slot allocation conferences, the tegic business plans. In assessing the likelihood of potential entry, the Commission has expressly stated that they do not restrict competition, Commission uses as a benchmark whether the carrier in question: and thus a block exemption is unnecessary. Finally, while the Commission • operates services on other O&D city-pairs of similar size and retains the power to adopt block exemptions under Regulation 487/2009 characteristics; currently in force, it has so far expressed no intention to exercise this • already has a local market presence, in particular through the opera- power. tion of a hub or a base at either end of the O&D city-pair; and • has appropriate aircraft that could be deployed on the relevant O&D 29 Is there a sector-specific regulator or are competition rules city-pairs. applied by the general competition authority? There is no EU-level sector-specific regulator concerning the application The Commission recognises verifiable efficiencies created by airline alli- of competition law in the air transport sector. Within the Commission, DG ances and mergers which are found to have some anti-competitive effects Comp enforces the EU competition rules, including (since 2010) EU state on the relevant market(s), provided that such efficiencies are passed on aid rules. Member state authorities and courts have concurrent but subsidi- to the consumer, and the consumer benefits outweigh, or at least equal, ary powers to apply articles 101 and 102 TFEU (but not the EUMR). the identified competition concerns. The Commission conducts a separate assessment of the efficiencies for each of the affected O&D city-pairs. 30 How is the relevant market for the purposes of a competition In more recent alliance cases, the Commission has (subject to important assessment in the aviation sector defined by the competition restrictions) also indicated a willingness to accept ‘out-of-market’ efficien- authorities? cies, ie, efficiencies created not on the overlap routes in question, but on When defining the relevant product and geographic market in the context other routes in the network where the alliance leads to consumer benefits of a competition assessment in the aviation sector, the general market defi- (eg, better/more frequent services and connections). nition principles under EU competition law apply. Finally, where the parties’ arguments concerning the existence of effi- The starting point when defining the relevant product market is to ciencies sufficient to offset potential competition concerns are not (fully) assess whether two products can be considered as substitutes from a confirmed by the investigation, remedies will be required to enable entry demand-side perspective. In mergers and alliance agreements between by competitors on ‘problem’ city-pairs (see question 32). airlines, the well-established approach to relevant market definition in passenger services is the origin/destination (O&D) city-pair. Accordingly, the 32 What types of remedies have been imposed to remedy relevant product market includes all relevant services on the O&D city-pair concerns identified by the competition authorities? in question. The relevant market may, in some cases, be further segmented Remedies typically offered by parties in airline mergers or alliances to between the market for premium (mainly business) passengers, and the remove competition concerns include: market for non-premium (mainly leisure) passengers. • slot divestitures at congested (hub) airports at one or both ends of Only in exceptional circumstances will the possibility of indirect the ‘problem’ city-pairs, primarily designed to encourage entry by services be seen as exercising a significant competitive restraint on non- new competitors. This is by far the most important element of the stop short-haul services, ie, when a one-day round trip is not possible on Commission’s current remedy policy in aviation cases; non-stop services of indirect services account for a significant share of • code share, interlining obligations, special pro-rate agreements and passengers. On long-haul services, the Commission has traditionally fare combinability arrangements; and included only indirect services that are seen as credible alternatives taking • remedies relating to access to joint frequent-flyer programmes and into account connection and overall journey time. Recently, however, the CRS displays. Commission has suggested a more flexible approach at least as concerns long-haul routes, including all one-stop bookings in the market definition In some older cases, the Commission imposed pricing constraints, used to stating that if one-stop services are not a credible alternative then they will address concerns of potential predation, and frequency freezes. However, only account for a very small share of passengers anyway. such measures have not been included in more recent cases, and it is The city-pair approach means that the relevant market may include doubtful whether they still form part of the Commission’s remedy policy. competing flights from neighbouring airports, if there are significant over- The Commission has also requested member states to relax the fifth and laps between the catchment areas of the relevant airports. Likewise, ser- sixth freedom rights restrictions on ‘problem’ city-pairs to further encour- vices by other modes of transport such as high-speed trains may also form age entry in such O&D city-pairs. part of the same relevant market. These are fact-specific questions that the Moreover, following an inquiry in 2008 into the effectiveness of rem- Commission will assess on a case-by-case basis. These broader market def- edies in the airline sector, the Commission has also required measures initions are generally more likely to be valid options for non-premium or designed to enhance the likelihood that slot commitments are taken up non-time sensitive rather than for premium or time sensitive passengers. by new entrants and in particular carriers envisaging to operate services on several of the routes where slot remedies are required. These include,

www.gettingthedealthrough.com 69 EUROPEAN UNION Shearman & Sterling LLP for instance, measures facilitating the grandfathering of slots acquired as • airlines launching a new route with the aim of increasing connectivity a result of the remedies, preference given to carriers able to start new ser- of a region may be permitted to receive ‘start-up’ state aid. In order to vices on several problem routes, and (where the concerns relate to short- qualify for the aid airlines must either present a business plan showing haul routes) measures designed to facilitate the establishment of a base that the route in respect of which aid is being received has prospects of operation by the new entrant at one of more of the airports concerned. becoming profitable without public funding after three years or give an Finally, the Commission has also sought to facilitate the new entrant’s irrevocable commitment to the relevant airport(s) to operate the route access to behind and beyond routes through the conclusion of special pro- for a period at least equal to the period of state aid funding. rate agreements and fare combinability arrangements with the parties. The Commission’s SGEI decision also contains specific provisions on air- Financial support and state aid ports providing SGEIs. On 25 April 2012 the Commission adopted, as the final pillar of the package, the De Minimis Regulation for the field of SGEI. 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or 34 What are the main principles of the state aid rules applicable government-controlled agencies or companies (state aid) in to the aviation sector? the aviation sector? If not, do general state aid rules apply? The general EU principles relating to state aid, namely, the ‘market econ- Both general and aviation-specific state aid rules apply to the provision of omy investor principle’, the ‘proportionality principle’, the ‘one time, last direct or indirect financial support to companies active in the air transport time principle’, and the ‘principle of neutrality of property ownership’ also sector. apply to the aviation sector. The general state aid rules applicable to the aviation sector are: In particular, the ‘market economy investor principle’ is used to assess • article 107 TFEU containing the general prohibition of the unlawful whether a public investment in an undertaking is made under conditions grant of state aid, specifying generally what constitutes state aid, and that would be acceptable to a long term private investor operating under granting exemptions; normal market conditions. If this is the case, a member state’s interven- • article 108 TFEU creating a standstill obligation; tion is regarded as economically neutral and therefore does not constitute • article 106(2) TFEU on undertakings entrusted with services of gen- state aid within the meaning of article 107 TFEU. Depending on the type eral economic interest (SGEIs); of the relevant transaction, variations of this principle such as the ‘market • Regulation 659/1999 (as amended) (Procedural Regulation), laying economy lender principle’, the ‘market economy creditor principle’, and down rules for the application of article 107 TFEU; the ‘market economy guarantor principle’ apply on the same basis. • Regulation 794/2004 (as amended), setting out detailed provisions The ‘proportionality principle’ must also be observed by member on notifications and annual reports referred to in the Procedural states when granting aid under the exemptions of article 107(3) TFEU, Regulation; meaning that only aid that is proportionate to its objective (eg, the restruc- • Directive 2006/111 laying down rules on the transparency of financial turing programme under consideration) may be exempted under article relations between member states and public undertakings, where an 107(3)(c) TFEU. air carrier is a state-controlled undertaking; Under the ‘one time, last time principle’, member states may contrib- • Regulation 651/2014 (General Block Exemption Regulation) declaring ute to the rescue or restructuring of one and the same undertaking under certain categories of aid compatible with the internal market in appli- the exemption of article 107(3)(c) TFEU only once every 10 years. This cation of articles 107 and 108 TFEU; principle is explained in the Commission guidelines for rescue and restruc- • 2014 Guidelines on state aid for rescuing and restructuring non-finan- turing of non-financial undertakings in difficulty. cial undertakings in difficulty; The ‘principle of neutrality of property ownership’ also applies in this • 2008 Notice on the application of articles 107 and 108 TFEU to state sector, allowing member states to set up public undertakings, to acquire aid in the form of guarantees; shareholdings, and to nationalise existing undertakings which operate in • The Commission’s SGEI package comprising: a 2011 communica- all sectors of the economy, provided, however, that the conditions set by tion on the application of state aid rules to compensation granted for the market economy investor principle are met. the provision of SGEIs; Decision 2012/21 on the application of article Consistent with the commission’s communication on state aid mod- 106(2) TFEU to state aid in the form of public service compensation ernisation, the 2014 airport and airline guidelines state that in order to be granted to certain undertakings entrusted with the operation of SGEIs considered compatible with the internal market: (the SGEI Decision); a 2011 Communication on the EU framework for • a state aid measure in the aviation sector must contribute to a well- state aid in the form of public service compensation; and Regulation defined common interest objective; 360/2012 on the application of articles 107 and 108 TFEU to de mini- • state intervention must be necessary (eg, addressing a market failure mis aid granted to undertakings providing SGEIs; and of an equity or cohesion concern); • Regulation 1407/2013 on the application of articles 107 and 108 TFEU • state aid must be an appropriate policy instrument; to de minimis aid (the De Minimis Regulation) (see question 35). • the aid must have an appropriate ‘incentive effect’ on the undertaking concerned; In addition, in February 2014 the Commission issued guidelines on state • the aid must be proportionate, ie limited to a minimum; aid to airports and airlines. These guidelines consolidate and replace the • the aid must not have undue negative effects on competition and trade 1994 guidelines on state aid to the aviation sector and the 2005 guide- between member states; and lines on the financing of airports and start up aid to airlines departing • transparency of the aid such that all relevant stakeholders can have from regional airports. The guidelines have been in force since April 2014. access to all pertinent information and documents concerning the aid. Under the new guidelines: • smaller airports (ie airports with fewer than 3 million passengers per 35 Are there exemptions from the state aid rules or situations in year) may be permitted to receive a limited amount of aid for operat- which they do not apply? ing purposes for a transitional period of 10 years (starting from 4 April 2014). Airports receiving operating aid must demonstrate that they The general exemptions to the prohibition of article 107(1) TFEU con- will be capable of fully covering their operating costs by the end of the tained in article 107(2) and (3) TFEU, and the General Block Exemption 10-year transitional period; Regulation are fully applicable to the aviation sector. The 2014 guidelines • unless there are ‘very exceptional circumstances’, aid to finance infra- on state aid to airports and airlines provide a sector-specific framework structure investments is allowed only for airports with fewer than 5 for a state aid analysis. In principle, the generally applicable rules do not million passengers per year. Below that threshold, there are different exempt operating aid. However, the 2014 aviation guidelines do contain a bands of permissible intensities depending on the number of passen- limited exemption for certain categories of operating aid (see question 33). gers per year (the smaller the airport, the higher the permissible inten- Aid granted to allow for the restructuring and privatisation of a state- sity). According to the guidelines, state aid for investment purposes owned company is usually assessed under article 107(3)(c) TFEU. Such must have satisfactory medium term prospects; and a restructuring will be tested against the conditions described in the Commission’s rescue and restructuring guidelines. With regard to the

70 Getting the Deal Through – Air Transport 2015 Shearman & Sterling LLP EUROPEAN UNION privatisation process as such aid is generally excluded, and therefore noti- Phase II fication is generally not required under article 108(3) TFEU, if, upon priva- Where the Commission has serious concerns, it adopts a decision declar- tisation, the following conditions are fulfilled: ing the commencement of a formal investigation (article 6(1) Procedural • the participation of the private entity is made by way of an uncondi- Regulation). The decision contains a summary of the relevant issues of tional public tender process on the basis of transparent and non-dis- fact and law, and a preliminary assessment of the proposed aid, identify- criminatory terms; ing the Commission’s serious doubts as to the compatibility of the aid with • the participation is granted to the highest bidder; and the internal market. The member state concerned must submit its com- • the interested parties are given sufficient time to prepare their offer ments within one month from the day on which the decision was commu- and receive all the necessary information to undertake a proper nicated to it. The Commission also invites member states and interested evaluation. parties to submit comments. Other member states and interested parties may submit their comments within one month from the day the decision In addition, privatisations by flotation or competitive tender on the above is published in the Official Journal. If the notifying member state wishes to conditions generally need not be notified to the Commission in advance make oral submissions to the Commission, meetings for this purpose must for examination of aid implications, but member states may notify, if they be held within three months, at the latest, upon receipt of the letter stating desire greater legal certainty. that the procedure has been initiated. Regulation 1407/2013 on De Minimis Aid, which also applies to the air The formal investigation procedure is concluded by a Commission transport sector, provides for an exemption to article 107(1) TFEU, when decision, which should normally be adopted within 18 months of the the aid does not exceed €200,000 over any three-year period. Loans may opening of the Phase II procedure, and may be either a positive decision also be covered by the exemption if they are secured by collateral covering allowing the implementation of the aid, possibly subject to conditions, or a at least 50% of the loan and the loan does not exceed either €1 million and negative decision prohibiting the implementation of the aid. a duration of five years or €500,000 and a duration of 10 years. Loan guarantees may be covered by the exemption to the extent that the guarantee 38 If no clearance is obtained, what procedures apply to recover does not exceed 80% of the underlying loan and either the guaranteed part unlawfully granted state aid? of the loan does not exceed €1.5 million and the duration of the guaran- Where the Commission finds that the notified aid is not compatible tee does not exceed five years or the guaranteed part of the loan does not with the internal market, the aid cannot be put into effect (article 7(5) exceed €750,000 and the duration of the guarantee does not exceed 10 Procedural Regulation). years. In order to avoid abuses, forms of aid the inherent aid amount of Where the Commission finds that granted aid is incompatible with the which cannot be calculated precisely in advance (ie, non-transparent aid), internal market, the aid must be recovered from the beneficiary by means and aid to firms in difficulty have been excluded from the de minimis rule. of a recovery decision (article 14 Procedural Regulation). Member states Rules on cumulation of aid apply. must take all necessary measures to recover the aid, except if such recovery Finally, in accordance with Commission Decision 2012/21 on the is contrary to a general principle of EU law. Recovery takes place in accord- application of article 106(2) TFEU to state aid in the form of public service ance with the national procedural rules of the member state concerned. In compensation granted to certain undertakings entrusted with the opera- addition, the aid to be recovered must include interest at market rate, to tion of SGEIs provides that member states are exempted from the obliga- be calculated from the date on which the unlawful aid was at the disposal tion to notify compensation for the provision of SGEIs by airports with of the beneficiary until the date of its recovery. The interest rate is to be 200,000 or fewer passengers per year. applied on a compound basis. The Commission updates the interest rates applicable in recovery cases regularly. 36 Must clearance from the competition authorities be obtained A negative Commission decision is final and fully binding upon the before state aid may be granted? member state concerned, which has the right to seek its annulment by the Yes, unless the block exemption de minimis rule or SGEI exception applies EU courts. In principle, appealing a Commission decision does not sus- (see question 35). pend the challenged decision’s enforcement, unless the EU court orders As set out in article 108(3) TFEU, the Commission’s supervision of state the grant of interim measures following application by the member state aid is based on a system of ex ante authorisation (see also the Procedural concerned. The only occasion where a member state is justified not to Regulation). Member states are thus required to inform the Commission recover the aid is where there is absolute impossibility to do so, as provided upfront of any plan to grant or alter state aid (which is not covered by the for in the relevant case law. General Block Exemption Regulation), and they may not grant such aid prior to Commission approval (‘standstill obligation’ – see article 108(3) Miscellaneous TFEU and article 3 Procedural Regulation). State aid granted without such 39 Is there any aviation-specific passenger protection formal approval is automatically unlawful, and the member state involved legislation? may be required by the Commission to recover it from the recipient. 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 www.gettingthedealthrough.com 71 EUROPEAN UNION Shearman & Sterling LLP concerned have a right to reimbursement of the cost of the ticket (within airports may levy a specific non-discriminatory charge on airport users seven days), or a return flight to the first point of departure or rerouting to to fund this assistance. In addition, the regulation sets out a number of their final destination. They also have a right to care (refreshments, meals, requirements in relation to the provision of air transport services to disa- hotel accommodation, transport between the airport and place of accom- bled passengers, including matters such as the transmission of informa- modation, two free telephone calls, telex or fax messages, or e-mails) and tion, the quality standard for the assistance, the training of personnel, and to compensation of €250 for all flights of 1,500km or less; €400 for all the available complaint procedures. intra-EU flights of more than 1,500km and non intra-EU flights between In June 2012, the Commission supplemented Regulation 1107/2006 by 1,500 and 3,500km; and €600 for all other flights. Compensation can be publishing Interpretative Guidelines on the application of this regulation. reduced where the passenger is offered a rerouting alternative which does 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 provid- of the cancellation at least two weeks in advance or was given rerouting ers within the EU. Conditions imposed by the CRS Code of Conduct (as alternatives which do not exceed the time of arrival of the original flight by revised) include: 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 on a non-discriminatory basis; and rigorously. Between December 2011 and March 2012, the Commission car- • non-discrimination by parent carriers against competing CRSs. ried 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 The Commission also held a stakeholder conference in May 2012, details that data submitted by them to a CRS is accurate, and contains provi- of which are also available on the DG Move website. sions reinforcing the protection of personal data (processing, access and In March 2013, the Commission announced a package of measures to storage). strengthen air passengers’ rights to information, care and rerouting when The Commission has clearly defined powers of investigation in case of they are stranded at an airport, to improve complaint procedures and infringements of the CRS Code of Conduct, and may impose fines of up to clarify grey areas in respect of, inter alia, delays and cancellations, extraor- 10 per cent of the total turnover in the preceding business year. However, dinary circumstances and contingency planning. The proposal aims to pro- few fines have so far been imposed for breach of either incarnation of the vide for better complaint procedures and enforcement measures. CRS Code of Conduct and none has been anywhere near the 10 per cent cap. Package holidays In March 2009, the Commission published an explanatory note on the Directive 90/314 determines the minimum standards concerning the pro- meaning of ‘parent carrier’ for the purposes of the CRS Code of Conduct. tection of passengers that have purchased a package holiday. In particular, In summer 2011, DG Move commissioned a mid-term evaluation of and the directive covers matters in relation to: stakeholder consultation on the CRS Code of Conduct. The final report • the information to be provided to the consumer; was issued in September 2012. The final report considered that continued • the formal requirements for package travel contracts; regulation of the area was necessary and did not recommend any funda- • the compulsory rules applicable to contractual obligations (cancel- mental changes to the current regime. lation, modification, the civil liability of package tour organisers or retailers, etc); and Airfares • the protection of consumers in the case of the package tour organiser’s Regulation 1008/2008 imposes certain obligations to ensure transparency insolvency. The directive has been implemented by all member states of passenger fares offered from an airport in an EU member state. In par- (see national chapters). ticular, the final price to be paid for any offer (published on the internet or elsewhere) must always be indicated and specify the fare, the applicable In July 2013, the Commission proposed a reform of the Package Travel tax, charges, surcharges and fees which are unavoidable and foreseeable Directive to cover the traditional pre-arranged packages (and also those at the time of the publication. Optional price elements have to be commu- that are combined at the consumers’ requests) and clarify legal grey areas nicated clearly, and customers must be able to accept them on an opt-in in respect of consumer protection. The aim is to make consumers better (rather than opt-out) basis. The regulation also prohibits price discrimi- informed; to provide for fairer and more predictable prices, enhanced pro- nation between passengers solely on the basis of their nationality or their tection for travellers and savings and to facilitate cross-border trade for place of residence within the EU. businesses. In March 2014, the Parliament backed the Commission’s proposal. At the time of writing, the legislative process is still ongoing. 40 Are there mandatory insurance requirements for the operators of aircraft? Disabled passengers Regulation 785/2004 (amended by Regulations 1137/2008 and 285/2010) The rights of disabled passengers are set out in Regulation 1107/2006 con- on insurance requirements for air carriers and aircraft operators estab- cerning the rights of disabled persons and persons with reduced mobility lishes minimum insurance requirements for air carriers and aircraft opera- when travelling by air. According to the regulation, disabled persons or per- tors, for both commercial and private flights. It requires air carriers and sons with reduced mobility cannot be refused air transport on grounds of aircraft operators to be insured, in particular with respect to passengers, their disability, except for justified safety reasons or physical impossibility. baggage, cargo and third parties, covering the risks associated with avia- Designated points of arrival and departure should be established to allow tion-specific liability (including acts of war, terrorism, hijacking, sabotage, the disabled persons or persons with reduced mobility to announce, with unlawful seizure of aircraft and civil commotion). The coverage levels do ease, their arrival at the airport and request assistance. They should be not apply to flights over the territory of a member state carried out by non- given assistance at airports and on board after advance notice of their spe- EU air carriers and by aircraft operators using aircraft registered outside cific needs. The managing bodies of the airports have the overall respon- the EU, which do not involve landing in, or take off from, that territory. sibility for providing such assistance (Annex I Regulation 1107/2006), There are also minimum insurance requirements for liability in respect of and the airlines will be responsible for the assistance on board (Annex II third parties per accident and per aircraft. Regulation 1107/2006). Disabled persons or persons with reduced mobil- The Commission’s public consultation on the operation of Regulation ity are entitled to receive assistance at no additional charge, although 785/2004 was concluded on in April 2008. The general conclusion was

72 Getting the Deal Through – Air Transport 2015 Shearman & Sterling LLP EUROPEAN UNION

Update and trends Ownership and control of airlines hub airports face capacity constraints, while smaller and more remote The European Commission is reported to have opened investigations airports are often underutilised. In view of this, the new guidelines show into several non-EU minority holdings in European airlines, including a degree of leniency towards small and medium sized airports and those Delta Air Lines’ stake in Britain’s Virgin Atlantic and Etihad’s in geographically remote regions, as well as airlines operating to and stake in Germany’s Air Berlin, to verify whether they comply with from these airports. In particular, subject to conditions, the guidelines the foreign ownership and control of EU airline requirements of allow smaller airports to receive operating aid for a transitional ten-year Regulation 1008/2008 (see question 5). The Commission apparently period. At the time of writing, it is yet to be seen how the Commission has no concerns over the size of the shareholdings as such, but it is will apply the new guidelines in practice. investigating whether such minority stakes may grant effective control of the EU airlines to non-EU persons through board appointments or Merger control other means of corporate governance. As the primary responsibility In October 2013, Greece’s Aegean Airlines won, at the second attempt, for monitoring and approving such shareholdings pursuant to the Commission’s approval to merge with Olympic Air. Since the Regulation 1008/2008 lies with national authorities, the Commission’s initial, blocked, merger attempt in 2010, Olympic’s fortunes had investigations are presumably into the proper application of Regulation seriously deteriorated and its operations had significantly reduced. 1008/2008 by the member states rather than directly into the airlines or The Commission’s second investigation found Olympic to be a ‘failing the shareholdings themselves. firm’ and that therefore competition would not suffer as a result of the merger. The transaction therefore gained unconditional clearance. This State aid decision contrasts with the Commission’s 2012 IAG/bmi decision in As stated above, in February 2014 the Commission issued guidelines which the parties were unsuccessful in their attempts to persuade the on state aid to airports and airlines. These guidelines consolidate and Commission that bmi was a ‘failing firm’. The transaction was therefore replace the 1994 guidelines on state aid to the aviation sector and the cleared subject to commitments. The valuable Heathrow slots held by 2005 guidelines on the financing of airports and start up aid to airlines bmi played an important role in the Commission’s assessment of that departing from regional airports. The guidelines have been in force transaction. since April 2014 (see question 33). According to the Commission, the Aegean’s and Olympic’s success at the second attempt also new guidelines ‘are a key ingredient for a successful and competitive contrasts with the Commission’s February 2013 prohibition, for the European aviation industry’. second time, of the proposed acquisition by Ryanair of the Irish flag The guidelines form part of a broader initiative by the Commission carrier Aer Lingus (in addition, Ryanair aborted an attempt to acquire to modernise the EU state aid rules and aim to provide for more efficient Aer Lingus in 2009). The proposed transaction concerned the two and effective member state support, with specific focus on ensuring largest Irish airlines that were also the two largest airline users of adequate levels of competition throughout the EU aviation industry. Dublin airport, Ireland’s main hub airport. Ryanair has appealed the Since the previous guidelines, low cost carriers have continued to Commission’s prohibition decision, which, at the time of writing, is expand while some traditional network carriers have struggled. Many pending before the EU general court.

that the regulation effectively fulfilled its objective of ensuring appropriate 2320/2002 (adopted as a consequence of the 11 September attacks in the insurance coverage and that, despite the claim of certain stakeholders that United States). Regulation 300/2008 is supplemented by Regulation the established requirements are inappropriately high for some categories, 272/2009 (as amended by Regulation 297/2010), 1254/2009 and 18/2010, the minimum requirements have not caused any substantial problems in and it is implemented by Regulations 72/2010 and 185/2010 (as amended the majority of member states. Along with other internal aviation market by Regulations 357/2010, 358/2010 and 1082/2012). legislation, the regulation is also subject to a ‘fitness check’ designed to Regulation 300/2008 aims at safeguarding civil aviation against acts of see if the current rules are fit for purpose. The final report was issued in unlawful interference, by setting out common rules and basic standards on September 2012. aviation security, and mechanisms for monitoring compliance. Common basic standards relate, inter alia, to airport and aircraft security (such as 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

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

www.gettingthedealthrough.com 73 EUROPEAN UNION Shearman & Sterling LLP

NSP. Regulation 300/2008 also empowers the Commission to conduct – in ultra vires and infringed fundamental rights. The Court of Justice therefore cooperation with the competent national authority – inspections (including did not have to assess the validity of the substance of the Commission deci- unannounced inspections) and to adopt general measures amending non- sions. The resulting agreements concerned PNRs and consumers’ financial essential elements of the common basic standards. Regulation 72/2010 data. The former agreement reduces the amount of passenger data now establishes the applicable procedures for conducting Commission inspec- collected by US authorities but includes, inter alia, names, contact data, tions in the field of aviation safety. Finally, the member states are in charge payment details, and itinerary information. In the latter agreement, the US of determining the entity bearing the costs of security measures (eg, the agreed to restrict use of any data received from the banking consortium state, the airport operators, airlines or users), and the penalties applicable SWIFT exclusively for counter-terrorism purposes, and to retain the data to infringements of the regulation. for a maximum of up to five years. In addition, the Commission agreed to At an international level, the EU and the US reached two agreements appoint an ‘eminent European’ to monitor the US use of SWIFT data. on forms of data-sharing in June 2007. These agreements were triggered Furthermore, article 9 of the first-stage air transport agreement by two Court of Justice judgments annulling two Commission decisions between the EU and US and the second-stage agreement (see question regarding US legislation requiring airlines carrying passengers to, from or 1) both provide for regulatory convergence mechanisms in security which across the US to grant US authorities electronic access to passenger name are key for the creation of a ‘one-stop security’ approach (checking passen- records (PNRs). One decision concerned the processing and transfer of gers and luggage only at the start of their journey and not again at every PNR data by air carriers to the US authorities, while the other related to the transfer). The ‘one-stop security’ approach is also explicitly advanced in adequate level of the protection of personal data contained in the PNR data Regulation 300/2008. transferred to the US authorities. The Commission held that the US authorities offered a sufficient level of protection for personal data transferred 42 What serious crimes exist with regard to aviation? from the EU. The Court of Justice found that neither of the decisions had This is a matter for member state national law (see national chapters). an appropriate legal basis, and that the decision on adequacy was adopted

74 Getting the Deal Through – Air Transport 2015 Ehlers, Ehlers & Partner GERMANY

Germany

P Nikolai Ehlers Ehlers, Ehlers & Partner

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

www.gettingthedealthrough.com 75 GERMANY Ehlers, Ehlers & Partner

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

76 Getting the Deal Through – Air Transport 2015 Ehlers, Ehlers & Partner GERMANY documentation, the qualification of the maintenance organisation and its 22 Are there any laws or rules specifically relating to ground facilities and personnel, etc). EASA has been established to ensure, inter handling? alia, uniformity in the application of common technical requirements and For certain large airports, the market for ground-handling services has administrative procedures in the field of continuing airworthiness. EASA been opened up by EU Council Directive No. 96/67 and the respective therefore contributes to maintaining aircraft to the same high standards German legislation, particularly the German Regulation on Ground- throughout the EU (and beyond). handling Services. Certain charges under this regulation have been held to be inconsistent with EU Council Directive No. 96/67 by the European Airports Court of Justice. The EU Commission’s ‘Better Airports Package’ aims 17 Who owns the airports? at improving the quality and efficiency of ground handling services at airports. Most large German airports are state-owned; shares of state-owned airports are mostly held by the state, by the federal state where the airport is 23 Who provides air traffic control services? And how are they located and by the city served by the airport. However, some of the large regulated? airports have private shareholders too, such as the Hamburg, Düsseldorf or Frankfurt airports. The shares of the Frankfurt airport company (Fraport Air traffic control services in Germany are provided by DFS GmbH, (owned AG) are listed in the stock markets and Lufthansa is one of its largest by the Federal Republic of Germany) since the former state agency BFS shareholders. Smaller and special airports are owned by a variety of own- was incorporated as a GmbH (limited liability corporation) under German ers including flying clubs and aerospace manufacturers (eg, Airbus in corporate law. The main legislation regulating air traffic control services Hamburg-Finkenwerder). in Germany are the EU Regulations establishing the Single European Sky; section 27(c) and (d) of the German Aviation Act; and the German 18 What system is there for the licensing of airports? Regulation on ATC Services. The plan to fully privatise DFS was not carried out for constitutional reasons. All German airports need to be licensed under the German Aviation Act. Certain air traffic control services for the north-west of Germany (and This licence is required for the construction of an airport as well as for the the Benelux countries) are provided by Eurocontrol through its Upper Area significant extension of an airport. For a certain category of larger airports, Control Centre in Maastricht under the Eurocontrol Convention and other a more comprehensive regulatory approval is required under the Aviation Eurocontrol instruments. Act in addition to the licence. When processing the application for this licence, the authority in charge will assess the effects of the airport pro- Liability and accidents ject with respect to regional planning and development objectives, environmental protection, noise, safety, etc. The planning approval comprises 24 Are there any special rules in respect of death of, or injury to, all other necessary licences, approvals and permits required under other passengers or loss or damage to baggage or cargo in respect of regulatory laws. domestic carriage? The Aviation Act contains special rules in respect of death of, or injury to 19 Is there a system of economic regulation of airports and, if so, passengers and loss or damage to baggage for carriage that is not covered how does it function? by international treaties or European law. Domestic carriage is covered by Larger airports are required to charge take-off and landing fees, park- those rules only to the extent that is not provided by carriers with a licence ing fees and certain other fees on the basis of a fee policy that needs to under Community law as the latter carriers are subject to the European be approved by the respective regulatory authority. The fee policy has to instruments in respect of domestic carriage too. However, said rules of be published. Not all fees charged by airports are subject to this approval the Aviation Act are identical to those of the Montreal Convention and the requirement. The fee policy is also an important tool to control noise European instruments. through surcharges for noisier aircraft. International law and European Domestic carriage of cargo by carriers that do not have a licence under law (to a certain extent ‘soft’ law) have great influence on the economic Community law is governed by the German Commercial Code, which pro- regulation of airports, including whether airport charges may be used to vides for a limit of liability of 8.33 special drawing rights (SDR) per kilo- finance certain extension projects or whether certain fee structures consti- gram. This limit does not apply in case of wilful misconduct. tute illegal state aid. 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? The Aviation Act provides for no-fault liability of the aircraft opera- Under Regulation (EC) No. 1008/2008 of the European Parliament and of tor in case of surface damage resulting from an accident during the opera- the Council, member states may regulate without discrimination among tion of the aircraft. Someone who uses the aircraft without the operator’s destinations inside the EU or on grounds of nationality or identity of the air permission will be liable instead of the operator. The liability for surface carrier the distribution of traffic between airports that serve the same city damage is limited (€600,000 per person and total limits based on the or urban area and satisfy certain conditions. Operational limitations will maximum take-off weight of the aircraft) and will only be reduced in case apply under the licence of the respective airport. of contributory negligence of the injured party. Germany has neither ratified the 1952 Rome Convention relating to surface damage nor the 2009 21 How are slots allocated at congested airports? Ground Damage Convention. Air carriers need to obtain slots to take-off and land at an airport that has been designated as fully coordinated. The German Minister of 26 What system and procedures are in place for the investigation Transport appoints the coordinator who is in charge of allocating slots, of air accidents? assisted by a coordination committee. Slots are allocated on the basis of Aircraft accidents in Germany are investigated by the Federal Bureau EU Council Regulation No. 95/93, as amended by EU Council Regulation of Aircraft Accidents Investigation (BFU) on the basis of the Aircraft No. 793/2004, taking into consideration a list of criteria provided for by Accidents Investigation Act (FlUUG), which conforms to Regulation (EU) said regulation, such as the ‘use it or lose it’ rule, grandfather rights or the No. 996/2010 of the European Parliament and of the Council and Annex interests of new entrants. The slot allocation duties are to be performed 13 to the Chicago Convention. The BFU is functionally independent. in an equitable, non-discriminatory and transparent way. Slots can also Investigations are carried out by an investigator or a commission with the be exchanged or transferred subject to certain conditions. In April 2008, necessary authority, particularly regarding access to the site of the acci- the Commission indicated in a communication that it accepts exchanges dent, the taking of evidence and access to documents, etc. The exclusive of slots with monetary and other consideration as long as all administra- purpose of the aircraft accident investigation under the FlUUG is to deter- tive requirements for the allocation of slots in the applicable legislation mine the cause of the accident or incident, but not to determine liability. are respected. The ‘Better Airports Package’ adopted by the European The aircraft accident investigation report will contain the findings of the Commission is supposed to introduce market-based mechanisms for the investigation. Certain interested parties will be given the opportunity to trading of slots between airlines (‘secondary trading’) in a transparent way, submit comments to the draft report. Safety recommendations can be as well as measures to ensure that existing capacity is used by airlines. www.gettingthedealthrough.com 77 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 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 the aviation sector? If not, do general state aid rules apply? The pilot in command, another crew member or the operator is required to report an accident or serious incident during the flight of certain air- The basic rules for state aid control are contained in the core articles 107 craft immediately to the BFU if it occurred in Germany or if the aircraft and 108 of the TFEU, namely the definition of state aid that is incompatible concerned is registered in Germany or operated by a German operator. with the internal market, as well as a list of possible exemption clauses, Certain aviation authorities are also required to report accidents and seri- procedural rules and the legal basis for council regulations in the state aid ous incidents. The report can be made using a form provided by the BFU, field. Sector-specific rules are the 2014 Guidelines on state aid to airports but the BFU may require a more comprehensive report from the operator. and airlines (replacing the 1994 Guidelines for the application of articles 92 Similar reporting obligations apply in cases of accidents during the trans- and 93 (now articles 107 and 108 of the TFEU) and the 2005 Community port of dangerous goods and bird strike. Guidelines on financing of airports and start-up aid to airlines departing from regional airports). Competition law 28 Do sector-specific competition rules apply to aviation? If not, 34 What are the main principles of the state aid rules applicable do the general competition law rules apply? to the aviation sector? The domestic competition law rules that apply to the aviation sector in The TFEU pronounces the general prohibition of state aid that distorts or Germany are those provided for by general competition law, such as threatens to distort competition if it affects trade between member states. the Act against Restraints of Competition and the Law against Unfair The Commission applies the Market Economy Investor Principle and its Competition. extensions to determine if illegal state aid is involved. The TFEU also provides for certain exemptions, that is, situations in which aid is or may 29 Is there a sector-specific regulator or are competition rules be considered compatible with the internal market. Regulation (EC) No. applied by the general competition authority? 1008/2008 of the European Parliament and of the Council allows mem- The domestic regulator in charge in Germany is the regular competition ber states to compensate air carriers for adhering to the standards required authority, the Federal Cartel Office. by a public service obligation, and the 2014 Guidelines on state aid to airports and airlines allow certain aid under accurate conditions set by the 30 How is the relevant market for the purposes of a competition Commission. If state aid is approved under the Guidelines on state aid for assessment in the aviation sector defined by the competition rescuing and restructuring, the proportionality principle shall be observed authorities? and the aid will be subject to certain conditions, first and foremost the gen- The competition authorities distinguish between cargo and passenger air eral rule of ‘one time, last time’. transport services. The initial definition of the relevant geographic market is based on the origin and destination city pairs. Adjacent airports with 35 Are there exemptions from the state aid rules or situations in overlapping catchment areas will be considered and substitutable indirect which they do not apply? flights will be taken into account. On short-haul routes, competition may Article 107(2) and (3) of the TFEU specify a number of cases in which state also result from other modes of transport, for example, high-speed trains. aid is compatible with the internal market or could be considered accept- On the demand side, a distinction between time-sensitive (business) and able, such as aid to make good the damage caused by exceptional occur- non-time-sensitive (leisure) passengers will be taken into consideration as rences or certain regional aid. Specific requirements provided for by the well. The network effects may be significant particularly in merger control cases. 2014 Guidelines on state aid to airports and airlines apply to these exceptions. Aid for rescuing and restructuring firms in difficulty can be allowed 31 What are the main standards for assessing the competitive in accordance with the respective guidelines. The De Minimis Regulation effect of a transaction? provides for an exemption from the notification requirement in article 108(3) of the TFEU. For the competition assessment non-stop/non-stop, non-stop/indirect and indirect/indirect overlaps of services are taken into account in order to identify competition issues with respect to city pairs. Special attention is 36 Must clearance from the competition authorities be obtained given to hub-to-hub routes. Market power, market entry conditions, reg- before state aid may be granted? ulatory factors, network issues, the collective dominance of two or more Under Council Regulation (EC) No. 659/1999 as amended by Council firms as well as positive welfare effects in the form of efficiencies that ben- Regulation (EU) 734/2013 any plans to grant aid must be notified to the efit consumers will be taken into consideration, too, when assessing the European Commission (unless covered by an exemption) which will take a competitive impact of a transaction. decision as to the compatibility of the aid with the common market. Under the standstill clause, any notifiable aid must not be put into effect before 32 What types of remedies have been imposed to remedy the Commission has taken or is deemed to have taken a decision authoris- concerns identified by the competition authorities? ing it. The remedies applied will vary depending on the competition analysis in an individual case. The following are examples of the types of aviation- 37 If so, what are the main procedural steps to obtain clearance? specific remedies that have been imposed in merger control cases: The notification must be made in sufficient time by the member state • surrender of slots; concerned and must include all necessary information to enable the • frequency freezes or reductions; Commission to take a decision. The notifiable aid must be notified elec- • pricing constraints; • blocked-space agreements; tronically on the respective notification form. If necessary, the Commission • interlining and code share obligations; will decide to initiate formal investigation proceedings. This decision will • access to frequent-flyer programmes; include a preliminary assessment of the proposed measure. The member • access to computerised reservation systems (CRS) displays; state concerned and interested parties may submit comments. The formal • sale of certain assets; and investigation proceedings will be closed by means of a decision as to the • intermodal agreements. compatibility of the notified measure with the common market.

78 Getting the Deal Through – Air Transport 2015 Ehlers, Ehlers & Partner GERMANY

38 If no clearance is obtained, what procedures apply to recover carriers to be insured also to cover liability in case of accidents with respect unlawfully granted state aid? to mail. 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 41 What legal requirements are there with regard to aviation recipient. The recovery shall be effected without delay and in accordance security? with the procedures under the national law of the member state concerned. The main legal requirements concerning aviation security are provided The aid to be recovered shall include interest at an appropriate rate fixed by for in the Aviation Security Act of 2005 (as amended), which conforms the Commission. The Commission would not require recovery of the aid if to Regulation (EC) No. 300/2008 on common rules in the field of civil this were contrary to a general principle of EU law. aviation security, complying in particular with the requirement to adopt a national civil aviation security programme. The Aviation Security Act con- Miscellaneous tains detailed requirements concerning airport and air carrier security programmes, airport planning, access control, screening of staff, items carried 39 Is there any aviation-specific passenger protection and vehicles, physical security and patrols, protection of aircraft, screening legislation? of passengers and baggage, separation of passengers, cargo, courier and Regulation (EC) No. 261/2004 provides for compensation and assistance express parcels, mail, air carrier catering, stores and supplies, general avia- to passengers in the event of denied boarding and of cancellation or long tion, staff recruitment and training, equipment used in support of aviation delays (without prejudice to a passenger’s rights to further compensation). security, prohibited articles, etc. The provision of the Aviation Security Act New provisions in the Aviation Act provide for the mediation of consumer allowing the shooting down of civilian aircraft being used as a weapon is claims in Germany. Detailed provisions on the rights of consumers and unenforceable because it has been held unconstitutional by the Federal the duties of organisers and retailers of package holidays (including the Constitutional Court. obligation to provide security by means of insurance or bank guarantee Many security issues (eg, the controversial transfer of passenger data) for the event of insolvency) are provided for by section 651(a) et seq of the are dealt with elsewhere, for instance in international agreements and con- German Civil Code and by a German regulation requiring the organiser or ventions to combat terrorism, ICAO Annex 17, EU regulations and domes- the retailer to provide the consumer with certain information before the tic law. contract is concluded. This legislation is based on Council Directive No. 90/314/EEC (currently under review). Regulation (EC) No. 1107/2006 of 42 What serious crimes exist with regard to aviation? the Parliament and of the Council aims at improving the opportunities for Serious crimes with regard to aviation are: air travel of disabled persons and persons with reduced mobility. CRS are • hijacking aircraft and certain other acts of dangerous interference subject to Council Regulation (EU) No. 80/2009 on a code of conduct for with air traffic; CRSs. Regarding airfares, see question 12. • sabotage acts against airports; • flying aircraft while intoxicated; 40 Are there mandatory insurance requirements for the • carrying dangerous items; operators of aircraft? • dangerous violation of ATC instructions; and Regulation (EC) No. 785/2004 (as amended) establishes minimum insur- • certain significant violations of regulatory requirements. ance requirements for air carriers and aircraft operators in respect of passengers, baggage, cargo and third parties. It requires air carriers and When assessing criminal liability in the context of accidents and incidents aircraft operators to be insured, covering the risks associated with avia- the prosecuting authorities normally put great emphasis on the outcome of tion-specific liability (including war and terrorism risks). Regulation (EC) the technical investigation by the BFU. No. 1008/2008 of the European Parliament and of the Council requires air

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 79 GREECE Bahas, Gramatidis & Partners

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,

80 Getting the Deal Through – Air Transport 2015 Bahas, Gramatidis & Partners GREECE part D). The HCAA must notify the applicant in writing within 20 calendar for the specific purpose, airport, date and time it has been issued for, while days from the day of their submission of any missing documents, which charter flights should be carried out without violating airport operating should be presented within 30 days. The HCAA shall analyse and evaluate hours. As for individual flights, an exception is made and the only require- the aforementioned documents and reply to the applicant within 120 days ment is the notice before flight to the airport authorities and the airport from the submission of all documents required for the application. involved.

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

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• a title of registration; and Privatization, relevant société anonyme companies (SAAAs) may be estab- • two summaries of the title which should contain the names, last lished for the administration and operation of all or certain Greek regional names, residences and professions of the creditor and the debtor, airports. the date and the type of the above-mentioned title, the amount due, the repayment date of the debt, the description of the aircraft or the 18 What system is there for the licensing of airports? engine and the process agent that has been appointed. Ministerial Decision D3/A/20357/2002 approves the Basic Regulation for Airport Licensing, Functioning and Operating. Its purpose is to estab- The registrar of mortgages ought to record all the elements included in lish the criteria and procedures under which the Hellenic Civil Aviation the summaries and note down the date that the application form is sub- Authority certifies Greek airports serving international flights. Regardless mitted for registration (article 55 Air Law Code and articles 1315, 1337 of of their ownership, operation and supervision regime, the Hellenic Civil Civil Code). From the moment of its registration in the mortgage record, Aviation Authority must certify that they provide the necessary level of the mortgage is considered valid. safety, regularity and efficiency. Moreover, the contracts for leases and subleases, which are prepared An airport certificate is required for all Greek airports serving flights to in written form, are registered in the above-mentioned registers, as no and from abroad. The airport licence applicant must submit a form to the separate record of leases is kept. The registration of a lease and sublease Hellenic Civil Aviation Authority enclosing the airport manual. Before the contract in the above-mentioned registers is a constituent element of the certificate is issued, the HCAA controls and ensures that the airport meets, contract (article 80 of the Air Law Code). inter alia, the following conditions: the applicant and staff have the necessary competence and experience to properly operate and maintain the 15 What rights are there to detain aircraft, in respect of unpaid airport; and an acceptable safety management system is in place. airport or air navigation charges, or other unpaid debts? The airport certificate licensing regime obliges the airport operator Article 189 of the Air Law Code provides that any aircraft flying over Greek to ensure safe, regular and efficient operation of the airport and to allow territory or landing at Greek airports, or accepting any kind of airport ser- access of the authorised personnel of the CAA to the airport to conduct vices, is subject to payment of rights, dues and other charges related to security audits, inspections and tests. aviation, landing and using Greek airports. In case of non-payment, the The airport certification process includes: creditor can request that the airport authority prohibits the take-off of the • preparation and expression of interest from the applicant for the aircraft and the provision of services to that aircraft or any other aircraft certificate; that the debtor owns or operates. • submission of the official application including the airport manual; If the total debt exceeds the minimum amount determined by the • providing the necessary facilities, equipment, service and airport minister of finance and the minister of transportation and telecommuni- operating procedures; cations, the airport authority must satisfy the request of the creditor and • the act itself of issuance or denial of the airport certificate; and detain the aircraft, drafting a relevant report. • notification of the certified status of the airport and the publication of The airport authority detaining the aircraft must enable its take-off in the related details in the Greek Aeronautical Information Manual. following cases: • if the owner or administrator of the aircraft deposits a letter of guaran- 19 Is there a system of economic regulation of airports and, if so, tee from a bank operating legally in Greece, equal to the total debt; and how does it function? • if the creditor does not submit to the relevant airport authority a Chapter I of Ministerial Decision D3/A/20357/2002, which approves the request of aircraft provisional arrest within four days of its detention. Basic Regulation for Airport Licensing, Functioning and Operating, and article 189 of the Air Law Code provide that the operator (the state oper- 16 Do specific rules regulate the maintenance of aircraft? ates all airports in Greece, with the exception of the Eleftherios Venizelos Aircraft maintenance in Greece is governed by EC Regulation No. International Airport) may establish charges for all airport users. The basic 2042/2003 as amended by EC Regulation No. 376/2007 and deci- principles for the determination of airport charges are the following: sion of the administrator of civil aviation at the Civil Aviation Ministry • the maintenance of a high level of services to support the airport’s eco- D2/46777/13556, which adopts Annex 6, Part II of the International Civil nomic efficiency and competitiveness; Aviation Organization regarding International General Aviation – aero- • the existence of incentives for the efficient and economically effective planes issued under the Chicago Convention. According to the above- use of the existing infrastructure; mentioned, the owner or the leaseholder, in the case of a leased aircraft, • the prevention of abuse of dominant position; is responsible for the constant airworthiness of the aircraft and the assign- • the assurance of necessary funding to meet future demand; ment of the aircraft’s mechanical controls to an approved maintenance • the achievement of local and regional economic development objec- organisation. tives; and Moreover, the Civil Aviation Department inspects the maintenance • the assurance of transparency and direct presentation of all necessary programme and conducts audits to verify the airworthiness of aircraft, to financial assets. ensure that: • the aeroplane is maintained in a status of airworthiness; 20 Are there laws or rules restricting or qualifying access to • the operational equipment and emergency equipment, necessary for airports? the planned flight, are in use; EC Regulation No. 1008/2008 and HCAA Regulation D1/D30817/2180 • the airworthiness certificate of the aircraft remains active; and provide a general right of air carriers with an operating licence to provide • the maintenance of the aircraft is conducted according to the regula- air transport services on domestic routes and on routes in the European tions of civil aircraft maintenance EASA, part145 that are in force and Union. There are also restrictions to the free access in the market of air approved by the CAA. transport services, when the state imposes public service obligations on scheduled airlines that serve regional yet vital areas to strengthen eco- Airports nomic development. Thus, it is possible to limit access to route to an exclu- 17 Who owns the airports? sive carrier, selected by a public tender. Moreover, the state can limit access 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 exception of Athens International Airport. Said airport is operated by Athens 21 How are slots allocated at congested airports? International SA, which has the exclusive right and obligation to conduct the financing, construction, completion, operation, development and The allocation of slots in Greece is regulated by EC Regulation No. management of the airport, and the Greek state retains control of, and 541/2009, which defines slot capacity available for allocation, the process supervision over, these activities. of allocation and monitoring of the correct use of slots. ‘Slot’ shall mean Moreover, pursuant to Law 3913/2011 and by virtue of a decision the permission given by a coordinator to use the full range of airport infra- of the competent Intra-Ministerial Committee of Restructuring and structure necessary to operate an air service at a coordinated airport on a

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

www.gettingthedealthrough.com 83 GREECE Bahas, Gramatidis & Partners evidence gathered, the board completes a justified report for the causes 31 What are the main standards for assessing the competitive and the circumstances of the accident. Copies of the finding, which is not effect of a transaction? binding for the judge, is evaluated independently along with the rest of the Article 1 of Law 3959/2011 prohibits all business transactions whose pur- evidence, as well as the file are submitted to the minister. pose or effect is the impeding, the constraint or the distortion of competi- In the case of death or serious injury of a crew member, a passenger or tion. The standards for assessing the competitive effect of a transaction, as a third person on the surface, the file and the finding are transmitted to the used by the Competition Authority, are whether through these agreements public prosecutor of the magistrates’ court with jurisdiction. the companies lead to: The preliminary investigation is completed within six months of the • the direct or indirect fixing of market prices, sales prices or other trans- accident, while the process of the board is completed within three months action terms; of the receipt of the file. The minister may extend these time limits up to six • the restriction or the control of production, distribution, technological months. The HCAA is not responsible for prosecuting criminal behaviour development or investments; or assigning blame. • the distribution of markets or supply sources; • the anti-competitive imposition of unequal conditions on trade or the 27 Is there a mandatory accident and incident reporting system provision services, especially the unjustifiable refusal to sell, buy or and, if so, how does it operate? provide services or other transactions; The provisions of article 140 of the Air Law Code require that aircraft oper- • the application of unequal terms to equal transactions on trade and ators report all accidents and certain incidents to the nearest airport, police services, in a way that restrains competition, especially the unjustifi- or other authority responsible. According to Law No. 2912/2001, the Air able refusal to sell, purchase or provide services or other transactions; or Safety and Accident Investigation Committee keeps a mandatory accident • the dependence of contracts on the acceptance (by the parties and incident reporting system. The committee is also charged with inves- involved) of additional terms that are, by their nature or according to tigating accidents and serious incidents regarding civil aviation aircraft. commercial usage, unrelated to the subject of those contracts. It is under the purview of the Ministry of Transport and Communications and it is assisted by the Air Accidents and Incidents Investigation Unit. The On the contrary, the Competition Authority may consider an anti-competi- investigation process and techniques must comply with Annex 13 to the tive transaction permissible, if the following thresholds are met: Chicago Convention and the manuals of the International Civil Aviation • the transaction contributes to the improvement of production or distri- Organization. When the investigation is complete, the Committee’s find- bution or to economic development; ings are summarised and published in two daily newspapers with the larg- • the transaction ensures a benefit to consumers; est sales, issued in Athens, and in a local newspaper published in the area • the permissible constraints of competition must be absolutely neces- covered by the court of first instance with jurisdiction for the case where sary for the achievement of positive results; and the incident occurred. • the competition in a significant part of products or services is not abolished. 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? Both civil and criminal penalties can be imposed by the Competition There are no sector-specific competition rules applied to aviation. In Authority for competition violations. Criminal penalties are imposed, Greece, the general provisions of Competition Law 3959/2011 as well as under article 44 of Law 3959/2011, on individuals responsible for compli- EU competition rules apply to air transport. ance with the competition rules and can be differentiated regarding the type of violation. In addition, individuals can be imprisoned for criminal 29 Is there a sector-specific regulator or are competition rules violations, according to article 44(2) of Law 3959/2011. applied by the general competition authority? To determine the amount of the civil penalties or fines, the Competition There is no specific competition regulator for the aviation sector. The Authority takes into account the duration and severity of the offence. competition rules introduced by the Law 3959/2011 apply for the aviation sector under the supervision of the Greek Competition Authority. The Financial support and state aid Competition Authority has four main areas of regulatory authority: the discretionary authority to opine on competition issues, the authority to 33 Are there sector-specific rules regulating direct or indirect supervise compliance with competition rules, the authority to issue indi- financial support to companies by the government or vidual administrative acts and the authority to enforce sanctions in cases government-controlled agencies or companies (state aid) in of the breaking of competition rules (recommendations, fines, licence the aviation sector? If not, do general state aid rules apply? revocation). In the aviation sector, general state aid rules apply according to the direct or indirect financial support to individual companies by the government 30 How is the relevant market for the purposes of a competition or government-controlled agencies or companies. In particular and in assessment in the aviation sector defined by the competition the scope of European Union law, articles 107 and 108 of the TFEU, EC authorities? Regulations No. 659/1999 as amended, 794/2004 as amended and The evaluation of competition in the aviation sector is focused on the rel- 800/2008 and Community Guidelines C312 of 9 December 2005 on evant geographical market and the relevant product or service market. The financing airports and start-up aid to airlines departing from regional air- liberalisation of the air transport services market aims to ensure a con- ports are applicable. stantly growing healthy competition between air transport companies, as At a national level, except for the abovementioned European Union well as other means of public transportation, which is fulfilled through a texts that have direct application to the Greek legislation, Ministerial variety of transportation options available at passengers’ disposal. The city Decisions 2007892/1982 and 2/2000 for the recovery of illegal state aid pair (origin and destination), the passenger’s demand and the transport and Circulars 39729/2005 and 16825/2006 of the Ministry of Finance/ cost determine the configuration and supply of the alternative means of General Directorate for Economic Policy/ Directorate of European Union transportation. regarding the organisation and management of the state aid system elec- The healthy competition in Greece between aviation companies tronic notification system also apply. that operate to and from big cities, either within the country or abroad, is proven by the configuration of ticket pricing, in contrast with the pricing for remote and arid areas. In such cases, where the state assigns the service of these areas to a single carrier after public contest, maintaining quality standards, regularity, non-discrimination and affordable prices, compliance with the established competition rules is not compulsory.

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34 What are the main principles of the state aid rules applicable finding by way of a decision. Where the Commission finds that no doubts to the aviation sector? are raised as to compatibility with the common market and competition Financial support in a company is considered state aid when the following rules of a notified measure, it shall decide that the measure is compatible criteria are met: with the common market. Where the Commission finds that doubts are • there is state intervention that can take various forms (eg, grants, raised as to the compatibility with the common market and competition interest subsidies, the provision of goods or services on preferential rules of a notified measure, it shall decide to initiate the formal investiga- terms, etc); tion procedure. • the intervention affects trade between member states; • the intervention provides benefits to the recipient on a selective basis; The formal investigation procedure and The Commission, through its decision to initiate the formal investigation • competition is or could be distorted. procedure, shall call upon the state concerned and upon other interested parties to submit comments within a prescribed period which shall nor- Among the basic principles of the state aid rules applicable to the aviation mally not exceed one month. After having considered the above-men- sector, are the following: tioned comments, within 18 months from the commencement of this • the proportionality principle: the aid granted must be proportional to proceeding the Commission should conclude its examination by means of its objective for an exemption under article 87(3) of the EC Treaty to be a final decision that rejects or approves the notified measure or imposes granted; additional terms. Once the above-mentioned time limit has expired, the • the principle of non-discrimination: the aid must be granted on equal Commission shall within two months make a decision on the basis of the terms for public and private companies; information available, upon request by the state concerned. • the principle of transparency, between states and companies that are 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 www.gettingthedealthrough.com 85 GREECE Bahas, Gramatidis & Partners

40 Are there mandatory insurance requirements for the Update and trends operators of aircraft? Pursuant to article 22 of Law 3913/2011, which, among others, Pursuant to article 137 of the Air Law Code, a carrier must have insurance provides for the development and exploitation of Greek airports, coverage for damages deriving from the transportation contract of pas- where relevant private société anonyme companies may be sengers, items or luggage. Civil responsibility insurance for the carrier and established for the administration or operation of all or certain for third-party damage on the surface is among the obligations of the car- Greek airports, article 22A was added by Law 4146/2013, which rier, as defined by Regulation D1/D/30817/2180 as well as a prerequisite provides the establishment of a ‘Regional Management SA’, for granting an operating licence. In obligatory insurance ceases, the Air operating under Laws 3913/2011 and 2190/1920. Law Code states that the validity of the operating licence may be revoked. The scope of said company is the administration, management, Moreover, the aircraft operator must have insurance covered for harm or operation, development, expansion, maintenance and exploitation damage caused by crew members of crew or others embarking the aircraft of regional airports within Greece in cases where those airports are not allocated to private investors and those airports are municipal, for the service of the flight, as well as for third parties on the surface. and the respective municipalities cannot sustain operations. Additionally, EC Regulation No. 785/2004 applies in fixing the minimum insurance claims of carriers and aircraft operating companies. The insurance is defined per accident for each aircraft, proportionately with its MTOM(kg) classification and the risks that are covered include damage With regard to travel packages (Presidential Decree 339/96), the tour due to the carrier as well as risks deriving from acts of war, hijacking and operator bears responsibility for the proper fulfilment of obligations which terrorist acts. derive from the contract signed by the consumer and the tour operators, regardless of whether these obligations would be executed by a particular 41 What legal requirements are there with regard to aviation tour operator or the providers of other tourism services, since these ser- security? vices constitute a part of the contract. With regard to the damages which The security of airports and air safety in general is based on EC Regulation the consumer suffers owing to non-execution or improper execution of the No. 300/2008 and the National Civil Aviation Security Regulation. The transportation contract, the tour operator bears the responsibility, except CAA is responsible for planning, development, implementation, monitor- if non-execution or improper execution is due to neither its fault nor that ing and maintenance of the National Civil Aviation Security Programme as of other service providers, but is the exclusive fault of the consumer or well as coordinating all the activities of those involved in the safety of civil a third party, unrelated to the services offered in the contract or it is due aviation. The purpose of the National Civil Aviation Security Programme is to greater forces. In cases of non-execution or improper execution of the to set aviation security standards, procedures and practices for preventing agreed transport service by a carrier, the consumer may turn against the and suppressing acts of unlawful interference against civil aviation that are tour operator, which in turn may sue the carrier in question (article 5, para- committed on the ground and in flight. graph 1, Presidential Decree 339/1996 ). Among these practices of airport and aircraft security, the following Also, under the aforementioned Regulation No. 1107/2006, a num- are basic: ber of facilities for disabled people are defined, which ensure their right to • an identity check of passengers; travel in the air without problems. The relevant regulations are specified in • security control of passengers either by hand or through a metal detec- detail in the chapter about the European Union. tor portal; Finally, EC Regulation No. 1008/2008 prohibits all price discrimina- • security control of hand luggage; tions based on the customer’s residence or nationality or the travel agent’s • controls on hold baggage; and location. It also provides the following consumer rights regarding the • prohibiting passengers from carrying items hazardous to safety into prices of tickets offered or even published online. security restricted areas and the aircraft cabin. There must be a clear indication of the total price. Additional charges such as airport taxes, fuel surcharges, booking fees or credit card charges 42 What serious crimes exist with regard to aviation? must be stated from the beginning in the ticket price published, rather than be added at a later stage in the overall reservation price. Many airlines do The provisions of articles 162 to 184 of the Air Law Code contain various not include various charges such as airport fees or surcharges in their final crimes that are either felonies or misdemeanours. These crimes include, prices to make them attractive to consumers. This practice is illegal and the among other things: Commissioner for Consumer Affairs, Menglena Cuneva, has sent a strict • aircraft operation without the appropriate licence; warning to companies that mislead consumers. • violation of pilot’s official duties and violation of air traffic regulations; • breach of obligations of the exploited aircraft;

Bahas, Gramatidis & Partners

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

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

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• aircraft’s clearance to foreigners; • omission of an accident’s announcement or provision of help • omission of aircraft insurance; • violations by the crew in case of emergency; • illegal loading or transport; • despoilment or depredation; • breaches of orders; • air piracy; • violation of the pilot’s instructions and orders; • destruction or damages to the aircraft or survival tools; • jeopardising the safety of aircraft during the flight by passengers or • carrying weapons or explosives on the plane; crew members; • destruction or damages to facilities; and • transaction of stunt flights without the appropriate licence; • spreading false rumours. • flight in a restricted area;

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Hong Kong

Michael Kan and Lawrence Cheng Brandt Chan & Partners in association with Dentons HK LLP

General purpose of public transport if hire or reward is given or promised for the carriage of passengers or cargo (including mail and animals) on that flight; 1 Which bodies regulate aviation in your country, under what or if passengers or cargo are carried gratuitously on that flight by an air basic laws? transport undertaking. The principal body for the regulation of aviation in the Hong Kong Special An aircraft is on a private flight when the flight is undertaken neither Administrative Region is the Civil Aviation Department (CAD). The for the purpose of public transport nor for the purpose of aerial work (both Airport Authority Hong Kong (AAHK), however, performs an important of which require that the flight be commercial in nature). day-to-day statutory function in the administration and operation of Hong The Air Navigation (HK) Order 1995 specifies in detail the equipment Kong International Airport (HKIA), the authority of which stems from the required for each category of aircraft listed above. For a private category Airport Authority Ordinance (Cap 483). The CAD operates under the Civil aircraft, it has to be equipped with, among other things, a flight data Aviation Ordinance (Cap 448), enacted in 1994, which primarily gives recorder capable of retaining the data recorded during at least the last 25 effect to the Chicago Convention 1944 and provides legislative authority hours of its operation, a cockpit voice recorder required capable of retain- for Hong Kong’s system of civil aviation regulation and administration. ing the data recorded during at least the last 30 minutes of its operation and Statutes regulating civil aviation and administration include the a specified type of flight-recording system. Aviation Security Ordinance (Cap 494), the Carriage by Air Ordinance (Cap 500) and various subsidiary legislation such as the Air Transport 4 Is access to the market for the provision of air transport (Licensing of Air Services) Regulations and Air Navigation (Hong Kong) services regulated and, if so, how? Order 1995. Access to the market for providing air transport services is governed by the Civil Aviation Ordinance (Cap 448) and commercial licensing is gov- Regulation of aviation operations erned by the Air Transport (Licensing of Air Services) Regulations, which 2 How is air transport regulated in terms of safety? prescribe the procedures to be followed by the Air Transport Licensing Authority (ATLA) and the Director of Civil Aviation (DCA). The principal instrument regulating aviation safety is the Air Navigation A distinction is made between Hong Kong air carriers and foreign (Hong Kong) Order 1995 (amended in 2011). It includes provisions relat- airlines designated reciprocally by foreign countries party to bilateral air ing to aircraft (registration, airworthiness, maintenance and equipment), services agreements with Hong Kong, and also to Hong Kong and foreign operators (air operator certificates and operating and other requirements air service operators seeking to provide charter air services from or to Hong relating to public transport flights), personnel (crew requirements, powers Kong: and duties of commander and licensing of flight crew and air traffic controllers) and air traffic services and equipment. The principal body responsible for regulating aviation safety is the CAD, whereas the AAHK is also Hong Kong air carriers tasked with providing for the safe, secure and efficient operation of HKIA. Hong Kong scheduled international airline services must apply for a licence to the ATLA, and an inquiry may be held to determine if the licence should 3 What safety regulation is provided for air operations that do be granted in accordance with the criteria set out in the Air Transport not constitute public or commercial transport and how is the (Licensing of Air Services) Regulations. To obtain such licence, the appli- distinction made? cant must separately satisfy the DCA as to the adequacy of its staff and traffic-handling capability and that it possesses all required operational An aircraft shall not fly unless a certificate of airworthiness in respect of the and flight preparation manuals, route books for aircrew, flight plans, log aircraft has been issued and is in force. For the purpose of issuing certifi- books, load sheets, radio apparatus, maintenance and operational manuals cates of airworthiness, aircraft are divided into five categories: and schedules. • transport category (passenger) aircraft, which may fly for any purpose; The applicant must satisfy the ATLA that it is an airline duly incorpo- • transport category (cargo) aircraft, which may fly for any purpose rated in Hong Kong with its principal place of business in Hong Kong. except for the public transport of passengers; • aerial work category aircraft, which may fly for any purpose other than Foreign carriers public transport, broadly speaking, an aircraft that is flown if hire or Foreign airlines and charter air services must apply to the DCA. This is reward is given or promised in respect of the flight or the purpose of essentially an administrative formality subject to the proviso that the air- the flight; lines must first, if required, satisfy the aeronautical authorities of that other • private category aircraft, which may fly for any purpose other than contracting party that they are qualified to fulfil the conditions prescribed public transport or aerial work; and by law normally applied to the operation of international air services by • special category aircraft, which may fly for any purpose, other than such authorities and secondly, the aeronautical authorities must be satis- public transport, specified in the certificate of airworthiness but not fied that, depending on the agreement in question, the substantive owner- including the carriage of passengers unless expressly permitted. ship and effective control of the airlines designated are vested in the other contracting party government or its nationals, or alternatively, that the Pursuant to Air Navigation (Hong Kong) Order 1995, ‘public transport airline is incorporated and has its principal place of business in that other aircraft’ (which are for the carriage of passengers or cargo or both) means country. an aircraft flying or intended by the operator of the aircraft to fly for the

88 Getting the Deal Through – Air Transport 2015 Brandt Chan & Partners in association with Dentons HK LLP HONG KONG

5 What requirements apply in the areas of financial fitness and of China, has the power to renew or amend air service agreements and nationality of ownership regarding control of air carriers? arrangements previously in force, negotiate and conclude new air service When considering whether to grant a licence the ATLA is obliged, under agreements providing routes for airlines incorporated in Hong Kong and the Air Transport (Licensing of Air Services) Regulations, to consider the negotiate and conclude provisional arrangements with foreign states or financial resources of the applicant. In addition, the ATLA has the discre- regions with which no air service agreements have been concluded. tion to attach such terms as the ATLA sees fit. If the terms of the licence The Competition Ordinance was passed in June 2012 but is not yet have not been complied with, the licence may be revoked, suspended or in force. This aims to regulate anti-competition acts in Hong Kong. The varied. Competition Ordinance prevents anti-competitive agreements, con- A licence may be revoked by the ATLA if it is not satisfied that the certed practices and decisions, and prohibits any undertaking that has a holder continues to meet the requirement that it is an airline duly incor- substantial degree of market power from abusing that power having the porated in Hong Kong with its principal place of business in Hong Kong, object or effect of preventing, restricting or distorting competition. The which is expressly required under the Basic Law. The Basic Law provides Competition Ordinance is expected to be in force in 2013. However, the that the mainland Chinese government empowers the Hong Kong govern- Competition Ordinance expressly excludes from its purview any air service ment to issue licences to airlines incorporated in Hong Kong with its prin- agreement or provisional arrangement referred to under the Basic Law and cipal place of business in Hong Kong. international arrangement relating to civil aviation. There are, however, no legislative provisions for issuing a statement 6 What procedures are there to obtain licences or other rights to of policy. Representatives of the Hong Kong government, notably the operate particular routes? financial secretary and the secretary of economic services, may from time to time publish statements, in the Hong Kong Legislative Council or else- Applications for licences must be made in accordance with the Air where, clarifying the policies which the Hong Kong government applies in Transport (Licensing for Air Services) Regulations. The applicants must the performance of its air transport licensing functions. complete and file the prescribed form (form 1 in the schedule) with the ATLA information to be provided, including details of the route to be 9 What requirements must a foreign air carrier satisfy in order served and intermediate stopping points, documentation setting proposed to operate to or from your country? schedules, frequencies, tariffs for passengers, freight and mail, baggage allowance and excess baggage rates, total number of aircraft, aircrew and Under Hong Kong’s bilateral air services agreements, state parties are details of insurance. authorised to designate one or more air carriers incorporated in those The ATLA can grant a licence containing mandatory provisions on the states to perform the scheduled air services prescribed in the agreement. routes and frequency of flights by the carrier. The ATLA is required to have Such air carriers need to obtain authorisations (permits and licences) for regard for: the operation of the prescribed scheduled international air services. Once • the existence of other air services in the area through which the pro- this has been received the Hong Kong government must grant authorisa- posed services are to be operated; tions without delay. • the demand for air transport in that area; Two provisos apply: • the degree of efficiency and regularity of the air services, if any, already • the airlines must satisfy the aeronautical authorities of their home provided in the area; country that they are qualified to fulfil the conditions prescribed under • the period for which such services have been operated by the applicant the laws and regulations normally applied to the operation of interna- or by other operators; tional air services by such authorities; and • the extent to which it is probable that the applicant will be able to pro- • the aeronautical authorities must be satisfied that, depending on these vide a satisfactory service in respect of safety, continuity, regularity bilateral air services agreements, the substantial ownership and effec- of operation, frequency, punctuality, reasonableness of charges, and tive control of the airlines designed are vested in its country’s depart- general efficiency; ment or its nationals, or that the airline is incorporated and has its • the financial resources of the applicant; principal place of business in that other country. • the type of aircraft to be used; • the remuneration and general conditions of employment of aircrew 10 Are there specific rules in place to ensure aviation services and other personnel employed by the applicant; and are offered to remote destinations when vital for the local • any objections or representations made in accordance with the Air economy? Transport (Licensing for Services) Regulations. Not applicable to Hong Kong.

7 What procedures are there for hearing or deciding contested 11 Are charter services specially regulated? applications for licences or other rights to operate particular Control of permissions for such services to and from Hong Kong is retained routes? by the DCA who is authorised to grant permits for the carriage of pas- Before revoking or suspending a licence, the ATLA must give the licence sengers, main or cargo by air for hire or reward on other than scheduled holder notice. The licence holder can attend the inquiry and require that it journeys. In practice, these permits are granted on an ad hoc basis to meet be a public inquiry. specific demands and the extent to which such permits are granted is Within 14 days of an ATLA decision to revoke or suspend a licence, any determined primarily by government policy. person may enter an objection or make a representation about the deci- The DCA may revoke or suspend any air charter permit if the holder is sion. There are no express provisions in the Air Transport (Licensing of Air convicted of any breach of the terms of the regulations. The Aeronautical Services) Regulations requiring service of the objection or representations Information Publication (AIP) sets out the procedures and criteria for on the applicant, if any, or upon any other person who holds a licence to obtaining charter permits. which the application relates. Hong Kong’s bilateral air services agreements do not otherwise In the case of an emergency hearing, the ATLA may determine an expressly regulate non-scheduled commercial air services. application for a licence to remain in force for a period not exceeding 30 days and grant a licence for reasons of public interest. 12 Are airfares regulated and, if so, how? There are no provisions in the Air Transport (Licensing of Air In general, there is minimal economic regulation of civil aviation in Hong Services) Regulations concerning appeals or reviews of licensing decisions. Kong. The recently passed Competition Ordinance, which aims to regulate However, decisions made by ATLA may be challenged by way of judicial anti-competitive acts in Hong Kong, may have an impact on airfares. See review in the High Court. questions 8 and 28 et seq for further details. There could also be tariff provisions used in the Hong Kong’s bilateral 8 Is there a declared policy on airline access or competition and, air services agreements, and airlines are required to submit such tariff con- if so, what is it? trols to the relevant aeronautical authorities of each government party for The Basic Law, being the constitution of Hong Kong, provides that the Hong approval. Kong government, under the authorisations by the central government

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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 HKIA is operated and maintained by the AAHK, which is a statutory body aircraft listed on your country’s register? established in 1995 and is wholly owned by the Hong Kong government. According to article 4(3) of the Air Navigation (Hong Kong) Order 1995 (Cap 448C), the persons entitled to hold a legal or beneficial interest in air- 18 What system is there for the licensing of airports? craft in Hong Kong are: Article 73 of the Order governs the licensing of airports in Hong Kong for • the mainland Chinese government or the Hong Kong government; the purpose of operating aerodromes other than government aerodromes. • Chinese citizens; The Hong Kong government considers the following factors in deciding • Hong Kong permanent residents; or whether to grant a licence: • bodies incorporated in Hong Kong or other parts of the People’s • whether the person applying for the said notice is competent, hav- Republic of China and having their principal place of business in Hong ing regard to his or her previous conduct and experience, equipment, Kong or in other parts of China. organisation, staffing, maintenance and other arrangements, in ensuring that the aerodrome is safe for use by aircraft; The owner or the charterer will be mentioned in the aircraft register and • whether the aerodrome is safe for use by aircraft, having regard in they will be furnished a certificate of registration by the Hong Kong chief particular to the physical characteristics of the aerodrome and its sur- executive. However, if at any time any persons other than those listed roundings; and above become entitled to the legal or beneficial interest by way of owner- • whether the aerodrome manual submitted to the authority is adequate. ship of the aircraft, the registration shall become void. 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? As mentioned previously, HKIA is a public airport operated by the AAHK. According to the CAD and article 4 of the Air Navigation (Hong Kong) Airport charges in Hong Kong are governed by the Airport Authority Order 1995 (the Order), Hong Kong does not maintain a register of aircraft Ordinance and the Air Navigation (Hong Kong) Order 1995. mortgages or charges. Instead, where an aircraft is being mortgaged, infor- Under section 7 of the Airport Authority Ordinance, the AAHK is mation on its legal ownership, demise charter agreement and mortgage empowered to fix the level of charges and fees. Section 34 of the ordinance arrangement will be required at the time of registering the aircraft. Hence, provides guidance on how the amount and scale of the airport charges may the certificate of registration will contain the information of any mortgages be determined. or charges created on an aircraft registered in Hong Kong and the applicant Under article 76 of the Air Navigation (Hong Kong) Order 1995, the has the choice to agree or not agree to such information being released to Hong Kong chief executive is also given the authority to determine the the International Civil Aviation Organization. Depending on the status of charges and fees related to the aerodrome granted with licence for public the mortgagor or chargor, the existence of a mortgage or charge may need use. to be separately registered with the Hong Kong Companies Registry. 20 Are there laws or rules restricting or qualifying access to 15 What rights are there to detain aircraft, in respect of unpaid airports? airport or air navigation charges, or other unpaid debts? The Airport Authority Ordinance (Cap 483) provides the relevant Under section 40 of the Airport Authority Ordinance (Cap 483), aircraft restriction. may be detained by the AAHK where default is made in the payment of any Under section 18(1)(b) of the Airport Authority Ordinance, the Hong charges payable to the AAHK or to its subsidiaries. The ordinance further Kong chief executive is granted with the authority to make regulations for provides that if the defaulted payment remains unsettled after 60 days of the purpose of prohibiting, restricting or otherwise controlling access of such detention, the AAHK may proceed to sell the aircraft so as to recover any persons, animals, vehicles, vessels or other things to or in the vicinity outstanding payments. In so deciding, the AAHK is expected to ensure that of the airport area. Under section 35(2)(c), the AAHK may also by making the payment in default is affirmative without dispute. relevant provisions in its by-laws, prohibit, restrict, or control access to or the movement within the by-law area of persons, animals, vehicles, vessels 16 Do specific rules regulate the maintenance of aircraft? or other things. The Order and the Hong Kong Aviation Requirements (the HKAR) govern this aspect. 21 How are slots allocated at congested airports? According to article 7 of the Order, before an aircraft can fly in Hong The Air Services Division of CAD is responsible for schedule coordina- Kong, a valid certificate of airworthiness must be sought from the CAD. tion and slot allocation for HKIA in accordance with the International The actual inspection in this regard will be performed by the Flight Air Transport Association Worldwide Scheduling Guidelines (the IATA Standards and Airworthiness Division of the CAD who will inspect and Guidelines) and local guidelines. recommend the issuance in accordance with the Order and the procedures According to the IATA Guidelines, an independent coordinator should and the guidelines set out in HKAR-1. The Order further provides that the be appointed by the appropriate authority for allocating slots in congested certificate shall remain in force for such period as may be specified therein, airports (designated as coordinated airports and categorised as level 3). As and may be renewed from time to time by the authority for such further one of the busiest airports in the world, HKIA is categorised as a level 3 period as he thinks fit. airport and CAD has assumed the role of schedule coordinator for HKIA Article 9 of the Order also requires that in addition to the certificate since 6 July 2008. of airworthiness, an aircraft registered in Hong Kong shall not fly unless Listed below are some of the principles in this respect (per IATA it is maintained in accordance with a maintenance schedule approved by Guidelines): the Hong Kong chief executive. A certificate of maintenance will then be • slots are allocated by the coordinator only at a coordinated airport; issued to the subject aircraft. The Order provides that aircraft registered • slots can be allocated to aircraft operators. All operations at a coordi- in Hong Kong shall maintain log books for the aircraft, including for the nated airport require a slot allocated by the coordinator; engines and propellers. • in order to operate into and out of a coordinated airport, an aircraft Under article 12 of the Order and pursuant to the HKAR-66, aircraft operator must have slots allocated to it. However, the government may should be maintained by engineers holding valid aircraft maintenance exempt certain categories of aircraft operations, for example, humani- licences who will issue a certificate of maintenance upon satisfactory tarian flights; inspection. • the initial forum for discussion of slots and the adjustment of schedules is the Schedules Conference, which is typically held twice a year.

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Airlines, coordinators, schedule facilitators and invited observers will is not in force in the People’s Republic of China and hence it is also not in participate; and force in Hong Kong. • slots may be transferred or exchanged within or between airlines subject to final confirmation of the coordinator. 26 What system and procedures are in place for the investigation of air accidents? The IATA Guidelines provides that the basic principle of the slot alloca- The Accident Investigation Division is responsible for the investigation tion process is the historic precedence, also known as grandfather rights, of aircraft accidents under the Hong Kong Civil Aviation (Investigation whereby airlines are entitled to claim a series of slots based on the series of Accidents) Regulations (Cap 448B). The regulations lay down detailed of slots allocated and operated by them in the past. To be so entitled, the provisions on the system of investigation of air accidents including what airline seeking the allotment must show that it has operated at least 80 per accidents are reportable, the duty on the commander or aircraft operator to cent of the slots (as cleared by the coordinator) it has been allocated in the furnish information relating to the accidents, appointment of inspectors by past. the Hong Kong chief executive and the powers of the inspectors. Following investigation, the inspector will prepare a report stating the facts relating 22 Are there any laws or rules specifically relating to ground to the accident and an analysis of the facts leading to the conclusion as to handling? the possible cause or causes of the accident. The purpose of the accident As the statutory body responsible for the management, operation and investigation is to determine the circumstances and cause of the accident maintenance of HKIA, the AAHK has the authority to enter into various with a view to the preservation of life and the avoidance of accidents in the contracts and agreements with service providers including ground-han- future. The regulations also provide for the mechanism to seek a review of dling agents and contractors. This is usually done by way of public tender. the report produced by the inspectors by any person who thinks that their The right for the AAHK to enter into contracts and agreements on its own reputation has been adversely affected by the findings of the report within account is granted under section 7 of the Airport Authority Ordinance a specified time period. whereby the AAHK is provided with the right to make a contract or other agreements and also to employ an agent or contractor. 27 Is there a mandatory accident and incident reporting system The Airport Authority By-law (Cap 483A) provides relevant rules gov- and, if so, how does it operate? erning ground-handling matters such as landside traffic, ground move- Regulation 5 of the Hong Kong Civil Aviation (Investigation of Accidents) ments of aircraft, signs and removal and parking of aircraft. Regulations (Cap 448B) recognises that notice must be given to the chief inspector or the police, or both, in the event that a reportable accident 23 Who provides air traffic control services? And how are they occurs. regulated? To promote accident prevention by analysis of accident and incident Air traffic control services are provided by the Air Traffic Management data, the CAD has established an incident reporting system, which consists Division within the CAD. The division also provides flight information ser- of the mandatory incident reporting system and the voluntary incident vice and altering service within the Hong Kong Flight Information Region. reporting system. Under the mandatory incident reporting system, when Section 64A of the Air Navigation (Hong Kong) Order 1995 provides that there is an aircraft reportable accident or serious incident, the commander only the person granted such authority by the Hong Kong chief executive and/or operator of the aircraft, air traffic controller, maintenance services may provide relevant services. provider and the AAHK shall submit an accident report to the Accident Investigation Division by telephone, fax, e-mail, aeronautical fixed tel- Liability and accidents ecommunications network or post. Upon receipt of the accident report, the Accident Investigation Division will determine whether an investiga- 24 Are there any special rules in respect of death of, or injury to, tion is required under the regulations. The voluntary incident reporting passengers or loss or damage to baggage or cargo in respect of system captures occurrences other than accidents and serious incidents. domestic carriage? It is operated in a non-punitive environment and the source of information The liability regime governing the carriage by air in Hong Kong is provided will not be disclosed unless required to do so by law, or the person con- for under the Carriage by Air Ordinance (Cap 500). The ordinance imple- cerned authorised the disclosure. If the reported occurrence is the subject ments different air carriage liability regimes established by different inter- of an investigation, the information will only be used in accordance with national conventions and protocols. Domestic carriage is dealt with under the regulations. section 13 of the ordinance which provides that the Montreal Convention 1999 shall apply for non-international carriage. Competition law To the extent that it is not provided for in the ordinance, it is governed by common law rules as to carriage. 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? 25 Are there any special rules about the liability of aircraft The Competition Ordinance, passed in June 2012, regulates anti-compe- operators for surface damage? tition acts in Hong Kong generally. The Competition Commission was The liability of aircraft operators for surface damage is provided for in the established in May 2013 and the Competition Tribunal will be established Civil Aviation Ordinance (Cap 448). According to section 8(2) of the ordi- soon. The substantive provisions are expected to come into force in 2014. nance, the owner of the aircraft is strictly liable for material loss or damage The Competition Ordinance prevents anti-competitive agreements, caused to any person or property on land or water by, or by a person in, or concerted practices and decisions, and prohibits any undertaking that has an article or person falling from, an aircraft while in flight, taking off or a substantial degree of market power from abusing that power having the landing, unless such material loss or damage was caused or contributed to object or effect of preventing, restricting or distorting competition. by the negligence of the person by whom it was suffered. However, a per- The Competition Ordinance provides for: son will not be regarded as the owner of the aircraft for the purpose of this • a cross-sector rule prohibiting anti-competitive agreements and other ordinance if at the time of the loss or damage was caused, the aircraft had arrangements between undertakings (the First Conduct Rule); been leased for a period exceeding 14 days, no member of the crew of the • a cross-sector rule prohibiting abuse of market power by undertakings aircraft was in the employment of the owner, and the owner did not have with a substantial degree of market power (likely to be 25 per cent mar- the management of the aircraft (section 8(5)). ket share) (the Second Conduct Rule); and The Rome Convention 1952 provides for strict liability for causing • merger control. damage to persons on the surface by an aircraft in flight or by any person or thing falling therefrom. However, the convention was not ratified by the However, the Competition Ordinance expressly states that any air service United Kingdom and hence it was not in force in Hong Kong when sover- agreement or provisional arrangement referred to under the Basic Law and eignty reverted to the People’s Republic of China in 1997. The Convention international arrangement relating to civil aviation will not be captured by

www.gettingthedealthrough.com 91 HONG KONG Brandt Chan & Partners in association with Dentons HK LLP the legislation. Therefore, the application of the competition rules to the Financial support and state aid aviation industry is limited and its impact on the industry remains to be 33 Are there sector-specific rules regulating direct or indirect seen. financial support to companies by the government or government-controlled agencies or companies (state aid) in 29 Is there a sector-specific regulator or are competition rules the aviation sector? If not, do general state aid rules apply? applied by the general competition authority? There are no sector-specific rules regulating direct or indirect financial The Competition Ordinance creates the Competition Commission and the support to companies in aviation sector by the Hong Kong government. Competition Tribunal to police those new rules and formulate guidelines However, there are different government funding schemes available to regarding interpretation and enforcement. The Competition Commission companies in different sectors. The quantification criteria are different for is responsible for investigating suspected breaches of the law and bring pro- each scheme. In this regard, the SME Development Fund provided fund- ceedings before the Competition Tribunal. The work of the Competition ing to small and medium-sized Hong Kong enterprises in order for them Tribunal is to hear and adjudicate cases brought by the commission, pri- to comply with global aviation quality management standards for entering vate actions and review determination of the commission. into the aviation parts manufacturing industry. 30 How is the relevant market for the purposes of a competition 34 What are the main principles of the state aid rules applicable assessment in the aviation sector defined by the competition to the aviation sector? authorities? Not applicable. There is no definition of ‘market’ for the purpose of a competition assessment in the Competition Ordinance. However, the Hong Kong govern- 35 Are there exemptions from the state aid rules or situations in ment has issued some guidelines on the definition of ‘market’ to assist the which they do not apply? members of the Legislative Council to understand this concept. In general, ‘market’ has two dimensions: the product market and the geographic Not applicable. market. The task is to define the products on the demand side that buyers regard as reasonable substitutes for the product under investigation (‘focal 36 Must clearance from the competition authorities be obtained product’), and then to identify all the sellers who supply the focal and sub- before state aid may be granted? stitute products, or who could potentially supply them (this is regarded as The impact of the Competition Ordinance is not yet clear with respect to the relevant market). These sellers are the competitors that actually con- state aid issues should these arise. strain the exercise of market power. Thereafter, the geographical reach of the relevant market can be defined. 37 If so, what are the main procedural steps to obtain clearance? It is expected that draft guidelines to be published by the Competition Not applicable. Commission to assist compliance with the Competition Ordinance will provide further guidance in due course. 38 If no clearance is obtained, what procedures apply to recover unlawfully granted state aid? 31 What are the main standards for assessing the competitive effect of a transaction? Not applicable. Under the Competition Ordinance, the First Conduct Rule prohibits agree- Miscellaneous ments, concerted practices, or the making of or giving effect to decisions of an association that have the object or effect of preventing, restricting or 39 Is there any aviation-specific passenger protection distorting competition in Hong Kong. The ordinance distinguishes serious legislation? anti-competition conduct, namely price-fixing, market allocation, output The Aviation Security Ordinance (Cap 494) contains provisions relating control and bid-rigging, from other non-hardcore violation. to preventing persons from boarding. For instance, the commander may The Second Conduct Rule prohibits undertakings with a ‘substantial disembark a person who is believed to have done or about to do any act on degree of market power’ from abusing that power by engaging in conduct the aircraft while it is in flight that may jeopardise the safety of the aircraft that has the object or effect of preventing, restricting or distorting competi- or of persons or property on board the aircraft or good order and discipline tion in Hong Kong. Although the government had decided not to define on board the aircraft. ‘substantial degree of market power’ in the Competition Ordinance, the Other aviation-specific offences include hijacking, destroying, damag- secretary for commerce and economics set out in his speech that an under- ing or endangering the safety of aircraft, as well as offences in relation to taking with a market share of 25 per cent or below would be considered certain dangerous articles and acts of violence, threats or destruction of unlikely to possess a substantial degree of market power. The Competition property in general. Please refer to question 42 for further details. Ordinance also contains a list of factors that may be considered when determining the market power of an undertaking. It is expected that draft 40 Are there mandatory insurance requirements for the guidelines to be published by the Competition Commission to assist com- operators of aircraft? pliance with the Competition Ordinance will provide further guidance in The Civil Aviation (Insurance) Order (Cap 448F) requires all civil aircraft, due course. whether operating commercial or non-revenue flights, to have a Combined Single Limit (CSL) insurance. The CSL should cover the operator’s liabili- 32 What types of remedies have been imposed to remedy ties in respect of third-party risks, death of or bodily injury to any pas- concerns identified by the competition authorities? senger, damage to baggage, cargo and mail. Other liability items may be The Competition Ordinance provides for the following remedies: included, except liability in respect of damage to the hull of the operator’s • maximum pecuniary penalties of 10 per cent of the local turnover of aircraft. If an operator declares in writing that the aircraft does not carry the infringing undertaking for each year of infringement, up to a maxi- any passenger, baggage, cargo or mail, as the case may be, these items may mum of three years; be excluded from the CSL. The insurance cover must be on a per-occur- • damages, which may be awarded (on the Competition Tribunal’s own rence basis. The minimum CSL required is fixed according to taxi weight, initiative or on application) to any aggrieved persons; which can be found under Gen 1.2-2 of AIP. • orders to unwind a transaction and interim injunctions stopping com- An aircraft shall not land or take off in Hong Kong unless there is in mercial conduct during investigations and pending prosecution; and force a policy of insurance in the aircraft that insures the operator in respect • disqualification orders against directors and others who have contrib- of any liability for the above-mentioned risks. uted to the contravention of competition rules (for up to a maximum of five years).

92 Getting the Deal Through – Air Transport 2015 Brandt Chan & Partners in association with Dentons HK LLP HONG KONG

41 What legal requirements are there with regard to aviation or anything that may cause serious damage to the structure of an aircraft security? or impairment of any system or equipment of an aircraft. It is an offence to The Aviation Security Ordinance contains provisions that are preventive in use any device to commit at an aerodrome serving international civil avia- nature (eg, preventing unfit persons from boarding). The Airport Authority tion any act of violence that could cause death or serious personal injury By-law also imposes restrictions including no smoking, no hazardous and endanger the safe operation of the aerodrome or the safety of persons goods on board, no radio interference, etc. at the aerodrome. In addition, the Aviation Security Ordinance, the Aviation Security Any act or omission taking place on board a Hong Kong-controlled Regulation and the Airport Authority By-law contain a number of offences aircraft while in flight elsewhere than in or over Hong Kong, which, if it in order to ensure better protection of aircraft, aerodromes and air navi- took place in Hong Kong, would have constituted an offence under Hong gation installations. See question 42 for details. The provisions of the Kong law, will constitute that offence. Hong Kong courts that have juris- Aviation Security Ordinance take priority over the provisions of the Airport diction regarding piracy committed on the high seas will have jurisdiction Authority By-law. in respect of piracy committed by or against an aircraft, wherever that piracy is committed. The Offences Against the Person Ordinance (Cap 212) 42 What serious crimes exist with regard to aviation? and Crimes Ordinance (Cap 200) also preserve the offences of murder, attempted murder, manslaughter, culpable homicide or assault. The Aviation Security Ordinance introduces offences (punishable by life The Air Navigation (Hong Kong) Order 1995 contains certain offences imprisonment) of hijacking an aircraft, destroying, damaging or endanger- relating to the carriage of baggage, weapons and munitions of war, danger- ing the safety of aircraft, committing on board an aircraft in flight any act ous goods and animals. The list of penalties in the case of contravention of of violence likely to endanger its safety, placing a device or substance that particular provisions can be found in this order. is likely to destroy the aircraft, damage any property used for the provision If proceedings for an offence are brought in a court that does not other- of air navigation facilities, or interfere with the operation of any such prop- wise have jurisdiction to determine the proceedings, then for the purposes erty, where such damage or interference is likely to endanger the safety of of conferring such jurisdiction, the act will be treated as having occurred the aircraft in flight, having any restricted article such as explosives, arms in Hong Kong.

Michael Kan [email protected] Lawrence Cheng [email protected]

3201 Jardine House Tel: +852 2533 3622 One Connaught Place Fax: +852 2868 0069 Central www.dentons.com Hong Kong

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Iceland

Erlendur Gíslason Logos Legal Services

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

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Non-scheduled commercial operations are subject to the ICETRA’s Aircraft approval except for entities listed above. Non-scheduled non-commercial 13 Who is entitled to be mentioned in the aircraft register? Do operations as well as private operations are permitted except for entities requirements or limitations apply to the ownership of an from states not signed up to the Chicago Convention, which need to apply aircraft listed on your country’s register? for the ICETRA’s permit for flying in Icelandic airspace. The aircraft register is a title register such that the owner of an aircraft 7 What procedures are there for hearing or deciding contested is primarily entitled to be mentioned in the aircraft register. The aircraft applications for licences or other rights to operate particular operator or holder is also mentioned as such. routes? Ownership of an aircraft on the Icelandic nationality register is restricted to: As a public administrative body, the ICETRA is subject to the Act on (i) Icelandic nationals and Icelandic legal persons; and Administrative Procedures No. 37/1993 and must abide by the principles (ii) nationals or legal persons, citizens and domiciled in states with which of full disclosure and investigation of facts, fair hearing and party contesta- Iceland has entered an agreement to this effect, provided the aircraft is tion, proportionality and other administrative principles laid down in said operated by an Icelandic air operator. Act. The rejection by the ICETRA of an application for licences or operation of routes can be appealed to the Ministry of the Interior. An appeal The latter applies to aircraft owned by natural and legal persons from against the decision of the Ministry regarding the objection can be lodged within EEA member states. Aircraft owned by entities falling outside cat- with a district court. An appeal against the judgment of the district court egories (i) and (ii) may be registered with the ICETRA’s permit provided can be entered with the Supreme Court of Iceland. the aircraft is subject to adequate supervision and specific reasons speak in favour of the registration, in particular that the aircraft is on the fleet of 8 Is there a declared policy on airline access or competition and, an Icelandic operator through a lease arrangement with the foreign owner. if so, what is it? There is no official policy on airline access or competition. Competition 14 Is there a register of aircraft mortgages or charges and, if so, matters are assessed on a case-by-case basis by the Icelandic Competition how does it function? Authority with regards to the objectives of the Icelandic Competition There is a register for the recording of mortgages and other rights on air- Act No. 44/2005, which is to promote effective competition and thereby craft in Iceland (the Register of Rights in Aircraft). The Register of Rights is increase production efficiency. maintained pursuant to the 1948 Geneva Convention on the International Recognition of Rights in Aircraft and the Icelandic Implementation Act 9 What requirements must a foreign air carrier satisfy in order No. 21 of 1966 creating the Register of Rights. Pursuant to the Register of to operate to or from your country? Rights Act 1966, an aircraft can be registered with the Register of Rights if To operate commercial flights a foreign air carrier which has its principal the aircraft is registered with the Icelandic nationality register. The follow- place of business in an EEA member state requires an operating licence ing rights can be registered with the Register of Rights: issued by the relevant member state. Air carriers from countries outside • ownership rights, whether unconditional or subject to the payment of the EEA require a designation pursuant to the applicable bilateral agree- a purchase price (purchase option) or other conditions; ment between Iceland and that other country. • mortgages and similar security interests intended to secure the pay- Furthermore, the foreign air carrier requires an air operator’s certifi- ment of debt; and cate (AOC) to operate the flights. While operating the flights, the applicable • rights arising from a lease agreement for a lease term of six months or rules in respect of insurance, airworthiness, traffic control, etc, have to be more. complied with. 15 What rights are there to detain aircraft, in respect of unpaid 10 Are there specific rules in place to ensure aviation services airport or air navigation charges, or other unpaid debts? are offered to remote destinations when vital for the local According to article 136 of the Act on Aviation, the ICETRA and an opera- economy? tor of an airport or air traffic control services may prevent the departure of The Ministry of the Interior can decide to make certain domestic routes in an aircraft from an airport until charges are paid or security placed for the Iceland subject to public service obligations for being considered as a part payment of charges with respect to the relevant aircraft or other operation of the basic transportation net. If there are no airline companies willing to of the relevant owner or operator of the aircraft. offer their services on general market conditions on each route, the govern- Further, the general Icelandic rules on pre-judgment seizure of prop- ment offers state aid in an open tender bid to those companies willing to erty (Act on Pre-judgment Attachment and Injunction) apply in respect of provide services. unpaid charges or other debts. By an agreement between the Icelandic and British governments in 11 Are charter services specially regulated? 1974, the UK CAA bills and collects air navigation charges imposed by Charter services are regulated as follows: Iceland on the North Atlantic route. Under English legislation, it is possible Non-commercial charter services may be operated to and from for aircraft to be detained in certain UK airports for the non-payment of Iceland and through Icelandic airspace by operators from member states of these Icelandic air navigation charges. the Chicago Convention without specific permission, while operators from states not members to the Chicago Convention require a permit from the 16 Do specific rules regulate the maintenance of aircraft? ICETRA which needs to be applied for at least 48 hours prior to the aircraft In Iceland, there is specific legislation regarding the maintenance of air- entering Icelandic airspace. craft. The Act on Aviation, and certain regulations implementing EU regu- Commercial charter services may be operated to and from Iceland lations in this field pursuant to the obligations of Iceland under the EEA and through Icelandic airspace without specific permission by operators Agreement contain provisions regarding maintenance. The standards that are: imposed by EASA (which are based on standards developed by the former • issued with an operating licence in an EEA member state; JAA) apply. The main provisions regard the responsibility of the operator • designated by a contracting state pursuant to a bilateral air services to develop a maintenance programme, periodical maintenance operations agreement between Iceland and a third state; and and research and notification of defects, as well as licensing requirements • where the international obligations of Iceland in relation to other applicable to maintenance services providers. states permit the air operation provided the foreign operator is Through Regulation No. 206/2007 (as subsequently amended) acknowledged and designated by its home state. Iceland has implemented Commission Regulation (EC) No. 2042/2003 of 20 November 2003 (as subsequently amended) on the continuing air- 12 Are airfares regulated and, if so, how? worthiness of aircraft and aeronautical products, parts and appliances and Airfares are not regulated in Iceland, either on domestic or international on the approval of organisations and personnel involved in these tasks. routes. The safety requirements laid down in this regulation apply to all aircraft

www.gettingthedealthrough.com 95 ICELAND Logos Legal Services registered in Iceland or subject to the ICETRA’s oversight, whether consti- governing body existing under its constitutive legislative Act No. 102 of 13 tuting public/commercial transport or private non-commercial operations. June 2006. The Act contains provisions with respect to the statutory tasks and organisation of Isavia, its financial means and financial structure, and Airports the tariffs to be charged by Isavia. In respect of the latter, reference is also made to Regulation No. 1020/2008 on a common tariff system for air navi- 17 Who owns the airports? gation services, which implements EC Regulation on common tariffs No. All public airports in Iceland are owned by the Icelandic state. 1794/2006 of 6 December 2006. Regulation No. 870/2007 on Air Traffic Services in the Single European Sky (SES) implemented into Icelandic law 18 What system is there for the licensing of airports? the four main EC Regulations of the SES on 10 March 2004, namely, the Pursuant to the Act on Aviation, anyone desiring to operate an airport for SES Framework Regulation, the Service Provision Regulation, the Airspace public aviation shall apply for a licence from the ICETRA at least three Regulation and the Interoperability Regulation. The substantive provisions months in advance of the proposed opening of the airport. Written obser- of commission regulation (EC) No. 2096/2005 of 20 December 2005 on vations from the relevant local government shall accompany the applica- common requirements for the provision of air navigation services apply in tion. Upon satisfaction of the applicable requirements, the ICETRA shall Iceland. issue the operating licence. There are no further provisions on the licensing system. Liability and accidents 24 Are there any special rules in respect of death of, or injury to, 19 Is there a system of economic regulation of airports and, if so, passengers or loss or damage to baggage or cargo in respect of how does it function? domestic carriage? Apart from licensing requirements as described in the preceding paragraph, Chapter X of the Act on Aviation contains rules with respect to air carrier which apply equally to the operation of airports and airport terminals, liability. These rules are based on and comply with the rules laid down in no further system of economic regulation exists specifically for airports. the Montreal Convention (in particular Annex 13) and apply to domestic Considering competition regulation as a type of economic regulation, the carriage. general competition laws apply to airports but no specific competition reg- In principle, air carriers are liable for damage sustained in case of ulations are tailored for airports only. Airports in Iceland are operated as death or bodily injury of a passenger only upon the condition that the acci- two separate airport networks, one comprising only Keflavik International dent which caused the death or injury took place on board the aircraft or Airport and the other one all other airports in the country. Only Keflavik in the course of any of the operations of embarking or disembarking. With Airport is of such size as to be subject to Directive 2009/12/EC on airport respect to checked baggage, the air carrier is liable for damage sustained by charges which provides for the transparency of charges, consultation with an event that took place on board the aircraft or during any period within airport users and non-discrimination among airport users. The main prin- which the checked baggage was in the charge of the carrier, unless the ciple of the economic regulation of airports is that they shall be financed by damage resulted from the inherent defect, quality or flaw of the baggage. way of user charges rather than tax revenue. However, the operation and With respect to unchecked baggage, fault liability applies. maintenance of airports other than Keflavik Airport is not sustainable on The liability of the air carrier in respect of personal injury or death of user charges only, so they rely also on government contributions. passengers will be limited for each passenger to a maximum of 100,000 special drawing rights (SDR, defined by the International Monetary Fund) 20 Are there laws or rules restricting or qualifying access to if the air carrier proves that such damage was not due to the negligence or airports? other wrongful act or omission of the air carrier or its servants or agents, Apart from the specific rules governing the allocation of slots and access to or such damage was solely due to the negligence or other wrongful act or ground handling services as described below, no further rules apply as to omission of a third party. Air carriers cannot contractually limit their liabil- restricting or qualifying access to airports. Furthermore, general competi- ity under the amount of 100,000 SDR. With respect to liability to loss or tion rules apply in this respect, among other things on the prohibition of damage to baggage, in principle a maximum liability of 1,000 SDR applies. abuse of a dominant position. 25 Are there any special rules about the liability of aircraft 21 How are slots allocated at congested airports? operators for surface damage? Slots are allocated in accordance with Regulation No. 1050/2008 on the Chapter XI of the Act on Aviation provides for the liability of the aircraft Allocation of Airport Slots. According to this Regulation airports can be owner or the operator as the case may be for damage caused by the use of categorised as either coordinated airports or schedule-facilitated airports, the aircraft to individuals or property located outside of the aircraft, except in which case a coordinator is designated for the coordination of slots allo- within the limits of an airport. The owner and operator may exonerate cation on the basis of the principles of independence, impartiality, clar- themselves of liability if they prove that the injured caused the damage wil- ity, transparency and equality and by safeguarding the interests of new fully or by gross negligence. entrants. Currently, only one airport, Keflavik International Airport, is categorised as a fully coordinated airport, with an independent Danish entity, 26 What system and procedures are in place for the investigation Airport Coordination Denmark (ACD) appointed as coordinator. of air accidents? The investigations of civil aviation accidents and serious incidents are car- 22 Are there any laws or rules specifically relating to ground ried out by an independent seven-member committee, the Transportation handling? Accident Investigation Committee (TAIC). Upon the receipt of a notifica- The Act on Aviation and implementing regulations govern the access to tion of an accident or an investigation request, the TAIC will verify whether third-party ground handling and self-handling at airports open to commer- an investigation is required. The results of investigations by the AAIC are cial aviation. The rules provide certain threshold passenger volumes which, published in a report. Before the final report is published, parties with a if exceeded, may justify the imposition of access restrictions, mandatory vested interest are entitled to review the draft report and submit their use of airport infrastructure and ownership and control requirements on comments. The legislative Act on Transport Accident Investigations was service providers. The rules further govern the selection of service provid- designed to attain the objectives of Annex 13 to the Chicago Convention ers, invitation to tenders, restriction to certain services etc, while ensuring and the investigations by the TAIC are carried out in accordance with said respect for fair competition principles. 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? Air traffic control services are subject to official regulation by the ICETRA The Act on Transport Accident Investigation No. 18 of 6 March 2013 places and may be conducted by a public entity, institution or private company a universal reporting obligation on anyone who obtains knowledge of which is issued with a licence by the ICETRA for operating air traffic con- the occurrence of an air accident or serious incident. A specific reporting trol services. Currently, only the state-owned public limited company duty is placed on the ICETRA, air traffic control and air navigation service Isavia provides air traffic control services. Isavia is an independent

96 Getting the Deal Through – Air Transport 2015 Logos Legal Services ICELAND providers, aircraft operators, holders of air operator’s certificates as well as matters have mainly been imposed in merger cases and are generally of a emergency call centres. behavioural nature. Although divestiture measures have become more fre- Notifications shall be sent to the TAIC. The TAIC decides in its discre- quent, such remedies have not yet been imposed in airline matters. tion whether or not to open an investigation on the basis of a notification. The most common remedies in merger cases involve the requirement EC Directive 2003/42 has been implemented by Act No. 18/2013. to appoint a board member of a target company which is not a board mem- Pursuant to the Act, certain occurrences which have or may have affected ber or employee of the takeover company. Another common remedy is the flight safety and that have not resulted in an accident or serious incident obligation to ensure the legal and operational separation of two entities must be notified to the TAIC. that belong to the same group of companies, in other words, a prohibition of a full merger. Other remedies that have been imposed in aviation cases Competition law are a prohibition of cooperation between the target company and takeover company in relation to any business agreements; a prohibition on sensitive 28 Do sector-specific competition rules apply to aviation? If not, information disclosure between the merging companies; a prohibition on do the general competition law rules apply? price discrimination; a prohibition on the tying and bundling of products; There are no official sector-specific competition rules that apply to aviation. an obligation to sell or offer a certain amount of the supply to parties out- The Icelandic Competition Act No 44/2005 applies to aviation. Articles 10 side of the merging parties group; and an obligation to purchase certain and 12 of the Competition Act prohibit anti-competitive agreements and services from a party outside of the merging parties group. concerted practices. Article 11 of the Act prohibits a dominant undertaking from abusing its position on the relevant market. Financial support and state aid It should be noted that the Competition Authority is of the opinion that predatory pricing matters in relation to aviation should be assessed with 33 Are there sector-specific rules regulating direct or indirect regards to the specific cost nature of the airline industry. Instead of apply- financial support to companies by the government or ing the standard average variable cost/average total cost (AVC/ATC) test, government-controlled agencies or companies (state aid) in the Competition Authority uses a cost benchmark referred to as long-term the aviation sector? If not, do general state aid rules apply? fully allocated cost. General state aid rules under the EEA Agreement apply to aviation in Iceland. According to paragraph 1, article 61 of the EEA Agreement, state 29 Is there a sector-specific regulator or are competition rules aid which distorts or threatens to distort competition by favouring certain applied by the general competition authority? undertakings or the production of certain goods insofar as it affects trade There is no sector-specific regulator for aviation. General competition between the states that are parties to the EEA Agreement is generally pro- rules are applied by the Competition Authority in aviation matters. hibited unless exemptions under paragraphs 2 and 3, article 61 of the EEA Agreement apply. Currently the Icelandic government provides state aid to 30 How is the relevant market for the purposes of a competition air services on six routes in Iceland that are considered of specific impor- assessment in the aviation sector defined by the competition tance from a socio-demographic perspective. authorities? 34 What are the main principles of the state aid rules applicable The relevant market is generally defined on a case-by-case basis and the to the aviation sector? 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 See the response to question 33. markets for international flights on the one hand and domestic flights on the other hand. Each market is then divided into passenger travel and the 35 Are there exemptions from the state aid rules or situations in transport of goods. The passenger market is further divided into scheduled which they do not apply? flights and charter flights. Yes. According to paragraph 2, article 6 of the EEA Agreement, aid that has The Competition Authority has generally applied point of origin – a social character; aid that is granted to individual consumers, provided point of destination (O&D) definitions in scheduled passenger flights. The that such aid is granted without discrimination; aid related to the origin of Competition Authority has argued in one case that the relevant market in the products concerned; and aid that is intended to make good the damage passenger flight should be defined with respect to the passengers’ needs, caused by natural disasters or exceptional occurrences is exempt from the namely, a market for business (time-sensitive) passengers on the one hand state aid rules. and leisure (non-time sensitive) passengers on the other. The Competition Furthermore, pursuant to paragraph 3, article 61 of the EEA Appeal Committee rejected the approach and stated that the O&D market Agreement, state aid can be considered lawful if: definition is the appropriate market. • it is used to promote the economic development of areas where the standard of living is abnormally low or where there is serious 31 What are the main standards for assessing the competitive underemployment; effect of a transaction? • it is used to promote the execution of an important project of common A transaction may be assessed in three separate ways depending on the European interest or to remedy a serious disturbance in the economy nature of the agreement. When assessing whether a transaction falls foul of an EU member state or an EFTA state; of article 10 or 12 (anti-competitive actions of two or more companies) of • it is used to facilitate the development of certain economic activities the Competition Act, the Competition Authority examines whether the or of certain economic areas, where such aid does not adversely affect transaction has the object or effect of prevention, restriction or distortion trading conditions to an extent contrary to the common interest; or of competition. • it falls within the ambit of such other categories of aid as may be speci- In order to assess whether a transaction constitutes an abuse of a dom- fied by the EEA Joint Committee. inant position under article 11 of the Competition Act, the Competition Authority focuses on whether the transaction has or is likely to have 36 Must clearance from the competition authorities be obtained an exclusionary effect or exploitative effect and thereby be harmful to before state aid may be granted? competition. Yes, a clearance from the EFTA Surveillance Authority must be obtained. When a transaction involves a merger, the Competition Authority investigates the transaction in order to assess whether it results in distor- 37 If so, what are the main procedural steps to obtain clearance? tion of competition by the creation or strengthening of a dominant position The state must notify the EFTA Surveillance Authority (ESA) of the state or whether it significantly impedes effective competition. aid and the authority must within two months decide whether the state aid is compatible with the EEA Agreement. If the state aid is considered 32 What types of remedies have been imposed to remedy incompatible with the EEA Agreement, the ESA will commence a formal concerns identified by the competition authorities? investigation procedure and ask third parties to comment on the matter The Competition Authority may impose structural or behavioural rem- before a final decision is reached. The ESA decision may be appealed to edies in merger cases as well as infringement cases. Remedies in aviation the EFTA Court.

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Organisation of the Travel Industry provides for the obligation of compre- Update and trends hensive tour operators as a condition to their operating licence to place a guarantee for the repayment of passengers’ instalments on package tours There is an emerging trend in the way the government runs airports and repatriation from abroad in case of the tour operator’s bankruptcy or in that the objective is for airports to be financially self-sustainable by relying exclusively on revenue generated by user charges. To this cessation of operations. end, all specific taxes whose revenues were designated to airports A dispute resolution committee with respect to complaints by passen- have been abolished and replaced by commercial revenue, user fees gers is in place based on an agreement between the association of compa- and per-passenger charges. While this aim has been achieved in the nies in the travel and tourism sector and the consumer organisation. The case of the main international airport, Keflavik Airport, the same committee can order the payment of damages and its decisions are binding does not apply to any of the domestic airports, all of which still must unless the relevant travel organisation refers the matter to the courts within rely on specific financial contributions from the state in order to four weeks of the decision. This complaint mechanism aims to provide finance their management and maintenance. passengers with a low-threshold, quick and inexpensive manner through which to resolve their conflicts with airlines and other travel organisations.

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? If no clearance is obtained the party which received the aid must repay the Yes, EC Regulation 785/2004, which applies in Iceland pursuant to aid with interest. The Icelandic state is responsible for recovering the state implementing regulation No. 78/2006 on mandatory aviation insurance, aid from the recipient within four months from the date of the ESA deci- establishes minimum insurance requirements for air carriers and aircraft sion ordering the repayment of the aid. The rate of interest is fixed by the operators in respect of passengers, baggage, cargo and third parties. ESA. 41 What legal requirements are there with regard to aviation Miscellaneous security? 39 Is there any aviation-specific passenger protection Regulation No. 985/2011 on Aviation Security provides for rules regarding legislation? security officers, airport operators’ aviation security programmes, airport access restrictions and other security measures for airports, passenger and The following aviation-specific legislation on passenger protection is in baggage control and the control of goods and airport service providers. The force in Iceland: Aviation Security Regulation implements into Icelandic law a number of Regulation No. 1048/2012, replacing Regulation No. 574/2005, imple- EU regulations on aviation security as a part of Iceland’s obligations under mented into Icelandic law the provisions of EC Regulation 261/2004 on the EEA Agreement. compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights. Thus, the same regime 42 What serious crimes exist with regard to aviation? applies in this respect in Iceland as in European Union member states. Flights from, to or passing through an airport within the EEA operated The Act on Aviation and implementation regulations primarily contain by airlines with a licence granted by an EEA member state are subject to provisions that declare non-compliance with or breach of certain rules as Regulation No. 475/2008 on the rights of disabled persons and individuals regulatory offences, but not as criminal offences. with reduced mobility travelling by air, which implemented into Icelandic On the other hand, the Icelandic General Penal Code identifies spe- law the provisions of EC Regulation 1107/2006. cific criminal offences related to aviation such as terrorism by way of Act No. 80 of 19 May 1994 on Package Tours provides protection to hijacking aircraft and the causing of aircraft accidents. passengers purchasing a package comprised of at least two of the three In addition to these provisions, Iceland is also party to certain inter- components of travel, accommodation and another service constitut- national instruments providing for rules against the hijacking of aircraft, ing a significant part of the tour. This Act implemented the provisions offences and crimes committed on board an aircraft and sabotage, such as of EEC Directive No. 90/314/EBE and provides consumer protection to the Tokyo Convention 1963, the Hague Convention 1970 and the Montreal passengers in case of cancellation and changes to package tours by either Convention 1971. Offences against the Montreal Convention are subject to the passenger or tour operator. Further, Act No. 73 of 24 May 2005 on the 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

98 Getting the Deal Through – Air Transport 2015 I.L.A. Pasrich & Company INDIA

India

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

General maintaining and managing civil aviation infrastructure. The AAI is charged with construction, modification and management of passenger terminals, 1 Which bodies regulate aviation in your country, under what development and management of cargo terminals, development and basic laws? maintenance of apron infrastructure including runways, taxiways etc, pro- The principal regulatory body in the field of civil aviation in India is the visions for communication, navigation and surveillance, air traffic control, Directorate General of Civil Aviation (DGCA), headed by the director gen- passenger facilities 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 investigates air accidents or incidents; and provides technical assistance its establishment in late 2009, the AERA has decided tariffs, charges for to the courts and committees of inquiry. The DGCA coordinates regula- aeronautical services and 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 2014). 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 2014). 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- 1992 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 (amended in 2003), accident/incident prevention programme. Appendix A to the CAR con- the AAI was entrusted with the responsibility of creating, upgrading, tains ‘Guidance Material for Preparation of the Flight Safety Manual’. www.gettingthedealthrough.com 99 INDIA I.L.A. Pasrich & Company

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/ Further requirements for issuance of the certificate of airworthiness SMS Division was established in the DGCA in 2010. A regulatory frame- are set out in a 2007 CAR section II dated 1 February 2007, amending the work, after introduction of the SSP and SMS, has also been established. original CAR of 20 March 1992, which contain reference to the application The Safety Management Systems are established in terms of rule 29D of procedure, documentation and other conditions, mentioning particularly the Aircraft Rules, 1937. the renewal procedure (every two years for aircraft under 20 years old and The DGCA, through relevant officers, carries out station facility every year for aircraft over 20 years old). inspection, cockpit enroute inspection, cabin inspection, air operator pilot proficiency checks, main base inspection and air operator ramp inspection 4 Is access to the market for the provision of air transport apart from checking the airworthiness of each aircraft. services regulated and, if so, how? Various statutory/regulatory provisions starting with the Aircraft Act Access to the market for provision of air transport services is regulated 1934, the Aircraft Rules 1937, CARs, ATACs, and AICs, etc (explained under Parts XIIA and XIII of the Aircraft Rules, 1937. Rule 134 introduces above) stipulate the safety and operational requirements applicable to dif- requirements for an operating permit to be issued by the central govern- ferent types of operations. CARs are divided into 11 sections. Section 5 of ment in relation to scheduled air transport service from, to, in, or across the CARs issued by the DGCA deals with air safety. India. Similarly, under rule 134A(4), an application may be made for grant All flight crew members are now required to necessarily undergo peri- of a non-scheduled operator’s permit valid for up to two years. Access to odic refresher and flight safety courses as stipulated. Aircraft operators the Indian market may be considered regulated by reference to the pro- are required to have trained and qualified, DGCA-approved, load and trim visions of Schedule XI to the Aircraft Rules setting out the requirements sheet personnel at each airport for the type of aircraft operated. All crew for a scheduled air transport service. These provisions confer some degree members, cargo handling personnel, etc must be DGCA-approved before of discretion on the DGCA, but also contain rigorous disclosure require- they receive BCAS airport entry permits. If the operator intends to employ ments that must be met in terms of experience and financial resources, foreign pilots and engineers for a specified period, specific approval of the satisfactory equipment, organisational strength, staffing arrangements, competent authority shall have to be obtained. general competence based on track record, ability to meet liabilities aris- Every operator must have a chief of flight safety who shall be respon- ing from loss or damage to persons or property, existing/potential need or sible to the DGCA for ensuring compliance of all operational requirements demand for the relevant service, adequacy of other air transport services and responsible for implementation of policies laid down in the flight and the possibility of wasteful duplication or material diversion of traffic, safety manuals and all other safety measures required by law. All operators capital expenditure involved, reasonableness of the tariff and objections or are also required to have a safety audit team. The DGCA has safety audit representations made (by any person including a third party). The permit teams to carry out safety audits of the operators periodically. follows a recommendation from the civil aviation authority of the interna- The AAI also has its own Directorate of Aviation Safety. This tional airline’s home country recommending the operator in accordance Directorate monitors aerodrome operations, air navigation operations. It with a bilateral agreement between the two governments. Clarifications detects safety hazards and points them out to the concerned directorates; are provided by this authority. The bilateral agreement (or air services assists all the directorates with establishing their SMS; coordinates safety agreement) finds reference in rule 134(2). The permit itself does not gener- matters of the AAI with the DGCA, ICAO and other stakeholders; pro- ally contain conditions, but the application sets out the operator’s intended motes the safety of aerodromes and air navigation services; presents safety frequencies. reports to the Safety Review Board (SRB) and implements the directions The DGCA issued a CAR on 1 March 1994 (updated several times given by it and effective safety programmes. up to 9 April 2014), which sets out minimum requirements for grant of a permit to operate a scheduled passenger air transport service. The rel- 3 What safety regulation is provided for air operations that do evant CAR specifies minimum capitalisation, requirement of a minimum not constitute public or commercial transport and how is the number of aircraft, maintenance engineers, flight crew and cabin require- distinction made? ments, etc and also refers to various permissions needed before an initial The DGCA issued a CAR on 24 April 1992 under section 2 – Airworthiness no-objection certificate is granted, actions to be completed before acquisi- (series O, part I, issue IV) on ‘Minimum requirements to be complied tion of aircraft and airworthiness requirements, operational requirements, with by Operators Engaged in Scheduled/Non Scheduled operation or in etc. As per the applicable CAR, full equity as required shall be available aerial work including Flying Training and Private work’. Rule 134A of the with the company even at the initial stage so as to demonstrate commit- Aircraft Rules, 1937 provides that for operation of an air transport service ment. The CAR expressly provides that the requirements are complemen- (other than a scheduled air transport service) by an air transport under- tary to ICAO Annex 6 Part I. As explained in response to question 5, foreign taking located outside India, special permission from the central govern- equity participation of up to 49 per cent is now (as of March 2013) permit- ment is required. For operation of an air transport service (other than a ted to be made by a foreign airline. There is also a circular AIC No. 12/2013 scheduled air transport service) by an Indian air transport undertaking, dated 1 October 2013 in this regard. a non-scheduled operator’s permit granted by the central government is It is possible to see some of the CAR requirements and the discretion required. A non-scheduled operator’s permit is valid for two years and may granted to the DGCA with regard to the above-mentioned factors operat- be renewed for another two years upon application. Rule 3(2)(49) defines ing as non-tariff barriers that could limit access to the market, but India has a ‘scheduled air transport service’ as an ‘air transport service undertaken not made specific WTO commitments for air transport services and there between the same two or more places and operated according to a pub- are no known reports of limited access due to these factors or discrimina- lished timetable or with flights so regular or frequent that they constitute a tory treatment arising from the exercise of discretion in this regard even recognisably systematic series, each flight being open to use by members though some measure of protectionism is inherent in the continued state of the public’. This definition results in the distinction between scheduled ownership of the national carrier. The nationality requirements mentioned and non-scheduled air transport. in reply to question 5 are also relevant here, as is our response to question Rule 134B of the Aircraft Rules, 1937 provides that no operator shall 7 covering the procedures for deciding applications (these applications are undertake any aerial work unless it holds a valid non-scheduled operator’s now decided by a standing committee on behalf of the DGCA). permit granted under sub-rule (2) of rule 134A. Aerial work is defined in rule 3(1A) as ‘any aircraft operation undertaken for an industrial or com- 5 What requirements apply in the areas of financial fitness and mercial purpose or any other remunerative purpose, but does not include nationality of ownership regarding control of air carriers? operation of an air transport service’. As per the updated CAR dated 1 March 1994 (revised 9 April 2014) under Rule 140 lists the minimum requirements to be complied with by oper- section 3 – Air Transport (series ‘C’, part II), a scheduled operator’s permit ators and provides that ‘all aircraft owners and operators shall comply with can be granted only to: the engineering, inspection and manual requirements contained in Part • a citizen of India; or

100 Getting the Deal Through – Air Transport 2015 I.L.A. Pasrich & Company INDIA

• a company or a body corporate provided that: need for the services in the proposed area keeping in view the existing • it is registered and has its principal place of business within India; services, airport capacity and constraints at the main base and night • its chairman and at least two-thirds of its directors are citizens of stop station, suitability of the proposed aircraft type keeping in view India; and the airworthiness and safety regulations, satisfactory plan of human • its substantial ownership and effective control are vested in Indian resource development, maintenance arrangements and compliance nationals. with the requirements stipulated for grant of the permit sought by the applicant. Schedule XI to the Aircraft Rules, 1937 and a similar CAR dated 1 June 2010 contain the requirements for a non-scheduled operator’s permit. Clause 3.2 The committee can seek clarifications and it only recommends (to the of the CAR dated 1 March 1994 provides that before the scheduled opera- MoCA) grant of the initial NOC after security clearance, if the require- tor’s permit is issued, an applicant shall have paid-up capital of: ments are satisfied and subject to such ‘conditions as may be considered • 500 million rupees for airlines operating aircraft with a take-off mass necessary’. equal to or exceeding 40,000 kilograms (up to five aircraft) and for It is possible for all government decisions to be challenged under the each addition of up to five aircraft, additional equity investment of 200 Constitution of India (article 226), but it is more common for the MoCA to million rupees; and arrive at conditions that are realistic and achievable, to discuss the same • 200 million rupees for airlines operating aircraft with a take-off mass with the affected party and then direct compliance accordingly. It is not not exceeding 40,000 kilograms (up to five aircraft) and for each addi- common for a third party to claim that a proposed licence may be preju- tion of up to five aircraft, additional equity investment of 100 million dicial to its existing routes or interests and the regulator would probably rupees. only allow such objections to be tested by market forces. There have been instances in the past of the government exercising protectionism with As of 1 March 2013 scheduled and non-scheduled air transport under- regard to the national carrier and its routes, but the tendency has generally takings are each allowed foreign direct investment (FDI) of up to 49 per been resisted in the past few years by successive governments and this has cent by foreign airlines; the new policy further enables the government noticeably affected the financial health of the carrier. Where permissions to approve up to 74 per cent FDI in non-scheduled airlines and chartered are withheld due to a particular route, the route dispersal guidelines dis- airlines. cussed in question 10 are relevant. The DGCA has regulated non-scheduled air transport services through another CAR dated 1 June 2010 (revised on 31 May 2011) setting out the 8 Is there a declared policy on airline access or competition and, same minimum nationality requirements as listed above. Guidelines in the if so, what is it? CAR permit FDI of up to 74 per cent (as against the current 49 per cent for There is no newly declared policy on airline access or competition but the scheduled operators), but again the majority of directors on the board are Government of India has pursued an open skies policy since 1994 when required to be Indian citizens and if the positions of chairman, managing the two state airlines were required to compete against private carriers. director, CEO or CFO are held by foreign nationals they must be security Air India and Indian Airlines have merged since then. Various bilateral vetted. air service agreements were signed pursuant to the open skies policy and although some air service agreements still have seat restrictions, the gen- 6 What procedures are there to obtain licences or other rights to eral trend has been to allow greater access from points in India to points operate particular routes? in the other country. India’s improved pro-competition and free market As explained above, rules 134 and 134A of the Aircraft Rules, 1937 provide access approach has also been bolstered by the new Competition Act that that permission of the central government is required to operate scheduled came into force in 2009 and a Competition Commission that has been and non-scheduled air transport services. Rule 134B also requires a valid increasingly active since then. Despite the anti-merger provisions of the non-scheduled operator’s permit for any aerial work. Application fees are Competition Act, 2002 there have been several permitted or accepted air- prescribed for scheduled and non-scheduled operator permits. For this pur- line mergers such as the Jet-Sahara acquisition and, earlier on, Kingfisher’s pose, the DGCA has issued various CARs. CAR dated 1 March 1994 under acquisition of Deccan Airways. No particular control has been exercised section 3 – Air Transport’ series ‘C’ part II lists out the minimum require- by the DGCA or the Competition Commission of India in relation to for- ments for grant of a permit to operate scheduled passenger air transport eign mergers such as Delta’s acquisition of North-West, the Air France and services. CAR dated 1 June 2010 under section 3 – Air Transport, series ‘C’ KLM integration and various code-share agreements but the DGCA has part III, issue II lists the minimum requirements for grant of a permit to been involved in various airline company investments in 2013–14 such as operate non-scheduled air transport services. CAR dated 26 August 1997 the Etihad acquisition of equity in Jet Airways. Despite many liberalisations (revised 21 May 2009) under section 3 – Air Transport, series ‘C’ part IV in the law, rule 135(4) still empowers the DGCA to issue directions to an air lists the minimum requirements for grant of a permit and operation of air transport undertaking that ‘has established excessive or predatory tariff’ transport cargo services. The relevant operating permits are the equivalent or ‘has indulged in oligopolistic practice’. Some vestiges of the old protec- of the air operator’s certificate referred to in ICAO documents. tionist provisions survive such as AIC No. 8 of 2009, section 3.6 of which ATAC No. 1 of August 1997 issued by the DGCA on the ‘Air Operator provides that operational plans submitted by the national carrier would be Certification Procedure’ sets out the procedure for grant of a permit in considered before allocation of traffic rights to other eligible applicants. It clause 3, which is as follows: is usually hoped that undue priority will not be given to the national carrier, • Application for grant of an initial ‘no-objection certificate’ (NOC). but this laudable objective is not necessarily uniformly applied. That the • Examination of the application for issue of the initial NOC. government is perfectly conscious of the need for free access to the market • Actions required to be taken by the initial NOC holder. can be seen from a June 2012 report of the committee constituted to report • Application for permission for import/acquisition of aircraft. on the competitive framework for civil aviation in India. The committee • Actions to be taken after import/acquisition of aircraft. has recommended: • Issue of an air operator’s permit. The regulator may consider abandoning preferential international The detailed procedures are outlined in this ATAC, which must be read route assignments to the national carrier, which would allow private along with the above-mentioned Schedule XI and CARs. carriers to compete with Air India. Taking away Air India’s right to priority route assignments will also help other Indian international 7 What procedures are there for hearing or deciding contested carriers expand service to additional international destinations, lead- applications for licences or other rights to operate particular ing to expansion in the range of choices for consumers. routes? The above-mentioned CARs set out the procedure for applications for the The committee did accept an expert researcher’s report, but interestingly necessary permits. The applications are now reviewed by a standing com- was itself composed mostly of government of India officers. It was chaired mittee constituted by the MoCA. This committee recommends grant of the by the secretary of the MoCA with the DGCA as a member. initial NOC, but it may also direct compliance with any unfulfilled requirements. The committee examines various aspects, such as the:

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9 What requirements must a foreign air carrier satisfy in order Scheduled operations must be conducted from approved operational to operate to or from your country? bases and the operator is required to ensure that operations are conducted The DGCA has issued AIC No. 8 dated 1 December 2010 on the only to and from airports suitable for the type of aircraft. The carrier must ‘Requirements for grant of Operating Authorisation to Foreign Airlines ensure that all security requirements stipulated by the BCAS are strictly under Bilateral Air Services Agreements’. The AIC requires designation of followed in respect of their operations at all airports. the foreign airline subject to the following conditions: In a recent development, IndiGo, Jet Airways, SpiceJet and GoAir asked the aviation regulator to deny an airline permit to Tata SIA Airlines Ltd, a • substantial ownership and effective control of that airline vested in the joint venture between the Tata group and Singapore Airlines, complaining party designating the airline or its nationals; that substantive and effective control (of Tata SIA) did not vest in Indian • the designated airline must be qualified to meet conditions prescribed hands, that the mandate of Schedule XI to the Aircraft Rules, 1937 (related under the laws and regulations normally applied to operation of inter- to minimum airworthiness, operations and other general requirements for national air services; grant of air permit) was not being satisfied and that foreign airlines are not • the party designating the airline must maintain and administer the entitled to use sensitive airports. The DGCA eventually approved the Tata standards with regard to safety and aviation security set forth in the SIA proposal after imposing conditions and upon being satisfied that con- bilateral air services agreement; and trol remains with the Tatas and that other requirements were met. • all the other provisions of the bilateral air services must be complied with along with other requirements set out in the AIC. 10 Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local The airline must be officially designated by the country of the airline by economy? reference to the air services agreement. Information and documentation must be provided as per appendices A and B of the AIC. With a view to achieving better regulation of air transport services and taking into account the need for air transport services for different regions in The operating permit can be revoked or suspended, or made subject to the country, the central government through the DGCA on 1 March 1994 additional conditions or limitations, in any case where: laid down the Route Dispersal Guidelines. According to these Guidelines, • substantial ownership and effective control of the designated airline all routes were divided into three categories. Route categorisation was are not vested in the government of the country designating the airline based on traditionally surplus generating routes (Category I), loss-making or its nationals; routes (Category II) and the remaining routes (Category III). Category • the designated airline has failed to comply with Indian laws and regu- IIA was mandated as a category within Category II, to cover specifically lations; or the states of Jammu and Kashmir, Andaman and Nicobar Islands, and the • standards in relation to safety or aviation security are not being prop- Lakshadweep Islands. erly maintained and administered by the country of the airline. It was obligatory on the part of scheduled airlines to deploy a specified percentage of capacity on Category II, IIA and III routes, as per the follow- For code-share arrangements that are recognised in the relevant air service ing requirements: agreement, one of the designated airlines performs the agreed services as • on Category II routes, at least 10 per cent of the capacity deployed on the operating carrier while the other airline operates as a marketing air- Category I routes; line. Pursuant to the AIC, both the operating and marketing airlines are • on Category IIA routes, at least 10 per cent of the capacity deployed on required to obtain operating authorisation under the respective air ser- Category II routes; and vice agreement and furnish the necessary information and documents. • on Category III routes, at least 50 per cent of the capacity deployed on Marketing airlines are only exempt from providing the operational manual, Category I routes. fleet details and security programme. The AIC also calls for coordination of slots, filing of schedules and general compliance with the bilateral agree- The guidelines have been strengthened by the inclusion of 10 to 12 air- ment terms. The information sought under appendix A and the documents ports from Category III into Category I making Category II, IIA and III required under appendix B are similar to those required by the earlier AIC requirements more rigorous. To ensure that aviation services are offered No. 3 of 2000. to remote destinations, an Essential Air Services Fund (EASF) has been The airline must be formally designated through diplomatic chan- recommended to be created by the MoCA with the help of the central gov- nels or by the aeronautical authorities of its home country (ie, the country ernment, state governments and airport operators for the development of whose government has signed the relevant air services agreement with the low-cost airports and to improve connectivity to remote cities of the coun- government of India). Several documents must be filed before an operat- try. The funds collected can be used on routes that are commercially unvi- ing permit can be granted and these include incorporation documents of able for three to five years until they reach a level of maturity. To improve the airline, details of the board of directors, copies of other air operator air connectivity to remote areas of India new initiatives are required such certificates or equivalent document issued by the state where the opera- as the underwriting of some seats by state governments, a reduction in tor is already operating, an operations manual approved by the competent sales tax on air transport finance, and routes that have a passenger load authorities of the home state, details of the fleet, a detailed security pro- factor of less than 50 per cent and certain others should be given assistance gramme etc. Once the application is submitted, approval of the compe- from the EASF. tent authorities involved in respect of airline level requirements must be The MoCA recently issued an Order No. AV1303/34/2012-DT dated submitted (this includes any arrangements with the Airports Authority, 4 March 2014, which provides for the requirements under which services Reserve Bank of India permissions, etc). The slots are coordinated with the are to be operated in different regions and remote areas of the country. AAI and the schedule is to be filed at least 30 days prior to commencement As per the said order it is mandatory for all scheduled airlines to operate of services. at least six per cent of their total domestic operating capacity to airports After the above process is completed, a carrier engaged in interna- in remote or strategic areas. Further, for all airports in the North-Eastern tional operations must ensure that all its employees comply with the laws, Region (with the exception of Guwahati and Bagdogra), all airports in the regulations and procedures pertinent to performance of their duties. The Jammu and Kashmir region (with the exception of Jammu) and all airports operator must have all necessary operational documents and publications in the Andaman and Nicobar islands and Lakshadweep, it is now manda- such as an operations manual, CARs, AICs, NOTAMs, aeronautical maps tory for all India-based airlines to assign at least one per cent of their total and charts, operational circulars, etc, for reference. The carrier is required operating capacity. to have and must follow an approved flight safety manual laying down the policies and procedures for ensuring safety of operations, computer- 11 Are charter services specially regulated? ised systems to analyse digital flight data recorders, solid state flight data A CAR dated 12 October 2010 (revised on 9 May 2013) issued under section recorders to record data of all flights to determine exceedances in flight 3 – Air Transport, series ‘F’, part I deals with the issue of non-scheduled operations and to ensure compliance with operating procedures, investi- flight clearances to foreign-registered aircraft including cargo flights, inclu- gation of occurrences, implementation of safety recommendations, acci- sive tour package (ITP) charter flights, aerial photography and geophysical dent/incident prevention programmes and safety enhancement measures survey and cloud seeding operations, non-scheduled flights by Indian oper- as per the requirements laid down by the DGCA and the BCAS. ators to foreign destinations and for becoming enrolled as a flight clearance agency. The CAR contains general requirements, minimum notice

102 Getting the Deal Through – Air Transport 2015 I.L.A. Pasrich & Company INDIA periods, application procedures, special provisions (long stays for aircraft, 14 Is there a register of aircraft mortgages or charges and, if so, non-ICAO flights, air-dropping and non-ITP passenger flights), provisions how does it function? for changes in flight clearance, landing at defence airfields, etc. ITP charter In the CAR dated 10 September 1998 (revised 16 November 2012) under flights remain under regulations covered by an earlier AIC (No. 12 of 2008 section 2 – Airworthiness, series ‘F’ part I, on ‘Procedures Relating to dated 6October 2008). The Circular sets out the application procedure, the Registration/Deregistration’, it is provided that an owner or his authorised conditions for operation of ITP charter flights (including a provision for the representative may apply for registration of an aircraft in the prescribed DGCA to impose additional conditions) and the applicable ‘safeguards and form. Where the aircraft has been mortgaged or hypothecated, the owner penalties’ (ie, applicable penalties for non-compliance). or operator shall submit his consent for the same and the papers to this effect. Such a mortgage or hypothecation shall be endorsed on the certifi- 12 Are airfares regulated and, if so, how? cate 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 [section iffs established by it in such manner and form as specified by the DGCA. 2(16) of the 2013 Act] thereof provides that ‘charge’ includes a mortgage. Although filing and approval of tariffs is no longer required, the DGCA has Section 125 [section 77] provides that every company is required to file the the power under sub-rule (4) to intervene in cases where it is satisfied that particulars of the charge created, together with the instrument by which the operator has established excessive or predatory tariffs or has indulged the charge is created, with the registrar for registration as required by the in an oligopolistic practice. Rule 135 has been amended by the DGCA by Companies Act within 30 days of the date of creation of the said charge. Circular No. 9/9/2009-IR dated 11 May 2009 referring to a MoCA Gazette Section 130 [section 81] provides that the registrar shall keep a register con- notification dated 16 April 2009. This notification provides that all airlines taining the particulars of all the charges requiring registration under this operating scheduled air services (domestic as well as international) to, part. The particulars of the charges to be entered are the date of creation from or within India are required to advise passengers of the consolidated of the charge, the date of the acquisition of the property (where the charge fare as well as a complete breakdown thereof and also show the fare on the exists on property acquired by the company), the amount secured by the ticket in the same manner. Another example of the government’s regula- charge, the short particulars of the property charged and the persons enti- tion of tariffs can be seen in a Circular dated 17 December 2012, whereby it tled to the charge. Section 136 [section 85 of the 2013 Act] of the Companies was directed that ‘all Indian and foreign air carriers’ were prohibited from Act, 1956 requires every company to keep a copy of every instrument creat- charging transaction fees in violation of rule 135 of the Aircraft Rules as ing a charge requiring registration at its registered office. Section 142 [sec- part of the airfare. This Circular became part of the subject of a Supreme tion 86] provides for penalties, in case of default. Court of India case and resulted in directions of the Supreme Court in February 2013. This eventually resulted in a further government order 15 What rights are there to detain aircraft, in respect of unpaid dated 16 September 2013, which provides that the terms ‘Commission’, airport or air navigation charges, or other unpaid debts? ‘Transaction Fees’, ‘Convenience Fees’ or any other similar terms are to be Section 8 of the Aircraft Act, 1934 empowers an authority authorised by the treated as ‘Commission’ mentioned in rule 135 of Aircraft Rules, 1937 as a central government to detain any aircraft if in its opinion: part of the tariff to be determined by the airlines and that no amount will be • the flight of such aircraft would endanger persons in the aircraft or any collected from the consumers over and above this. other persons or property; or • such detention is necessary to secure compliance with the provisions Aircraft of the Aircraft Act or the rules applicable to such aircraft, or such detention is necessary to prevent a contravention of section 5(2h) (the 13 Who is entitled to be mentioned in the aircraft register? Do air routes by which and, the conditions under which aircraft may enter requirements or limitations apply to the ownership of an or leave India, or may fly over India, and the places at which the air- aircraft listed on your country’s register? craft shall land) and section 5(2i) (the prohibition of flight by aircraft The owner of the aircraft, and in the case of leased aircraft the lessor and over any specified area, either absolutely or at specified times, or sub- the lessee are to be mentioned in the aircraft register. ject to specified conditions and exceptions) of the Aircraft Act, or to Rule 30(2) of the Aircraft Rules, 1937 provides that an aircraft may be implement any order made by any court. registered in India in either of the following two categories: • Category A, where the aircraft is wholly-owned either: With respect to unpaid debts, in the CAR dated 10 September 1998 (i) by citizens of India; (revised 16 November 2012) under section 2 – Airworthiness, series ‘F’ part (ii) by a company or corporation registered and having its principal I, on ‘Procedures Relating to Registration/Deregistration’, it is provided in place of business within India; clause 9.1 that the registration of an aircraft registered in India may be can- (iii) by the central government or any state government or any com- celled at any time by the DGCA, if it is satisfied that: pany or corporation owned or controlled by either of the said gov- • such registration is not in conformity with paragraph 3.1 of this CAR; ernments; or • the registration has been obtained by furnishing false information; (iv) by a company or corporation registered elsewhere than in India, • the aircraft could more suitably be registered in another country; provided that such company or corporation has given the said air- • the aircraft has been destroyed or permanently withdrawn from use; craft on lease to any person mentioned in (i), (ii) or (iii) above; or • it is inexpedient in the public interest that the aircraft should remain • Category B, where the aircraft is wholly-owned either: registered in India; • by persons resident in or carrying on business in India; who are • the lease in respect of the aircraft registered pursuant to paragraph not citizens of India, or 3.1(iv) has expired, has been terminated by mutual agreement between • by a company or corporation registered elsewhere than in India the lessor and the lessee, or has been otherwise terminated in accord- and carrying on business in India. ance with the provisions of the lease agreement; or • the certificate of airworthiness in respect of the aircraft expired five or Rule 30(3) provides that aircraft for which the conditions mentioned in more years ago. rule 30(2) are not satisfied or that are already validly registered in another country shall not be registered in India. Rule 30(4) provides that where the In the case of a dispute regarding termination of an aircraft lease agree- usual station of an aircraft and its ordinary area of operation are not situ- ment, action can be taken under section 8(1)(b) of the Aircraft Act, 1934 for ated in India, the central government may refuse an application for regis- detention to implement a court order. tration of the aircraft in India or to permit an aircraft to remain registered in India, if, in its opinion, the aircraft could more suitably be registered in 16 Do specific rules regulate the maintenance of aircraft? another country. Rule 33 provides for change in the ownership of a regis- Rule 60(2)(a) of the Aircraft Rules, 1937 provides that the DGCA may tered aircraft. specify standards and conditions for the maintenance of an aircraft, aircraft component and item of equipment. As per rule 60(1), maintenance

www.gettingthedealthrough.com 103 INDIA I.L.A. Pasrich & Company refers to performance of all work necessary for the purpose of ensuring grant of a licence. As per rule 84, an aerodrome licence may be granted for that the aircraft is airworthy and safe including servicing of the aircraft and a period not exceeding two years and the same time frame is prescribed all modifications, repairs, replacements, overhauls, processes, treatment, for renewals. Rule 86 sets out tariff charges and rule 87 provides for the fee tests, operations and inspection of the aircraft, aircraft components and that is chargeable for the grant of a licence for an aerodrome. The licensee items of equipment required for that purpose. Maintenance is also defined is entitled to collect passenger service fees under rule 88 and user devel- in rule 3(33C) of the Aircraft Rules, 1937. opment fees under rule 89. As per rule 88A, the central government, or Part XIIIA of the Aircraft Rules, 1937 deals with engineering, inspec- any authority designated by it, may levy and collect aviation security fees tion and manual requirements for owners or operators. As per rule 154, on embarking passengers, cargo transported out of an airport, departing (i) ‘engineering and inspection’ refers to the performance of all work general aviation private aircraft, chartered aircraft operations and any necessary for ensuring airworthiness and safety of the aircraft, including other dedicated civil aviation operations. The relevant fees are treated as overhaul, maintenance, modification, repair, replacement, manufacture, a tariff for aeronautical services regulated as explained in reply to question assembly, testing, treatment, inspection and certification; and (ii) ‘man- 19. An Aerodrome Advisory Circular dated 14 September 2006 contains ual’ refers to ‘operators’ maintenance system manual’ or ‘operators’ qual- ‘Guidelines for preparation and maintenance of an Aerodrome Manual’. ity 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 17 Who owns the airports? operated or are intended to be operated (other than airports and airfields 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 2]. 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 ernised and are now managed by Delhi International Airport Pvt Limited a set tariff may be amended during this period if ‘considered appropriate (DIAL) and Mumbai International Airport Pvt Limited (MIAL), but the AAI and in the public interest’. Section 17 provides for the establishment and retains a 26 per cent stake in both these companies which are financed and powers of the AERA Appellate Tribunal to adjudicate disputes and dispose largely run by private interests (ie, the GMR group for Delhi and the GVK of appeals (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 lic aerodrome or a part of such aerodrome or any other area in such aero- of aerodromes. An aerodrome should have a licence or it should have been drome, an admission ticket issued by the aerodrome operator or an entry approved by the DGCA for such purpose. Sub-rule (2) provides that an pass issued by the commissioner of security (civil aviation) or any person aerodrome shall be licensed by the central government for public and pri- authorised by the central government is mandatory. Sub-rule (2) provides vate use. Rule 79 provides that a licence for an aerodrome shall be granted that no person, without permission in writing, by general or special order, only to (i) a citizen of India; (ii) a company or body corporate, provided of the central government or any authorised officer, shall (i) enter or that (a) it is registered and has its principal place of business in India and remain or cause any other person to enter or remain in the movement area; (b) it meets the equity holding criteria specified by the central government (ii) leave or throw or cause to be thrown any animal, bird or property or from time to time; (iii) the central government or a state government or any object of any nature whatsoever in the movement area; (iii) permit any ani- company or any corporation owned or controlled by either of them; or (iv) a mal under his possession or control or otherwise to stray in the movement society registered under the Societies Registration Act, 1860. Rule 80 pro- area; and (iv) operate any vehicle in the movement area. As per rule 3(35A), vides that an application for the grant of a licence for an aerodrome shall ‘movement area’ means the area of an aerodrome intended for the surface be made to the DGCA along with the aerodrome manual (rule 81 provides movement of an aircraft and includes the manoeuvring area and aprons. that an aerodrome manual shall be maintained by a licensee in the speci- Sub-rule (3) provides that sub-rules (1) and (2) shall not apply to any pas- fied form and it shall contain the particulars as per sub-rule (2) thereof) senger embarking, disembarking or in transit who holds an air ticket or any in the form as specified by the DGCA. Additional information or evidence person who is engaged on regular duty at an aerodrome and holds a photo may also be requested by the DGCA. Rule 81(3) provides that a copy of the identity card issued by the commissioner of security (civil aviation) or any aerodrome manual, or such part as may be prescribed by the DGCA, shall person authorised by the central government in this behalf. Rule 90(4) be made available by the licensee to all units of the aerodrome. Rule 82 provides that the officer-in-charge of an aerodrome or any person author- deals with inspection and rule 83 talks about the conditions governing the ised by the central government in this behalf, may if he is satisfied that it is

104 Getting the Deal Through – Air Transport 2015 I.L.A. Pasrich & Company INDIA necessary or expedient so to do for maintaining proper order or decorum, […] a carrier may carry out ground handling services at metropoli- refuse admission to any person into the terminal building or the movement tan airports, that is, the airports located at Delhi, Mumbai, Chennai, area or require any person in such building or such area to leave the same. Kolkata, Bangalore and Hyderabad, by engaging the services of (i) AAI or its Joint Venture Company (ii) subsidiary companies of the 21 How are slots allocated at congested airports? national carrier ie, NACIL or its joint ventures specialised in ground As per guidelines (revised in May 2013) issued by the MoCA, a ‘slot’ is a handling services […] (iii) any other ground handling service provider permission given by a coordinator for a planned operation to use the full selected through competitive bidding […] range of airport infrastructure necessary to arrive or depart at a Level 3 airport on a specific date and time. For the purpose of slot allocation, airports These regulations were similar to DGCA Circular No. 7/2007 dated 28 are generally categorised according to the following levels of congestion: September 2007 whose implementation date had been extended from • Level 1: where the capacity of the airport infrastructure is generally time to time. The Ground Handling Regulations, 2007 supersede the adequate to meet the demands of airport users at all times. Airports Authority of India (General Management, Entry for Ground • Level 2: where there is potential for congestion during some periods of Handling Services) Regulations, 2000. the day, week, or season which can be resolved by voluntary coopera- The BCAS has also issued an AVSEC Order No. 3/2009 dated 21 August tion between airlines. 2009 which specifically provides that the aircraft operators’ aviation secu- • Level 3: where capacity is constrained due to lack of sufficient rity functions listed therein ‘cannot be mixed-up with other ground han- infrastructure. dling activities, and these AVSEC functions shall not be allowed by an aircraft operator/airport operator to be undertaken by a Ground Handling For Level 3 airports, a coordinator is required to be designated to allocate Agency’. slots to airlines and other aircraft operators using or planning to use the airport as a means of managing available capacity. 23 Who provides air traffic control services? And how are they Guidelines have been formulated to reflect international best practice regulated? and are in accordance with the recommendations of the IATA Worldwide ‘Air traffic service’ as per rule 3(1F) of the Aircraft Rules, 1937 means the Slot Guidelines (WSG), as amended twice yearly. The WSG is the globally flight information service, alerting service and air traffic advisory service adopted standard for efficient slot allocation to optimise the use of severely and air traffic control service (area control service, approach control ser- congested airport infrastructure worldwide. vice or aerodrome control service). Part XII of the Rules deals with person- After leasing of the Delhi and Mumbai Airports to JVCs, and after nel of air traffic services. Rule 93(1) provides that only a person who holds a setting up greenfield airports at Hyderabad and Bangalore, the MoCA valid air traffic controller’s licence shall engage himself in the provision of reviewed the slots allocation procedure and issued a revised procedure air traffic services in the Indian airspace or in any airspace outside Indian in its letter dated 10 September, 2007. This revised procedure allows the territory for which India has, pursuant to any international arrangement, respective JV airport operators of Delhi and Mumbai to allocate slots for undertaken to provide air traffic services. Rule 93(2) provides that the des- these airports, and the AAI for the other airports. Later, the revised pro- ignated military authority may provide air traffic services to civil aircraft in cedures were also made applicable to the other JVCs at Hyderabad and the airspace designated for military use in accordance with the provisions Bangalore. of Part XII and subject to the conditions specified by the DGCA. Rule 95 Part VII of the Guidelines deals with slot allocation. provides for grant or renewal of the licences by the licensing authority and Airlines are required to file their slot requests for initial allocation the conditions for grant or renewal of the same. The DGCA’s CAR dated 8 twice each year for the summer and winter seasons with the concerned January 2010 (revised 28 November 2013) regulates airspace and air traffic coordinator for Level 3 airports. The actual deadline for filing this request management. is as provided for in the IATA WSG Coordination Calendar. As per CAR ‘Air traffic service’ is also defined in section 2(d) of the Airports dated 1 March 1994, the operator shall inform about slots and/or flights not Authority of India Act, 1994. Section 22 provides that the AAI may, with operated for a considerable period to DGCA and all concerned agencies the previous approval of the central government, charge fees or rent for every month. providing air traffic services etc. There is a Manual of Air Traffic Services issued by the AAI. Chapter 4 of this manual deals with air traffic services 22 Are there any laws or rules specifically relating to ground – its objectives, divisions, classification of airspaces, responsibility for con- handling? trol etc. A Department of Air Traffic Management under the AAI provides Rule 92 of the Aircraft Rules, 1937 provides that the licensee of an aero- air traffic services to all arriving, departing and enroute aircraft over Indian drome shall, while providing ground handling service by itself, ensure a airspace, establishment of air routes, realignment of existing air routes in competitive environment by allowing the airline operator at the airport to consultation with user airlines and international bodies such as IATA and engage, without any restriction, any ground handling service provider per- ICAO, manpower planning, training and award of ratings to air traffic con- mitted by the central government to provide such service. This is subject to trollers in conformity with ICAO rules and regulations as stated in Annex I a proviso that such ground handling service provider should have security (Personnel Licensing), monitoring of standards and procedures in the pro- clearance. vision of ATC, etc. The DGCA has issued AIC No. 03/2010 dated 2 June 2010 on the sub- The AAI has drawn up plans to upgrade the air traffic management ject of ‘Grant of permission for providing ground handling services at air- infrastructure in the country both in terms of conditional provision of ports other than those belonging to the Airports Authority of India’. Clause automation systems and upgrading of technology which also involves 1.2 of this Circular provides that in accordance with the Airports Authority shifting from ground-based navigation to satellite-based navigation. A of India (General Management, Entry for Ground Handling Services) Communication, Navigation and Surveillance (CNS) Planning Department Regulations, 2000, an airline operator may carry out ground handling ser- deals with planning, procurement and commissioning of CNS facilities vices at an airport either by itself or engage the services of any of the fol- and support systems for air navigation. lowing, namely: (i) AAI; (ii) Air India or Indian Airlines; and (iii) any other agency licensed by the AAI. Other circulars and guidelines such as the Liability and accidents BCAS Circular No. 4/2007 dated 19 February 2007 contain instructions on 24 Are there any special rules in respect of death of, or injury to, deployment of ground handling agencies at the airports. passengers or loss or damage to baggage or cargo in respect of On 18 October 2007, the AAI in exercise of powers conferred by sec- domestic carriage? tion 42 of the Airports Authority of India Act, 1994 formulated the Airports The relevant statute is the Carriage by Air Act 1972, which in section 8 Authority of India (General Management, Entry for Ground Handling provides that the central government may, by notification in the Official Services) Regulations, 2007. Regulation 1.3 thereof provides that these Gazette, apply the rules contained in the Schedules to the Act to such car- Regulations shall apply to all airports and civil enclaves managed by the riage by air, not being international carriage by air, subject to such excep- AAI, provided that they shall not apply to defence installations or enclaves tions, adaptations and modifications as may be specified. Pursuant to the or enclosures at the airports. said section, the DGCA has issued an AIC No. 2/2014 dated 14 February Regulation 3 provides that: 2014 which refers to a MoCA notification of 17 January 2014 which provides that from the date of publication of the notification, the provisions www.gettingthedealthrough.com 105 INDIA I.L.A. Pasrich & Company of Section 5 of the 1972 Act and the rules contained in the Third Schedule shall make a report to the DGCA in the format specified by the Bureau. to the said Act shall apply to all carriage by air not being international car- The DGCA shall forward the report of the inquiry officer to the central riage subject to the exceptions, adaptations and modifications mentioned government. therein. For death or bodily injury, the carrier’s liability cannot exceed The AAI has also issued an Air Traffic Management Circular No. 7 of 2 million rupees. In case of damage caused by delay, liability is limited 2012 on the ‘Procedure to be followed in case of Aircraft Accidents and to 80,000 rupees. For the carriage of baggage, the liability for destruc- Serious Incidents’. Clause 2.1 provides that the purpose of this Circular is to tion, loss, damage or delay is limited to 20,000 rupees unless there is a make air traffic controllers (ATCOs) aware of the procedure to be followed special declaration, and for the carriage of cargo, the liability for destruc- in case of aircraft accidents and serious incidents and the role of ATCOs tion, loss, damage or delay is limited to 350 rupees per kg unless there is regarding notification of accidents and serious incidents along with pres- a special declaration in place. As per rule 24, these units of liability are to ervation of air traffic service records. be reviewed by the central government every five years based on the cost The DGCA CARs under section 5 – Air Safety on the ‘Procedure for inflation index as determined by the central government. In the 2011 case Accident/ Incident Investigation’ (series ‘C’) and ‘Prevention of Accidents/ of S Abdul Salam v Union of India (the Union), the Union (and their insurers) Incidents’ (series ‘F’) cover aircraft accidents and serious incidents and attempted to pay about 3 million rupees instead of at least 100,000 SDR to also provide for investigation, protection and preservation of the wreckage, the family of a passenger killed in an Air India crash at Mangalore. This was evidence, disclosure of records, and submission of reports. considered discriminatory by the Kerala High Court, which directed full payment as per the Montreal Convention. The judgment is under appeal 27 Is there a mandatory accident and incident reporting system in the Supreme Court of India. The 1972 Act, as amended, enforces the and, if so, how does it operate? 1929 Warsaw Convention (first schedule), the 1955 Hague Protocol (sec- Rule 18 of the Aircraft (Investigation of Accidents and Incidents) Rules, ond schedule) and the 1999 Montreal Convention (third schedule), which 2012 provides for a mandatory incident reporting system. This system practically applies for most international carriage by air. Chapter III deals requires the relevant persons, service providers and stakeholders to notify with the liability of a carrier. As per rule 17 of all three schedules, a carrier all accidents and incidents by the most suitable and quickest means to the is liable for damage sustained in the event of the death or wounding of a Aircraft Accident Investigation Bureau and the DGCA, but in any case not passenger or any other bodily injury suffered by a passenger, if the accident later than 24 hours. The DGCA is required to notify the Bureau immedi- that caused the damage sustained took place onboard the aircraft or in the ately about the accidents and incidents containing information as specified course of any of the operations of embarking or disembarking. Rule 18 (of in rule 4(2). Rule 18(4) outlines who is included in ‘relevant persons, service all three schedules) provides that a carrier is liable for damage sustained in providers and stakeholders’. There is also a voluntary incident reporting the event of the destruction or loss of, or of damage to, any registered lug- system provided for in rule 19. gage/baggage or any goods/cargo, if the occurrence that caused the damage sustained took place during the carriage by air. Unfortunately there is Competition law still a dearth of case law on the clear exception in rule 17 limiting remedies to physical injury (lésion corporelle) and the consumer fora in India still tend 28 Do sector-specific competition rules apply to aviation? If not, to award compensation for mental agony and inconvenience. In Interglobe do the general competition law rules apply? Aviation limited v N. Satchidanand (2011) 7 SCC 463 the Hon’ble Supreme There are no specific competition rules (although rule 135 of the Aircraft Court held: Rules, 1937 does prohibit an ‘oligopolistic’ or anti-competitive practice) for aviation. The Competition Act, 2002 (notified in 2009) applies and prohib- What is relevant is whether there was any cause of action for claim- its anti-competitive agreements (section 3), prohibits abuse of dominance ing damages, that is, whether there was any deficiency in service or (section 4) and regulates combinations including mergers (sections 5 and whether there was any negligence in providing facilitation. If the delay 6). was due to reasons beyond the control of the airline and if the appel- An anti-competitive agreement case filed by travel agents against sev- lant and its crew have acted reasonably and in a bona fide manner, the eral airlines was dismissed by the Competition Commission of India (CCI) appellant cannot be made liable to pay damages even if there has been in 2011 along with their appeal to the Competition Appellate Tribunal in some inconvenience or hardship to a passenger on account of the delay. 2012. A planned acquisition of 24 per cent of Jet Airways by Etihad was approved by the CCI in 2013. The CCI can approve such combinations if 25 Are there any special rules about the liability of aircraft the same have no appreciable adverse affect on competition. If the CCI operators for surface damage? fails to accord approval within 210 days, or if it does not pass any order or The Rome Convention, 1952 has been enacted to ensure adequate com- issue any directions, then the combination is deemed to be approved. The pensation for persons who suffer damage caused on the surface by foreign Competition Appellate Tribunal has issued notice to the CCI on an appeal aircraft, while limiting in a reasonable manner the extent of the liabilities challenging the clearance given to the 20.6 billion rupee (US$343 Million) incurred for such damage so as not to hinder the development of interna- Jet-Etihad deal. tional civil air transport. Chapter II deals with the extent of liability. India Apart from the above matter relating to a combination, there have signed the Convention in 1955. been a few cases that have come for adjudication before the CCI in relation to both abuse of dominance and anti-competitive agreements. In a 2011 case (Uniglobe v Travel Agents’ Association of India or TAAI and oth- 26 What system and procedures are in place for the investigation ers), the CCI penalised three travel agent associations for indulging in the of air accidents? anti-competitive practice of boycotting airlines that had shifted to zero Section 7 of the Aircraft Act, 1934 outlines the power of the central gov- per cent commission; the CCI also passed cease-and-desist orders on the ernment to make rules for investigation of accidents or incidents arising practice. In TAAI v British Airways, decided in 2010, the CCI dismissed out of or in the course of the navigation in or over India of any aircraft, a complaint against the carrier alleging abuse of dominance for having or anywhere of aircraft registered in India. Accordingly, the Aircraft restricted sale of their tickets only through certain accredited travel agents, (Investigation of Accidents and Incidents) Rules, 2012 have been notified. as the Commission found that British Airways was not dominant in the rel- Rule 12 provides for the setting up of an Aircraft Accident Investigation evant market. In 2011, the CCI dismissed a complaint, and then in 2012 Bureau of India (the Bureau) for the purposes of carrying out investigation the Competition Appellate Tribunal (Compat) dismissed an appeal involv- into accidents, serious incidents and incidents referred to in rule 5(1), (2) ing TAAI against nine airlines on the ground that the airlines had (acting and (4). Rule 9 provides for a preliminary investigation and rule 12 provides as a cartel) been guilty of abuse of dominance in moving to the zero per details on the formal investigation for which the central government shall cent commission system. The CCI and Compat both rejected the city-pair appoint a competent person referred to as the court who shall have, for the argument (that being the relevant market) and held that the airlines taken purposes of investigation, all the powers of a civil court under the Code together were not dominant, did not act in concert so there was no agree- of Civil Procedure, 1908. As per rule 13, the DGCA may order investiga- ment and hence dismissed the complaint and appeal. tion of any incident or serious incident involving an aircraft covered under rule 5(1)(c) and may appoint a competent and qualified person as inquiry officer for the purposes of carrying out the investigation. The inquiry officer has the same powers as an aircraft accident investigator under rule 10 and

106 Getting the Deal Through – Air Transport 2015 I.L.A. Pasrich & Company INDIA

29 Is there a sector-specific regulator or are competition rules held, ‘…it cannot be concluded that the airlines had been carrying on any applied by the general competition authority? anti-competitive practice in violation of section 3(3) of the Act’. Both competition agencies and regulators usually have some overlapping mandate to achieve economic efficiency. However, the conceptual frame- Financial support and state aid work reflects that sectoral regulators such as the DGCA have specific func- 33 Are there sector-specific rules regulating direct or indirect tions relating to that sector but not market functions, which is the domain financial support to companies by the government or of the general competition authority (ie, the Competition Commission of government-controlled agencies or companies (state aid) in India). Therefore there are generally no sector-specific competition laws or the aviation sector? If not, do general state aid rules apply? rules that can be applied by the competition authority, however the provisions of rule 135 cited in reply to question 28 referring to oligopolistic prac- No. However, the central government has given approximately US$1.7 bil- tices are an exception that is not usually resorted to by the regulator or the lion in the past four years (before 31 March 2013) to aid Air India. In 2013, DGCA. Indian Oil Corporation, the nation’s biggest refiner, agreed to sell jet fuel to Air India at an 8 per cent discount. 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 Competition Act 2002 defines ‘relevant market’ under section 2(r). The state has, as a policy, given aid and injected funds to assist Air India’s Ascertaining the relevant market is a pertinent step to analysing whether business. It has been recommended that the stated policy ‘that the national there is an adverse effect on competition. The relevant market is deter- carrier would be considered before allocation of traffic rights to other mined in a two-pronged manner [section 19(5)]: one needs to ascertain eligible applicants’ should be discontinued (see the 2012 Report of the the relevant geographic market as prescribed under section 19(6) and also Committee Constituted for examination of the recommendations made in determine the relevant product market as prescribed under section 19(7). the Report on Competitive Framework of Civil Aviation Sector). Attempts have been made to define a geographic market by reference to city-pairs in the aviation sector, but the Competition Commission and the 35 Are there exemptions from the state aid rules or situations in Competition Appellate Tribunal have not accepted this argument, gener- which they do not apply? ally preferring the view that the market is international flights to and from State aid is only given to the national carrier, as it is government-owned; as India. such there are no applicable exemptions.

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? The standard for assessing the competitive impact of a transaction is by No, since Air India is fully state-owned as the national carrier and no state determining whether such transaction has an appreciable adverse effect on aid is rendered to other airlines. The competition authorities do not seem competition. Appreciable adverse effect on competition can be determined to regard state aid as anti-competitive. by the presence of any kind of anti-competitive agreements between parties or whether such transaction would result in an abuse of dominance, 37 If so, what are the main procedural steps to obtain clearance? 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- Not applicable. nation would result in or is likely to cause an appreciable adverse effect on competition. 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 CCI may make inquiries into certain types of agreements (under sec- Miscellaneous tion 19) and combinations (under section 20, provided they are above the 39 Is there any aviation-specific passenger protection statutory threshold limit) to see whether they are anti-competitive. The legislation? CCI also has the power to take up these inquiries suo moto (of its own motion). Upon finding a contravention of the Act, the CCI may pass an The Carriage by Air Act, 1972 and the Consumer Protection Act, 1986 are order directing the responsible enterprises to discontinue the contraven- the statutes under which passengers may file an action to redress their tion and impose such penalties as it deems fit. The penalties can be up to 10 grievances or approach civil courts for compensation and damages. per cent of the offender’s average turnover for the preceding three financial The DGCA has issued CARs under section 3 – Air Transport, series years. In the case of a cartel, the CCI may impose a greater penalty equal to ‘M’ for ‘Passenger Facilitation’. CAR dated 28 February 2014 (revised 17 three times the profit for each year that the contravention was carried on by July 2014), under this series, on ‘Carriage by Air of Persons with Disability the cartel. The CCI can by order modify agreements, award compensation and/or Persons with Reduced Mobility’ lists the rules for the protection of or pass such order as it may deem fit. and provision of assistance to disabled persons and persons with reduced In the case of a combination that is likely to or will cause an appreci- mobility travelling by air in order to protect them against any form of dis- able adverse effect on competition, the CCI has the power to stop such a crimination and to ensure that they receive all possible assistance during combination from coming into effect, modify the combination suitably or their travel. Clause 4.5.1 thereof deals with the complaints procedure and propose appropriate modifications so as to eliminate any adverse effect on provides that if a person with disability or reduced mobility considers that competition. If the parties do not agree with the modifications suggested this CAR has been infringed, he or she may bring the matter to the atten- by the CCI, such parties may amend the proposed suggestion and seek tion of the airlines and airport operator, as the case may be. Another CAR the CCI’s approval within 30 days. The CCI, in its effort to tackle cartels, dated 22 May 2008 has been issued on the subject of ‘Refund of Airline also has a leniency programme in place. In April 2014, the Competition Tickets to Passengers of Public Transport Undertakings’. The CAR dated Appellate Tribunal disposed of an appeal seeking to restrain implementa- 6 August 2010 (revised on 14 January 2011) is on the subject of ‘Facilities tion of IATA’s cargo accounts settlement system. The tribunal upheld the to be provided to passengers by airlines due to denied boarding, cancel- CCI’s ruling that had rejected an Air Cargo Agents Association of India lation of flights and delays in flights’. This should be read in the context of complaint in this regard. In a case decided by the CCI on 11 January 2012 the Interglobe decision cited in the reply to question 24. Clause 3.7 covers titled In re: Domestic Air Lines, the CCI considered whether exorbitant fares passenger redressal and provides that when affected by denied boarding, a of various Indian airlines for tickets and ‘shifting seats from lower buck- cancellation or a long delay, the passenger may complain directly to the air- ets to higher buckets’ (allegedly due to a strike called by Air India pilots), line. If the airline has not provided compensation or reasonable facilities as violated Section 3(3) of the Act. It was held that price parallelism in this listed in clauses 3.5 and 3.6, or if an airline fails to fulfil its obligations, pas- case was established but ‘this on its own cannot be said to be indicative of sengers may complain to the statutory bodies set up under the relevant law. any ‘practice’ being carried on in terms of section 3(3) of the Act’. The CCI

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hull loss and third-party risks in compliance with the requirements of the Update and trends Carriage by Air Act, 1972, or any other applicable law.

Domestic passenger numbers in India have been growing at the 41 What legal requirements are there with regard to aviation rate of about 6.2 per cent (for domestic carriers) and the outlook is security? strangely very positive in the face of airlines that continue to struggle with mounting losses. Two big new carriers are poised to enter the Section 5A of the Aircraft Act, 1934 provides that the DGCA or any other market, namely Air Asia and Tata Sia (soon to be called Vistara) who officer specially empowered by the central government, may issue direc- must offer game-changing service while old players like Jet Airways tions, etc in any case where the DGCA or such other officer is satisfied that and Air India will fight to hold on to their market share. Curiously, in the interests of the security of India or for securing the safety of aircraft airlines like Indigo have managed to return profits unlike some operations it is necessary so to do. other competitors in the same market, reflecting that good service The central government has created the Aircraft (Security) Rules, reputation pays off. There is little big-ticket litigation in this field at present, but this will arise as consolidations occur and when mergers 2011. Part II thereof deals with security measures at aerodromes, Part V take place to make the whole market more efficient. Consolidation deals with security measures by aircraft operators and Part VIII covers is inevitable for such a market given the fact that seat capacity is security accidents and incidents. continuing to grow with demand and yet efficiency is a tough target Aviation security comes under the purview of the Bureau of Civil for many of the smaller players and even some of the old, well- Aviation Security (BCAS), which issues AVSEC (aviation security) orders established ones. Increased regulation will also open up issues and and circulars. It lays down aviation security standards in accordance with aspects that have hitherto been outside the purview of public review. Annex 17 to the Chicago Convention of the ICAO for airport operators, As regulations continue to become more sophisticated, the sky airline operators, and their security agencies responsible for implement- will become safer for more aircraft that pollute less (per seat), and ing AVSEC measures; the BCAS monitors implementation of security rules perhaps reach further and further into the lesser-frequented though well-populated parts of India that really need air connectivity for and regulations and carries out surveys of security needs; it ensures that them to prosper. persons implementing security controls are appropriately trained and possess all competencies required to perform their duties; it plans and coordinates aviation security matters; and conducts surprise/dummy checks to test professional efficiency and the alertness of security staff as well as 40 Are there mandatory insurance requirements for the mock exercises to test the efficacy of contingency plans and operational operators of aircraft? preparedness of the various agencies. The BCAS has prepared a national CAR dated 1 March 1994 (revised on 9 April 2014) provides in Clause 10.12 aviation security programme for airport operators, airline operators and that an operator shall maintain current insurance for an amount adequate their security agencies. The commissioner of security of the BCAS is to cover its liability towards passengers and their baggage, crew, cargo, responsible for the development, implementation and maintenance of the hull loss and third party risks in compliance with the requirements of the national civil aviation security programme. Carriage by Air Act, 1972, or any other applicable law. CAR dated 1 June 2010 under section 3 – Air Transport, series ‘C’ part 42 What serious crimes exist with regard to aviation? III, issue II lists the minimum requirements for grant of permit to operate Crimes with regard to aviation (hijacking; committing an act of violence non-scheduled air transport services and Clause 10.10 thereof provides for onboard an aircraft in flight; destruction of, or damage to, air navigation insurance requirements on similar lines as Clause 10.12 mentioned above. facilities; offence at airports, etc) are provided for in the Anti-Hijacking CAR dated 26 August 1997 (revised 21 May 2009) under section 3 – Air Act, 1982 along with the Anti-Hijacking (Amendment) Act, 1994 and the Transport, series ‘C’ part IV lists the minimum requirements for grant of a Suppression of Unlawful Acts against Safety of Civil Aviation Act, 1992 permit and operation of air transport cargo services. This CAR, in clause 7, along with the Suppression of Unlawful Acts against Safety of Civil Aviation provides that the application for an operating permit shall contain informa- (Amendment) Act, 1994. Other crimes include human and drug trafficking, tion on a current comprehensive insurance policy covering passengers and inappropriate behaviour onboard an aircraft, carrying of prohibited goods, their baggage, crew, third-party risks, hull loss and any other conditions etc for which the general criminal laws apply. Some provisions to regulate that may be specified by the DGCA. Clause 10.12 thereof provides that conduct aboard an aircraft also exist in the Aircraft Rules which, read with the operator shall maintain a current insurance for an amount adequate Schedule VI, provide for punishments that include imprisonment. to cover its liability towards passengers and their baggage, crew, cargo,

Amir Singh Pasrich [email protected] Mohana Malhotra [email protected]

901–905 Naurang House Tel: +91 11 4101 2000 21 Kasturba Gandhi Marg Fax: +91 11 4101 2004 Connaught Place, New Delhi – 110001 www.ilaindia.com India

108 Getting the Deal Through – Air Transport 2015 Bahar & Partners INDONESIA

Indonesia

Wahyuni Bahar and Anggia Rukmasari* Bahar & Partners

General applicable standards. However, for an air carrier 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 a national airline after securing a licence from the MoT; antimonopoly. • 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 evalu- unprofitable, to encourage territorial development and promote defence ate the financial fitness of air carriers. The standard is divided into and homeland security. The GoI will tender a licence to operate particular two main criteria: (i) criteria for a commercial air carrier licensee routes to either a commercial air carrier or a non-commercial air carrier. as the applicant of an air operator certificate (AOC); and (ii) criteria for a commercial air carrier licensee as the holder of an AOC. For 11 Are charter services specially regulated? each of the criteria, the MoT determines the debt-to-equity ratio, Charter services are classified as non-scheduled air transport, and are debt-to-total-asset ratio, current ratio, working capital turnover and other therefore regulated under the regulations pertaining to non-scheduled air www.gettingthedealthrough.com 109 INDONESIA Bahar & Partners transport services. Such services may be conducted by a national air trans- airports that may be owned by an Indonesian airport business entity. port business entity carrying out domestic non-scheduled commercial air However, Indonesia limits foreign ownership shareholdings to a maxi- transport after getting a non-scheduled commercial air transport business mum of 49 per cent on becoming an airport business entity. In line with licence after securing flight approval from the MoT. the opportunity for private participation, a regulation on the public airport For foreign non-scheduled commercial air transport activities that business is currently being prepared by the MoT. are engaged in by national commercial air transport business entities, approval is needed from the MoT, while for foreign non-scheduled com- 18 What system is there for the licensing of airports? mercial air transport activities that are engaged in by foreign air transport All airports need approval to be established and require licences and cer- companies, approval is needed from the relevant minister (minister of for- tificates to operate the airport. Such licences and certificates are issued eign affairs for diplomatic clearance approval and minister of defence for either by the MoT or DGCA. The licensing processes involve a general security clearance approval). assessment of a national airport master plan, safety and security, environmental aspects, economics and financial worthiness, etc. Detailed rules 12 Are airfares regulated and, if so, how? and requirements are set out by the MoT and 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. The MoT is mandated by the uled commercial air transport for passengers and cargo. Aviation Law to stipulate the structure and the category for these charges, while the amount of the charges is determined by the airport operator and Aircraft cannot contravene the MoT stipulation. As mandated by the Aviation Law, 13 Who is entitled to be mentioned in the aircraft register? Do the MoT is currently preparing a ministerial regulation on airport service requirements or limitations apply to the ownership of an charges. aircraft listed on your country’s register? Airport-related services such as ground handling, cargo and mail handling, aircraft catering and other services will also be required to charge DGCA shall record details of aircraft owners, operators, manufacturers’ fees. The charges for these services are determined by the service provider designation and serial number of an aircraft in the register. based on an agreement between the service provider and service users. An owner of an aircraft to be registered in Indonesia must be a citizen It is also worth noting that air navigation services in Indonesia are also or legal entity of Indonesia. A foreign citizen or legal entity is allowed to required to charge fees. The charges are based on the structure and cat- register its aircraft in Indonesia, provided that the aircraft is operated and/ egory of charges. As well as aviation service charges, the structure and cat- or controlled by a citizen or legal entity of Indonesia under an agreement. egory of charges for air navigation services will be stipulated by the MoT. The charges of air navigation services for airports operated by the GoI are 14 Is there a register of aircraft mortgages or charges and, if so, determined by the GoI itself, while air navigation services operated by an how does it function? air navigation service body will be determined by the air navigation ser- There is no register of aircraft mortgages or charges in Indonesia. An vices body concerned. Indonesian aircraft, subject to a security agreement, title reservation agreement and/or leasing agreement will be registered in the International 20 Are there laws or rules restricting or qualifying access to Registry. airports? Other than compliance with the requirements on licensed airlines, reg- 15 What rights are there to detain aircraft, in respect of unpaid istered aircraft, flying permits and general safety standards, there are no airport or air navigation charges, or other unpaid debts? restrictions to access airports. However, please note that Indonesia adopts The government normally will not detain an aircraft based on non-pay- the cabotage principle. Consequently a foreign air carrier cannot provide ment of debt to the GoI or any other parties. However, for safety and secu- domestic flight within Indonesia. rity considerations, an airport has the authority to keep an aircraft from taking off if it does not have flight approval. 21 How are slots allocated at congested airports? Slots are coordinated by the Indonesian Slot Coordinator (IDSC) and regu- 16 Do specific rules regulate the maintenance of aircraft? lated by DGCA. Those regulations refer to the International Air Transport The Aviation Law and other implementing regulations require that main- Association (IATA) Worldwide Scheduling Guidelines. tenance is mandatory for an aircraft. These regulations manage, for exam- DGCA has determined a number of congested airports. Slot clearance ple, maintenance practices, air operator certificate, approved maintenance in the congested airports is determined by the IDSC in reference to the organisation and aircraft maintenance engineer licences. notice of airport capacity (NAC). Slot clearance is prioritised for scheduled flights. Airports 22 Are there any laws or rules specifically relating to ground 17 Who owns the airports? handling? Airports in Indonesia are privately and publicly owned. Private airports Besides being regulated in the Aviation Law, ground-handling services may be owned by either the GoI (central or regional) or an Indonesian legal are further regulated by DGCA. Ground-handling services may be done entity. Meanwhile, public airports, prior to the enactment of the Aviation by Indonesian individuals or Indonesian legal entities, including stated- Law, could only be owned by the government through a state-owned enter- owned enterprises (being AP I or AP II) and local state-owned enterprises. prise, namely PT Angkasa Pura I (AP I) and PT Angkasa Pura II (AP II). The foreign shareholdings limitation in an Indonesian legal entity pro- Currently, the Aviation Law has opened up an opportunity for the pri- viding ground handling services is limited to 49 per cent. vate sector to participate in operating a public airport business through a public-private partnership scheme. In determining a private partner, the 23 Who provides air traffic control services? And how are they MoT will hold an open tender, and the winning bidder will enter into a regulated? concession agreement with the MoT. Under the prevailing laws, there is no priority right granted to AP I and AP II as airport operators, thus putting As of 13 September 2012, air traffic control services are provided by the their status on the same footing as other business entities. Indonesian Aviation Navigation Services Agency (LPPNPI) replacing AP I, Currently, the Aviation Law has opened up an opportunity for the AP II and the technical execution unit of DGCA as the previous provid- private sector to participate in a public airport business through a public- ers. LPPNPI was established in the form of a public corporation in order private partnership scheme. There is no limitation as to the number of to prevent it from mere profiteering in providing its services. The air traffic

110 Getting the Deal Through – Air Transport 2015 Bahar & Partners INDONESIA control services provision by LPPNPI covers two flight information regions operators’ report for an accident, incident and serious incident occurring (FIRs), namely Jakarta FIR and Makassar FIR. The services provided by at an airport. For an aircraft accident and incident, the report shall be LPPNPI include: immediately submitted by aircraft operators to 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? Is there a sector-specific regulator or are competition rules The MoT regulates that air carriers can be obliged to pay compensation 29 applied by the general competition authority? with regard to: • 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 delays; 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). 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 competitive effect of a transaction under Law No. 5/1999. The standards in the crash, data of the flight navigation services, and meteorological will assess the effective competition and also determine any company hav- and other data related to the operation of the afflicted aircraft; ing market power in relevant markets. This assessment aims: • evaluate, analyse and make a conclusion as to the most probable cause • to analyse whether a company or group of companies with significant of the aircraft accident; 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? 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 KNKT to form an aviation profession council. The aviation pro- the KPPU is authorised, upon its initiative or complaints, to investigate fession 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, KPPU may impose sanctions on the busi- performance of further inquiry by a civil servant investigator; ness 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: (i) aircraft In the aviation sector, the GoI will provide financial support for a private operators’ report for an aircraft accident and incident; and (ii) airport company undertaking pioneer air transport activity in the form of aid for www.gettingthedealthrough.com 111 INDONESIA Bahar & Partners

Miscellaneous Update and trends 39 Is there any aviation-specific passenger protection Air liberalisation within the Association of South East Asia Nations legislation? (ASEAN) will start in 2015 (ASEAN Open Sky). Thus, it is worth Yes, there are a number of passenger protection regulations, concerning seeing how smooth the implementation of this policy is within the ASEAN countries. Besides liberalisation within ASEAN, ASEAN also the protection of passengers’ flight safety and security, airfares, accidents paves the way to the possibility of having an open skies agreement resulting in the death of passengers and accidents resulting in permanently with EU as the two regional organisations concluded in a joint disabled passengers, flight delays, lost, disappeared and damaged cargo declaration early last year. Owing to the development within the and baggage, etc. region and increase in air traffic, airports and airlines development (including privatisation), labour (flight crew), safety and security, as 40 Are there mandatory insurance requirements for the well as competition, will draw much attention in the forthcoming operators of aircraft? years. Furthermore, to encourage internal Indonesian and regional air transport development, GoI is now focusing on preparing a set Insurance is mandatory. No carrier will be allowed to operate an aircraft in of regulations. The latest update is that, besides preparing some Indonesia unless it has the requisite insurance policies that protect: regulations as mentioned above, GoI is also preparing an aircraft • operated aircraft; mortgage law. • personnel of the operated aircraft; • responsibility for second-party loss; • responsibility for third-party loss; and air transport operation costs and/or aid for fuel transport costs. In addition, • incident investigation activities. the GoI may grant a guarantee in respect of airport construction. In addition, Law No. 17/2003 on State Finances, as the general state 41 What legal requirements are there with regard to aviation aid rule, stipulates that the central or regional government can provide aid security? to a private company (including a private company in the aviation sector) in the form of loans, gifts or capital participation, provided that the aid must Aviation security requirements are regulated by the government. According first be set out in the state/regional budget. to the regulation, the MoT has a vital role in preserving aviation security. The GoI does not only support direct financing but also indirect The aviation security covers security of airports, aircraft, flight personnel, financing in the form of incentives to be released from paying value added passengers, cargo, etc. For example, screening must be conducted on pas- tax (VAT) to companies operating overseas flights. sengers, baggage, cargo and mail in order to be able to enter into an airport.

34 What are the main principles of the state aid rules applicable 42 What serious crimes exist with regard to aviation? to the aviation sector? The Aviation Law contains a number of aviation-related sanctions, includ- Indonesia does not regulate any main principles related to state aid rules ing the endangering of aircraft, passenger, cargo or third parties by disre- that are applicable to the aviation sector. Nevertheless, Law No. 17/2003 garding aviation rules. The Indonesian Criminal Code, however, contains governs several principles in managing state finance, namely good order, sanctions for most serious aviation-related crimes, for example: compliance with laws and regulations, efficiency, economical, effective- • air piracy; ness, transparent and accountable. • destruction of aircraft; • air sabotage; 35 Are there exemptions from the state aid rules or situations in • carrying air hazardous material; which they do not apply? • acts against air traffic; and Not applicable. • acts against the safety and security of aircraft.

36 Must clearance from the competition authorities be obtained These crimes are subject to penalties. before state aid may be granted? In line with this, Indonesia has also ratified several conventions in rela- Not applicable. tion to aviation crime, such as the Tokyo Convention of 14 September 1963, the Hague Convention of 16 December 1970 and the Montreal Convention 37 If so, what are the main procedural steps to obtain clearance? and Protocol of 23 September 1971. Not applicable. * Loura Hardjaloka and Anita Patresya Damanik, both associates at Bahar 38 If no clearance is obtained, what procedures apply to recover & Partners, have assisted in the preparation of this review. unlawfully granted state aid? Not applicable.

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

112 Getting the Deal Through – Air Transport 2015 Studio Pierallini ITALY

Italy

Laura Pierallini Studio Pierallini

General • non-commercial operations or general aviation operations, which cover activities carried out by, among others, flying clubs, flying 1 Which bodies regulate aviation in your country, under what schools, small private aircraft and aerial works. basic laws? The main body regulating aviation in Italy is the Italian Civil Aviation The aircraft’s private use must result by the statement rendered by the air- Authority (ENAC), as provided by article 687 of the Italian Navigation craft’s captain to ENAC on landing. Such statement is subject to checks by Code and Legislative Decree No. 250/1997. The Ministry of Transport is ENAC. The aircraft’s private use must be free of charge. the body having supervising authority for ENAC and general competence. Other bodies regulating aviation in Italy are Assoclearance and ENAV SPA, 4 Is access to the market for the provision of air transport which are the entities with delegated authority in the field of, respectively, services regulated and, if so, how? slots allocation and air traffic control (see questions 2 and 6). The principal Access to the market for the provision of air transport services is regulated. law on aviation is the Italian Navigation Code, approved by Royal Decree In particular, air carriers must obtain a licence to operate from ENAC. dated 30 March 1942 No. 327, as amended by Legislative Decree dated According to article 778 of the Italian Navigation Code, ENAC issues air 9 May 2005 No. 96 and Legislative Decree dated 15 March 2006 No. 151. carriers’ licences to enterprises established in Italy in compliance with EU Regulation No. 1008/2008. Regulation of aviation operations 2 How is air transport regulated in terms of safety? 5 What requirements apply in the areas of financial fitness and nationality of ownership regarding control of air carriers? Safety regulation falls within the institutional duties of ENAC. ENAC issues and renews airworthiness certificates and air operator According to article 778 of the Italian Navigation Code, air carriers must: certificates and approves maintenance programmes. ENAC carries out • be enterprises located in Italy and whose effective control is owned inspections and controls on aircraft, operated for private and public use. and must be continued to be owned directly or through majority own- Air traffic control is entrusted to ENAV. ership by member states or nationals of member states; Italy applies all the international rules issued by the International Civil • have as their main objective, air transport in isolation or combined Aviation Organization (ICAO) (ie, Annex 17), and by JAR 145/EASA 145 as with any other commercial operation of aircraft or the repair and amended by the European Aviation Safety Agency (EASA) Implementation maintenance of aircraft; Rules (whose role has been significantly increased by Regulation (EC) No. • own a valid certificate of airworthiness issued by ENAC and one 216/2008 of the European Parliament and the Council of 20 February 2008 or more aircraft being its property or leased (dry lease), as provided on common rules in the field of civil aviation) and, with effect from 16 July by article 2.2 of the Circular EAL-16 issued by ENAC on 27 February 2008, EU-OPS as provided by article 2 of Regulation (EC) No. 1899/2006 2008; and amending Council Regulation (EC) No. 3922/91 on the harmonisation of • provide satisfactory evidence of administrative, financial and insur- technical requirements and administrative procedures in the field of civil ance requirements, as provided by EU Regulation No. 1008/2008 aviation), as well as all the EU regulations. and EU Regulation No. 785/2004, as subsequently amended by EU ENAC issues its own circulars and rules to implement and further Regulation No. 285/2010 on 6 April 2010. detail the international rules above. ENAC is also responsible for the regulation of crew skill assessment. In particular, on 27 February 2008 ENAC issued Circular EAL-16, which governs in detail the requirements for financial and administrative fitness. 3 What safety regulation is provided for air operations that do Attached to this circular are, inter alia, the forms for business plans, cash not constitute public or commercial transport and how is the flow, etc. Moreover, on 21 December 2011, ENAC issued Circular EAL-17-A distinction made? implementing Regulation No. 785/2004 on insurance requirements for air carriers and aircraft operators. In general, safety requirements governing commercial and private flights are the same. They cover the technical requirements of aircraft, air traffic 6 What procedures are there to obtain licences or other rights to control and public safety requirements. The differences relate to admin- operate particular routes? istrative, organisational and financial regulations. On 29 October 2009, ENAC issued Circular Nav 71-A, replaced by Circular Nav 71-B dated 31 For national and European routes, air carriers must submit an applica- October 2011, which provides that from 28 September 2009 air carriers tion to the local coordinator in charge for the allocation of slots, accord- operating private transport must obtain the continuing airworthiness man- ing to international rules provided by IATA conferences (clearance). By agement organisation approval certificate (CAMO) when the aircraft oper- Ministerial Decree No. 44/T dated 4 August 1997, Assoclearance has ated have a weight of more than 5,700kg or other certain specifications. been appointed as the local coordinator for Italian congested airports. The criteria to determine whether the operations constitute com- Assoclearance is responsible for the allocation of slots and must abide by mercial operations rather than private operations are provided by ENAC its Statute and Code of conduct approved on 21 July 2009. To perform this Regulation dated 21 October 2003 (and following amendments) and ENAC activity, it has to meet the principles of transparency, neutrality, non-dis- Regulation dated 30 June 2003. Such regulations provide, in relation to the crimination, and the ‘use it or lose it’ rule. aircraft’s use, a general distinction between: When an air carrier has operated the slots allocated for at least 80 per • commercial operations, which are those carried out against considera- cent of the time during the scheduling period for which they have been tion. Such operations include scheduled, charter and taxi flights; and allocated, it will be entitled to operate the same series of slots in the next www.gettingthedealthrough.com 113 ITALY Studio Pierallini equivalent scheduling period (the grandfather rule). If an air carrier can- 11 Are charter services specially regulated? not evidence such percentage of use, the slots are placed in a slot pool Charter services were governed by the Decree of the Ministry of Transport and reallocated by the local coordinator upon request, unless the air car- dated 18 June 1981 (regulation of non-scheduled services), which covered: rier involved can justify not having met the target on the basis of any rea- • taxi flights; sons pointed out in article 10 of EU Regulation No. 95/93, as amended by • own-use charter; Regulation No. 793/04. Furthermore, on 24 August 2009 ENAC issued • inclusive tour charter; Circular EAL-18 on ‘slot allocation at the Italian congested airports’. The • advance booking charter; circular aims at interpreting and clarifying some provision of Regulation • special event charter; No. 95/93, as amended. • student charter; Traffic rights on non-European routes are governed by the Chicago • affinity charter; Convention of 1944 (which came into effect on 4 April 1947 and was • migrant workers charter; and approved in Italy by Legislative Decree dated 6 March 1948, No. 616) and • charter cargo. by the relevant treaties. To operate such routes, Italian air carriers must be designated by ENAC in compliance with the applicable treaty; designation Most of the rules, especially those concerning charter flights within the may be single or multiple. Once designated, an air carrier must apply for EU, have been superseded by EU regulations, international conventions its relevant slots. and treaties. Moreover, ENAC has issued a draft Regulation on extra-Community 7 What procedures are there for hearing or deciding contested charter services, currently under discussion, which contains a substantial applications for licences or other rights to operate particular modification of the above-mentioned Decree dated 1981. routes? Any decision made by ENAC or Assoclearance concerning a licence appli- 12 Are airfares regulated and, if so, how? cation or other rights to operate particular routes can be challenged by the According to Regulation No. 1008/2008, EU air carriers are able to freely interested air carrier by hierarchical petition before the superior adminis- set airfares. Regulation No. 1008/2008 introduced new rules relating to trative entity or before the competent administrative court. The judgments the transparency of airfares, which can be briefly summarised as follows: or orders can then be challenged before the Supreme Administrative Court. • fares must include applicable conditions when offered or published; The applicant may also submit the question to the European Commission • the final price must, at all times, be indicated and must include the if its application for an operating licence under Regulation 1008/2008 has fare and all applicable, unavoidable and foreseeable taxes, charges, been rejected. surcharges and fees; • in addition to the final price, the fare, taxes, airport charges and other 8 Is there a declared policy on airline access or competition and, charges, surcharges or fees must be specified where they have been if so, what is it? added to (ie, separated out from) the fare; and There is no declared policy on airline access. In relation to competition, the • any optional price supplements must be communicated clearly at the competent antitrust authority, the Autorità Garante della Concorrenza e start of the booking process and must be subject to acceptance on a del Mercato (AGCM), has expressed several principles about airline com- strictly ‘opt-in’ basis. petition. These include abolishing burdens, opening the market and avoiding concentrations that could have the effect of restricting competition. ENAC, acting within its general powers of control of the Italian air carriers, oversees the fares determined by air carriers with respect to extra-EU long- 9 What requirements must a foreign air carrier satisfy in order haul routes operated with scheduled flights. to operate to or from your country? No restrictions are provided for Community air carriers to operate to and Aircraft from Italy, provided that they submit an application to the local coordina- 13 Who is entitled to be mentioned in the aircraft register? Do tor in charge of the allocation of slots according to international rules pro- requirements or limitations apply to the ownership of an vided by IATA conferences (clearance), Community Regulation No. 95/93, aircraft listed on your country’s register? as amended by Regulation No. 793/04, as well as Circular EAL-18 issued Depending on the circumstances, the owner and the operator are entitled by ENAC on 24 August 2009. to be mentioned in the aircraft register. Registration in the Italian Aircraft Non-Community air carriers wishing to operate flights to and from Registry is governed by article 750 of the Italian Navigation Code, which Italy according to traffic rights set out in either bilateral or multilateral air states: ‘Aircraft can be registered under the National Aircraft Registry held services agreements have to be designated by the state holding the traffic by ENAC provided that nationality requirements set forth in article 756 of rights. Should no air services agreement be in force, the schedule can be the Italian Navigation Code are met’. authorised only upon prior request submitted by the civil aviation authority Referring to the nationality requirements of the owner, article 756 of the country. paragraph I of the Italian Navigation Code states as follows. In order to satisfy the nationality requirements for registration in the 10 Are there specific rules in place to ensure aviation services National Aircraft Registry, aircraft should be whole or major property of: are offered to remote destinations when vital for the local • states, regions, provinces, municipalities and any other Italian or EU economy? member state’s public or private body; According to article 782 of the Italian Navigation Code, as amended by • Italian citizens or citizens of other EU member states; or Legislative Decree No. 96/2005 and Legislative Decree No. 151/2006, the • companies established or with registered offices in Italy or other EU Italian government may impose public service obligations to guarantee the member states, whose share capital is whole or major property of right of mobility provided by article 16 of the Italian constitution. Article Italian or other EU states’ citizens, or Italian or other EU member 782 of the Italian Navigation Code complies with EU Regulation No. states’ body corporate with the same characteristics of shareholding 1008/2008 and No. 95/1993, as amended by EU Regulation No. 793/04. and whose president and most part of the directors, including the The Italian government may impose public service obligations in respect of managing director are Italian or other EU member states’ citizens. domestic scheduled air services serving a peripheral or developing region or on a thin route to any regional airport, when such route is considered Article 756, paragraph II, concerning registration in the name of the opera- vital for the economic development of the region in which the airport is tor, states as follows: ENAC may, derogating from the provisions of the par- located. The Italian government imposed public service obligations from agraph above, by grounded rulings, allow the registration in the National and to Sicily and Sardinia pursuant to, respectively, article 36 of Law No. Aircraft Registry of aircraft that are effectively used by, but not property of, 144/99, as modified, EU Communication No. 2006 C 305/05 published in companies holding the air carrier licence. In such case, the title different the EU Official Journal on 14 December 2006, and EU Communication No. from property, based upon which the registration is made, shall result from 2006 C 93/08 published in the EU Official Journal on 21 April 2006. the National Aircraft Registry and the registration certificate.

114 Getting the Deal Through – Air Transport 2015 Studio Pierallini ITALY

14 Is there a register of aircraft mortgages or charges and, if so, January 1999, implementing Directive 96/67/EC, which allows only how does it function? ENAC-licensed handlers and service providers access to airports. ENAC Mortgages are registered with the National Aircraft Registry kept by licences are granted on the basis of the requirements set out in section 13 of ENAC. Registration is made by filing the mortgage deed duly certified by Legislative Decree No. 18/99, in a Regulation issued by ENAC on 23 March a notary public with the relevant department of ENAC. ENAC records the 2011, which replaced a January 2011 Regulation which had previously mortgage on both the Aircraft Registry and the Certificate of Registration superseded a 2008 Regulation, and in Circular APT 02A issued by ENAC of the relevant aircraft. Failing registration, the mortgages are null and on 25 January 2007, replaced by Circular ATP 02B dated 22 November 2013. void. A mortgage is the most common priority on aircraft and the only one Additionally, Circular APT-19 issued by the ENAC on 26 October 2005, that can be voluntarily granted. Other liens on an aircraft can only arise by section 2.2 about the airport regulation system, governs handlers’ and ser- law or by judicial order. vice providers’ access to airports. It also sets out regulations that each airport has to implement. 15 What rights are there to detain aircraft, in respect of unpaid airport or air navigation charges, or other unpaid debts? 21 How are slots allocated at congested airports? The Italian courts may order the attachment on any Italian or foreign air- At congested airports, slots are allocated by Assoclearance (the local coor- craft for unpaid charges provided under article 6 of Law No. 324 dated 5 dinator) in accordance with articles 6, 8, 9, 10 of EU Regulation No. 95/93, May 1976, which states joint liability of the owner of the aircraft and the as amended by EU Regulation No. 793/04. operator for the payment of any rights, taxes and interests to the airports. As already mentioned, in special cases, such as for Milan Linate air- Moreover, in Italy an aircraft can be attached, pursuant to article 1023 of port, slot allocation is further governed by ministerial decrees (Ministerial the Italian Navigation Code, which provides certain liens on the aircraft by Decree dated 3 March 2000 (Bersani I) and Ministerial Decree dated 5 cause of its operation. January 2001 (Bersani II)) restricting the slot allocation to EU carriers and limiting the number of slots to the requested destination on the basis of the 16 Do specific rules regulate the maintenance of aircraft? number of passengers with the destination airport (article 1 of Bersani II). ENAC has issued technical regulations about maintenance programmes 22 Are there any laws or rules specifically relating to ground as well as various circulars (ie, NAV 26C dated 24 January 2007, NAV 6A, handling? NAV 13, NAV 31B, NAV 42, and NAV 71-B) regulating aircraft maintenance operations. Moreover, ENAC applies international rules governing the EU Directive No. 96/97 of 15 October 1996 on access to the ground-han- maintenance of aircraft (ie, JAR/EASA 145 and, with effect from 16 July dling market at EU airports has been implemented in Italy by Legislative 2008, EU-OPS, as provided by article 2 of Regulation (EC) No. 1899/2006 Decree No. 18 dated 13 January 1999. amending Council Regulation (EC) No. 3922/91 on the harmonisation of Additionally, as already mentioned above, other measures have been technical requirements and administrative procedures in the field of civil issued by ENAC. In particular, the regulation dated 23 March 2011 and aviation). Circular APT 02A dated 25 January 2007, replaced by Circular ATP 02B dated 22 November 2013 The key changes relate to subcontracting and self- Airports handling (ie, arrangements whereby airlines provide handling services to their own flights and passengers). 17 Who owns the airports? Most of the Italian Commercial Airports are state-owned and managed by 23 Who provides air traffic control services? And how are they concessions from the state to private companies, according to article 2 of regulated? Ministerial Decree No. 521 dated 12 November 1997. ENAV SpA is the Italian company in charge of controlling and supporting Such companies can be participated in by a public entity, such as air traffic. It became a publicly controlled joint-stock company on 1 January regional, provincial, municipal or other local public entities (eg, the 2001, according to Law No. 665 dated 21 December 1996, as amended by Chamber of Commerce). Law No. 144 dated 17 May 1999. ENAV’s aim is to: There are many private airports devoted to activities such as general • allow aircraft to fly within the assigned airspace with constantly aviation, flying schools, parachuting, etc. enhanced levels of safety, optimising the effectiveness of the service provided and the efficiency of the company; and 18 What system is there for the licensing of airports? • handle the airspace safely and consistently, guaranteeing operational The interested party must file an application pursuant to Ministerial continuity and regularity. Decree No. 521 dated 12 November 1997. Provided that all the necessary requirements are met, the Ministry of Transport entrusts the management ENAV provides three main types of service: of the relevant airport by decree. • air space management; • air traffic flow management; and 19 Is there a system of economic regulation of airports and, if so, • air traffic services (ATS). how does it function? Based on the requirements of the International Civil Aviation Organization A system of economic regulation for airports is provided by Law No. 324 (ICAO), the tasks of the ATS are to: dated 5 May 1976, by Law No. 537 dated 24 December 1993, as amended by • prevent collisions between aircraft; article 11 of Law No. 248 dated 2 December 2005, and by Law No. 662 dated • prevent collisions between aircraft in the manoeuvring area and 23 December 1996. According to the above rules, aircraft and passenger obstructions in that area; traffic to and from national airports are subject to the following charges and • expedite and maintain an orderly flow of air traffic; duties fixed by law: • provide advice and information useful for the safe and efficient con- • landing and departure charges; duct of flights; and • parking charges; and • notify appropriate organisations regarding aircraft in need of search • boarding of passengers charges. and rescue aid, and assist such organisations when required. Pursuant to article 11-nonies of Law No. 248 dated 2 December 2005, air- Liability and accidents port charges are fixed by a Decree of the Ministry of Transport on the basis of certain criteria established by a government committee called Comitato 24 Are there any special rules in respect of death of, or injury to, Interministeriale Programmazione Economica (CIPE). passengers or loss or damage to baggage or cargo in respect of domestic carriage? 20 Are there laws or rules restricting or qualifying access to Liability of air carriers for the death of, or injury to, passengers and loss or airports? damage to baggage or cargo in respect of domestic carriage is governed by Yes. In particular, in relation to handlers and other service providers, the Montreal Convention dated 28 May 1999 (Convention for the unifica- the relevant rules are contained in Legislative Decree No. 18 dated 13 tion of certain rules for international carriage by air), which entered into

www.gettingthedealthrough.com 115 ITALY Studio Pierallini force in Italy on the 60th day (28 June 2004) after the 30th ratification (arti- 29 Is there a sector-specific regulator or are competition rules cle 56, paragraph 6), as implemented and integrated by Council Regulation applied by the general competition authority? (EC) No. 2027/97 of 9 October 1997 on air carrier liability in the event of The competition rules are applied by the general competition authority, the accidents, as amended by EU Regulation No. 889/2002 of 13 May 2002. AGCM.

25 Are there any special rules about the liability of aircraft 30 How is the relevant market for the purposes of a competition operators for surface damage? assessment in the aviation sector defined by the competition Liability of aircraft operators for surface damage is regulated by article 965 authorities? of the Italian Navigation Code. According to article 965, the liability of an In the aviation sector, the AGCM has distinguished between the charter aircraft operator for surface damage caused by an aircraft is entirely gov- and scheduled flights markets. For charter flights, the geographical market erned by international rules applicable in Italy. is divided into long-haul routes and medium or short-haul routes that are International rules also apply in case of damages caused by aircraft then divided between European countries and the Mediterranean Sea. registered in Italy and by state aircraft within the Italian territory. The relevant market for scheduled flights is defined on the basis of the single routes operated by air carriers involved in a competition assessment. 26 What system and procedures are in place for the investigation of air accidents? 31 What are the main standards for assessing the competitive Air accidents are regulated by articles 826 to 833 of the Italian Navigation effect of a transaction? Code. The airport manager and public security authorities have to imme- The AGCM takes into account the following standards: diately inform the judicial authority and the Agenzia Nazionale per la • the possibilities of substitution available to suppliers and users; Sicurezza del Volo, the national agency for flight safety, of any accidents • the market position of the undertakings; (Legislative Decree No. 66 dated 25 February 1999 which implemented • the access conditions to suppliers or markets; Directive No. 94/56/EC of the Council of 21 November 1994 containing • the structure of the relevant markets; the basic principles governing the investigations of civil aviation accidents • the competitive position of the domestic industry; and incidents. Directive No. 94/56 has been superseded by Regulation • barriers to entry of competing undertakings; and (EU) No. 996/2010 of the European Parliament and of the Council of 20 • evolution of supply and demand for the relevant goods or services. October 2010 on the investigation and prevention of accidents and incidents in civil aviation and repealing Directive No. 94/56/EC). 32 What types of remedies have been imposed to remedy Pursuant to article 826, the technical investigations of air accidents and concerns identified by the competition authorities? incidents, if any, are conducted or supervised by the Agenzia Nazionale per Competition concerns can be identified by the AGCM after an investiga- la Sicurezza del Volo in cooperation with the authorities responsible for the tion has been performed: judicial inquiry. • in the event of an alleged infringement of article 2 (Agreements According to Legislative Decree No. 66/99 any investigation of an restricting freedom of competition) or article 3 (Abuse of a dominant accident or incidents shall be the subject of a report in a form appropriate position) of Law No. 287/1990; or to the type and seriousness of the accident. • if the authority considers that a concentration may be subject to pro- Moreover, it applies Legislative Decree No. 213 dated 2 May 2006, which hibition under article 6 (Prohibition on concentrations restricting free implemented Directive No. 2003/42/EC of the European Parliament and competition) of Law No. 287/1990. of the Council of 13 June 1993 on occurrence reporting in civil aviation, and Legislative Decree No. 18 dated 14 January 2013, governing the system of fines In the event of infringements under the first of these points, the author- applicable in the case of Regulation (EU) No. 996/2010 infringements. ity sets a deadline within which the undertakings and entities concerned have to remedy the infringements. In the most serious cases it may decide, 27 Is there a mandatory accident and incident reporting system depending on the gravity and duration of the infringement, to impose a and, if so, how does it operate? fine up to 10 per cent of the turnover of each undertaking or entity during The captain of the aircraft concerned has to record the accident or incident the previous financial year. In the case of non-compliance, the authority in the flight book and report it to ENAC (local airport) immediately after shall impose a fine of up to 10 per cent of the turnover of each undertaking landing. or entity during the prior financial year. In the case of non-compliance, the Additionally, according to articles 828 and 829 of the Italian Navigation authority shall impose a fine up to 10 per cent of the turnover. The author- Code, as amended by article 17 of Legislative Decree No. 66 dated 25 ity shall also set a time limit for the payment of a fine. In cases of repeated February 1999, already mentioned above, the airport director and any non-compliance, the authority may decide to order the undertaking to sus- other public authority, upon knowledge of an accident or incident, have pend activities for up to 30 days. to immediately report it to the competent judicial authority, the Agenzia If, following an investigation under the second point, the authority Nazionale per la Sicurezza del Volo and ENAC. ascertains that a concentration falls within the scope of article 6 of Law No. A specific mandatory accident and incident reporting system is pro- 287/1990, it shall prohibit, or impose limits to, the same. vided for in article 3 of Legislative Decree No. 213 of 2 May 2006, which In particular, in the aviation sector limits to concentration have con- lays down that, except as what is provided in articles 828 and 829 of the sisted in release of slots. An exception to the limits to concentration has Italian Navigation Code, occurrences that endanger or that, if not cor- been established for the recent new Alitalia/Air One merger, which has rected, would endanger an aircraft, its occupants, or any other person, been consequent to the insolvency of the former Italian flag carrier Alitalia. are reported to ENAC. A list of examples of these occurrences appears in If the concentration has already taken place, the authority may require Annexes I and II to Legislative Decree No. 213. Article 4 indicates a list of measures to be taken in order to restore conditions of effective competi- persons who, in the exercise of his or her functions, must report the occur- tion, and remove any effects that distort the same (for example it may order rences to ENAC. According to article 5, the information gathered is stored the acquiring party not to exercise the acquired voting rights). in a database held by ENAC. That information will be used for the sole The authority imposes administrative fines on undertakings which objective of the prevention of incidents and accidents in civil aviation (arti- implement a concentration in violation of the prohibitions above, ranging cles 1 and 9). from a minimum of 1 per cent to a maximum of 10 per cent of the turnover of the business forming the object of the concentration. The authority Competition law may also impose administrative fines on undertakings that fail to comply 28 Do sector-specific competition rules apply to aviation? If not, with the prior notification requirements in the amount of 1 per cent of the do the general competition law rules apply? turnover of the year before the year in which the undertaking is challenged, over and above any other penalties for which it may be liable. General competition law rules apply to the aviation sector. No special rules are in force.

116 Getting the Deal Through – Air Transport 2015 Studio Pierallini ITALY

Update and trends On 31 March 2014, the Italian Civil Aviation Authority (ENAC) issued In addition, the Regulation establishes mandatory third-party Circular EAL-22 in respect of the implementation of Article 802, second insurance, and subjects the treatment of personal data eventually paragraph, of the Italian Navigation Code (INC), which provides that collected by the operations of a RPAV to the Italian Data Protection ENAC can prevent the departure of aircraft when certain taxes, charges Code. With regard to model aircraft, instead, the Regulation establishes and fees due from the relevant operator are outstanding. Notice of any a more lenient framework, by setting solely a number of technical such non-payment is given to ENAC by ENAV (the Italian Agency for requirements for their flight operations. No self-declaration or the Air Traffic Control), Eurocontrol or the managing company of the authorisation is required. The ENAC Regulation represents one of the involved airport. The main purpose of Circular EAL-22 is to specify the first pieces of legislation providing a legal framework for such kind of application area of the mentioned provision of law. First of all it clarifies objects, in the absence of a European common standard and with ICAO the taxes, charges and fees whose non-payment entitles the Authority to still committed to the adaptation of relevant Annexes to the Chicago deny the aircraft take-off, in particular: Convention in order to include drones. • charges for landing, take-off and parking of aircraft; In January 2014, the Italian Competition Authority (Autorità • taxes for embarking of passengers; Garante della Concorrenza e del Mercato) responded to concerns • taxes for cargo loading and unloading; raised by the Italian Air Carriers Association (Assaereo), the Italian • fees for safety control operations; Airports Association (Assaeroporti) and Società Aeroporti di Roma • fees for using the airport infrastructures; S.p.A. (the management company of Rome’s Ciampino and Fiumicino • fees for ground handling services, to the extent they are performed airports) on the new regional aircraft noise tax (namely IRESA), by a sole operator; and issuing a communication to the parliament and the government • route and terminal charges. under the Competition and Fair Trading Act (Law No. 287/1990), specifically regarding the competition distortions caused by the tax According to Circular EAL-22, ENAC is also entitled to prevent the implementation. The authority noted that certain material differences departure of any aircraft operated to or from Italian territory by national, in the assessment and collection of the tax in each region were not European or extra-EU carriers. Referring to the Italian operators, justified on technical or geographical grounds, but were merely due to Article 802 of INC is applicable both to Italian-registered aircraft and a lack of proper coordination among the regions. As a consequence, foreign-registered aircraft operated under lease or charter agreements. such differences will inevitably and unjustifiably alter the investment No denial to take-off can be taken with respect to ‘public aircraft’ – as return conditions of the air carriers operating in different airports. The defined by article 744 of INC (ie, military aircraft, aircraft owned by authority further noticed that these circumstances will clearly have a public entity and operated by police, customs, or for firefighting, distortive consequences for competition among sector operators, as rescue or safety reasons, as well as aircraft operated to provide other well as negative effects for passengers. Moreover, in its communication public services) – or to private aircraft treated as state-owned pursuant the authority considered other important weaknesses of the regional to article 746 of INC (according to which the Ministry of Transport can tax regime, such as the lack of efficiency ratio in the parameters of tax treat private aircraft as state-owned aircraft, when they are used by a calculation and collection. For instance, unlike the law of other EU private operator for non-commercial public services). member states, the Italian tax regime does not take into account the The Italian civil aviation authority (ENAC) has issued a Regulation particular urban characteristics of each airport, the actual noise level on Remotely Piloted Aerial Vehicles (first edition dated 16 December of specific aircraft and the distinction between daytime and night-time 2013, entered into force on 30 April 2014), which provides the legal flights. In addition, the new tax does not seem to comply with its main framework for the operation of so-called drones on the Italian purpose, as in some regions (eg, Lazio) only 10 per cent of the collected territory. The Regulation applies to two categories of aerial objects: amount is assigned to the management of the social costs arising Remote Piloted Aerial Vehicles (RPAVs) and model aircraft. In order to from aircraft noise (eg, airport monitoring systems, anti-pollution determine the operational requisites, the Regulation establishes two measures and indemnification of communities affected by aircraft categories of RPAVs, depending upon the maximum take-off weight noise pollution). Finally, the authority also suggested measures to be of the object: below 25 kg, and above 25 kg. For the lighter drones adopted at a national level to remove the risk of competition distortion employed in non-critical flight operations, the responsibility to assess and uniform standards for the implementation of the tax across the the airworthiness lies upon the operator, by the requirement of a regions. Such criteria should set the tax level on the basis of the type self-declaration of compliance with the provisions of the Regulation. and characteristics of aircraft in order to avoid arbitrary discriminations Critical flight operations on the contrary must obtain authorisation by among airports and air carriers. The suggested measures should be ENAC. The criticality of a flight operation depends on the kind of area also combined with adequate provisions to ensure that the tax revenues involved in the activity, whether congested, restricted or hosting critical be mainly allocated for noise decrease instruments (ie, the intended infrastructures, and on the following potential risk of damage to third purpose of the tax) and to justify the negative impact on the aviation parties. RPAVs whose take-off weight is equal to or above 25 kg always sector competitiveness accordingly. require airworthiness certification and the authorisation of the operator by ENAC, irrespective of the criticality of their flight operation.

Financial support and state aid 35 Are there exemptions from the state aid rules or situations in which they do not apply? 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or There are some circumstances in which the state aid rules do not apply, government-controlled agencies or companies (state aid) in such as in the case of de minimis aid. The threshold of €200,000 in a the aviation sector? If not, do general state aid rules apply? 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 General state aid rules provided by the EC Treaty are applied in Italy and of the Treaty to de minimis aid’, is applied in Italy. in the aviation sector. No sector-specific rules regulating direct or indirect Moreover, certain exemptions are provided under laws issued by Italy financial support to individual companies by the government or govern- in accordance with article 107 TFEU (ie, Law No. 808 dated 24 December ment-controlled agencies or companies exist. 1985, on the public funding subsidies granted to promote the technological development of the aeronautical industry as well as to increase relevant 34 What are the main principles of the state aid rules applicable employment). Other situations in which the state aid rules do not apply to the aviation sector? are provided on a case-by-case basis in compliance with EU exemption No special rules regulating state aid exist in the aviation sector. The main regulations. principles of the state aid rules are contained in article 107 of TFEU. Pursuant to article 107, any aid granted by the state or through state 36 Must clearance from the competition authorities be obtained resources in any form whatsoever is incompatible with the common mar- before state aid may be granted? ket when it distorts or threatens to distort competition by favouring certain Clearance from the AGCM does not have to be obtained before state aid undertakings or the production of certain goods. can be granted.

www.gettingthedealthrough.com 117 ITALY Studio Pierallini

Instead, the European Commission must be informed about any travelling by air, applicable from 26 July 2008, except for articles 3 and 4, potential new aid or about plans to grant or alter aid. If the European which entered into force from 26 July 2007. Commission determines that such aid or plans are not compliant with the Regulation (EC) No. 80/2009 of the European Parliament and of the common market, having regard to article 107 TFEU, it shall impose that the Council of 14 January 2009 on a Code of Conduct for computerised res- state concerned must withdraw or alter such aid, fixing the relevant term. ervation systems and repealing Council Regulation (EEC) No. 2299/89, is applied in Italy. 37 If so, what are the main procedural steps to obtain clearance? See question 36. 40 Are there mandatory insurance requirements for the operators of aircraft? 38 If no clearance is obtained, what procedures apply to recover Insurance for hull-risk, hull war-risk, and liability for damage incurred unlawfully granted state aid? by crew and passengers is mandatory (articles 935 and 942 of the Italian Upon a negative decision of the European Commission in cases of unlawful Navigation Code). aid, Italy is required, pursuant to article 14 of Council Regulation (EC) No. 659/1999 of 22 March 1999, as amended, to take all necessary measures, 41 What legal requirements are there with regard to aviation in compliance with Italian laws, to recover the aid from the beneficiary, security? except when the recovery is contrary to a general principle of Community Article 5 of Law No. 217, dated 28 February 1992, provides certain rules law. The recovery measure is usually adopted by an administrative act, about aviation security services activities. The rules have been then imple- which can be challenged by the beneficiary of the aid before the competent mented by Ministerial Decree No. 85 dated 29 January 1999, which set forth Italian courts. the legal requirements that the suppliers of security services are required to meet in order to be licensed by the ENAC. The following requirements are Miscellaneous provided: • professional, technical, insurance and financial capabilities; 39 Is there any aviation-specific passenger protection • reliability in carrying on the activities; legislation? • the registered office to be located in Italy; and ENAC has issued regulations, in particular Circular APT 23A dated • share capital not to be lower than €50,000. 5 February 2008, governing the disciplinary proceedings in the case of EU Regulation No. 261/04 infringements, implementing EU Regulation No. ENAC has also issued Circulars SEC-01, SEC-02 and SEC-03, dated 7 261/04, establishing common EU rules on compensation and assistance October 2004, SEC-04 dated 23 January 2013, SEC-05 dated 20 December to passengers in the event of denied boarding, cancellation or long delays 2012 and SEC-06 dated 15 May 2013, which provide technical regulation of of flights. Circular APT 23A replaced Circular APT 23 dated 23 June 2006. the activities of the aviation security services. On 13 March 2013 the European Commission submitted its proposal for revision of EU Regulation 261/2004, which was then amended and voted 42 What serious crimes exist with regard to aviation? through by the European Parliament on 5 February 2014. The Italian Navigation Code provides some crimes specific to aviation Package travel, holiday and tours are regulated, including liability, by (see articles 1080 to 1248). In particular, the following have to be noted in Legislative Decree No. 206/2005 (the Consumer Code) and by Legislative term of seriousness: Decree No. 79/2011 (the Code of Tourism), which provides, inter alia, a • defection (article 1091 of the Italian Navigation Code); special fund to reimburse passengers in the case of bankruptcy (limited to • a passenger disregarding an order given by the crew (articles 1094 and passengers having purchased package tours). 1095 of the Italian Navigation Code); With reference to disabled passengers, ENAC, according to Law No. • abandonment of an aircraft in distress by the captain or by the crew 104/1992 and Presidential Decree No. 503/1996, has issued a regulation (articles 1097 and 1098 of the Italian Navigation Code); (Circular EAL-11, dated 17 December 2003, replaced by Circular Enac • offences against the captain or officer (article 1104 of the Italian GEN-02, implementing EU Regulation No. 1107/2006) regarding the Navigation Code); assistance of passengers with reduced mobility. Moreover, the European • mutiny (article 1105 of the Italian Navigation Code); and Parliament has issued Regulation No. 1107/2006, dated 5 July 2006, • piracy (article 1135 of the Italian Navigation Code). regarding the rights of disabled persons with reduced mobility when

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

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118 Getting the Deal Through – Air Transport 2015 Okabe & Yamaguchi JAPAN

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? 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 CAL to Air carriers that wish to operate a charter service must obtain permission a certain extent (Self-Defence Forces Law article 107.) The airworthiness from the MLITT. certificates, the licence, the flight certificate, the flight instructor certifi- No special regulation exists. cate, and the aircraft registration requirements of 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 domes- Following enactment of the Act on Promotion of Private Finance tic air carriers operate air transport services in order to ensure pas- Initiative in 2010, it is expected that the airport management will be open senger transport necessary for local residents’ life on a route between to private companies. points within the country where it is expected to be difficult to con- The private company shall be chosen by the government or the local tinue the services due to decreased demand for air transport services; government that manages the airport. and

120 Getting the Deal Through – Air Transport 2015 Okabe & Yamaguchi JAPAN

• in the case where any domestic air carrier concludes an agreement on joint carriage, fare agreement and other agreements relating to Update and trends transportation with another air carrier in order to promote public convenience for a route between a point in the country and another The Japanese government has requested the Council for the Ministry of Justice to amend the Commercial Code (Transport and Maritime point in a foreign country, or between one point and another in foreign Law) and add the provisions about air transport. The Council is, at countries. the time of writing, in discussions about the amendments. The Draft of the amended Commercial Code is expected to be completed in 29 Is there a sector-specific regulator or are competition rules 2015. applied by the general competition authority? The competition rules applicable are those of the general competition authority, the Fair Trade Commission. Japan Air Lines Ltd (JAL) was reorganised by application of the Corporate Reorganisation Law, which is usual legal procedure in the courts. 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 same general principles will be applied to the aviation sector as for No state aid rules exist. However, when JAL faced financial difficulties, it other business areas. was supported by the Regional Economy Vitalization Corporation of Japan (REVC), a fund set up by the government and private financial companies 31 What are the main standards for assessing the competitive to support companies with large debt. effect of a transaction? An enterprise must not effect private monopolisation or unreasonable 35 Are there exemptions from the state aid rules or situations in restraint of trade (Antitrust Law article 3). which they do not apply? An enterprise must not enter into an international agreement or an No state aid rules exist. international contract which contains such matters that fall under unreasonable restraint of trade or unfair trade practices (Antitrust Law article 6). 36 Must clearance from the competition authorities be obtained No enterprise shall employ unfair trade practices (Antitrust Law arti- before state aid may be granted? cle 19). No state aid rules exist. The support from the REVC is not the government aid. It is just sup- 32 What types of remedies have been imposed to remedy port from a fund. concerns identified by the competition authorities? In the JAL case, a court procedure was used to apply for reorganisation. A person whose interests are infringed upon or likely to be infringed upon The REVC supported JAL through the court proceedings. 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 37 If so, what are the main procedural steps to obtain clearance? seek the suspension or prevention of such infringements from an enter- Air carriers also use the Corporate Reorganisation Law or other insolvency prise or a trade association that infringe upon or are likely to infringe upon law procedures. such interests (Antitrust Law article 24). The REVC decides to give its support at its own discretion but govern- A enterprise that has committed an act in violation of the provisions of ment policy is often important. articles 3, 6 or 19 (for enterprises that have committed acts in violation of the provisions of article 6, limited to enterprises that have effected unrea- 38 If no clearance is obtained, what procedures apply to recover sonable restraint of trade or employed unfair trade practices in the inter- unlawfully granted state aid? national agreement or contract concerned) and any trade association that has committed an act in violation of the provisions of article 8 is liable for As the court system is used to reorganise air carriers, no unlawful aid exists. damages suffered by another party (Antitrust Law article 25(1)). The REVC’s support is not unlawful.

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 There is no specific passenger protection legislation. the aviation sector? If not, do general state aid rules apply? No financial aid in the form of state aid is provided to the aviation sector as air carriers are private companies.

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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40 Are there mandatory insurance requirements for the Any person who kills a person or persons by destroying or downing an operators of aircraft? aircraft shall be sentenced to between seven years’ and unlimited impris- There are no mandatory insurance requirements. onment, or to death. However, the MLITT may order a carrier to conclude an insurance contract that underwrites liability for damage or injury due to aircraft acci- Article 3 dents (CAL article 112(6)). Any persons who destroy an aircraft shall be sentenced to between one year and 10 years’ imprisonment. 41 What legal requirements are there with regard to aviation Any persons who kill a person or persons by destroying an aircraft shall security? be sentenced to between three years’ and unlimited imprisonment. CAL requires all airports and aircraft operators to have a security manual to prohibit any dangerous objects from being brought into airports or on Article 4 board aircraft. Any persons who bring explosive object(s) into an aircraft shall be sen- CAL also prohibits any persons from affecting the safety of the aircraft. tenced to three years’ imprisonment or more. Any person who brings a gun, knife, Molotov cocktail or other danger- 42 What serious crimes exist with regard to aviation? ous objects shall be sentenced to two years’ imprisonment or more. There are two special laws about crimes relating to air carriage: the Law on The AHL provides the following crimes: Punishment of Acts to Endanger Aviation (APAEA) and the Anti- Hijacking • any persons who hijack an aircraft shall be sentenced to between Law (AHL). seven years’ and unlimited imprisonment; and The APAPEA provides the following crimes: • any persons who kill a person or persons by hijacking an aircraft shall be sentenced to death or unlimited imprisonment. Article 1 Any persons who destroy airport facilities, air navigation facilities or under- Japanese criminal laws have a large range in the punishment’s term. The take any other acts to make air carriage dangerous shall be sentenced to up punishment shall be at the judge’s discretion. to three years’ imprisonment.

Article 2 Any person who destroys or downs a flying aircraft shall be sentenced to three years’ imprisonment or more, including unlimited imprisonment.

122 Getting the Deal Through – Air Transport 2015 Dingli & Dingli Law Firm MALTA

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

www.gettingthedealthrough.com 123 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. In so far 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 aircraft lack of proportionality. by virtue of the community of acquests subsisting between such person and a citizen as described above in whose name the aircraft is registered; 8 Is there a declared policy on airline access or competition and, (c) an undertaking formed and existing in accordance with the laws of if so, what is it? Malta, of a member state of the European Union, of an EEA state or of Malta does not have a declared policy on airline access or competition. Switzerland and having its registered office, central administration and Market access is regulated by bilateral air service agreements. Furthermore principal place of business within Malta, or the European Union, or the as a member state of the European Union, air services between Malta and European Economic Area or Switzerland, whereof not less than 50 per other member states are liberalised. cent of the undertaking is owned and effectively controlled by the government of Malta, or by any member state of the European Union, or by

124 Getting the Deal Through – Air Transport 2015 Dingli & Dingli Law Firm MALTA

persons referred to in (b), whether directly or indirectly through one or in favour of one or more creditors, in the form prescribed, which shall be more intermediate undertakings; and entered into the National Aircraft Register by the Director General. (d) a natural person who is a citizen of, or an undertaking established in, an When a prohibitory notice is entered in the National Aircraft Register, approved jurisdiction, other than those mentioned in (b) or (c), shall be the Director General shall not thereafter record any security interest in the qualified to register aircraft in construction or one which is not used to National Aircraft Register in accordance with this part, until the prohibi- provide air services if it: tory notice is withdrawn by the creditor. • enjoys, to the satisfaction of the Director General, legal capacity to own or operate an aircraft in terms of the law under which it has 15 What rights are there to detain aircraft, in respect of unpaid been established or registered; airport or air navigation charges, or other unpaid debts? • complies with the requirements established under the Aircraft The detention of aircraft in respect of unpaid charges may be achieved Registration Act, and any regulations made or guidelines issued through a warrant of arrest of the aircraft, both as a precautionary measure pursuant thereto; or as a means of enforcement. As a precautionary measure, the warrant of • satisfies the Director General that it can and will ensure due arrest may only be sued out by a mortgagee whatever the amount of the observance of the laws of Malta relating to civil aviation; and mortgage or any other creditor in security of a claim of €7,000 in case of • complies with the requirements applicable to an international reg- non-commercial aircraft or €1 million in case of aircraft being used for istrant in terms of Part III of the Aircraft Registration Act. public transport.

An aircraft may be registered in the National Aircraft Register by any per- 16 Do specific rules regulate the maintenance of aircraft? son referred to in article 6 and who may be: The Air Navigation Order regulates aircraft maintenance. Article 9 states (a) an owner of the aircraft who operates the said aircraft; that an aircraft registered in Malta in respect of which a certificate of air- (b) an owner of an aircraft under construction or temporarily not being oper- worthiness in any category except the special category is in force shall not ated or managed; fly unless: (c) an operator of an aircraft under a temporary title which satisfies the con- • the aircraft, including in particular its engines, together with its equip- ditions that may be prescribed; or ment and radio station is maintained in accordance with a mainte- (d) a buyer of an aircraft under a conditional sale or title reservation or simi- nance schedule or maintenance programme approved by the Director lar agreement which satisfies the conditions that may be prescribed and General in relation to that aircraft; and who is authorised thereunder to operate the aircraft. • there is in force a certificate, in this order referred to as a ‘certificate of maintenance review’, issued in respect of the aircraft in accordance Moreover, when an aircraft is registered by a registrant under (c) or (d) with the provisions of this article and such certificate shall certify the above, every person who holds any interest by way of ownership or title in dates on which the maintenance review was carried out and the date the aircraft or a share therein may make a request in writing to the Director thereafter when the next review is due – provided that such a certifi- General to have his name, address and ownership interests or title noted in cate is not required where an aircraft is being operated to the require- the certificate of registration. ments of JAR OPS 1 or JAR OPS 3. With regard to aircraft not engaged in air services (non-commercial aircraft) there are no restrictions insofar as qualification for registration Airports is concerned. However, the Director General of Civil Aviation retains the right by law to declare that a registrant is not qualified. 17 Who owns the airports? Malta International Airport, which is the only international airport in 14 Is there a register of aircraft mortgages or charges and, if so, Malta, is currently owned and operated by Malta International Airport plc. how does it function? The Aircraft Registration Act contains specific provisions with regard to 18 What system is there for the licensing of airports? mortgages and other charges. Mortgages are recorded by the Director The licensing of airports is regulated by the Civil Aviation (Aerodrome General of Civil Aviation in the National Aircraft Register in the order of Licensing) Regulations. time in which they are produced to him for that purpose. The applicant for an aerodrome licence has to submit for accept- Where it is stated in the instrument of the mortgage that it is prohib- ance to the Director General of Civil Aviation an aerodrome manual and ited to create further mortgages on an aircraft without the prior written amendments thereto as may be required from time to time. The manual consent of the mortgagee, the Director General shall make a note in the shall consist of five parts which shall contain the information specified in National Aircraft Register to such effect, and the Director General shall not appendix 1 to ICAO Document 9774. record such further mortgage unless the consent in writing of the holder of The aerodrome manual shall: a prior mortgage is produced to him, and any mortgage registered in viola- • be typewritten or printed, and signed by the aerodrome operator; tion of this provision shall be null and void. • be in a format that is easy to revise; Provided that where such further mortgage is executed in favour of an • have a system for recording the currency of pages and amendments existing creditor, no such consent shall be required from such creditor. thereto, including a page for logging revisions; and Provided further that the above does not hinder the registration of a • be organised in a manner that will facilitate the preparation, review special privilege where the Aircraft Registration Act requires registration and acceptance and/or approval process. for its continuing validity and effect. When it is stated in the instrument of mortgage that it is prohibited to Furthermore the operator of an aerodrome used for public transport pur- effect the transfer of the aircraft which is being mortgaged or charged, or poses shall comply with the Standards and Recommended Practices of of a share therein, without the previous written consent of the mortgagee, volume 1 and volume 2, Annex 14 to the Convention on International Civil the Director General shall make a note in the National Aircraft Register to Aviation, except for differences filed by Malta, and with national regula- such effect, and the Director General, notwithstanding any other provision tions, as well as with any conditions that are specified in the aerodrome of the Aircraft Registration Act, shall not record any transfer of such air- licence. craft or of a share therein unless the consent in writing of such mortgagee is produced to him, saving where the transfer is made pursuant to a court 19 Is there a system of economic regulation of airports and, if so, order in a sale by auction of such an aircraft or pursuant to any other court how does it function? order, and any transfer registered in violation of this provision shall be null and void. The Airport Economic Regulations transpose into Maltese law Directive Where a creditor has registered an international interest in the 2009/12/EC of the European Parliament and of the Council of 11 March International Registry in accordance with the first Schedule to the Aircraft 2009 on airport charges. The Airport Charges Regulatory Board is respon- Registration Act, it shall be lawful for the debtor (being the registrant or sible for the determination, review and regulation of airport charges as well the owner of the aircraft, or both) to execute and file a prohibitory notice as the quality of service provided.

www.gettingthedealthrough.com 125 MALTA Dingli & Dingli Law Firm

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

126 Getting the Deal Through – Air Transport 2015 Dingli & Dingli Law Firm MALTA

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

www.gettingthedealthrough.com 127 MALTA Dingli & Dingli Law Firm national authorities for the enforcement of consumer protection laws of 41 What legal requirements are there with regard to aviation the Regulation on consumer protection cooperation. security? The Package Travel, Package Holidays and Package Tours Regulations, The legal requirements with regard to aviation security in Malta are which transposed into Maltese law Council Directive 90/314/EEC, grant found in the Airports and Civil Aviation (Security) Act. This act imple- protection to customers of package holidays and tours. EC Regulation No. 80/2009, which repealed EEC Regulation No. ments EC Regulation No. 820/2008. Moreover, the Civil Aviation Security 2299/89, protects passengers with regard to computerised reservation sys- Regulations adopt the standards found in Annex 17 to the Chicago tems. In 2007 the Maltese parliament had enacted the Code of Conduct Convention and in Document 30 of ECAC. for Computerised Reservation Systems Act, which provides protection for passengers in relation to the data submitted by carriers. 42 What serious crimes exist with regard to aviation? Apart from other offences affecting aviation security and punishable by the 40 Are there mandatory insurance requirements for the imposition of a fine or imprisonment, or both, depending on the severity of operators of aircraft? the offence, the Civil Aviation (Security) Act gives effect to the provisions The Civil Aviation (Insurance Requirements for Air Carriers and Aircraft of the Tokyo Convention 1963, the Hague Convention 1970, the Montreal Operations) Order implements the rules emanating from EC Regulation Convention 1971 and the Montreal Protocol 1988 and therefore the crimes No. 785/2004 (later amended by Regulation No. 1137/2008). The order found therein are also punishable as crimes under Maltese law. prohibits aircraft to fly in Malta without having insurance cover that meets the requirements of the Regulation.

Tonio Grech [email protected]

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

128 Getting the Deal Through – Air Transport 2015 Alegre, Calderón y Márquez Abogados MEXICO

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 Transports (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 25 Services Authority (SENEAM), which was created on 12 October 1978 per cent at the most in the area of air transport. and regulates the navigation fees and existing services through the 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 on the vency, availability of financial resources and an investment programme in Federal Official Gazette on 19 February 1940; accordance with the service to be provided and its projection for a period • the Civil Aviation Law published on the Federal Official Gazette on 12 of no less than three years. May 1995; • the Airport Law published on the Federal Official Gazette on 22 6 What procedures are there to obtain licences or other rights to December 1995; operate particular routes? • the Regulation of the Civil Aviation Law published on 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 on 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 on 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.

www.gettingthedealthrough.com 129 MEXICO Alegre, Calderón y Márquez Abogados

Concessions may be granted for a period of up to 30 years and may be • approval of the slots and routes for non-scheduled flights; and extended on one or more occasions, as long as the extended periods do not • a letter of validation or exemption issued by the Technical Director of exceed a 30-year period. the DGAC (see step 2). In addition to the above, the following air transport services may be authorised through a permit: The incorporation documents and the power of attorney must contain or be • non-scheduled domestic service (including domestic charters); attached to the following in order to meet filing requirements of Mexican • scheduled international service; law: a certification by a notary public in the relevant jurisdiction; legalisa- • non-scheduled international (international charters); and tion via competent consular officers or an ‘apostille’, issued by the local • private commercial service. competent authorities (ie, secretary of state, county clerk or equivalent), based on the requirements of the Hague Convention of 5 October 1961, The permits would be granted to Mexican corporations, in the specific case Abolishing the Requirement of Legalisation for Foreign Public Documents; of an operation contemplated in the first instance, above; to foreign corpo- a legalisation before a Mexican embassy or consulate is required in case the rations in the second instance, above; to Mexican or foreign corporations corresponding State is not a part of the Hague Convention; a translation or entities in the third instance, above; and to Mexican individuals or cor- into Spanish, which needs to be certified by a court-approved translator in porations in the fourth instance, above. Mexico; and a certification by a notary public in Mexico. The establishment of a service, for example, a repair shop or training and qualification facilities, would require a permit, which could be granted Filing for the validation of the operations specifications of the air to Mexican or foreign individuals or corporations. carrier The permits would be granted for indefinite periods. A petition should be filed at the office of the technical director of the DGAC in compliance with the requirements of norm NOM-008-SCT3-2003 (the 7 What procedures are there for hearing or deciding contested norm), which was published in the Official Daily Gazette of the Federation applications for licences or other rights to operate particular on 14 May 2003. routes? In compliance with this norm, notwithstanding that it involves a vast The air carrier has the right to appeal, if the authority denies its appli- list of documentary requirements, the initial filing that is required needs cation, through an administrative procedure pursuant to the Federal only to be accompanied by a copy of the operations specifications of the Administrative Law. air carrier, issued by the Technical Aeronautical Authority. In response to this filing, the carrier will be granted with a response from DGAC, in which 8 Is there a declared policy on airline access or competition and, a list of the documents that the air carrier will need to file will be included if so, what is it? and in which an exemption period will be granted in order to comply with On 25 October 2001, the government released a policy document related the same. to the general development of the aviation industry; nevertheless, the gov- In practice, the DGAC does not always requires all of the requirements ernment stated that within the following months, such authority should established in the norm. The list of requirements has been reduced sub- release a new aeronautical policy that would include, inter alia, airlines stantially in recent months and is determined by DGAC on a case-by-case access, slots allocations, foreign investment, competition, safety, security, basis. among others. Once the exemption is granted, the DGAC will consider the validation requirement as complied with for the purposes of issuing the operating 9 What requirements must a foreign air carrier satisfy in order permit and for the purposes of the required approval for the commence- to operate to or from your country? ment of operations (see step 3). To perform operations to or from Mexico, the air carrier must obtain an Obtaining approval for the commencement of operations operational permit; the procedure for obtaining an operating permit for a Once the operating permit has been issued, a filing is required in order foreign air carrier consists of the following steps: to obtain the final approval that allows the air carrier to initiate its operations. For this, a few requirements must be credited, some of which are not Obtaining an operating permit referred to in the applicable laws and regulations but appear listed in the A petition should be filed by air carrier through its legal representative in actual text of the non-scheduled operating permit: Mexico at the DGAC, accompanied by the following documents: • the original of the operating permit duly registered before the Mexican • incorporation documents of the air carrier; Aeronautic Registry; • the appointment of an address for hearing and receiving notifications • approval of the slots, if applicable, for the operation issued by the cor- in Mexico; responding Airport Slot Committee; and • power of attorney granted in favour of certain individuals of a law firm • approval by the General Directorate of Tariffs of the Ministry of in order to represent the interests of the air carrier in Mexico and to be Communications and Transports of the registered tariffs for the trans- recognised by the different authorities and entities as representatives portation services to be provided by the air carrier. of the carrier’s interests; • corresponding executed airport service agreements. • an air carrier certificate, issued in favour of the airline by the competent transportation authority (ie, CAA, DOT) and operations specifica- In practice, the issuance by the DGAC of an operating permit takes approx- tions issued by the competent aviation authority; imately 60 to 90 calendar days from the date when filings are made in com- • a list of aircraft tail numbers and type that will be used for the pliance with all of the above mentioned requirements. operation; • certificates of registration of each aircraft; 10 Are there specific rules in place to ensure aviation services • certificates of airworthiness of each aircraft; are offered to remote destinations when vital for the local • noise certificate for each aircraft; economy? • insurance certificates. Two originals (original signatures are required) and a copy of international and Mexican liability insurance certificates No specific rules exist to ensure aviation services are offered to remote evidencing coverage carried by the airline for all risk and third-party destinations, even when vital for the local economy. Nevertheless, agree- liability. Insurance brokers are normally aware of this requirement, ments exist and have verified among local and federal air carriers on which particularly with respect to the requirements of Mexican law concern- costs are shared or absorbed by local authorities, in an effort to render an ing the policy that must be issued by a Mexican insurance carrier; air transportation service to a destination with different economical condi- • notification of whom the air carrier will be receiving in Mexico tions to those attractive to national or foreign carriers. (ie, ground handling and dispatch services; fuel; and maintenance services); 11 Are charter services specially regulated? • security manuals and procedures of the airline; The air charter carrier must obtain a non-scheduled operating permit • manuals to prevent acts of illicit interference; based on the requirements set forth in question 9, above.

130 Getting the Deal Through – Air Transport 2015 Alegre, Calderón y Márquez Abogados MEXICO

Once the air carrier has obtained the non-scheduled operating permit, the use of Mexican airspace. Such notification has an immediate conse- such carrier must obtain a specific authorisation for every charter opera- quence in the suspension of services regarding the use of Mexican air- tion or several charter operations, as the case may be. Therefore, the air space, and therefore the suspension of operations in Mexico. carrier must file a petition before the DGAC, establish the route and schedule of the operation and attach a copy of the air charter agreement. 16 Do specific rules regulate the maintenance of aircraft? There are some Official Norms that regulate some aspects of mainte- 12 Are airfares regulated and, if so, how? nance, for example, (Norm NOM-006-SCT3-2001, which establishes the Airfares are regulated through the General Directorate of Tariffs (GDT), minimum content of general maintenance manual and Norm NOM-060- an entity that is part of the Ministry of Communications and Transport. SCT3-2001, which establishes the procedures to be followed in the report Tariffs are proposed by any and all carriers and finally approved or author- of failures occurred to aircraft). In addition to these specific Norms, sched- ised by the GDT. ule carriers are required to have minimum provisions of maintenance National and foreign air carriers are obliged to file before the GDT the depending the type and size of operation. tariffs that are or will be sold to the general public, as well as the corresponding amendments to these tariffs. Airports Essentially, a potential concern to the authority would be the imple- 17 Who owns the airports? mentation of predatory tariffs, which would jeopardise or cause damage to any and all carriers operating into or from Mexico, including but not lim- Aeropuertos y Servicios Auxiliares (ASA), as a government entity, has con- ited to domestic operations and the market industry environment. trol of 26 airports (the ASA airports); and is the only vendor that provides fuel to any and all carriers operating into and from Mexico. Aircraft The major and more important airport facilities in Mexico are controlled by four different airport groups: ASUR Airport Group, Pacific 13 Who is entitled to be mentioned in the aircraft register? Do Airport Group, Central – North Airport Group and the Mexico City Airport requirements or limitations apply to the ownership of an Group – AICM. The first three are private entities and the fourth is a gov- aircraft listed on your country’s register? ernment entity. Any individual, entity or corporation that has a legal interest in an aircraft ASUR has the administration and control of nine major airports within or engine is entitled to carry out registrations before the DGAC of an exist- the southeastern part of Mexico: ing lien, encumbrance, seizure, mortgage, pledge, possession or owner- • Cancún; ship. No particular requirements or limitations exist (particularly as to • Cozumel; nationality), apart from notary formalisation, legalisation, apostille and • Huatulco; certified translation formalities. • Mérida; • Minatitlán; 14 Is there a register of aircraft mortgages or charges and, if so, • Oaxaca; how does it function? • Tapachula; Mortgages, ownership and any and all liens in connection to aircraft and • Veracruz; and engines are registered before the Mexican Aeronautics Registry, entity • Villahermosa. under the subordination of the DGAC. The Mexican Aeronautics Registry is public and under the supervision Pacific Airport Group (GAP) has the administration of 12 major airports on of the Ministry of Communications and Transports. In such registry shall the north-west geographical area of Mexico: be filed: • Tijuana; • the documents through which property, possession and other rights on • Mexicali; Mexican aircraft are acquired, transmitted, modified or extinguished, • Hermosillo; including such aircraft-related engines, as well as the lease of Mexican • La Paz; or foreign aircraft; • Los Mochis; • the registration and airworthiness certificates; • Los Cabos; • the resolution of the DGAC in case of abandonment, partial or total • Guadalajara; loss and destruction; • Aguascalientes; • the concessions and permits granted by the DGAC for an air transport • Puerto Vallarta; service and any amendments or resolutions that modify or extinguish • Manzanillo; such specific authorisations; and • Morelia; and • the insurance policies. • Guanajuato.

In addition to the above, as of November 2007, Mexico is part of the Cape Central – North Group (OMA) controls 13 major airports on the central and Town Convention on International Interest in Mobile Equipment and its northerly regions of Mexico: Protocol on Matters Specific to Aircraft Equipment, therefore, any interna- • Monterrey; tional interest must be registered before the International Registry. • Acapulco; • Mazatlan; 15 What rights are there to detain aircraft, in respect of unpaid • Zihuatanejo; airport or air navigation charges, or other unpaid debts? • Ciudad Juarez; • Chihuahua; In Mexico, the authority does not have a right to detain aircraft in respect of • Culiacan; unpaid airport or air navigation charges, or other unpaid debts in the spe- • Durango; cific case that the existing amounts due or owed are from an airline, opera- • Reynosa; tor or carrier that does not have any legal interest in an aircraft. • San Luis Potosi; Unfortunately, we are aware of certain cases where the airport author- • Tampico; ity, SENEAM and immigration authorities, without any legal authority, • Torreon; and have detained aircraft for short periods of time. • Zacatecas. On the other hand, SENEAM has resolved, in accordance to what is established in the Mexican applicable law, to notify on a monthly basis, The Mexico City Airport Group (AICM) has one airport, nevertheless, to the competent tax authorities (SAT) and the Legal Affairs Unit of the the airport with the most significant number of operations in the country. Mexican Ministry of Communications and Transportations (SCT), those AICM operates in 50 cities in Mexican territory and over 40 cities outside air carriers that have any omissions in respect to their payment obligations of Mexico. of the duties generated from the services rendered by SENEAM regarding

www.gettingthedealthrough.com 131 MEXICO Alegre, Calderón y Márquez Abogados

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 Competence 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 • The SCT will issue its award on the basis of a comparative analysis of a local airport committee that comprises the airport administration, the the proposals received and all participants will be notified thereof. local authorities and the air operators that makes suggestions regarding • If applicable, the SCT will confer the concession within the term speci- the slots, however, there are no specific rules for the allocation of slots at fied in the rules, and an extract of the respective certificate will be congested airports. On 17 April 2013 the SCT officially declared Mexico published in the Official Gazette of the Federation at the cost of the City International Airport as a congested airport and is currently under concessionaire. the process of establishing the rules to remove, assign, allocate and even • A concession will not be granted if the proposals do not offer the best to auction slots to airlines. conditions for national airport development, if they do not satisfy Such process should be concluded by the end of 2013. the requirements of the bidding rules and technical specifications or airport safety specifications, or for reasons that could affect national 22 Are there any laws or rules specifically relating to ground sovereignty and safety; or when the economic proposals as presented handling? are unsatisfactory in the judgment of the SCT. In these cases, the bidding procedure will be deemed abandoned and a new invitation may The Airport Law and its Regulation regulates the ground handling activity. be issued. Only Mexican corporations are allow to provided ground handling ser- • The SCT may confer concessions without having to follow a public vices to third parties, however, the air carrier has the right to provide its bidding procedure in the following cases: own ground handling service. • to the holder of a permit granted to operate a civil aerodrome, in operation, who intends to convert it into an airport, provided that 23 Who provides air traffic control services? And how are they the proposed change is congruent with national airport develop- regulated? ment policies and programmes; that a civil aerodrome has been in SENEAM, a government entity created on 12 October 1978, that provides continual operation for at least the preceding five years and com- air traffic control services within the Mexican territory, regulates the navi- plies with the requirements for the concession in question; and gation fees and existing services through the Mexican airspace to foreign • to concessionaires who require a complementary airport to satisfy and national carriers. increased demand, provided that they show that the increase is The Federal Duty Law established that any air carrier that procures necessary to expand existing capacity with another airport; that Mexican air navigation services by SENEAM has the obligation to pay the operation of both airports by the same concessionaire will be duties for the said services, including over flights. economically more efficient in comparison with other options for The payment for air navigation services needs to be self-determined achieving better coordination and rendering of services; that the on a monthly basis directly by air carrier. The payment procedure should obligations established in the concession certificate have been be completed by the 15th of each month; after that day late payment must satisfied and that the requirements stipulated for the new conces- be made, including the payment of updates and surcharges. sion are satisfied. There are three stages of the payment: When for public interest reasons the relocation of an airport is • the self-determination; ordered, the concessionaire will be entitled to receive the new conces- • the report of the self-determination to SENEAM; and sion directly, if it satisfies the established requirements. • the actual payment and its report to SENEAM. • The SCT may grant concessions to entities of the Federal Public Administration without having to call a public bidding. It is important to bear in mind that the lack of payment of the said duty could have as a consequence the suspension of the services provided by

132 Getting the Deal Through – Air Transport 2015 Alegre, Calderón y Márquez Abogados MEXICO

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: Mexican law will not recognise other damages in addition to mate- When the damage is caused to the individuals and produces the death rial and moral damages, and consequently, it does not recognise punitive or the total or partial disability, temporary or permanent, the amount of damages or damages for pain and suffering or similar concepts, and con- the indemnity shall be fixed applying the tariffs established in the Federal sequently, those items are not recoverable damages under Mexican law. Labour Law. The basis to compute the corresponding indemnity shall be four times the highest daily minimum salary in force in the region. 25 Are there any special rules about the liability of aircraft Pursuant to articles 500 and 502 of the Federal Labour Law, the operators for surface damage? indemnity payment to be made in the event of death of the victim shall be equivalent to two months of salary for funeral expenses and the payment Aside from civil law and environmental general regulations, there are no of an amount equivalent to 5,000 days of salary. special rules on the liability of aircraft operators for surface damage. In accordance with article 62 of the Civil Aviation Law, the right to recover damages is subject to that prescribed by article 1915 of the Civil 26 What system and procedures are in place for the investigation Code for the Federal District in common matters and for all of the Republic of air accidents? in federal matters, with the only exception that the recoverable amount The SCT, through the DGAC, is responsible for the procedures and inves- shall be three times the amount provided in such article. tigation of an accident or incident involving an aircraft within Mexican Consequently, pursuant to the above, the recoverable material dam- territory, including the constitution of an investigation commission with ages, under article 1,915 of the Civil Code, would be the amount equivalent technical experts and investigators, in order to create a report of the to the minimum salary in force at the time of the death, multiplied by 790 investigation. (5,000 plus 60 days for funeral expenses). This result is multiplied by four. Now, when the Civil Aviation Law applies to the recoverable damages, 27 Is there a mandatory accident and incident reporting system the amount resulting from the numerical operations described in the previ- and, if so, how does it operate? ous paragraph is multiplied by three (article 62 of the Civil Aviation Law). The mandatory reporting system in accordance with Mexican regulation is the Regulation on Search, Rescue and Investigation of Air Accidents. Moral damage It is important to note that article 62 of the Civil Aviation Law only pre- Competition law scribes that the damages to passengers would be subject to the indemnities established by article 1,915 of the Civil Code for the Federal District. Such 28 Do sector-specific competition rules apply to aviation? If not, legal provision only prescribes the recovery for material damages. do the general competition law rules apply? Nevertheless, there is possibility that a Mexican court would analyse The Mexican Federal Competition Law and rules apply in the aviation sec- and grant moral damages to the plaintiff, if the court finds that a moral tor, together with the Federal Competition Commission (CFC). damage has been caused to such plaintiff. Pursuant to article 1,916, a moral damage consists in affection suffered 29 Is there a sector-specific regulator or are competition rules by a person to his or her feelings, likings, religious beliefs, decorum, hon- applied by the general competition authority? our, reputation, private life, configuration and physical aspect or the con- General competition rules are applied by the CFC, however, certain arti- sideration that third parties may have of him or her. cles of the Civil Aviation and Airport Laws establish certain regulation in In accordance with articles 1,916 and 1,916-bis of the Civil Code for the competition matters. Federal District, the indemnity for moral damage must be established in a monetary amount determined by the judicial authority taking into account 30 How is the relevant market for the purposes of a competition the following. assessment in the aviation sector defined by the competition authorities? The affected rights of the victim No specific conceptualisation is defined by the competition authority for The plaintiff must prove that they have actually suffered in terms of their the purposes of a competition assessment in the aviation sector. feelings, likes, religious beliefs, decorum, honour, reputation, private life, configuration and physical aspects or else the considerations that third par- 31 What are the main standards for assessing the competitive ties may have of them. It is not enough, pursuant to Mexican law, to make effect of a transaction? a general statement indicating that a damage has been caused, but instead, the plaintiff must demonstrate to the court the alleged actual damage. The CFC decisively acts to promote the competition and free market principles in the instrumentation and design of economic, sectoral and regula- The degree of responsibility tory policies, and also to advocate for favourable regulatory frameworks for Pursuant to this principle, the court shall determine in any event the exist- competition and market efficiency. For that, it has an essential tool: opin- ence of an illicit conduct, and in its case, the extent or degree of same. An ions on competition and free market issuing. illicit act or conduct is defined by article 1,830 of the Civil Code as that which is contrary to the laws of public order or against customary good 32 What types of remedies have been imposed to remedy behaviour. concerns identified by the competition authorities? It should be noted that, pursuant to article 1,916-bis of the Civil Code The CFC has the power to issue opinions on bills, regulation drafts, regu- for the Federal District, in any and all events, whoever claims recovery for lations, rules, agreements and any kind of administrative acts as well as www.gettingthedealthrough.com 133 MEXICO Alegre, Calderón y Márquez Abogados

35 Are there exemptions from the state aid rules or situations in Update and trends which they do not apply? Not applicable. There is a possible amendment of the Foreign Investment Law, to permit up to 49 per cent foreign investment, in addition to the announcement of the new Mexico City International Airport. 36 Must clearance from the competition authorities be obtained Furthermore, we expect certain regulations regarding safety before state aid may be granted? procedures related to the disappearance of the flight MH370, and we Not applicable. should expect an increase on the premiums and rates regarding hull and liability insurance due to the unfortunate MH370 events. 37 If so, what are the main procedural steps to obtain clearance? Not applicable. programme adjustments and public policies regarding their effects on 38 If no clearance is obtained, what procedures apply to recover competition and free access to markets. The CFC can also issue opinions unlawfully granted state aid? on the current regulatory framework. Not applicable. There are two kinds of opinions, those that have legal effects (binding opinions) and those that do not. The non-binding opinions are issued Miscellaneous with regard to bill and regulation drafts, as well as current regulation. Commonly, these kind of opinions are issued by the CFC’s chairman. 39 Is there any aviation-specific passenger protection legislation? The ‘binding opinions’ can be addressed to public federal administration bodies with regard to programme adjustments and public policies, as The Consumer Protection Law is a passenger protection legislation, in well as regulation drafts. The Plenum has the power to issue these opin- addition to provisions on the Civil Aviation Law. ions. The recommendations set forth in the binding opinions are obligatory 40 Are there mandatory insurance requirements for the for the bodies, unless the chairman objects to the opinion. operators of aircraft? Financial support and state aid Article 74 of the Civil Aviation Law establishes that third-party liability insurance is required for the operation of an aircraft. 33 Are there sector-specific rules regulating direct or indirect financial support to companies by the government or 41 What legal requirements are there with regard to aviation government-controlled agencies or companies (state aid) in security? the aviation sector? If not, do general state aid rules apply? Mexican legislation requirements in aviation security are linked with a Not applicable. main directives address by ICAO and international standard regulations.

34 What are the main principles of the state aid rules applicable 42 What serious crimes exist with regard to aviation? to the aviation sector? Mexico is part of the Convention on Offence and Certain other Acts Committed Onboard Aircraft signed at Tokyo on 14 September 1963 and Not applicable. 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

134 Getting the Deal Through – Air Transport 2015 Stek NETHERLANDS

Netherlands

Jeroen Timmermans and Laetitia Kunst-den Teuling 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 50 been implemented in national aviation legislation. The Aviation Act and per cent of said air carrier, and effectively control it, whether directly or the Act on Aviation contain general provisions relating to the safety of air indirectly through one or more intermediate undertakings, except as pro- transport and air traffic, which are specified in further regulation based vided 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 Regulations, 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. In case 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 infra- applicable to private air operations and corporate air operations. Aerial structure 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 135 NETHERLANDS Stek competitive an aviation market as possible. Other important policy docu- criteria for the granting of consent (to the extent still required) have been ments on aviation are the Licensing Policy Document on Aviation and included in policy regulations. the Policy Regulations on Licenses for Scheduled and Non-scheduled Air Transport (both published in May 2014), through which the government Aircraft aims to establish a level playing field, especially in light of increased con- 13 Who is entitled to be mentioned in the aircraft register? Do solidation of air carriers. requirements or limitations apply to the ownership of an aircraft listed on your country’s register? 9 What requirements must a foreign air carrier satisfy in order to operate to or from your country? According to the Act on Aviation and the Regulations on the Registration of Netherlands Civil Aircraft, in the nationality register the holder of the To operate commercial flights to or from the Netherlands, a foreign, EEA- aircraft (typically the lessee) is registered, as well as the owner if this is a established air carrier must be in the possession of an operating licence natural person or legal entity other than the holder. Pursuant to the Aircraft issued in accordance with EC Regulation No. 1008/2008 by the competent Decree 2008, the holder of the aircraft should be a national or resident of licensing authority of the member state in which the air carrier’s principal an EEA member state, or a legal entity incorporated under the laws of, and place of business is located. Air carriers not established in the EEA must having its corporate seat or actual place of business in, an EEA member be designated pursuant to the applicable bilateral agreement between the state or Bonaire, St Eustatius or Saba (Caribbean islands forming part of Netherlands and the relevant country (or must be granted an operating the Netherlands). If the holder of the aircraft is not the owner as well, it is licence in accordance with article 16 of the Aviation Act; see question 4). additionally required that the owner is not a national of, or a legal entity Furthermore, the Act on Aviation provides that any air carrier oper- established in, a state with which the Netherlands no longer maintain dip- ating flights for remuneration within the Amsterdam flight information lomatic relations. region must be in the possession of an air operator’s certificate (AOC) granted by the minister for infrastructure and the environment, unless 14 Is there a register of aircraft mortgages or charges and, if so, provided otherwise by international agreement. Under EC Regulation No. how does it function? 1008/2008, an operating licence shall only be granted provided that the air carrier applying for such licence holds a valid AOC issued by the compe- Yes, pursuant to the 1948 Geneva Convention on the International tent authority of the member state concerned. Recognition of Rights in Aircraft there is a public register for the registration of mortgages and other rights on aircraft, which is held by the Land 10 Are there specific rules in place to ensure aviation services Registry. Rules pertaining to the registration of aircraft in the public reg- are offered to remote destinations when vital for the local ister can be found in the Netherlands Civil Code, the Rules on Registered economy? Aircraft 1996 and the Regulations on Registered Aircraft 2005. An aircraft can only be registered with the public register if said aircraft has a maxi- Under EC Regulation No. 1008/2008, public service obligations may be mum take-off mass of at least 450 kilograms, has been registered with the imposed by a member state in respect of scheduled air services between Netherlands nationality register, has not been registered with the national- an EU airport and an airport serving a peripheral or development region in ity register of another state, and if the court has approved the request for its territory or on a thin route to any airport on its territory, any such route registration. being considered vital for the economic and social development of the region which the airport serves. Public service obligations shall be imposed 15 What rights are there to detain aircraft, in respect of unpaid only following consultations with the other member states concerned and airport or air navigation charges, or other unpaid debts? after having informed the European Commission, the airports concerned and the air carriers operating on the relevant route, and only to the extent In the Netherlands, there are no specific rights to detain aircraft in respect necessary to ensure on that route the minimum provision of scheduled of unpaid airport or air navigation charges. In general, the provisions of air services satisfying fixed standards of continuity, regularity, pricing or the Netherlands Code of Civil Procedure on seizure of aircraft apply in minimum capacity, which air carriers would not assume if they were solely respect of unpaid charges or other debts. Under Netherlands law, an asset considering their commercial interest. In the Netherlands, no specific rules can be detained by a creditor holding said asset (eg, a repairman) until the on public service obligations exist. related amount owed to it is paid in full. In principle, this right of detention also exists in respect of aircraft, with the understanding that with 11 Are charter services specially regulated? respect to aircraft registered with the Netherlands public register, or any other public register within the meaning of the 1948 Geneva Convention EC Regulation No. 1008/2008 applies to both scheduled services and on the International Recognition of Rights in Aircraft, special rules apply. charter services. Pursuant to article 3 of the Decree on Non-scheduled Air The Netherlands Civil Code provides that a right of detention can be exer- Transport, the operation of non-scheduled flights between the Netherlands cised in respect of such registered aircraft but that the same shall not entail and a non-EEA member state that are not governed by a bilateral agree- a right of priority over such aircraft, so that it merely serves as a pressure ment between the EU or the Netherlands on the one hand and the relevant tool. non-EEA member state on the other, must be authorised by the Minister for Infrastructure and the Environment. 16 Do specific rules regulate the maintenance of aircraft? 12 Are airfares regulated and, if so, how? At a European level, EC Regulation No. 2042/2003 (as amended from time to time) applies. At a national level, the maintenance of aircraft is regu- Pursuant to EC Regulation No. 1008/2008, air carriers established in lated by the Act on Aviation, the Aircraft Decree 2008, the Regulations on the EEA, and, on the basis of reciprocity, air carriers established in third Aircraft Maintenance, the Regulations on Recognitions of Airworthiness countries, may freely determine airfares for air services within the EEA 2008 and the Air Operation Decree. (although certain restrictions may apply in case of public service obligations). Notwithstanding the provisions of bilateral agreements between Airports EEA member states, EEA member states may not discriminate on grounds of nationality or identity of air carriers in allowing EEA-established air car- 17 Who owns the airports? riers to set fares and rates for air services between their territory and a third NV Luchthaven Schiphol, which is owned by the State of the Netherlands country. (69.8 per cent), the municipality of Amsterdam (20 per cent), Aéroports de Pursuant to the Tariff Decree on Scheduled Air Transport, airfares for Paris (8 per cent) and the municipality of Rotterdam (2.2 per cent), owns scheduled air transport services between the Netherlands and destinations 100 per cent of Amsterdam Airport Schiphol (through Schiphol Nederland outside the EEA require prior consent from the minister for infrastructure BV), Rotterdam The Hague Airport (through Rotterdam Airport BV) and and the environment, but only to the extent the international agreement Lelystad Airport (through NV Luchthaven Lelystad). Schiphol Nederland between the Netherlands and the relevant non-EEA country so requires. BV owns 51 per cent of Eindhoven Airport (through Eindhoven Airport Such international agreements with third countries often contain liberal NV), of which the municipality of Eindhoven and the province of Noord- tariff regimes, under which any designated air carrier may, under super- Brabant each own 24.5 per cent. vision of the contracting states, freely determine its tariffs. The necessary

136 Getting the Deal Through – Air Transport 2015 Stek NETHERLANDS

Maastricht Aachen Airport is owned by OMDV BV, which in turn is provide that the Minister for Infrastructure and the Environment may limit owned by Omniport Holdings Limited (99.86 per cent) and Dura Vermeer the number of providers for certain categories of ground handling services Deelnemingen BV (0.14 per cent). Groningen Airport Eelde is owned by to no less than two per such category, whereby at least one of these suppli- Groningen Airport Eelde NV. Shareholders of Groningen Airport Eelde NV ers should be entirely independent from the airport and the dominant air are the provinces of Groningen (30 per cent) and Drenthe (30 per cent), carrier at that airport. The Minister for Infrastructure and the Environment and the municipalities of Groningen (26 per cent), Assen (10 per cent) and may also limit the number of users of self-handling services (meaning that Tynaarlo (4 per cent). Enschede Airport Twente is out of operation. air carriers provide the services in question for themselves) to no less than two. Furthermore, the Minister for Infrastructure and the Environment 18 What system is there for the licensing of airports? may impose certain conditions (relating to, for example, financial fitness Pursuant to the Act on Aviation, the operation of Amsterdam Airport and safety) on ground handling service providers or users of self-handling Schiphol is subject to a licence (which has been granted to Schiphol services. Nederland BV). According to the Act on Aviation, the licence is granted for an indefinite period of time, but can be revoked by the minister for 23 Who provides air traffic control services? And how are they infrastructure and the environment, among others, in the event of mis- regulated? management by the airport operator endangering the continuity of the Up to flight level 245 (24,500 feet), air traffic control services are provided airport. In case of a serious presumption of impending mismanagement by by Air Traffic Control the Netherlands, an agency existing under the Act on the airport operator, the minister for infrastructure and the environment Aviation and reporting to the minister for infrastructure and the environ- may give binding instructions in order to avoid said mismanagement. The ment (while air traffic control services for the upper airspace above 24,500 Regulations on Civil and Military Airports contain provisions for civil and feet are provided by the Maastricht Upper Area Control Centre, an agency military airports other than Amsterdam Airport Schiphol. operated by Eurocontrol). The tasks, structure and (operational and financial) management of Air Traffic Control the Netherlands are governed 19 Is there a system of economic regulation of airports and, if so, by the Act on Aviation. In respect of air traffic control services, reference how does it function? should also be made to the Single European Sky (II) legislation, the aim The Act on Aviation complies with EC Directive 2009/12, which applies and purpose of which is to ensure a harmonised regulatory framework for to Amsterdam Airport Schiphol and aims to create a common framework air traffic management in the EU. for the regulation of airport charges (ie, a levy paid by air carriers for the use of facilities and services related to landing, take-off, lighting and park- Liability and accidents ing of aircraft, and processing of passengers and freight). At least once a 24 Are there any special rules in respect of death of, or injury to, year, the operator of Amsterdam Airport Schiphol must determine the tar- passengers or loss or damage to baggage or cargo in respect of iffs and conditions relating to its activities for the benefit of the use of the domestic carriage? airport by air carriers. Said tariffs and conditions must be reasonable and Air carrier liability for passengers and their baggage is governed by EC non-discriminatory between air carriers. Tariffs may be modulated in the Regulation No. 2027/97, which has been amended by EC Regulation No. public and general interest, including environmental issues. The criteria 889/2002 in order to implement the relevant provisions of the Montreal used for such a modulation shall be relevant, objective and transparent. Convention regarding the carriage of passengers and their baggage by The Authority for Consumers and Markets (ACM) is responsible for the air, and which applies to domestic carriage as well. EC Regulation No. enforcement of compliance with the relevant tariff regulations under or 2027/97 lays down the obligations of EU air carriers in relation to liability pursuant to the Act on Aviation. in the event of accidents to passengers for damage sustained in the event of death or wounding of a passenger or any other bodily injury suffered 20 Are there laws or rules restricting or qualifying access to by a passenger, if the accident which caused the damage took place on airports? board an aircraft or in the course of any of the operations of embarking The Act on Aviation provides that access to the airport is to be ensured by or disembarking. The air carrier is liable for damage sustained in case of the airport operator in accordance with the Act on Aviation and further reg- damage to, or destruction or loss of, checked baggage, provided that the ulations based thereon. Said further regulations contain restrictions with a event which caused said damage, destruction or loss took place on board view to noise, safety, the environment, etc. Furthermore, access to airports the aircraft or during any period within which the checked baggage was in may be limited pursuant to regulations on slot allocation (see question 21). the charge of the air carrier. However, the air carrier is not liable if and to the extent the damage resulted from the inherent defect, quality or vice of 21 How are slots allocated at congested airports? the baggage. In the case of unchecked baggage, the air carrier is liable if the In accordance with the Decree on Slot Allocation, based on EC Regulation damage resulted from its fault or that of its servants or agents. In order to No. 95/93 (as amended by EC Regulation No. 793/2004 and most strengthen the position of passengers, a revision of EC Regulation 2027/97 recently by EC Regulation No. 545/2009), slots at coordinated airports is currently under preparation. (ie, Amsterdam Airport Schiphol, Eindhoven Airport and Rotterdam At a national level, provisions relating to air carrier liability (based The Hague Airport) are allocated by Stichting Airport Coordination on the Montreal Convention), have been included in Chapter 8 of the Netherlands (SACN). Air carriers having been allocated slots from the pool Netherlands Civil Code. are allowed to use the airport infrastructure for the purposes of take-off and landing at particular times and during a particular season. An air car- 25 Are there any special rules about the liability of aircraft rier has the right to retain the series of slots allocated to it in a particular operators for surface damage? season for the next corresponding season, but only if such air carrier has No, there are no special rules about the liability of aircraft operators for operated the relevant slots for at least 80 per cent of the time. These rights surface damage. are known as ‘grandfather rights’. If said 80 per cent usage cannot be evidenced, the relevant slots are returned to the pool. SACN must act in a neu- 26 What system and procedures are in place for the investigation tral, non-discriminatory and transparent way. of air accidents? EU Regulation No. 996/2010, taking into account Annex 13 to the Chicago 22 Are there any laws or rules specifically relating to ground Convention, lays down international standards and recommended prac- handling? tices for aircraft accident and incident investigation. Said Regulation The Regulations on Ground Handling Airports, based on the Act on applies to safety investigations into accidents and serious incidents which Aviation and EC Directive 96/67 (in respect of which EC Directive replac- occur: ing legislation has been proposed), apply to all types of ground handling • within the EU; services on airports open to commercial traffic whose annual traffic is no • outside the EU, but involve aircraft registered in a member state or less than 2 million passenger movements or 50,000 tons of cargo. operated by an undertaking established in a member state; or In principle, access to the market by suppliers of ground handling • in territories where a member state may, according to international services is free. However, the Regulations on Ground Handling Airports standards and recommended practices, appoint a representative or

www.gettingthedealthrough.com 137 NETHERLANDS Stek

has a special interest by virtue of fatalities or serious injuries to its transport of persons could be divided into medium-haul and long-haul citizens. flights. The ACM has left open whether or not this results in the existence of separate product markets, but has considered that if there is a sepa- Pursuant to EU Regulation No. 996/2010, a member state is obligated rate product market for long-haul flights, it will in any event include both to investigate every aircraft accident or serious incident which occurs on scheduled flights and charter flights. The geographical scope of the market its territory. The Annex to EU Regulation No. 996/2010 contains a list of for air transport of persons is considered to be national. examples of serious incidents. Each member state must ensure that safety Tour operators and travel agencies purchase blocks of seats, which the investigations are conducted or supervised by a permanent, independent ACM has considered to be a separate product market as well. Also the mar- national civil aviation safety investigation authority. In the Netherlands, ket for the purchase of blocks of seats is considered to be national, since this is the Safety Board. Also, EU Regulation No. 996/2010 establishes tour operators focus all of their promotional activities on the national mar- a European Network of Civil Aviation Safety Investigation Authorities, ket and purchase seats for flights departing from said national market. formed of all member states’ national safety investigation authorities, in order to improve the quality of investigations conducted by safety inves- 31 What are the main standards for assessing the competitive tigation authorities and strengthen their independence. EASA is closely effect of a transaction? involved in the investigations referred to above; an EASA representative If a notified transaction significantly impedes competition in the must be invited to participate in said investigations as an adviser. Netherlands market or part thereof, the ACM may prohibit said transac- In 2015, EU Regulation No. 996/2010 shall be amended by EU tion. In particular, this will be the case if the transaction results in the crea- Regulation No. 376/2014 to the extent it concerns the reporting of occur- tion or strengthening of a dominant position. To assess the competitive rences in civil aviation (see question 27), effects of a transaction, the ACM determines the position of the undertakings on the relevant markets. Market shares form the most important indi- 27 Is there a mandatory accident and incident reporting system cation of dominance, but the ACM will also take into account other factors, and, if so, how does it operate? such as the structure of the markets concerned, buyer power and barriers Pursuant to EU Regulation No. 996/2010, which contains detailed provi- to entry. sions on safety investigations following aircraft accidents or serious incidents, any person involved who has knowledge of the occurrence of such 32 What types of remedies have been imposed to remedy accident or serious incident shall notify without delay the competent safety concerns identified by the competition authorities? investigation authority of the member state in which the accident or seri- If a certain transaction raises concerns, the ACM may impose behavioural ous incident has occurred. The competent safety investigation authority in or structural remedies. To date, the ACM has not required any remedies in turn has the obligation to notify without delay the European Commission, the aviation sector. EASA, ICAO, the member states and any third parties involved. Each safety investigation shall be concluded with a report in a form appropriate Financial support and state aid to the type and seriousness of the accident or serious incident. Such report shall contain, where appropriate, safety recommendations. 33 Are there sector-specific rules regulating direct or indirect EC Directive 2003/42, regarding the reporting system in respect of financial support to companies by the government or occurrences (operational interruptions, defects, faults or other irregular government-controlled agencies or companies (state aid) in circumstances) that have or may have influenced flight safety but that have the aviation sector? If not, do general state aid rules apply? not resulted in an accident or serious incident, has been implemented in General and sector-specific EU state aid rules apply in the aviation sec- the Act on Aviation and further regulation (ie, the Decree on Occurrence tor. Commission communication 2014/C 99/03 contains guidelines spe- Reporting in Civil Aviation and the Regulations on Occurrence Reporting cifically relating to state aid to the aviation industry and airports. National in Civil Aviation). Such occurrences must be notified to the minister for sector-specific rules apply to Amsterdam Airport Schiphol in view of infrastructure and the environment by the natural persons and legal enti- its dominant position. On the basis of these rules, Amsterdam Airport ties referred to in article 4, paragraph 1 of EC Directive 2003/42 (eg, the Schiphol is required to hold separate accounts for aviation and non-avia- operator or commander of a public transport aircraft, maintenance provid- tion activities. ers, air traffic controllers, etc) within 72 hours following the discovery of any such occurrence. 34 What are the main principles of the state aid rules applicable As per 15 November 2015, EU Regulation No. 376/2014, amending EU to the aviation sector? Regulation No. 996/2010 and repealing EC Directive 2003/42, shall apply. According to article 107(1) of the Treaty on the Functioning of the European Said Regulation establishes more proactive rules on the reporting, collect- Union (TFEU), any aid granted by a member state that distorts or threatens ing, storing, protecting and disseminating of safety incident information in to distort competition by favouring certain undertakings shall be incom- order to identify potential safety hazards before they result in an accident. patible with the internal market, insofar as it affects trade between member states. The European Commission applies the ‘market economy investor Competition law principle’ to determine the legality of aid granted by a member state or 28 Do sector-specific competition rules apply to aviation? If not, another public authority. Under this principle, the European Commission do the general competition law rules apply? assesses whether a private investor would have made the investment under normal market conditions. The general competition law rules as laid down in the Netherlands Competition Act apply. Sector-specific rules apply to Amsterdam Airport 35 Are there exemptions from the state aid rules or situations in Schiphol. which they do not apply? 29 Is there a sector-specific regulator or are competition rules Article 107(2) and (3) TFEU list specific situations in which state aid shall applied by the general competition authority? be compatible with the common market. Furthermore, Block Exemption Regulation No. 651/2014 applies. The ACM is entrusted with the enforcement of the competition rules, including the sector-specific rules applicable to Amsterdam Airport 36 Must clearance from the competition authorities be obtained Schiphol. before state aid may be granted? 30 How is the relevant market for the purposes of a competition All state aid must be notified to the European Commission on the basis assessment in the aviation sector defined by the competition of article 108(3) TFEU, unless Block Exemption Regulation No. 651/2014 authorities? applies. The ACM has defined two separate product markets: the sale of airline 37 If so, what are the main procedural steps to obtain clearance? capacity for transport of cargo and the sale of airline capacity for transport of persons. Procedural steps are laid down in EC Regulation No. 659/1999, as imple- With reference to the decisional practice of the European Commission, mented by EC Regulation No. 794/2004. the ACM has considered that the market for sales of airline capacity for

138 Getting the Deal Through – Air Transport 2015 Stek NETHERLANDS

38 If no clearance is obtained, what procedures apply to recover unlawfully granted state aid? Update and trends In the event of unlawfully granted state aid, a member state shall take all The Netherlands government has approved plans to develop appropriate measures to recover said granted state aid, including interest Lelystad Airport into an airport handling up to 45,000 air transport at an appropriate rate. movements per year, so that gradually, Lelystad Airport can provide alternative air traffic capacity and support the growth of Amsterdam Miscellaneous Airport Schiphol. On 20 March 2013, the Authority for Consumers & Markets 39 Is there any aviation-specific passenger protection (ACM) announced that it imposed a total fine of €370,000 on legislation? Ryanair, the Irish airline, for four violations that were found in its online booking system. Ryanair offered airfares on its website that EC Regulation No. 261/2004 establishes minimum rights for passengers did not include all foreseeable and unavoidable costs such as fees in case of denied boarding against the passenger’s will, flight cancellations and surcharges that must be statutorily charged. In most cases, and long delays by providing rules pertaining to reimbursement of costs consumers thus paid considerably more than the airfares that of tickets, care (eg, meals, hotel accommodation, etc) and compensation. were initially displayed on Ryanair’s website. This is in violation of EC Regulation No. 1107/2006 contains provisions for the protection of, consumer protection regulations. The ACM has dismissed Ryanair’s and provision of assistance to, disabled persons and persons with reduced objection against its decision. Ryanair has filed an appeal against the mobility travelling by air. In principle, disabled persons and persons with ACM’s decision on the objection with the court of Rotterdam. Plans to turn Enschede Airport Twente (which has been out of reduced mobility cannot be refused reservations or boarding on grounds operation since 2008) into a commercial civil airport in 2016 have of their disability. Exceptions can be made on the basis of applicable safety failed. Thus far, no alternative intended use of the Enschede Airport requirements and physical impossibility of embarkation or carriage. In Twente site has been agreed. respect of computerised reservation systems (CRS), EC Regulation No. 80/2009 applies, establishing a harmonised code of conduct regarding the use of CRS, in order to protect consumers’ interests. EC Regulation No. 41 What legal requirements are there with regard to aviation 1008/2008 deals with passengers’ rights regarding airfares (see question security? 12). EC Regulation No. 300/2008 on common rules in the field of civil avia- The Human Environment and Transport Inspectorate is responsible tion security (as supplemented by EC Regulation 272/2009, EC Regulation for the enforcement of compliance with EC Regulation No. 261/2004. 1254/2009 and EU Regulation No. 18/2010) provides rules relating to avia- On 17 September 2011 a policy regulation on the enforcement of said EC tion security. It provides the basis for a common interpretation of Annex 17 Regulation, issued by the state secretary for infrastructure and the envi- to the Chicago Convention regarding security issues. In the Netherlands, ronment, entered into force. This policy regulation was last amended as of the Aviation Act, the Civil Aviation Security Decree, the Regulations on 23 September 2013. Implementation of Civil Aviation Security and several further regulations In order to strengthen passengers’ position, a revision of EC Regulation provide for rules regarding security officers and security measures of air- No. 261/2004 is currently under preparation. ports, passenger and baggage control and control of goods.

40 Are there mandatory insurance requirements for the 42 What serious crimes exist with regard to aviation? operators of aircraft? Examples of serious crimes regarding aviation are equipping or rental Yes, there are mandatory insurance requirements for the operators of of an aircraft to be used for violent acts, violence against any person on aircraft, laid down in EC Regulation No. 785/2004, as amended by EC board an aircraft, deliberate reporting of incorrect flight information while Regulation No. 1137/2008 and EU Regulation No. 285/2010. EC Regulation knowing the same jeopardises the safe operation of an aircraft, acts of No. 785/2004 contains minimum insurance requirements for air carriers violence against any person on airports and trespassing on airports. Said and aircraft operators in respect of passengers, baggage, cargo and third crimes have been identified in the Netherlands Criminal Code. Besides parties, for both commercial and private flights. Under EC Regulation No. these provisions, the Netherlands is also a party to certain international 785/2004, air carriers and aircraft operators are required to be insured to instruments providing for rules against hijacking of aircraft, offences and cover the risks associated with aviation-specific liability (including acts of crimes committed on board an aircraft and sabotage, such as the 1963 war, terrorism, hijacking, acts of sabotage, unlawful seizure of aircraft and Tokyo Convention, the 1970 Hague Convention and the 1971 Montreal civil commotion). Convention.

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

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

www.gettingthedealthrough.com 139 NEW ZEALAND Buddle Findlay

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

140 Getting the Deal Through – Air Transport 2015 Buddle Findlay NEW ZEALAND to accept New Zealand’s designation of, and to issue an operating authori- and effectively controlled by Australian or New Zealand nationals, or both, sation to, such an airline. in accordance with the above, or have been jointly approved as a SAM air- The financial ability of the applicant to carry on the proposed service line by the relevant Australian and New Zealand ministers. and the likelihood of the applicant carrying on the service satisfactorily must also be taken into account by the responsible minister in considering 6 What procedures are there to obtain licences or other rights to an application for a scheduled international air service licence. Information operate particular routes? that is required to accompany applications includes a business plan setting Part 8A of the Civil Aviation Act requires operators of scheduled interna- out the objectives of the enterprise and the resources available to achieve tional air services to or from New Zealand (including by way of code shar- these objectives, a budgeted statement of financial performance of the air- ing on the aircraft of another airline) to have a scheduled international air line for its first year of operation, including key assumptions made, a state- service licence or an open aviation market licence. ment of financial position as of the date of the application and as predicted An open aviation market licence is applicable only for services sched- over the first year of operation, a cash flow analysis on a month-by-month uled between New Zealand and certain countries or territories that have basis for the airline’s first year of operation, a list of commitments and been specifically designated by the minister of transport. An open aviation guarantees given by the enterprise or its directors and management team, market licence is currently applicable in respect of operations to and from and a summary of relevant qualifications and work experience of senior Australia, Brunei, Chile, the Cook Islands, Luxembourg, Malaysia, Samoa, management. Singapore, Tonga, the United Arab Emirates and the United States. An airline intending to operate scheduled services between New Special shareholder restrictions in respect of the national carrier, Zealand and a country other than those listed above, may do so only with a Air New Zealand Limited (Air NZ) scheduled international air service licence. The current requirements and In order to provide enforcement rights to the Crown in the event of a procedures required for international air service licences and open aviation breach of Air NZ’s constitution, the ‘Kiwi share’, a single shareholding, market licences respectively can be found at the New Zealand Ministry of is owned by the Crown as the ‘Kiwi shareholder’, and has a wide range of Transport’s website at www.transport.govt.nz. rights attached to it. One of those rights is the power to force the sale of Licensing provides the mechanism for ensuring airlines abide by the equity securities transferred in breach of the restrictions on the ownership air traffic rights exchanged in bilateral negotiations. For New Zealand air- of equity securities. lines, licensing is also the method for allocating New Zealand’s air traffic Additionally, the relevant provisions of Air NZ’s constitution cannot rights that, under most agreements, are still restricted. be amended, removed or altered, without the written consent of the Kiwi shareholder. 7 What procedures are there for hearing or deciding contested Air NZ’s company constitution restricts persons who own or operate applications for licences or other rights to operate particular an airline business from holding or having an interest in equity securities routes? in Air NZ without the consent of the Kiwi shareholder. It also restricts non- Certain procedural requirements are prescribed under the Civil Aviation New Zealand nationals from holding or having an interest in equity secu- Act. According to information available from the Ministry of Transport, rities that confer 10 per cent or more of the total voting rights in Air NZ, international air service licence applications are notified in the New without the prior written consent of the Kiwi shareholder. A ‘New Zealand Zealand Gazette and may be sent directly to interested parties. Not less national’ is defined in the constitution, and includes a New Zealand citi- than 21 clear days are allowed within which the responsible minister will zen, the Crown and any company incorporated in New Zealand that is receive written representations relating to the application. The applicant substantially owned and effectively controlled by New Zealand nationals. is then given the opportunity to comment on those representations to the responsible minister. Foreign international airlines Where there are competing scheduled international air service licence A foreign international airline applicant may be required to supply evi- applications for constrained capacity, the responsible minister considers dence of the nationality of the control of the airline, and either evidence of specific criteria. These comprise the extent to which: the nationality of its ownership or its principal place of business and place • the proposed service would help develop a competitive environment of incorporation. Under most of New Zealand’s bilateral air services agree- on the route concerned; ments, the nationality of the ownership and control of an airline can affect • the proposed service would facilitate increased inbound tourism and its entitlement to exercise the rights accorded by the agreement. In some trade and investment; and agreements the principal place of business and place of incorporation of • an airline has the ability to satisfy consumer interests in terms of the airline may also be relevant. degree of choice.

International airlines operating under an open aviation market Where a dedicated freight service is proposed, the extent to which the ser- licence for SAM airlines for services between Australia and New vice would contribute to trade development, in particular export markets, Zealand is also considered. In order to demonstrate that the applicant meets eligibility criteria under The duration of scheduled international air service licences for a New the single aviation market (SAM) provisions of the Australia–New Zealand Zealand international airline is normally five years but may be stipulated Air Services Agreement, applicants must verify: for a shorter term. The responsible minister must designate licensed air- • that Australian or New Zealand nationals or both: lines in accordance with the provisions of the relevant bilateral air services • own a majority of the paid-up capital of the airline, and that, for agreement and notify the government of the countries concerned. passenger airlines, the total paid-up capital is commensurate with the scale of the operation proposed; 8 Is there a declared policy on airline access or competition and, • have effective control of the airline by holding at least two-thirds if so, what is it? of the positions on the board, including that of chairperson; New Zealand has been a leader, internationally, in seeking liberalisation of • that the airline’s head office and operational base are in Australia or access for international air services including pursuing open skies and other New Zealand; and regional agreements (eg, with Australia and the UK, and with certain Pacific • whether arrangements relating to the operation of the proposed ser- Rim and Pacific Island countries under the MALIAT Agreement). In August vice in effect vest control of the airline in a foreign interest. 2012, the government issued an International Air Transport Policy Statement (available on www.transport.govt.nz) which recorded, among other things, An airline that does not meet these ownership and control requirements that New Zealand will pursue a policy of putting in place reciprocal open may still be granted an open aviation market licence if the airline is jointly skies agreements, except where it is not in the best interests of the coun- approved as a ‘SAM airline’ by both the Australian and New Zealand min- try as a whole, will consider, on a case-by-case basis, granting approval for isters responsible for civil aviation in accordance with the Single Aviation extra-bilateral services pending the putting into place of new or expanded Market Arrangements between the two countries. air services arrangements and that certain policy limits on foreign airline In order to continue to exercise the rights granted in an open aviation ownership would be removed (which has since occurred). However, access market licence, an airline must either continue to be substantially owned

www.gettingthedealthrough.com 141 NEW ZEALAND Buddle Findlay or competition policies for any particular international air services licences 12 Are airfares regulated and, if so, how? depend on the relevant licensing criteria under the Civil Aviation Act and the The Civil Aviation Act and International Services Licences may require terms of the air services agreements relating to the services concerned. services and tariff filings. Part 9 of the Act provides for the responsible minister to issue commission regimes or, in defined circumstances, authorise 9 What requirements must a foreign air carrier satisfy in order tariffs in respect of international air services. Agents’ commission arrange- to operate to or from your country? ments for carriage of passengers and the international carriage of cargo are In order to operate scheduled international air services to or from New also regulated. Zealand (including by way of code-sharing on the aircraft of another airline), an airline is required under Part 8A of the Civil Aviation Act to hold Aircraft a scheduled international air service licence or, for services between New 13 Who is entitled to be mentioned in the aircraft register? Do Zealand and countries or territories that have been specifically designated requirements or limitations apply to the ownership of an by the Minister of Transport (currently Australia, Brunei, Chile, the Cook aircraft listed on your country’s register? Islands, Luxembourg, Malaysia, Samoa, Singapore, Tonga, the United Arab Emirates, and the United States), an open aviation market licence. The only party entitled to be mentioned on the New Zealand Register of Compliance with the relevant provisions of the Civil Aviation Act Aircraft is the ‘owner’ of the aircraft, being for the purposes of the Rules involves various licensing requirements and procedures. Full details are the person lawfully entitled to possession of the aircraft for 28 days or available at www.transport.govt.nz but key features are highlighted below. longer. There are no requirements or limitations, particularly as to nation- Clearly, before scheduled services can be commenced between New ality, that relate to the ‘ownership’ of an aircraft listed on the New Zealand Zealand and other countries or territories, applicant airlines must meet the Register. However, an applicant for registration must be a ‘fit and proper requirements of the relevant authorities in each of those other countries person’ having regard to such matters as past history of transport safety or territories. compliance and physical and mental health. If granting a scheduled international air service licence or open aviation market licence would be contrary to the relevant bilateral air services 14 Is there a register of aircraft mortgages or charges and, if so, agreement or associated arrangements, or to any other international how does it function? agreement, convention or arrangement to which New Zealand is a party, International interests in aircraft (such as mortgages, charges and leases) the minister or licensing authority (as the case may be) must refuse to grant can be registered on the International Registry of Mobile Assets (the IR) the licence. in accordance with the Convention on International Interests in Mobile For open aviation market licences in respect of airlines operating Equipment (the Cape Town Convention). The Cape Town Convention and under the Single Aviation Market Arrangement between New Zealand and the Aircraft Protocol were adopted as part of New Zealand law under the Australia (SAM airlines) for services between New Zealand and Australia, Civil Aviation (Cape Town Convention and other Matters) Act 2010. the granting of a licence must not be contrary to the Australia–New Zealand Aircraft mortgages and charges and leases of aircraft for more than Air Services Agreement or to any other international agreement, conven- one year can also be independently registered on the New Zealand tion or arrangement to which New Zealand is a party. Personal Property Securities Register (PPSR) created by the Personal A foreign airline applying for a scheduled international air service Property Securities Act 1999 (PPSA) along with security interests in other licence may be required to supply evidence of the nationality of the control personal property. Aircraft mortgages and charges and leases of aircraft for of the airline, and either evidence of the nationality of its ownership or its more than one year are ‘security interests’ for the purposes of the PPSA. principal place of business and place of incorporation. Nevertheless, as a matter of statute the provisions of the Cape Town To qualify for an open aviation market or a scheduled international Convention have effect in place of any other New Zealand law (including licence, the applicant airline must have been designated by its government the PPSA), to the extent that the Cape Town Convention applies to a matter in accordance with the relevant provisions of the air services arrangements to which the other law applies. Registrations on the IR, as a matter of New between New Zealand and that other country. Zealand law, therefore have priority over PPSR registrations. A foreign airline applicant may also be required to supply evidence that it complies with the requirements for designated airlines under the 15 What rights are there to detain aircraft, in respect of unpaid relevant provisions of the air services arrangements and that it holds airport or air navigation charges, or other unpaid debts? a foreign air operator certificate (unless the application is only for code- There is no statutory right of detention of aircraft in respect of unpaid air- sharing on the aircraft of another carrier that has the relevant operating port or air navigation charges or other unpaid debts. authorisation). Airport companies or other service providers may, as a matter of con- Applicants must also supply proof of insurance covering liability tract, withdraw services in respect of aircraft where there are unpaid fees that may arise from or in connection with the operation of the proposed and charges. service(s) in respect of death or bodily injury or property damage. The licensee may be called upon at any time to supply proof of such insurance. 16 Do specific rules regulate the maintenance of aircraft? After taking into account the requirements set out above, the Minister or licensing authority may refuse a licence application by a foreign inter- The maintenance of aircraft is provided for in the Civil Aviation Act and national airline, or may grant it wholly or partly, and subject to such con- the Rules. ditions as the Minister thinks fit. If an applicant airline has met all the requirements, a decision on the granting of a scheduled international air Airports service licence can normally be made within one week of receipt of the 17 Who owns the airports? licence application. However, a licence cannot be granted until all these Civilian airports in New Zealand are operated by airport authorities or requirements have been met. When a licence has been granted, notice to airport companies. Airport authorities are local authorities authorised that effect is given in the New Zealand Gazette. to operate airports by Order in Council under the Airport Authorities Act 1966. Airport companies are also authorised under that act. Airport 10 Are there specific rules in place to ensure aviation services companies are owned by wholly commercial companies, by commercial are offered to remote destinations when vital for the local interests and local authorities jointly, by joint ventures between the New economy? Zealand Crown and local authorities, or by the Crown alone. The three There are no specific rules in place to give effect to public service obliga- main international airports (Auckland, Wellington and Christchurch) are tions either in respect of domestic aviation services or international avia- all owned by airport companies. tion services. 18 What system is there for the licensing of airports? 11 Are charter services specially regulated? There is no economic licensing of airports as such. The Civil Aviation Act Commercial non-scheduled international flights for carriage of passen- provides for licensing and other requirements for aviation safety purposes. gers, cargo or mail for remuneration or hire must be authorised by the The Airport Authorities Act 1966 sets out certain rules concerning the Secretary of the Ministry of Transport in accordance with any guidelines operation of airports, including in relation to charges. issued by the responsible minister (section 87ZE of the Civil Aviation Act).

142 Getting the Deal Through – Air Transport 2015 Buddle Findlay NEW ZEALAND

19 Is there a system of economic regulation of airports and, if so, on an airline within New Zealand. The death or injury would instead be how does it function? compensated for according to the relevant accident compensation legis- The Airport Authorities Act 1966 requires airport companies to consult lation, the Injury Prevention Rehabilitation and Compensation Act 2001. their substantial airline customers before setting or changing their charges However, proceedings may still be brought to recover exemplary damages (including charges to passengers) for ‘identified airport activities’, and or in respect of mental injury alone. within five years after fixing or changing their charges. ‘Identified airport The Carriage of Goods Act 1979 regulates the liability for domestic activities’ are the aeronautical services provided by an airport. Substantial carriage of goods, including the domestic carriage of baggage or cargo by customers are defined as representing 5 per cent or more of an airport’s air. The Act provides for a general presumption that a carrier will be liable revenue for aeronautical activities either as individual airlines or as a for loss or damage to goods that occurs while the carrier is responsible for combined group of airlines. Specified airport companies (with revenues in the goods even if such loss or damage is not caused by the carrier. However, excess of NZ$10 million per annum) must also consult over capital expend- this presumption is subject to the limitations set out in the Act (eg, if the iture plans (representing 20 per cent of the companies’ assets as defined). carrier can establish that the loss or damage was caused by an inherent vice The manner in which consultations are carried out, and whether or a breach of certain contractual terms implied by the Act such as fitness charges are manifestly unreasonable, may be the subject of administra- to be carried, it will not be liable and where the loss or damage was not tive law review by the New Zealand courts (although there are limits as to caused intentionally, the liability of the carrier for each unit of goods lost or the extent to which price setting by airport companies is subject to judicial damaged during carriage is limited to NZ$2,000). The parties may agree review). The charges at New Zealand’s three major airports, Auckland, to contract out of some of the provisions of the Act (eg, they may agree that Wellington and Christchurch, are regulated by the Commerce Act 1986, 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 age or loss was caused by or contributed to the person who suffers the loss, airports? 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? 26 What system and procedures are in place for the investigation Slots are allocated by the individual airports in accordance with their of air accidents? individual airport policies and consultations with airlines. The allocation 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 failure, a person is seriously injured or killed, or the aircraft is missing. An The operation of ground-handling services is determined by the airlines ‘incident’ is an occurrence that is associated with the operation of an air- concerned but in accordance with arrangements with airports, for example craft and that affects or could affect the safety of that operation, but is not counter licence agreements. The practice regarding ground handling and an accident. services may vary between airlines and airports and may include full out- If the CAA is notified of an accident or incident, it must as soon as sourcing of ground-handling services. The arrangements are potentially practicable inform the Transport Accident Investigation Commission subject to challenge under Part 2 of the Commerce Act (which deals with (TAIC) if the accident involves aircraft or if the incident is a serious inci- restrictive trade practices). dent. The TAIC has a duty to investigate such an accident or incident in certain circumstances. Otherwise, it has only a discretion to do so. The 23 Who provides air traffic control services? And how are they TAIC’s purpose is to investigate the accident so as to promote safety in the regulated? 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 regula- Yes. See question 26. tion under the Civil Aviation Act. Competition law Liability and accidents 28 Do sector-specific competition rules apply to aviation? If not, 24 Are there any special rules in respect of death of, or injury to, do the general competition law rules apply? passengers or loss or damage to baggage or cargo in respect of domestic carriage? New Zealand’s generic competition statute, the Commerce Act (notably Parts 2 and 3), applies to the aviation sector. Yes, the domestic carriage of passengers is regulated by the Civil Aviation In addition, Part 9 of the Civil Aviation Act is relevant to competition Act. New Zealand has a no-fault accident compensation scheme that bars law. It provides that certain restrictive trade practice prohibitions under any actions for compensatory damages that arise directly or indirectly out the Commerce Act do not apply in respect of arrangements containing a of personal physical injury or death that occurs during domestic carriage provision relating to international carriage by air or the negotiation of such www.gettingthedealthrough.com 143 NEW ZEALAND Buddle Findlay a provision provided it has been authorised by the minister of transport The government may nevertheless respond on an ad hoc basis, par- under Part 9 (International Air Carriage Competition) of the Civil Aviation ticularly in circumstances that involve sensitive national interests includ- Act. Part 9 sets out a specific regime for authorisation of international air ing retention of reciprocal landing rights. carriage arrangements, commission regimes and tariffs. Conduct that has been authorised is deemed to be specifically authorised for the purposes of 34 What are the main principles of the state aid rules applicable the prescribed exemptions from the restrictive trade practices provisions to the aviation sector? of the Commerce Act. As noted above, there are no generic or sector-specific state aid rules.

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

144 Getting the Deal Through – Air Transport 2015 Buddle Findlay NEW ZEALAND

Human Rights Act 1993, the rights of consumers booking flights on CRSs would be protected by the Consumer Guarantees Act 1993 and any issues Update and trends in relation to misleading representations regarding package holidays, for instance, would be covered by the Fair Trading Act 1986. Air New Zealand, as the national carrier, remains the major force in both domestic and international aviation in New Zealand. Nevertheless there is strong competition on trans-Tasman routes 40 Are there mandatory insurance requirements for the from the Australian carriers, including Jetstar, Virgin Australia operators of aircraft? and Qantas, as well as other carriers such as Emirates. Jetstar also Under the Civil Aviation Act, the Minister of Transport or the Secretary of competes domestically with Air New Zealand. Other international the Ministry of Transport may call upon an applicant for a licence or the airlines, including Emirates, China Southern, Virgin Australia, Jetstar, Singapore Airlines and Hawaiian Air, continue to serve the holder of a licence to furnish to his or her satisfaction proof that its liabil- New Zealand international market. ity in relation to death or bodily injury or damage to property is covered The adoption of the Cape Town Convention remains the most by insurance. This reflects the obligation in article 50 of the Montreal significant recent change to aviation law in New Zealand. It became Convention 1999 that state parties require their carriers to maintain ade- part of New Zealand law on 1 November 2010 and is has become an quate insurance cover in respect of liability under the Convention. established part of aircraft financing in New Zealand. New Zealand continues to have a dual system with registrations of security 41 What legal requirements are there with regard to aviation interests in aircraft still permitted under the pre-existing Personal security? Properties Securities Act. Arguably, this defeats some of the benefits of adoption of the Convention and there are continuing calls for a Aviation security is covered by the Civil Aviation Act and the Aviation change such that the International Registry will be the sole register Crimes Act 1972. The Civil Aviation Act provides for detailed regulation of for security interest over prescribed aircraft. aviation security service providers and sets out the functions and duties of those persons. These duties include carrying out baggage, passenger and crew screening as well as undertaking aerodrome security. In addition, The provisions of the Crimes Act also apply to crimes committed on they are jointly responsible with New Zealand Police for preventing the board an aircraft within New Zealand and, in certain circumstances, to commission of crimes under the Aviation Crimes Act. The Aviation Crimes crimes committed on aircraft beyond New Zealand. In particular, there is a Act is discussed further in response to question 42 below. duty in the Crimes Act that is placed upon persons in charge of dangerous things, which could apply to operators of aircraft. Any person who has in 42 What serious crimes exist with regard to aviation? their control anything that may endanger human life in the absence of pre- In New Zealand, several serious crimes exist with regard to both acts caution or care is under a legal duty to take reasonable precautions against, and omissions by passengers as well as aircraft operators. Serious crimes and to use reasonable care to avoid, that danger. Certain provisions of the in respect of aviation are dealt with in the Aviation Crimes Act and the Crimes Act are also specifically expressed with regard to acts done in rela- Crimes Act 1961. The Aviation Crimes Act gave effect to the provisions tion to aircraft, for example, arson. of the Tokyo, Hague and Montreal Conventions. It establishes the crime The Civil Aviation Act also creates several strict liability ‘public wel- of hijacking, which is punishable by imprisonment for life. Other crimes fare’ safety offences in respect of the conduct of aircraft operators. These relating to aircraft set out in that Act include destroying or damaging an air- include ‘unnecessary endangerment’ and ‘careless operation of aircraft’ craft in service; committing an act of violence that is likely to endanger the offences, and may be punished by way of a significant fine (in the case of safety of any aircraft in service; and endangering the safety of an aircraft the ‘unnecessary endangerment’ offences, up to three times the value of in flight by communicating false information. Similarly, it is also a crime to any commercial gain if the offence was committed in the course of pro- use any device, substance, or weapon to intentionally do certain acts that ducing a commercial gain), imprisonment or disqualification, or all of the endanger or are likely to endanger the safety of an international airport. above. The Civil Aviation Act also provides that it is an offence punishable These offences are punishable by up to 14 years’ imprisonment (although by up to 12 months’ imprisonment or a maximum NZ$10,000 fine to pro- if the conduct in relation to an airport is the same as conduct that would vide false or misleading information at a security check. have been murder or manslaughter under the Crimes Act then the offence is punishable by imprisonment for life).

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

www.gettingthedealthrough.com 145 NIGERIA Babalakin & Co

Nigeria

Olawale Akoni, Kehinde Daodu and Olamide Aiyeola Babalakin & Co

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? The market for provision of air transport is regulated by the issuance of licences and permits to operators that satisfy all the conditions necessary The primary aviation regulatory authority in Nigeria is the Nigerian Civil to be granted a licence. To provide air transport services in Nigeria, the Aviation Authority (NCAA), established under the Civil Aviation Act 2006 NCAA must have certified the aircraft and issued an air transport licence in (CAA 2006). The NCAA is primarily responsible for regulating air naviga- respect of scheduled journeys; an air operating permit for non-scheduled tion, including matters such as the registration and inspection of aircraft, journeys; and an airline tour organisers’ licence for tour organisers. issuance, renewal or validation of certificates, safety, security, personnel licensing, inspection and regulation of aerodromes, and other aviation 5 What requirements apply in the areas of financial fitness and matters. It is also responsible for developing airworthiness directives, nationality of ownership regarding control of air carriers? regulating the standards for provision of air traffic services and the technical and financial capability of a proposed carrier to conduct commercial air The requirements applicable to the financial fitness of air carriers include services. The NCAA is further empowered to make regulations with regard the stipulation of the following minimum paid-up share capital: to civil aviation generally. • 500 million naira for carriers engaged in domestic operations; The CAA 2006 gives the Minister for Air Transport supervisory • 1 billion naira for carriers engaged in regional operations; and authority over the NCAA and is responsible for the formulation of policies • 2 billion naira for carriers engaged in international operations. and strategies for the promotion and encouragement of civil aviation in Nigeria. The Minister is also empowered to give directions to the NCAA on The NCAA also monitors the financial health of air carriers by regular certain matters specified in the CAA 2006. screening of up-to-date monthly management accounts, quarterly balance The CAA 2006 is the primary legislation regulating aviation in Nigeria. sheets, annual profit and loss accounts and cash-flow projections. It may Comprehensive regulations have been made by the NCAA pursuant to sec- also require the companies to provide bank references, cash-flow analyses tion 30 of the CAA 2006, and these are contained in the Nigerian Civil and evidence of tax payment by the company and its directors. The air car- Aviation Regulations 2009 (NCAR 2009). riers must have insurance (comprehensive or third-party) for hull, passenger or cargo in accordance with the relevant aviation regulation. Regulation of aviation operations The nationality of ownership regarding control of air carriers is strictly controlled. By virtue of section 33(1) of the CAA 2006, a licence, permit, 2 How is air transport regulated in terms of safety? certificate or other authorisation sought for the purposes of air transport Aviation safety is regulated by the NCAR 2009, which makes elaborate undertaking (such as carrying passengers or cargo for reward, on such regulations for the safe operation of aviation. By virtue of the NCAR, only journeys or classes of journeys whether beginning and ending at the same persons who have been granted an air operator’s certificate (AOC) are per- point or at different points) will not be issued unless the applicant is a mitted to operate commercial aircraft, and then, only to the extent author- Nigerian citizen or a company or body corporate registered in Nigeria and ised by the AOC. has Nigeria as its principal place of business and is controlled by Nigerian The AOC is only granted to operators who meet all safety and techni- nationals. cal requirements necessary for the provision of commercial air transport This is, however, without prejudice to the ability of foreign air opera- services and compliance with the conditions of granting the AOC is neces- tors from contracting states to the Convention on International Civil sary for the certificate to be retained. Part 2 of the NCAR 2009 also sets Aviation (the Chicago Convention) to operate in Nigeria in accordance out categories and types of licences that the NCAA may issue to personnel with Part 10 of the CAA 2006. involved in the aviation industry. The NCAA has oversight duties and must ensure that the condition for grant of any licence is continuously complied 6 What procedures are there to obtain licences or other rights to with. operate particular routes? Domestic routes are liberalised, thus, there are no special procedures for 3 What safety regulation is provided for air operations that do obtaining the rights to operate them. Operators are free to fly any routes not constitute public or commercial transport and how is the within the country subject to their giving notice of their flight schedule distinction made? to the NCAA, the Federal Airports Authority of Nigeria and the Nigerian All civil aviation, whether public, private or commercial, is regulated by Airspace Management Agency. the CAA 2006 and no aircraft shall be flown in Nigerian airspace unless it International routes are however subject to air services agreement has been issued a certificate of airworthiness or validated under the law of between Nigeria and other countries. Nigerian operators apply to the min- the country of its registration. The certificate is issued after an inspection ister of air transport for designation as carriers under the respective agree- by the NCAA has ascertained that the aircraft is fit to fly. The owner must ments. The application is then subjected to a technical evaluation by the ensure that the aircraft continues to be airworthy by observing all main- NCAA, and upon a favourable report, such operator is so designated. tenance specifications and complying with all airworthiness directives For foreign airlines seeking to operate in Nigeria, the relevant con- issued in respect of such aircraft. tracting state must have designated the carrier under the air service Standard certificates of airworthiness are issued for the following cat- agreement as the carrier to operate that route. It then passes the notice of egories: transport category (passenger); transport category (cargo); aerial designation to the Nigerian Ministry of Foreign Affairs, which transmits it work category; private category; and special category. to the Minister of Air Transport. On receipt of the designation, the minister

146 Getting the Deal Through – Air Transport 2015 Babalakin & Co NIGERIA writes to the NCAA for comments, which reviews the notice for compliance individual who has been lawfully admitted for permanent residency in with the air services agreement between Nigeria and the other contracting Nigeria or a corporation lawfully recognised and doing business under the state, and then makes a recommendation to the Ministry of Air Transport laws of Nigeria. However, where an aircraft is chartered by demise to a per- which may now accept the nomination. The acceptance is conveyed to the son qualified as aforesaid, it may be registered whether or not an unquali- Ministry of Foreign Affairs and then to the contracting state. fied person is entitled as the owner of a legal or beneficial interest therein. The designated airline will then be asked to forward documentation for the grant of a foreign air carriers’ certificate. The air service agreements 14 Is there a register of aircraft mortgages or charges and, if so, between the countries usually stipulate the air traffic rights and the number how does it function? of frequencies given to such carriers and the airports of entry. Additional There is at present no register of aircraft mortgages or charges; however, frequencies can be negotiated under the agreements via commercial the NCAA registers the interests of mortgagors or other encumbrances at agreements between the government and the air carrier. the point of application and these are included in the registration particulars of the aircraft contained in the NCAA file. 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular 15 What rights are there to detain aircraft, in respect of unpaid routes? airport or air navigation charges, or other unpaid debts? There is no set procedure for hearing or deciding contested applications for The FAAN and the Nigerian Airspace Management Agency (NAMA), licences or other rights to operate particular routes. which is an agency of the federal government of Nigeria and is regulated by the NCAA, are responsible for the provision of airport and air naviga- 8 Is there a declared policy on airline access or competition and, tion services respectively. Under the enabling statutes for these two bod- if so, what is it? ies, there are no express powers to detain aircraft for unpaid charges or There is no declared policy on airline competition, although there is a gen- other unpaid debts. However, section 53 of the CAA 2006 provides that any eral Bill on Antitrust Law currently pending before the National Assembly. regulation, rule or order made pursuant to the Act in relation to an aircraft However, the policy for domestic carriers is liberal and any airline may may provide for the detention of aircraft to secure compliance with the reg- operate any route in the country. Foreign airlines operating in Nigeria are ulation, rule or order. Also, article 39 of the Convention on International limited to the airport of entry specified in their air traffic licence and may Interests in Mobile Equipment contained in Schedule 5 to the CAA 2006 not operate domestic routes. recognises the right of a State entity, intergovernmental organisation or any other private provider of public services to arrest or detain an object 9 What requirements must a foreign air carrier satisfy in order under the law of that State for payment of amounts owed to such entity, to operate to or from your country? organisation or provider directly relating to those services in respect of that For foreign airlines seeking to operate in Nigeria, the relevant contract- object or another object. ing state must have designated the carrier under the relevant Air Service Agreement as the carrier to operate that route. It then passes the notice 16 Do specific rules regulate the maintenance of aircraft? of designation to the Nigerian Ministry of Foreign Affairs, which transmits The NCAR 2009, in Parts 5 and 8, contain rules on aircraft maintenance it to the minister of aviation. On receipt of the designation, the minister and its record. requests comments from the NCAA, which reviews the notice for compliance with the Air Services Agreement between Nigeria and the other Airports contracting state. The recommendation of the NCAA is forwarded to the 17 Who owns the airports? minister of aviation who may accept same and convey it to the contracting state through the Ministry of Foreign Affairs. Airports in Nigeria are generally owned either by the federal government of Nigeria through the Federal Airports Authority of Nigeria (FAAN) or by 10 Are there specific rules in place to ensure aviation services state governments. However, there are a few privately owned and oper- are offered to remote destinations when vital for the local ated airports. One was built and is being operated by the Shell Petroleum economy? Development Company Limited at Osubi, Warri in Delta State. Also the new domestic wing of the Murtala Mohammed Airport in Lagos, MMA2, There are no specific rules on this subject matter and provision of services was recently built and is being operated on a build, operate and transfer is determined by demand for particular routes. arrangement by Bi-Courtney Limited. 11 Are charter services specially regulated? 18 What system is there for the licensing of airports? There are no special regulations for charter services beyond the general By virtue of Part 12 of the NCAR, no person is allowed to operate an aer- applicable regulations made under NCAR 2009. Air carriers seeking to odrome in Nigeria for the take-off and landing of aeroplanes engaged in operate charter services must obtain air operating permits and air operat- flights for the purpose of public transport or instruction in flying unless he ing certificates (AOC). or she holds an aerodrome certificate granted under the regulations. An application for the issuance of an aerodrome certificate is made 12 Are airfares regulated and, if so, how? to the NCAA in the appropriate form prescribed and accompanied by rel- Section 30(4)(d) of the CAA 2006 requires every Nigerian and foreign car- evant documents as specified in the section 7(2) of Part 12 of the NCAR rier to file and keep open for public inspection, tariffs showing all rates, together with the prescribed fee. The NCAA grants the certificate to the fares and charges charged by such carrier. In addition, the NCAA may applicant if the aerodrome facilities, services and equipment are in accord- approve or reject tariffs so filed if they are inconsistent with approved rates ance with the standards specified in the Authority’s Aerodrome Standards specified by the NCAA under the CAA and NCAR rules and orders. It must Manual and its Regulations among other criteria specified in section 7(3) be noted, however, that there are currently no such rules or orders as, in of Part 12 of the NCAR. practice, airfares are deregulated in practice. The aerodrome certificate is issued for one year and is renewable annually under a process that must be commenced not less than 90 days Aircraft before the expiry of the current term. 13 Who is entitled to be mentioned in the aircraft register? Do requirements or limitations apply to the ownership of an 19 Is there a system of economic regulation of airports and, if so, aircraft listed on your country’s register? how does it function? The owners, operators and lessors are entitled to be mentioned in the air- There is no laid out system for the economic regulation of airports. craft register. There are limitations to the ownership of an aircraft listed However, NCAA has responsibility to approve proposals on charges or tar- in the Nigerian register. Ordinarily, by virtue of the NCAR, no aircraft is iffs set by operators. allowed to be registered unless it is owned by a citizen of Nigeria or an

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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? By-laws made pursuant to the Federal Airports Authority Act make provi- The Civil Aviation (Investigation of Accidents) Regulations made pursuant sion in respect of access to airports. Unauthorised persons are prohibited to the repealed CAA 1964 make it mandatory for any person in charge of from certain areas of airports clearly marked as restricted. the aircraft at the time of the accident to send notice thereof (containing certain specified particulars) to the minister by the quickest means of com- 21 How are slots allocated at congested airports? munications available and in the case of an accident occurring in or over Usually, slots will be allocated on a first-come, first-served basis; however, Nigeria, shall also notify the nearest police authorities of the accident and allocation of slots is ultimately determined by the operators of the various the place where it occurred. airports, which for most airports is the FAAN. There are also a few privately operated airports. Competition law 28 Do sector-specific competition rules apply to aviation? If not, 22 Are there any laws or rules specifically relating to ground do the general competition law rules apply? handling? A competition law is yet to be enacted in Nigeria, however, a competition There are no specific laws relating to ground handling except that by virtue bill is pending before the National Assembly. The Securities and Exchange of section 72 of the CAA 2006 the NCAA issues licences to, and regulates Commission (SEC) established by the Investment and Securities Act, the operations of, ground handling service companies at the airports. however, makes rules in respect of mergers and acquisitions concerning companies and the approval of the SEC must be sought and obtained for 23 Who provides air traffic control services? And how are they any form of takeover or merger of companies in the aviation industry to regulated? be valid. Air traffic control services are provided exclusively by the NAMA. The CAA 2006, however, empowers the NCAA to guard against anti- competitive practices. Pursuant to this power, the NCAA in section 5 of the Liability and accidents NCAR makes it an offence for any aircraft operator to be engaged in anti- competitive and unfair business practices and including but not limited to; 24 Are there any special rules in respect of death of, or injury to, • collusion; passengers or loss or damage to baggage or cargo in respect of • price fixing; domestic carriage? • predatory pricing; and The Convention on the Unification of Certain Rules relating to International • deceptive and unethical advertisement. Carriage by Air 1999 as modified and set out in the third Schedule to the CAA 2006 (and as may be amended from time to time) applies to death of The penalty for an infraction is a fine of 1 million naira and the suspension or injury to passengers, or loss or damage to baggage or cargo in respect of of the operation authorisation. Persistent violation could lead to the revo- domestic carriage. cation of the operating authorisation. Among other things the Rules limit the liability of carriers in respect of each passenger to the sum of US$100,000 where the carrier is able to 29 Is there a sector-specific regulator or are competition rules establish that the damage was not due to the negligence or other wrongful applied by the general competition authority? act or omission of the carrier or its servants or agents; or that it was solely There is no sector-specific regulatory body as it concerns competition in due to the negligence or other wrongful act or omission of a third party. the aviation sector (see question 28). The carrier is also required, in the event of death or injury to passengers, to make an advance payment without delay to persons entitled to claim com- 30 How is the relevant market for the purposes of a competition pensation to meet their immediate economic needs. assessment in the aviation sector defined by the competition authorities? 25 Are there any special rules about the liability of aircraft operators for surface damage? Not applicable. There are no special rules about the liability of aircraft operators for sur- 31 What are the main standards for assessing the competitive face damage. The general rules on tort will be applicable in these circum- effect of a transaction? stances. In 1970, Nigeria adhered to the 1952 Rome Convention on Damage Caused by Foreign Aircraft to Third Party Surface (as amended in Montreal Not applicable. in 1978) but denounced the Convention with effect on 10 November 2002. 32 What types of remedies have been imposed to remedy 26 What system and procedures are in place for the investigation concerns identified by the competition authorities? of air accidents? Please see question 28. The Accident Investigation Bureau (AIB) established by section 29(1) of the CAA 2006 is the body charged with the responsibility for the investigation Financial support and state aid of air accidents in Nigeria. It is an autonomous body reporting to the presi- 33 Are there sector-specific rules regulating direct or indirect dent of Nigeria through the Minister for Air Transport. financial support to companies by the government or The Bureau is headed by a commissioner of accidents investigation government-controlled agencies or companies (state aid) in who shall be appointed by the president upon the recommendation of the the aviation sector? If not, do general state aid rules apply? minister for air transport. In cccordance with section 31 of the Central Bank of Nigeria Act 2007, the The Minister for Air Transport is empowered to make regulations pro- Central Bank of Nigeria in 2010 approved the investment of the sum of 500 viding for investigation into accidents or incidents arising out of or in the billion naira debenture stock to be issued by the Bank of Industry, out of course of air navigation and either occurring in or over Nigeria or occurring which 300 billion naira has been dedicated to power and airline projects. to Nigerian aircraft elsewhere and the Bureau is required to follow such Specifically called the Power and Aviation Intervention Fund, the amount regulations in the exercise of its functions. was set aside to sustain private sector investment in both the power and The Civil Aviation (Investigation of Accidents) Regulations made aviation sectors. A set of guidelines for the disbursement of the fund were pursuant to the repealed CAA 1964 are still the applicable regulation with also established by the Central Bank of Nigeria, in which it is stated that the regards to accident investigations in Nigeria in light of the fact that no new fund was to be directed towards refinancing of existing loans, refinancing regulations have been made pursuant to the CAA 2006. The validity of the of existing leases and provision of working capital for the aviation sector. erstwhile regulations is kept in force by section 77(2) of the CAA 2006 until By 2012, there seemed to be a change in direction concerning the use of the new regulations are made pursuant to the 2006 Act. fund as the minister of aviation proposed that the fund be geared towards

148 Getting the Deal Through – Air Transport 2015 Babalakin & Co NIGERIA

Update and trends Bearing in mind that the Nigerian Civil Aviation Regulations (NCARs) under which any person may operate flights in defined portions of 2009 was promulgated to correspond with the international civil airspace including MNPS, RVSM or any other routes where navigation aviation standards published by the International Civil Aviation for specification for performance-based navigation has been prescribed. Organisation (ICAO), the ICAO amended the Standards and The Order further makes provisions for Reduced Vertical Separation Recommended Practices (Annexes) to the Convention on International Minimum, continued serviceability and inspection of flight recorder Civil Aviation in 2009. As a result of these amendments, it became systems, aircraft search procedure checklist and the carriage of pertinent to bring the NCARs 2009 up to date with the amended weapons. Standards and Recommended Practices (Annexes) to the Convention Order 002 makes it mandatory for flight recorder systems to be on International Civil Aviation. constructed, located and installed in aeroplanes and helicopters in such Consequently, in 2014 Nigeria promulgated the Nigerian Civil a manner as to provide maximum practical protection for the recordings Aviation Order 001 and 002 of 2014. in order that the recorded information may be preserved, recovered Order 001 provides, in addition to the requirements in NCARs and transcribed. The Order also makes provisions amongst others, for Part 7.3.1.1(a) and (b), that for flights in defined portions of airspace the operation, types and parameters for the flight recorders in different or on routes where a Required Communications Performance (RCP) specifications of aircrafts as well as aircraft equipage for operation. The type has been prescribed, the aeroplane shall be provided with Order provides that operators shall provide the documentation of flight communication equipment which will enable it to operate in accordance recording systems parameters in electronic format and in accordance with the prescribed RCP type and also be authorised by the Authority with industry specification to accident investigation authorities. for operations in the airspace. The Order also provides for conditions

acquiring new aircraft for existing airlines. The proposed change in direc- 38 If no clearance is obtained, what procedures apply to recover tion also prescribed that funds should not be given directly to airline opera- unlawfully granted state aid? tors but to the airline manufacturers who would in turn transfer the aircraft Not applicable. to the airlines. Miscellaneous 34 What are the main principles of the state aid rules applicable to the aviation sector? 39 Is there any aviation-specific passenger protection legislation? The original eligibility criteria for the aviation sector to benefit from the fund were that an airline simply be duly registered under the Company and Part 19 of the NCAR provides some protection for passengers in relation to Allied Matters Act 2004 and that it be operating in Nigeria. The proposed denied boarding, cancellation and delays. These range from endorsement change in direction of the use of the fund, however, set higher criteria for of tickets to alternative airlines, immediate reimbursement of passengers, airlines to benefit from the fund, as opposed to the earlier requirement of provision of hotel accommodation and boarding (for international opera- simply being registered and operating in Nigeria. The new criteria focused tions) to fines payable by the carrier. more on issues such as ownership structure, good governance, efficiency In addition, the federal government of Nigeria’s Civil Aviation Policy and functionality. The government is strict on ensuring that the fund is 2001 requires all aviation authorities and service providers to establish geared towards the intended purpose. consumer service units to enlighten aviation consumers of their rights and In addition, airline projects must be insured in order to benefit from to address their grievances. Pursuant to this, the NCAA has a Consumer the fund. Protection Unit to deal with complaints of aggrieved passengers.

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? Not applicable. The NCAA is empowered to make regulations to ensure that the extent of insurance cover taken by any of the airlines is not less than that prescribed. 36 Must clearance from the competition authorities be obtained Every aircraft operator must maintain adequate insurance cover for hull, before state aid may be granted? passenger, cargo and third-party liabilities. By section 74 of the CAA 2006, the aircraft operator is also obliged to make quarterly returns to the NCAA Not applicable. evidencing that adequate insurance is maintained. Under section 7 of Part 18 of the NCAR regulation on offences, failure to maintain adequate insur- 37 If so, what are the main procedural steps to obtain clearance? ance cover will attract a fine of not less than 500,000 naira, imprisonment Not applicable. for a term not less than six months, or both.

Olawale Akoni [email protected] Kehinde Daodu [email protected] Olamide Aiyeola [email protected]

9th to 12th Floors, 43A Churchgate Street Tel: +234 1 270 2802 / 270 06831 / 271 8806 Victoria Island Fax: +234 1 270 2812 / 270 2806 Lagos www.babalakinandco.com Nigeria

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41 What legal requirements are there with regard to aviation Convention for the Suppression of Unlawful Seizure of Aircraft have security? been ratified in Nigeria and made applicable to domestic operations. The Part 17 of the NCAR 2006 makes extensive regulations regarding aviation offences include flying an aircraft in a manner such as to cause danger to safety and designates the NCAA as the appropriate authority for aviation any person or property in the aircraft, on land or water. In this regard, the security in Nigeria. The regulations empower the NCAA to direct every pilot and the owner of the aircraft or any other person responsible for its airport and aircraft operator to establish and implement an airline operator safe navigation is liable to imprisonment for a term not less than two years security programme appropriate to meet the requirements of the NCAA. or a fine of not less than 1 million naira, or both. The regulations cover all areas of aviation security ranging from aero- Serious offences such as hijacking, destruction or damage to aircraft or drome security, aircraft operator security, cargo and regulated agent secu- air navigational facilities, endangering the safety of an aircraft in flight have rity, flight catering operator security, tenant-restricted area security and been created in the CAA 2006. The penalties range from life imprisonment other miscellaneous security issues. and a fine of not less than 10 million naira for hijacking to imprisonment for a term of five years or a fine of not less than 2 million naira for offences 42 What serious crimes exist with regard to aviation? endangering safety. However, no serious criminal offence was created by The CAA 2006 creates serious offences with regard to aviation. the CAA 2006 applicable to companies engaged in general aviation. International conventions dealing with aviation crimes such as the

150 Getting the Deal Through – Air Transport 2015 Advokatfirmaet Simonsen Vogt Wiig AS NORWAY

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 8; KOFA (the Norwegian appeal board for public tenders in Norway). • regulation of aircraft, AA Chapter 4; • regulation of crew, AA Chapters 5 and 6; and 8 Is there a declared policy on airline access or competition and, • regulation of airports, AA Chapter 7. 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. 9) 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 3A. 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 NORWAY Advokatfirmaet Simonsen Vogt Wiig AS

For aircraft owned by other foreign entities, registration can neverthe- 23 Who provides air traffic control services? And how are they less be allowed with a licence from the CAA. Such licence will normally regulated? be conditional on the aircraft being operated by an approved Norwegian Air control services are provided by the CAA (see AA section 7-4). operator. The EEA-agreement addendum XIII No. 66n (Regulation (EF) No. 216/2008 as amended by regulation (EF) No. 690/2009, regulation (EF) 14 Is there a register of aircraft mortgages or charges and, if so, No. 1108/2009 and Regulation (EU) No. 6/2013) regarding common rules how does it function? for civil aviation and the establishment of an European aviation safety Yes. The Norwegian Aircraft Registry (AA section 3-5) is an ownership reg- body apply as Norwegian regulation with such adaptations as follow from istry, allowing (and compelling) registration of the aircraft (but not engines Amendment XIII, Protocol 1 to the agreement and the agreement itself.. separately), ownership and also encumbrances (aircraft mortgages and mortgagees, leases, etc) (see AA section 3-43). Liability and accidents Ownership and encumbrances that do not appear in the registry do not have any legal effect against a party performing a transaction relating to 24 Are there any special rules in respect of death of, or injury to, the aircraft who is relying on the information in the registry in good faith passengers or loss or damage to baggage or cargo in respect of (see AA section 3-33). domestic carriage? Norway has ratified the Cape Town Convention on Mobile Equipment The AA Chapter 10D contains detailed rules regarding liability, and has and the Protocol to the Convention on International Interests in Mobile adopted EU Regulation (EC) No. 2027/97 as amended by EU Regulation Equipment on Matters Specific to Aircraft Equipment, which takes prec- (EC) No. 889/2002. edence over the domestic registration in case of conflict (see AA section 3-53). 25 Are there any special rules about the liability of aircraft operators for surface damage? 15 What rights are there to detain aircraft, in respect of unpaid An aircraft used in traffic in Norway must have third-party damage insur- airport or air navigation charges, or other unpaid debts? ance in accordance with EU Regulation (EC) No. 785/2004 (see AA section According to AA section 7-26 the authorities can stipulate fees for the use 11-2). of airports and aviation services. According to the fee regulations issued The owner of the aircraft has a no-fault liability for any damage caused pursuant thereto (section 6-7), the authorities may detain an aircraft if the to third parties outside the aircraft (see AA section 11-1). fees for it are not paid. 26 What system and procedures are in place for the investigation 16 Do specific rules regulate the maintenance of aircraft? of air accidents? Yes, among others, Maintenance Regulation BSL B 2-1, issued pursuant to The AA Chapter 12E–F provides for an investigatory commission to inves- AA section 4-1, regulates the maintenance of aircraft. tigate all aviation accidents and serious aviation ‘occurrences’ (events that almost led to an aviation accident). Airports 17 Who owns the airports? 27 Is there a mandatory accident and incident reporting system Most (46) airports in Norway are owned by Avinor AS (formerly the and, if so, how does it operate? Norwegian Civil Aviation Authority) (www.avionor.no), a company wholly- The AA Chapter 12B provides rules obligating all witnesses to an aviation owned by the Norwegian Ministry of Transport and Communications. accident to report it to the police or main rescue centre. This obligation also A few airports are privately owned, notably Torp and Rygge Airports, applies to all crew and all personnel employed in aviation safety, who also which are located reasonably near Oslo (about 100 kilometres) and are have an obligation to report any serious aviation ‘occurrence’. used by some low-cost airlines, both Norwegian and foreign. Competition law 18 What system is there for the licensing of airports? 28 Do sector-specific competition rules apply to aviation? If not, Establishing, owning and operating an airport requires a licence (AA sec- do the general competition law rules apply? tion 7-5). A licence shall only be granted if it is compatible with the public interest. The technical and operational conditions must be approved by the The general competition rules apply to aviation in Norway. CAA. 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? There is no sector-specific regulator of competition rules for aviation. Per se there is no such system. However, Avinor does cross-subsidise its Norway observes EU Council Regulation (EC) No. 487/2009 regardless profitable airports by the revenue from the more profitable airports, as ing interlining (without itself having made any regulation in accordance part of a policy of keeping airports in remote regions to facilitate air traffic therewith). and consequently fulfil the public purpose of maintaining population centres in such regions. 30 How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition 20 Are there laws or rules restricting or qualifying access to authorities? airports? The relevant market has been defined route by route, and not depend- No, AA section 7-28 specifically states that foreign aircraft shall also have ent on intermodal competition (ie, competition from other means of access to airports that otherwise are open to general traffic on the same transportation). terms as apply to Norwegian aircraft in corresponding international aviation, when provided for by applicable treaties. 31 What are the main standards for assessing the competitive effect of a transaction? 21 How are slots allocated at congested airports? The standard will be whether there is a significant impediment to Slots at major airports are allocated by Airport Coordination Norway AS competition. (ACN) (www.airportcoordination.no), a company owned 50 per cent by The Norwegian Competition Act closely follows EU competition rules, Avinor and 50 per cent by the airlines. and in practice there is no difference in application.

22 Are there any laws or rules specifically relating to ground 32 What types of remedies have been imposed to remedy handling? concerns identified by the competition authorities? No particular rules apply. However, since Avinor is a government-owned In principle all remedies are possible, which are prohibition or consent with entity, access to ground handling must be provided on a non-discrimina- conditions (eg, demand for divestiture of certain business, etc). tory basis.

152 Getting the Deal Through – Air Transport 2015 Advokatfirmaet Simonsen Vogt Wiig AS NORWAY

Financial support and state aid 33 Are there sector-specific rules regulating direct or indirect Update and trends financial support to companies by the government or Norway generally follows the liberalisation of the aviation sector in government-controlled agencies or companies (state aid) in the EU and internationally, and is expected to continue to do so. the aviation sector? If not, do general state aid rules apply? The issue mentioned in the 2014 edition regarding Norway’s state subsidy of airports (and of remote routes) as an issue of Norway has three areas where state financial support is an issue: discussion with the European Commission (due to the Commission’s • the Norwegian government owns 16 per cent of SAS (Scandinavian proposal that airports with more than 200,000 passengers annually Airlines) (and together with the Swedish and Danish governments shall not be entitled to subsidy) has not been resolved. owns a total of 51 per cent) where a recent state loan as part of a refi- A state loan as part of a necessary refinancing of SAS was nancing was made. See ‘Update and trends’ for more details regarding challenged as unlawful state aid by low-cost competitors that are this; part of the European Low Fares Airlines Association (ELFAA) • the Norwegian government subsidises certain air routes to remote through a complaint with the European Commission. However, the regions as part of a public service; and EU Commission did not find it to be on other than commercial terms • the state-owned airport authority Avinor cross-subsidises small and therefore not unlawful state aid. unprofitable airports with income from major airports. See ‘Update The two private airports around Oslo (see question 17) have and trends’ for more details. a dispute with Avinor regarding control tower services fees and particularly regarding a recently-introduced fee increase for general air control of airspace from 26,200 feet down to visual contact Apart from the subsidies for remote routes, no rules or regulations govern with tower, which was claimed by these airports to jeopardise their these activities. continued viability.

34 What are the main principles of the state aid rules applicable to the aviation sector? Miscellaneous Norway has as a stated policy to facilitate communications to remote regions to encourage a widespread population pattern over many regions 39 Is there any aviation-specific passenger protection in Norway, and believes state aid to airlines (and indirectly by its cross- legislation? subsidy of airports owned by Avinor) to keep routes to such regions is not Yes, AA section 10-42 has authorised the enactment of the EEA/EU rules incompatible with ESA (EFTA Surveillance Authority – the EEA watchdog) regarding passenger rights. guidelines for state aid (corresponding to the EU rules). See also question 11 regarding the Package Tour Act.

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? No, see also question 34. 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) 36 Must clearance from the competition authorities be obtained No. 785/2004 applies. before state aid may be granted? No. 41 What legal requirements are there with regard to aviation security? 37 If so, what are the main procedural steps to obtain clearance? The observance of air security is provided for in AA section 7-4, which Not applicable. authorises the CAA to give regulations for that purpose.

38 If no clearance is obtained, what procedures apply to recover 42 What serious crimes exist with regard to aviation? unlawfully granted state aid? The Aviation Act Chapter 14 contains a number of offences that carry If ESA should find state aid has been unlawful, the recipient will have to potential punishment for up to several years in prison. In actual fact, most repay the aid to the state. such offences are for breach of various regulatory regulations unlikely to entail more than a fine, but some could mean a prison sentence, such as acting as crew or in certain ground operation positions under the influence of alcohol or drugs, failing to observe safety regulations or acting reck- lessly. In addition, AA section 13 contains rules regarding fines for breaches of a number of rules and regulations. Furthermore, the Norwegian Criminal Act 1902 applies to all activity, including aviation.

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 PHILIPPINES SyCip Salazar Hernandez & Gatmaitan

Philippines

Mia G Gentugaya, Emmar Benjoe B Panahon and Ma Luisa D Manalaysay SyCip Salazar Hernandez & Gatmaitan

General citizen is defined as: an individual who is a citizen of the Philippines; a partnership of which each member is such an individual; or a corporation 1 Which bodies regulate aviation in your country, under what or association created or organised under the laws of the Philippines, of basic laws? which the directing head and two-thirds or more of the board of directors Two government bodies regulate aviation in the Philippines: the Civil and other managing officers are citizens of the Philippines, and in which Aviation Authority of the Philippines (CAAP) by virtue of Republic Act No. 60 per cent of the voting interest is owned or controlled by persons who are 9497 or the CAAP Law and the Civil Aeronautics Board (CAB) by virtue of citizens of the Philippines (section 3(r), RA 776). Note, however, that for- Republic Act No. 776, as amended by Presidential Decree 1462. eigners residing in the Philippines who are members of aero clubs organ- The CAAP acts as the public registry for aircraft and generally regu- ised purely for recreation, sport, or the development of flying skills, may lates the technical, operational, safety and security aspects of aviation be issued permits as a prerequisite to any aeronautical activities within while the CAB regulates the economic aspect of air transport, and has the Filipino airspace. general supervision, control and jurisdiction over air carriers, general sales Air carriers must seek specific approval from the CAB to operate as agents, cargo sales agents and air-freight forwarders. such. The CAB requires air carriers to have a minimum paid-up capital ranging from 10 million pesos for carriers with domestic non-scheduled Regulation of aviation operations flights to 50 million pesos for carriers with domestic and international scheduled flights. 2 How is air transport regulated in terms of safety? The CAAP, through its director general, prescribes rules, regulations, or 6 What procedures are there to obtain licences or other rights to minimum standards governing practices, methods and procedures that are operate particular routes? necessary to provide adequately safe civil aviation. The director general A person or entity wishing to engage in air transport in the Philippines – and has the power, among others: specific routes – must submit an application to the CAB, together with the • to issue airmen certificates to individuals who possesses the proper required documentary requirements. The application will be published in qualifications for, and are physically able to, perform the duties per- newspapers of general circulation in the Philippines and all affected air- taining to the position for which the airman certificate is sought; lines will be notified. A hearing on the application will be conducted by the • to issue airworthiness certificates for Filipino-registered aircraft, CAB to determine whether to grant the application to engage in air trans- after it is found that the aircraft conforms with the appropriate type of port (or specific routes) in the Philippines. design and construction and is in a condition allowing for safe operation; and 7 What procedures are there for hearing or deciding contested • to issue air operator certificates to air carriers that are properly and applications for licences or other rights to operate particular adequately equipped and have demonstrated the ability to conduct routes? safe operations. All affected air operators are notified of the application for an air carrier’s 3 What safety regulation is provided for air operations that do permit and may enter its objection to the application by appearing in the not constitute public or commercial transport and how is the hearing of such application before the CAB. distinction made? 8 Is there a declared policy on airline access or competition and, The safety regulations for both commercial and non-commercial air trans- if so, what is it? port are contained in the Philippines Civil Aviation Rules (PCAR) promulgated by the CAAP. Yes, it is a declared policy that in the exercise and performance of the powers and duties of the CAB and the CAAP that they shall consider, as 4 Is access to the market for the provision of air transport being in the public interest, and in accordance with the public convenience services regulated and, if so, how? and necessity, competition between air carriers to the extent necessary to assure the sound development of an air transport system properly adapted Yes. Filipino rules and regulations require that any person or entity wishing to the need of the foreign and domestic commerce of the Philippines, of the to engage in air commerce or transport, whether foreign or domestic, must postal service, and of the national defence. secure a certificate of public convenience and necessity (CPCN) from the CAB. 9 What requirements must a foreign air carrier satisfy in order Foreign carriers who wish to operate to and from the Philippines to operate to or from your country? must also secure a permit from the CAB before they can operate in the Philippines. These permits ensure that the person or entity wishing to Only foreign air carriers duly designated by their respective governments engage in air transport has the financial and technical capability to perform with which the Philippines has an air service agreement (ASA) can oper- such services. (Please see question 9.) ate in the Philippines by applying for a foreign air carrier’s permit (FACP) with the CAB. The foreign air carrier must submit an FACP application 5 What requirements apply in the areas of financial fitness and form, together with the required attachments (including articles of incor- nationality of ownership regarding control of air carriers? poration and by-laws of the foreign air carrier, Securities and Exchange licence to conduct business in the Philippines, and a note verbale designat- Generally, a permit authorising a person to engage in domestic air coming the applicant as an official carrier to the Philippines), to the CAB. Upon merce or air transport can only be granted to a Filipino citizen. A Filipino

154 Getting the Deal Through – Air Transport 2015 SyCip Salazar Hernandez & Gatmaitan PHILIPPINES publication of the application and notice to affected airlines, the CAB will Filipino tax authorities may also distrain or sell an aircraft for failure to conduct a hearing to determine whether it will issue a FACP in favour of the pay Filipino taxes (section 207, Tax Code). Customs authorities may like- foreign carrier applicant. wise sell an aircraft for failure to pay customs duties, fees, charges or fines, or for carriage of smuggled or contraband goods unless, in the latter case, 10 Are there specific rules in place to ensure aviation services such aircraft is used as a duly authorised common carrier (section 2530, are offered to remote destinations when vital for the local Tariff and Customs Code). economy? The director general may also detain an aircraft if it may not be airwor- We are not aware of any such specific rules. However, air transport serving thy or the operation would cause imminent danger to persons or property missionary or developmental routes, as indicated in the CPCN may qualify on the ground, (section 39, CAAP Law) and impose a lien on an aircraft if for pioneer status under the Philippines Investment Priorities Plan, which the charges and other fees are not paid in full on the due date or any part entitles them to avail of incentives such as tax allowances for investments, of the charges or the late payment penalty remains unpaid or for failure to post-operative tariff protection, tax exemptions and income tax holidays pay administrative fines arising from violation of any rules and regulations under the Investment Incentives Act. promulgated by the CAAP (section 73, CAAP Law).

11 Are charter services specially regulated? 16 Do specific rules regulate the maintenance of aircraft? Yes. Economic Regulations No. 2 issued by the CAB specifically regulates Yes. PCAR provides for the regulatory requirements for, among oth- charter services, both domestic and international. It provides, among others, the maintenance requirements of aircraft expected to operate in the ers, rules and regulations as to authorisation for charter trips, limitation on Philippines. amount of charter trips that may be performed, charter agreements and applicable tariffs. Airports

12 Are airfares regulated and, if so, how? 17 Who owns the airports? Yes. The CAB has the power to fix and determine reasonable individual, The majority of airports in the Philippines are owned by the national joint or special rates, charges or fares which an air carrier may demand, government. collect or receive for any service in connection with air commerce. The board may, however, adopt any original, amended or new individual, joint 18 What system is there for the licensing of airports? or special rates, charges or fares proposed by an air carrier if the proposed Aerodrome or airport operations are regulated by the CAAP through the individual, joint or special rates, charges or fares are not unduly preferen- Manual of Standards for Aerodromes and the Civil Aviation Regulations tial or unduly discriminatory or unreasonable (section 5.01, IRR of EOs 219 governing Aerodromes. Aerodrome operators are required to comply with and 32). the standards, practices and procedures that are required under the manual, as appropriate to the operations conducted at the aerodrome and the Aircraft requirements for aircraft using the aerodrome. The CAAP, however, may 13 Who is entitled to be mentioned in the aircraft register? Do exempt an aerodrome operator from compliance with specified provisions requirements or limitations apply to the ownership of an of the Civil Aviation Regulations or the manual, taking into account any aircraft listed on your country’s register? relevant considerations relating to the safety of air navigation. The owner or operator of the aircraft (as the case may be) is entitled to be mentioned in the aircraft register. 19 Is there a system of economic regulation of airports and, if so, The CAAP Law provides that, except as otherwise provided in the how does it function? Constitution and existing treaty or treaties, no aircraft shall be eligible for Yes, the CAAP imposes and fixes reasonable charges and fees for the use registration in the Philippines unless it is owned by or leased to a citizen of of government aerodromes or air navigation facilities, and fixes the rea- the Philippines or corporations or associations organised under the laws of sonable charges to be imposed in the use of privately owned air navigation the Philippines at least 60 per cent of whose capital is owned by Filipino facilities and aerodromes (section 24(k) and (l), CAAP Law). citizens (section 44, CAAP Law). Thus, the nationality of the owner or the operator is the principal factor in determining qualification for a Filipino 20 Are there laws or rules restricting or qualifying access to certificate of registry. The owner of the aircraft (if not qualified to be the airports? entity named in the aircraft registry) may still record its interest in the air- We are unaware of any laws specifically restricting or qualifying access to craft register and cause the annotation of the Filipino certificate of registry airports. Airport security regulations and procedures, which may restrict to reflect such interest. or qualify access to airports to a certain extent, are determined and implemented by each airport authority such as the Manila International Airport 14 Is there a register of aircraft mortgages or charges and, if so, Authority and the Mactan-Cebu International Airport Authority. In addi- how does it function? tion, the CAAP, in coordination with the appropriate government agency Yes. The CAAP maintains the aircraft registry, in which conveyances affect- tasked to provide airport security, is empowered to prescribe reasonable ing title to or interest (including mortgages and charges) over Filipino- regulations, methods and procedures to ensure the safety of passengers registered aircraft may also be recorded. and property (section 24(s), CAAP Law). Any conveyance affecting title to or interest in any Filipino-registered aircraft (including a mortgage) or any portion thereof must be recorded 21 How are slots allocated at congested airports? with the CAAP in order to be valid and effective against third persons. Otherwise, it will bind only the parties and their successors-in-interest and Slots are allocated at congested airports using the Communication any person who has actual notice of such conveyance (section 49, CAAP Navigation Surveillance/Air Traffic Management (CNS/ATM) system. Law). CNS/ATM systems are communications, navigation, and surveillance systems, employing digital technologies, including satellite systems together 15 What rights are there to detain aircraft, in respect of unpaid with various levels of automation, applied in support of a seamless global airport or air navigation charges, or other unpaid debts? air traffic management system. Under Executive Order No. 903, the Manila International Airport Authority 22 Are there any laws or rules specifically relating to ground (MIAA), which is empowered to levy and collect dues, charges and fees or handling? concessions, or for any service provided by the MIAA, may detain, on its own authority, any aircraft, equipment or furniture belonging to the owner Ground handling services are also subject to regulation by the CAAP. or agent of said aircraft, until the amounts have been paid. Ground handling personnel are required to obtain licences from the The Civil Code also recognises possessory liens in respect of credits Licensing Division of the CAAP by undergoing knowledge and skills for the making, repair, safekeeping or preservation of personal property on examinations. an aircraft thus made, repaired, kept or possessed (article 2241, Civil Code). www.gettingthedealthrough.com 155 PHILIPPINES SyCip Salazar Hernandez & Gatmaitan

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 by the Air Traffic Service (ATS) of authorities? the CAAP. The ATS adopts international standards in providing air traffic Not applicable. control services. One such international standard is the ICAO Annex 2 on the Rules of the Air. 31 What are the main standards for assessing the competitive effect of a transaction? Liability and accidents Not applicable. 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 32 What types of remedies have been imposed to remedy domestic carriage? concerns identified by the competition authorities? Yes. Under the Civil Code, common carriers, including aircraft, are bound Not applicable. to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them (article 1733, Civil Code). Financial support and state aid In the event of loss, destruction or deterioration of the goods, common 33 Are there sector-specific rules regulating direct or indirect carriers are responsible, unless they can prove that the loss, destruction or financial support to companies by the government or deterioration was brought about by the causes specified in article 1734 of government-controlled agencies or companies (state aid) in the Civil Code (article 1734, Civil Code). In all other cases, common carri- the aviation sector? If not, do general state aid rules apply? ers are presumed to have been at fault or to have acted negligently, unless We are not aware of any sector-specific rules regulating direct or indirect they prove that they observed extraordinary diligence (article 1735, Civil financial support to companies in the aviation sector. There are, however, Code). tax benefits granted to certain importation of aircraft, equipment and In case of death of or injuries to passengers, common carriers are pre- machinery, spare part commissary and catering supplies, aviation fuel and sumed to have been at fault or to have acted negligently, unless they prove oil and such other articles imported by and for use by airlines operating that they observed utmost diligence of a very cautious person, with due under a congressional franchise. regard for all the circumstances (articles 1755 and 1756, Civil Code). 34 What are the main principles of the state aid rules applicable 25 Are there any special rules about the liability of aircraft to the aviation sector? operators for surface damage? Not applicable. We are unaware of any special rules about the liability of aircraft operators for surface damage. Generally, our Civil Code prescribes that whoever 35 Are there exemptions from the state aid rules or situations in by act or omission causes damage to another, there being fault or negli- which they do not apply? gence, is obliged to pay for the damage done (article 2176, Civil Code). Not applicable. The Philippines is also a signatory to the Convention on Damage Cause by Foreign Aircraft to Third Parties on the Surface otherwise known as the 36 Must clearance from the competition authorities be obtained 1952 Rome Convention. before state aid may be granted? 26 What system and procedures are in place for the investigation Not applicable. of air accidents? 37 If so, what are the main procedural steps to obtain clearance? Investigation of air accidents is within the jurisdiction of the director gen- Not applicable. eral of the CAAP and the Aircraft Accident Investigation and Inquiry Board (AAIIB), which is also under the CAAP (section 49, CAAP Law). As its sys- 38 If no clearance is obtained, what procedures apply to recover tem, the AAIIB follows ICAO Annex 13 on Aircraft Accident and Incident unlawfully granted state aid? Investigation. Not applicable. 27 Is there a mandatory accident and incident reporting system and, if so, how does it operate? Miscellaneous The owner, operator or pilot-in-command of the aircraft must report to 39 Is there any aviation-specific passenger protection the AAIIB when an aircraft accident or incident occurs in the Philippines legislation? or involves a Filipino aircraft or an aircraft operated by a Filipino opera- We are not aware of any aviation-specific passenger protection legisla- tor. The owner, operator or pilot-in-command shall provide all the infor- tion in the Philippines. However, the CAB has issued an economic regula- mation listed in PCAR Part 13 when notifying the AAIIB, which has the tion providing for a bill of rights for air passengers and carrier obligation power to promulgate rules and regulations governing the notification and (Economic Regulation No. 9). the reporting of accidents and incidents involving aircraft (section 42(a), CAAP Law). As previously stated, the AAIIB follows ICAO Annex 13 on 40 Are there mandatory insurance requirements for the Aircraft Accident and Incident Investigation. operators of aircraft? The PCAR provides that there must be a valid insurance policy covering Competition law the aircraft hull, each person, freight and mail on-board the aircraft, and liability in favour of third parties. In the absence of these requirements, the 28 Do sector-specific competition rules apply to aviation? If not, aircraft cannot be operated. do the general competition law rules apply? The Philippines Constitution prohibits and protects Filipino enterprises 41 What legal requirements are there with regard to aviation against unfair competition. However, there are no sector-specific competi- security? tion rules that apply to aviation. We note, however, that there are general penal provisions in the Revised Penal Code, which punishes any act that When the airline or air carrier issues a ticket to a passenger, a condition restrains free competition in the market. stating that the ‘holder hereof and his hand-carried luggage are subject to search for, and seizure of, prohibited materials or substances. Holder 29 Is there a sector-specific regulator or are competition rules refusing to be searched shall not be allowed to board the aircraft’, must applied by the general competition authority? be printed in the ticket. Airline companies that operate as public utilities There is no specific regulator that regulates the aviation sector nor are or operators of aircraft are authorised to open and investigate suspicious there specific competition rules that apply to the aviation sector. packages and cargoes in the presence of the owner or shipper or authorised

156 Getting the Deal Through – Air Transport 2015 SyCip Salazar Hernandez & Gatmaitan PHILIPPINES representatives. It can refuse the loading of the same if any of the persons who shall compel an aircraft of foreign registry to land in Filipino terri- mentioned above refuses to have such packages and cargoes opened and tory or shall seize or usurp the control thereof while it is within the Filipino inspected. territory. It is also unlawful to ship, load or carry in any passenger aircraft oper- 42 What serious crimes exist with regard to aviation? ating as a public utility within the Philippines, any explosive, flammable, Republic Act No. 6235 punishes any person who shall compel a change in corrosive or poisonous substance or material. The shipping, loading or the course or destination of an aircraft of Filipino registry, or to seize or carrying of any explosive in any cargo aircraft operating as a public utility usurp the control thereof, while it is in flight. It also punishes any person within the Philippines should be in accordance with regulations issued by the CAB.

Mia G Gentugaya [email protected] Emmar Benjoe B Panahon [email protected] Ma Luisa D Manalaysay [email protected]

SyCipLaw Center, 105 Paseo de Roxas Tel: +63 2 982 3500/3600/3700 Makati City 1226 Fax: +63 2 817 3896/818 7562 Metro Manila www.syciplaw.com Philippines

www.gettingthedealthrough.com 157 POLAND MMMLegal Legal Counsels

Poland

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

General certification. For such airports the CAA determines the type of flights operated to and from the airport, the time when such flights can be operated as 1 Which bodies regulate aviation in your country, under what well as characteristics of aircraft that can be operated. basic laws? The certification process is conducted according to the Aviation Act Civil aviation in Poland is subject to international, EU and national legis- and its implementing Regulation on certification. lation. Poland applies the Chicago Convention and its Annexes. Both the Treaty and secondary EU legislation are applied. All EU regulations are 4 Is access to the market for the provision of air transport applied directly in Polish law. Other pieces of secondary law are imple- services regulated and, if so, how? mented into national law. Further to EU Regulation 216/2008 and its EU rules apply, particularly EU Regulation 1008/2008. The Aviation Act implementing rules, the operation of civil aviation entities is also subject to defines a system of licences and certificates enabling access to the mar- European Aviation Safety Agency (EASA)’s legislation. ket. Besides a certificate, an air carrier has to obtain the CAA’s licence The main national rules of civil aviation are defined in the Aviation Act (koncesja). Operating on particular routes may require the CAA’s consent, (consolidated text Journal of Laws 2013.1393, as amended) and implement- authorisation or appointment. Third-country carriers require the CAA’s ing Regulations issued by relevant ministers. Most Regulations are issued consent for air carriage sales. by the minister competent for transport. Significant regulatory powers are vested also in the President of the Civil Aviation Office (CAA) regarding 5 What requirements apply in the areas of financial fitness and guidelines and instructions. The CAA is the authority competent for most nationality of ownership regarding control of air carriers? practical decisions in the field of civil aviation. Poland applies EU Regulation 1008/2008. Under the Regulation an under- Regulation of aviation operations taking may be granted with an operating licence by the Polish CAA if, inter alia, nationals of EU member states own more than 50 per cent of 2 How is air transport regulated in terms of safety? the undertaking and effectively control it, whether directly or indirectly, In Poland the Chicago Convention with its Annexes as well as EU legisla- except as provided for in an agreement with a third country to which the tion regarding air safety apply. The main national act regulating all safety Community is a party. issues is the Aviation Act with numerous implementing Regulations. Most An undertaking applying to the Polish CAA for a licence shall submit important are those related to safety of aircraft and airport exploitation, a business plan for, at least, the first three years of operation. The business construction requirements, certification, airworthiness, air accidents and plan shall also detail the applicant’s financial links with any other commer- search and rescue (SAR). The CAA issues guidelines and instructions as cial activities in which the applicant is engaged either directly or through well as airworthiness directives. related undertakings. Requirements are to a certain extent modified in the EASA plays an important role in the scope of safety. Commercial air case of carriers operating aircraft of less than ten tonnes maximum take- transport operators, aerodromes, personnel, aeronautical products, parts off mass (MTOM) or less than 20 seats. and appliances and ATM/ANS services and products are subject to the Holders of an existing licence are obliged to notify the Polish CAA of rules determined under EU Regulation 216/2008 and its implementing any planned changes in their activities as well as any mergers or acquisi- rules and EASA decisions. tions that could influence their financial standing, attaching relevant The European Aviation Safety Programme and Plan have not been documentation. implemented yet. The relevant legislative works on the State Safety Programme have been commenced. 6 What procedures are there to obtain licences or other rights to Air safety is primarily administered and supervised by the CAA and operate particular routes? the minister competent for transport. Polish and EU carriers are not required to obtain licences for operating All air carriers will have to be certified according to EU Regulation intra-Community connections, both for scheduled and non-scheduled 965/2012 by 28 October 2014. By the end of 2017, all public usage air- flights. ports will have to be certified according to the rules determined under EU For outside-EU connections, Polish and community air carriers shall Regulation 139/2014. apply to the CAA for a licence to operate on a particular route. Where required in international treaties or third country law, the CAA shall also 3 What safety regulation is provided for air operations that do appoint a carrier authorised to perform flights to a particular third country. not constitute public or commercial transport and how is the As regards third-country carriers, see question 9. distinction made? In general, the Aviation Act provides the same safety rules for all air opera- 7 What procedures are there for hearing or deciding contested tions. In the case of aircraft falling outside the scope of EASA supervision, applications for licences or other rights to operate particular the airworthiness falls under the supervision of the CAA. routes? In the case of aerodromes, public usage airports have to be fully In practice, this problem concerns outside-EU routes, as intra-Com- certified in compliance with International Civil Aviation Organization munity connections are not subject to licensing. Where there are two or (ICAO) Annex 14 whereas exclusive usage airports have to comply with more applicants for operating a particular route, the CAA shall organise a national Regulations. Some airports may apply to the CAA for a limited

158 Getting the Deal Through – Air Transport 2015 MMMLegal Legal Counsels POLAND selection procedure, and the result shall be determined by the following PSO, specifying its requirements concerning regularity and continuity of criteria in particular: the air traffic at this airport. • air carriers’ capacity to offer an adequate level of services and charges as well as competing effectively with third country carriers; and 11 Are charter services specially regulated? • previous expenditures for development of the connection in question General Regulations on aviation apply to air charter services, with minor and economic results achieved hitherto. changes, including the following. When operating to or from Poland, an air carrier with its operat- 8 Is there a declared policy on airline access or competition and, ing licence granted by the EU, Swiss Confederation, Iceland, Norway or if so, what is it? Lichtenstein is obliged to communicate its flight programme to the CAA 14 Again, the problem concerns outside-EU connections. The Aviation Act days before the start of each traffic season. determines a list of circumstances when an application for a licence to A foreign air carrier aiming to perform charter services to or from operate routes outside the EU can be rejected. These are when: Poland is obliged to file a motion to the CAA in order to obtain authori- • it is essential under the limitations provided by international treaties sation to operate. Such motion should be submitted, at the latest, 14 days or Regulations; before the series of non-scheduled commercial flights starts, where ‘series’ • it is justified in order to avoid serious limitation of effective competi- of flights means at least 10 flights (one flight includes an outbound and tion among Polish, EU and third country carriers; inbound operation). • it is justified by a need to ensure profitability of regular flights on a The Aviation Act and the Regulation of the Polish minister responsible given route that is already being serviced, and where there is no need for transport on the principal rules of organisation of air transportation in to increase carriage capacity; terms of package tours and charter flights impose requirements regarding • operating regular flights has already been entrusted to another carrier the documentation that should be submitted to the CAA together with the under public service obligation. motion. Additionally, the CAA is entitled to ask the air carrier to submit the charter agreement between the carrier and the tour operator. As regards third country carrier access to connections to and from Poland, please refer to question 9. 12 Are airfares regulated and, if so, how? Airfares for air services provided within the EU are fixed on the general 9 What requirements must a foreign air carrier satisfy in order basis of EU Regulation 1008/2008. This means that the rules of pricing to operate to or from your country? freedom together with the informative obligations and non-discrimination A foreign air carrier may operate to or from Poland provided that it obtains rule apply. a permit issued by the CAA. The permit is granted upon the air carrier’s However, as regards airfares applying to air services between Poland request, taking into account the provisions of existing agreements and and a ‘third country’, when a bilateral agreement on airfares exists, there international law. A foreign air carrier may be granted the permit, provided is an obligation to submit the airfares to the CAA. Procedures, as well as that: the detailed scope of information required from the carrier when assess- • it is in the public interest; ing correctness of airfares, are described in the Regulation of the minister • Polish air carriers benefit from the similar rights in the foreign air car- competent for transport. rier’s country or obtain other mutual benefits; • flight service at Polish airports can be assured; and Aircraft • the rules of organisation of air transportation in terms of package tours 13 Who is entitled to be mentioned in the aircraft register? Do and charter flights set by Polish law are fulfilled by the foreign air car- requirements or limitations apply to the ownership of an rier operating from Poland. aircraft listed on your country’s register? The Aviation Act also lists circumstances when the CAA may decline a An aircraft owner or another aircraft user (eg, operator) as well as their motion for a permit, inter alia: attorneys are entitled to be mentioned in the Aircraft Register. • when required by international treaties or Regulations; An aircraft may be entered into the Polish Aircraft Register if it is • when a carrier infringes aircraft safety or security Regulations; and owned or operated by: • when a carrier has overdue liabilities towards Polish entities, in par- • a Polish citizen; ticular towards the state ATM body and ground handlers. • a Polish legal person; • another Polish entity not possessing status of a legal person; or 10 Are there specific rules in place to ensure aviation services • a citizen of another county permanently domiciled in Poland. are offered to remote destinations when vital for the local economy? The CAA also exercises a discretionary right to enter an aircraft operated by other persons than listed above into the Polish Aircraft Register. There are two situations when public service obligation (PSO) can be imposed: 14 Is there a register of aircraft mortgages or charges and, if so, how does it function? PSO imposed on a specific route The minister competent for transport, in cooperation with the minis- Aircraft mortgages are registered in a general mortgages register, kept by ter competent for regional policy, may impose PSO on a specific route in 11 courts in Poland (depending on the seat of mortgager). The mortgage respect of scheduled air services, determining its period as well as terms registers are open, which means that the documents lodged in the register and conditions of service performance. PSO can be imposed between two can be viewed by anyone. Electronic access to such registers is unavailable. airports located in Poland, or between an airport located in Poland and an Once registered in the general mortgages register, aircraft mortgages are airport located in any other country within the EU. The decision must be reflected in in the Polish Aircraft Register ex officio. made taking into account state policy in respect of regional development and non-discriminatory rules among EU carriers. The procedures and the 15 What rights are there to detain aircraft, in respect of unpaid criteria in this matter are laid down in EU Regulation No. 1008/2008. airport or air navigation charges, or other unpaid debts? The Aviation Act allows for temporary detention, retention or seizure of an PSO imposed on an airport authority aircraft, inter alia: In a situation where an airport has relatively low air traffic, though is still • by the CAA for breach of safety Regulations; important for a city or for a certain region, a local government unit can file • by the airport operator for securing claims for airport charges or a motion to the CAA to compensate the airport’s loss or to grant other ben- damages caused at the airport, subject to limitations imposed by efits. The CAA can conclude an agreement with the airport authority on the Convention for the Unification of Certain Rules relating to the Precautionary Arrest of Aircraft made in Rome on 29 May 1933;

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

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Liability and accidents 30 How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition 24 Are there any special rules in respect of death of, or injury to, authorities? passengers or loss or damage to baggage or cargo in respect of domestic carriage? There is no definition of the relevant market in the aviation sector. The definition of the Act on Protection of Competition and Consumers is appli- Under the Aviation Act there are no specific rules in respect of death of, cable. Further to the definition it is the market of goods, which, with regard or injury to, a passenger or loss or damage to baggage or cargo in respect to their destination, price and features, including quality, are considered of domestic carriage. Such damages are subject to the rules envisaged by by the purchasers as substitutes which are offered in an area, where, due to the Montreal Convention. In matters not regulated by the Convention, the their type and features, barriers in accessing the market, consumers’ pref- rules of the Aviation Act and of the Polish Civil code may be applicable. erences, significant price differences and transport costs, a similar competition environment exists. 25 Are there any special rules about the liability of aircraft Each case is examined individually by the CCPO on the basis of gath- operators for surface damage? ered evidence. The ‘relevant markets have a dynamic character. The deci- The liability of the aircraft operators for surface damage is regulated by sion of the CCPO defining the ‘relevant market’ in one case cannot be the Aviation Act and the Polish Civil Code. Generally the rules provide treated as a precedent for future proceedings; it may merely be treated as for strict liability, with very limited exoneration possibilities. Poland has a guideline. not ratified the 1952 Rome Convention. Two new international conven- There is not much Polish case law regarding mergers and acquisitions tions on surface damage made in Montreal in 2009 – the Convention on within the aviation industry. Compensation for Damage Caused by Aircraft to Third Parties and the Convention on Compensation for Damage to Third Parties resulting from 31 What are the main standards for assessing the competitive Acts of Unlawful Interference Involving Aircraft – have not entered into effect of a transaction? force due to the lack of sufficient number of ratifications. Poland has not The CCPO examines whether a transaction could limit the competition signed either of them. on a relevant market, in particular through creation or strengthening of a dominant position. 26 What system and procedures are in place for the investigation of air accidents? 32 What types of remedies have been imposed to remedy The primary pieces of legislation governing the investigation of air acci- concerns identified by the competition authorities? dents are EU Regulation 996/2010, the Aviation Act and the Regulation of There is no relevant case law in the aviation industry in Poland. In general, the Minister of Transport on Aviation Accidents and Incidents. Generally, the CCPO can for example: under the Aviation Act, an investigation into aviation accidents or serious • order sale of the whole, or part of, the enterprise of one or more incidents may be carried out by the Polish State Commission for Aircraft undertakings; Accident Investigation (SCAAI) if an accident or serious incident took • order disposal of a controlling stake in an enterprise, and place on Polish territory or in Polish airspace. The purpose of the inves- • order the granting of a licence to a competitor. tigation carried out by SCAAI is the prevention of air accidents; SCAAI does not decide on fault nor liability issues. Any access to the SCAAI files Financial support and state aid concerning aviation accident is limited and requires consent from the 33 Are there sector-specific rules regulating direct or indirect Regional Court in Warsaw. financial support to companies by the government or government-controlled agencies or companies (state aid) in 27 Is there a mandatory accident and incident reporting system the aviation sector? If not, do general state aid rules apply? and, if so, how does it operate? There are no sector-specific rules on state aid in the aviation sector beside Any events of malfunction, damage to aircraft or other circumstances the Aviation Act which allows support to airlines and airports or other avia- which had or could have had influence on flight safety must be reported to tion undertakings in the purchase of equipment necessary to ensure safety SCAAI by inter alia: an operator or pilot in command, an aircraft construc- and fairport development. Public service obligation, subject to remunera- tor/designer/manufacturer, an ATM authority, an airport operator and a tion, can be imposed on airports and airlines. ground handler. Reporting of air events shall be made immediately, not later than 72 hours from the occurrence. The computer database for man- 34 What are the main principles of the state aid rules applicable datory occurrence reporting in civil aviation is maintained in accordance to the aviation sector? with the European system of central coordination of events notification in The rules applicable under EU law apply. This is mainly governed by the aviation, ie, that of the European Coordination Centre for Accident and Treaty and EU guidelines on state aid to airports and airlines. In the case Incident Reporting Systems (ECCAIRS). of state aid granted under national or regional aid schemes, the rules governing the given scheme apply. The Aviation Act and its implementing Competition law Regulations govern the rules on state aid granted for performing safety 28 Do sector-specific competition rules apply to aviation? If not, tasks, public service obligation or investments in airport infrastructure do the general competition law rules apply? used for services of general economic interest. General competition law rules apply. However, under the Aviation Act, cer- 35 Are there exemptions from the state aid rules or situations in tain agreements, decisions and other practices of air carriers concerning which they do not apply? the use of traffic rights granted in international treaties or granted to Polish air carriers by third countries are permitted. In general, EU rules apply, particularly EU Regulation 659/1999 (as Council Regulation (EC) No. 487/2009 is also applicable in Poland. amended). The procedure in Poland is governed by the Act on procedure in the field of state aid. No national rules have been elaborated for imple- 29 Is there a sector-specific regulator or are competition rules menting EU guidelines on state aid to airports and airlines. In the cases applied by the general competition authority? defined in EU guidelines on state aid to airports and airlines the ‘private investor’ rule would apply. The general competition authority, the CCPO, is competent. Under EU Regulations the European Commission also exercises significant powers.

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Update and trends Application of EU Regulation 261/2004 in Poland has recently created regarding mutual relations between the CAA and the proceedings of the new challenges for the aviation market, adding to the already burdening civil courts. In practice passengers, or rather professional undertakings obligations coming from the text of Regulation itself, as well as from representing groups of passengers, file claims simultaneously to both the ECJ judgments. The Regulation was implemented in Poland by the CAA and the civil courts. In the worst-case scenario it can even the Aviation Act. The Act provides for a simplified manner of seeking lead to double enforcement of the same liability or to the existence of compensations under article 7 by a claim to a dedicated passengers’ contradictory decisions of the courts and of the CAA in respect of the rights commission within the CAA. Final commission decisions same claim. awarding compensation may be enforced by the passengers directly In addition, the length of the limitation period of the claims under against carriers through the court bailiffs. The question arose whether article 7 of the Regulation is also a matter of legal controversy. From the a claim to CAA is exclusive, namely whether it precludes filing a claim administrative court ruling that there is no limitation period at all, to in the civil courts. In February 2014, the Supreme Court ruled that the a civil court verdict on applying a one year limitation period, the legal passengers can file claim for compensations both to the CAA and to the situation is very unclear. Even the expected Supreme Court judgment civil courts. The ruling created enormous practical problems, especially (scheduled for August 2014) may not solve the problem definitively.

36 Must clearance from the competition authorities be obtained carrier shall present the financial statements and other required docu- before state aid may be granted? ments to the statutory auditor. The CAA may suspend or revoke the oper- In most cases the opinion of the CCPO is required before notification to the ating licence in the cases referred to in EU Regulation 1008/2008. EU Commission Notification of a state aid scheme may require consent to be granted by the Council of Ministers. 40 Are there mandatory insurance requirements for the operators of aircraft? 37 If so, what are the main procedural steps to obtain clearance? Under the Aviation Act air carriers and aircraft operators are required to See question 36. The steps depend on the type of state aid, that is whether conclude a contract of insurance civil liability for damages in connec- it is individual aid, individual restructuring aid or an aid scheme as well as tion with the business of air transport in accordance with EU Regulation whether it is de minimis aid. 785/2004. In the case of non-commercial operation of aircraft with a maximum take-off mass not exceeding 2,700 kg, the minimum amount of 38 If no clearance is obtained, what procedures apply to recover cover liability insurance in respect of each single passenger in a single flight unlawfully granted state aid? from one event whose effects are covered by insurance is the equivalent of 100,000 SDR. Air carriers are required to conclude a contract on liability If the EU Commission obligates a beneficiary to return the state aid insurance for damage caused by delay in the carriage of passengers, bag- amount, the full amount has to be returned together with the interest gage or goods. Air carriers are required to conclude the insurance contract determined under EU Regulation 659/1999. If not returned voluntarily, on civil liability for damage resulting from the carriage of mail by air, the amount will be subject to a forced execution by administrative or civil in accordance with the provisions of the European Union concerning com- court bodies. mon rules for the operation of air services in the community. Miscellaneous 41 What legal requirements are there with regard to aviation 39 Is there any aviation-specific passenger protection security? legislation? In general international and EU law applies, in particular EU Regulations European law, particularly EU Regulation 261/2004 and EU Regulation 300/2008 and 185/2010. The Aviation Act provides implementing rules 1107/2006 shall apply. and the most important national Regulations concern the National Civil There are no aviation-specific passenger protection rules on package Aviation Security Programme, the National Training Programme and the holidays or bankruptcy protection. However in the event of clear signs of National Quality Control Programme. The protection of civil aviation financial problems of the carrier or in the event of opening insolvency pro- against acts of unlawful interference threatening security and the safety ceedings against an air carrier, the CAA shall make a detailed assessment of persons and property in connection with aviation business are subject to separate agreements, international laws and Regulations and special proof the financial situation of the carrier. At the request of the CAA, the air visions of the Aviation Act.

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

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

162 Getting the Deal Through – Air Transport 2015 MMMLegal Legal Counsels POLAND

42 What serious crimes exist with regard to aviation? The Aviation Act provides for certain penalising regulations, mostly in The Polish Criminal Code and the Aviation Act provide for certain catego- respect of regulatory offences. As regards non-regulatory offences under ries of crimes related to traffic, including aviation. For example, under the the Aviation Act, the following may be noted as an example of offences: Criminal Code the following constitute criminal offences and are subject • breaching the provisions concerning air traffic in the area while per- to imprisonment: forming a flight; • causing a disaster to air traffic, and thereby endangering the life or • destroying or seriously damaging aircraft located at the airport or health of many people, or property to a significant degree; causing an interruption in the activities of an airport; • unintentionally causing an accident in which another person suffers a • refusing to obey orders of the PIC during flight; bodily injury by violating, even unintentionally, the safety rules for air • carrying or using firearms, gas-based weapons or explosives onboard; traffic; and • destroying airport facilities and air-traffic devices; and • allowing, in spite of a special duty, a vehicle to be operated in a condi- • emitting or causing the emission of a laser light or light from other tion that directly endangers the safety of air traffic. sources in the direction of an aircraft in a manner likely to cause blind- ing, and as a result posing a threat to the safety of an aircraft or health of crew and passengers on board.

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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 Institute of Civil Aviation (INAC) whose responsibilities are • a flight crew operating manual must be submitted for INAC’s approval; established in Decree-Law No. 145/2007 of 27 April. The main responsibili- and ties of INAC in the regulation and supervision of air transport activity are • all flights must be conducted in accordance with the information 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 INAC. • assisting the Portuguese state in the national civil emergency policies; Please also note that aerial work is defined under section 2(l) of • participating, planning and supervising the national civil and military Decree-Law No. 44/2013 of 2 April as the use of an aircraft for any pur- measures concerning the use of airspace, search and rescue, safety of pose other than the transportation of passengers, cargo or mail against any air transport and cooperating with the Office for the Prevention and form of payment (ie, any purpose other than private, commercial or public Investigation of Aircraft Accidents (GPIAA) – the Portuguese authority air transport). The following activities qualify as aerial work: aerial pho- for the prevention and investigation of all accidents and incidents with tography, aerial advertising, parachute dropping, etc. Only operators duly civil aircraft; certified and licensed by INAC may exercise these activities. An insurance • promoting and defending competition rules on the aviation sector; policy to cover liability 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 subject Please note that INAC is a public authority with administrative and financial to prior licensing by INAC. Several requirements must be fulfilled, notably: autonomy from the Portuguese state budget. However, its activity is super- • the principal place of business of the applicant must be located in vised by the government Department of Public Works, Transportation and Portugal and more than 50 per cent of its share capital must be held by Communication and by its minister. EU member states or by national citizens of EU member states; • financial fitness and technical ability must be assured; Regulation of aviation operations • an adequate professional structure (ie, flight personnel, maintenance, sales, etc) must be set by the operator; 2 How is air transport regulated in terms of safety? • air carriers must be insured to cover liability in case of accidents with Access to the market is subject to the granting by INAC of an air opera- respect to passengers, cargo, mail and third parties; tor’s certificate (AOC) and an air carrier’s operating licence, which certify • applicants are required to provide proof that the persons who will man- that the air carrier meets all the financial, technical, insurance and safety age the operations of the air carrier are of good repute and have profes- requirements imposed by European Community law (eg, EC Regulation sional integrity (ie, have no criminal background and have not been No. 1008/2008 and No. 859/2008) and by domestic law (eg, Decree-Law declared bankrupt); and No. 19/82 of 28 January and Decree-Law No. 289/2003 of 14 November). • it is also necessary to own an aircraft fleet adequate to the specific The most relevant safety requirements to be fulfilled are the following: activity intended to be developed. Please note that licences are • all aircraft must be duly certified in terms of airworthiness and envi- non-transferable. ronmental compliance; • maintenance of the aircraft fleet and all of the aircraft equipment and Market access and the exercise of traffic rights for scheduled air services components must be assured directly by the operator or by a third in extra-Community routes is ruled by Decree-Law No. 116/2012 of 29 entity duly certified for the maintenance of aircraft; May. This new regime harmonises national laws with Community regula- • operational facilities in the operators’ main base must be adequate for tions on non-discriminatory market access and distribution of traffic rights the area and type of operation licensed; embodied in Regulation (EC) No. 847/2004 of 29 April and Regulation (EC) No. 1008/2008 of 29 April, respectively.

164 Getting the Deal Through – Air Transport 2015 APTS – Alves Pereira & Teixeira de Sousa RL PORTUGAL

5 What requirements apply in the areas of financial fitness and in non-compliance with international safety standards may be grounded nationality of ownership regarding control of air carriers? until corrective measures are adopted by the aircraft operator. To obtain a licence from INAC, several requirements in the area of finan- Commission Regulation (EU) No. 452/2014 of 29 April 2014 laying cial fitness must be fulfilled by the air operator. In particular, the air opera- down technical requirements and administrative procedures related to air tor shall prove that: operations of third country operators is also applicable. • it is able to meet, at any time, its actual and potential obligations estab- Furthermore, all air carriers operating to and from Portuguese coor- lished under realistic assumptions, for a period of 24 months from the dinated airports (see question 21) must previously submit a request for the start of operations; allocation of slots to ANA, SA (the schedules facilitator and national coor- • it is able to meet its fixed and operational costs incurred by operations dinator). Non-scheduled flights must be approved by INAC in advance. according to its business plan and established under realistic assumptions for a period of three months from the start of operations, without 10 Are there specific rules in place to ensure aviation services taking into account any income from its operations; and are offered to remote destinations when vital for the local • it does not have any amount in debt to the Portuguese tax authorities economy? or social security, or both. In accordance with article 16 of EC Regulation No. 1008/2008, the Portuguese government is entitled to impose public service obligations The air operator must also submit a business plan for at least the first three (PSOs) in respect of scheduled air services to an airport serving a periph- years of operation, which shall detail its financial connection with any eral or development region in its territory, when the route is considered other commercial activities in which it is engaged directly or not. In respect vital for the economic and social development of the region. of nationality of ownership see question 4, bullet point one. PSOs were created by the Portuguese government to guarantee the following routes: in both directions between the mainland and the Azores 6 What procedures are there to obtain licences or other rights to and, in both directions between the Azores and Madeira. Air carriers operate particular routes? that operate those routes are entitled to receive compensation from the To operate particular routes it is essential to obtain the respective licence Portuguese government by way of payment of a predetermined amount or from INAC. For that purpose it is necessary to submit an application to a percentage of the airfare of passengers. INAC informing it of the details of the desired route, namely, the identifi- The PSOs in respect of the routes to and from the mainland and cation of the complete route, flight type, licence and type of the aircraft and Madeira, between Lisbon and Vila Real, and between Lisbon and Braganza the schedule of the operation. were cancelled by the Portuguese government. Notwithstanding, the gov- If the application is duly submitted with all necessary information, ernment will subsidise a percentage of the airfare directly to the passen- INAC shall grant the licence and will publish its decision in the Portuguese gers residing or studying in Madeira, Vila Real and Braganza. Official Journal. See also question 4. 11 Are charter services specially regulated? There is no special regulation of charter services in Portugal. EC Regulation 7 What procedures are there for hearing or deciding contested No. 1008/2008 is applicable either to scheduled and non-scheduled air applications for licences or other rights to operate particular services and INAC does not distinguish these two flight types in order to routes? grant certification and licensing to air operators. However, air operators INAC shall make a decision on an application as soon as possible (not later must inform INAC on its flight type. than three months) after all the necessary information has been submitted. Should INAC refuse the application, it must indicate the grounds for this 12 Are airfares regulated and, if so, how? refusal. In this case, the applicant has the right to be heard and to submit its In accordance with article 22 of EC Regulation No. 1008/2008, EU air car- reasons why the application should not have been refused. riers can freely set airfares. As an EU member state, Portugal is covered by the aforementioned provision. 8 Is there a declared policy on airline access or competition and, Please note that in respect of public service obligations (see question if so, what is it? 10) and in accordance with article 16 of EC Regulation No. 1008/2008, a There is no declared policy specifically on airline access or competition. standard airfare must be fixed. The provisions of EC Regulation No. 1008/2008 are applicable. In accordance with such provisions, the applicant for licensing of air carrier Aircraft activity in Portugal – ie, the applicant for a Portuguese AOC – must have its 13 Who is entitled to be mentioned in the aircraft register? Do principal place of business located in Portugal and more than 50 per cent of requirements or limitations apply to the ownership of an its share capital must be held by EU member states or by national citizens aircraft listed on your country’s register? of EU member states. The Portuguese Aircraft Register must mention the complete information Notwithstanding, air carriers duly certified and licensed in other about the owner of the aircraft, namely, the name, address, marital status member states are entitled to provide air services in Portuguese territory. (if applicable), VAT and ID number. There are no special requirements or See also question 4. limitations (or both) concerning the ownership of an aircraft. The Aircraft Register must also contain several details concerning the 9 What requirements must a foreign air carrier satisfy in order aircraft, notably: to operate to or from your country? • name of the operator and the manufacturer; Intra-Community air carriers duly licensed in their place of residency • model, serial number, construction date (eg, year), weight, capacity are entitled to operate in Portugal in accordance with EC Regulation No. and number of flight hours; 1008/2008. • number of engines, respective model and serial number; and Within the scope of the ‘Open Skies Agreement’ signed between the • usual airport or aerodrome of the aircraft. United States and the European Union, air carriers registered in the United States are also entitled to operate to or from Portugal. In addition, Portugal The following documents are necessary for the registration of an aircraft signed several bilateral agreements with a number of states, which regu- in Portugal: late the operation of flights to or from Portugal by air carriers registered in • bill of sale; contracting states. • cancellation of registration certificate of the country where the aircraft Please also note that Decree-Law No. 40/2006 of 21 February (which was previously registered or a non-registration certificate, if the air- incorporated into Portuguese law Directive 2004/36/CE), establishes rules craft was never registered in any other country; and procedures for ramp inspections of non-member state aircraft land- • customs release certificate – only required when the aircraft is from a ing at airports located in Portugal in order to guarantee aircraft airworthi- non-EU country; ness. According to the aforesaid legal provisions, any aircraft to be found

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• two photos of the aircraft – one of the front and one in profile, with the Santo), the airports of Madeira being directly operated by ANAM (ANA’s marks of nationality and registration painted, in 9cm x 12cm format, subsidiary company). without margins and printed in natural colour; and • registration application form (under the format of the official form of 18 What system is there for the licensing of airports? INAC). Under the rules set forth in Decree-Law No. 186/2007 of 10 May (amended by Decree-Law No. 55/2010 of 31 May), the construction and operation of The aforementioned documents must be submitted by the owner of the civil airports is subject to prior licensing by INAC. For that purpose several aircraft to INAC together with the application for the aircraft registration. requirements must be fulfilled in terms of physical characteristics of the Registration fees currently amounting to €72.33 (or 50 per cent of this airport (eg, the absence of physical obstacles and known meteorological amount whenever the applicant is an aero club) must be paid upon submis- conditions that may put at risk the safe operation of aircraft), environmen- sion of the necessary registration documents. tal impact and terminal facilities. Airport operators must also have a valid insurance policy to cover liability deriving from any accident occurring in 14 Is there a register of aircraft mortgages or charges and, if so, the airport facilities. An airport operations manual must also be subject to how does it function? INAC’s approval. There is a register for any mortgage or charges concerning an aircraft registered in Portugal. As previously mentioned (see question 1), INAC 19 Is there a system of economic regulation of airports and, if so, is the Portuguese authority responsible for the registration acts related to how does it function? aircraft. Under Decree-Law No. 254/2012 of 28 November, airport operators are Therefore, in order to apply for the registration of a mortgage over air- entitled to lease part of the airport infrastructures to third parties and are craft in Portugal, it is necessary that the owner submits the following docu- also entitled to grant third parties the right to provide services within the ments to INAC: airport (eg, ground handling services, restaurants and stores, etc). The • the Aircraft Security Agreement or similar instrument or notarial deed granting of such rights is ordinarily subject to public tender procedure. containing a valid constitution of a mortgage; and Airport charges are freely set by the airport operators but are capped under • the registration application form. the single-till model (ie, charges are capped considering the costs and revenues of both aeronautical and other commercial activities being per- The registration fees must be paid upon submission of the aforementioned formed in the respective airport). documents which are calculated as following: full amount covered by the mortgage divided by 100,000. Please note that there is a minimum and 20 Are there laws or rules restricting or qualifying access to a maximum amount for registration fees, which are €72.33 and €947.72, airports? respectively. Night flying restrictions are imposed to meet the noise reduction criteria established in EU Directive 2002/CE/30 (eg, Lisbon Airport may only 15 What rights are there to detain aircraft, in respect of unpaid receive 91 weekly flights during the period from midnight to 6am). The airport or air navigation charges, or other unpaid debts? applicable domestic laws in this matter are Decree-Law No. 293/2003 of Portugal is a signatory of the Convention on the International Recognition 18th November and Decree-Law No. 9/2007 of 17th January. 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? INAC is responsible for the supervision of the slots allocation As mentioned in question 2, an air operator must be certified and licensed procedure. by INAC 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 air- handling? craft fleet, as required by Regulation (EC) No. 2042/2003 of 20 October. Ground handling activity is subject to prior licensing by INAC and the fol- The compliance of all aircraft equipment and components must be directly lowing requirements must be met: assured by the operator or by a third entity duly certified by INAC for the • the applicant must be incorporated under Portuguese law; maintenance of aircraft. • its principal place of business must be located in Portugal, in another The violation of this duty gives INAC 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 be exercised in airports which have: a traffic volume equal or higher than

166 Getting the Deal Through – Air Transport 2015 APTS – Alves Pereira & Teixeira de Sousa RL PORTUGAL

3 million passengers or 75,000 tons of cargo per year; or registered traffic any accident or serious incident must be subject to an investigation by the of more than 2 million passengers or 50,000 tons of cargo during the six GPIAA. The investigation led by GPIAA is not intended to determine fault months prior to 1 April or to 1 October of the preceding year. The number or liability but rather to improve safety and prevent future accidents and of suppliers for each airport is subject to government restrictions. Under incidents. Ordinance No. 14886-A/2013 of the Secretary of State for Transportation, Investigators are granted full access to the accident site, to the aircraft a restriction of two ground-handling companies operating in Lisbon, and to the flight data recording systems. Investigators are also entitled to Oporto and Faro was imposed, until a minimum annual volume of 15 mil- hear any witness of the accident or incident. lion passengers or 200,000 tonnes of cargo is reached. A final report on the accident or incident will be published by GPIAA, INAC may impose other restrictions owing to airport capacity and in accordance with the rules and procedures established in ICAO’s Annex space limitations. 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 involv- is the Portuguese state-owned company NAV Portugal, EPE. NAV’s main ing aircraft during the performance of their professional duties is obligated duties are to: to report such occurrence to INAC. Failure to do so constitutes a very seri- • promote the safe, orderly and rapid flow of aircraft traffic; ous aeronautical offence punishable with a fine up to €250,000. • supply all information and suggestions necessary for the flight safety; Notification to INAC and GPIAA must be made within six hours after • avoid collisions between aircraft and between aircraft and obstacles the occurrence of the accident or incident. INAC shall notify the compe- on the ground; and tent authorities of the member states where: • alert all necessary entities whenever an aircraft is found to be in an • the accident or incident occurred; emergency situation and to provide those entities with the required • the aircraft is registered; assistance and cooperation. • the aircraft was manufactured; and • the aircraft operator is licensed. All air traffic controllers employed by NAV must be duly licensed by INAC. Portugal is a member of Eurocontrol and is subject to the Single European Competition law Skies legislative package. 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? Liability and accidents There are no sector-specific rules. The general Portuguese competition law 24 Are there any special rules in respect of death of, or injury to, rules are applicable. passengers or loss or damage to baggage or cargo in respect of domestic carriage? 29 Is there a sector-specific regulator or are competition rules Under Decree-Law No. 321/89 of 25 September, a regime of strict liabil- applied by the general competition authority? ity (ie, regardless of fault) was established in respect of death or injury of There is no sector-specific regulator. The competition rules are applied by passengers and for loss or damage of luggage or cargo in domestic flights. the Portuguese Competition Authority. Notwithstanding, air carrier strict liability is limited to the following amounts: 30 How is the relevant market for the purposes of a competition • death or bodily injury to passengers – €125,000 per passenger, with the assessment in the aviation sector defined by the competition maximum amount per accident of €125,000 multiplied by the number authorities? of seats of the aircraft; Two rulings of the Portuguese Competition Authority provide some guide- • loss or damage of luggage – the same limits per kilogram of luggage lines in this respect, namely the decision of 5 June 2007 concerning the established in the Montreal Convention (ie, 1,131special drawing rights merger between TAP and PGA. The Portuguese Competition Authority (SDR) per passenger); and makes a distinction between the following services: • loss or damage of cargo – the same limits per kilogram of cargo estab- • scheduled commercial flights: the relevant market includes all routes lished in the Warsaw Convention, the Hague Protocol and its addi- operated by the air carriers and each route or destination is treated as tional protocols. a separate market; • carriage of goods and mail: there is a European geographical market as Under EC Regulation No. 2027/97, compensation for death or bodily injury defined by the European Commission; and to passengers in case of blameworthy conduct of the air carrier is not sub- • in-flight catering: the relevant market includes the provision of food ject to any limitation. and beverages aboard the aircraft for passengers and flight crew. In the instance of Portuguese air carriers, the relevant geographical market 25 Are there any special rules about the liability of aircraft for the provision of catering services is the Portuguese territory. operators for surface damage? Aircraft operators are subject to a regime of strict liability for surface dam- 31 What are the main standards for assessing the competitive age caused by the aircraft (while flying, on the ground, or simply deriving effect of a transaction? from objects detached from the aircraft) to third parties. Strict liability is Portuguese competition rules aim to prohibit any agreements between limited to a maximum amount equal to the minimum mandatory insur- undertakings, decisions by associations of undertakings, concerted prac- ance cover as determined in EC Regulation No. 785/2004 – see question tices between undertakings, abusive exploitation of a dominant position 40. or abusive exploitation of the economic dependence of any supplier or cli- Nevertheless, liability may be excluded when surface damage is ent with the purpose or effect to prevent, distort or restrict competition, caused by: particularly: • natural catastrophes; • the imposition of purchase or selling prices; • wars or riots; • the imposition of other conditions; • the use of guns or weapons by third parties; or • the restriction or limitation of production, distribution, technical • when the accident was entirely caused by blameworthy conduct of the development or investments; person who suffered the damage. • the share of markets or sources of supply; • the use of discriminatory or unequal conditions or pricing for similar 26 What system and procedures are in place for the investigation services; of air accidents? • the refusal to purchase or sell goods or services; or Under the rules set forth by Regulation (EU) No. 996/2010 of the European Parliament and of the Council and Decree-Law No. 318/99 of 11 August,

www.gettingthedealthrough.com 167 PORTUGAL APTS – Alves Pereira & Teixeira de Sousa RL

• subjecting the execution of agreements to the acceptance of additional Furthermore, passengers also have a ‘right of care’ (ie, an airline car- obligations which, by their nature or according to the trade usage, have rier must provide meals and refreshments, hotel accommodation when no relation to the purpose of such contracts. necessary, etc). The right of care is also applicable in case of flight delays of: 32 What types of remedies have been imposed to remedy • more than two hours, for flights less than 1,500km; concerns identified by the competition authorities? • three hours or more, for flights within the EU longer than 1,500km, The Portuguese Competition Authority may impose one or more of the fol- and for flights outside the EU between 1,500km and 3,500km; and lowing remedies, depending upon the type of infringement or the circum- • more than four hours for flights over 3,500km outside the EU. stances (or both) of the case: • interim measures (eg, the immediate suspension of the prohibited If the delay is longer than five hours, passengers are also entitled to a practice); refund of the ticket price. For flights arriving from outside the EU, when • coercive remedies (eg, prohibiting the merger or, at a later stage, operated by airlines of non-member states, passengers are entitled to the ordering the demerger of the undertakings, imposing changes to protection established in the Warsaw Convention, Hague Protocol and transaction, etc); Montreal Convention (when the airline is registered in a contracting state). • fines or periodic penalty payment; • advertisement of the penalty in the Official Gazette or in a local news- Disabled passengers paper; and The rights of disabled passengers are regulated by domestic law (Decree- • other additional penalties. Law No. 254/2012 of 28 November) and by EC Regulation No. 1107/2006. Air carriers cannot refuse the transportation of disabled passengers Financial support and state aid or of passengers with reduced mobility on the grounds of their disability. Notwithstanding, air carriers may refuse to accept a reservation from or 33 Are there sector-specific rules regulating direct or indirect to embark a disabled person or a person with reduced mobility in order to financial support to companies by the government or meet applicable safety requirements or when such transportation is physi- government-controlled agencies or companies (state aid) in cally impossible (eg, the size of the aircraft or its doors are too small). the aviation sector? If not, do general state aid rules apply? Air carriers must ensure that their personnel have sufficient training There are no sector-specific rules. General EU state aid rules are applicable on how to meet the needs of persons having various disabilities or mobility to the aviation sector. impairments.

34 What are the main principles of the state aid rules applicable Package holidays to the aviation sector? Rules governing package holidays are set forth in Decree-Law No. 61/2011 See question 33. of 6 May (which repeals and replaces Decree-Law No. 209/97 of 13 August and incorporates into domestic law EC Directive 90/314/CE). Notably, 35 Are there exemptions from the state aid rules or situations in rules were set on the licensing of travel agencies, consumer information, which they do not apply? contractual obligations, cancellations, liability, guarantees and mandatory insurance. See question 33.

Computerised reservation system 36 Must clearance from the competition authorities be obtained EC Regulation No. 80/2009 on a Code of Conduct for computerised res- before state aid may be granted? ervation systems, which entered into force on 29 March 2009, is applica- Clearance from the Portuguese Competition Authority does not need to ble in Portugal. This new Regulation intends to reduce booking costs and be obtained before state aid is granted. However, at the request of any increase travel options with benefit to the consumer. interested party, the Portuguese Competition Authority may scrutinise any state aid (or state aid project) and make such recommendations to the Airfares government as it deems necessary to eliminate the adverse effects on com- The final price to be paid by air passengers shall include the applicable petition of such aid. airfare or air rate as well as all applicable taxes, charges, surcharges and fees that are unavoidable and foreseeable at the time of publication (see 37 If so, what are the main procedural steps to obtain clearance? EC Regulation No. 1008/2008 and Decree-Law No. 173/2007 of 8 May). 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? Under EC Regulation No. 785/2004 and Decree-Law No. 289/2003 of 14 See question 36. November, commercial air carriers and operators must be insured to cover liability in case of accidents with respect to passengers, cargo and third Miscellaneous parties. For liability in respect of passengers, the minimum insurance cover 39 Is there any aviation-specific passenger protection is 250,000 SDR per passenger. For baggage and cargo, the minimum legislation? insurance cover is 1,131 SDR per passenger and 19 SDR per kilogram, Denied boarding, cancellation and delay of flights respectively. EC Regulation No. 261/2004 is applicable. Domestic law establishes For liability in respect of third parties, there are different minimum offences and sanctions for the non-compliance with the rules set out in the insurance covers that vary from 750,000 SDR for aircraft with a maximum aforesaid EC Regulation. take-off mass (MTOM) of less than 500kg to 700 million SDR for aircraft In case of denied boarding, air carriers must compensate passengers with a MTOM equal or higher than 500,000kg. on the following amounts: • €250 for flights of less than 1,500km; 41 What legal requirements are there with regard to aviation • €400 for flights within the EU longer than 1,500km and for flights out- security? side the EU between 1,500km and 3,500km; and In matters of aviation security, Portugal is subject to the provisions of EC • €600 for flights over 3,500km outside the EU. Regulation No. 300/2008 of 11 March (which repealed and replaced EC Regulation No. 2320/2002) and Regulation (EU) No. 185/2010 of 4 March In addition, passengers may opt for a refund of the price of the ticket or 2010. In obedience to such provisions, INAC approved a national security alternative transport to their final destination. training programme for aeronautical personnel and a national security The same rules apply should the flight be cancelled. However, mon- quality control programme. etary compensation to passengers is only due if notice of the flight cancellation is not given with sufficient time in advance.

168 Getting the Deal Through – Air Transport 2015 APTS – Alves Pereira & Teixeira de Sousa RL PORTUGAL

Furthermore, internal rules on the prevention and repression of unlawful acts on board aircraft were also introduced by Decree-Law No. Update and trends 254/2003 of 18 October. According to the aforesaid statutory law, all penalties (ie, fines and imprisonment) for criminal offences committed on board After last year’s privatisation of ANA – Aeroportos de Portugal, SA (elected ‘Airport Deal of The Year 2013’ by World Finance Magazine) aircraft were increased. In addition, new crimes (eg, disobeying of a cap- – the Portuguese government intends to proceed with the second tain’s orders and conveying false information concerning the flight to other public tender procedure for the privatisation of the Portuguese passengers, thus causing unnecessary alarm) and regulatory offences (eg, national carrier (TAP airline). smoking on board, the use of mobile phones and other electronic equip- TAP had a net profit for its aviation operation of €32 million in ment when such use is not allowed by the air carrier and any behaviour 2013, with a flight occupation rate of approximately 80 per cent (the resulting from alcohol or drugs abuse that jeopardises aircraft security) biggest in Europe). 2013 was the company’s fifth consecutive profit were also introduced. year, and 10 new international routes were opened by TAP in the last A new National Quality Control Programme for Civil Aviation security 12 months. was approved by INAC on 13 February 2012. In the ground-handling sector, the Portuguese Civil Aviation Authority (INAC) is currently considering altering the limit from two to three ground-handling companies operating in the Portuguese 42 What serious crimes exist with regard to aviation? major airports, in accordance with EU recommendations. The most severe criminal offences sanctioned under Portuguese law are as follows: • aircraft hijacking (punishable with imprisonment of up to 15 years); Other relevant criminal offences are also established in Decree-Law • endangerment of air transportation safety (punishable with imprison- No. 254/2003 of 18 October, such as disobedience of captain’s orders (pun- ment of up to 10 years); and ishable with imprisonment up to two years) and conveying false informa- • reckless operation of aircraft (punishable with imprisonment of up to tion concerning the flight to other passengers, hence causing unnecessary eight years). alarm (punishable with imprisonment up to one year). Sound pollution is also deemed a criminal offence punishable with Any crime committed by a terrorist association or on board an aircraft, thus imprisonment of up to three years. jeopardising aircraft safety, shall have its penalty aggravated by one-third of its minimum and maximum duration.

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 169 RUSSIA Sokolov, Maslov and Partners

Russia

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

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? There is no difference in the safety regulations applicable to either air Aviation is regulated in the Russian Federation by: transport or air operations that do not constitute public or commercial • the Ministry of Transport as the federal body of executive power in the transport, such as private operations or aerial works. In fact, aviation is sphere of transport, including air transport. The Ministry of Transport divided in the Russian Federation into civil, state and experimental. Civil works out the state policy and deals with legal regulation in the sphere aviation is aviation used for the purposes of meeting requirements of the of, inter alia, aviation, use of the airspace and aero-navigational ser- citizens and economy. Civil aviation is further divided into commercial vices provided to the users of the airspace; (used for providing services for the air transportation of passengers, lug- • the Federal Agency of Air Transport (FAAT), a federal body with exec- gage, cargoes, post, or performing aerial work) and general-purpose avia- utive power that provides state services and manages state property tion (which does not include commercial air transport and performance in the sphere of air transport (civil aviation), of the use of the airspace of aerial work). State aviation is divided into military aviation and special- and aero-navigational services provided to the users of the airspace. purpose aviation. The same safety regulations are applicable to all types of Inter alia, the FAAT conducts certification of airports and keeps the aviation in the Russian Federation. state register of civil aerodromes and airports. Among other things, the FAAT is in charge of registration of aircraft. The FAAT is part of the 4 Is access to the market for the provision of air transport Ministry of Transport; services regulated and, if so, how? • the Federal Service on the Supervision in the Sphere of Transport (FSSST), which is the federal body having mostly control and supervi- Certain types of activity in the sphere of aviation can be undertaken only sion functions in different transport sectors, including, among other on the basis of licences issued in accordance with the legislation of the areas, civil aviation, the use of airspace and aero-navigational services Russian Federation (see question 2). The same applies to foreign entities provided to the users of the airspace. The FSSST is also part of the sys- performing international air transport or aerial work within the territory of tem of the Ministry of Transport; and the Russian Federation. • the Ministry of Defence, which regulates the use of airspace in general. Foreign entities do not have the right: • to accept in the territory of the Russian Federation aircraft passen- The main aviation law is the Air Code of the Russian Federation, which is gers, luggage, cargo or post for air transport to the territory of a foreign followed by extensive subordinate legislation. The legal status, authority, state, or to transport such items from the territory of a foreign state to scope of activity and functions of the above-mentioned federal bodies with the territory of the Russian Federation, unless otherwise provided for executive power are determined by respective government decrees. by an international treaty of the Russian Federation or single-voyage permissions issued by the FAAT; or Regulation of aviation operations • to accept on the territory of the Russian Federation aircraft passengers, luggage, cargo and post for air transport within the territory of 2 How is air transport regulated in terms of safety? the Russian Federation without permission issued by the FAAT or the The following activities, persons and products are subject to obligatory FSSST. See also questions 9, 28 and 29. certification: • designers and manufacturers of aircraft and other aviation equipment; In addition, the Ministry of Transport establishes the rules for the deter- • persons performing or servicing commercial air carriage, or perform- mination and application of tariffs, charging duties, selling tickets, issuing ing aerial works; airway bills and other transportation documents. • persons carrying out the maintenance and repair of aircraft; • aerodromes; 5 What requirements apply in the areas of financial fitness and • airports; nationality of ownership regarding control of air carriers? • the relevant educational institutions; No specific requirements in the area of financial fitness shall be applica- • aircraft; ble to air carriers in comparison with other spheres of commercial activ- • aviation engines and certain other aviation equipment; and ity. This can be verified at the stage when the necessary licences are being • persons whose activity is directly connected with ensuring the safety issued, and generally in the course of doing business (proper payment of of flights or aviation safety. Aviation personnel are subject to obliga- taxes, performing obligations generally, not being subject to bankruptcy, tory attestation. Obligatory certification and obligatory attestation are etc). As to the nationality of ownership, the law provides that establishment performed by authorised agencies. 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 Certain types of activity in the sphere of aviation, in relation to design, proof air carriage of passengers, luggage, cargo, post or of aerial work) shall be duction, testing, repairs of aviation equipment, carriage by air of passen- allowed on condition that the share of foreign capital shall not exceed 49 gers and cargo (except carriage for the carrier’s own purposes), are subject per cent of the share capital of the aviation enterprise, its manager shall be to obtaining a licence. a citizen of the Russian Federation, and the number of foreign citizens in

170 Getting the Deal Through – Air Transport 2015 Sokolov, Maslov and Partners RUSSIA the governing body of the aviation enterprise shall not exceed one-third of 11 Are charter services specially regulated? the composition of the governing body. Prices for charter services are regulated only by the parties of the charter agreement. 6 What procedures are there to obtain licences or other rights to operate particular routes? 12 Are airfares regulated and, if so, how? The licensing requirements for the carriage of passengers and goods are Generally, airfares are established by the carriers themselves. In accord- laid down by the government. To fulfil the requirements the applicant shall: ance with the Air Code of the Russian Federation rules for the determi- • have an operator’s certificate; nation and application of tariffs shall be established by the Ministry of • abide by the rules of transportation of passengers or goods; and Transport. • have aircraft (including reserve aircraft) sufficient to execute scheduled flights. Aircraft

The obligation to organise the issuance of licences is vested in the 13 Who is entitled to be mentioned in the aircraft register? Do Department of Regulation of Air Transportation of the FAAT of the requirements or limitations apply to the ownership of an Ministry of Transport of the Russian Federation. aircraft listed on your country’s register? As to international transportation, the Ministry of Transport has estab- The state register of civil aircraft contains data in respect of civil aircraft lished the routine admittance of air carriers that have the required opera- and owners thereof. Civil aircraft, except for super-light aircraft for gen- tor’s certificate and a licence for effecting air carriages. To be admitted to eral-purpose aviation, are subject to registration in the state register of international transportation, the interested air carrier sends an applica- civil aircraft. The legislation determines that a super-light aircraft is an tion, together with the required documentation, to the FAAT. The appli- aircraft with a maximum take-off weight of 495kg without including the cation shall be considered by the special commission of the FAAT. The weight for aviation salvage means, and that general-purpose aviation is decision of the Commission shall be minuted, and on the basis of the said civil aviation not performing commercial air carriage or aerial work. The minutes an executive order of the FAAT shall be issued. registered aircraft acquires Russian Federation nationality. The Law on State Registration of Aircraft came into force in September 2009. The 7 What procedures are there for hearing or deciding contested Law establishes a procedure of state registration of aircraft, which is fur- applications for licences or other rights to operate particular ther detailed in the Rules of Keeping the Register of Rights to Aircraft and routes? Transactions Therewith, approved by the government, and in the Rules of A decision of the Department of Regulation of Air Transportation of the Registration of Aircraft approved by the Ministry of Transport. The regis- FAAT to refuse to issue a licence can be contested to the Head of FAAT, to ter should contain data on the owner of the aircraft, where ownership is the Ministry of Transport or in court. restricted by lease, mortgage etc, on the lessee, mortgagee etc, and, where A decision of the FAAT to refuse to admit the air carrier to undertake a transaction with aircraft is registered, on the parties to the transaction. If international transportation cannot be contested by any further applica- an aircraft is sold to a foreign party and exported out of Russia, it should be tion to any other state body. However, it may be contested in the courts deleted from the registry. in accordance with the established procedure if the applicant believes that the refusal violates the rights and lawful interests of persons and legal enti- 14 Is there a register of aircraft mortgages or charges and, if so, ties in the sphere of business and other economic activity. how does it function? Under the Law on State Registration of Aircraft mortgages should be reg- 8 Is there a declared policy on airline access or competition and, istered in the state registry of aircraft. The information contained in the if so, what is it? registry is open to any interested person, and the law provides a procedure There are no specific rules on the access or competition applicable to air- for obtaining such information. The mortgage is registered in a special sec- lines and air transport. General rules on competition and anti-monopoly tion of the state registry of civil aircraft. The information contained in the legislation should obviously be complied with, but no special arrange- register includes the identification of aircraft, name of the mortgagee, the ments are applicable in the air transport legislation. term of mortgage and the amount of obligation secured by mortgage.

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? Flights of foreign aircraft to or from the Russian Federation shall be There are no specific rules established by the internal legislation of the effected on the basis of international treaties of the Russian Federation Russian Federation concerning the possibility of the detention of aircraft with the respective state or states, or on the basis of permissions issued by in respect of unpaid debts. In accordance with the general rules of Russian the FAAT. law it is possible to obtain a court order to arrest assets of a debtor to secure The foreign carrier effecting such flights should, inter alia: a claim against the debtor. • comply with the respective laws and rules of the Russian Federation, Also, a creditor (claimant) holding property, which should be trans- conditions of effecting international carriages; ferred to the debtor or a person specified by the debtor, is entitled to a lien • not have any indebtedness for the aero-navigational services rendered on the said property until the debtor performs its obligations, in particular, thereto in the Russian Federation; payment obligations. Claims of a creditor with a lien shall be subject to sat- • procure availability of necessary documentation on board, as estab- isfaction from the value of the property in the same scope and manner as in lished for international flights, by complying with the aviation stand- respect of claims secured by a mortgage. ards recognised by the Russian Federation; and • procure insurance or other security regarding liability for causing 16 Do specific rules regulate the maintenance of aircraft? harm to third parties and aircraft. Maintenance of aircraft is regulated to the extent that organisations providing maintenance should be properly certified. When undertaking main- 10 Are there specific rules in place to ensure aviation services tenance, organisations providing maintenance are supposed to comply are offered to remote destinations when vital for the local with mandatory requirements for the ‘flying fitness’ of aircraft, which are economy? determined by federal aviation rules. No specific public service obligations are stipulated by legislation. However, the Air Code of the Russian Federation provides that issuance Airports of a particular licence (a licence to perform certain types of activity in the 17 Who owns the airports? sphere of aviation – see question 2) to a legal entity or an individual entrepreneur might oblige such legal entity or individual entrepreneur to per- A civil airport may be a private, municipal or federal property. As a complex form socially significant air carriage or aerial work. object it may have several owners. However, any airport should have an operator who is responsible for the operation of the airport in its entirety.

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Objects that are part of the unified system of air traffic management can be 2 million roubles in case of personal injury, the exact amount of such com- federal property only. Ownership of shares in airport operators and other pensation to be determined depending on the extent of damage to the pas- strategic enterprises is subject to restrictions (see question 29). senger’s health. If the actual damage caused by death or personal injury is higher than the amount of the fixed compensation, the injured party who 18 What system is there for the licensing of airports? has received the compensation may claim the balance from the air carrier. An airport is entitled to operate provided that the airport itself, as well as The limits of compensation for luggage are set at its declared value or all radio, lightning and meteorological equipment used in it, has a certifi- 600 roubles per kilogram; for other property, the limit of compensation is cate of fitness. The permission to operate is given by the FAAT. The FAAT 11,000 roubles, unless it is not proved that the damage is larger. also keeps unified registers where all airports and aerodromes should be The risk of the civil liability of the carrier with regards to death of, or registered: the State Register of Airports and the State Register of Civil injury to, passengers or loss or damage to luggage or cargo must be insured. Aerodromes. There is an obligatory pre-judicial procedure, which means that before filing the claim to the court the interested party should send a pre-judicial 19 Is there a system of economic regulation of airports and, if so, claim to the air carrier. Such pre-judicial claim in cases of domestic car- how does it function? riage must be filed within six months (in cases of international carriage, 18 months). According to the Taxation Code, VAT is not applicable to services rendered at airports within Russia, including aero-navigational services. In addi- 25 Are there any special rules about the liability of aircraft tion, fees for aero-navigational services are exempt from the tax on profits. operators for surface damage? These two exemptions create a specific tax regime for services rendered at airports. The operator is liable to compensate the damage incurred during the operation of the aircraft, unless it is able to prove that the damage arose due to 20 Are there laws or rules restricting or qualifying access to force majeure or the intent of the injured party. The liability of the opera- airports? tor for damage that can be caused as a result of aerial work must also be insured. Each airport has a restricted zone where persons or vehicles without spe- It should be noted that for the purposes of personal injury compen- cial permission are not allowed. The territory of the airport should be sation, the air transportation of a passenger includes the period starting fenced and under control of the aviation security division of the airport. from the moment of pre-flight baggage check until the moment when the The airports must have internal regulations regarding restricted areas and passenger has left the airfield accompanied by the representatives of the conditions of access. carrier. 21 How are slots allocated at congested airports? 26 What system and procedures are in place for the investigation The slots are allocated pursuant to the list of priorities, which is set out in of air accidents? the Air Code. They rank as follows (from highest to lowest priority): There is a mandatory system for the investigation of air accidents and inci- • strategic interests of the state; dents concerning all types of the aircraft. In accordance with the law, the • rescue services; main purpose of the investigation is to clarify the reasons for the accident • regular carriage of passengers and luggage; and to prevent such accidents in future. Finding a person guilty or respon- • state operations (ie, military and similar); sible for the accident is not considered as one of the purposes of the inves- • experimental aviation operations; tigation – this should be done by means of common judicial proceedings, • regular carriage of cargo and mail; which shall be held separately from the investigation. • non-regular carriage by air; The investigation is held by a special commission created for acci- • sport events, demonstrations and similar; and dents by the International Aviation Committee and in case of an incident, • private aviation. by the FAAT. The commission may include representatives of government authorities, scientific, construction and other commercial organisations 22 Are there any laws or rules specifically relating to ground that are not directly connected with the accident. Members of the commis- handling? sion should not represent the interests of insurance companies. Ground handling is governed by a number of acts containing mostly tech- The work of the commission shall be executed in accordance with a nical provisions, such as: monitoring the condition of the runway; handling prescribed plan, which provides for the main direction of the commission’s the airport lightning equipment; dealing with the ornithological safety activities, their sequence and the division of the areas of responsibility of the airport; organisation of passengers’ boarding and calculation of between groups within the commission. Before the approval of the plan the aircraft’s centring; and use of other special equipment at the airport. in case of accidents, the commission is only allowed to undertake urgent Compliance with such regulations is a condition for the certification of an measures, such as evacuation of persons, preservation of evidence that airport. might disappear, etc. The investigation period is 30 days for accidents and 10 days for inci- 23 Who provides air traffic control services? And how are they dents, which can be extended. The investigation shall end with the final regulated? report on results. The final report shall be addressed to a mandatory list of There is a unified system of air traffic management. It unites subdivisions entities and may be open to the public. At the end of the investigation the of the Ministry of Defence and the FAAT as well as various items and company owning or operating the aircraft shall make an open analysis of equipment that are part of the system. The system is divided into subdivi- the accident in order to inform the interested parties of the grounds and sions covering all areas of the country. There are specific technical rules as underlying factors of the accident. to the interaction of these subdivisions and the communication between them. Apart from territorial division, the system is divided into civil and 27 Is there a mandatory accident and incident reporting system military sectors. The instructions of the military sectors are obligatory for and, if so, how does it operate? the civil sectors and all users of airspace. There is a mandatory reporting system, and persons intentionally conceal- ing an accident or an incident, or information or data connected therewith, Liability and accidents shall be held responsible. Upon receipt of initial information, traffic superintendents shall 24 Are there any special rules in respect of death of, or injury to, inform the central and regional authorities in the aviation sector. The passengers or loss or damage to baggage or cargo in respect of FAAT shall then forward the information to the authorities in the spheres of domestic carriage? security, environment and economy and to the International Civil Aviation In the case of a death of a passenger, the air carrier shall pay a fixed com- Organization (ICAO). If an accident involving a Russian aircraft has taken pensation of 2,025 million roubles. According to the rule implemented as place over or on the territory of a foreign state or if foreign citizens were from 1 January 2010, the air carrier should also pay compensation of up to on board the aircraft, diplomatic channels are used to convey information.

172 Getting the Deal Through – Air Transport 2015 Sokolov, Maslov and Partners RUSSIA

Three days after arrival at the place of the accident, the chairman of restricting competition or concerted practices, the list contains prohibition the commission shall forward a follow-up report. The final report on results of abuse of a dominant position and prohibition of unfair competition. shall be sent to the addressees within 10 days following its approval. The standards for assessing the anti-competitive effect of a transaction may be the following: Competition law • diminishing the number of players on the relevant market; • price manipulation; 28 Do sector-specific competition rules apply to aviation? If not, • restricting certain market players from taking independent action; do the general competition law rules apply? • determination of joint conditions for the circulation of goods; and Russian competition law does not have a very long history and it tends to • other circumstances allowing some of the market players to influence follow the European model of regulation (as opposed to the US antitrust the conditions for the circulation of goods. model). The first law on competition was enacted in 1991. For these reasons, among others, the overwhelming majority of the competition rules 32 What types of remedies have been imposed to remedy applicable to aviation are of a general nature and are laid down in the set of concerns identified by the competition authorities? general legislative acts – the Federal Law on Protection of Competition, the The Federal Antimonopoly Service and its local bodies may issue instruc- Federal Law on Natural Monopolies, etc. The role of sector-specific rules is tions, which are obligatory for the companies and addressees and may not very significant. contain a wide variety of remedies, such as: termination of agreements It should also be noted that in May 2008 the Law on Foreign restricting competition, execution of pro-competitive actions, termination Investments in the Companies Having Strategic Importance was enacted. of unfair competition, fulfilment of economic, technical and information This law provides requirements that complement the requirements of the requirements on elimination of discriminatory conditions, payment of Law on Protection of Competition (see question 29) and is applicable to revenues received as a result of the infringement of competition law and some of the enterprises in the aviation sector. restoration of the status quo before the infringement of competition law. In case of mergers, the Service may also impose obligatory conditions, such 29 Is there a sector-specific regulator or are competition rules as third-party access to production capacities, infrastructure and informa- applied by the general competition authority? tion, provision of intellectual property to the third parties, requirements The competition rules are applied by the general competition authority for transfer of assets and requirements for the composition of the group of – the Federal Antimonopoly Service and its local bodies. In the sphere of affiliated persons. natural monopolies, the tariffs for their services are being approved by the Federal Service on Tariffs. Financial support and state aid There is a specific registry of natural monopolies in the transport sector (as well as in other sectors) approved by the Federal Service on Tariffs, 33 Are there sector-specific rules regulating direct or indirect which includes the companies that operate the airports and certain other financial support to companies by the government or companies. government-controlled agencies or companies (state aid) in In the light of the Law on Foreign Investments in the Companies the aviation sector? If not, do general state aid rules apply? Having Strategic Importance, it should be stressed that any transaction The general state aid rules contained in the Law on Protection of aimed at transferring control of a strategic company to a foreign inves- Competition are not applicable to the aviation sector. The purposes of state tor needs to be ex ante approved by a special commission of the govern- aid contained in the said Law (such as environmental protection and social ment on control of foreign investments. Foreign investors are also obliged security) do not coincide with the priorities of the development of aviation. to provide information upon acquisition of at least 5 per cent of shares in There is also a specific Law on Public Regulation of the Development of strategic companies. The list of strategic companies within the meaning of Aviation. This Law, however, contains mere references to the main priori- the said law includes not only natural monopolies in the transport sector, ties of the public policy in this sector. but also companies exercising activities in the spheres of maintenance of State aid in the form of subsidies is distributed in the aviation sector by aviation security, engineering, production, repair and testing of aircraft and means of regulations of the government and other public authorities, such equipment. as the Ministry of Transport or the FAAT. These regulations usually take the form of ‘Rules for Granting Subsidies’. At present the most important 30 How is the relevant market for the purposes of a competition subsidies are the following: assessment in the aviation sector defined by the competition • partial compensation to Russian leasing companies for interest on authorities? loans, established by the government; 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 due to air the sphere of air fuel. As the result of this some of the air fuel suppliers carriage of passengers who entered into air carriage agreement with were fined for their concerted practices. At present the government has 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 173 RUSSIA Sokolov, Maslov and Partners

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? None of the above-mentioned regulations provides for obligatory clear- There are several types of mandatory insurance applicable in aviation. In ance from the competition authorities. The recipient of the subsidies particular, the owner of the aircraft must insure its liability for personal should file with the administrator of funds documents confirming the ful- injury or damage to property of third parties (see questions 24 and 25). The filment of the underlying obligation and the timely payment of taxes. air carrier must insure its liability to passengers and cargo owners. In addition, the crew members of an aircraft must have life insurance coverage. 37 If so, what are the main procedural steps to obtain clearance? 41 What legal requirements are there with regard to aviation None. security? Aviation security is defined by the Air Code as the protection of aviation 38 If no clearance is obtained, what procedures apply to recover from illegal interference. Aviation security may be procured, inter alia, by unlawfully granted state aid? the following means: Usually the regulation providing for the subsidies does not contain express • restriction of access to controlled zones of airports and aerodromes; sanctions for the non-fulfilment of the subsidies’ conditions. It is implied • guarding the aircraft while at the parking area; that the administrator of funds shall cease to subsidise the company in • prevention of illegal carriage of dangerous items; and such cases. Sometimes it is expressly stated that the administrator can stop • pre-flight and post-flight inspections. the subsidies or even recover the funds already granted. Aviation security services are entitled to detain persons who violate avia- Miscellaneous tion security requirements, as well as luggage, cargo or post containing prohibited items. 39 Is there any aviation-specific passenger protection Each airport must have an emergency plan identifying actions that legislation? should be taken in case of extraordinary situations. On the federal level, the FAAT is in charge of elaborating and taking measures to enhance avia- The rules of carriage of passengers and their luggage by air contain a tion security. detailed regulation of carrier-passenger relations. They include specific provisions related to carriage of children, disabled and sick passengers. 42 What serious crimes exist with regard to aviation? The rules define the range of service to be provided to passengers under the carriage by air contract, such as transportation from the airport termi- The Russian Criminal Code provides a number of specific crimes in the field of aviation. Capture or stealing of the aircraft may lead to up to 15 nal to the aircraft, loading or unloading of luggage, etc. They also provide years of imprisonment. Violation of the rules of international flights may conditions on which the passenger is entitled to free additional services result in a fine, arrest of up to six months and deprivation of the right to (hotel, storage of luggage, additional meals, etc). Besides, the rules define hold positions connected with aviation for up to three years. Violation of the scope of information that the carrier must disclose to the passenger safety rules applicable and non-compliance with the safety instruction of when entering into the contract. the state authorities in aviation may be a criminal offence if it leads, by neg- Under the rules, a passenger is entitled to return the money paid for ligence, to severe injury or death of one or more person or substantial dam- carriage in case of ‘forced rejection of carriage’, that is, rejection caused age of property. It can be punished by up to seven years of imprisonment. by delay or cancellation of flight, change of route, failure to comply with Finally, poor-quality repair of aircraft and airport facilities, if it leads, by the timetable (except for safety reasons), etc. A partial compensation of the negligence, to severe injury or death can also be punished by up to seven airfare may also be provided in case of voluntary rejection of carriage. years’ imprisonment.

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

174 Getting the Deal Through – Air Transport 2015 Shepstone & Wylie Attorneys SOUTH AFRICA

South Africa

Vanil Bagwandeen, Kamiel Rajah, Sally Mashiane and Jennifer Finnigan Shepstone & Wylie Attorneys

General certain operations, even where conducted for reward, are excluded from the definition of ‘air service’ and would therefore not amount to a com- 1 Which bodies regulate aviation in your country, under what mercial operation. Those services excluded are the hiring out of an aircraft basic laws? together with the crew, a service operated solely for the benefit of a com- The Department of Transport (DOT) is the government department man- pany or a group of companies, or any subsidiary thereof, in its commercial dated with the regulation of aviation in South Africa. activities by a person who is a member or in the employ of such company The DOT achieves its mandate by operating several companies, cre- or group of companies or subsidiary, and which is not offered for reward to ated by statute, each with the purpose of regulating a different aspect of the public in general, the conducting of flight testing or assessment of skills aviation within South Africa. in respect of flying an aircraft, any type of training or instruction in respect The South African Civil Aviation Authority (CAA) established and of flying an aircraft, and the participation in any air race, navigation rally or operated in terms of the Civil Aviation Act No. 13 of 2009, is responsible other aviation sporting event of an aircraft which is sponsored, if the sole for the control and regulation of the civil aviation industry in South Africa. advertisement by such aircraft consists of the display of the name or logo As a party to the Chicago Convention, the Aviation Safety Investigation of, or any other reference to, the sponsor in question. Board (ASIB) was established in terms of the Civil Aviation Act No. 13 of The safety of private operations is regulated in terms of the Civil 2009 to give effect to Annex 13 to the Chicago Convention. Aviation Act and the CARS. Specifically, the CARS regulate the licensing of The Airports Company South Africa Limited (ACSA), established in private pilots and the airworthiness of aircraft. terms of the Airports Company Act No. 44 of 1993, owns and operates all of the major airports within South Africa. 4 Is access to the market for the provision of air transport The Air Traffic and Navigation Services Company Limited (ATNS), services regulated and, if so, how? established in terms of the Air Traffic and Navigation Services Company Access to the market for provision of air transport services are regulated in Act No. 45 of 1993, is responsible for the provision and management of air terms of the requirements that an applicant for an air service licence must traffic, navigation, training and associated services within South Africa. fulfil before being granted a licence. The Air Services Licensing Council, established in terms of the Air Domestic air service licences will only be issued to an applicant that, in Services Licensing Act No. 115 of 1990, is responsible for the licensing of the case of a natural person, is a resident of South Africa, or if not a natural domestic air services within South Africa. person, that is incorporated in South Africa and at least 75 per cent of the The International Air Services Council, established in terms of the voting rights are held by residents of South Africa. International Air Services Act No. 60 of 1993, is responsible for the regula- The issuing of an international air service licence requires substan- tion and control of international air services within South Africa. tially the same requirements in terms of the status of the applicant, except that where the applicant is not a natural person, it must be incorporated in Regulation of aviation operations South Africa and the voting rights must be substantially held by residents 2 How is air transport regulated in terms of safety? of South Africa. Furthermore, air services licences will only be granted where an appli- The CAA is mandated to conduct the safety and security oversight of civil cant can show that the air service will be operated in a safe and reliable aviation within South Africa. The CAA is empowered to develop, monitor manner, that the applicant will be actively and effectively in control of the and enforce the Civil Aviation Regulations 2011 (CARS) published in terms air service, that the applicant has access to the financial capability to con- of the Civil Aviation Act No. 13 of 2009. duct the air service, the type of aircraft the applicant intends to operate, The scope of CAA’s mandate includes the airworthiness, registration the applicant’s experience in operating an air service, and any air transport and marking of aircraft; the licensing of pilots, cabin crew, air traffic ser- agreements that exist in relation to the routes that the applicant proposes vice personnel and aircraft maintenance service engineers; the licensing to operate. and operation of aerodromes and heliports; the approval and operation of aviation training organisations, aircraft maintenance organisations and 5 What requirements apply in the areas of financial fitness and manufacturing organisations; and the approval of airspace and air traffic nationality of ownership regarding control of air carriers? services within South Africa. Furthermore, no domestic or international air services may be con- With regard to the requirement of financial fitness, an air service licence ducted within South Africa without an air service licence granted by the Air may only be granted if the applicant shows that it is financially capable Service Licensing Council or the International Air Services Council, respec- of operating the air service. In order to prove this, an applicant may be tively. The competent Council will only issue a licence where an applicant required to submit an audited set of its most recent financial accounts, a shows that it will operate air services in a safe and reliable manner. balance sheet, statement of assets and liabilities and proof that adequate cash resources will be available at the outset to fund the air service. 3 What safety regulation is provided for air operations that do With regard to the requirement of nationality, a domestic air service not constitute public or commercial transport and how is the licence will only be issued to an applicant that, in the case of a natural per- distinction made? son, is a resident of South Africa, or if not a natural person, that is incorporated in South Africa and at least 75 per cent of the voting rights are held by The Air Services Licensing Act defines an ‘air service’ as a service oper- residents of South Africa. Where the application is in respect of an interna- ated by means of an aircraft for reward. The distinction between what tional air service licence, the applicant must fulfil substantially the same constitutes a commercial air service and a private air service is there- requirements, except that where the applicant is not a natural person, it fore based on whether the air service is conducted for reward. However, www.gettingthedealthrough.com 175 SOUTH AFRICA Shepstone & Wylie Attorneys must be incorporated in South Africa and the voting rights must be sub- applies, the International Air Services Act requires that the air service stantially held by residents of South Africa. must be conducted subject to the conditions of a foreign operator’s permit Furthermore, all stakeholders in the aviation industry are bound by issued under the Act. the application of the Domestic Aviation Sub-Sector Code for BBBEE, A foreign operator’s permit is obtained by making application to the issued in terms of the Broad Based Black Economic Empowerment Act No. International Air Services Council on the prescribed form. The application 53 of 2003. Essentially, this code seeks to increase the participation of his- will be subject to various procedural steps and a determination will then torically disadvantaged South Africans in the aviation industry. Foreign- be made by the Council. A permit will only be granted where the applicant owned business entities and airlines are not required to comply with all the shows that: requirements of this code but they will be required to create and participate • the international air service concerned will be operated in such a man- in equity equivalent programmes. ner that it will in all material respects comply with the applicable international conventions which have been implemented in South Africa by 6 What procedures are there to obtain licences or other rights to law; operate particular routes? • it is fit and able to operate the international air service; A distinction is made between domestic and international air services. • it is in possession of a valid foreign licence which pertains to the inter- With regard to domestic air services, an application for a licence must national air service for which application is being made for a permit; be made on the prescribed form and accompanied by specified support- and ing documentation. The Air Services Licensing Council must consider and • the international air service complies with the prescribed make a determination on the application within 120 days from the date requirements. of the lodging of the application. Should the Council be satisfied that the applicant fulfils the statutory requirements a licence will be issued to the 10 Are there specific rules in place to ensure aviation services applicant. are offered to remote destinations when vital for the local With regard to international air services, an application for a licence economy? must be made on the prescribed form to the International Air Services No. Council. The applicant must specify the airports from and to which flights are undertaken as well as the frequency thereof. The Council must make a 11 Are charter services specially regulated? determination on the application within 120 days from the date of the lodg- No. However, the definition of air service includes charter services. ing of the application. Various factors are taken into account before grant- Therefore, charter services are regulated in terms of the licensing of air ing an air service licence, but of specific relevance is the effect the granting services. Air services are licensed with regard to the type or class of service of the licence will have on additional licensees and the benefits that may to be provided and the category of aircraft to be used in the provision of flow from operating more than one international air service over the same the service. route or in the same region. Where an air service provider wishes to operate additional routes other 12 Are airfares regulated and, if so, how? than those granted in terms of an air service licence, it will be required to Airfares are not directly regulated in terms of any aviation legislation. The submit an application to have the licence amended to include those addi- Competition Act as enforced by the Competition Commission plays a sig- tional routes. Such amendment will only be granted where the Council is nificant role in ensuring anti-competitive practices are not carried on in the satisfied that the statutory requirements have been met. aviation industry (see below), including direct and indirect price fixing or market division. 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular Aircraft routes? The Air Services Licensing Council is required to publish in the Government 13 Who is entitled to be mentioned in the aircraft register? Do Gazette the details of each application for an air service licence within 21 requirements or limitations apply to the ownership of an days after receipt thereof. After such publication, any other person may aircraft listed on your country’s register? request a copy of the application and may, within 21 days of publica- In order for an aircraft to be registered on the South African Civil Aircraft tion, make written representations to the Council. Only representations Register (SACAR), and a certificate of registration to be issued, the follow- founded on the applicant’s ability to satisfy the prescribed requirements ing requirements must be met: for a licence will be considered by the Council. These representations are • in the case of an individual, the applicant is a resident of South Africa; made available to the CAA and to the applicant. The CAA shall, and the • in the case of a juristic person, the applicant is registered and has its applicant may furnish any information relating to the application and the principal place of business in South Africa; and representations to the Council. If necessary, the Council may require the • the aircraft is not registered in any other state or territory. applicant and party making the representations to attend a meeting in order to hear arguments in favour or against the application. The meet- Registration of an aircraft and the issuing of a certificate of registration ing is open to the public and parties may be represented. Thereafter, the does not confer or imply ownership of the aircraft. Council will make a final determination on whether to grant the licence. The regulations provide for the circumstances in which the certificate of registration becomes invalid or must be cancelled. 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, There is no declared policy on airline access or competition. However, the how does it function? provisions of the Competition Act and its related case law are relevant (on The Convention on the International Recognition of Rights in Aircraft which, see below). Act No. 59 of 1993 incorporates the provisions of the Convention on the International Recognition of Rights in Aircraft into South African law and 9 What requirements must a foreign air carrier satisfy in order deals with matters connected with the hypothecation of aircraft and shares to operate to or from your country? in aircraft. The International Air Services Act provides that no person shall use or Where an aircraft or share in an aircraft is mortgaged by bond (as secu- attempt to use an aircraft to operate an international air service, except rity for a loan or other debt) this must be recorded in the South African under and in accordance with the terms and subject to the conditions of Mortgage Register (and not the deeds registry). an international air service licence granted in terms of the Act. However, Furthermore, in terms of the regulations, the holder of the certificate the Act also provides for certain exceptions where foreign-registered air- of registration in terms of the SACAR must, simultaneously with the reg- craft are used to conduct air service operations. In such a case, a licence is istration by the financier of the mortgage on the South African Mortgage not required if the air service is operated in terms of the International Air Register, apply for an amendment of its certificate of registration in order Services Transit Agreement, signed at Chicago on 7 December 1944, an to have the said certificate endorsed with the details of the mortgage, mort- air transport service agreement or a foreign licence. Where an exemption gagee, mortgagor and date of registration of the said mortgage.

176 Getting the Deal Through – Air Transport 2015 Shepstone & Wylie Attorneys SOUTH AFRICA

The right of preference given to a mortgagee by a registered mortgage be valid for the period determined by the Director, which period shall not of an aircraft or a share in an aircraft is not affected by the insolvency of the exceed five years from the date on which the licence is issued or renewed. mortgagor, or if the mortgagor is a company, by its being wound up, after the date of the record of the mortgage. 19 Is there a system of economic regulation of airports and, if so, The Convention on International Interests in Mobile Equipment Act 4 how does it function? of 2007 enacts the convention of the same name as well as the Protocol to The Airports Company Act provides for an independent statutory body the Convention on International Interests in Mobile Equipment on Matters known as the Regulating Committee, to oversee the economic regulation Specific to Aircraft Equipment into South African law. An international of ACSA. The primary objectives of the committee are to: interest is an interest in an aircraft object, as defined in the Convention • prevent ACSA from abusing its monopoly position, without placing and Protocol, which is: granted by the chargor under a security agreement; undue restrictions on its commercial activities; vested in a person who is the conditional seller under a title reservation • promote the reasonable interests and needs of the users of ACSA agreement; or vested in a person who is the lessor under a leasing agree- airports; ment. The agreement creating or providing for the interest must: be in • promote the safe, efficient, economical and profitable provision of writing; relate to an object of which the chargor, conditional seller or lessor facilities and to encourage timely improvement of facilities at ACSA has power to dispose; enable the object to be identified in conformity with airports so as to satisfy anticipated demand; and the Protocol; and in the case of a security agreement, enable the secured • ensure ACSA is able to finance its obligations and has a reasonable obligations to be determined, but without the need to state a sum or maxi- prospect of earning a commercial return. mum sum secured. Provided all requirements in terms of the Convention and the Protocol are complied with, an international interest in an aircraft In terms of the Airports Company Act, the Regulating Committee regulates object may be registered in the International Registry. ACSA in two ways. First, it is responsible for limiting aeronautical charges, which are regulated through the use of a price formula, CPI-X. These 15 What rights are there to detain aircraft, in respect of unpaid charges are determined for a period of five years, with a two-year overlap. airport or air navigation charges, or other unpaid debts? Second, the committee is responsible for prescribing service standards at Should an aerodrome not be paid the airport and air traffic service charges all of ACSA’s airports. due to it, it is entitled to exercise a common law lien over the aircraft of any operator that fails to pay. 20 Are there laws or rules restricting or qualifying access to The right to exercise a common law lien is also available to the repairer airports? of an aircraft in respect of unpaid repair costs. South Africa is a signatory to the International Air Services Transit Agreement and the Convention on International Civil Aviation, ‘which 16 Do specific rules regulate the maintenance of aircraft? provide for the aircraft of contracting states to pass over and land in the The regulations set out general maintenance rules relating to aircraft, territory of other contracting states, subject to the compliance of certain including provisions relating to aircraft maintenance schedules, manda- conditions’. tory inspections, airworthiness limitations, modifications to aircraft, test flights, recording of maintenance and release to service. 21 How are slots allocated at congested airports? The regulations also regulate the issuing of licences to South African South Africa follows the IATA Worldwide Scheduling Guidelines in respect aircraft maintenance engineers and the validation of foreign aircraft main- of its three coordinated airports, being OR Tambo International, Cape tenance engineers licences, as well as the approval and operation of air- Town International and King Shaka International. The Air Traffic and craft maintenance organisations (including foreign aircraft maintenance Navigation Services Company (ATNS) is the appointed and recognised organisations) for the maintenance of aircraft and aircraft components. IATA slot coordinator. ATNS’s primary responsibilities include, inter alia, allocating slots at the said coordinated airports, monitoring and enforcing Airports the use of slots at coordinated airports, facilitating the scheduling of slots 17 Who owns the airports? at scheduled facilitated airports and ensuring that the capacities of airports are not exceeded. South Africa’s nine principal airports are owned and operated by the Airports Company of South Africa (ACSA), as provided for by the Airport 22 Are there any laws or rules specifically relating to ground Companies Act. ACSA, while majority owned by the South African govern- handling? ment, is legally and financially autonomous. ACSA is responsible for the management, control, operation and maintenance of these aerodromes. Competition aspects are regulated by the Competition Act. There are no Private aerodromes, while privately owned, must be appropriately licensed specific rules or laws relating to ground handling, and ground handling and regulated in terms of the relevant legislation. companies are contractually governed by service level agreements implemented by ACSA. 18 What system is there for the licensing of airports? 23 Who provides air traffic control services? And how are they It is a requirement in terms of the CARS that all aerodrome operators be in regulated? possession of a valid aerodrome licence. All applications are to be made to the Director of Civil Aviation (the Director) in the prescribed form and are ATNS is responsible for the provision and maintenance of air navigation to be accompanied by: infrastructure. The objectives of ATNS are the acquisition, establishment, • an operations manual; development, provision, maintenance, management, control or opera- • plans for the aerodrome; tion of air navigation infrastructures, air traffic services or air navigation • written approval from the local government; services. ATNS is established and regulated by the Air Traffic Navigation • an environmental impact report; Services Company Act. It is also a prerequisite in terms of the CARS that • written approval from all interested governmental institutions; no person shall provide an air traffic service within any airspace in South • proof of financial capability; Africa, unless such a person holds a valid air traffic service licence and rat- • particulars of non-compliance with, or deviations from aerodrome ing that is compliant with the prescribed requirements and appropriate to design and airspace classification requirements; and the duties being performed. • payment of a prescribed fee. Liability and accidents On receipt of the application, the Director is required to publish the respec- 24 Are there any special rules in respect of death of, or injury to, tive details and particulars of the application in the Government Gazette passengers or loss or damage to baggage or cargo in respect of for commentary by any person, who is entitled to make written represen- domestic carriage? tations against or in favour of the application concerned. Once these for- No. However, provision for the consequences of these eventualities will malities have been completed, the Director may grant the application if normally be incorporated into the air ticket or airline or operator’s terms he is satisfied that the application satisfies the requirements and that the aerodrome concerned will not jeopardise aviation safety. The licence shall www.gettingthedealthrough.com 177 SOUTH AFRICA Shepstone & Wylie Attorneys and conditions of contract. These terms and conditions may be subject to Competition law consumer legislation. 28 Do sector-specific competition rules apply to aviation? If not, do the general competition law rules apply? 25 Are there any special rules about the liability of aircraft operators for surface damage? South Africa does not have aviation sector-specific competition law rules. The Competition Act 89 of 1998 generally regulates competition in In terms of the Civil Aviation Act, the registered owner of an aircraft is South Africa. The Competition Act and associated jurisprudence apply to strictly liable in respect of material damage or loss caused by an aircraft aviation. in flight, taking off or landing, or by any person in any such aircraft, or by Section 6 of the Competition Amendment Act 1 of 2009 came into any article falling from any such aircraft to any person or property on land effect on 1 April 2013. Section 6 empowers the Competition Commission or water. to initiate and conduct market inquiries. A market inquiry is an investiga- Liability for such damage or loss is specifically excluded where the per- tion into a sector or market as a whole, in the absence of a complaint about son who suffered the damage or loss caused or contributed to it negligently the conduct of any specific firm. The Competition Commission can initiate or wilfully. a market inquiry if it has reason to believe that any feature or combina- The owner of an aircraft can seek to recover damages where the dam- tion of features of a market for any goods or services prevents, distorts or age or loss was caused solely by the wrongful or negligent action or omis- restricts competition within that market or in order to achieve the purposes sion of someone other than the owner or his or her employee. of the Competition Act. The Competition Commission has wide investi- It is also relevant that the Civil Aviation Act requires a registered gatory powers in relation to market inquiries, including the right to sum- owner or operator of an aircraft to have the prescribed insurance for any mons market participants to provide information or answer questions. damage or loss that is caused by an aircraft to any person or property on Information provided in a market inquiry may be used by the Competition land or water. Commission to initiate a complaint against any firm for further investigations on any prohibited practices. 26 What system and procedures are in place for the investigation of air accidents? 29 Is there a sector-specific regulator or are competition rules The Aviation Safety Investigation Board (ASIB), established in terms of the applied by the general competition authority? Civil Aviation Act, investigates all aircraft accidents or aircraft incidents The CAA regulates the aviation sector, primarily in relation to safety and occurring in or over South Africa or involving South African aircraft. Part security. It does not regulate the sector in relation to competition law. 12 of the CARS deals substantially with the reporting and investigation pro- Competition law and rules are enforced by three statutory bodies – the cedures relating to aircraft accidents and incidents. Competition Commission (with mainly investigative and some adjudica- In essence, the procedure for investigations, as provided for in the tive powers), the Competition Tribunal (with adjudicatory and inquisi- CARS, is as follows: torial powers and the power to hear appeals and reviews in respect of • all accidents or incidents must be reported to the Director; Competition Commission decisions) and the Competition Appeal Court. • on notification of an accident or incident, an investigator in charge is In certain circumstances, appeals also lie to the Supreme Court of Appeal appointed to investigate the accident or incident; and the Constitutional Court. • on completion of the investigation, the investigator in charge must make a report to the Director; 30 How is the relevant market for the purposes of a competition • after considering any comments, the Director will prepare a final assessment in the aviation sector defined by the competition report; authorities? • an appeal against the findings as detailed in the final report may be made by an interested person; and In South Africa, relevant markets are generally defined with reference to • the Director may confirm, vary or set aside the findings. the products or services sold (or bought) in that market and the geographic area within which those products or services are sold. Defining the rel- 27 Is there a mandatory accident and incident reporting system evant market is usually a complex economic inquiry but, in essence, the and, if so, how does it operate? market is determined by the degree of substitutability between products/ services and how easy or difficult (or expensive) it would be for consum- Yes. In terms of Part 12 of the CARS, the pilot in command of an aircraft ers to purchase the same (or substitutable) products or services from other involved in an accident or incident within South Africa, or if he or she is geographic areas. killed or incapacitated, a flight crew member, or if there are no surviving South African competition authorities have not dealt with many avia- flight crew members or if they are incapacitated, the operator or owner, tion-related cases and have therefore not yet analysed the relevant markets as the case may be, shall, as soon as possible but at least within 24 hours in significant detail. In the cases they have considered, the relevant mar- since the time of the accident, notify the Director, an air traffic service unit kets were defined with reference to routes (city pairs), flight times (whether (ATSU) or the nearest police station, of such accident. If an ATSU or police passengers were time-sensitive), type of passenger service (scheduled or station is notified of an accident they must immediately on receipt of the non-scheduled and domestic or international) and air freight and cargo notification, notify the Director and where such accident occurs on an aer- services. The Competition Commission has also informally indicated to odrome, the aerodrome manager. the authors that it would look to international precedents in considering The notification must contain the following information: market definition in aviation-related markets. • the type, model, nationality and registration marks of the aircraft; • the name of the owner or operator; 31 What are the main standards for assessing the competitive • qualification of flight crew members; effect of a transaction? • the date and time of the accident or incident; • the last point of departure and point of intended landing of the aircraft; When assessing a transaction for the purposes of merger approval, com- • the location of the accident or incident with reference to an easily petition authorities in South Africa must determine, initially, whether the identifiable geographical point and, if known, with reference to lati- transaction is likely to substantially prevent or lessen competition in the tude and longitude, the number of: relevant market and, thereafter, whether the transaction can or cannot be • flight crew members and passengers aboard, killed or seriously justified on public interest grounds. injured; and To determine whether a transaction is likely to substantially prevent • other persons killed or seriously injured; or lessen competition in the relevant market, competition authorities must • the nature of the accident or incident and extent of damage to aircraft assess the strength of competition in that market and the probability of as far as is known; cooperative behaviour between competitors after the merger. They do so • the terrain characteristics of the area where the accident or incident by considering certain factors about the relevant market. Those factors occurred; include the actual or potential level of import competition, ease of entry • details of any dangerous goods or hazardous substances known to be into the relevant market, the level of concentration and history of collu- on board the aircraft; and sion in the market, the degree of countervailing power in the market, the • any other relevant information. dynamic characteristics of the market such as growth, development and product differentiation and the nature and extent of vertical integration

178 Getting the Deal Through – Air Transport 2015 Shepstone & Wylie Attorneys SOUTH AFRICA within the market, whether the business of one of the merging parties is ACSA, ATNS, South African Airways and the CAA are listed in terms likely to fail but for the merger and whether the merger will result in the of the PFMA and their financial capabilities are therefore regulated in removal of an effective competitor. terms of thereof. To determine whether a transaction can or cannot be justified on pub- The Aviation Safety Investigation Board and the Civil Aviation lic interest grounds, the Competition Act requires competition authori- Authority Board, which have been established under the Civil Aviation Act, ties to consider the effect that the merger is likely to have on a specific must also comply with the PFMA. industrial sector or region, employment, the ability of small or black- owned businesses to become competitive and the ability of South African 34 What are the main principles of the state aid rules applicable industries to compete internationally. The cases to date indicate that to the aviation sector? this list is not exhaustive. Consent orders concluded by the Competition Not applicable. Commission have considered other public interest issues and suggest that, in the Competition Commission’s view, the statutory list of those issues is 35 Are there exemptions from the state aid rules or situations in merely a starting point. which they do not apply? Competition authorities may also consider whether the effect of a Not applicable. transaction amounts to a prohibited practice. Some prohibited practices (including price fixing, market division, tender collusion, minimum resale 36 Must clearance from the competition authorities be obtained price maintenance, excessive pricing by a dominant firm and a dominant before state aid may be granted? firm’s refusal to grant a competitor access to an essential facility when it is economically feasible to do so) are absolutely prohibited, regardless of Not applicable. whether they have anti-competitive effects. Other prohibited practices (including generally anti-competitive agreements between competitors 37 If so, what are the main procedural steps to obtain clearance? or firms in a vertical relationship, exclusionary conduct by dominant firms Not applicable. and price discrimination by dominant firms) are prohibited only if they give rise to anti-competitive effects that are not outweighed by efficiency, 38 If no clearance is obtained, what procedures apply to recover technological or other pro-competitive gains. In these circumstances, the unlawfully granted state aid? cases have held that an anti-competitive effect generally refers to exploita- Not applicable. tion of consumers or foreclosure of a market to competitors. Miscellaneous 32 What types of remedies have been imposed to remedy concerns identified by the competition authorities? 39 Is there any aviation-specific passenger protection Transactions that are assessed for merger approval and that give rise to legislation? competition law concerns may be prohibited or conditionally approved No. However, the Civil Aviation Act and the CARS indirectly provide for (conditions may include anything competition authorities consider appro- the protection of passengers, specifically in regard to aircraft safety. priate to remedy their concerns and typically involve the divestiture of part Furthermore, South Africa has ratified the Montreal Convention in of the business, supply undertakings and restrictions on merger-related terms of the Carriage by Air Act No. 17 of 1946. This Act specifically deals retrenchments). with damages and loss to person and baggage in relation to international The remedies imposed in relation to prohibited practices include carriage. administrative penalties of up to 10 per cent of a firm’s turnover in, into or Also, the general law relating to consumer protection and contract will from South Africa, interdicts stopping the prohibited practice, orders relat- apply to contracts of carriage between air service operators and passen- ing to the supply of goods or services or access to essential facilities and gers, particularly the Consumer Protection Act. declarators that agreements or part thereof are void. 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 Yes. It is a statutory requirement that all air service licences are conditional financial support to companies by the government or upon the licensee being insured as prescribed in the Regulations to the government-controlled agencies or companies (state aid) in Air Services Licensing Act and International Air Services Act, whichever the aviation sector? If not, do general state aid rules apply? is applicable. The amount of insurance cover required is determined in relation to the class and type of air service and the category of aircraft as No. However, the Public Finance Management Act No. 1 of 1999 (PFMA) provided for in the licence. regulates financial management in national and provincial government.

Vanil Bagwandeen [email protected] Kamiel Rajah [email protected] Sally Mashiane [email protected] Jennifer Finnigan [email protected]

24 Richefond Circle Tel: +27 31 575 7000 Ridgeside Office Park Fax: +27 31 575 7100 Umhlanga Rocks 4319 www.wylie.co.za South Africa

www.gettingthedealthrough.com 179 SOUTH AFRICA Shepstone & Wylie Attorneys

41 What legal requirements are there with regard to aviation on board an aircraft and making certain false communications and acts security? related to restricted areas or aviation facilities. The acts are declared to be The Civil Aviation Act requires the DOT to develop a National Aviation offences and punishable by fine or imprisonment. Security Programme in compliance with Annex 17 to the Convention on International Civil Aviation. Furthermore, operators of designated air- 42 What serious crimes exist with regard to aviation? ports, the Air Traffic and Navigation Services Company Limited, any air South Africa is party to several international conventions including the carrier and any other aviation participants designated by the minister are Convention for the Suppression of Unlawful Seizure of Aircraft, the required to have a national aviation security programme. Failure to comply Convention on Offences and Certain Other Acts Committed on Board with the obligation is an offence punishable by a fine or imprisonment, or Aircraft, the International Convention Against the Taking of Hostages, both. the Protocol for the Suppression of Unlawful Acts of Violence at The content of what should be included in any such security pro- Airports Serving International Civil Aviation and the Convention for the gramme is provided for in the Civil Aviation Security Regulations of 2011. Suppression of Unlawful Acts against the Safety of Civil Aviation. The Civil Aviation Act provides for the prohibition of various other acts In order to give effect to these conventions, the Protection of that are likely to endanger the safety of the aircraft. The prohibitions relate Constitutional Democracy Against Terrorist and Related Activities Act No. to actions on board an aircraft, destroying or damaging an aircraft, plac- 33 of 2004 was promulgated. This Act creates specific offences relating to ing dangerous substances or devices likely to destroy or damage an aircraft terrorism and hijacking of aircraft.

180 Getting the Deal Through – Air Transport 2015 Baumgartner Mächler SWITZERLAND

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 they are operated. In addition, maintenance companies for aircraft and Airports require the allocation of slots by Slot Coordination Switzerland,

www.gettingthedealthrough.com 181 SWITZERLAND Baumgartner Mächler a non-profit organisation, in accordance with the procedures established 10 Are there specific rules in place to ensure aviation services in the Worldwide Slot Guidelines (WSG) of the International Air Transport are offered to remote destinations when vital for the local Association (IATA) and the provisions of EC Regulation No. 95/93. economy? Switzerland may impose public service obligations with respect to sched- 5 What requirements apply in the areas of financial fitness and uled air services on routes that are vital for the economic development of nationality of ownership regarding control of air carriers? the region they serve. EC Regulation 1008/2008 contains specific rules. Under EC Regulation No. 1008/2008 and national law, the applicant must prove to FOCA that at any time in the 24-month period beginning with the 11 Are charter services specially regulated? start of operations, it can meet its actual and potential obligations as estab- There is no special regulation of charter services as regards operations lished under realistic assumptions. Additionally, the applicant must show within the EU and Switzerland. its ability to meet its fixed and operational costs for the first three months An air carrier incorporated outside the EU that plans to operate non- without taking into account any income from its operations. Thereafter, scheduled services to and from Switzerland is required to apply for an oper- the carrier must be able to demonstrate to FOCA that it can meet its actual ating permit (a route licence is not necessary). FOCA issues such permits and potential obligations over a 12-month period. for third and fourth freedom flights. For routes within the EU, in accordance with EC Regulation No. If the carrier wishes to operate fifth freedom traffic rights, it is also 1008/2008, the holder of an operating licence must at all times be able to required to apply for approval. FOCA approval is subject to the applicant demonstrate to FOCA that it is owned directly or through majority owner- providing a declaration of reciprocity issued by the national Civil Aviation ship by either EU member states or Switzerland or nationals of either EU Authority of its home country. member states or Switzerland. It must also be effectively controlled by such states or nationals. 12 Are airfares regulated and, if so, how? With respect to scheduled air services outside the EU and Switzerland, Under EC Regulation No. 1008/2008, carriers are free to set airfares. the conditions agreed upon in the relevant bilateral air services agree- Regulatory approval is not required but a notification might be. ment apply. Traditionally, most air service agreements require that the Non-EU scheduled air services are subject to the conditions agreed designated air carriers must be substantially owned and effectively con- upon in the relevant bilateral air services agreements. According to the trolled by the respective states or their citizens. These ownership and Swiss Federal Aviation Law, FOCA must be notified of airfares. control rules, however, have been an issue in the context of multinational There is no notification requirement for the fares of charter services. mergers and takeovers of airlines, for instance in Lufthansa’s takeover of The final price to be paid by the customer for air services should always Swiss International Airlines. Thus, many air services agreements involv- be indicated inclusive of all taxes, charges and fees. ing Switzerland now contain a clause that merely requires a designated air carrier to be incorporated and to have its principle place of business in the Aircraft country of designation. 13 Who is entitled to be mentioned in the aircraft register? Do 6 What procedures are there to obtain licences or other rights to requirements or limitations apply to the ownership of an operate particular routes? aircraft listed on your country’s register? An air carrier holding an operating licence issued by an EU member state Both the owner and operator are mentioned in the aircraft register, but the no longer requires separate permission for flights between the EU and entry does not constitute ownership in the legal sense. Registration of own- Switzerland (EC Regulation No. 1008/2008). Cabotage flights within ership with an affect on third parties must be done in the aircraft ownership Switzerland currently fall outside the EU–Switzerland Agreement and and mortgage register (see question 14). Lessees and mortgagors are also require prior permission. Negotiations for the inclusion of cabotage in the recorded in such register. EU–Switzerland Agreement began in November 2011. An aircraft can only be registered, if it is owned by Swiss nationals, com- An air carrier of an EU member state that plans to operate flights panies with their seat in Switzerland, Swiss public corporations and agen- between Switzerland and a country outside the EU is required to apply for cies, or Swiss private associations (if two-thirds of their members are Swiss the exercise of the respective traffic rights (the fifth freedom of the air, con- nationals). Foreign individuals are entitled to own a Swiss aircraft, if they cerning traffic to and from non-EU countries). have a permanent residence permit for one or more years. Foreigners who FOCA approval is subject to the applicant providing a declaration of do not live in Switzerland and foreign companies may receive equal treat- reciprocity issued by the national Civil Aviation Authority of the appli- ment through bilateral treaties. Based on the EU–Switzerland Agreement, cant’s home country. this is the case for citizens and companies of EU member states. An air carrier incorporated outside the EU that plans to operate scheduled services to and from Switzerland is required to apply for an operating 14 Is there a register of aircraft mortgages or charges and, if so, permit and a route licence. FOCA will grant the operating permit provided how does it function? that the air carrier is duly authorised by the authorities of its home country Apart from the aircraft register, Switzerland also maintains an aircraft to operate international services. The route licence is granted according to ownership and mortgage register (in compliance with the 1948 Geneva the conditions agreed upon in the relevant bilateral air services agreement. Convention on the International Recognition of Rights in Aircraft). In this register, mainly ownership and mortgages are recorded, but restraints on 7 What procedures are there for hearing or deciding contested disposal or leasing and charter agreements (with duration of at least six applications for licences or other rights to operate particular months) may also be registered. Lessors and charterers may register their routes? agreements in the aircraft ownership and mortgage register, but they are If FOCA rejects an application, the applicant may appeal to the Federal not obliged to do so. The entry would, however, affect third parties and an Administrative Court. Competitors may also be heard under certain acquirer of an aircraft would also step into those existing leasing agree- circumstances. ments recorded in such register. The status of a mortgage relates to the day of registration and the 8 Is there a declared policy on airline access or competition and, entries in the register are deemed to be publicly known. There are also if so, what is it? statutory liens on the aircraft for salvage compensations and extraordinary The Swiss Federal Council published an aviation policy report in 2004, in expenses indispensable for the prevention of aircraft. They must be reg- which the Federal Council stressed the importance of direct air transport istered within three months after the lien has come into existence, other- connections to European and global centres and the need to strengthen the wise, the liens will extinguish. competitiveness of Swiss air transport companies. 15 What rights are there to detain aircraft, in respect of unpaid 9 What requirements must a foreign air carrier satisfy in order airport or air navigation charges, or other unpaid debts? to operate to or from your country? Normally there are no rights to detain aircraft in respect of unpaid airport See questions 4 and 6. charges, air navigation charges or other unpaid debts. Switzerland is a signatory to the 1933 Rome Convention on Precautionary Arrest of Aircraft,

182 Getting the Deal Through – Air Transport 2015 Baumgartner Mächler SWITZERLAND which, in most cases, prevents precautionary attachment or detention of coordinated airports, such as Zurich and Geneva (but not Basel), a coor- aircraft. Exceptions apply with regard to operating private (non-commer- dinator is appointed, who must act in an independent, neutral and non- cial) and certain non-scheduled flights. discriminatory manner. In Switzerland, the coordinator is a non-profit organisation by the name of Slot Coordination Switzerland (SCS). SCS is 16 Do specific rules regulate the maintenance of aircraft? financed through Swiss airports (49 per cent), airlines holding a Swiss AOC Regulations regarding maintenance, repair and overhaul are contained in (49 per cent) and FOCA (2 per cent). Annex 8 to the Chicago Convention, in publications of EASA, as well as The core of the slot allocation process is the use of historical prec- in national regulations. The most relevant legislation in that regard is the edence. Incumbent airlines have ‘grandfather rights’ giving them prefer- above-mentioned EC Regulation No. 2042/2003 that lays down techni- ential rights to slots, provided that at least 80 per cent of the slots were cal requirements and administrative procedures for ensuring continuous operated by the airline (‘use it or lose it’ rule). Some preference is also airworthiness of aircraft including any component for installation thereon given to new entrant airlines that may obtain slots from a slot pool, con- which are registered in a member state of EASA, including Switzerland. sisting of unused and newly created slots. Airlines may transfer slots from Maintenance organisations need approval from FOCA. Certifying staff one route to another route (operated by the same airline). Airlines are also must also be qualified. Organisations involved in the training of personnel, permitted to exchange slots on a one-to-one basis. Moreover, slots may be such as certifying staff, must also be approved by FOCA. transferred between parent and subsidiary companies and between subsidiaries, and in the case of a takeover when the slots are directly related to Airports the airline taken over.

17 Who owns the airports? 22 Are there any laws or rules specifically relating to ground Most larger airports in Switzerland are either directly or indirectly state- handling? owned. For instance, Geneva Airport is organised as a public agency Ground handling services are regulated on the basis of EC Directive 96/67, owned by the canton of Geneva. which essentially provides that at larger airports access to the market by Basel-Mulhouse-Freiburg Airport is located completely on French suppliers of ground handling services must be free, and that for certain soil, but jointly operated by Switzerland and France. It is organised as a categories of services the number of suppliers should be at least two. At state-owned public enterprise. least one of these suppliers should be independent from the airport or the Zurich Airport is partly privatised. Flughafen Zurich AG is both owner dominant airline at that airport. Similar rules apply to self-handling, which of the airport infrastructure and operator of Zurich Airport and is thus means that airlines provide the services in question for themselves: there responsible for managing Zurich Airport. Shares of Zurich Airport are should be at least two airlines admitted for these services. listed on the Swiss Stock Exchange (SIX); the major shareholders are the canton and (to a lesser extent) the city of Zurich. 23 Who provides air traffic control services? And how are they regulated? 18 What system is there for the licensing of airports? As mentioned above, air traffic control services are provided by Skyguide Public airports need a licence, which may be granted by DETEC. The Swiss Air Navigation Ltd. Skyguide is a non-profit public limited company licence grants the right to operate the airport commercially in accordance that is over 99 per cent owned by the Swiss Federation. Ownership is exer- with the Sector Plan Infrastructure of Aviation (SIL process), and to impose cised through DETEC, which must approve strategic goals, board appoint- airport charges. The licensee must provide the necessary infrastructure ments and fees, which are paid by the users of Skyguide’s services. and must ensure that the airport is operated in a safe and secure manner. In FOCA regulates the safety management of Skyguide and DETEC is addition, the licensee has the duty to open the airport to all aircraft, regard- empowered to regulate fees. less of whether aircraft are operating nationally or internationally, subject to certain exceptions. Liability and accidents Non-public airports must be approved by FOCA, which defines the rights and duties that are attached to the operation of these airports. 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 19 Is there a system of economic regulation of airports and, if so, domestic carriage? how does it function? In the case of EU and Swiss air carriers, domestic carriage is governed by EC Swiss airport authorities levy charges for the use of the airport, for instance Regulation No. 2027/97 as amended by Regulation No. 889/2002. These landing charges, noise charges (according to noise classes), pollution Regulations implement provisions of the Montreal Convention (which charges (according to pollution emission classes), parking charges, pas- applies to international carriage) on air carrier liability with respect to car- senger charges, cargo charges and security charges. Charges must not be riage of passengers and their baggage. According to these rules, liability of discriminatory and, in principle, users shall bear their share of the cost of the carrier for bodily injury or death of a passenger is premised upon there having access to the airport, as provided for in article 15 of the Chicago being an accident on board the aircraft or in the course of embarking or Convention and in ICAO’s policies on airport charges, as well as under disembarking. The carrier is strictly liable for the first 131,100 special draw- national laws. ing rights (SDR). Above that amount, the carrier can defend itself against a claim by proving that it was not negligent or otherwise at fault. For loss or 20 Are there laws or rules restricting or qualifying access to damage to baggage, the carrier is liable for up to 1,131 SDR. airports? For cases that fall outside the scope of EC Regulation Nos. 2027/97 and 889/2002, the Swiss Ordinance on carriage by air applies the provisions of Specific operating regulations apply for all Swiss airports. the Montreal Convention to domestic carriage. As regards air traffic services to and from the EU, access to Swiss air- In the case of loss or damage to cargo, the carrier’s liability is, in prin- ports may be restricted in accordance with EC Regulation No. 1008/2008, ciple, limited to a sum of 19 SDR per kilogram. which states, as mentioned above, that the exercise of traffic rights may be conditioned, limited or refused, when serious congestion or environmen- 25 Are there any special rules about the liability of aircraft tal problems exist, in particular when other modes of transport provide operators for surface damage? satisfactory levels of service. The operation of Zurich Airport is also affected by controversial uni- Pursuant to the Swiss Aviation Act, the aircraft operator is strictly liable lateral German ordinances, which prohibit overflight of southern German without limitation for all surface damage caused by the aircraft. If the air- airspace during certain operating hours. craft was used by a third party without the permission of the operator, such third party will be liable. Nevertheless, the operator (or rather its insurer) 21 How are slots allocated at congested airports? will still have to provide the minimum insurance coverage, which depends on the maximum take-off weight of the aircraft and is laid down in EC Slots are allocated in accordance with the procedures established in IATA- Regulation No. 785/2004. WSG and EC Regulation No. 95/93. Airports may be designated as ‘schedules facilitated’ or ‘coordinated’, depending on the level of congestion. At

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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 Clearance need not be obtained from the competition authorities before authorities? state aid is granted, but the Swiss authorities and the European Commission The same principles apply in the aviation sector as in other industry sec- review matters to which the prohibition of state aid of the EU–Switzerland tors. In order to determine the affected markets, it is necessary to first Agreement may apply. determine the relevant markets. The relevant market is made up of the The Swiss Competition Commission examines whether the follow- product market and the geographic market. ing are compatible with the provisions on state aid of the EU–Switzerland The product market consists of all the products or services substitut- Agreement: able, due to their characteristics and use, to the product or service under • the drafts of decrees of the Swiss Federal Council that favour certain consideration. The geographical market corresponds to the territory in companies or manufacturing branches, in particular services and which the potential partners of the operation are engaged. shareholdings of airlines; and • similar support measures taken by cantons and communes or other 31 What are the main standards for assessing the competitive Swiss bodies or institutions subject to public law or of mixed economic effect of a transaction? structure. Agreements that significantly affect competition in the relevant market and are not justified on the grounds of economic efficiency and all agree- Switzerland and the EU ensure that the other party is informed of any pro- ments that lead to the suppression of effective competition are unlawful. cedure initiated to guarantee respect of the provisions of the agreement Practices of enterprises that have a dominant position are deemed and may submit observations before a final decision is taken. Upon request unlawful when such enterprises, through the abuse of their position,

184 Getting the Deal Through – Air Transport 2015 Baumgartner Mächler SWITZERLAND

Update and trends The 1999 EU–Switzerland Agreement on Air Transport forms part of On 9 February 2014, Swiss voters narrowly approved a referendum seven sectoral agreements (known in Switzerland as the Bilaterals I), to reintroduce quotas on the number of foreigners allowed to live and which were negotiated and concluded between the EU and Switzerland work in Switzerland. Following the referendum, the Swiss government as a package deal. The agreements are linked by a guillotine clause, must draft implementing legislation within three years. While the stipulating that they can only remain effective together. If one of the government has some flexibility, it is possible that Switzerland will seven agreements were to be terminated, all others would also cease to breach the EU–Switzerland Agreement on the Free Movement of have effect six months after receipt of the termination notice. Persons, thereby risking the termination of all sectoral agreements One of the agreements connected by the guillotine clause to made in 1999 (including the air transport agreement). Such a move the agreement is the 1999 EU–Switzerland Agreement on the Free would have far-reaching consequences for Switzerland’s relations Movement of Persons, providing for the right of EU and Swiss citizens to with the European Union – and would lead to turbulent times in the air freely choose their place of work and place of domicile in the territories transport sector. of the contracting parties. If this agreement is terminated, the EU– Switzerland on Air Transport would also cease to apply.

by either Switzerland or the EU, the joint committee set up under the 40 Are there mandatory insurance requirements for the agreement discusses appropriate measures. operators of aircraft? EC Regulation No. 785/2004 (as amended by EU Regulation No. 285/2010) 37 If so, what are the main procedural steps to obtain clearance? establishes minimum insurance requirements for air carriers and aircraft See question 36. operators. The minimum insurance coverage for liability with respect to passengers is 250,000 SDR per passenger, for liability with respect to 38 If no clearance is obtained, what procedures apply to recover baggage 1,131 SDR per passenger, and for liability with respect to cargo unlawfully granted state aid? 19 SDR per kilogram in commercial operations (subject to exceptions for See question 36. non-commercial operations by aircraft with a maximum take-off weight of 2,700kg or less). In respect of liability for third parties, the minimum Miscellaneous insurance cover varies according to the maximum take-off weight of the aircraft concerned. 39 Is there any aviation-specific passenger protection legislation? 41 What legal requirements are there with regard to aviation EC Regulation No. 261/2004 provides for compensation and assistance security? for passengers that are denied boarding or experience cancellation or long Annex 17 to the Chicago Convention and EC Regulation No. 300/2008 delays of their flight. It applies: on civil aviation security apply in Switzerland. The main objective is to • to passengers departing from the EU including Switzerland; and establish and implement measures to prevent acts of unlawful interfer- • to passengers departing from a third country to the EU including ence against civil aviation. The basic standards for protecting civil aviation Switzerland, if the operating carrier is licensed based on EC Regulation cover: airport security; demarcated areas of airports; aircraft security; pas- No. 1008/2008, unless the passengers received benefits or compensa- sengers and cabin baggage; hold baggage; cargo and mail; air carrier mail tion and were given assistance in that third country. and air carrier materials; in-flight and airport supplies; in-flight security measures; staff recruitment and training; and security equipment. There EC Regulation No. 1107/2006 on rights of disabled persons and persons are, in addition, detailed Swiss national laws and regulations with regard with reduced mobility is in force in Switzerland. It applies to passengers to security issues. with disabilities or reduced mobility departing from, on transit through, or on arrival at an airport situated in the EU including Switzerland. Articles 3 42 What serious crimes exist with regard to aviation? (prevention of refusal of carriage), 4 (derogations, special conditions and information) and 10 (assistance by air carriers) also apply to passengers Switzerland implemented the provisions of the 1963 Tokyo Convention on departing from a third country to the EU including Switzerland, if the oper- Offences and Certain Other Acts Committed on Board Aircraft, the 1970 ating carrier is licensed based on EC Regulation No. 1008/2008. Hague Convention for the Suppression of Unlawful Seizure of Aircraft and The Federal Act on package holidays contains provisions on the lia- the 1971 Montreal Convention for the Suppression on Unlawful Acts. The bility of tour organisers and their obligation to secure the repayment of Swiss Federal Aviation Act contains a number of aviation-related sanc- prepaid charges and to provide for the return journey in case they declare tions, including the endangering of life and property by disregarding air themselves bankrupt. The Act implements EC Directives 90/314 on pack- traffic rules. The Swiss Penal Code, however, contains sanctions for most age travel, package holidays and package tours and 93/13 on unfair terms serious aviation-related crimes, for example aircraft hijacking, hostage- in consumer contracts. taking, serious interference with public traffic, causing an explosion and EC Regulation No. 80/2009 on a code of conduct for computerised endangering life or property by using explosives or toxins. reservation systems also applies in Switzerland.

Andreas Fankhauser [email protected]

Löwenstrasse 2 Tel: +41 44 215 44 77 PO Box 2121 Fax: +41 44 215 44 79 8022 Zurich www.bmlaw.ch Switzerland

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Thailand

Alan Polivnick and Joe Osgerby-Lacey Watson, Farley & Williams (Thailand) Ltd

General licence (AOL) under a DCA 2008 announcement. Although it is necessary for an air operator to acquire both licences before they are permitted to 1 Which bodies regulate aviation in your country, under what begin operating, the DCA will usually issue both the AOC and AOL at the basic laws? same time where an operator has applied for both simultaneously. Aviation is regulated by the Civil Aviation Board (CAB) and the Department Access to international air transport services is also governed by air of Civil Aviation (DCA). The CAB operates under the supervision of the services agreements, which are usually restricted to operators designated Ministry of Transport, and its primary functions are to consider and imple- as Thai or majority Thai-owned. A number of foreign airlines operate ser- ment policies, rules and procedures for aviation and to issue regulations vices to and from Thailand using fifth freedom access rights. When the in accordance with the Air Navigation Act 1954 (ANA) and the Chicago ASEAN Open Skies Agreement comes into force, access to the market will Convention. The role of the DCA is more administrative; it is responsible be liberalised for ASEAN carriers operating services between ASEAN capi- for coordinating with both domestic and foreign public or private bodies in tal cities. While the ANA states that Thailand intends to sign by 2015, the relation to aviation and civil aviation security. The ANA regulates civil air Agreement will not come into force until sometime later once it has been navigation and is responsible for implementing the Chicago Convention. ratified by all the ASEAN member countries.

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? The DCA is the body responsible for assessing financial fitness and compli- The ANA is the primary Act dealing with aviation safety regulations, and ance with ownership requirements under the 2008 DCA announcement on they are broadly covered in the following categories: operators (registra- issuing an AOL. tion and making of the aircraft); aircraft (aircraft type, aircraft production, and airworthiness control (standards for aircraft, type certification, and production certification)); operations (airworthiness certificate); crew Financial fitness (personnel); maintenance (repair station); and, air traffic control under the The minimum required registered capital is: DCA supervision and approval. • 25 million baht for non-scheduled fixed-wing air services (more than In addition to the regulations contained in the ANA, it is necessary for one engine); operators working in the aviation sector to comply with the safety provisions • 10 million baht for non-scheduled fixed-wing air service (one engine); as set out in CAB Regulation No. 86, which contains ICAO Annex 6 and the • 200 million baht for scheduled air services for fixed-wing; and amendment to Annex 6 dealing with operators, aircraft, operations, crew, • 35 million baht for scheduled fixed-wing air services (maximum maintenance and air traffic control. weight not more than 5,700kg).

3 What safety regulation is provided for air operations that do The registered capital must be paid up in full at the time of the application. not constitute public or commercial transport and how is the distinction made? Nationality of ownership and control No bearable shares are to be issued and not less than 51 per cent of shares The ANA defines a ‘transport aircraft’ as an aircraft used or intended to must be held, separately or in any combination, by the following: be used for transporting goods or passengers for the purpose of remunera- • Thai nationals; tion. A ‘private aircraft’ is defined as an aircraft used or intended to be used • Thai government agencies; or without remuneration. There are regulations, pursuant to the ANA, for • companies in which Thai government agencies hold more than a 51 per private aircraft, that cover a broad range of issues but do not deal specifi- cent share. cally with safety, as well as provisions relating to ultralight aircraft in CAB Regulations Nos. 43 and 72. In addition, aircraft used in military service, A majority of board members of the company must be Thai. Foreigners are police service or any other administrative service do not fall within the prohibited from operating domestic air transport by the Foreign Business scope of transport or private aircraft as defined in the ANA and thus safety Act 1999 unless specific permission is granted by the Commerce Minister requirements for these types of air operators are addressed separately. and supported by the appropriate cabinet resolution. 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? Permission to operate a public utility, which includes air transport, is When applying for the AOC and AOL, an applicant is required to submit its required from the Minister of Transport. Moreover, the Foreign Business business plan, a feasibility study and copies of their financial statements to Act 1999 restricts access to domestic air transport operations to Thai the DCA. For Thai air operators applying to operate international routes, nationals and to companies that are 51 per cent Thai-owned, except where an application must be submitted to the director of the DCA. Negotiation specific permission is granted by the Minister of Commerce and the of international routes is undertaken by the Ministry of Foreign Affairs Cabinet. with input from the DCA to determine route allocation based on the eco- The ANA designates the DCA as the regulator, giving it the responsibil- nomic prospects for that destination or destinations. To operate particular ity to assess applications to become an air operator in Thailand. To become international routes, the Ministry of Transport applies the following pro- an air operator, the applicant must obtain an air operator’s certificate cedures. Where an international air services agreement between Thailand (AOC), pursuant to CAB Regulation No. 85, together with an air operator’s

186 Getting the Deal Through – Air Transport 2015 Watson, Farley & Williams (Thailand) Ltd THAILAND and the destination does not currently exist for scheduled air services, the October 2009, Thai operators that initiate scheduled and non-scheduled applicant must submit their request to the DCA, which in turn will submit air services on new routes can also be granted exemptions for take-off, the proposal to the Committee on Air Services. Where the requested route landing and maintenance fees. does not correspond with the provisions of an existing air services agreement, the applicant must submit its request to the DCA for approval. 11 Are charter services specially regulated? No. In an attempt to promote charter flights while minimising the negative 7 What procedures are there for hearing or deciding contested impact on scheduled services, the DCA have not regulated charter services applications for licences or other rights to operate particular but have issued guidelines for both passenger and cargo charter flights. routes? These deal primarily with the grounds on which passenger and charter The DCA is responsible for allocating routes to applicants and when mak- flights will be approved. However, the Ministry of Transport is currently ing their decision will take a number of different factors into consideration: preparing a draft regulation that will set out the provisions for passenger • the readiness and suitability of the air operations (number of aircraft, rights in relation to flight delays, cancellations, denied boarding and for frequencies, type of aircraft, aircraft use); disabled passengers and unaccompanied minors, which will apply to both • the history of air services (amount of previously allocated rights, domestic and international charter services. amount of actual services comparing to existing allocation rights, and consistency of services operation); 12 Are airfares regulated and, if so, how? • the feasibility study supplied by the applicant (market size, strategy, Yes domestic air services are regulated in Thailand. As commercial air five years of services profits); the applicant’s financial statements (cap- transport is a public service, the determination of airfares and freight rates ital, insurance policy, balance, profit and current account); and for transport aircraft must be reasonable and fair for service providers • any government policies that may apply. and users. The CAB sets rules and procedures for calculating airfares and freight rates for domestic transport aircraft operators. These were most The procedure for allocating a route is set out above. Generally, the DCA recently set in 2010. The rates prescribed by the CAB must be less than the has broad discretion in the allocation of international routes among Thai rates specified in the ministerial regulations of 2011 on maximum passen- carriers. There are no procedures for a contested international route ger and air cargo charges. For passengers, this rate has been set at a maxi- application. mum of 30 baht per kilometre, while for air cargo the maximum charge is The DCA reserves the right to revoke the right to operate a route if 50 baht per kilogram. The minimum charge for domestic cargo is 500 baht an operator fails to operate the flight within the time specified, or to grant per invoice. those rights to other qualified air operators based on qualification and Airfares for international air services will depend on terms of the rel- readiness to operate the route within the time frame stipulated by the DCA. evant air services agreements.

8 Is there a declared policy on airline access or competition and, Aircraft if so, what is it? 13 Who is entitled to be mentioned in the aircraft register? Do The ANA prohibits any foreign aircraft from flying over, taking off from or requirements or limitations apply to the ownership of an landing in Thailand unless it has the right to do so under the Convention aircraft listed on your country’s register? or other international agreement, or has obtained prior written permission from the Minister of Transport. An applicant must be a Thai citizen or Thai company. For a partnership, Aviation in Thailand is subject to the Trade Competition Act 1999 (the limited company or public limited company, it must be both registered and Competition Act), which defines air services as an undertaking in the ser- have its principal place of business in Thailand, and: vice sector, which falls within the scope of the Competition Act. However, • in the case of an ordinary partnership, all partners must be Thai; state-owned enterprises, notably Thai Airways, are currently exempt from • in the case of a limited partnership, all partners who jointly have the Competition Act. unlimited liability must be Thai and at least 51 per cent of the capital of In addition, in accordance with the ASEAN Economic Community such partnership will belong to natural Thai persons; Blueprint, Thailand is required to implement provisions to allow for an • in the case of a limited company or public limited company, such com- ASEAN single aviation market. This will require the Thai government to pany must not have bearer shares in issue, a majority of its directors authorise the appropriate agencies to begin preparing draft regulations to must be Thai, and at least 51 per cent of all shares must belong to any allow for this relaxation to the aviation sector for ASEAN operators. one or any combination of the following persons: • natural Thai persons; 9 What requirements must a foreign air carrier satisfy in order • ministries, sub-ministries, or departments of the government; to operate to or from your country? • limited companies or public limited companies, of which ministries, sub-ministries, or departments of the government hold not A foreign air carrier must have a certificate of airworthiness that has been less than 51 per cent of all shares; issued in the aircraft’s home country by the relevant authority which is a • limited companies or public limited companies, of which natural state party to the Chicago Convention. If the country in question is not a Thai persons holding not less than 51 per cent of all shares; and party to the Chicago Convention, it may still be able to operate in Thailand • other corporate entities as specified in the ministerial regulations; by agreement, provided that the certificate of airworthiness issued by and the aircraft’s home state meets the same standards as prescribed in the • in the case of an association, it must be registered and have its prin- Annexes to the Chicago Convention. If there is an international agreement cipal place of business of the association in Thailand, and the regula- designating the holder of a licence to operate an air navigation business tions of the association must have been approved by the CAB. using a foreign aircraft for business operations in Thailand under the lease contract or other similar contract, a certificate of airworthiness may be In addition to nationality requirements, an applicant must also satisfy own- issued by the Director General of the DCA. ership requirements. The registrant of the aircraft must be the owner of the aircraft or the person who, if not the owner, has the possessory right to 10 Are there specific rules in place to ensure aviation services the aircraft and has obtained permission for registration from the Minister. are offered to remote destinations when vital for the local economy? 14 Is there a register of aircraft mortgages or charges and, if so, The Ministry of Transport provides support to help develop aviation ser- how does it function? vices to remote destinations by giving Thai operators exemptions from Thailand does not have a register of aircraft mortgages or charges. Any take-off, landing and maintenance fees for scheduled and chartered form of registration or documentation is not legally binding but may be air services at airports under the supervision of the DCA, including used in evidence in the event of a dispute. In practice, when a problem Chumphon, Tak, Nakhon Ratchasima, Phetchabun, Phrae, Pattani, Mae relating to registration of the aircraft’s mortgage or charge arises, its valid- Sariang, Ranong, Roi Et, Loei, Mae-sot and Hua Hin. In addition, from 25 ity will be determined by the court on a case-by-case basis.

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A proposed register of aircraft mortgages and charges is currently must satisfy qualifications regarding knowledge and expertise as set out before Parliament and if approved could come into force in a few years. in the CAB Regulation No. 88 and submit to the Director of the DCA an The ANA requires the aircraft registrant to surrender the certificate of reg- application for a public aerodrome operating certificate, together with an istration to the DCA without delay, where there is a change in ownership of aerodrome manual for that licensed aerodrome or licensed temporary the aircraft, if the owner is a registrant, or a change in the possessory rights take-off and landing area and other documents as specified in the regu- in an aircraft where the registrant has possessory rights, the registrant does lations. Moreover, the holder of a public aerodrome operating certificate not meet the requirements of the ANA or it appears that the ownership or must have a public aerodrome manager to be responsible and accountable possessory right of the aircraft registrant is not as shown in the registration. for the operation of the licensed aerodrome or licensed temporary take-off and landing area pursuant to the certificate. 15 What rights are there to detain aircraft, in respect of unpaid airport or air navigation charges, or other unpaid debts? 19 Is there a system of economic regulation of airports and, if so, Thai air navigation authorities do not have authority to detain an aircraft how does it function? under the ANA in respect of unpaid airport or air navigation charges, or In addition to requirements in relation to an applicant’s qualifications, other unpaid debts. The DCA only has the power to delay the departure of the ANA allows for the Minister of Transport to specify minimum capital the violating aircraft if there is a breach of the ANA relating to the aircraft. requirements, but to date a ministerial regulation setting out these require- However, it may be possible to detain an aircraft where the operator can ments has yet to be issued. Currently, the only requirement in force relates be considered to be in default under the Thai Civil Procedure Code. The to the applicant’s registered share capital, calling for them to have at least 51 aircraft creditors can seek a court order to seize the aircraft as a temporary per cent of their total capital provided by a Thai national or Thai company. measure before judgment or execution of the judgment. However, such an In addition, the ANA restricts the fees that an owner or operator of a order will only be granted in exceptional circumstances. licensed aerodrome providing services to the public can charge as follows: • a departure passenger service charge; 16 Do specific rules regulate the maintenance of aircraft? • an aircraft take-off and landing service charge; Yes, AOC and AOL holders are required to comply with the requirements • an aircraft storage service charge; of CAB Regulation No. 86, which regulates scheduled maintenance, struc- • a ramp service charge; and tural inspections, unscheduled maintenance, required inspection items, • any other service charge, tariff or monetary remuneration as may be repairs assessment for pressurised fuselages, maintenance and fuel tank prescribed by royal decree. systems, continuing analysis and surveillance and maintenance reliability programmes. The owner or operator of a licensed aerodrome providing services to the public who wishes to collect the departure passenger service charge must Airports comply with the new ministerial regulation of 2013 by submitting a request to the director general of the DCA, they in turn will propose the changes to 17 Who owns the airports? the Minister of Transport for approval. This must be supported by a recom- The majority of airports in Thailand are publicly owned by the Airport mendation from the CAB. Authority of Thailand (AOT), which owns Suvarnabhumi Airport, Phuket Take-off and landing and aircraft storage service charges cannot Airport, Chiang-Mai Airport, Don Mueang Airport and Hat-Yai Airport. Of exceed those specified in CAB Regulation No. 84. For ramp service charges the remaining airports, a small number are privately owned such as Samui, and for the final category of charges above, the charges must be approved Sukhothai and Trat Airports, which are all owned by Bangkok Airways, or by the CAB, which will take into consideration consumer fairness and the some military airports such as U-Tapao Airport, which is owned and oper- profitability of the aerodrome in question. ated by the Royal Thai Air Force. 20 Are there laws or rules restricting or qualifying access to 18 What system is there for the licensing of airports? airports? An applicant wishing to establish a private airport must: The ANA restricts airport access by authorising the Minister of Transport • be a natural person or corporate entity; to designate a licensed aerodrome or a temporary take-off and landing area • be solvent; for aircraft as a restricted area. In addition, the ANA allows the minister to • not have been sentenced to imprisonment (excluding imprisonment designate an area near an aerodrome, or a place in which an air navigation for negligence or petty offences); facility is situated, as a restricted area. • own or occupy the area requested to establish the airport; and The holder of a public aerodrome operating certificate may restrict • demonstrate an ability to manage private airports. areas for passengers, baggage, and cargo screening and handling, and further control access to the area for non-passengers. The Director General An applicant wishing to establish a public airport must: must approve these restricted areas in advance, although there are provi- • be a limited company or public limited company; sions allowing for urgent and temporary restrictions to be put in place with- • be registered and have its principal place of business in Thailand; out the Director General’s prior approval. • have a majority of Thai directors and at least 51 per cent of all shares For a description of access to slots for airlines, please see below. must belong to any one or any combination of natural Thai persons, ministries, sub-ministries, or departments of the government, limited 21 How are slots allocated at congested airports? companies or public limited companies, of which ministries, sub- Slot allocation in Thailand is supervised by the Slot Committee, which is ministries, or departments of the government hold not less than 51 per divided into the Slot Coordination Committee and the Slot Working Group cent of all shares and limited companies or public limited companies, Committee. The Slot Coordination Committee is responsible for setting of which natural persons holding Thai nationality hold not less than 51 policy relating to slot management. It is headed by the DCA and comprises per cent of all shares; representatives of AOT, Thai Airways and AEROTHAI. In practice, the • own or occupy the area requested to establish the airport; and Slot Working Group Committee, which has a similar membership to the • have sufficient capital and experience to establish and operate a public Slot Coordination Committee, will deal with applications for slots. Until airport. recently, slot allocation was done solely by Thai Airways and the new procedure controlled by the two committees appears to have been introduced The DCA will assess the application and make a recommendation to the to address capacity constraints during peak times at Suvarnabhumi Airport Minister of Transport. If a licence is granted, it will be valid for 10 years. and the suggestion that slot allocation favoured Thai Airways’ flights. Once the minister approves the establishment of the airport, the applicant must submit the plans for setting up the airport to the DCA before construction can begin. In order to provide services to the public, the owner or operator of a licensed aerodrome or licensed temporary take-off and landing area

188 Getting the Deal Through – Air Transport 2015 Watson, Farley & Williams (Thailand) Ltd THAILAND

22 Are there any laws or rules specifically relating to ground mechanism, fund, or sanctions for non-compliance as can be found in the handling? Rome Convention. The holder of an operator licence for ramp or aircraft technical services must comply with CAB regulations. In the case of a foreign-designated air- 26 What system and procedures are in place for the investigation line, the holder of an operator licence for ramp services or aircraft technical of air accidents? services must be accepted by Thailand in accordance with the air services The owner or its representative is required to notify and submit a report to agreement and that country cannot impose prohibitions or restrictions on the DCA immediately, when an accident occurs involving any aircraft in a Thai-designated airline to operate ramp services or aircraft technical ser- Thai airspace, or where an accident occurs involving a Thai-registered air- vices in that country. Amendments to the ANA in 2009 would appear to craft somewhere else in the world. The DCA will then report the incident restrict maintenance and repair station licences to majority Thai-owned, to the director general to consider whether it is an ‘aircraft accident’ as operated and managed companies. However, the ministerial regulations defined in the regulations. In order to fall within this definition, one of the giving effect to these provisions have yet to be come into operation and for- following must have occurred: death or serious injury; parts falling from an eign MRO providers continue to provide services at Thai airports. aircraft; damage to an aircraft; damage caused by an engine blast; or where an aircraft has been reported as missing. If the accident meets one or more 23 Who provides air traffic control services? And how are they of these requirements, the Director General will immediately notify the regulated? Aircraft Accident Investigation Committee, as well as sending a notifica- Aeronautical Radio of Thailand Limited (AEROTHAI) is assigned by the tion in accordance with Annex 13 to the Chicago Convention. The Aircraft Thai government to provide air traffic control and aeronautical communi- Accident Investigation Committee will make a preliminary accident data cation services for airline operations. These services can be categorised as report for the director to submit to the respective states and ICAO, fol- follows: lowed by its draft final report, which the director will send to the Minister • air traffic management; of Transport for approval. The Director will be able to disclose the results • aeronautical communication, navigation and surveillance systems of the investigation following approval from the Minister. The director will and services; then notify the results of the investigation to the relevant states and to the • aeronautical information services and aeronautical charts; and ICAO. • other administrative issues provided for by Thai government policy. 27 Is there a mandatory accident and incident reporting system The services offered by AEROTHAI are separated into three sectors: and, if so, how does it operate? Aerodrome Control Services, Approach Control Services and Area Control Yes. Accident notification can either be done in English or Thai using tel- Services. Aerodrome Control and Approach Control Services are responsi- ephone, fax, e-mail, aeronautical fixed telecommunication network or any ble for all commercial airports in Thailand within a 30-nautical-mile radius other approved way, but must be notified immediately and without delay, from each airport and at altitudes of 3.35km and below. no later than 45 days from the date of the accident. Area Control Services are in charge of all Thai airspace and the Bangkok Flight Information Region outside the limits of Aerodrome and Competition law Approach Control Services. In addition, the Area Control Service is also 28 Do sector-specific competition rules apply to aviation? If not, responsible for the airspace over part of the South China Sea, just west of do the general competition law rules apply? Cambodia, at an altitude of between 4.12km and 14km. However, for Suvarnabhumi Airport, Aerodrome and Approach There are no sector-specific competition rules, however as the aviation Control Services will provide control services in a 50-nautical-mile radius sector amounts to a business service, it is governed by normal competi- and at an altitude of up to 4.88km, because of the high volume of traffic at tion rules as contained in the Thai Competition Act 1999, and there are this airport, and the need to be able to transfer air traffic directly to nearby no sector-specific competition rules. It is important to note, however, that airports, such as U-Tapao and Kampangsaen. this Act is not applicable to state-owned enterprises such as Thai Airways.

Liability and accidents 29 Is there a sector-specific regulator or are competition rules applied by the general competition authority? 24 Are there any special rules in respect of death of, or injury to, Yes. The enforcement authority under the Competition Act is the Trade passengers or loss or damage to baggage or cargo in respect of Competition Commission (TCC), established by the Department of domestic carriage? Internal Trade (DIT). The TCC is responsible for the enforcement of com- Thailand does not have specific laws on carriage by air. Liability in the avia- petition law in all industry sectors. In launching an investigation, TCC will tion sector is governed primarily by the Thai Civil and Commercial Code liaise with the Office of the Trade Competition Commission, which oper- 1992 (CCC), which generally imposes strict liability on the carrier. Under ates under the DIT. the CCC, a person who, wilfully or negligently, unlawfully injures the life, body, health, property or any rights of another person, is said to commit a 30 How is the relevant market for the purposes of a competition wrongful act must compensate the wronged party. Relatively few passen- assessment in the aviation sector defined by the competition ger death or injury claims have been litigated in Thailand and the small authorities? body of case law in this area does not offer a binding precedent. In terms of Even though the Competition Act has been in force for more than 10 years, loss or damage to baggage or cargo, the CCC imposes strict liability on an the TCC has yet to address competition in the aviation sector. The TCC airline as the carrier for any loss, damage or delay in delivery of the goods. defines market dominance as one or more business operators in the market The only defences available to the airline are that of force majeure, the for any good or service, having a market share of more than 50 per cent nature of the goods or the proven fault of the sender or consignee. Liability and a turnover of at least 1 billion baht in the previous year, or where the limits can only be enforced where the sender has expressly consented to top three business operators have a combined market share exceeding 75 terms limiting or restricting liability. Thailand is not a party to the Warsaw per cent and a turnover of at least 1,000 million baht in the previous year. or Montreal Conventions and therefore any liability limits contained in The Act contains an exemption for business operators whose market share these conventions will only apply where they have been specifically incor- is less than 10 per cent or whose turnover is less than 1,000 million baht. porated into the contract of carriage. 31 What are the main standards for assessing the competitive 25 Are there any special rules about the liability of aircraft effect of a transaction? operators for surface damage? The Competition Act aims to identify the competitive effect of a transaction No. The provisions regarding the liability of aircraft operators for surface and whether the conduct of a business operator has the effect of destroy- damage will be determined by the CCC. These are broadly consistent ing, impairing, obstructing, impeding or restricting the business of others with the provisions of the Rome Convention, which has been signed but operating in the same or similar market, or preventing other persons from not ratified in Thailand. However, the CCC does not have a compensation

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The 2007 Constitution also imposes an obligation on the government Update and trends to promote a free and equitable economy through market forces and sustainable economic development by repealing and refraining from enacting Air operators are preparing for ASEAN Open Skies in 2015. This will laws and regulations that restrict or distort market forces. The state sector liberalise access to air services between all ASEAN capital cities as should also refrain from business activities in competition with the private part of a longer-term programme to create a single aviation market for ASEAN. This will require harmonisation of regulatory regimes sector unless it is necessary for maintaining the security of Thailand, in the across the ASEAN region, particularly in relation to ownership, public interest or for the provision of public facilities. maintenance, operating and liability regimes. Readiness for these changes varies between ASEAN member states, and it is possible 35 Are there exemptions from the state aid rules or situations in that the launch of Open Skies will be delayed beyond 2015. which they do not apply? The proposed International Carriage by Air Law has yet to Companies whose private ownership is more than 50 per cent will be ineli- be passed by the National Legislative Assembly (an appointed legislative body established under the 2014 Interim Constitution). gible for state aid. This law will introduce the provisions of the Montreal Convention 1999 into Thai domestic law and is viewed as a means of updating 36 Must clearance from the competition authorities be obtained Thai aviation laws but is not intended to involve ratification of the before state aid may be granted? Montreal Convention and will not create a treaty relationship. In No, the Competition Act exempts the application of the act to state-owned addition, a number of modifications have been made to the text of enterprises. the Convention which depart from the provisions of the Convention. 37 If so, what are the main procedural steps to obtain clearance? Not applicable. carrying out business or causing their cessation of business, or acts in any other way that can be shown to prevent or hinder free and fair competition. 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?

To date, the competition authorities have not made any investigations into Miscellaneous the aviation sector. Since the Competition Act came into force, there has only been one prosecution of a company for anti-competitive behaviour. 39 Is there any aviation-specific passenger protection Therefore, it is difficult to say what remedies may be imposed. However, it legislation? is likely that for an abuse of market dominance, the typical remedies would Yes. In 2010, the Ministry of Transport introduced a new regulation that include an order to suspend, cease or vary the market share. Conditions sets out the provisions for passenger rights for flight delays, cancellations, can be imposed for mergers, acquisitions and other agreements where denied boarding and for disabled passengers and unaccompanied minors. these are considered to be anti-competitive by the TCC. These include reimbursement of airfares and charges, upgrades and enhanced complaints procedures. Financial support and state aid In addition to the above, the new ministerial regulation to protect passengers taking both domestic and international charter services (including 33 Are there sector-specific rules regulating direct or indirect ad hoc and programme charters) is intended to be introduced by the end financial support to companies by the government or of this year. government-controlled agencies or companies (state aid) in the aviation sector? If not, do general state aid rules apply? 40 Are there mandatory insurance requirements for the State aid is available only for state-owned companies and entities. Thai law operators of aircraft? does not contain any provisions that enable state aid to be given specifi- For non-scheduled air services, the requirements for fixed-wing (one cally to the aviation sector but state-owned airlines, notably Thai Airways, engine) are: can receive state aid pursuant to the State Enterprise Corporatisation Act • passenger insurance of not less than 1 million baht per person; and 1999. Privately owned airlines are, however, unable to apply for state aid. • third-party insurance of not less 15 million baht per incident. 34 What are the main principles of the state aid rules applicable For fixed-wing (more than one engine), the requirements are: to the aviation sector? • passenger insurance of not less than 1 million baht per person; and The key requirement is that the entity receiving state aid be more than 50 • third-party insurance of not less 20 million baht per incident. per cent owned by the Thai government. By way of example, Thai Airways is 51.03 per cent owned by the Ministry of Finance on behalf of the Thai government.

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For scheduled air services, the requirements are: workers who will board an aircraft, including any articles to be taken on the • passenger insurance of not less than 2 million baht per person; and aircraft by such persons, screen baggage or articles to be loaded onto an • third-party insurance of not less 5 billion baht per incident. aircraft and screen persons, vehicles as well as articles that will enter the restricted area of the aerodrome. For scheduled air services (for aircraft weighing up to 5,700kg), the requirements are: 42 What serious crimes exist with regard to aviation? • passenger insurance of not less than 2 million baht per person; and The ANA imposes general criminal offences relating to the safety of air- • third-party insurance of not less 500 million baht per incident. craft, including endangering an aircraft or person in an aircraft, or causing or permitting an aircraft to endanger any person or property, or failing to 41 What legal requirements are there with regard to aviation comply with ANA. Furthermore, the Thai Penal Code, together with the security? Aviation-related Crime Act 1995, deals with offences involving violence on The CAB is responsible for security and safety programmes, which must the aircraft, destroying or causing serious damage to an aircraft in service comply with Regulation Nos. 85 and 86. Air operators, holders of pub- or on board, injuring persons or property on an aerodrome or air naviga- lic aerodrome operating certificates and business operators at licensed tion installation or carrying a firearm, explosive or article made, or weapon aerodromes are responsible for, and must supervise, compliance with the likely to endanger its safety. Offences are punishable by sanctions includ- national civil aviation security and safety programme. The holder of a pub- ing the death penalty, life imprisonment, imprisonment of one to 20 years lic aerodrome operating certificate has to screen passengers, personnel or and a fine of between 1,000 and 1 million baht.

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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 An operator of any aircraft based in the UAE must have an authority to of Civil Aviation of Abu Dhabi, Dubai, Sharjah and Fujairah) and a repre- operate under a licence or permit issued by the GCAA that shall define its sentative from the Ministry of the Interior and the UAE Air Force. conditions, such as: The principal legislation regulating civil aviation is: • its aircraft must be registered in a state approved by the GCAA; • Federal Law No. 20 of 1991 issuing the Law of Civil Aviation; • each aircraft must maintain a current certificate of airworthiness • Civil Aviation Regulations (the Regulations); and issued by the state of registry; • Federal Law No. 8 of 1993 issuing the Commercial Transactions Law, • each aircraft must bear the appropriate marks of nationality and providing for the rules of Air Carriage. registration; • the aircraft must comply with the equipment requirements of the Regulation of aviation operations GCAA in addition to those of the state of registry; • the members of its aircrew must hold the appropriate licences; 2 How is air transport regulated in terms of safety? • liability insurance must be maintained with respect to crew, passen- Air transport safety is regulated by the GCAA, which maintains strict gers and third parties on the ground in accordance with established requirements as to airworthiness and licensing procedures for flight crew principles; and and other relevant personnel. All requirements relating to safety are found • the commercial operator must hold an appropriate AOC. in the Law of Civil Aviation and the Regulations. 7 What procedures are there for hearing or deciding contested 3 What safety regulation is provided for air operations that do applications for licences or other rights to operate particular not constitute public or commercial transport and how is the routes? distinction made? Applications are made directly to the GCAA. There are no rights of appeal The GCAA regulates the safety of all air transport and the same airworthi- or any provisions for formal public hearings. ness guidelines apply to both private and commercial aircraft. All commercial operators based in the UAE must obtain an air operator’s certificate 8 Is there a declared policy on airline access or competition and, (AOC) and operations specifications from the GCAA before conducting if so, what is it? operations, but proposed operators of UAE-registered private category air- Currently there is no stated policy on airline access or competition. craft do not need to obtain an AOC, although they need authority to operate pursuant to a private operator certificate. 9 What requirements must a foreign air carrier satisfy in order The GCAA may grant an exemption to operators of foreign aircraft to operate to or from your country? based in the UAE and used for commercial air transport operations from With respect to foreign air carriers operating from the UAE, see question 6. compliance with the Law of Civil Aviation for up to one year. Foreign- Aircraft operating to the UAE must be in compliance with the regulations registered aircraft operated under this exemption shall have their AOC of their state of registration. revoked and be required to leave the UAE on completion of the exemption period. 10 Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local 4 Is access to the market for the provision of air transport economy? services regulated and, if so, how? There are no rules in place that require aviation services to be provided to Pursuant to the Law of Civil Aviation no aircraft may operate within the remote destinations when vital to the local economy. territory or air space of the UAE without a licence or permit issued by the GCAA or pursuant to an international treaty or effective bilateral air agree- 11 Are charter services specially regulated? ment. The licence or permit shall be deemed personally granted and may not be assigned. Charter services are not regulated in the UAE.

192 Getting the Deal Through – Air Transport 2015 Donald H Bunker and Associates UNITED ARAB EMIRATES

Update and trends The GCAA has introduced, via the latest revisions made to the 75,000 pounds or 34,020 kilograms or more, shall be operated Airworthiness Regulations contained under the Regulation (ie, issue No. to and from a UAE airport, unless it is compliant with a standard 3 of Part V, Chapter 1 of the Regulation of June 2014), noise restriction equivalent to ICAO Annex 16 Chapter 3 or FAR Part 36 stage 3 or regulations affecting the registration and operation of aircraft to and better noise standards. from the UAE. Pursuant to these regulations and as from: • 1 January 2015, no jet powered subsonic aircraft, certificated to an Accordingly, aircraft owners and operators seeking aircraft registration equivalent standard to ICAO Annex 16 Chapter 2 or FAR Part 36 in the UAE after 1 January 2015, and those aircraft owners and operators stage 2 standards or worse, and with a maximum take-off mass with aircraft already registered in the UAE wishing to continue (MTOM) of 75,000 pounds or 34,020 kilograms or more, shall be operating such aircraft to and from the UAE after 1 January 2017, will registered in the UAE; and have to ensure that their aircraft complies with the foregoing noise • 1 January 2017, no jet powered subsonic aircraft registered in the restriction regulations. UAE, certificated with a maximum take-off mass (MTOM) of

12 Are airfares regulated and, if so, how? 20 Are there laws or rules restricting or qualifying access to Airfares are not regulated in the UAE. airports? All aircraft entering any airport of the UAE must comply with security Aircraft requirements established by the Law of Civil Aviation and the Regulations. All airports must have a security protocol that follows the requirements of 13 Who is entitled to be mentioned in the aircraft register? Do the GCAA. requirements or limitations apply to the ownership of an aircraft listed on your country’s register? 21 How are slots allocated at congested airports? To be registered with the GCAA, an aircraft must be owned by, or leased to: The allocation of slots is regulated by the relevant DCAs in the UAE. • a UAE national or a corporate entity controlled by UAE nationals or having UAE nationality; or • a corporate entity that is located in a UAE free trade zone, which may 22 Are there any laws or rules specifically relating to ground be foreign-owned and controlled. handling? There is no national law with respect to ground handling in the UAE. The A mortgagee may be recorded on the register (see question 14). respective DCAs are responsible for and regulate matters relating to ground handling in their respective emirates in accordance with the administrative 14 Is there a register of aircraft mortgages or charges and, if so, procedures together with the provisions of the Law of Civil Aviation and how does it function? the Regulations. For example, Dnata Airport Services, which together with There is no mortgage registry in the UAE. However, it has been the practice Emirates comprises the Emirates Group, is the sole ground handling agent for creditors financing foreign-owned aircraft to have the existence of any at Dubai International Airport. foreign-registered mortgage relating to such aircraft noted by the GCAA on its files. The GCAA will also acknowledge the existence of any irrevoca- 23 Who provides air traffic control services? And how are they ble de-registration and export request authorisation validly registered with regulated? the International Registry under the Cape Town Convention, 2001. (The The GCAA has the authority and responsibility for the provision of air navi- UAE acceded to the Cape Town Convention on 13 April 2008.) gation services and all aspects of flight safety. While there is no specific law on the point and there have been no court decisions in this regard, it is expected that after noting such mortgage, and assuming that the mortgage is legal, valid and binding under the Liability and accidents laws by which it expresses it is governed, a security interest will be created. 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? Special rules with respect to liability regarding air carriage are provided No detention rights exist with respect to unpaid airport or air navigation under the Commercial Transactions Law. charges per se. However, detention rights may be available under the general civil law in favour of an owner or in the case of in rem rights in an air- 25 Are there any special rules about the liability of aircraft craft of other creditors, although there are no known cases with respect to operators for surface damage? aircraft. The owner of any civil aircraft flying over the UAE territory is liable for any 16 Do specific rules regulate the maintenance of aircraft? damage caused to people or property on the surface. The maintenance of aircraft is regulated by the GCAA. Maintenance 26 What system and procedures are in place for the investigation organisations supporting aircraft types specified in UAE AOCs must be of air accidents? registered in the UAE as approved maintenance organisations. The GCAA, either itself or through an external body nominated by it, has Airports the jurisdiction and obligation to investigate all accidents and incidents involving aircraft that occur within the territory and waters of the UAE. 17 Who owns the airports? The airports of the UAE are owned by the respective governments of the 27 Is there a mandatory accident and incident reporting system emirates in which they are located. and, if so, how does it operate? Any local authority must inform the competent authority immediately in 18 What system is there for the licensing of airports? case of an aircraft accident occurring in the area of its jurisdiction. The regulation and licensing of airports in the UAE is the responsibility of The aircraft involved and any debris or cargo relating thereto may not the GCAA. be moved from the accident site without the consent of the competent authority. 19 Is there a system of economic regulation of airports and, if so, Representatives of the states of registry and the manufacturer may how does it function? attend the investigation as observers. Such states together with the There is no system for the economic regulation of airports in the UAE. International Civil Aviation Organization, as well as the manufacturer, Each airport is operated and promoted by the department of civil aviation owner, operator or insurer, who suffer damages as a result of the accident, (DCA) in the relevant emirate. www.gettingthedealthrough.com 193 UNITED ARAB EMIRATES Donald H Bunker and Associates shall be entitled to receive a copy of the investigation report of the compe- 38 If no clearance is obtained, what procedures apply to recover tent authority. unlawfully granted state aid? Not applicable. Competition law 28 Do sector-specific competition rules apply to aviation? If not, Miscellaneous do the general competition law rules apply? 39 Is there any aviation-specific passenger protection The UAE does not have competition or antitrust laws, although the enact- legislation? ment of such laws is being contemplated. There is no aviation-specific passenger protection legislation in the UAE.

29 Is there a sector-specific regulator or are competition rules 40 Are there mandatory insurance requirements for the applied by the general competition authority? operators of aircraft? See question 28. Operators must maintain liability insurance with respect to crew, passengers and third parties on the ground in accordance with established 30 How is the relevant market for the purposes of a competition principles. Insurance brokerage for such coverage must be placed through assessment in the aviation sector defined by the competition companies registered with the Registrar of Insurance Companies in authorities? accordance with UAE law. See question 28. 41 What legal requirements are there with regard to aviation 31 What are the main standards for assessing the competitive security? effect of a transaction? The Law of Civil Aviation and the Regulations thereunder contain the See question 28. rules of the National Civil Aviation Security Programme (NCASP), which has the force of law and defines certain basic aviation security standards 32 What types of remedies have been imposed to remedy and procedures consistent with the international conventions to which the concerns identified by the competition authorities? UAE is a member (for example, the Tokyo Convention, 1963; the Hague See question 28. Convention, 1970; and the Montreal Convention, 1971).

Financial support and state aid 42 What serious crimes exist with regard to aviation? Any person who intentionally commits, plans to commit or aids and abets 33 Are there sector-specific rules regulating direct or indirect the commission or planned commission of any of the following offences is financial support to companies by the government or deemed to be the perpetrator of a crime against an aircraft and is subject to government-controlled agencies or companies (state aid) in prosecution and a maximum sentence of life imprisonment: the aviation sector? If not, do general state aid rules apply? • act of aggression against a person on board an aircraft in flight status if No general or specific rules exist. such action endangers the safety of the aircraft; • seizure, destruction or damage of an aircraft in service while in flight 34 What are the main principles of the state aid rules applicable status; to the aviation sector? • placement of any equipment or material with an intention of destroy- Not applicable. ing or damaging an aircraft while in flight status; • destruction or damage to or interference with navigation facilities if 35 Are there exemptions from the state aid rules or situations in such action endangers any aircraft in flight status; and which they do not apply? • threatening the safety of any aircraft while in flight status, with false information. Not applicable. An aircraft shall be deemed to be in flight status at any time from the 36 Must clearance from the competition authorities be obtained moment of the completion of the closing of the doors at the time of board- before state aid may be granted? ing, to the time that the doors are opened for disembarkation. Not applicable. An aircraft shall be deemed to be in service from the commencement of operation of the aircraft for flight until 24 hours after any landing of the 37 If so, what are the main procedural steps to obtain clearance? aircraft. Not applicable. There are numerous other lesser offences subject to various degrees of penalty.

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

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United Kingdom

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General 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 1 Which bodies regulate aviation in your country, under what the holder of an air operator’s certificate (AOC). The operator of any such basic laws? flight must hold and comply with a national AOC. The two principal bodies responsible for the regulation of aviation are the Aerial work means any purpose, other than commercial air transport Department for Transport, headed by the Secretary of State for Transport, or public transport, for which an aircraft is flown if valuable considera- and the Civil Aviation Authority (CAA). The CAA was established in 1971 tion is given or promised for the flight or purpose of the flight. Aerial work as a regulatory body removed from detailed ministerial supervision, while operations are only regulated from the safety point of view with regard to subject to some control by the Secretary of State. crew licensing, although they are subject to aircraft safety rules and rules The basic law laying down the functions of the Secretary of State and of the air. the constitution and functions of the CAA is the Civil Aviation Act 1982, and A private flight is a flight that is not aerial work, public transport or further provisions relevant to the relationship between the Department for commercial air transport. The operation of private flights is not regulated Transport and the CAA are contained in the Transport Act 2000. The cur- from the safety point of view, although they are regulated from the point of rent Civil Aviation Bill, when enacted, will modify the CAA’s powers and view of pilot licensing and aircraft safety. duties. 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 2007 (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

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5 What requirements apply in the areas of financial fitness and administrative requirements relating to the carrier’s aircraft and insurance nationality of ownership regarding control of air carriers? arrangements. Under the Regulation, an applicant must be able to show that it can meet at any time its actual and potential obligations for a period of 24 months 10 Are there specific rules in place to ensure aviation services from commencement and that it can meet its fixed and operational costs are offered to remote destinations when vital for the local for a period of three months from commencement without taking account economy? of income. The EU Regulation permits a member state to impose a public service Existing licence holders of an operating licence must notify the CAA obligation (PSO) in respect of scheduled air services between any airport of substantial changes in their activities, mergers or acquisitions and any in the EU and an airport serving a peripheral or development region in its significant change in ownership. If the CAA considers that such changes territory or on a thin route to any airport in its territory where the route have a significant bearing on the carrier’s finances it may ask for a revised is considered vital for the economic and social development of the region 12 month business plan or that the licence be re-submitted for approval, the airport serves, and prescribes various procedures and conditions which or both. Existing licence holders must also supply to the CAA audited must be complied with. A number of such PSOs have been imposed on accounts each year, and other specified financial information upon request. routes in the UK, principally in the Scottish Highlands and Islands. Modified financial requirements apply to carriers exclusively engaged in operations with aircraft of less than 10 tons MTOW or less than 20 seats. 11 Are charter services specially regulated? A licence holder must also be able to satisfy the CAA at all times that it is Within the EU there is no distinction for regulatory purposes between more than 50 per cent owned and effectively controlled, directly or indi- scheduled and charter services, except only that a public service obligation rectly through one or more intermediate undertakings, by member states may only be imposed in respect of scheduled air services. or nationals of member states. As regards services to or from points outside the EU, as mentioned While the Regulation provides a definition of ‘effective control’, above, different route licences are issued for scheduled services on the one the way in which the requirements apply in particular situations can be hand and charter services on the other. The licensing of charter services unclear. Some assistance is provided by a guidance note provided by the is generally very liberal, subject only to any restrictions in the applicable CAA on these requirements. bilateral.

6 What procedures are there to obtain licences or other rights to 12 Are airfares regulated and, if so, how? operate particular routes? Under the EU Regulation, Community air carriers are entirely free to An applicant for an operating licence must satisfy the CAA that it meets set fares for services on routes between two points in the EU. Moreover, the various requirements mentioned above. As regards intra-EU routes, member states may not discriminate on grounds of nationality or identity no further authorisation or procedure is necessary. A UK-licensed carrier in allowing Community air carriers to set fares and rates for air services wishing to operate a route to or from a point outside the EU must obtain a between their territory and a third country. route licence on application to the CAA. However, the Regulation does provide some regulation of fares from However, such a licence (issued either as a scheduled licence or a char- the points of view of transparency and non-discrimination. Fares available ter licence) only permits operations on any route where the holder has traf- to the general public must include applicable conditions when offered or fic rights, and the holder will need to ensure that traffic rights exist or are published, the final price must at all times be indicated and be all-inclusive, obtained under the relevant bilateral and that it is designated under the and where elements of the fare are separated out they must be specified. bilateral by the Department for Transport. Air carriers must grant access to generally available fares without discrimi- An air operator that is not a Community air carrier must hold an air nation based on the nationality or place of residence of the customer or transport licence in order to operate a UK-registered aircraft for the car- place of establishment of the agent or ticket seller. riage for reward of passengers or cargo. In practice, this requirement Excessively high or excessively low pricing may, depending on the applies mostly to air carriers established in the Channel Islands, the Isle of circumstances, be capable of constituting an abuse of a dominant posi- Man and British dependent territories. tion for the purposes of article 102 of the Treaty on the Functioning of the European Union, and similar UK competition legislation. 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular Aircraft routes? 13 Who is entitled to be mentioned in the aircraft register? Do In practice, contested applications now only arise in respect of routes to or requirements or limitations apply to the ownership of an from outside the EU for which there is ‘scarce capacity’ under the relevant aircraft listed on your country’s register? bilateral, and a decision has to be made as to how to allocate such scarce capacity as between competing applicants. Relevant procedures, which Only the following persons are entitled to hold a legal or beneficial interest include the ability to make representations and the right to a public hear- by way of ownership in an aircraft registered in the UK: ing, are contained in the Civil Aviation Authority Regulations 1991. • the Crown; • Commonwealth citizens; 8 Is there a declared policy on airline access or competition and, • nationals of any EU or EEA state; if so, what is it? • British protected persons; • bodies incorporated in and having their principal place of business in Within the EU, as there is essentially complete freedom of access for some part of the Commonwealth; and Community air carriers, as mentioned above, there is no scope for any par- • undertakings formed in accordance with the law of and having their ticular policy position. As regards air transport to or from countries outside registered office, central administration or principal place of business the EU, the CAA adopts similarly a very liberal policy, as indicated in its in the EU or EEA. published Statement of Policies on Route and Air Transport Licensing. However, the CAA may permit an aircraft in which an unqualified person 9 What requirements must a foreign air carrier satisfy in order holds an interest to be registered in the UK if it is satisfied that the aircraft to operate to or from your country? may otherwise be properly registered and: Under the Air Navigation Order, an aircraft registered in a state other than • the person resides or has a place of business in the UK; and the UK must not take on board or discharge any passengers or cargo in the • the aircraft is leased to a qualified person. UK for valuable consideration without an operating permit granted by the secretary of state. Such permit will only be granted if the necessary traffic rights under the relevant bilateral exist, and also subject to satisfying the Department for Transport of compliance by the carrier with a number of

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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? The Mortgaging of Aircraft Order 1972 provides for the creation of a The system of economic regulation of airports that had been provided Register of Aircraft Mortgages to be kept by the CAA. There may be entered by the Airports Act 1986 was replaced by a new system introduced by the on it any mortgage of a UK-registered aircraft, including spare parts for Civil Aviation Act 2012. Under this system an airport operator that has, or is such an aircraft. As a general rule, a mortgage of an aircraft entered in the likely to acquire, substantial market power requires a licence from the CAA Register has priority over any other mortgage of or charge on that aircraft, where the benefits of this are likely to outweigh the adverse effects from other than any other mortgage previously entered on the Register, and the point of view of users of air transport services, and competition law other than liens or other rights to detain aircraft arising by operation of law. does not provide sufficient protection. Heathrow and Gatwick currently hold licences, which include conditions relating to price controls, service 15 What rights are there to detain aircraft, in respect of unpaid quality and operational resilience. Although Stansted had previously been airport or air navigation charges, or other unpaid debts? regulated, the CAA found that it did not meet the market power test and Under section 88 of the Civil Aviation Act 1982, a government or local consequently it has not required a licence since 1 April 2014. authority airport, or an airport specifically designated by order, may detain any aircraft in respect of which any airport charges are due and unpaid, or 20 Are there laws or rules restricting or qualifying access to any other aircraft of which the person in default is the operator at the time, airports? or both. Under the Airports Act 1986, the Secretary of State has certain powers to Under the Civil Aviation (Chargeable Air Services) (Detention and restrict or qualify access to airports: Sale of Aircraft) Regulations 2001, the CAA may detain and sell any air- • by means of a direction where necessary or expedient in the interests craft in respect of which any air navigation charges are due and unpaid, or of national security or external relations; any other aircraft of which the person in default is the operator at the time, • through traffic distribution rules between airports serving the same or both. Similar provisions are made in respect of unpaid charges due to area in the UK (which must comply with the conditions relating to such Eurocontrol by the Civil Aviation (Chargeable Air Services) (Detention and rules in EU Regulation No. 1008/2008); Sale of Aircraft for Eurocontrol) Regulations 2001. • through the imposition of a limit on the number of movements at an In addition, a lien may arise by operation of law in favour of a person airport; and who has undertaken work on an aircraft improving it (ie, repair, as opposed • by means of a scheme prepared by the CAA, at the direction or the sec- to mere maintenance). Providers of maintenance and repair services often retary of state, allocating capacity at the airport. incorporate contractual liens in their contractual terms and conditions which give broader rights. HM Revenue & Customs has rights to detain 21 How are slots allocated at congested airports? aircraft in certain circumstances. Slot allocation at airports in the EU is regulated by EU Regulation No. 95/93 (as amended) and (to the extent they are compatible with the 16 Do specific rules regulate the maintenance of aircraft? Regulation) the IATA Worldwide Scheduling Guidelines. The revision of UK-registered aircraft must not fly unless they are maintained in accord- the Regulation is currently under consideration. ance with EASA requirements, laid down in EU regulations, and any main- Most congested airports are designated as coordinated airports, tenance, overhaul, repair or modification work must be followed by the although an airport with a lesser degree of congestion may be designated issue of a certificate of release to service issued by the holder of an aircraft as a schedules facilitated airport. At a coordinated airport, the allocation maintenance engineer’s licence or other approved person. of slots is carried out by an independent coordinator (in the UK Airport The CAA issues such maintenance engineer’s licences, and mainte- Coordination Limited). The bedrock of the slot allocation system is the nance organisations are approved pursuant to the Part 145, provisions con- principle of ‘grandfather rights’, whereby an airline which has used a slot tained Annex II to Commission Regulation 2042/2003 on the continuing for at least 80 per cent of the time during a traffic season is entitled to have airworthiness of aircraft. it allocated to it in the next equivalent season, but if it cannot show at least 80 per cent usage, then the slot must be given up to the slot pool. There are Airports certain other rules about priority, including that priority in the allocation of 50 per cent of slots from the slot pool must be given to ‘new entrants’ 17 Who owns the airports? (as defined). Since the BAA was privatised in 1986, the state does not own any of the Slots may be transferred by an air carrier between its routes and airports in the UK. Heathrow, Aberdeen and Glasgow (former state- between carriers in a group, but cannot otherwise generally be transferred. owned airports) and Southampton are now owned by a consortium led However, they may be exchanged between air carriers. In reliance on this by Ferrovial of Spain. Ferrovial did also own Gatwick, Edinburgh and right the practice of slot trading has developed, at any rate at the London Stansted Airports, but was compelled by the Competition Commission airports, whereby valuable slots are exchanged for worthless slots plus to sell them, with Gatwick and Edinburgh now owned by Infrastructure money and thus effectively sold. This practice was sanctioned by a judg- Partners (also the owner of London City Airport), and with Stansted owned ment of the High Court in 1999 (in R v Airport Coordination Limited ex p by the Manchester Airport Group as of March 2013. The States of Guernsey Transport Board) and, although it had previously There are, however, a number of airports owned by local authori- expressed doubts on the legality of the practice, by the Commission in a ties through public airport companies, and the Scottish government communication issued in April 2008. owns a number of the airports in the Highlands and islands of Scotland. The EU Regulation is implemented in the UK by the Airports Slot Other major airport owners include the Manchester Airport Group, Allocation Regulations 2006. which, in addition to Manchester and Stansted, owns the East Midlands, Bournemouth and Humberside Airports, and the Peel Group, which owns 22 Are there any laws or rules specifically relating to ground Durham Tees Valley, Doncaster, Sheffield and Manchester City Airports handling? and has a 35 per cent share in Liverpool Airport. EU Directive No. 96/67 liberalises access to the ground handling market at EU or EEA airports, and is implemented in the UK by the Airports 18 What system is there for the licensing of airports? (Groundhandling) Regulations 1997. Although no airport is required to be licensed, aircraft engaged on public The main effect of the Directive and the Regulations is to: transport flights or for instruction in flying can generally only take off or • require member states to allow access for third-party ground handlers land at a licensed airport. The CAA must grant a licence if various specified to the ground handling market at airports with annual traffic of not less safety requirements are met. A licence may be granted either for private than 2 million passengers or 50,000 tons of freight, subject to the abil- use or for public use, and in the latter case the airport must be available to ity of member states to impose limits in certain circumstances; and all persons on equal terms and conditions at all times when it is available for the take-off or landing or aircraft.

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• 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, tons 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 simi- Trading (OFT), although the CAA has some role, particularly as regards larly 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), as lowed the well-developed European Commission approach based on iden- implemented in the UK by the Air Carrier Liability Regulations 2004, pro- tifying overlapping routes, starting on a basis of point-to-point city-pair vides that the rules of the Montreal Convention 1999 shall apply to all car- routes, but also including surface and indirect alternatives, to the extent riage by a Community carrier (ie, a carrier with an operating licence issued they provide acceptable substitutes, and taking account of networks. by an EU or EEA member state). Consequently, the Montreal Convention regime applies in respect of death of or injury to passengers or loss or dam- 31 What are the main standards for assessing the competitive age to baggage in the context of domestic carriage within the UK, as well effect of a transaction? 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. • financial assistance 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 eco- aircraft, its occupants or any other person. The Directive is implemented nomic activities, but generally subject to certain conditions – prin- by the Air Navigation (General) Regulations 2006 and article 226 of the Air cipally, that the aid must form part of an approved restructuring Navigation Order, which require the reporting to the CAA of any occur- programme and be used for its purposes, and not be used for any anti- rence that endangers or that, if not corrected, would endanger an aircraft, competitive purposes. The Commission’s typical ‘one time, last time’ its occupants or any other person. approach makes it unlikely that approval will be given for payment of aid to an airline which has already received it;

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• aid for the financing of the construction of airport infrastructure may • Regulation No. 1107/2006 on the rights of disabled persons and per- be permitted if necessary to meet a clearly defined objective of general sons with reduced mobility when travelling by air; and interest and there is no unacceptable effect on competition; • Regulation No. 80/2009 setting out a code of conduct for computer- • operating aid to regional airports Is allowed for a transitional period of ised reservation systems. 10 years and under certain conditions; and • start-up aid to airlines for new routes from small and peripheral air- As mentioned in question 12, EU Regulation No. 1008/2008 regulates fares ports (owned by the state or regional government) may be approved if from the points of view of transparency and non-discrimination. a number of conditions are satisfied (following the Commission’s deci- There is implementing legislation providing for the enforcement of sion in the Ryanair/Charleroi case). the above rules. In addition, the Civil Aviation (Air Travel Organisers’ Licensing) Regulations 2012 provide for a system of licensing of those sell- 35 Are there exemptions from the state aid rules or situations in ing accommodation on aircraft (other than airlines themselves), involving which they do not apply? bonding and financial protection for consumers. The principal exemptions are provided by article 107 of the TFEU, although the mandatory exemptions will rarely apply in an airline context. 40 Are there mandatory insurance requirements for the In addition, a Commission Regulation stipulates that aid amounting to up operators of aircraft? to €200,000 over a three-year period is de minimis and hence not subject EU Regulation No. 785/2004 lays down mandatory minimum insurance to control. requirements for air carriers and aircraft operators, and is implemented in the UK by the Civil Aviation (Insurance) Regulations 2005. The mini- 36 Must clearance from the competition authorities be obtained mum requirements are in line with most airlines’ normal insurance cover. before state aid may be granted? Compliance with these requirements is a precondition of eligibility for an Under the EU state aid rules, state aid must be notified to and approved by operating licence under Regulation No. 1008/2008. the Commission before it is granted, and if it is granted before and without Non-EU or EEA operators wishing to operate to or from the UK need such permission it is illegal. to satisfy the Department for Transport that they have adequate insurance in place. 37 If so, what are the main procedural steps to obtain clearance? 41 What legal requirements are there with regard to aviation The procedure for applying to the Commission for approval of aid is security? contained in EU Council Regulation No. 659/1999, as implemented by Commission Regulation No. 794/2004, and amended by Council An increasing amount of legislation on aviation security is made at EU Regulation No. 734/2013. The Commission normally carries out a prelimi- level. The basic Regulation is No. 300/2008 on common rules in the field of nary examination, and if this gives rise to concerns that there has been ille- aviation security, and there are a number of implementing measures, most gal aid it will normally continue with a full investigation. importantly Commission Regulation No. 185/2010, and the most recent of which is Commission Regulation No. 245/2013 of 19 March 2013 amending 38 If no clearance is obtained, what procedures apply to recover Regulation No. 272/2009 on the screening of liquids, aerosols and gels at unlawfully granted state aid? EU airports. In addition, the Aviation Security Act 1982, and regulations made If the Commission reaches a formal decision that the aid is illegal, it will thereunder, contain detailed provisions on safety relating to aircraft, air- normally as part of that decision require the member state concerned to craft operators, airports and air cargo agents. recover it. If it does not do so, the Commission may commence infringe- The Civil Aviation Act 2012 transferred certain aviation security func- ment proceedings before the Court of Justice. tions from the secretary of state to the CAA. Miscellaneous 42 What serious crimes exist with regard to aviation? 39 Is there any aviation-specific passenger protection The Aviation Security Act 1982 creates the offences, punishable by impris- legislation? onment for life, of hijacking an aircraft, destroying an aircraft in service, The principal aviation-specific passenger protection legislation applicable committing on board an act of violence likely to endanger its safety, or in the UK is provided at EU level, by: placing on board an aircraft anything likely to destroy or endanger it, and • Directive No. 90/314 protecting consumers in connection with pack- of carrying a firearm, explosive or article made, adapted or intended for age holidays; injuring persons or property on an aerodrome or air navigation installation, • Regulation No. 261/2004 on compensation and assistance to passen- or carrying munitions of war on board an aircraft. gers in the event of denied boarding, cancellation and long delay; UK criminal jurisdiction extends to any act or omission taking place • Regulation No. 2111/2005 requiring passengers to be informed of the on board a British-controlled aircraft in flight outside the UK which would identity of the operating air carrier; have been an offence if committed in the UK, and to any act or omission

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

www.gettingthedealthrough.com 199 UNITED KINGDOM Clyde & Co LLP taking place on a foreign aircraft outside the UK if it lands next in the UK abusive or insulting words or behaviour towards a member of the crew of and the act or omission would constitute an offence under the law of the the aircraft. state of registration of the aircraft (section 92 Civil Aviation Act 1982). The Corporate Manslaughter and Corporate Homicide Act 2007 intro- The Air Navigation Order 2009 creates certain criminal offences relat- duced the offence of corporate manslaughter, committed where a corpo- ing to the safety of aircraft, including: endangering an aircraft or person in rate entity causes death in gross breach of its duty of care. Such offence is an aircraft, or causing or permitting an aircraft to endanger any person or capable of being committed in connection with death arising in an aircraft property; being drunk on an aircraft; smoking on an aircraft; failing to obey accident. the lawful commands of the aircraft commander; and using threatening,

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United States

Andrew J Harakas and Christopher Carlsen Clyde & Co US LLP

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? Yes. A US air carrier must obtain ‘safety’ and ‘economic’ authorisation from the FAA and DOT, respectively. (See question 9 regarding foreign air Aviation in the US is primarily regulated by the US Department of carriers.) The DOT issues a certificate of public convenience and neces- Transportation (DOT) and the Federal Aviation Administration (FAA), an sity to carriers it determines are ‘fit, willing, and able’ to perform their agency within the DOT. The Federal Aviation Act of 1958 created the FAA, proposed services, making such carriers ‘certificated carriers’. Pursuant to which is now organised under the DOT. The primary aviation laws are cod- FAR Part 298, applicants planning to operate only small aircraft may seek ified at Title 49 of the US Code, section 40101 et seq (the Transportation an exemption and, instead of becoming a ‘certificated air carrier’, may Code). Regulations issued by the DOT and FAA are published in Title 14 of become either a ‘commuter air carrier’ or an ‘air taxi operator’. the Code of Federal Regulations (FARs). Certain other regulations related FAR Part 204 addresses information provided to the DOT in a ‘certifi- to the civil reserve fleet, carriage of hazardous material, air safety proceed- cated air carrier’ application. This information helps the DOT determine ings and accident report/investigation/evidence are set forth in Title 49 of whether an applicant has sufficient financial resources, managerial compe- the Code of Federal Regulations. tence and a satisfactory record of compliance. Prior to filing, an applicant In addition to the application of US federal laws and regulations, should have an operating proposal, be able to identify key personnel and, at each individual state also has aviation statutes, regulations and common least, have a reasonable and verifiable plan to obtain funding. law tort rules that may apply to the extent that such state laws and regula- After review, the DOT usually issues a show cause order. If the DOT tions are not found to be pre-empted by federal law. Thus, when operating finds an applicant fit, it issues an order tentatively finding fitness and pro- within a state in the US, it is important to consult the relevant state’s laws posing issuance of a certificate for the applicant’s proposed services. The and regulations in addition to federal laws. DOT publishes a summary of the order in the Federal Register and interested parties may comment on the findings. If after this notice and com- Regulation of aviation operations ment period, the DOT determines the applicant is fit, it issues a final order. 2 How is air transport regulated in terms of safety? The final order may impose initial limitations on carrier operations. US and foreign air carriers seeking to operate code-shared services The safety of commercial and private air transport is regulated by the DOT must obtain authorisation from the DOT in the form of a statement of and FAA. The Transportation Security Administration (TSA), an agency authorisation under FAR Part 212. The DOT will approve the application if within the Department of Homeland Security (DHS), regulates aviation it determines that the service is in the public interest. security. The National Transportation Safety Board (NTSB) is an independent federal agency responsible for the organisation, conduct and control of 5 What requirements apply in the areas of financial fitness and non-criminal accident and incident investigations within the US where the nationality of ownership regarding control of air carriers? accident or incident involves any civil aircraft or certain public aircraft. Financial fitness 3 What safety regulation is provided for air operations that do When reviewing an application, pursuant to FAR Part 204, the DOT not constitute public or commercial transport and how is the determines whether the applicant has financial fitness, which means an distinction made? understanding of the start-up costs, and either possession of or access to FAR Parts 121 and 135 provide rules governing ‘common carriage’, while necessary capital. A third party must verify that the applicant can cover all FAR Parts 91 and 125 provide rules governing ‘private carriage’. To distin- pre-operating costs and operating expenses for three months of operations. guish between common and private carriage, a carrier engaging in common carriage – a ‘common carrier’ – is a carrier that ‘holds out’ to the public Nationality of ownership and control or to a segment of the public a willingness to transport passengers or prop- A certificated carrier must be owned by and be under the actual control of erty for compensation. ‘Holding out’ includes, but is not limited to, adver- US citizens. Pursuant to FAR section 204.2(c)(3), a corporation or associa- tising services. tion has US citizenship when its president is a citizen, at least two-thirds of FAR Part 91 prescribes rules governing small private aircraft and larger the board of directors and managing officers are citizens and citizens own private aircraft that are not for hire. Pursuant to FAR Part 1.1, a ‘small air- and control at least 75 per cent of the entity’s voting interest. craft’ is an ‘aircraft of 12,500 pounds or less, maximum certificated take-off For US citizens to be in ‘actual control’, foreign interests must not pos- weight’. FAR Part 91, however, does not prescribe rules for moored bal- sess a substantial influence over a carrier’s operations. Although foreign- loons, kites, unmanned rockets and unmanned free balloons (Part 101), or ers must not own more than 25 per cent of voting stock, in the past, the ultralight vehicles (Part 103). FAR Part 125 prescribes rules governing large DOT, on a case-by-case basis, has approved up to 49 per cent of total equity private aircraft for hire. foreign ownership in a carrier. In 2007, the US and EU entered into an air A chart in the FAA’s Aviation Maintenance Technician Handbook transport agreement agreeing that 50 per cent or more total equity owner- provides guidance on which regulations apply (www.faa.gov/regulations_ ship by EU nationals in a US air carrier would not automatically trigger a policies/handbooks_manuals/aircraft/amt_handbook/media/FAA-8083- presumption that foreigners possessed actual control. 30_Ch12.pdf).

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6 What procedures are there to obtain licences or other rights to In accordance with the International Aviation Safety Assessment operate particular routes? (IASA) programme, the DOT notifies the FAA of the application to obtain FAR Part 121, subpart E, governs certificate holder route approval for the FAA’s evaluation of the respective civil aviation authority’s capability domestic and flag operations. For DOT approval, a carrier must prove it for providing safety certification and continuing oversight for its interna- can satisfactorily conduct scheduled operations between each regular, pro- tional carriers. The focus of the IASA programme is on a country’s ability, visional and refuelling airport over its proposed routes and prove adequacy as opposed to that of the individual air carrier, to adhere to international and availability of airports and other vital facilities (set forth in FAR sec- standards and recommended practices for aircraft operations and mainte- tions 121.97–121.107). nance established by the International Civil Aviation Organization (ICAO). International routes are subject to international bilateral or multilat- Public notice of the application is given and, for a specified time eral agreements. The DOT issues international route authority to a carrier period, interested parties may comment on the application. Based upon subject to competitive proceedings and presidential approval. the information it receives, the DOT determines whether approving the application is in the public interest. 7 What procedures are there for hearing or deciding contested Pursuant to FAR Part 129, after receiving a foreign air carrier permit or applications for licences or other rights to operate particular an exemption, the carrier then must obtain FAA operations specifications. routes? FAR Part 294 provides simplified licensing requirements for Canadian air taxi operators. In addition, applicants from EU member states (also FAR Part 302 governs procedures for DOT aviation economic proceedings. Iceland and Norway) may file abbreviated applications for permits or Subpart B addresses US air carrier certificate and foreign air carrier per- exemptions pursuant to the US–EU Reciprocal Recognition Procedures mit licensing proceedings. Although the DOT generally reviews certificate (released by the DOT on 19 February 2009), which delineates the US–EU and permit applications as written submissions, the DOT decision-maker Joint Committee procedures for the reciprocal recognition of regulatory (usually the Assistant Secretary for Aviation and International Affairs) may determinations with regard to airline fitness and citizenship. decide, on petition by any person or on his or her own initiative, that an oral presentation or an administrative law judge (ALJ) decision is necessary. An 10 Are there specific rules in place to ensure aviation services ALJ presides over an oral evidentiary hearing and recommends or makes are offered to remote destinations when vital for the local an initial decision, which is subject to the decision-maker’s approval. economy? 8 Is there a declared policy on airline access or competition and, Yes. Congress established the Essential Air Service (EAS) programme if so, what is it? (Transportation Code, sections 41731–41748). The Airline Deregulation Act of 1978 gave airlines almost complete freedom to choose which domes- Yes. Federal antitrust policies include those against monopolisation, tic markets to serve and what fares to charge. The EAS programme was attempted monopolisation and mergers and acquisitions lessening compe- established to ensure that small communities that were served by air car- tition (see questions 28–32). The aviation sector is subject to the Sherman riers before deregulation would continue to have a minimal level of sched- Antitrust Act, 15 USC sections 1–7 and the Clayton Act, 15 USC sections uled air service and access to the nation’s hub airports. 12–27, 29 USC sections 52–53. The Department of Justice (DOJ) reviews air- The programme subsidises carriers for providing ‘basic essential air line mergers, acquisitions and interlocking directorates (corporate board service’ to these communities. The Transportation Code section 41732 and of director members sitting on boards of multiple corporations) in the avia- FAR Part 398 define and set guidelines for this service. With some exception sector as it does for any other sector. tions, at a minimum, such service must include two daily round trips for six The Transportation Code section 41712 authorises the DOT to inves- days a week, not more than one intermediate stop to a hub airport, reason- tigate and determine whether an air carrier ‘has or is engaged in an unfair able times for passengers and reasonable prices. or deceptive practice or an unfair method of competition in air transpor- Recently, the Federal Aviation Modernization and Reform Act of 2012 tation or the sale of air transportation’. Even if conduct does not violate capped the number of communities participating in this programme and federal antitrust law, after providing notice and an opportunity for hearing, mandated that communities average at least 10 passenger enplanements the secretary of transportation can order a carrier to stop such conduct if per service day to remain in the programme. the secretary, guided by section 40101, determines doing so is in the public EAS programme carriers generally enter into two-year contracts with interest. The DOT also has authority to issues civil penalties for violations. the DOT. Ninety days prior to a contract’s expiration the DOT issues a request for bids containing service and subsidy proposals from which it 9 What requirements must a foreign air carrier satisfy in order selects an EAS carrier. When selecting a carrier, the DOT considers the to operate to or from your country? carrier’s reliability, the carrier’s contract, marketing arrangements and A foreign air carrier conducting operations to and from the United States interline arrangements with larger carriers operating at the target hub and must receive safety and economic authority from the FAA and the DOT. the concerns of the community being served. To receive economic authority, a foreign carrier applies for a foreign air carrier permit (Transportation Code, section 41301) or an exemption 11 Are charter services specially regulated? (Transportation Code, section 40109). The foreign air carrier permit is the Yes. A charter must be either a FAR Part 119 certificated carrier or have more permanent licence, typically having a duration coextensive with the a FAR Part 298 exemption. FAR Part 135 operating rules govern charter terms of the applicable bilateral aviation agreement between the United service providers. FAR Parts 212 and 380 provide further charter-specific States and the applicant’s homeland, or, if there is no agreement, a dura- regulations. Part 380 requires all persons who wish to arrange public char- tion of five years. Typically, the DOT grants exemptions for one- or two- ter flights to first submit a charter prospectus to the Special Authorities year periods, and the carrier must renew to continue operations. Division with the required information about the proposed charter pro- FAR Parts 211 and 302 govern foreign air carrier permit and exemption gramme. This document outlines the procedures, payment information applications. FAR Part 211 sets forth the filing and evidence requirements and related forms needed to apply. for prospective foreign air carriers, which include proof: The Transportation Code section 41104 authorises the secretary of • of the carrier’s ownership; transportation to regulate and restrict ‘marketability, flexibility, acces- • of the carrier’s operational and financial fitness to conduct the pro- sibility, or variety of charter air transportation’ to the extent that such posed services; and regulation or restriction is required by the public interest. This section also • that the proposed services either prohibits, with certain exceptions, regularly scheduled charter services to • fall under an air transport agreement between the US and the or from airports lacking FAR Part 139 operating certificates (see question applicant’s homeland; or 18) in aircraft designed to seat more than nine passengers. Transportation • proof of sufficient comity and reciprocity to support granting the is not ‘regularly scheduled’ if the air carrier negotiates the departure time, applicant’s proposed services. departure location and arrival location with its customers. FAR Part 302 describes the manner of filing the application with the DOT. 12 Are airfares regulated and, if so, how? Applicants also are required to provide a copy of the application to US carriers authorised to serve the applicant’s homeland. Since the Airline Deregulation Act of 1978, domestic airfares (travel fares within all US territories) have not been regulated. The DOT, however, collects airfare information and provides that information to the public in a

202 Getting the Deal Through – Air Transport 2015 Clyde & Co US LLP UNITED STATES quarterly Consumer Air Fare Report (www.dot.gov/policy/aviation-policy/ Under section 46304 of the Transportation Code, the government domestic-airline-fares-consumer-report). may seize an aircraft for unpaid civil penalties assessed against an aircraft With regard to foreign airfares, US and foreign carriers file tariffs with owner until the owner pays the penalty, a compromise occurs, the Attorney the DOT which, subject to exemption, provide fare information for carrier General decides not to bring a civil suit or the owner deposits a bond condi- routes or joint fare information for routes served by a carrier jointly with tioned on payment of penalty. another carrier. Pursuant to the Transportation Code section 41501, US and foreign air carriers’ fares must be ‘reasonable’. A fare cannot be unrea- 16 Do specific rules regulate the maintenance of aircraft? sonable for being too low or too high unless it is 5 per cent higher than or FAR Part 43 prescribes rules governing aircraft maintenance, preventative 50 per cent lower than the ‘standard foreign fare level’ defined in section maintenance, rebuilding and alteration, maintenance records and who 41509(e). may perform these activities and approve an aircraft’s return to service.

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 air- aircraft listed on your country’s register? ports may be publicly or privately owned. Privately owned public airports The registration of aircraft is governed by FAR Part 47. An aircraft regis- must be intended for public use and fall under the category of ‘commercial tered in the US cannot be registered in another country and must be owned service airports’ or ‘reliever airports’ (section 47102). The Code defines by a US citizen, a permanent resident alien or a non-citizen corporation ‘commercial service airports’ as airports that have at least 2,500 board- meeting certain requirements. An aircraft can be registered only in the ings per year and that receive scheduled service (section 47102(7)). A name of its owner, who may be a buyer in possession, bailee or lessee under ‘reliever airport’ relieves congestion at commercial service airports (sec- a conditional sale contract (FAR section 47.5). tion 47102(23)). Publicly owned airports also may be considered ‘general To satisfy the requirement that the aircraft be owned by a US citizen, aviation airports,’ which are public airports not meeting the boarding or a foreign applicant may place legal title of the aircraft with US citizen or scheduling requirements of commercial service airports. resident alien trustees. By doing so, the foreign applicant becomes a ben- State and local governments often directly own, directly licence or eficial owner. An affidavit from each trustee must be filed stating that the indirectly own (through a quasi-governmental body called an ‘authority’) trustee is not ‘aware of any reason, situation, or relationship (involving commercial service airports or general aviation airports. beneficiaries or other persons who are not US citizens or resident aliens) as a result of which those persons together would have more than 25 percent 18 What system is there for the licensing of airports? of the aggregate power to influence or limit the exercise of the trustee’s FAR Part 139 governs airport certification. Generally, an airport operat- authority’. ing certificate (AOC) is required for airports serving scheduled passenger Pursuant to FAR section 47.8, a domestic corporation owned by for- operations on aircraft with more than nine passenger seats and serving eign shareholders may be considered a citizen through establishing a vot- non-scheduled passenger operations with aircraft of more than 30 seats. ing trust. To do so, the corporation must file a voting trust agreement with An AOC applicant submits an airport certification manual. The manual the FAA and all voting trustees must be US citizens. A change in the voting describes the airport’s operating procedures, facilities, equipment and trust resulting in a US citizen voting interest of less than 75 per cent results other information deemed necessary for the airport to comply with specific in loss of citizenship. Part 139 regulations. AOC possession subjects airports to FAA inspection. A non-citizen corporation can register an aircraft in the US if it is Airports also may be subject to state or local municipal regulations. organised and doing business in the US and the aircraft is based and primarily used in the US (at least 60 per cent of an aircraft’s flight hours must 19 Is there a system of economic regulation of airports and, if so, come from flights starting or terminating in the US). Pursuant to FAR sec- how does it function? tion 47.9, a semi-annual report must be filed with the FAA certifying this information. Under section 40116 of the Transportation Code (the Anti-Head Tax Act), Aircraft registrations expire after three years and aircraft owners are state and local governments may collect ‘reasonable rental charges, land- required to renew every three years. ing fees, and other service charges from aircraft operators for the use of airport facilities’. The US Supreme Court in Northwest Airlines, Inc v County 14 Is there a register of aircraft mortgages or charges and, if so, of Kent, 510 US 355 (1994), held that for charges and fees to be ‘reasonable’ how does it function? they must be ‘based on some fair approximation of use of the facilities’, not be ‘excess in relation to the benefit conferred’, and ‘not discriminate Yes. Under FAR Part 49, the FAA maintains an aircraft registry that against interstate commerce’. records aircraft conveyances, bills of sale, mortgages, contracts and other The Transportation Code section 47107 (Airport and Airway instruments. The registry assists prospective aircraft purchasers, financi- Improvement Act of 1982 (AAIA)), expanded the reasonableness require- ers and other interested parties. The registry includes information about ment to airports receiving federal assistance. the registered owner, any recorded security interests and the aircraft’s Section 47129 of the Transportation Code authorises the secretary of airworthiness. transportation to determine reasonableness of the fees airport owners and To record a security agreement/chattel mortgage or a claim of lien, operators impose upon air carriers. The secretary makes a determination there is a fee of US$5. In addition to recording an aircraft as collateral, after receiving the written request of either an owner or operator or an air certain aircraft engines and propellers capable of 550 rated take-off horse- carrier’s written complaint. FAR Part 302, subpart F provides that an ALJ power and certain propellers capable of absorbing over 750 rated take-off makes an initial finding which becomes final upon the secretary’s approval. horsepower may be recorded as well. According to the FAA’s Air Carrier Incentive Program Guidebook, air- The United States ratified the Cape Town Convention on International port revenue may be used for ‘the full costs of activities directed at promot- Interests in Mobile Equipment recognising an electronic international air- ing competition at an airport’ and ‘public and industry awareness of airport craft and aircraft engine registry. FAR Part 49, subpart F addresses filing facilities and services’, but may not be used for ‘destination or tourism mar- an interest on this registry. Permissible items to record include airframes keting, any activities, materials, or expenses for general economic devel- capable of transporting at least eight individuals or over 2,750 kilograms in opment not related to the airport, and marketing or promotional activities goods, jet engines with at least 1,750 pounds of thrust, and turbine or piston unrelated to airports or airport systems’. aircraft engines of at least 550 rated take-off horsepower. The AAIA limits an airport’s usage of revenues, if receiving federal assistance for development projects, to capital or operating costs of ‘the 15 What rights are there to detain aircraft, in respect of unpaid airport, the local airport system, or other local facilities owned or operated airport or air navigation charges, or other unpaid debts? by the airport owner or operator and directly and substantially related to Subject to state law and federal bankruptcy law, creditors may obtain a the air transportation of passengers or property’. The Transportation Code judgment against an aircraft operator for unpaid debts. Upon an operator’s default, a lien holder may foreclose upon a lien and seize an aircraft.

www.gettingthedealthrough.com 203 UNITED STATES Clyde & Co US LLP section 47133(a) expanded usage limits to public and non-public airports performance-based, results-oriented, organization’ (Executive Order No. receiving any federal assistance after September 1996. 13,180, 65 Fed. Reg. 77,493 (7 December 2000)). The FAA publishes an airport compliance manual on its website, www. The FAA regulates air traffic control services. FAR Part 65 provides air faa.gov. traffic control operator eligibility and certification requirements and operating rules. Further, FAR Part 65 requires that air traffic control operators 20 Are there laws or rules restricting or qualifying access to perform their duties in accordance with FAA air traffic control manuals to airports? ‘provide for the safe, orderly and expeditious flow of air traffic’. In FAR Part Yes. Airport access may be restricted or qualified through ‘slot’ regulations 170, the FAA provides rules governing an airport’s qualification for an air- or ‘perimeter rules’. Since 1968, at some congested airports, the FAA has port traffic control tower. divided and allocated runway time into ‘slots’. The Transportation Code section 41714 defines a ‘slot’ as a ‘reservation for an instrument flight rule Liability and accidents take-off or landing by an air carrier of an aircraft in air transportation’. At 24 Are there any special rules in respect of death of, or injury to, some airports, FAA perimeter rules restrict airport usage if a flight is sched- passengers or loss or damage to baggage or cargo in respect of uled to take off from or land at another airport outside a designated perim- domestic carriage? eter. For instance, the Washington Metropolitan Airports Act of 1986 limits The US is a party to the Montreal Convention (1999), Warsaw Convention air traffic using Ronald Reagan Washington National Airport to flights -tak (1929) and the Warsaw Convention as amended by the Hague Protocol ing off or landing within a 1,250 mile radius. (1955) and Montreal Protocol No. 4 (1975). These conventions apply to These restrictions recently have been relaxed. For example, under sec- international carriage by air and exclusively govern the liability of an air tion 41718, Congress authorised the DOT to grant several ‘beyond-perim- carrier with respect to passenger injury/death, baggage and cargo. eter’ and ‘within-perimeter’ exemptions at Ronald Reagan Washington If the carriage is not governed by these conventions (ie, wholly domes- National for transportation meeting certain criteria, such as promoting ser- tic carriage), the liability of the air carrier generally is governed by state vice to small communities and increasing competition. At other airports, tort law. Common carriers owe passengers the highest duty of care, which restrictions have been allowed to expire. includes providing safe conditions for its passengers during transportation, ingress and egress and warning passengers of potentially dangerous 21 How are slots allocated at congested airports? conditions. In 1969, the FAA established a high density rule (HDR) at five airports – In addition, some states have enacted statutes that impose liability on John F Kennedy, LaGuardia, O’Hare, Washington National, and Newark the owner of an aircraft for death or injury to person or property resulting – and labelled these airports high density traffic airports (HDTA). Except from a negligent or wrongful act or omission in the operation of the aircraft. for Newark, HDR became a permanent rule at these airports. The FAA set Although an air carrier may limit liability for damaged or lost baggage HDTA slot quotas based on each airport’s operating capacity. occurring during domestic carriage, FAR Part 254 requires that a carrier not FAR Part 93 governs slot allocation. Slots may be bought, sold or limit liability to less than US$3,400 per passenger on large passenger air- leased for any consideration, including being traded for other slots at any craft. The DOT reviews this limit every two years and adjusts the amount HDTA. These slots, however, are not property rights, but instead operat- using the July consumer price index for that year. However, the limits ing privileges subject to FAA control, which the FAA reserves the right to provided in Part 254 do not apply for loss, damage or delay concerning withdraw. With exceptions, the FAA recalls and redistributes slots not used wheelchairs or other assistive devices provided in Part 254. The basis for 80 per cent of the time over a two-month period. Pursuant to FAR section calculating the compensation for a lost, damaged or destroyed wheelchair 93.225, redistribution occurs via lottery. Separate slot allocation procedures or other assistive device is the original purchase price of the device (FAR are used for international and EAS operations. section 382.131). If a government employee’s (such as an FAA employee) negligent or 22 Are there any laws or rules specifically relating to ground wrongful act or omission caused death or injury to another, the Federal handling? Tort Claims Act (FTCA) applies. The FTCA provides a limited waiver of Yes. The Transportation Code prohibits fixed-base operators (which the United States’ immunity from suit, allowing claims for damages ‘for includes ground handlers) from being given an exclusive right to use the injury or loss of property, or personal injury or death caused by the negli- airport on which federal funds have been expended (49 USC sections gent or wrongful act or omission of any employee of the Government while 40103(e), 47107(a)(4)). However, provision of services at an airport by acting within the scope of his office or employment, under circumstances only one fixed-based operator is not an exclusive right if ‘the right would where the United States, if a private person, would be liable to the claimant be unreasonably costly, burdensome or impractical for more than one in accordance with the law of the place where the act or omission occurred’ fixed-base operator to provide the services; and allowing more than one (28 USC section 1346(b)). Under the FTCA, the US government is liable ‘in fixed-based operator to provide the services would require reducing the the same manner and to the same extent as a private individual under like space leased under an existing agreement between the one fixed-base circumstances, but [is not] liable for interest prior to judgment or for puni- operator and the airport owner or operator’ (49 USC section 47107(a)(4) tive damages’ (28 USC section 2674). (A)(B)). Where an airport owner’s failure to grant a lease to an applicant Certain state law doctrines may impose liability upon an owner or les- is not based upon an award of exclusive rights to other airport tenants but sor of aircraft even when the aircraft is not under their immediate control on the failure of the airport owner and applicant to agree on acceptable or possession. For example, some states have a ‘dangerous instrumental- lease terms and conditions, there is no violation of the prohibition against ity’ doctrine that imposes vicarious liability on aircraft owners or lessors granting exclusive rights. See, for example, J Andrew Lange, Inc v FAA, 208 for the negligent operation of the aircraft that causes injury. An aircraft F.3d 389 (2d Cir. 2000). Furthermore, fixed-base operators similarly using owner or lessor also may be liable under a state law negligent entrustment the airport can only be subjected to the same charges (49 USC section doctrine, under which the aircraft owner or lessor is under a duty to entrust 47107(a)(5)) and an air carrier using the airport can either service itself it to a responsible person whose use will not create an unreasonable risk or use any fixed-based operator allowed by the airport to provide services of harm to others. Thus, an aircraft owner or lessor may be liable for its at the airport (49 USC section 47107(a)(6)). Airports have been granted a active negligence in entrusting the aircraft to an incompetent or reckless limited immunity for alleged antitrust violations – injunctive relief but not individual. Such liability may occur even if the individual being entrusted monetary damages may be awarded against them (15 USC sections 34–36). is a licensed pilot, if the owner or lessor was, or should have been, aware of facts indicating that the individual lacked the ability to safely operate the 23 Who provides air traffic control services? And how are they aircraft under certain conditions. regulated? The Federal Registration and Recordation of Aircraft – Limitation Through the Air Traffic Organization (ATO), the FAA employs and trains of Liability Statute (Transportation Code section 44112) may serve as a most air traffic controllers. The ATO was created by an executive order defence to dangerous instrumentality claims where aircraft owners or les- to ‘reorganiz[e] the FAA’s air traffic services and related offices into a sors are vicariously liable even though they are not in possession of the aircraft. Section 44112(b) provides:

204 Getting the Deal Through – Air Transport 2015 Clyde & Co US LLP UNITED STATES

Liability – A lessor, owner, or secured party is liable for personal injury, 27 Is there a mandatory accident and incident reporting system death, or property loss or damage on land or water only when a civil and, if so, how does it operate? aircraft, aircraft engine or propeller is in the actual possession or 49 CFR Part 830 requires aircraft operators to immediately notify the NTSB control of the lessor, owner, or secured party, and the personal injury, after accidents and certain incidents. Operators must immediately notify death, or property loss or damage occurs because of (i) the aircraft, the NTSB only for certain incidents such as malfunctions or failures in a engine or propeller; or (ii) the flight of, or an object falling from, the flight control system, damage to property other than the aircraft exceeding aircraft, engine or propeller. US$25,000, in-flight fire, and loss of information from more than half of an aircraft’s cockpit displays (49 CFR section 830.5). The purpose of the statute is to remove one of the obstacles to financing or purchases of new aircraft by removing the threat of liability for aircraft over Competition law which financiers have no actual possession. Recently, one court held that to the extent that the dangerous instrumentality doctrine applies to injuries, 28 Do sector-specific competition rules apply to aviation? If not, damages or deaths that occur on the surface of the earth (but not to pas- do the general competition law rules apply? sengers onboard the aircraft), the doctrine conflicts with, and is therefore Federal competition laws include the Sherman Act, 15 USC sections 1–7; the pre-empted by, section 44112(b). However, claims based upon the active Clayton Act, 15 USC sections 12–27, 29 USC sections 52–53; the Robinson- negligence of an owner or lessor (eg, negligent maintenance and inspec- Patman Act, 15 USC section 13; and the Federal Trade Commission Act, tion) would not be pre-empted. Although that decision did not directly 15 USC sections 41–58. While the Sherman Act and Clayton Act apply to address the interplay between section 44112(b) and state negligent entrust- carriers, the Robinson-Patman Act and the Federal Trade Commission Act ment law, the federal statute likely would not pre-empt a claim based upon do not. negligence of the owner or lessor while the aircraft is in its possession or The Sherman Act addresses unreasonable ‘contracts, combinations control, such as a claim for negligent entrustment. or conspiracies in restraint of trade’ as well as ‘monopolization, attempted monopolization, or conspiracy or combination to monopolize’ (15 USC 25 Are there any special rules about the liability of aircraft sections 1–2). The US Supreme Court has held that this prohibition only operators for surface damage? extends to ‘unreasonable restraints of trade’ (State Oil Co v Khan, 522 US No. The US has neither signed nor ratified the Rome Convention of 1952, 3, 10 (1997)). The Clayton Act applies to conduct not specifically addressed the 2009 Convention on Compensation for Damages to Third Parties by the Sherman Act, such as mergers and acquisitions. The Clayton Act resulting from Acts of Unlawful Interference Involving Aircraft or the prohibits mergers and acquisitions deemed to have the effect of ‘lessening 2009 Convention on Compensation for Damages Caused by Aircraft to competition’ or ‘creating a monopoly’ (15 USC section 18). Third Parties. The Transportation Code contains industry-specific competition rules State law governs the liability of aircraft operators for surface damage. granting power to the DOT, similar to the FTCA’s grant of authority to the Notably, some states have statutes that impose absolute liability on the Federal Trade Commission not applying to air carriers. The FTCA author- owner of an aircraft for injuries to individuals and property on the ground ises the FTC to investigate and prevent ‘unfair methods of competition’ caused by the flight of an aircraft or objects falling from an aircraft. (See and ‘unfair or deceptive acts or practices’ (15 USC section 45). Similarly, question 24 regarding potential pre-emption of such state statutes in 49 section 41712 of the Transportation Code authorises the DOT to investi- USC section 44112 for lessors, owners or secured parties who lack actual gate and prevent an air carrier from engaging in ‘an unfair or deceptive possession and control of the aircraft.) practice or unfair method of competition in air transportation or the sale of air transportation’ if taking such action would be in the public interest. 26 What system and procedures are in place for the investigation Under the Transportation Code section 41720, major US air carriers of air accidents? must submit joint venture agreements for the DOT to determine whether the agreements are against public interest and anti-competitive. Pursuant to 49 USC section 1132, the National Transportation Safety Board The DOT also has the power to grant US and foreign air carriers immu- (NTSB), an independent investigatory agency, is responsible for investi- nity from US antitrust laws allowing carriers to enter into commercial alli- gating each civil aircraft accident. The NTSB defines an ‘accident’ as ‘an ance agreements to coordinate on matters including fares, capacity and occurrence associated with the operation of an aircraft that takes place services (Transportation Code, sections 41308–41309). between the time any person boards the aircraft with the intention of flight and all such persons have disembarked, and in which any person suffers 29 Is there a sector-specific regulator or are competition rules death or serious injury, or in which the aircraft receives substantial dam- applied by the general competition authority? age.’ (14 CFR section 830.2) Along with the NTSB, section 1132 requires the FAA to assist in the investigation when necessary and, pursuant to section The DOJ and DOT regulate competition in the aviation sector. The DOJ’s 1131, other parties may be joined to assist in the investigation, as well. The antitrust division, a general competition authority, enforces federal anti- NTSB does not conduct criminal investigations and must give the Federal trust laws – the Sherman Act and the Clayton Act – and reviews proposed Bureau of Investigation investigative priority if it appears criminal conduct mergers, acquisitions and interlocking directorates to determine whether may have caused the accident (49 USC section 1131(a)(2)). they are anti-competitive. Section 1131 requires that an NTSB investigation ‘establish the facts, The DOT, as a sector-specific regulator, has authority to stop ‘an unfair circumstances, and cause or probable cause’ for each accident and provide or deceptive practice or an unfair method of competition in air transporta- a public report. Further, pursuant to section 1136, in the event of a foreign tion or the sale of air transportation’, to grant antitrust immunity to cer- or domestic air carrier crash resulting in major loss of life, the NTSB desig- tain air carrier agreements when in the public interest, and to oversee joint nates an NTSB employee to act as a liaison between the families and the air ventures between carriers such as code-sharing, joint marketing, and joint carrier and designates an organisation to provide family services. frequent-flyer programmes (Transportation Code sections 41712, 41720 NTSB investigations vary depending on the size of the accident and 41308 and 41309). Although the DOJ enforces federal antitrust laws, the the type of aircraft involved. ‘Major investigations’ of accidents involving DOT conducts an analysis and provides the DOJ with input on carrier commercial air carriers often require that the NTSB send a ‘go-team’ from mergers and acquisitions. its main headquarters to the scene to investigate the accident. For smaller The FTC and individual states, which usually regulate competition, accidents, an NTSB regional office may handle the accident investigation. do not regulate air carrier competition. The FTCA exempts common carri- For certain accidents involving small aircraft, rotorcrafts, amateur-built ers from the FTC’s authority (15 USC sections 45–46). 49 USC section 1713 aircraft and restricted category aircraft, the NTSB may delegate the inves- exempts carriers from state antitrust laws. tigation to the FAA and the FAA reports its findings to the NTSB.

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30 How is the relevant market for the purposes of a competition Act (the ATS Act) allowed airlines to seek federal assistance in the wake of assessment in the aviation sector defined by the competition the 11 September 2001 terrorist attacks. authorities? The DOT also has authority to exempt air carriers from certain eco- According to the DOJ’s Horizontal Merger Guidelines, the DOJ considers nomic regulations when necessary. both product and geographic dimensions when defining a relevant product market to assess competition. When defining a market, the DOJ looks to a 34 What are the main principles of the state aid rules applicable consumer’s ability and willingness to substitute demand from one product to the aviation sector? to another as a result of a price increase or a reduction in quality or service. The FAA insurance programme, which currently provides war-risk insur- For passenger aviation transportation, the DOJ uses specific air carrier ance, addresses insurance needs of the US aviation industry not adequately markets. The DOJ often looks to ‘city pairs’ (the specific origin and destina- met by commercial insurers. The premium war-risk insurance programme tion points served by an air carrier). The DOJ identifies city pairs covered began post-9/11 and covers hull loss, passenger liability and third-party by merging air carriers and then determines the merger’s effect on custom- liability. ers’ access to those markets. See questions 10 and 33.

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? Under the Sherman Act, an agreement must not be an ‘unreasonable To receive premium war-risk insurance, the FAA requires that the US car- restraint of trade’. See State Oil Co v Khan, 522 US 3, 10 (1997). The US rier ‘be a regularly scheduled airline that is actively holding out a schedule Supreme Court has held that unlawful monopolisation occurs when there to the public’. To receive non-premium war-risk insurance, the carrier must is ‘possession of monopoly power in the relevant market’ and ‘the willful be ‘engaged in operations that the President decides are necessary in the acquisition or maintenance of that power, as distinguished from growth or interest of air commerce, or national security, or to carry out the foreign development as a consequence of a superior product, business, acumen, or policy of the United States’. Non-premium insurance is issued on standby historic accident’. United States v Grinnell Corp, 384 US 563, 570–71 (1966). mode and only becomes effective when the Department of Defense The Court also has held that ‘attempted monopolization’ occurs when an requests FAA non-premium insurance, the FAA agrees to provide this entity ‘(1) has engaged in predatory or anticompetitive conduct with (2) a insurance and the FAA notifies the operator that the coverage is in effect. specific intent to monopolize and (3) a dangerous probability of achieving See questions 10 and 33. monopoly power’ in a relevant market. Spectrum Sports, Inc v McQuillan, 506 US 447, 456 (1993). 36 Must clearance from the competition authorities be obtained For the Clayton Act and DOT standards, see question 28. before state aid may be granted? See question 10. 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? Sherman Act violations may lead to civil or criminal liability, or See question 10. both. The DOJ reserves criminal prosecutions of Sherman Act violations for the most clear and serious violations, such as price fix- 38 If no clearance is obtained, what procedures apply to recover ing and bid rigging. For corporations, the maximum criminal fine is unlawfully granted state aid? the larger of US$100 million or twice the amount either gained from Not applicable. the illegal conduct or lost by victims. Individuals may be fined up to $1 million and sentenced to federal prison for up to 10 years (15 USC sec- Miscellaneous tions 1–3; 18 USC section 3571(c), (d)). The Clayton Act only provides for civil penalties including the issuing of an injunction to stop anti-competi- 39 Is there any aviation-specific passenger protection tive conduct (15 USC sections 21, 26). The DOT also is allowed to enjoin a legislation? carrier’s unfair or deceptive practices (Transportation Code section 41712). Yes. FAR Part 250 addresses oversales and protection to passengers denied Violations of the antitrust laws also can create civil liability to third boarding. If a flight is oversold, the carrier must ensure that the fewest parties who are injured by those violations. Injured parties are entitled to passengers possible are denied boarding involuntarily. Under FAR sec- recover treble damages for injury to their business or property caused by tion 250.2b(a), the carrier must request volunteers to give up seats prior to an antitrust violation and are entitled to recover their attorneys’ fees (15 denying boarding passengers. The part addresses the information a carrier USC section 15). must provide a volunteer giving up his or her seat. If having to resort to Recently, a number of air carriers have paid substantial amounts involuntary denials, the regulations govern the boarding priority rules the resulting from Sherman Act violations. The largest fines assessed on carri- carrier must follow and the compensation a carrier must provide a bumped ers include fines of US$350 million and US$300 million. passenger. For the past several years the DOJ has been investigating violations As previously stated, pursuant to section 41712 of the Transportation involving air cargo and freight forwarding services for air cargo. According Code, the DOT may prohibit ‘unfair or deceptive practices or an unfair to the most recent DOJ statistics, the air cargo investigation secured more method of competition in the sale of air transportation’. Pursuant to sec- than US$1.9 billion in criminal fines and over US$100 million in criminal tion 41712, the DOT has enacted consumer protection regulations. Among fines with respect to freight forwarding. The civil class-action suits against those regulations, FAR Part 399 protects airline consumers from unfair and the air cargo carriers have, to date, resulted in numerous airlines paying or deceptive practices relating to advertising and price increases. agreeing to pay hundreds of millions of dollars to settle the claims against FAR Part 259 requires that air carriers have contingency plans for them. lengthy tarmac delays. The regulations require that carriers covered under these rules (US carriers and foreign carriers operating to and from the US Financial support and state aid providing passenger service with aircraft of 30 or more passenger seats) 33 Are there sector-specific rules regulating direct or indirect adopt and submit contingency plans ensuring that the aircraft will not financial support to companies by the government or remain on the tarmac for over a specified amount of time (three hours government-controlled agencies or companies (state aid) in for domestic flights and four hours for international) without an oppor- the aviation sector? If not, do general state aid rules apply? tunity for its passengers to deplane, subject to certain exceptions such as for safety and security. The plan must include providing passengers with The federal government subsidises airlines serving communities under the adequate food and water, medical attention, operable lavatory facilities EAS programme. Also, pursuant to the FAA aviation insurance programme and notifications during a delay. and subject to its expiration, the DOT provides premium and non-premium war-risk insurance. The Air Transportation Safety and System Stabilization

206 Getting the Deal Through – Air Transport 2015 Clyde & Co US LLP UNITED STATES

Update and trends Immunity from civil liability under the Aviation and a claim. These sanctions often are implicated in major international Transportation Security Act (ATSA) air disasters given the fact such claims often involve victims and Pursuant to 49 USC section 44941, airlines and their employees are beneficiaries from various nations. Due to the fact that the OFAC immune from civil liability for reporting suspicious behaviour to the sanctions are ever-evolving as the geopolitical landscape changes, the Transportation Security Administration (TSA) unless the disclosure is regulations should not only be considered when a claim is presented, made with actual knowledge that it was false, inaccurate, or misleading but should be reviewed regularly throughout the process and especially or the disclosure is made with reckless disregard as to the disclosure’s contemporaneously with any payment. truth or falsity. In January 2014, the US Supreme Court in Air Wisconsin Airlines Corp v Hoeper, 134 S. Ct. 852 (2014) addressed the scope of DOT’s strict enforcement of consumer protection violations the statute, holding that immunity extends to all reports of suspicious The DOT has authority to investigate potential violations of its behaviour except for materially false statements. regulations. The DOT may commence an investigation based upon an informal or formal complaint or on its own initiative. The Montreal Convention’s pre-emption of state law claims If the DOT’s investigation reveals a violation, the DOT has The US Supreme Court in El Al Israel Airlines, Ltd v Tsui Yuan Tseng, 525 authority to issue civil penalties and other remedies, which range from a U.S. 155 (1999) held that the Warsaw Convention (the predecessor to warning letter to the suspension or revocation of operating authority to the Montreal Convention) provides the exclusive remedy if a plaintiff’s criminal sanctions. Most often, the DOT issues consent orders, wherein state law claims fall within the convention’s scope. If the convention without admitting culpable conduct, the alleged violator is ordered to completely pre-empts state law claims within the convention’s scope, cease and desist the prohibited conduct and a penalty is assessed. US federal courts would have jurisdiction to hear any such state law Over the past year, the DOT has issued significant fines for violation claim under federal question jurisdiction. Recently, however, there of its regulations including a record US$1.1 million fine for violating have been several federal decisions finding that the convention does regulations concerning lengthy tarmac delays. not completely pre-empt state law claims within the convention’s scope. Such rulings have led these courts to determine that they do not have US Supreme Court decision re-affirming the ‘broad pre-emptive jurisdiction over the plaintiff’s state law claims and have resulted in purpose’ of the Airline Deregulation Act remands to state courts. The Airline Deregulation Act of 1978 (ADA) contains a pre-emption provision which states that ‘a State, political subdivision of a State, Impact of US economic and trade sanctions on aviation claims or political authority of at least 2 States may not enact or enforce a The Office of Foreign Assets Control (OFAC) of the US Department of law, regulation, or other provision having the force and effect of law the Treasury administers and enforces economic and trade sanctions related to a price, route, or service of an air carrier that may provide air based on US foreign policy and national security goals against targeted transportation under this subpart’. In Northwest v Ginsberg, 572 U.S. ___ foreign countries and regimes, terrorists, international narcotics (2014), the US Supreme Court clarified that state common law claims traffickers, those engaged in activities related to the proliferation of (and not simply state legislation and regulations) fall within the ADA’s weapons of mass destruction and other threats to the national security, pre-emptive scope. In doing so, the Supreme Court reaffirmed the foreign policy or economy of the United States. OFAC acts under ‘broad pre-emptive scope’ of the ADA. It held that state common law presidential national emergency powers, as well as authority granted by claims ‘fall comfortably within the language of the ADA pre-emption specific legislation, to impose controls on transactions and freeze assets provision’ and that ‘exempting common-law claims would also disserve within US jurisdiction. In the past year, OFAC has issued new sanctions the central purpose of the ADA’. In so holding, it reversed a court of programmes relating to the conflict in Ukraine and has updated existing appeals decision which held that claims for breach of implied covenant programmes for countries such as Syria, Democratic Republic of Congo of good faith and fair dealing are ‘categorically exempted’ from pre- and the Central African Republic. emption under the ADA because they are ‘too tenuously connected to The OFAC sanctions have a major impact on the resolution of airline regulation to trigger pre-emption under the ADA’. It remains to either first- or third-party claims for property damage, personal injury be seen how the Supreme Court’s decision will be interpreted in the or death. US and foreign air carriers and their insurers and reinsurers context of other tort claims. must consider the OFAC sanctions regulations when presented with

The Air Carrier Access Act, 49 USC section 41705, prohibits discrimi- and a total of at least US$300,000 per aircraft for each occurrence. For nation based upon a passenger’s mental or physical disabilities. FAR Part loss or damage to third-party property, the operator must maintain at least 382 governs air carriers’ responsibilities 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 (FAR Part 254), refunds (FAR passengers of at least US$75,000 per passenger and US$75,000 multiplied Part 374), carrier on-time performance (FAR Part 234), smoking onboard by 75 per cent of the number of passenger seats per involved aircraft. aircraft (FAR Part 252), gambling (FAR Part 212) and code-sharing (FAR In addition to these rules, there are separate rules in FAR Part 205 for 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 Transportation Security Administration (TSA) ments. US and foreign direct air carriers, including commuter air carriers was established and assumed responsibility for airport security. In March but excluding air taxi operators, must maintain third-party aircraft acci- 2003 the TSA and 21 other agencies were consolidated into a newly cre- dent liability coverage of at least $300,000 for third-party bodily injury or ated Department of Homeland Security (DHS). DHS responsibilities death and for damage to property with at least US$20 million per involved include transportation security, customs, immigration and agricultural aircraft for each occurrence. Carriers, however, need only maintain cover- inspections. age of US$2 million per involved aircraft for each occurrence for aircraft The Transportation Code section 44901 et seq provides rules gov- with no more than 60 seats or 18,000 pounds maximum payload capacity. erning aviation security. This Chapter contains sections addressing the Carriers providing passenger air transportation also must maintain screening of passengers and property (section 44901), information about insurance coverage for bodily injury or death of passengers at a minimum threats to aviation security (section 44905), explosive detection (section of US$300,000, and, for involved aircraft in each occurrence, US$300,000 44913), deployment of federal air marshals (section 44917), the deploying multiplied by 75 per cent of the number of aircraft passenger seats. and usage of airport detection equipment (section 44925) and procedures FAR Part 205 provides different minimums for Part 298 US taxi opera- for passengers who believe they were wrongfully refused boarding by air- tors. Such operators must maintain third-party aircraft accident liability port security (section 44926). coverage for bodily injury or death of individuals at US$75,000 per person

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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) (not interference with crew members (section 46504) and carrying weapons or yet in force) and the Protocol Supplementary to the Convention for the explosives onto aircraft (section 46505). Suppression of Unlawful Seizure of Aircraft, opened for signature 10 In addition, the US also is a party to the Convention for the Suppression September 2010, ICAO Doc. 9959 (2011) (not yet in force). of Unlawful Seizure of Aircraft, 16 December 1970, 22 UST 1641, TIAS No.

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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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 directions of 1 Which bodies regulate aviation in your country, under what 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 We must distinguish operations of national and foreign carriers. Basically of Transportation has increased its operations to a level that currently access to market for foreign carriers is governed by the relevant bilateral shows that it is the civil aviation authority as a matter of fact. Created as air services agreements (ASAs). Uruguay has a number of bilateral ASAs, an advisory body, the National Board of Civil Aviation (JNAC), headed by some of them with an ‘open skies’ approach including cabotage, as is the the Minister of Transport and Public Infrastructure, has taken over all rel- case with Chile. evant decisions such as distribution of routes and traffic rights enacted as Uruguay is also a party to the Fortaleza Agreement together with ‘advisories’, virtually determining the aeronautical policy of the country, Argentina, Bolivia, Brazil, Chile, Paraguay and Peru, which establishes granting and denying routes to air operators and negotiating bilateral air intra-regional third, fourth, fifth and sixth freedom rights together with services agreements. For the moment, some executive functions on the unlimited capacity on routes different to those regulated under bilateral commercial side, such as supplemental and charter flights authorisations, ASAs. This agreement has led to some controversy when PLUNA, the still remain with the DINACIA, which also exclusively regulates matters Uruguayan flag carrier now in liquidation, requested authorisations to fly concerning safety, air navigation and airworthiness. from Montevideo to several cities in Argentina, supposedly granted by the Fortaleza Agreement, when authorisations had never been granted by the Regulation of aviation operations latter. A similar situation happened with TACA’s flights to some inner cities 2 How is air transport regulated in terms of safety? 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 Civil Aviation Authority in the safety area is the DINACIA, whose Finally on the international aspect of commercial air transport, role is the surveillance and control of safety with power of supervision of Uruguay is a signatory of the Multilateral Open Skies Agreement for safety, airworthiness, grants the airline operator certification, it certificates Member States of the Latin American Civil Aviation Commission, open for airports, ground-handling providers, grants licences to crews and other signature on November 2010 but which is still pending a round of ratifica- technical staff such as mechanics and flight dispatchers and certifies prod- tions to enter into force. ucts and parts as well. The DINACIA also has the power to impose penal- For the national carriers there are some limitations on access to mar- ties such as warnings, fines up to 1 million indexed units, suspension up to kets further specified in question 8. 10 years, cancellation of aeronautical documents (licence, certificate, etc) and cancellation of permits. 5 What requirements apply in the areas of financial fitness and The Aviation Accident and Incident Investigation Commission was nationality of ownership regarding control of air carriers? recently created by Decree 160/013, which derogates and substitutes the Uruguay traditionally followed the path of national ownership and effec- Office of Investigation and Prevention of Aviation Accidents. The new tive control of its airlines and similar requests to foreign airlines were Commission directly reports to the minister of defence but the latter used placed in the bilateral ASAs. However, after 1995 and the privatisation of to report to the Civil Aviation Authority (DINACIA). This new Commission its former flag carrier, PLUNA, a series of modifications of this regime were was granted technical independence. applied. The last was as of April 2010 (Decree 145/2010), by which ownership requirements were modified again. Uruguayan airlines must have 3 What safety regulation is provided for air operations that do head offices in Uruguay with management and control also in the country. not constitute public or commercial transport and how is the If the owner is an individual this person must be a Uruguayan citizen, but if distinction made? it is a company with its equity represented by shares, the majority of these There are three Uruguayan Regulations (RAU), the RAU 133, RAU 135 and shares must be nominative and be owned by Uruguayan citizens domiciled RAU 137, which regulate operations of cargo with helicopters, operations of in Uruguay or be owned by other Uruguayan companies with nominative non-scheduled air transport and agricultural operations respectively. shares. As a consequence a Uruguayan airline can be owned by foreign- RAU 135 regulates air taxi services with aircraft of less than 10 seats or ers through a Uruguayan company with nominative shares. One particular 3,400kg of maximum payload; scheduled and non-scheduled flights with innovation introduced by this last modification is that the shareholders aircraft from 11 to 30 seats; air courier and mail; tourist flights; and non- must inform the origin of funds to the Central Bank and the JNAC to pre- scheduled cargo flights with aircraft with a maximum 3,400kg of payload. vent money laundering and cooperation with terrorism.

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6 What procedures are there to obtain licences or other rights to 11 Are charter services specially regulated? operate particular routes? Certification of charter services is regulated under RAU 135, except for The procedure to obtain licences for national and foreign carriers and on aircraft of fewer than 30 seats (excluding crew). This regulation was also domestic and international flights is the one established by Decree 39 of recently updated following LAR 135, which adopted international stand- 1979, which has undergone minor modifications through the years, but ards in the field. remains essentially the same. It basically provides that any carrier must All charter operators are granted four flights per year for the same submit its request with a series of details such as routes to be served, fares route or eight for different routes, without the need of certification, just by to be applied, type of company and relationships with other companies, but presenting appropriate insurance (Decree 43/972). the most significant part is that prior to granting the licence, the request is Another relevant aspect are the operations to Punta del Este, which made public through the Official Gazette so any other party with a legiti- receive special treatment under Decree 244/2011. For flights to and from mate interest may oppose such a request. Although this process can be per- Punta del Este the only documentation requested from operators is their ceived as onerous, the common practice of the DINACIA is that provisional certificate of operations and a valid certificate of insurance. authorisation is granted prior to publication after the ‘green light’ from the JNAC, and this provisional authorisation de facto operates as final. 12 Are airfares regulated and, if so, how? Public air transport is considered a public service so airfares are supposed 7 What procedures are there for hearing or deciding contested to be regulated under the Constitution since regulation by government is applications for licences or other rights to operate particular mandatory for any public service. However, after the conclusion of several routes? bilateral air services agreements in which airfares were liberalised, the Originally there was a public hearing in which all interested parties were DINACIA is requesting the filing of airfares with no further control. able to make their statements and at the end the granting authority would make its decision. Following Decree 39/979 mentioned above, the pub- Aircraft lic hearing process was no longer required and the decision on contested 13 Who is entitled to be mentioned in the aircraft register? Do applications relies on the JNAC, which finally recommends which position requirements or limitations apply to the ownership of an to take and the decision is finally made by the DINACIA, which in all cases aircraft listed on your country’s register? follows the ‘recommendation’ of the JNAC (see the answer to question 1). Currently, most objections are dismissed on the grounds of promoting There are two registries with different competences. According to Law competition. No. 17,292 and Decree 63/001 there is an Aircraft National Registry which receives, among other registrations, registration of property rights 8 Is there a declared policy on airline access or competition and, and rights against aircraft. This registry works under the Public Registry if so, what is it? Services created by Law No. 16,871. According to the Aeronautic Code, to register the ownership of an air- Decree 325/1974 establishes the principles of Uruguayan air policy, which craft with Uruguayan registration marks ownership of the aircraft must fall has as a main principle that only one Uruguayan carrier can operate a cer- on: tain route except for reasons of public interest or specific needs of passen- • an individual who must be domiciled in Uruguay; or gers. The reasons of public interest and specific needs of passengers are • a company domiciled in Uruguay and must be a sociedad anónima (a not defined so it continues to be a matter of debate each time a second corporation whose equity is divided into shares): Uruguayan carrier is willing to operate the same route. • shares must be nominal; However, the validity of this decree has been challenged and cur- • 51 per cent of shareholders must be domiciled in Uruguay; and rently the JNAC and the DINACIA are in the position that the decree • two-thirds of the board of the company must be domiciled in has been abrogated by Law No. 18,159 for the Defence and Promotion of Uruguay. Competition, which grants free access in all activities, to all markets to all players. This position had been challenged in court by the main carrier As per the Aeronautic Code, article 38.3, Decree 507/002 and Decree PLUNA, which ceased operations in July 2012 and is now in the process of 695/991, lease agreements with terms of more than six months are reg- liquidation. There was no decision in this challenge which was closed due istered in the Aircraft National Registry that works under the DINACIA. to inaction As mentioned above, there are two different national aircraft registries, each with different tasks. The former registers ownership, mortgages, 9 What requirements must a foreign air carrier satisfy in order credits against aircraft, liens, attachments and seizures. The latter gives to operate to or from your country? registration marks, registers titles of use of aircraft, insurance of aircraft A foreign carrier must establish an office or branch in Uruguay, show its and airlines. Registration in the lease agreements section in the Registry financial details, determine the equity involved in the new venture, name of the DINACIA only gives a provisional registration for the term of the a legal representative domiciled in Uruguay with an adequate power of lease agreement. attorney, establish what type of service it intends to perform (scheduled, supplemental, cargo, passengers, etc), routes, aircraft, fares to be applied, 14 Is there a register of aircraft mortgages or charges and, if so, present a guarantee before the DINACIA and present certification accord- how does it function? ing to RAU 129 (Operations of Foreign Carriers), which mainly is a homolo- Yes, the registry working under the Public Registry Services registers mort- gation of the home base certification (security, safety, airworthiness). gages, ownership rights and seizures. RAU 129 was recently modified, adopting the LAR (Latin American Registration of ownership or a mortgage gives priority over any claim Regulation) 129 which implies a much simpler process of certification for of rights. Rights are considered as per the date of registration, so any rights 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) privi- have regular services to Punta del Este under the open skies regime, it will leged rights (liens) are granted to the crews for the salaries of the last be allowed to do so with a simplified application procedure requiring the month of work, legal fees on benefit of the mortgagee, taxes and fees for presentation of evidence of insurance coverage, airline operator certificate the use of airports and air navigation services (ATM services), credits for and operations specifications. provisions and repairs to continue the flight. These privileged rights last for a year after registration in the registry but they can be renewed. 10 Are there specific rules in place to ensure aviation services are offered to remote destinations when vital for the local 15 What rights are there to detain aircraft, in respect of unpaid economy? airport or air navigation charges, or other unpaid debts? No. Uruguayan geography and population density has prevented the devel- As mentioned above, airports’ ATM services have liens for unpaid airport opment of a relevant domestic air services network. or air navigation charges (article 54 Aeronautic Code). However, in the case

210 Getting the Deal Through – Air Transport 2015 Yelpo & Facal Abogados URUGUAY of aircraft used for public air transport, detention of the aircraft can only 23 Who provides air traffic control services? And how are they be made by a decision of a competent court for the public auction of such regulated? aircraft. DINACIA provides air traffic control services in Uruguay that are regulated by the Aeronautic Code and a system of decrees that establishes the fees 16 Do specific rules regulate the maintenance of aircraft? and how these are adjusted. DINACIA also collects the moneys corre- There are several rules applying to maintenance of aircraft. All mainte- sponding to these fees, which in respect to late payment penalties, interest nance workshops performing work on aircraft with Uruguayan registration rate and statute of limitations, are treated similar to taxes. marks must be certified by the DINACIA following RAU 145, which regulates facilities, personnel, tools and documentation. Liability and accidents In addition, RAU 43 also applies to any aircraft with a Uruguayan air- 24 Are there any special rules in respect of death of, or injury to, worthiness certificate, regulating people authorised to return aircraft to passengers or loss or damage to baggage or cargo in respect of service, facilities and other matters. domestic carriage? Airports The Aeronautic Code regulates liability in case of death, injury to passengers or loss or damage to baggage and cargo for domestic carriage and, 17 Who owns the airports? where no international treaty is applicable, to certain countries. From a legal perspective, airports can be privately or state owned. However, The limits of liability were set in identical terms to those of the Warsaw the approval for all airports falls to the government through the DINACIA. Convention of 1929, changing francs for unidades de cuenta, but with the Currently, the two main airports, Montevideo and Punta del Este, particular criterion followed by the courts in Uruguay whereby the method which are state-owned, are subject to concessions to private companies, of calculation is using the market value of gold at any given time. whose parent company is Corporación América, concessionaire of airports Thus, according to article 157 of the Aeronautic Code, liability to pas- in Argentina, Ecuador (Guayaquil), Armenia (Yerevan) and Brazil. sengers is limited to 250,000 units, liability to checked baggage and cargo is 250 units per kilogram unless a special declaration of value was made by 18 What system is there for the licensing of airports? the consignor at the moment the package or baggage was handed over to Uruguay, as signatory of the Chicago Convention, follows the standards the carrier. of Annex 14, so certification of security, safety, efficiency and regularity of Article 158 of the Aeronautic Code establishes that the ‘units’ shall be airports is the competence of the civil aviation authority, in this case the deemed to refer to 65.5 milligrams of gold at the standards of fineness of DINACIA. nine hundred thousandths, at the date of the arrival of baggage or cargo or The process of certification is established under RAU 139. The certi- the date it should had arrived. Following this rule, conversion is currently fication process is mandatory for all international airports but for those approximately US$600 per kilogram, which fluctuates with the value of only operating domestic flights with aircraft of fewer than 30 seats it is a gold. voluntary process. 25 Are there any special rules about the liability of aircraft 19 Is there a system of economic regulation of airports and, if so, operators for surface damage? how does it function? Uruguay is a signatory to the Rome Convention of 1952 so surface dam- The Airport and Concessions Control Board is headed by the director gen- age to third parties for international air transport is regulated by this eral of DINACIA. convention. One of its roles is the monitoring of prices, rates and other commercial On domestic carriage a presumption of liability of the operator is in terms of the airports. place, who can overrule it if it proves that it has taken all necessary meas- The monitoring of concessions at airports follows the rule that such ures to prevent the illegitimate use of the aircraft. concessions are established by an agreement between the government and The limits of liability in the case of surface damage to third parties the private bidder. In the case of airports operated by the government this were derogated by Law No. 16,403. monitoring does not work effectively since the operator and the surveyor are the same public entity, the DINACIA. 26 What system and procedures are in place for the investigation However, charges and fares of airports are subject to review by the of air accidents? competent administrative court, as with any other public fee. Pursuant to article 14 of Law No. 18,619, the investigation of accidents is performed by the Commission of Accident and Incident Investigation. 20 Are there laws or rules restricting or qualifying access to This commission works under the Ministry of Defence and has technical airports? autonomy. It investigates incidents and accidents for Uruguayan aircraft According to article 67 of the Aeronautic Code, public airports are open to both in Uruguay and foreign domains and accidents and incidents of for- international and domestic operations subject to the relevant certification eign aircraft in Uruguay. as mentioned above. On the other hand, military and private airports can only be accessed 27 Is there a mandatory accident and incident reporting system with authorisation from the air force in the first case or the owner in the and, if so, how does it operate? second. According to article 95 of the Aeronautic Code and article 15 of Law No. 18,619, operators, owners and crews, or any of the above, are obliged to 21 How are slots allocated at congested airports? report any accident or incident suffered by their aircraft. The same obli- There are no congested airports in Uruguay. gation applies to any person who knows about an accident or the remains of an aircraft. The person willing to make this report will file it before the 22 Are there any laws or rules specifically relating to ground commission stated above. handling? Competition law There are two main airports in Uruguay – Montevideo and Punta del Este. Ground handling at Montevideo was a monopoly in the hands of the flag 28 Do sector-specific competition rules apply to aviation? If not, carrier until the 1990s, in which ground handling was handled through do the general competition law rules apply? concession to another company but still with monopoly rights. In 2000 the Uruguay has in place a specific law on competition, ie, Law No. 18,159, monopoly was barred and now competition is free and open to other ven- which governs all types of activities, including air transport. However, cer- dors, which only need to be certified by DINACIA. tain restrictions on access to aviation markets are in place. On the other hand, in Punta del Este, ground handling was granted We already mentioned the disputes that the liquidated PLUNA had in the public bidding so it is part of the monopoly of the concessionaire of with the JNAC, the DINACIA and another operator on the applicability of the airport. the competition regime to air transport. We expect that similar disputes

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However, this rule was not observed when Corporación América Update and trends acquired the concession of Punta del Este Airport. It already had the concession of Montevideo Airport, so after this acquisition, Corporación In the past few years, the lease of aircraft to PLUNA was declared América had a virtual airport monopoly in Uruguay without antitrust promoted under tax law so the lessors and financiers, were not liable for income tax at a 25 per cent rate. This situation posed a challenge clearance. for other national airlines which needed to file their tax exemptions Additionally in the case of agreements between airlines, we have not based on the principle of fairness under tax law before the tax seen the civil aviation authority analysing the cases through the prism of authorities and were unable to grant indemnities to their lessors. competition law. Finally and after PLUNA bankruptcy, the government made general this tax exemption through Decree 96/2014 and granted 32 What types of remedies have been imposed to remedy such income tax exemption to any lessor of aircraft to Uruguayan concerns identified by the competition authorities? airlines. There are no precedents in aviation on the aspect of competition law. There is just one case between two airlines in which one of them has accused the other airlines of abuse of a dominant position and predatory pricing. The will arise once there are two or more Uruguayan carriers operating and Competence Defence Commission fined one of the airlines for unfair com- willing to explore the same routes. petition through misleading advertising. Associative agreements, between airlines, such as code sharing agreements, joint ventures and others, are assessed by the Civil Aviation Financial support and state aid Authority. Airlines must submit the intended agreement to the Civil Aviation Authority which has a 90-day period to evaluate it, and in case of 33 Are there sector-specific rules regulating direct or indirect silence, it is considered approved. There are no sanctions in place for jump- financial support to companies by the government or ing the gun regarding approval. government-controlled agencies or companies (state aid) in the aviation sector? If not, do general state aid rules apply? 29 Is there a sector-specific regulator or are competition rules There are no state aid provisions for aviation. However, air transport has applied by the general competition authority? a special tax treatment so in general terms, aircraft, parts, engines and From a competition perspective, we should distinguish access to markets others are exempted of import and local taxes. Additionally, airlines are with behaviour in such a market. Access to markets is regulated by the exempted from income tax, which is a kind of state aid. JNAC, so we cannot talk about unrestricted access to markets. The rule of Airline trade associations (international associations such as ALTA a single Uruguayan carrier per route is still applicable (see also question 8 and IATA, together with the local BAR) had been calling for years to gov- above) and the JNAC is the competent body to establish which airline will ernment-owned ANCAP (a fuel refinery and distributor) for transparency serve a route or whether there will be any exceptions applicable. in jet fuel pricing and the non-application of taxes due to the tax promotion In the market, behaviour such as predatory pricing, abuse of dominant noted above. In September 2012, just after PLUNA’s demise in July 2012, the Ministry of Finance exempted jet fuel from taxation. Additionally, fol- position and other types of conduct are controlled by the Competition lowing further pressure from airline associations, especially ALTA, the Defence Commission, which is the general competition authority. government forced ANCAP to use international standards in fuel pricing, and from December 2012 its price was reduced by over eight per cent. 30 How is the relevant market for the purposes of a competition Concerning state aid, there Is an intended start-up by former PLUNA assessment in the aviation sector defined by the competition employees who have been granted government aid of US$15 million which authorities? has led to concerns from its local competitors. The relevant market is defined in general terms, not only for aviation. Article 5 of Law No. 18,159 provides some guidelines in order to determine 34 What are the main principles of the state aid rules applicable relevant markets,, ie, the existence of substitute products, the geographic to the aviation sector? area and whether the conduct takes place in a certain relevant market. The other type of state aid rules are the subsidy for the instruction of pilots and mechanics. Aviation schools are granted tax exemptions and also 31 What are the main standards for assessing the competitive funds from the air force. effect of a transaction? Pursuant to article 7 of Law No. 18,159 there are two ways to look at a cer- 35 Are there exemptions from the state aid rules or situations in tain transaction, ie, if as a consequence of such transaction a share of more which they do not apply? than 50 per cent of the relevant market is obtained, or whether the new Not applicable. group after the transaction has gross revenues of more than 750 million indexed units or its current equivalent of US$75 million. 36 Must clearance from the competition authorities be obtained

Gonzalo Yelpo [email protected]

18 de Julio 1296 No. 701 Tel: +598 2908 4665 Montevideo 11100 Fax: +598 2908 4665 Uruguay www.yelpofacal.com

212 Getting the Deal Through – Air Transport 2015 Yelpo & Facal Abogados URUGUAY

before state aid may be granted? If insurance is not renewed on time and evidence registered with the No. Aeronautic Registry, the airworthiness certificate of the relevant aircraft is automatically cancelled (article 186 Aeronautic Code). 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? 38 If no clearance is obtained, what procedures apply to recover Aviation security is controlled by the air force pursuant to article 209 of unlawfully granted state aid? the Aeronautic Code, in which it is named as the ‘air police’. The security regulations follow the standards set by ICAO and the Chicago Convention Not applicable. and its Annexes. The rules set by the air force apply to all parties involved in air transport and airport operations, namely airlines, airports, vendors and Miscellaneous also other government agencies such as customs and migrations authori- 39 Is there any aviation-specific passenger protection ties. All the people involved must be duly licensed and must follow the legislation? rules set by the air force. There is a regulation of rights of passengers which, in addition to those granted by international regulations and treaties such as the Montreal 42 What serious crimes exist with regard to aviation? 1999 Convention, apply to compensation for denied boarding, cancella- The Aeronautic Code establishes several crimes in articles 198 to 208. tion of flights and other matters. This rule is called the Passenger Guide. These crimes rank from minor ones, which are punished with fines, to The Passenger Guide establishes for delayed flights of more than four serious crimes where prison terms can be applied. hours, the right to food and refreshments, hotel accommodation and trans- In cases where no personal damage or damage to goods is caused, the port to or from the airport. For the case of cancellation, this guide provides following crimes would be fined: for the immediate refund of the value of the air ticket. • flying an aircraft without an airworthiness certificate; • flying an aircraft with an airworthiness certificate that expired more 40 Are there mandatory insurance requirements for the than six months ago; operators of aircraft? • the deletion of registration marks from an aircraft; Insurance for the operators of aircraft is mandatory according to articles • the improper carriage of dangerous goods; 182 to 188 of the Aeronautic Code. Operators must provide evidence of • flying an aircraft without licence or having been prohibited from fly- insurance of liability for surface, accident to crew and hull insurance to ing; and passengers and third parties. • flying an aircraft under influence of alcohol or drugs. In the case of Uruguayan airlines, insurance must be granted by a Uruguayan-authorised insurance company. More serious crimes for which prison sentences are applied are: Aircraft without insurance are prevented from flying within Uruguayan • violence on or against aircraft or against its crew or any person on territory according to article 184 of the Aeronautic Code. board; The insurance is controlled by the Aeronautic Registry of the DINACIA • taking control of the aircraft or forcing a change to its route; in which these are registered and evidence of registration is stamped in • flying over restricted or prohibited areas; and each aircraft Certificate of Registration. • failure to provide aid to distressed aircraft.

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Venezuela

John R Pate De Sola Pate & Brown

General in Venezuelan airspace must be registered with or granted authorisation by INAC, and they must continue to satisfy regulatory standards. Further, all 1 Which bodies regulate aviation in your country, under what operations of airlines, as well as public and civilian air services, generally, basic laws? are subject to regulation and periodic certification. Additionally, air carri- In Venezuela, the civil aviation industry is regulated by the Ministry of ers are required to obtain approval for destinations and frequencies, their Aquatic and Air Transportation, and its technical agency, the National fares are regulated and all are subject to the regime of exchange controls, Institute of Civil Aeronautics (INAC). The basic law of civil aviation is among various other regulatory aspects that affect the industry. the Civil Aeronautics Law, last modified in March 2009. INAC regularly issues industry regulations, which are essentially based on norms of the 5 What requirements apply in the areas of financial fitness and International Civil Aviation Organization, referred to as Venezuelan nationality of ownership regarding control of air carriers? Aeronautical Regulations (RAV). In relation to commercial air transportation in principle: • the airline company or entity must be at least 51 per cent owned by Regulation of aviation operations Venezuelan citizens; 2 How is air transport regulated in terms of safety? • the president of the board of directors, or equivalent administrative body, of the airline company or entity must be a Venezuelan and at In addition to the basic norms established by the Civil Aeronautics Law, least 51 per cent of the members of the board of directors must be there are a number of RAVs that refer to safety issues. These include: Venezuelans; and • RAV 5 – system for controlling the management of operational security; • the control and administration of the airline must be under the direc- • RAV 21 – procedures for the certification of products and parts; tion of Venezuelan citizens domiciled in the country. • RAV 43 – maintenance, preventive maintenance, reconstruction of parts; There is no minimum capital requirement, although generally the airline • RAV 60 – licensing requirements for technical aeronautical personnel; entity must be in sound financial condition based on the general norms of • RAV 91 – operation of aircraft and flight norms; the Commercial Code. • RAV 107 – airport security; Notwithstanding the foregoing requirements, increasingly investors • RAV 108 – security measures for aircraft operators; close to the centralised government of Venezuela are acquiring aviation • RAV 109 – safety measures relating to freight, mail, provisions and companies and other assets, in which cases the rules may not be so strictly supplies; applied. • RAV 110 – dangerous materials; • RAV 111 – specialised airport services; 6 What procedures are there to obtain licences or other rights to • RAV 112 – security certification of service companies; operate particular routes? • RAV 119 – certification requirements for public service and specialised air transport; The procedure for obtaining licences or other rights to operate particular • RAV 125 – certification and operation of large aircraft (over 20 passen- routes is to apply to INAC indicating: gers or freight of over 6,000 pounds); • the route desired; • RAV 135 – operational requirements for regular and irregular flights; • the present competition on the route; • RAV 141 – instructional centres for pilots; • the equipment proposed to be operated on the route; • RAV 142 – training centres; • the frequency of flights proposed for the route; • RAV 145 – aviation maintenance organisations; and • connections with other routes or destinations; and • RAV 147 – certification of instructional centres and training of mainte- • any other relevant information. nance personnel. INAC encourages both the opening of new routes and a reasonable degree 3 What safety regulation is provided for air operations that do of competition on all routes, domestic and international. Moreover, politi- not constitute public or commercial transport and how is the cal criteria are now increasingly important, especially at the level of the distinction made? Ministry of Aquatic and Air Transportation. For the procedures and requirements for registration of all relevant Generally, the same licensing and safety regulations apply to both com- matters in the National Aeronautical Registry, see RAV 47, last modified mercial and private air transport activities. Aeronautical personnel are, in August 2010. however, qualified for specific types of aircraft, as well as for specific types of operations. 7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular 4 Is access to the market for the provision of air transport routes? services regulated and, if so, how? Based on the Civil Aeronautics Law and the Law of Administrative Access to the market for the provision of air transport services is regulated. Procedures, any decision that is deemed to be adverse or unjust for any All aeronautical personnel directly involved with aircraft must be licensed reason issued by a lower level official or division of INAC may be appealed by INAC and periodically they are required to update their technical and to the president of INAC. By an express provision of the Civil Aeronautics personal (including health) qualifications. Likewise, all civil aircraft that fly

214 Getting the Deal Through – Air Transport 2015 De Sola Pate & Brown VENEZUELA

Law, and notwithstanding the fact that INAC is now an agency of the 11 Are charter services specially regulated? Ministry of Aquatic and Air Transportation (it was under the Office of the In the case of domestic and international airlines offering charter services, Vice President of Venezuela when the law was last modified), the deci- there is a special procedure for obtaining INAC authorisation. An applica- sion of the President of INAC exhausts the administrative procedural tion must be filed with INAC, which must contain at least the following route (in analogous situations of other agencies and other ministries there information, depending on the circumstances: would normally be an administrative appeal to the particular minister). • route and airport or landing strip; Accordingly, if the decision of the President of INAC is considered to be • loading and flight control; adverse, it may be appealed to the administrative courts, of which there • the entity contracting the flight; are two levels, and thereafter to the Supreme Court. The courts will decide • the equipment to be used and its registration; on the basis of the applicable law. However it should be noted that under • programmed dates for flights; the present government there has been a significant decline in judicial • proposed customs services; independence. • handling of passengers and cargo; • route and time of flight; 8 Is there a declared policy on airline access or competition and, • security measures; if so, what is it? • maintenance support; and Since the early 1990s, Venezuela has generally had an ‘open skies’ policy • support at the destination airport. with respect both to the entry of new airlines into the market and to competition on particular routes. Accordingly, new airlines that satisfy the condi- If charter flights are offered to the same destination on a regular basis, tions will be permitted to enter the market. With regard to domestic routes, applications and approvals can be granted for specific extended periods. it is the general policy of INAC to encourage a reasonable degree of competition in the interest of satisfying the demand for air travel and reduc- 12 Are airfares regulated and, if so, how? ing costs to the public. In the case of international routes, it is the stated Domestic airfares are jointly regulated by the airlines and INAC, although policy of INAC to seek a general balance between Venezuelan and foreign INAC is authorised to impose maximum airfares in the event of disagree- air carriers on any particular route or to a particular destination. Moreover, ment. Airfares are established on the basis of quality, competitiveness, in recent years the international political relations of the national govern- security, continuity and costs and may vary depending on the category of ment have become a significant factor. It may also be noted that with the service. At present, airfares are set within a price band of minimum and increased authoritarianism of the regime, political factors are impacting maximum fares, permitting the airlines to compete on the basis of fares on the assignment of domestic routes and since the end of 2013 the for- within the band range. First-class fares, however, are not regulated, nor are eign exchange crisis, whereby the government has not honoured its com- other special services, such as charter flights. The regulations also provide mitments to convert local-currency ticket revenue to hard currency, has that certain classes of passengers are entitled to discounted fares: children severely impacted the willingness of international carriers to continue to under two years of age pay no fare, while children under 18 years of age, serve Venezuela. students, senior citizens over 60 years of age and persons with disabilities pay discounted fares. In the case of international airfares, as of mid-2014, 9 What requirements must a foreign air carrier satisfy in order the Ministry of Aquatic and Air Transportation is endeavouring to negoti- to operate to or from your country? ate with the international carriers so that, first, their per air mile tariffs, and In order to operate to or from Venezuela a foreign air carrier has to request depending on the class of service, are essentially the same as in the case of authorisation from INAC. This entails proposing, and then negotiating, neighboring countries (that is, for example, that a ticket would cost essen- the intended routes and frequencies, the type of service (passenger, mail, tially the same to fly from Bogotá to Miami as from Caracas to Miami) and, freight, etc), the type of equipment proposed, and other particulars. It is second, to then set the fares in US dollars, but payable in local currency at also necessary to demonstrate to INAC that the proposed equipment is an agreed ‘official’ exchange rate, which the government would presum- subject to satisfactory inspection and maintenance standards and all ably agree to convert to hard currency for remittance purposes. crews have been properly certified to the equivalent Venezuelan standards. Depending on the country and destinations of the foreign carrier, Aircraft authorisation by INAC may be conditioned on a degree of reciprocity for 13 Who is entitled to be mentioned in the aircraft register? Do Venezuelan airlines to compete either on the same routes or to other des- requirements or limitations apply to the ownership of an tinations in the country of origin of the foreign airline. However, with the aircraft listed on your country’s register? foreign exchange crisis affecting the airlines, the ministry (as these discussions are at the highest political level) is, as of mid-2014, attempting RAV 47 on the National Aeronautical Registry basically provides that every to negotiate tariffs, exchange rates and debt payments with the interna- person or entity, and every document, having to do with an aircraft is not tional carriers (essentially all of which have substantially reduced their fre- only entitled but required to be mentioned in the registry in connection quencies to Venezuela, with some having ceased to serve the Venezuelan with the aircraft. In particular this includes the owner of the aircraft, the market). person or entity having legitimate possession of the aircraft (such as lessees or purchasers under conditional sales contracts) and any mortgagee 10 Are there specific rules in place to ensure aviation services or pledgee of the aircraft. Generally, there is no restriction as to national- are offered to remote destinations when vital for the local ity, with the exception of the ownership of domestic public air carriers, as economy? referred to in question 5. Rather than specific rules, there is a general policy to ensure that aviation 14 Is there a register of aircraft mortgages or charges and, if so, services are offered to remote destinations when vital for the local econ- how does it function? omy. INAC may use its administrative discretion to require one or more airlines to service remote destinations as a quid pro quo for authorising Mortgages or charges on aircraft must be registered both at the special flights to more desirable destinations. By virtue of the number of smaller civil registry designated for the registration of mortgages or charges on airlines operating in Venezuela at present, as well as the diversity of equip- aircraft and at the air registry. Additionally, for a mortgage or charge to be ment being operated, INAC has had to resort to quasi-coercive tactics deemed valid on an aircraft under Venezuelan law, or for Venezuelan pur- less frequently in recent years. This is also due, in part, to the fact that for poses, the mortgage or charge must comply with the requirements of the extremely remote destinations the government has been providing some special Venezuelan law on this matter (the Chattel Mortgage Law of 1973). air services through the military. However, at the end of July 2012 the gov- Further, if the mortgagee is other than a Venezuelan financial institution, ernment signed a contract to purchase various Embraer 190 aircraft for authorisation to constitute the mortgage must first be obtained from the Conviasa, the state airline, which has met the demand for local air travel Ministry of Aquatic and Air Transportation. Accordingly, the procedure, to some extent. according to the relevant regulations, is to first obtain the Ministry’s authorisation (if relevant), then to file the mortgage or charge with the civil

www.gettingthedealthrough.com 215 VENEZUELA De Sola Pate & Brown registry and finally to file it with the air registry in all cases based, essen- 21 How are slots allocated at congested airports? tially, on the text of the mortgage or pledge document. However, it may be Priority is given to airlines flying regularly scheduled routes and which pay noted that in recent years INAC has adopted the practice of not requiring a fee for access to a passenger boarding bridge. In respect of other aircraft, the registration in the special civil registry as a prerequisite for registration or in the event of delayed arrivals or other situations of congestion, the air- in the air registry. craft will be required to park on the tarmac and to disembark passengers and cargo away from the terminal using the services of special vehicles 15 What rights are there to detain aircraft, in respect of unpaid when these are available. It may be noted that as a consequence of the con- airport or air navigation charges, or other unpaid debts? flict between the international carriers and the government over the debt INAC, as well as the public-sector airport authorities, may detain aircraft in hard currency owed to the airlines, as of mid-2014 the authorities have for unpaid airport or air navigation fees. The detention may continue until engaged in a form of psychological warfare with the airlines by denying the debt is resolved. Likewise, private creditors may seek the sequestration gates to arriving aircraft (requiring them to park on the tarmac and unload of an aircraft through judicial order, in the case of unpaid debts. However, passengers by uncomfortable buses), as well as to delaying departures. in the case of aircraft considered to be providing a public service, the Civil Aeronautics Law stipulates that such aircraft can only be attached 22 Are there any laws or rules specifically relating to ground or sequestered in conjunction with the execution of a final judicial deci- handling? sion. Moreover, the Law of the Attorney General provides that the attorney There are specific regulations both for ground handling companies and general could prevent the aircraft from being removed from public service their personnel. The companies must demonstrate that they are capable under the ‘public use doctrine’. Similarly, Venezuelan law contemplates of offering the services required and their personnel must be specially various other situations in which an aircraft could be detained, especially licensed, depending on the specialisation of each. Once qualified, the in the context of regulatory violations regarding the aircraft or illicit activi- company will be certified by INAC and authorised to operate within the ties involving the aircraft. particular airport by the respective airport authority. These certifications, as well as the licences of personnel, are subject to continued inspection and 16 Do specific rules regulate the maintenance of aircraft? periodic renewal. As indicated in question 2, there are specific regulations relating to both the maintenance of aircraft and to those permitted to undertake such mainte- 23 Who provides air traffic control services? And how are they nance. Maintenance is highly regulated and there are frequent, periodic regulated? inspections carried out by INAC personnel in relation to maintenance All matters involving aeronautical security, including air traffic control, are standards. reserved to the state. Air traffic controllers are under the authority of INAC, which supervises their training and certification. Airports 17 Who owns the airports? Liability and accidents The principal commercial airports of the country are state-owned and the 24 Are there any special rules in respect of death of, or injury to, trend has been for the central government to acquire, via expropriation, passengers or loss or damage to baggage or cargo in respect of the airports that were privately owned. An autonomous airport authority domestic carriage? administers the commercial airports. Likewise, the central government In the event of death or injury to passengers, loss or damage to baggage and has taken over the administration of most of the regional and state airports cargo, as well as for damages caused on the ground by aircraft, there are from the state governments. express provisions on liability in the Civil Aeronautics Law and in the aeronautical regulations for aircraft operators. These norms establish both the 18 What system is there for the licensing of airports? limits on liability and the procedures for bringing claims. Aircraft operators RAV 139 establishes the procedure for obtaining a licence for operating an are required to have approved liability insurance cover, which normally airport. In general, it is necessary for the operators to demonstrate a satis- includes reinsurance. Without insurance, aircraft will not be registered and factory knowledge of all procedures and that they have the required instal- may not be operated. lations and equipment in place. The airport will then be certified by INAC. 25 Are there any special rules about the liability of aircraft 19 Is there a system of economic regulation of airports and, if so, operators for surface damage? how does it function? The Civil Aeronautics Law expressly makes the operator of an aircraft lia- INAC conducts regular inspections and audits of airports to ensure that ble for damage caused on the ground to persons and property. This liability they comply with all of the requirements for operation. INAC has the is for damage caused either from the operation of the aircraft (emergency authority to decertify and close any airport that does not comply. Again, landings or crashes) or for objects that fall from, or are thrown out of, air- it may be noted that there is a trend to bring airports under centralised craft. It is also applicable in the event of illicit operation of the aircraft. state control, to increase regulation especially over private airports and to control the fees that they may charge. In any event, with the public air- 26 What system and procedures are in place for the investigation ports now under central government control their regulation has become of air accidents? an internal administrative matter. In fact, as of mid-2014 the Minister of The Ministry of Aquatic and Air Transportation’s Investigative Board for Aquatic and Air Transportation is also the president of the institute that Aviation Accidents is the agency primarily responsible for the investigation oversees public airports. of air accidents caused by civil aircraft. It has broad authority to investigate all matters relating to such accidents and may involve any other govern- 20 Are there laws or rules restricting or qualifying access to mental agencies and security forces as may be required. airports? Laws and rules are in place to restrict or qualify access to airports. With 27 Is there a mandatory accident and incident reporting system respect to aircraft, all civil aircraft using Venezuelan airspace may only and, if so, how does it operate? land at designated airports or landing strips. Commercial aircraft may only The Civil Aeronautics Law requires any person who becomes aware of use airports deemed adequate for the type of aircraft. In relation to access an accident or other irregular incident involving an aircraft to report it to by persons and vehicles, special authorisation is required to enter the non- the nearest public authority, which in turn reports the matter to INAC. public areas of airports as these areas are restricted to persons with official Depending on the circumstances, INAC then has to advise the Investigative justification. Board for Aviation Accidents, if the matter is within its competence.

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Competition law developed a substantial body of jurisprudence that provides more specific guidelines in the competition area. This notwithstanding, by virtue of the 28 Do sector-specific competition rules apply to aviation? If not, enhanced role of INAC, adhering to the authority of the national executive, do the general competition law rules apply? there is a tendency for decisions of INAC to be based on political or social Venezuela does not have sector-specific competition law rules for the avia- justice criteria. tion sector. Nonetheless, the general competition laws of Venezuela are fully applicable to the aviation sector. In this respect, however, it may be 32 What types of remedies have been imposed to remedy noted that Venezuela has only had a modern competition regime since concerns identified by the competition authorities? 1992 and so far there have been no cases involving the aviation sector Although not directly related to the aviation industry, the Superintendency brought under the competition laws. Notwithstanding, as a practical mat- has a broad arsenal of remedies that may be applied in situations that are ter, the Ministry of Aquatic and Air Transportation, together with INAC, deemed to threaten fair or open competition or that are deemed to do so. has increasingly taken on the role of regulating competition in the aviation The Superintendency may: sector. • prohibit or deny authorisation for certain mergers and acquisitions With respect to competition rules generally, however, it may be noted (which, depending on the circumstances, must be reviewed before- that the current, socialist-minded, autocratically oriented government of hand by the Superintendency) when these would be deemed to result Venezuela has relegated the concept of competition rules, and thus the in an anti-competitive concentration; Superintendency for the Promotion and Protection of Fair Competition • order the break-up of companies or the severance of certain activities (which is now part of the Ministry of Commerce), to a secondary role, basi- when these are deemed to restrict competition; cally because the government tends to minimise the function and impor- • issue cease-and-desist orders in cases of anti-competitive behaviour; tance of the economic market, rather conceiving of the regulation of access and to goods and services as a matter of direct government normative impo- • issue substantial fines against companies or entities deemed to have sition. Accordingly, while the Superintendency for Fair Competition does violated the norms or the competitive rights of competitors. still exist, it has become less relevant in recent years and, in the case of the aviation sector, basically the rules regarding competitive matters are With respect to the commercial aviation industry, INAC has promoted simply dictated by the Ministry of Aquatic and Air Transportation and/or competition among certain domestic airlines by removing routes from by INAC. Notwithstanding, the responses to the questions of this section certain carriers that were alleged to not be providing adequate ser- are based on the concept of fair competition jurisprudence. vice and assigning these routes to other carriers. INAC has also acted to enhance competition on certain routes by granting frequencies to new 29 Is there a sector-specific regulator or are competition rules state or state-favoured airlines. In 2006, INAC threatened to restrict the applied by the general competition authority? frequencies of US carriers to and from Venezuela unless the US restored There is no sector-specific competition regulator for the aviation indus- Venezuela to Category 1 status under the rules of the US Federal Aviation try, except for the Ministry of Aquatic and Air Transportation, and INAC. Administration, which occurred, thus averting this decision. Accordingly, any complaints of a competitive nature brought by competitors or by the public generally would, in principle, be resolved by the gen- Financial support and state aid eral competition authority, which is the Superintendency for the Promotion and Protection of Fair Competition. 33 Are there sector-specific rules regulating direct or indirect By virtue of the aviation industry’s growth in recent years and the financial support to companies by the government or increased number of airlines, at one point the Venezuelan National government-controlled agencies or companies (state aid) in Assembly was reviewing a possible law to create a sector-specific competi- the aviation sector? If not, do general state aid rules apply? tion jurisdiction for the aviation industry. However, there has been no pro- The only general, sector-specific financial support offered to the avia- gress on this initiative and the Ministry of Aquatic and Air Transportation, tion industry by the state may be in the form of tax incentives. The Civil and INAC have increased their administrative authority in this respect. Aeronautics Law provided for customs and income tax exemptions for domestic, public air transportation services and for the definitive impor- 30 How is the relevant market for the purposes of a competition tation of aircraft, engines, accessories, spare parts, and aviation vehicles assessment in the aviation sector defined by the competition and equipment, as well as a tax credit equal to 75 per cent of the cost of authorities? investments made by national airlines in the incorporation of new tech- As there have been no competition cases involving the aviation industry nology and the training of aeronautical personnel in such technology. brought before the Superintendency for the Promotion and Protection However, these tax incentives expired in March 2014 and thus far have not of Fair Competition (the Superintendency), there are no established cri- been substituted by new incentives. Notwithstanding, It may be noted that teria with respect to defining the relevant market for competition assess- the government does decree from time to time special tax exemptions for ment. Accordingly, at present, if a competition complaint were to be filed the importation of items for special projects or sectors. Likewise, given the before the Superintendency it would presumably apply the general legal multi-tier exchange control system in effect in Venezuela, the government criteria that have been developed for other economic areas. In this regard, can approve subsidised foreign exchange for the importation of aircraft, Venezuelan competition law is based largely on the criteria and standards replacement parts and related expenses, such as international reinsurance developed in the European Union. Also, there is in the Civil Aeronautics Law an indefinite exemption from Notwithstanding, by virtue of the enhanced role of INAC in regulat- all taxes related to air services in connection with fire fighting, searches, ing competition among commercial airlines (such as by cancelling the salvage, and the control and monitoring of air activities. routes of larger airlines and assigning them to smaller operators, in some In this context it should also be noted that the government continues cases on grounds that seem less than transparent) and given the central- to create a number of state-owned companies that compete directly, under ised nature of the present Venezuelan government, it is doubtful that the non-market and preferential conditions, with private-sector entities. In the Superintendency would become involved in such competition disputes. aviation industry the principal example is the launch in 2004 of the state Likewise, due to the lack of independence of the judiciary, it may be pre- airline Conviasa, which enjoys a number of privileges not available to pri- sumed that any matter of competition would have to be resolved by nego- vate airlines. Moreover, this trend may increase if the government contin- tiation with the central government, whether at the level of INAC or with ues to nationalise ‘strategic’ private companies or to otherwise gain control a higher authority. of private companies through the action of government-fomented ‘unions’ or other government-related parties, leading to an even more state-domi- 31 What are the main standards for assessing the competitive nated, centralised socialist economy. In the aviation area one example is effect of a transaction? that of the airline Aeropostal, which has been operated by the government since November 2008 when its owner was accused of drug trafficking and The basic Venezuelan standards, as contained in the Law to Promote racketeering; if convicted, the government has the authority under the and Protect Fair Competition, are that acts and agreements that tend to anti-narcotics law to confiscate the airline. Additionally, since 2013 certain impede, restrict, falsify or limit fair or unrestrained competition are prohib- domestic airlines have changed ownership to persons presumed to have ited. These general principles, which are deemed to be public order norms, close ties to the current government. are obligatory for all economic actors. Moreover, the Superintendency has www.gettingthedealthrough.com 217 VENEZUELA De Sola Pate & Brown

Update and trends The most critical issue as of mid-2014 regarding the aviation sector is government will implement, and how the airlines will accept, a massive the dispute between the state and the 25 international airlines servicing devaluation. To illustrate, most of the accumulated debt owed to the Venezuela over the approximately US$4.2 billion of revenues that the airlines was based on the official exchange rate of Bs6.30 = US$1, but government has been unwilling or unable to convert to hard currency in the latest offer by the government the proposal would be to pay this for remittance by the airlines. This problem stems from the imposition debt (over time) at the exchange rate of Bs10.30 = US$1 (a devaluation of complex and frequently changing exchange controls that have been of nearly 70 per cent, but without any guarantee that this exchange in effect since 2003. The international carriers were obligated to sell rate would be maintained); at the same time, and provided that the tickets in local currency (the bolivar or ‘Bs’) at the highly overvalued international airlines set dollar-based ticket prices at levels approved official exchange rate against the understanding (but not necessarily the by the government, the government would then reportedly permit the legal obligation) that the government would then sell foreign exchange airlines to sell tickets in Venezuela using an exchange rate of Bs50 = to the airlines at the same official exchange rate. However, with the US$1, or some 700 per cent more than the exchange rate in effect for deterioration of Venezuela’s financial situation, the government began ticket sales until early 2014. The other aspect of this situation, though, to default on this arrangement as early as 2012 in the case of some is that the flying public would be hit with a massive cost increase in airlines and from 2013 in the cases of essentially all of the airlines. As a the price of international air tickets, which along with other areas of consequence, since early 2014 the airlines have begun to take unilateral the domestic economy, is expected to have a high political cost for the action to protect their interests; several airlines have ceased operations government. The present situation, though, has caused tremendous to Venezuela entirely while most of the others have significantly, and inconvenience and cost for anyone needing to travel outside the country in some cases drastically, reduced both their flight frequencies and the as it is often necessary at present to try to take one of relatively few number of seats available on their routes. Accordingly, as of mid-2014, flights available to a neighboring country and then from there to buy there are now less than half the number of seats available as compared international tickets on the major carriers, which in most cases makes to early 2014. In addition, however, it has become extremely difficult to any trip longer and more complicated, often entailing having to spend obtain tickets on any air carrier as the airlines refuse to sell tickets until an extra night in the first city of destination both going and coming. relatively few days prior to the date of any flight. Moreover, many of the At some point it is anticipated that this situation will be eased, but it is airlines have adopted the policy of only selling tickets for passengers only likely to occur in the context of a broader economic adjustment who originate in Venezuela at the highest possible tariff regardless for the economy as a whole, including a significant devaluation and the of whether there are available seats on the planes. Since this crisis recognition of massive losses on both the part of the government and began, the government and the airlines have been in discussions as to the private creditors. how to resolve the problem, which is basically a question of how the

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? The tax incentives referred to in question 33 are applied in accordance with If it is determined that a company received a customs exoneration or took the norms of the customs and income tax laws on a similar basis as for other income tax credits that were not merited, the tax authority may impose the economic sectors or activities enjoying similar tax exonerations or credits. correct tax assessment, plus fines and interest. Further, the tax authority With respect to financial aid rules that could be applicable to certain may take judicial action to collect any sums owing to it. preferred airlines or, especially, to the state-owned or state-affiliated enti- Other forms of benefits or privileges improperly granted or accorded ties in the aviation area, there are a number of situations in which norms to a particular company, could give rise to judicial actions by the state, or by or state institutions could be manipulated so as to provide state aid. the state entity involved (such as a state bank), to recover sums improperly Generally, the applicable criteria are essentially political. Of particular provided. Such a situation could also give rise to private actions under the relevance in this regard is the application of the exchange control system competition laws, to the extent that the competitors not accorded similar in effect since early 2003, which has been applied so as to favour certain privileges could demonstrate that they were thereby damaged. In princi- aviation operators over others. In addition, with the increased role of the ple, private parties who deemed their interests to be affected could initiate state in the financial sector through government-controlled banks, airlines judicial actions or seek to enjoin the harmful activity, but again if political of interest to the state have had greater access to financial credit. interests were involved the courts would be unlikely to be effective.

35 Are there exemptions from the state aid rules or situations in Miscellaneous which they do not apply? 39 Is there any aviation-specific passenger protection Other than the express tax incentives referred to in question 33, there are legislation? no specific rules on direct state aid for the aviation industry; any exemp- Venezuela does have express regulations with respect to passenger pro- tions or inapplicability would be limited to qualifying for said tax incen- tection. INAC has created regulations on compensation and assistance to tives. Political criteria could be applied on an ad hoc basis, depending on passengers if they are unjustly prevented from boarding a flight or in the the circumstances. In contrast, access to foreign exchange through the event that the flight is cancelled or delayed beyond a certain period. The exchange control system entails compliance with various norms and prac- current version of these regulations is Providencia Administrativa No. tices, which may be more subjectively applied. PRE-CJU-353-09, which entered into effect in August 2010. 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? In the case of the tax incentives provided to the aviation industry, the For an air carrier to obtain permission to operate any particular aircraft competition authority would not be involved. In contrast, this is a matter it must first demonstrate to INAC that it has adequate liability insurance that would primarily involve the tax authority, known by the acronym of covering damages that could be caused by the operation of the aircraft SENIAT. The competition authority could only possibly become involved to persons and property on the ground, to the crew, to passengers and to in the event that there were allegations of unfair or privileged access to baggage, cargo and mail. In relation to commercial aircraft, the minimum sources of financing or other benefits accorded to certain air operators and liability coverage is US$500 million. not to others. Given the present political situation in Venezuela, if such privileges were provided by the state, it is unlikely that the competition 41 What legal requirements are there with regard to aviation authority, or the courts, would act independently. security? 37 If so, what are the main procedural steps to obtain clearance? There are multiple requirements in relation to aviation security, which generally follow the standards of the International Civil Aviation Organization. Not applicable (see question 36). These apply to aircraft, operators and airports, as well as all personnel

218 Getting the Deal Through – Air Transport 2015 De Sola Pate & Brown VENEZUELA involved in the aviation industry. The state, through both civilian and • interference with operational security; police and military authorities, has reserved a broad responsibility with • throwing things or substances from an aircraft in flight; respect to all aspects of air operations, on the ground and in the air. • deviation from or fraudulently obtaining route authorisation; All private sector entities involved in any aspect of aviation security • the illegal use of aircraft; must be licensed and are subject to continuous inspection and renewed • shooting down or damaging aircraft on the ground; certification. • environmental contamination; • the improper transport of harmful substances; 42 What serious crimes exist with regard to aviation? • failure to provide aid to distressed aircraft; and Both the Civil Aeronautics Law and other special laws establish a number • the consumption of illicit drugs while operating aircraft. of serious crimes relating to aviation. With respect to the former, these include, inter alia: Otherwise, the special laws that refer to aviation include, in particular, the • flights in prohibited or restricted zones; law against illegal drug trafficking, the law on contraband activities and • use of unauthorised airports or landing strips; laws regarding the security of the nation.

John R Pate [email protected]

Torre Domus, 16th Floor Tel: +58 212 793 9898 Av Abraham Lincoln, Sabana Grande Fax: +58 212 793 9043 Caracas 1050 www.desolapate.com Venezuela

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